KATHLEEN M. WILLIAMS, UNITED STATES DISTRICT JUDGE
The dispute in this case involves how Diabetic Experts marketed its diabetic testing supplies to six Medicare beneficiaries and then billed Medicare for the supplies that it provided. (Second Amended Complaint ("SAC") DE 43). Relators did not plead facts indicating that Diabetic Experts failed to send the billed-for
For the reasons discussed below, the Court grants Defendants' motion for summary judgment on the six exemplars. The Court concludes that Lincare and Diabetic Experts are a single supplier for the purposes of the Medicare statutes, regulations, and supplier standards at issue and that their reliance on AOBs for provision of diabetic supplies was not inconsistent with the Center for Medicare and Medicaid Services' ("CMS")
"The Medicare Program is a system of health insurance administered by the United States Department of Health and Human Services, through the Center for Medicare and Medicaid Services." See United States ex rel. Walker v. R & F Props. of Lake Cnty., Inc., 433 F.3d 1349, 1351 (11th Cir.2005). It is a "vast and complicated" program. United States ex rel. Wilkins v. United Health Group, Inc., 659 F.3d 295, 310-11 (3d Cir.2011). Part B, the part of the Medicare program at issue here, is "voluntary supplemental medical insurance covering . . . durable medical equipment." Int'l Rehabilitative Sciences Inc. v. Sebelius, 688 F.3d 994, 997 (9th Cir.2012). To provide context, the Court highlights a number of pertinent provisions from the complex regime found in the United States Code, the Code of Federal Regulations, and the Federal Register.
Medicare Part B pays for "covered items." 42 U.S.C. § 1395m(a)(13) ("[T]he term `covered item' means durable medical
Under the subheading of "payment for durable medical equipment," 42 U.S.C. § 1395m provides that testing strips are included in diabetic supplies, which is a subset of durable medical equipment. 42 U.S.C. § 1395m(a)(1)(H)(i) ("[T]he payment amount under this part for diabetic supplies, including testing strips, . . . shall be equal to the single payment amounts established . . . under section 1395w-3 of this title."). As referenced, 42 U.S.C. § 1395w-3(a)(2)(A) describes "durable medical equipment and medical supplies" as "covered items (as defined in section 1395m(a)(13) of this title)," including "supplies used in conjunction with durable medical equipment." Thus, the terms supplies and equipment are both used when referring to items like blood-testing strips. While the statutes describe general categories of covered items, including durable medical equipment, the applicable regulations provide a more precise definition that is informed by the expertise of CMS.
Supplies are those items necessary for the effective use of durable equipment. 42 C.F.R. § 414.402(2). The Medicare regulations define durable medical equipment as "equipment furnished by a supplier [that] can withstand repeated use." 42 C.F.R. § 414.202(1). Thus, the applicable regulations support a distinction between equipment as reusable implements and supplies as materials that may be used to replenish or augment the equipment. This represents a qualitative judgment by CMS that distinguishes equipment, which can withstand repeated usage, from more ephemeral supplies. As a result, "[s]upplies necessary for the effective use of DME" are listed separately from durable medical equipment in the regulations. 42 C.F.R. § 414.402; see also 42 C.F.R. § 400.202 (definitions specific to Medicare: "Services means medical care or services and items, such as . . . supplies, appliances, and equipment.").
Title 42 C.F.R. § 424.57 sets out the "special payment rules for items furnished by DMEPOS suppliers and issuance of DMEPOS supplier billing privileges." A DMEPOS supplier is "an entity or individual, which sells or rents Part B covered items to Medicare beneficiaries and which meets the standards in paragraphs (c) and (d) of this section." 42 C.F.R. § 424.57(a). In addition to meeting those standards, all DMEPOS suppliers must also comply with the general rules in paragraph (b) of the section in order to be eligible to participate in Medicare and receive payment for a covered item. See 42 C.F.R. § 424.57(b).
The general rules found in section (b) of the DMEPOS supplier special payment rules require that the supplier meet certain conditions to be "eligible to receive payment for a Medicare-covered item." 42 C.F.R. § 424.57(b). One such condition is that a supplier is not eligible to be paid unless it obtains a supplier number. See 42 U.S.C. § 1395m(j)(1)(A). Accordingly, before submitting claims to Medicare, each DMEPOS-selling business location that meets the eligibility requirements receives a supplier number from the National Supplier Clearinghouse ("NSC").
Furthermore, pursuant to the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), suppliers are required to obtain National Provider Identifiers ("NPI")
The subpart enrollment requirement is echoed elsewhere in the DMEPOS supplier special payment rules, which provide that a supplier must enroll each "separate physical location it uses to furnish Medicare-covered DMEPOS" and that "CMS issues only one supplier number for each location." 42 C.F.R. § 424.57(b). Although all DMEPOS supplier subparts must comply with the "DMEPOS quality standards and be separately accredited," the regulations make provision for how "multisite supplier[s]" can satisfy those standards. See id. CMS has spoken clearly on the topic in a Special CMS Communication Regarding the NPI and Medicare DME Suppliers: "Medicare DME suppliers are required to obtain an NPI for every location."
The Subpart Paper was explicit in both its purpose and guidance. CMS stated that "[t]his paper reflects the Medicare program's expectations on how its enrolled organization health care providers who are covered entities under HIPAA will determine subparts and obtain NPIs for themselves and any subparts." See Subpart Paper at 1. The Subpart Paper directed that "[e]ach enrolled supplier of DMEPOS that is a covered entity under HIPAA must designate each practice location (if it has more than one) as a subpart and ensure that each subpart obtains its own unique NPI." Id. at 8. The result is that a supplier must determine how to apply for NPIs, but "Medicare regulations require that each practice location of a supplier of DMEPOS (if it has more than one) must, by law, be separately enrolled in Medicare and have its own unique Medicare identification number." Id. Therefore, it is clear that a single supplier can have multiple subparts that have their own NPIs. Id.; see also Medicare Program; Additional Supplier Standards, 65 Fed.Reg. 60366-01, 60371 (Oct. 11, 2000) (to be codified at 42 C.F.R. Part 424) (noting that "some suppliers may have multiple sites from which they do business").
The standards require that the supplier operate its business and furnish covered items in compliance with "federal regulatory requirements that specify requirements for the provision of DMEPOS." 42 C.F.R. § 424.57(c). The supplier standard at issue in this case is 42 C.F.R. § 424.57(c)(11), which requires a supplier
Under both the statute and the regulation, a supplier is prohibited from making unsolicited telephone contacts with customers who are enrolled in Medicare unless one of three exceptions applies:
42 U.S.C. § 1395m(a)(17); 42 C.F.R. § 424.57(c)(11). Only the third exception is at issue here.
One of the other federal regulatory requirements identified in 42 C.F.R. § 424.57(c) that governs suppliers is that a claim submitted to Medicare on behalf of a customer must be authorized by that customer. This authorization can be made by the Medicare beneficiary customer's signature on the claim. See 42 C.F.R. § 424.36. In the alternative, there is a procedure where "Medicare pays the supplier for covered services if the beneficiary . . . assigns the claim to the supplier and the supplier accepts assignment." 42 C.F.R. § 424.55(a). Consequently, a beneficiary need not sign every single claim or individually assign each one. Rather, a supplier may maintain the customer's signature on file using a form "that contains adequate notice to the beneficiary . . . that the purpose of the signature is to authorize a provider or supplier to submit a claim to Medicare for specified services furnished to the beneficiary." 42 C.F.R. § 424.36(a). The CMS Claims Manual does not require "that the services be itemized or that the information submitted be complete." (CMS Claims Processing Manual Ch. 1 § 50.1.7—Definition of Claim for Payment DE 206-2 at 2).
The authorization may be incorporated by reference into subsequent claims. See 42 C.F.R. § 424.40(a). Furthermore, the supplier can retain an authorization in the supplier's file, which "may be effective indefinitely." 42 C.F.R. § 424.40(d). The indefinite effectiveness provision is not unlimited, however, and "a new statement is required if another item of equipment is rented or purchased." 42 C.F.R. § 424.40(d)(2).
