Health Law Daily Whistleblower claim loses steam without strong inference of fraud
Wednesday, January 9, 2019

Whistleblower claim loses steam without strong inference of fraud

By Robert B. Barnett Jr., J.D.

Evidence of fraud regarding the reimbursement of at-home-blood-tests must contain false statements or otherwise allow a court to distinguish between necessary and unnecessary testing. A patients False Claims Act (FCA) complaint against Tambra Investments—alleging excessive use of at-home blood-testing kits for blood-thinning treatment—was dismissed after the Massachusetts federal district court ruled that a complaint failed to plead fraud with sufficient particularity. The court held that Tambra’s enrollment forms contained no false statements and that the forms did not provide a means to distinguish between necessary and unnecessary testing (U.S. ex rel. Allen v. Alere Home Monitoring, Inc., January 7, 2019, Saris, P.).

Background. A patient receiving blood-thinning treatment filed a whistleblower suit under the FCA alleging that several companies involved in supplying at-home blood-testing kits overcharged the federal government for Medicare reimbursements. Under his theory, the kit providers violated the FCA by agreeing to provide the kits only to patients who needed to use the kits at least two to four times per month. As a result, physicians for patients who needed the kits only once a month (or less) were given an incentive to order them at least twice a month. Those who supplied the extra kits, the patient argued, violated the FCA by seeking Medicare reimbursement for medically unnecessary tests. The court dismissed the complaint against all but three defendants (not counting Tambra).

The claims against Tambra were stayed at both parties’ request for settlement negotiations. The United States then intervened to participate in the settlement discussions. At the end of the stay, which was extended once, and without a settlement agreement, Tambra reasserted its motion to dismiss. The patient, meanwhile, filed a motion asking the court to enforce what he believed was a valid settlement agreement that he had reached with Tambra.

Settlement. Examining the intent of the parties, the court concluded that they never reached a settlement agreement. While the patient and Tambra did reach agreement on basic terms, the settlement never became a binding contract because the federal government never agreed to their terms. Tambra insisted that it would not reach any agreement unless its individual officers were also fully released, a condition that the Justice Department would not agree to. As a result, all three parties to the agreement never mutually agreed to its scope.

The court rejected the patient’s argument that the court could separately enforce the agreement between the patient and Tambra. There was no "separate agreement," the court said, because the FCA requires that the Attorney General give written consent to the patient’s dismissal of the FCA action. In the absence of a meeting of the minds on an essential term of the settlement agreement, the court denied the patient’s motion to enforce the agreement.

Dismissal. In dismissing all of the defendants but three, the court ruled that an FCA claim cannot rely solely on an enrollment form provided by a defendant that never actually provided any kits to the patient. Those allegations, the court said, failed to particularly allege fraud because the court could not distinguish, based only on enrollment forms, between medically unnecessary tests and medically necessary tests.

The patient made three arguments against Tambra: (1) its three enrollment forms evinced a scheme to coerce and mislead physicians; (2) Tambra was not like the dismissed defendants; and (3) Tambra’s main enrollment form usurped physicians’ independent medical judgment. As for the allegedly deceptive enrollment forms, unlike the ACS enrollment form, the Tambra form contained no false statements. The fact that Tambra offers different testing options to patients from different facilities was not, without more evidence, indicative of fraud. In his complaint, the patient never satisfactorily explained how the forms provided a "strong inference" of fraud. As for Tambra’s comparison to the dismissed defendants, the court noted that, like them, Tambra provided no kits. As a result, the patient’s claim depended entirely on Tambra’s enrollment form, which the court described as an "uphill battle."

The complaint did allege that Tambra violated the FCA by giving physicians the option of receiving their patients’ test results only if they were out of range and/or monthly. Even if this were to evince fraud, however, the patient’s complaint failed to alleged any specific instance of a physician selecting a reporting option. In addition, the court noted, the patient lacked standing to assert common law claims against Tambra because he lacked standing to raise such claims on the U.S.’s behalf. And, finally, as for usurping the physicians’ independent medical judgment, the court ruled that no strong inference of false claims existed because a claim relying solely on enrollment forms could not distinguish between a claim involving genuine medical judgment and a claim that was medically unnecessary.

The court, therefore, denied the patient’s motion to enforce the settlement, and it granted Tambra motion to dismiss. The case will proceed against the remaining three defendants.

The case is No. 16-11372-PBS.

Attorneys: Jacquelyn A. McEttrick (Smith & Brink, PC) and Steven T. Sharobem, U.S. Attorney's Office MA, for James F. Allenunited. Alexander K. Parachini (Donnelly, Conroy & Gelhaar, LLP) and Andrew A. Kassof (Kirkland & Ellis LLP) for Alere Home Montoring, Inc. Brian Joseph Mullin (Bowditch & Dewey LLP) and Peter L. Avant (Stark Reagan, PC) for Tambra Investments, Inc. d/b/a Real Time Diagnostics.

Companies: Alere Home Montoring, Inc.; Tambra Investments, Inc. d/b/a Real Time Diagnostics

MainStory: TopStory CaseDecisions CMSNews FCANews FraudNews PaymentNews ProgramIntegrityNews QuiTamNews MassachusettsNews

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