Filed: Oct. 23, 1997
Latest Update: Mar. 02, 2020
Summary: United States Court of Appeals, Fifth Circuit. No. 96-40868. UNITED STATES ex rel. James M. THOMPSON, Plaintiff-Appellant, v. COLUMBIA/HCA HEALTHCARE CORPORATION, et al., Defendants-Appellees. Oct. 23, 1997. Appeal from the United States District Court for the Southern District of Texas. Before REYNALDO G. GARZA, HIGGINBOTHAM and DAVIS, Circuit Judges. W. EUGENE DAVIS, Circuit Judge: Relator, James M. Thompson, M.D., a physician in private practice in Corpus Christi, Texas, brought this qui tam
Summary: United States Court of Appeals, Fifth Circuit. No. 96-40868. UNITED STATES ex rel. James M. THOMPSON, Plaintiff-Appellant, v. COLUMBIA/HCA HEALTHCARE CORPORATION, et al., Defendants-Appellees. Oct. 23, 1997. Appeal from the United States District Court for the Southern District of Texas. Before REYNALDO G. GARZA, HIGGINBOTHAM and DAVIS, Circuit Judges. W. EUGENE DAVIS, Circuit Judge: Relator, James M. Thompson, M.D., a physician in private practice in Corpus Christi, Texas, brought this qui tam a..
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United States Court of Appeals,
Fifth Circuit.
No. 96-40868.
UNITED STATES ex rel. James M. THOMPSON, Plaintiff-Appellant,
v.
COLUMBIA/HCA HEALTHCARE
CORPORATION, et al.,
Defendants-Appellees.
Oct. 23, 1997.
Appeal from the United States District Court for the Southern
District of Texas.
Before REYNALDO G. GARZA, HIGGINBOTHAM and DAVIS, Circuit Judges.
W. EUGENE DAVIS, Circuit Judge:
Relator, James M. Thompson, M.D., a physician in private
practice in Corpus Christi, Texas, brought this qui tam action
pursuant to the federal False Claims Act ("FCA"), 31 U.S.C. §§ 3729
et seq., against defendants Columbia/HCA Healthcare Corporation and
certain affiliated entities (collectively, "Columbia/HCA") and
Corpus Christi Bay Area Surgery, Ltd. The district court dismissed
Thompson's complaint for failure to state a claim under Rule
12(b)(6) of the Federal Rules of Civil Procedure. For the reasons
set out below, we affirm in part, vacate in part, and remand for
further proceedings.
I.
In his second amended complaint, at issue in this appeal,
Thompson alleged that defendants submitted false or fraudulent
claims under the FCA by submitting Medicare claims for services
1
rendered in violation of the Medicare anti-kickback statute,1 42
U.S.C. § 1320a-7b, and two versions of a self-referral statute, 42
U.S.C. § 1395nn, commonly known as the "Stark" laws after the
statute's congressional sponsor, United States Representative
Fortney H. "Pete" Stark. He further alleged that defendants made
false statements to obtain payment of false or fraudulent claims in
violation of the FCA by falsely certifying in annual cost reports
that the Medicare services identified therein were provided in
1
Thompson alleged that defendants violated the Medicare
anti-kickback statute by inducing physicians to refer Medicare
patients to Columbia/HCA hospitals in the following ways:
(1) Offering physicians preferential opportunities not
available to the general public to obtain equity
interests in Columbia/HCA healthcare operations through
partnership or corporate structure arrangements;
(2) Offering loans or assistance in obtaining loans to
physicians to finance capital investments in equity
interests in Columbia/HCA entities;
(3) Making payments disguised as "consultation fees" to
physicians in order to guarantee on a risk-free basis
their capital investments in equity interests in
Columbia/HCA entities;
(4) Paying physicians "consultation fees," "rent" or
other monies;
(5) Providing physicians with free or reduced rent for
office space near Columbia/HCA hospitals in facilities
owned or operated by Columbia/HCA;
(6) Offering physicians free or reduced-rate vacations
and other recreational opportunities;
(7) Offering physicians free or reduced-cost medical
training;
(8) Providing physicians with income guarantees; and
(9) Granting physicians superior or exclusive rights to
perform procedures in particular fields of practice.
2
compliance with the laws and regulations regarding the provision of
healthcare services. Finally, Thompson alleged that defendants
violated the FCA by submitting Medicare claims for medically
unnecessary services.
The district court granted defendants' motions to dismiss
Thompson's second amended complaint for failure to state a claim.