During the time period at issue,
Relators begin from the premise that Diabetic Experts is a separate supplier from Lincare. (SAC DE 43 ¶ 2). Although the Parties vigorously dispute whether Lincare and Diabetic Experts are, as a matter of law, separate suppliers for the purposes of Medicare eligibility, marketing, billing, and the propriety of using general AOBs, the following facts are uncontroverted. (See, e.g., DE 101 ¶ 12; DE 199 ¶¶ 4, 8, Additional Facts ¶¶ 2-5, 11, 13, 15, 18, 21, 26, 29-31; DE 207 at 1-3). On March 18, 2004, Lincare registered the fictitious name Diabetic Experts of America to do business in Missouri. (DE 75 ¶ 10; Affidavit of Don Crisp, Director of Taxes, Lincare Holdings, Inc. DE 75-1 ¶ 15). There is no separate Diabetic Experts of America company, affiliate, or entity listed on Holdings' corporate organization chart for 2008 or 2009 (DE 100-11 at 2-3); Diabetic Experts is a fictitious name used by Lincare. (Crisp Aff. DE 75-1 ¶ 16; DE 75 ¶ 12; DE 101 ¶ 6 ("It is undisputed that `Diabetic Experts of America' is a d/b/a of Lincare, Inc.")).
Lincare registered with the NSC as a DMEPOS supplier. (DE 75 ¶ 7). Lincare maintains subparts like Diabetic Experts throughout the United States. (Id. ¶¶ 9, 17; see also Affidavit of Stacey Murphy, Division Reimbursement Manager, Lincare Holdings, Inc. DE 195-6 ¶ 9 (testifying that Lincare has over 800 subparts operating throughout the United States, each with its own unique NPI)). In accordance with the Medicare statutes and regulations, Lincare enrolled each of those subparts with the NSC. (DE 75 ¶ 9). In 2004, Lincare enrolled its Kansas City, Missouri brand, Diabetic Experts, with the NSC and obtained an NSC number for it. (Id. ¶ 10). Lincare's 2004 CMS-855S enrollment form for its Kansas City subpart reflected that: (a) Lincare was enrolling a "New Location for a Currently Enrolled DMEPOS Supplier"; (b) the legal name of that business was "Lincare Inc., d/b/a Diabetic Experts of America"; and (c) the Tax ID number used for the "Supplier IRS Identification" information was Lincare's: no. xx-xxx2900. (Id. ¶ 10). During one onsite inspection of Diabetic Experts, NSC completed the field for supplier name: "Lincare, Inc." (May 19, 2014 NSC onsite inspection of Diabetic Experts DE 100-5 at 2). In 2006, Lincare also obtained an NPI for Diabetic Experts. (DE 75 ¶ 15).
At each subsequent NSC inspection, Diabetic Experts certified that it had been provided with a copy of the supplier standards (listed in 42 C.F.R. § 424.57(c)) and acknowledged that its NSC number could be revoked if, at any time, it was determined that Diabetic Experts was noncompliant. (See May 19, 2014 NSC onsite inspection of Diabetic Experts DE 100-5 at 6; see also Mar. 22, 2012 NSC onsite inspection of Diabetic Experts DE 100-5 at 26). Diabetic Experts also agreed to "abide by the Medicare laws, regulations, and program instructions applicable to DMEPOS suppliers." (2004 CMS-855S enrollment form DE 75-2 at 34). Diabetic Experts further expressed its understanding that "payment of a claim by Medicare is conditioned upon the claim and the underlying transaction complying with such laws, regulations, and program instructions
During 2008 and 2009, Relators
Diabetic Experts then made the sales to the beneficiaries and submitted claims to Medicare for diabetic-testing supplies, e.g., testing strips and lancets used in testing blood glucose levels, which Medicare paid relying on the fact that the telephone contacts and AOBs were both compliant with applicable statutes and regulations. (DE 75 ¶ 20). Diabetic Experts used its NPI, which is different from Lincare's, to bill Medicare for the diabetic testing supplies on behalf of the six exemplar beneficiaries. (DE 199 Additional Facts ¶¶ 11, 15).
The sales history is represented in a table, below:
Date of Telephone Diabetic Testing Date Lincare Inc. Contact By Supplies Shipped as a Previously # Billing Account Lincare Inc. Result of Telephone Furnished a d/b/a Diabetic Contact Experts of Medicare Covered America item Testing strips, lancets, 1. 033-380-013-114 Dec. 8, 2008 disposable lancet device, Aug. 21, 2008 & solution Testing strips, lancets, 2. 033-380-018-996 Mar. 2, 2009 disposable lancet device. Feb. 8, 2009 & solution Testing strips, lancets, 3. 033-380-025-671 May 5, 2009 disposable lancet device, Apr. 20, 2009 & solution Testing strips, lancets, 4. 033-380-026-013 May 7, 2009 disposable lancet device, Mar. 5, 2009 & solution Testing strips, lancets, 5. 033-380-026-688 May 14, 2009 disposable lancet device, Mar. 18, 2009 & solution Testing strips, lancets, 6. 033-380-027-354 May 20, 2009 disposable lancet device, Apr. 17, 2009 & solution
(DE 75 ¶ 20).
There is no material dispute about three salient facts presented by the exemplars. (DE 101 ¶ 20 ("The content of the sales history with the six exemplars is undisputed.")). First, Diabetic Experts contacted the beneficiaries, sold the supplies, and billed Medicare. (DE 75 ¶ 20). Second, Diabetic Experts billed for testing strips, lancets, disposable lancet devices, and testing solution, but not for the diabetic-testing monitor.
Before the sale of diabetic supplies to the six exemplar Medicare beneficiaries, each of the six beneficiaries executed a patient agreement and consent form that contained, among other things, an assignment of benefits in favor of Lincare and its affiliates. (DE 75 ¶ 33). In those consent forms, the six beneficiaries agreed: (i) to rent or purchase covered items from either "Lincare and its affiliates" or from "Supplier and its affiliates"; (ii) that Lincare would provide "HME and Supplies" or "DME;" (iii) to the release of their health
The consent forms, which the Parties and the Court have referred to as the AOBs, provided that they were to be used in lieu of the beneficiaries' signatures on claims forms and Lincare kept them on file for this purpose. (DE 75 35-36). Diabetic Experts used the AOBs as signatures on file for the claims it submitted to obtain payment from Medicare for the diabetic testing supplies sold to the six exemplar Medicare beneficiaries. (DE 75 ¶ 37; DE 199 Additional Facts ¶¶ 16-18, 20, 31, 33-34). Although Diabetic Experts had its own form AOBs, it is undisputed that it "did not obtain AOBs that were specifically for diabetic testing supplies from Medicare beneficiaries—including the six exemplar beneficiaries—for its claims to Medicare for payment," but rather used the Lincare AOBs it had on file. (DE 199 Additional Facts ¶¶ 32-33, 36; DE 75 ¶ 34; DE 101 Additional Facts ¶ 19).
In October 2009, months after the submission of the claims for the six exemplar transactions, members of Holdings' compliance department discussed generally—that is, not directly concerning diabetic supplies—whether their AOBs may need to be "item specific." (DE 199 Additional Facts ¶¶ 40-43). Relators identify this discussion as evidence supporting the legal conclusion that Defendants "had actual knowledge of the requirement that AOBs must be item-specific." (DE 199 Additional Facts ¶ 40). However, Defendants correctly point out that the discussion was prompted by an educational webinar, which cited no authority for the item-specificity requirement, presented by Cigna in its capacity as a durable medical equipment Medicare Administrative Contractor ("MAC").
Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED.R.Civ.P. 56(a). The movant "bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317,
After the movant has met its burden under Rule 56(c), the burden shifts to the nonmoving party who "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The non-moving party "may not rely merely on allegations or denials in its own pleading," but instead must come forward with "specific facts showing a genuine issue for trial." Fed. R.Civ.P. 56(e); Matsushita, 475 U.S. at 587, 106 S.Ct. 1348. "Thus, to survive summary judgment, the nonmoving party must offer more than a mere scintilla of evidence for its position; indeed, the non-moving party must make a showing sufficient to permit the jury to reasonably find on its behalf." Urquilla-Diaz, 780 F.3d at 1050 (citing Brooks v. Cnty. Comm'n of Jefferson Cnty., Ala., 446 F.3d 1160, 1162 (11th Cir.2006)); Allen v. Tyson Foods, Inc., 121 F.3d 642, 646 (11th Cir.1997) (quoting Matsushita, 475 U.S. at 587, 106 S.Ct. 1348) ("Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial.").
In evaluating a motion for summary judgment, the Court considers the evidence in the record, "including depositions, documents, electronically stored information, affidavits or declarations, stipulations. . ., admissions, interrogatory answers, or other materials. . . ." FED. R. Civ. P. 56(c)(1)(A). The Court "must view all the evidence and all factual inferences reasonably drawn from the evidence in the light most favorable to the nonmoving party, and must resolve all reasonable doubts about the facts in favor of the non-movant." Rioux v. City of Atlanta, 520 F.3d 1269, 1274 (11th Cir.2008) (quotation marks and citations omitted). However, "the existence of a difficult or complicated question of law, when there is no issue as to the facts, is not a bar to a summary judgment." Shotz v. City of Plantation, Fla., 344 F.3d 1161, 1166 (11th Cir.2003) (quoting Ammons v. Franklin Life Ins. Co., 348 F.2d 414, 417 (5th Cir.1965)).
The Court notes that the Parties are not in complete accord regarding the operative facts, but their disputes either do not pose genuine issues material to the resolution of the motion or are not actually factual in nature. An example of a disputed, but not material, factual issue is the business relationship between Defendants (Holdings and Lincare) and two entities not mentioned or named as parties in the SAC (Med4Home, Inc. and Reliant Pharmacy Services) and how these non-parties participated in the alleged scheme of false billing. (See, e.g., DE 75 ¶ 4; DE 101 ¶ 4; DE 199 ¶ 4; DE 207 ¶ 4 (concerning phone numbers of Med4Home, Inc. and Reliant Pharmacy Services customers)).
First, allegations regarding non-parties Med4Home, Inc. and Reliant Pharmacy Services have nothing to do with the exemplars. (See generally SAC DE 43; DE 199 Additional Facts ¶¶ 13, 15). Second, claims regarding the previously unidentified entities Med4Home, Inc. and Reliant Pharmacy Services were not pleaded with specificity in the SAC. (See generally SAC DE 43). As discussed at the June 19, 2014 and March 19, 2015 status conferences, the pleadings are closed and the Court does not find "extraordinary" grounds justifying the inclusion of additional
Similarly, the Court need not dwell on the legal disputes presented in the Parties' statements of facts. An example of a non-factual dispute in the statements of material facts is the Parties' competing interpretation of what weight federal agencies place on tax identification numbers ("TIN" or "EIN") in determining whether an entity is a separate "supplier" under the applicable regulations. (DE 75 ¶ 8; DE 101 ¶ 8; DE 199 ¶ 8; DE 207 ¶ 8). It is an undisputed fact that Diabetic Experts is a d/b/a of Lincare. (DE 75 ¶ 6; DE 101 ¶ 6). However, Relators dispute that Lincare and Diabetic Experts are the same supplier as that term is used in the federal regulations governing Medicare supplier eligibility and billing. Id. This is a legal—not factual—issue. Accordingly, there is no genuine issue of material fact preventing the Court from deciding the motion for summary judgment on the six exemplars as a matter of law.
Before turning to the merits, the Court addresses whether Relators' expert report is appropriately considered with the motion for summary judgment on the exemplars. Federal Rule of Evidence 704 allows an expert to "testify as to his opinion on an ultimate issue of fact," but an expert may not tell the judge or jury what result to reach under the law. Montgomery v. Aetna Cas. & Sur. Co., 898 F.2d 1537, 1541 (11th Cir.1990) (finding error in district court's admission of expert testimony concerning legal conclusions). The Court determines the applicable law and expert opinions regarding the legal standards applicable to a case must be excluded. City of Tuscaloosa v. Harcros Chems., Inc., 158 F.3d 548, 565 (11th Cir.1998); United States v. Hunter, 373 Fed.Appx. 973, 978 (11th Cir.2010) ("The witness also cannot testify to the legal implications of conduct because the court must be the jury's only source of law.") (citing Montgomery, 898 F.2d at 1541). Since Relators' expert Charles Waldhauser's report consists primarily of impermissible legal
Therefore, Defendants' motion to strike Waldhauser's expert report (DE 104) is
The False Claims Act "was enacted in 1863 with the principal goal of stopping the massive frauds perpetrated by large private contractors during the Civil War." Vt. Agency of Natural Res. v. Stevens, 529 U.S. 765, 781, 120 S.Ct. 1858, 146 L.Ed.2d 836 (2000) (quotations omitted); see also Ragsdale v. Rubbermaid, Inc., 193 F.3d 1235, 1237 n. 1 (11th Cir.1999) ("The purpose of the Act, then and now, is to encourage private individuals who are aware of fraud being perpetrated against the government to bring such information forward.") (citation omitted). The False Claims Act imposes liability on any person who, inter alia:
31 U.S.C. § 3729.
The False Claims Act does not deal with all non-compliance and "[t]he
False Claims Act liability should not be invoked lightly; it is "not a vehicle to police technical compliance with complex federal regulations." United States ex rel. Hobbs v. MedQuest Assocs., Inc., 711 F.3d 707, 717 (6th Cir.2013) (quoting United States ex rel. Williams v. Renal Care Grp., Inc., 696 F.3d 518, 532 (6th Cir.2012)). Nonetheless, "a process tainted by fraud impairs the integrity of the government program." United States ex rel. Sharp v. Consol. Med. Transp., Inc., Case No. 96 C 6502, 2001 WL 1035720, at *8 (N.D.Ill.2001). Accordingly, in Clausen, the Eleventh Circuit sought a balanced approach: "[t]he False Claims Act does not create liability merely for a health care provider's disregard of Government regulations or improper internal policies unless, as a result of such acts, the provider knowingly asks the Government to pay amounts it does not owe." Clausen, 290 F.3d at 1311. The Eleventh Circuit recently reiterated that liability under the False Claims Act does not arise solely from "the disregard of government regulations or failure to maintain proper internal procedures." Urquilla-Diaz, 780 F.3d at 1045, 1051-52 (quoting Corsello v. Lincare, Inc., 428 F.3d 1008, 1012 (11th Cir.2005)); see also Jallali v. Nova Se. Univ., Inc., 486 Fed.Appx. 765, 766 (11th Cir.2012) (same). And the Second Circuit admonished that the False Claims Act is not a "blunt instrument" to be used for every false certification of compliance
In Count I, Relators argue that Diabetic Experts knowingly submitted false claims for payment—a so-called presentment claim—because the claims arose out of calls with beneficiaries that violated the unsolicited telephone contact rules and because Diabetic Experts used AOBs that could only be used by Lincare. In Count II, Relators argue that Holdings knowingly provided Diabetic Experts with improper sales leads generated from Holdings' database of patient information and Diabetic Experts knowingly used those leads to make the unsolicited sales calls alleged in Count I; and Holdings knowingly provided the purportedly false AOBs to Diabetic
Thus, as to Count I, the Court must determine whether Diabetic Experts had the requisite scienter when it called the six beneficiaries and used the Lincare AOBs to submit claims following those calls; and for Count II, whether Holdings and Diabetic Experts had the requisite scienter when they shared the patient information database and allegedly used false AOBs. For the AOBs to have been "false," either the six exemplar beneficiaries must not have had adequate notice that Diabetic Experts would submit their claim or the items provided must have been new pieces of equipment such that the regulations would preclude using the old AOBs.
