By Jeffrey H. Brochin, J.D.
A qui tam relator sufficiently pleaded materiality and scienter in her allegations of FCA violations by Brookdale Senior Living Communities (Brookdale), a federal appellate court has ruled. The timing requirement in 42 C.F.R. § 424.22(a)(2) for the submission of physician’s certifications is an express condition of payment for a "request for anticipated payment"(RAP) and residual final payments, and the required certification is not a certification unless it complies with all provisions of § 424.22(a)—both (a)(1) and (a)(2) (U.S. ex rel. Prather v. Brookdale Senior Living Communities, Inc., June 11, 2018, Moore, K.).
"Held Claims Project’". The relator alleged that Brookdale had a policy to enroll as many of its assisted living facility residents as possible in home health care services that were billed to Medicare even when the treatments were not always medically necessary. The solicitation of facility residents generated thousands of Medicare claims that were "held" because they did not meet basic Medicare requirements, and by September 2011, the backlog amounted to about 7,000 unbilled Medicare claims worth approximately $35 million.
Brookdale initiated the "Held Claims Project," which the relator was hired to work on, and she was employed by Brookdale from September of 2011 until November 23, 2012. She alleged that during that time, Brookdale only received a few signed and completed physician’s certification forms resulting in repeated billing of RAPs without having physician certifications and then re-billing them immediately after the RAPs were canceled in order to keep the funds received through the RAPs, while still lacking the required physician certifications.
Her complaint was previously dismissed by the district court, and after remand from the appellate court was again dismissed on the grounds that she did not sufficiently plead the materiality and scienter elements of her FCA claims. For the reasons stated below, the appellate court reversed and remanded.
Analysis of materiality is holistic. The court noted that a misrepresentation about compliance with a statutory, regulatory, or contractual requirement must be material to the government’s payment decision in order to be actionable under the FCA. Although misrepresentation cannot be deemed material merely because the government designates compliance with a particular statutory, regulatory, or contractual requirement as a condition of payment, that designation is a relevant factor in determining materiality.
Timing requirement as condition of payment. The parties disputed whether the timing requirement in 42 C.F.R. § 424.22(a)(2) is an express condition of payment for RAPs and residual final payments. The district court had concluded that the timing requirement was an express condition of payment for both, and the appellate court agreed: the prefatory language of the statute states that payment requires the physician to certify (or recertify) the contents specified in § 424.22(a)(1) and (b)(2). Section 424.22(a) explains what a certification requires, and the court concluded that the required certification is not a certification unless it complies with all provisions of § 424.22(a)—both (a)(1) and (a)(2). Because § 424.22(a)(2) states that the certification "must be obtained at the time the plan of care is established or as soon thereafter as possible and must be signed and dated by the physician who establishes the plan," the court held that the timing requirement in 42 C.F.R. § 424.22(a)(2) is an express condition of payment.
Based on the foregoing, the court ruled that the factual allegations proffered by the relator supported the inference that Brookdale was on notice that its claim-submission process was resulting in potential compliance problems, and that the allegations were sufficient at the motion stage to demonstrate scienter. The court accordingly reversed the district court’s dismissal of the relator’s complaint and remanded the matter.
The case is No. 17-5826.
Attorneys: Pat M. Barrett, III (Barrett Law Office, PLLC) for the United States. Brian Dudley Roark (Bass Berry & Sims PLC) for Brookdale Senior Living Communities, Inc., Brookdale Living Communities, Inc. and Brookdale Senior Living, Inc.
Companies: Brookdale Senior Living Communities, Inc.; Brookdale Living Communities, Inc.; Brookdale Senior Living, Inc.
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