The court held that Thompson's allegations that defendants
submitted Medicare claims for services rendered in violation of the
anti-kickback statute and the Stark laws were insufficient, by
themselves, to state a claim for relief under the FCA. The court
also held that Thompson's allegations that defendants falsely
certified in annual cost reports that the Medicare services
identified therein were provided in compliance with the laws and
regulations regarding the provision of healthcare services were
insufficient to state a claim for release under the FCA. The court
concluded that these allegations were insufficient because Thompson
had not alleged that defendants submitted false certifications to
obtain payment of false or fraudulent claims, i.e., claims or claim
amounts that the government would not have paid but for the alleged
fraud. Finally, the court held that Thompson's allegations that
defendants submitted claims for medically unnecessary services were
insufficient to state a claim because he failed to plead his
allegations with particularity as required by Rule 9(b) of the
Federal Rules of Civil Procedure.
II.
We review a district court's ruling on a motion to dismiss
3
for failure to state a claim de novo. Morin v. Caire, 77 F.3d 116,
120 (5th Cir.1996). A district court may not dismiss a complaint
for failure to state a claim unless it appears beyond doubt that
the plaintiff can prove no set of facts that would entitle him to
relief. Lowrey v. Texas A & M Univ. Sys.,
117 F.3d 242, 247 (5th
Cir.1997). A dismissal for failure to plead fraud with
particularity under Rule 9(b) is treated as a dismissal for failure
to state a claim under Rule 12(b)(6). Lovelace v. Software
Spectrum, Inc.,
78 F.3d 1015, 1017 (5th Cir.1996).
The FCA provides, in relevant part:
(a) Liability for certain acts.—Any person who—
(1) knowingly presents, or causes to be presented, to an
officer or employee of the United States Government ...
a false or fraudulent claim for payment or approval ...;
[or]
(2) knowingly makes, uses, or causes to be made or used,
a false record or statement to get a false or fraudulent
claim paid or approved by the Government ...
* * * * * *
is liable to the United States Government for a civil penalty
of not less than $5,000 and not more than $10,000, plus 3
times the amount of damages which the Government sustains
because of the act of that person....
31 U.S.C. § 3729(a)(1), (2).
A. Thompson's Claims Predicated on Statutory Violations
Thompson alleged that defendants violated the FCA by
submitting Medicare claims for services rendered in violation of
the Medicare anti-kickback statute and the Stark laws. The
Medicare anti-kickback statute prohibits (1) the solicitation or
receipt of remuneration in return for referrals of Medicare
4
patients, and (2) the offer or payment of remuneration to induce
such referrals. 42 U.S.C. § 1320a-7b(b).
The first Stark law, commonly known as "Stark I," was in
effect between January 1, 1992 and December 31, 1994. Stark I
prohibited physicians from referring Medicare patients to an entity
for clinical laboratory services if the referring physician had a
nonexempt "financial relationship" with such entity. 42 U.S.C.A.
§ 1395nn(a)(1)(A) (West 1992). Stark I also prohibited the entity
from presenting or causing to be presented a Medicare claim for
services furnished pursuant to a prohibited referral. 42 U.S.C.A.
§ 1395nn(a)(1)(B) (West 1992). With certain exceptions, "financial
relationship" was defined as (1) an ownership or investment
interest in the entity, or (2) a compensation arrangement with the
entity. 42 U.S.C.A. § 1395nn(a)(2) (West 1992). Stark I expressly
prohibited payment of Medicare claims for services rendered in
violation of its provisions. 42 U.S.C.A. § 1395nn(g)(1) (West
1992).
Stark II became effective January 1, 1995, and prohibits
physicians from referring Medicare patients to an entity for
certain "designated health services," including inpatient and
outpatient hospital services, if the referring physician has a
nonexempt "financial relationship" with such entity. 42 U.S.C. §
1395nn(a)(1), (h)(6). Like its predecessor, Stark II provides that
the entity may not present or cause to be presented a Medicare
claim for services furnished pursuant to a prohibited referral, and
expressly prohibits payment of Medicare claims for services
5
rendered in violation of its provisions. 42 U.S.C. § 1395nn(a)(1),
(g)(1).
We agree with the district court that claims for services
rendered in violation of a statute do not necessarily constitute
false or fraudulent claims under the FCA. In United States ex rel.