In order to succeed on a presentment claim, a relator must prove three things: (1) a false or fraudulent claim (2) was presented, or caused to be presented, by the defendant to the United States for payment or approval (3) with knowledge that the claim was false. R & F Props., 433 F.3d at 1355 (citing 31 U.S.C. § 3729(a)(1) (pre-FERA); 31 U.S.C. § 3729(a)(1)(A) (post-FERA)). In order to prevail on a make-or-use claim, a relator must establish:
A factually false claim occurs, for example, when a supplier submits a claim that misidentifies the goods supplied or requests reimbursement for goods that it never provided. See Mikes, 274 F.3d at 697. Simply put, the supplier falsely bills the government for something not received. See, e.g., United States ex rel. Kirk v. Schindler Elevator Corp., 601 F.3d 94, 114 (2d Cir.2010), rev'd on other grounds 563 U.S. 401, 131 S.Ct. 1885, 179 L.Ed.2d 825 (2011). Courts agree that
Although Relators claim in their supplemental facts that Defendants' phone calls to Medicare beneficiaries regarding diabetic supplies "result[ed] in overutilization and frequent overbilling of Medicare," this claim is not supported by the record. (DE 199 Additional Facts ¶ 3). The citations
A legally false claim is actionable when the supplier has falsely certified compliance with the applicable statutes and regulations, but nevertheless has submitted a claim. Mastej, 591 Fed.Appx. at 705-06. "The violation of the regulations and the corresponding submission of claims for which payment is known by the claimant not to be owed make the claims false." McNutt ex rel. United States v. Haleyville Med. Supplies, Inc., 423 F.3d 1256, 1259 (11th Cir.2005) (affirming denial of a motion to dismiss in anti-kickback statute case and finding that alleged kickbacks disqualified the defendants' medical services from reimbursement under the Medicare program). The Eleventh Circuit recognizes both varieties of false certification: express false certification and implied false certification. See Keeler, 568 Fed.Appx. at 798-99; Urquilla-Diaz, 780 F.3d at 1045 (expressly adopting the false certification theory of liability).
Although only implied certification is at issue here, it is more easily understood in juxtaposition with express certification. Express certification means that the supplier has certified compliance with applicable laws and regulations as part of the claims submission process. Keeler, 568 Fed.Appx. at 798-99; Mastej, 591 Fed. Appx. at 702, 705 n. 19 (discussing express certification in context of make-or-use claims). Verification of compliance with applicable laws and regulations is not always expressly required as part of the submission of claims for payment; sometimes it may only be an implied condition of payment or a condition of eligibility to participate in Medicare. Urquilla-Diaz, 780 F.3d at 1044-45; McNutt, 423 F.3d at 1259. As the Court explained in Keeler, an implied certification theory "recognizes
There is no allegation in the SAC that Holdings or Diabetic Experts expressly certified compliance with supplier standards when submitting the six claims at issue.
Courts limit implied false certification claims to situations where compliance is the sine qua non of receipt of federal funding. Urquilla-Diaz, 780 F.3d at 1052; United States ex rel. Osheroff v. Tenet Healthcare Corp., Case No. 09-22253-CIV, 2013 WL 1289260, at *4 (S.D.Fla. Mar. 27, 2013); United States ex rel. Hendow v. Univ. of Phoenix, 461 F.3d 1166, 1172 (9th Cir.2006); see also McNutt, 423 F.3d at 1259; Clausen, 290 F.3d at 1311. In Mikes v. Straus, an oftcited, pre-FERA case developing what has come to be called the condition of payment analysis, the Second Circuit observed that it would be anomalous for an act aimed at retrieving ill-gotten funds to attach liability to false certifications, "when the alleged noncompliance would not have influenced the government's decision to pay." Mikes, 274 F.3d at 697.
Although the telephone contact statute and regulation are enforced in slightly different ways, the Court assumes for purposes of this discussion that certification of compliance with the supplier standards affects the government's decision to pay claims and therefore does not undertake the Mikes analysis. (See Supplier Enrollment Application DE 75-2 at 34 (conditioning payment of claims upon the "the claim and the underlying transaction complying with [Medicare] laws, regulations, and program instructions . . . and on the supplier's compliance with all applicable conditions of participation in Medicare.")).
Inasmuch as the Court assumes that the condition of payment or materiality element of the False Claims Act analysis is satisfied, the Court must determine whether the six exemplars are instances where Defendants submitted claims to the government, certified compliance, or made or used records with knowledge: 1) that Defendants were in violation of the unsolicited telephone contact proscription; or 2) that the AOBs did not meet Medicare requirements. Defendants argue that Relators' theory of liability rests on two faulty premises: 1) that Lincare and Diabetic Experts are two distinct legal suppliers for the purposes of providing DMEPOS supplies to beneficiaries and submitting claims for payment; and 2) that the diabetic testing supplies provided to the six exemplar beneficiaries are new pieces of "equipment." The Court considers these arguments in turn.
The regulatory identity of the supplier is critical to the disposition of the instant motion. The Court starts from an uncontroverted fact sworn to by Holdings' Director of Taxes: there is no separate Diabetic Experts of America company, affiliate, or entity (DE 75 ¶ 12; Crisp Aff., DE 75-1 ¶ 16); Diabetic Experts is a fictitious name used by Lincare (DE 75 ¶ 12).
The Court must determine whether, pursuant to the Medicare statutes and regulations, Diabetic Experts is a separate and independent supplier from Lincare. If Lincare and Diabetic Experts are the same supplier, then the telephone contacts with the six exemplar beneficiaries were not violations; Lincare sold each a covered item of DMEPOS in the fifteen months prior to the billing at issue. Likewise, if they are the same supplier, Diabetic Experts' submission of a claim based on an AOB
The Court starts with the statutory text and proceeds from the "understanding
"The first rule in statutory construction is to determine whether the language at issue has a plain and unambiguous meaning with regard to the particular dispute." Shotz, 344 F.3d at 1167 (citation and internal quotation omitted). Similarly, when construing a regulation, a court looks to the "regulation's plain language" and may consider "other indications of the Secretary's intent at the time of the regulation's promulgation." Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512, 114 S.Ct. 2381, 129 L.Ed.2d 405 (1994); see also Urquilla-Diaz, 780 F.3d at 1053 (citing, without discussing degree of deference, agency responses to commentary published along with final regulation in the Federal Register).
Statutes may lack sufficient clarity for practical application and "[e]xecutive actors often must interpret the enactments Congress has charged them with enforcing and implementing." Gonzales v. Oregon, 546 U.S. 243, 255, 126 S.Ct. 904, 163 L.Ed.2d 748 (2006). Accordingly, courts defer when the "regulations g[i]ve specificity to a statutory scheme the Secretary was charged with enforcing." Id. at 257, 126 S.Ct. 904 (internal citation omitted). In general, agency interpretations are "entitled to respect . . . to the extent that those interpretations have the power to persuade." R & F Props., 433 F.3d at 1357 (internal citation and quotation marks omitted); Wis. Dept. of Health & Family Servs. v. Blumer, 534 U.S. 473, 497, 122 S.Ct. 962, 151 L.Ed.2d 935 (2002) (agency's position, even if only presented in a proposed rule, "warrants respectful consideration.").
At least three levels of deference are relevant to this discussion of the Medicare statutes and regulations. Chevron deference applies to agency interpretations of ambiguous statutes; Auer deference applies to agency interpretations of the agency's own ambiguous regulations; and Skidmore deference applies to less formal agency guidance documents and opinions. See Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 843-44, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984); Auer v. Robbins, 519 U.S. 452, 461, 117 S.Ct. 905, 137 L.Ed.2d 79 (1997); Skidmore v. Swift & Co., 323 U.S. 134, 65 S.Ct. 161, 89 L.Ed. 124 (1944); United States v. Mead Corp., 533 U.S. 218, 234-35, 121 S.Ct. 2164, 150 L.Ed.2d 292 (2001); Ramos-Barrientos v. Bland, 661 F.3d 587, 598 (11th Cir.2011) ("Even if these interpretations [of the regulations] are not entitled to deference under Chevron or Auer, they are persuasive under Skidmore."); Arriaga v. Fla. Pac. Farms, L.L.C., 305 F.3d 1228, 1238 (11th Cir.2002) (recognizing that Skidmore standard applicable to
Under Chevron, courts give agency interpretations of an ambiguous statute "controlling weight unless they are arbitrary, capricious, or manifestly contrary to the statute." Chevron, 467 U.S. at 843-44, 104 S.Ct. 2778. Although agency interpretations of ambiguous regulations contained in policy statements, manuals, and enforcement guidelines are not entitled to the force of law, R & F Props., 433 F.3d at 1357 (citing Christensen v. Harris County, 529 U.S. 576, 587, 120 S.Ct. 1655, 146 L.Ed.2d 621 (2000)), they are also "controlling unless plainly erroneous or inconsistent with the regulation." Auer, 519 U.S. at 461, 117 S.Ct. 905. Under Skidmore, a court grants weight to an agency interpretation according to its "power to persuade." Skidmore, 323 U.S. at 140, 65 S.Ct. 161. In Sarasota Mem'l Hosp. v. Shalala, 60 F.3d 1507 (11th Cir. 1995), the Eleventh Circuit observed that deference to an agency interpretation is all the more appropriate when it concerns a complex and highly technical regulatory program, like Medicare, "in which the identification and classification of relevant criteria necessarily require significant expertise and entail the exercise of judgment grounded in policy concerns." Id. at 1511 (citations and internal quotation omitted); accord Nat'I Cable & Telecomms. Ass'n v. Brand X Internet Servs., 545 U.S. 967, 1002-03, 125 S.Ct. 2688, 162 L.Ed.2d 820 (2005) (reaffirming the principle of judicial deference to agency interpretations on questions involving subject matter that is technical, complex, and dynamic, because the agency is in a far better position to address such questions than the courts are); see also Rehabilitation Ass'n of Va., Inc. v. Kozlowski, 42 F.3d 1444, 1450 (4th Cir.1994) (wryly observing that the various statutes and regulations governing Medicare are "among the most completely impenetrable texts within human experience").
The Secretary of Health and Human Services is charged by Congress with administering the Medicare statute. See Almy v. Sebelius, 679 F.3d 297, 299 (4th Cir.2012) (citing 42 U.S.C. § 1395ff(a)(1)); see also 42 U.S.C. § 1395hh. To that end, "Congress vested in the Secretary large rulemaking authority" and the Medicare Act authorizes the Secretary to issue regulations "defining reimbursable costs and otherwise giving content to the broad out-lines of the Medicare statute." Sebelius v. Auburn Reg'l Med. Ctr., ___ U.S. ___, 133 S.Ct. 817, 826, 184 L.Ed.2d 627 (2013); Tex. Alliance for Home Care Servs. v. Sebelius, 681 F.3d 402, 405 (D.C.Cir.2012) (citing Thomas Jefferson Univ., 512 U.S. at 506-07, 114 S.Ct. 2381). CMS, in turn, is given primary responsibility for regulating Medicare. See R & F Props., 433 F.3d at 1351.
As the Court explained in Chevron, "[t]he power of an administrative agency to administer a congressionally created. . . program necessarily requires the formulation of policy and the making of rules to fill any gap left, implicitly or explicitly, by Congress." Chevron, 467 U.S. at 842, 104 S.Ct. 2778. CMS has the relevant expertise and its published guidance and responses to specific comments—which are a byproduct of the rulemaking process—regarding supplier identification and standards should be accorded due weight. See, e.g., United States ex rel. Smith v. Boeing Co., Case No. CIV.A. 05-1073-MLB, 2014 WL 5025782, at *24
Nonetheless, judicial deference to CMS' interpretation is not unlimited. It does not extend, for example, to an additional layer of analysis, such as when a Medicare contractor offers a non-binding interpretation of Medicare compliance manuals. See Elgin Nursing & Rehab. Ctr. v. U.S. Dept. of Health & Human Servs., 718 F.3d 488, 493 (5th Cir.2013) (declining to accord deference to an agency's "interpretation of its manual interpreting its interpretive regulation."). And substantive changes in CMS manuals, interpretative rules, and general guidelines are not applied retroactively. See 42 U.S.C. § 1395hh(e). These limits are consonant with the recent Supreme Court decision in Young v. United Parcel Serv., Inc., ___ U.S. ___, 135 S.Ct. 1338, 191 L.Ed.2d 279 (2015), where the Court reaffirmed the principle that agency rulings, interpretations, and opinions are accorded persuasive weight due in part to their "consistency." Young, 135 S.Ct. at 1352.
In the final rule establishing the supplier standards for DMEPOS suppliers, CMS
In order to describe the relationship between the parent organizational health care providers and the separate physical locations at which durable medical equipment is actually dispensed to patients under the NPI regulations, CMS referred to the different components and physical locations as "subparts." HIPAA Administrative Simplification: Standard Unique Health Identifier for Health Care Providers, 69 Fed.Reg. 3434-01, 3438 (Jan. 23, 2004) (to be codified at 45 C.F.R. Part 162). Furthermore, later interpretation from CMS is consistent with the understanding that DMEPOS suppliers like Lincare may be:
(CENTERS FOR MEDICARE AND MEDICAID SERVICES, MEDICARE LEARNING NETWORK, THE NATIONAL PROVIDER IDENTIFIER (NPI): WHAT YOU NEED TO KNOW (2012) DE 75-3 at 85). With regard to subparts, Medicare requires suppliers to obtain an NPI for any subpart "that would be a covered health care provider if it were a separate legal entity." 45 C.F.R. § 162.410(a)(1); (DE 75 ¶ 14).
The allegations of non-compliance in the SAC depend on the premise that Diabetic Experts is not a subpart of Lincare, but is a separate supplier altogether. If that premise is incorrect, there is no cognizable violation stated against Holdings in Count II or against Diabetic Experts in Counts I or II for the telephone contacts and use of Lincare's AOBs. After a thorough review of the record, the Court does not view the question of whether Lincare and Diabetic Experts are the same entity for the purposes of Medicare to be a question of disputed fact. It is undisputed that Diabetic Experts is a d/b/a of Lincare. (DE 75 ¶ 6; DE 101 ¶ 6). Thus, whether Lincare and Diabetic Experts are separate suppliers for purposes of False Claims Act liability turns on an analysis of the Medicare statutes, regulations, rules, and related commentary and regulatory history.
Defendants' position that Diabetic Experts is not a separate legal entity from Lincare is consistent with both the agency discussion in the final rule establishing the NPI and the agency interpretation of that rule. Relators have not presented the Court with any authority suggesting that Diabetic Experts is anything other than a subpart of Lincare. The administrative appeal decision cited by Relators stands for the unremarkable idea that all Medicare supplier locations must comply with the Medicare supplier standards. See PSI Premier Specialties, Inc. d/b/a Med. Express PSI, Dept. of Health and Human Servs. Depart. Appeals Board Decision No. CR2833 (June 18, 2013).
Lincare is a DMEPOS supplier that at one time sold oxygen supplies to the six exemplar beneficiaries. Diabetic Experts is not a separate supplier, but is a d/b/a of Lincare that sells diabetic testing supplies; "[d]oing business as" means a company is using an assumed name, "it signals that the business may be licensed or incorporated under a different name." Black's Law Dictionary 454 (9th ed.2009); see also 8 Fletcher Cyclopedia of the Law of Private Corporations § 3831 (revised ed. 1992 & Supp.1999) ("[U]sing d/b/a or `doing business as' to associate an assumed or fictitious name with a corporation does not, without more, create a separate legal entity different from the corporation."); Snowden v. CheckPoint Check Cashing, 290 F.3d 631, 634 n. 2 (4th Cir.2002) (noting that a trade name is not a separate legal entity); Bauer v. Pounds, 61 Conn.App. 29, 762 A.2d 499, 503 (2000) ("It appears well settled that the use of a fictitious or assumed business name does not create a separate legal entity and that the designation d/b/a is merely descriptive of the person or corporation who does business under some other name.") (internal quotation marks, ellipses, and alterations omitted); Am. Express Travel Related Servs. Co. v. Berlye, 202 Ga.App. 358, 414 S.E.2d 499, 501 (1991) ("The use of d/b/a or `doing business as' to associate a tradename with
To support the allegation that Lincare and Diabetic Experts submit claims to Medicare as separate suppliers enrolled in the Medicare program, the SAC and Relators' statements of fact identify various differences between certain business practices of Lincare and Diabetic Experts. (See SAC DE 43; DE 101; DE 199). Diabetic Experts sells a different type of product than Lincare. Diabetic Experts "operates independently from Lincare" and "sells and markets completely separate lines of products;" Lincare sells oxygen supplies while Diabetic Experts sells diabetic supplies. (DE 101 ¶¶ 12, 21). Lincare does not have other subparts that sell diabetic supplies: "[n]o Lincare, Inc. location, other than Diabetic Experts, however, provides diabetic testing equipment or supplies." (DE 101 Additional Facts ¶ 8; DE 199 Additional Facts ¶ 10). Diabetic Experts filled out their claims forms with the name Diabetic Experts, Diabetic Experts' unique identifying numbers (e.g., the Diabetic Experts NPI), and Diabetic Experts' unique account number. (DE 101 ¶¶ 6, 12; DE 101 Additional Facts ¶¶ 9, 11, 16; DE 199 Additional Facts ¶¶ 6, 11, 15, 26).
However, Diabetic Experts supervisors took direction from and ultimately answered to Lincare regional managers. (SAC DE 43 ¶ 43). Furthermore, while it is undisputed that Lincare and Diabetic Experts maintain different account numbers for billing beneficiaries and that payments from Medicare are routed to different bank accounts for Lincare and Diabetic Experts, (DE 101 Additional Facts ¶ 14; DE 199 Additional Facts 2, 26), the revenue from Diabetic Experts is all reported to the IRS under Lincare's EIN. (DE 101 ¶ 12). Similarly, although the six exemplar claims were submitted pursuant to Diabetic Experts' EDI transmission agreements, (DE 199 Additional Facts ¶¶ 15, 16), those EDI transmission agreements reveal that the entity identified as responsible for the claim is "Lincare, Inc., d/b/a Diabetic Experts of America." (DE 195-7 at 4; DE 199 Additional Facts ¶ 16). Likewise, Diabetic Experts' correspondence with the MACs confirms that Lincare does business as Diabetic Experts. (See, e.g., DE 195-8 at 2). Against this factual backdrop, the Court addresses the pertinent Medicare regulations and agency interpretation regarding DMEPOS suppliers.
First, along with the NPI and NSC number, the EIN is the "basic identification number that [CMS] use[s] to distinguish between suppliers." Medicare Program; Additional Supplier Standards, 65 Fed.Reg. 60366-01, 60367 (Oct. 11, 2000) (to be codified at 42 C.F.R. Part 424). CMS expressly permits a DMEPOS supplier to enroll multiple "practice locations" using a single tax identification number. See Medicare Program; Establishing Additional Medicare Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Supplier Enrollment Safeguards, 75 Fed.Reg. 52629-01, 52632 (Aug. 27, 2010) (to be codified at 42 C.F.R. Part 424). But this carries a serious risk for a large supplier organization: "If the DMEPOS supplier makes the business decision
Second, simply having a unique NPI does not make Diabetic Experts a separate DMEPOS supplier. This is because, "[t]he health care provider numbers sometimes represent the actual health care provider that furnishes health care, but may also represent the health care provider's service locations, corporate headquarters, specialties, pay-to arrangements, or contracts." HIPAA Administrative Simplification: Standard Unique Health Identifier for Health Care Providers, 69 Fed.Reg. 3434-01, 3436-37 (Jan. 23, 2004) (to be codified at 45 C.F.R. Part 162). As discussed above, NPPES may assign an NPI "to a subpart of a health care provider," on request "if the identifying data for the subpart are unique." 45 C.F.R. § 162.408(a)(1); § 162.408(g). Lincare did precisely this for Diabetic Experts and was given an NPI by NPPES. (DE 75 ¶ 15). The regulations required Diabetic Experts to obtain an NPI in order to bill Medicare for DMEPOS provided to beneficiaries. See 45 C.F.R. § 162.410. Lacking an NPI is proof that a location cannot properly bill Medicare, but having an NPI does not prove that an entity is a separate supplier for the purposes of billing Medicare. The fact of an NPI shows that an entity can bill Medicare, but it does not explain why that entity can do so. And the same is true for obtaining NSC numbers. See 42 C.F.R. § 424.57 (providing that a subpart with unique identifying data could also apply for an NSC number if it met the requirements for DMEPOS suppliers generally). A subpart seeking an NSC number is subjected to review, after which NSC notifies the subpart regarding its enrollment decision and assigns an NSC number to it.
Moreover, CMS' responses to comments on the NPI rule support the conclusion that Diabetic Experts is a subpart of Lincare, and not a separate supplier. CMS recognized that Congress intended to accommodate health care providers that "operate at multiple locations and/or provide multiple types of health care services, and intended that the identifier standard take these variations in circumstance into account. We accommodate this language by requiring covered health care providers to obtain NPIs for subparts of their organizations." HIPAA Administrative Simplification: Standard Unique Health Identifier for Health Care Providers, 69 Fed.Reg. 3434-01, 3438 (Jan. 23, 2004) (to be codified at 45 C.F.R. Part 162). CMS stated in no uncertain terms, "[t]he subparts are simply parts of the legal entity. The legal entity—the covered entity—is ultimately responsible." Id. at 3439. When the regulations were crafted, CMS considered the creation of sub-IDs under each NPI such that the healthcare provider "might use the sub-IDs for different physical locations [or] subparts." Id. at 3440. Ultimately, it decided not to create a sub-ID system and instead allowed subparts to obtain an NPI. Id. Lincare organized this segment of its business consistently with the 2004 agency interpretation. Lincare has "over 800 subpart locations operating throughout the United States, each with its own unique NPI number." (Murphy Aff. DE 195-6 ¶ 9).
Finally, the supplier standards, state statutes, and federal regulations mandate enrollment or registration of different physical locations. See 42 C.F.R. § 424.57(b)(c). Diabetic Experts operates in Missouri and had Lincare failed to register its d/b/a, it would have run afoul of the standards requiring enrollment of each separate physical location and requiring the supplier to operate its business in compliance with applicable state licensure and
Therefore, a unique name, NPI, or NSC number for Diabetic Experts does not mean that Diabetic Experts is a separate supplier, but is consistent with Defendants' business decision to enroll Diabetic Experts as a subpart of Lincare. The fact that Diabetic Experts operates in a different location than Lincare does not undercut the notion that Diabetic Experts is a subpart; it is one of the reasons Diabetic Experts was required to obtain its own NPI and NSC numbers. See 42 C.F.R. § 424.57(b) (providing that the parent supplier must enroll each "separate physical location it uses to furnish Medicare-covered DMEPOS."). The Subpart Paper explicitly set forth CMS' position regarding unique Medicare numbers for subparts: "Medicare regulations require that each practice location of a supplier of DMEPOS (if it has more than one) must, by law, be separately enrolled in Medicare and have its own unique Medicare identification number." Subpart Paper at 8. The new Missouri location was a subpart of the existing supplier and the Medicare 855S supplier enrollment form, without which Diabetic Experts could not apply to be eligible to bill Medicare, bears the name "Lincare, Inc., d/b/a Diabetic Experts of America." (DE 195-6 at 20).
Relators argue that "it is clear that the companies [
It is undisputed that Lincare sold an item of DMEPOS to the exemplar beneficiaries within the fifteen months leading up to the phone calls in question. (DE 75 ¶ 20; DE 100 at 6). This situation fits the exception contained in the unsolicited telephone contact statute. Title 42 U.S.C. § 1395m(a)(17)(A)(iii) expressly provides that a supplier may make telephone contact with a beneficiary "regarding the furnishing of a covered item other than a covered item already furnished to the individual, [if] the supplier has furnished at least 1 covered item to the individual during the 15-month period preceding the
Nevertheless, Relators direct the Court to guidance from CMS that they argue clearly supports their view on the telephone contact issue. The guidance they rely upon is inapposite for three reasons. First, CMS published the guidance in response to frequently asked questions concerning the revised standards for DMEPOS suppliers. (DE 100-7 at 17-19). This FAQ went into effect on September 27, 2010.
The AOBs used by Diabetic Experts were originally given to Lincare. (DE 75 ¶¶ 33-37). Maintaining those signed statements on file allowed Lincare to submit claims for payment to the government. The AOBs were effective indefinitely and there is no evidence that the exemplar beneficiaries withdrew their consent before Medicare was billed by Diabetic Experts for the DMEPOS provided. See 42 C.F.R. § 424.40(d). For the reasons discussed above, Lincare and Diabetic Experts are one supplier for the purposes of Medicare
It should be noted that the AOBs signed by the exemplar beneficiaries were not identical. (See DE 75-2 at 73, 78, 83, 88, 93, and 98). Some of the AOBs refer to Lincare and others refer to "supplier and its affiliates." (Id. at 78, 88). Nevertheless, all six of the exemplar beneficiaries' AOBs contain clear language providing for services to be rendered by "Lincare" or "Supplier." (DE 75 ¶¶ 33-34; DE 101 ¶¶ 33-34 ("Undisputed as to the content of the forms executed by the six beneficiaries")). Inasmuch as Lincare and Diabetic Experts are the same supplier, there was adequate notice of this use of the Lincare AOBs by Diabetic Experts and there was no per se violation simply because the name Diabetic Experts did not appear on them. See 42 C.F.R. § 424.36(a) (providing that a supplier may maintain the customer's signature on file using a form "that contains adequate notice to the beneficiary. . . that the purpose of the signature is to authorize a provider or supplier to submit a claim to Medicare."). In addition, Holdings did not make or use a false record by allowing Diabetic Experts to access or use the AOBs.
Relators argue that even if Diabetic Experts were permitted to use the Lincare AOBs, those AOBs could not be used for the exemplar beneficiaries' diabetic testing supplies. Although an AOB may be effective and maintained on file indefinitely, a new AOB is required for a new piece of "equipment." 42 C.F.R. § 424.40(d)(2) (providing that "a new statement is required if another item of equipment is rented or purchased."). Relators argue that Defendants' construction of the new AOB requirement is impermissibly narrow and, in the alternative, that the testing strips, lancets, disposable lancet devices, and testing solution provided to the exemplar beneficiaries were new equipment that would require a new AOB. Defendants rejoin that the diabetes testing supplies were not new pieces of equipment, because they were not "equipment" at all.
The dispute between Relators and Defendants concerning the supplies and equipment distinction is best understood through a Chevron framework. In the two-step Chevron analysis, a court first determines whether Congress has spoken to the precise question at issue. Chevron, 467 U.S. at 842-43, 104 S.Ct. 2778. As the Eleventh Circuit recently explained "[i]f Congress' intent is clear, we, as well as the agency, must give effect to the unambiguously expressed intent of Congress." Alas-Murcia v. U.S. Atty. Gen., 589 Fed. Appx. 441, 442 (11th Cir.2014) (internal quotation and citation omitted). Relators argue that the "express statutory definition of DME provided by Congress" is found in 42 U.S.C. § 1395x and no further analysis is warranted. (DE 100 at 18). The Court does not agree. See United States v. Baxter Intern., Inc., 345 F.3d 866, 886 (11th Cir.2003) (ambiguity may be found where a statute has more than one plausible interpretation).
"[A]lthough the statute includes a non-exclusive statutory list of representative medical equipment," it does not specifically define the term DME. Currier v. Leavitt, 490 F.Supp.2d 1, 3 (D.Me.2007) (citation and internal quotation omitted); 42 U.S.C. § 1395x(n) (listing "iron lungs, oxygen tents, hospital beds, and wheelchairs" along with "blood-testing strips and blood glucose monitors"). This nonexclusive list is included within the broad category of DME. See Currier, 490 F.Supp.2d at 3. Title 42 U.S.C. § 1395x(n) does not directly address how to determine whether a covered item of DME is considered a piece
If "Congress has not directly addressed the matter or the statute is ambiguous with respect to the matter, [courts] move to Chevron's second step." Alas-Murcia, 589 Fed.Appx. at 442-43. In the second step, courts "do not simply impose [their] own construction of the statute, but instead ask whether the agency's answer is based on a permissible construction of the statute." Fla. Med. Ctr. of Clearwater, Inc. v. Sebelius, 614 F.3d 1276, 1281 (11th Cir.2010). Here, there is no suggestion or argument that the regulations were arbitrarily created by the Secretary or CMS or that they are an impermissible construction of the statute. Accordingly, the Court gives them controlling weight. See Chevron, 467 U.S. at 843-44, 104 S.Ct. 2778.
When construing a regulation, the Court looks to the "regulation's plain language." Thomas Jefferson Univ., 512 U.S. at 512, 114 S.Ct. 2381. Relators argument that diabetic testing strips are equipment by virtue of being listed in 42 U.S.C. § 1395x's description of DME is unavailing because "[t]he regulatory definition of DME focuses not on examples, but rather on qualitative criteria." Warder v. Shalala, 149 F.3d 73, 76 (1st Cir.1998). The regulations clarify the statute by explaining that supplies are those nondurable items "necessary for the effective use" of durable medical equipment. 42 C.F.R. § 414.402(2). "Durable medical equipment means equipment, furnished by a supplier" that "can withstand repeated use." 42 C.F.R. § 414.202(1). A recent proposed rule in the related area of Medicaid benefits, confirms this interpretation of the Medicare distinction between supplies and equipment:
Medicaid Program; Face-to-Face Requirements for Home Health Services; Policy Changes and Clarifications Related to Home Health, 76 Fed.Reg. 41032-01, 41034 (July 12, 2011) (proposed rule clarifying 42 C.F.R. Part 440) (emphasis added); Wis. Dept. of Health & Family Servs. v. Blumer, 534 U.S. at 497, 122 S.Ct. 962 (a proposed rule expressing agency position "warrants respectful consideration.").
It is beyond peradventure that the testing strips, lancets, disposable lancet devices, and testing solution cannot withstand repeated use. Therefore, they are not pieces of equipment. Rather, they are the supplies necessary for the effective use of a blood glucose home testing monitor. As a result, the AOBs used in the six exemplar transactions continued to be effective because Defendants did not send
Scienter is a necessary element of a claim under both 31 U.S.C. § 3729(a)(1)(A) and (B). See also Urquilla-Diaz, 780 F.3d at 1045. A court may enter summary judgment in favor of a defendant when there is no evidence in the record to support a relator's allegation that the defendant knew or should have known that its policies or practices violated the applicable statutes and implementing regulations. Id.
The Eleventh Circuit recently discussed the False Claims Act's "nuanced" scienter requirement in considerable depth and detail. The decision in Urquilla-Diaz cogently explains why the Court cannot find Defendants liable for the claims submitted and records made in connection with the six exemplars:
Urquilla-Diaz, 780 F.3d at 1058.
The Eleventh Circuit further observed that deliberate ignorance requires "even more culpability" than that needed to constitute reckless disregard. Urquilla-Diaz, 780 F.3d at 1058 n. 15. Accordingly, a court that finds a defendant did not recklessly disregard its obligations and duties also must conclude that the defendant was not deliberately ignorant of violations to the relevant regulations.
Relators' best evidence regarding Diabetic Experts' knowledge that their course of conduct might result in false claims concerns only the AOBs and not compliance with the unsolicited telephone contact proscription. Relators point to a March 2009 email where an employee expressed concern that Diabetic Experts had received AOBs from other "Lincare centers" that do not "meet guidelines." (DE 102-5 at 2). But this exchange focused on deficiencies in the AOBs having nothing to do with Diabetic Experts practice of using "AOBs from other Lincare centers in order to ship/bill the diabetic supplies."
Relators also make much of an October 2009 email between Defendants' employees regarding whether new AOBs were required for new pieces of diabetic testing "equipment." (DE 114 at 4-5). In that October 2009 email, Lincare personnel discussed the issue of AOBs, recognizing that they "[m]ay need to reconsider [their] process for Patient Agreements." (DE 114 at 4). Here, the last exemplar transaction at issue was initiated in May 2009. Relators do not explain how an October email would allow a reasonable jury to conclude that Diabetic Experts knowingly submitted false claims in May of the same year based on existing AOBs. Urquilla-Diaz, 780 F.3d at 1062 (finding that district court did not err in concluding that October 2005 notice from agency regarding lack of compliance was not sufficient to create a jury question regarding 2004 false certification of compliance).
Contrary to Relators' assertions that Defendants disregarded AOB regulations, the March and October 2009 email conversations indicate that Defendants were monitoring their AOBs with an eye toward compliance and culling out invalid AOBs. (DE 102-5 at 2). Even if in hindsight, the claims were proved to be objectively false, the record demonstrates that Defendants could have had a reasonable, non-reckless belief that: 1) Diabetic Experts could contact Lincare customers; 2) Diabetic Experts could submit claims to Medicare based on AOBs given to Lincare; 3) Diabetic Experts could submit claims for testing strips, lancets, disposable lancet devices, and testing solution based on broadly written AOBs for the provision of "HME and supplies" or "DME"; 4) Diabetic Experts could access the same information from Holdings as could Lincare; and 5) Holdings could provide the patient information and AOBs to Diabetic Experts. See United States ex rel. Hixson v. Health Mgmt. Sys., Inc., 613 F.3d 1186, 1191 (8th Cir.2010) (To prevail under the False Claims Act, "relators must show that there is no reasonable interpretation of the law that would make the allegedly false statement true.").
Summary judgment in favor of a False Claims Act defendant is appropriate where the relator has "not raised a genuine issue of material fact regarding scienter." Urquilla-Diaz, 780 F.3d at 1049, 1059. It is not enough to allege that Defendant might have known that its telephone marketing and use of AOBs may have been stretching the limits of best practices for Medicare suppliers. Relators must point to facts that show that Defendants knew or should have known that those practices rendered the claims they submitted false. See United States ex rel. Modglin v. DJO Global Inc., 48 F.Supp.3d 1362, 1405 (C.D.Cal.2014) ("While relators do plead facts supporting an inference that defendants knew they were supplying stimulators to patients for off-label use, none of their allegations supports an inference that they knew they could not lawfully seek reimbursement for the stimulators from Medicare."). Furthermore, "Courts have found that even if a defendant submits a false claim, if the defendant's interpretation of a statute or regulation was reasonable, and if there is no authoritative contrary interpretation of the rule, the relator cannot satisfy the knowledge requirement under the False Claims Act." United States ex rel. Parker v. Space Coast Med. Assocs., L.L.P., 94 F.Supp.3d 1250, 1262, Case No. 6:13-CV-1068-ORL-22, 2015 WL 1456122, at *8 (M.D.Fla. Feb. 6, 2015) (collecting cases) (internal quotation
Simply put, to survive summary judgment on the exemplars, Relators must cite record evidence "from which a reasonable jury could conclude that [defendant] knowingly and falsely certified its compliance" or knowingly made or used a false record. Boeing, 2014 WL 5025782, at *21. They have not done so. Therefore, the Court finds as a matter of law that, with regard to the six exemplars, no reasonable jury could find for Relators on the questions of whether Defendants submitted false claims or made or used false records with the requisite scienter.
There is a line of authority suggesting that disputes as to the interpretation of regulations do not implicate False Claims Act liability. See, e.g., Hagood v. Sonoma County Water Agency, 81 F.3d 1465, 1478 (9th Cir.1996) ("[T]o take advantage of a disputed legal question, as may have happened here, is to be neither deliberately ignorant nor recklessly disregardful."); United States ex rel. Swafford v. Borgess Med. Ctr., 24 Fed.Appx. 491, 491 (6th Cir.2001) (same). As a practical matter, the falsity analysis is intertwined with the scienter analysis. See United States ex rel. Lamers v. City of Green Bay, 168 F.3d 1013, 1018 (7th Cir.1999) ("[l]t is impossible to meaningfully discuss falsity without implicating the knowledge requirement."); United States ex rel. Morton v. A Plus Benefits, Inc., 139 Fed.Appx. 980, 982 (10th Cir.2005) ("[F]alsity and scienter requirements are inseparable."); Modglin, 48 F.Supp.3d at 1405 ("The deficiencies the court has noted in relators' pleading of falsity also render inadequate their allegations of scienter."). A claim is not false under the False Claims Act if the defendant is acting based on a reasonable interpretation of the regulations. See Lamers, 168 F.3d at 1018 (reasoning that "faulty calculations," "flawed reasoning," "imprecise statements," or "differences in interpretation growing out of a disputed legal question" are not "false" under the False Claims Act). A claim that turns on a "disputed legal question" rather than an objective falsehood is not false. Wilson, 525 F.3d at 377. "Expressions of opinion, scientific judgments, or statements as to conclusions about which reasonable minds may differ cannot be false." Morton, 139 Fed.Appx. at 983.
The gravamen of a False Claims Act claim is the submission of a false claim. Urquilla-Diaz, 780 F.3d at 1052 ("[O]ur caselaw is clear."); Morton, 139 Fed.Appx. at 982 ("A false or fraudulent claim is a common requirement."). Merely alleging a colorable claim that a statute or regulation relevant to Medicare has been violated is not sufficient. It is the submission and payment of a false Medicare claim, use of records known to be false, and false certification of compliance with the laws that create False Claims Act liability. See Mastej, 591 Fed. Appx. at 706; Hendow, 461 F.3d at 1172 (holding that for a defendant to be "found liable under the False Claims Act," he must make "a palpably false statement, known to be a lie when it is made."). A reasonable, but erroneous interpretation of a complex statutory or regulatory scheme should not, without facts demonstrating reckless disregard, create False Claims Act liability. The record does not support the conclusion that Defendants failed to comply with the supplier standards and regulations concerning telephone contact and the use of AOBs. Diabetic Experts did
The Parties have indicated that the Court's resolution of the motion for summary judgment regarding Relators' six exemplars is not case dispositive. The discovery disputes presided over by Magistrate Judge Simonton and the briefing related to this motion for partial summary judgment demonstrate that Relators believe claims might lie regarding Med4Home, Inc., Reliant Pharmacy Services, or other entities related to Defendants. Accordingly, the Parties shall submit a joint status report to the Court regarding what issues, if any, remain. However, it should be noted that the SAC is the operative pleading. Under this Circuit's stringent False Claims Act pleading standard, entities not named in the SAC and any alleged claims against them are not a part of this case. Keeler, 568 Fed. Appx. at 805 (quoting Clausen, 290 F.3d at 1313).
For the reasons discussed above, it is