Weinberger v. Equifax, Inc., 557 F.2d 456, 460-61 (5th Cir.1977),
we held that claims submitted by a government contractor who
allegedly violated the Anti-Pinkerton Act2 did not necessarily
constitute false or fraudulent claims under the FCA. In so holding,
we observed that the FCA is not an enforcement device for the Anti-
Pinkerton Act. We recognized, however, that the FCA "interdicts
material misrepresentations made to qualify for government
privileges or services."
Id. at 461.
The Ninth Circuit has taken a similar approach concerning the
scope of the FCA. In United States ex rel. Hopper v. Anton, 91 F.3d
1261, 1266 (9th Cir.1996), the court held that "[v]iolations of
laws, rules, or regulations alone do not create a cause of action
under the FCA." The court concluded, however, that false
certifications of compliance create liability under the FCA when
certification is a prerequisite to obtaining a government benefit.
Thus, where the government has conditioned payment of a claim
upon a claimant's certification of compliance with, for example, a
statute or regulation, a claimant submits a false or fraudulent
2
The Anti-Pinkerton Act provides: "An individual employed by
the Pinkerton Detective Agency, or similar organization, may not be
employed by the Government of the United States...." 5 U.S.C. §
3108.
6
claim when he or she falsely certifies compliance with that statute
or regulation.
Thompson alleged that, as a condition of their participation
in the Medicare program, defendants were required to certify in
annual cost reports that the services identified therein were
provided in compliance with the laws and regulations regarding the
provision of healthcare services. He further alleged that
defendants falsely certified that the services identified in their
annual cost reports were provided in compliance with such laws and
regulations. Thus, Thompson fairly alleged that the government's
payment of Medicare claims is conditioned upon certification of
compliance with the laws and regulations regarding the provision of
healthcare services, including the anti-kickback statute and the
Stark laws, and that defendants submitted false claims by falsely
certifying that the services identified in their annual cost
reports were rendered in compliance with such laws and regulations.
Columbia/HCA argues that the certifications of compliance
contained in annual cost reports are not a prerequisite to payment
of Medicare claims because Medicare claims are submitted for
payment shortly after services have been rendered and well before
annual cost reports are filed. Thompson contends that such
certifications are indeed a prerequisite to payment because the
retention of any payment received prior to the submission of an
annual cost report is conditioned on the certification of
compliance contained therein. We are unable to determine from the
record before us whether, or to what extent, payment for services
7
identified in defendants' annual cost reports was conditioned on
defendants' certifications of compliance. We therefore deny
defendants' 12(b)(6) motions as they relate to this issue and
remand to the district court for further factual development.
Thompson also contends that, in any event, claims for services
rendered in violation of the Stark laws are, in and of themselves,
false or fraudulent claims under the FCA. Thompson bases his
contention on provisions in the Stark laws expressly prohibiting
payment for services rendered in violation of their terms. In
holding that Thompson failed to allege a violation of the FCA, the
district court did not specifically consider this contention.
Because the district court must determine whether the government's
payment of defendants' Medicare claims was conditioned on
defendants' certifications of compliance in their annual cost
reports, we will give the district court the opportunity to
consider this argument on remand as well.
B. Thompson's False Statement Claims
As discussed above, the FCA imposes liability not only on any
person who submits a false or fraudulent claim for payment, but
also on any person who knowingly makes a false statement in order
to get a false or fraudulent claim paid. See 31 U.S.C. §
3729(a)(2). If the district court determines on remand that claims
for services rendered in violation of the Stark laws are, in and of
themselves, false or fraudulent claims under the FCA, then the
court should also consider whether Thompson has sufficiently
alleged that defendants committed separate and independent
8
violations of the FCA by making false statements to obtain payment
of false or fraudulent claims.
C. Thompson's Claims Based on Medically Unnecessary Services
Thompson alleged that "[i]n reasonable probability, based on
statistical studies performed by the Government and others"
approximately 40 percent of claims submitted by defendants for
services rendered in violation of the anti-kickback statute or the
Stark laws were for services that were not medically necessary.
Thompson made no further allegations in support of his claim. The
district court held that Thompson failed to satisfy Rule 9(b) of
the Federal Rules of Civil Procedure, which requires that all
averments of fraud be pled with particularity. The court concluded
that Thompson failed to meet the pleading requirements of Rule 9(b)
because he did not identify any specific physicians who referred
patients for medically unnecessary services or any specific claims
for medically unnecessary services that were submitted by
defendants.
Claims brought under the FCA must comply with Rule 9(b).
Gold v. Morrison-Knudsen Co., 68 F.3d 1475, 1476-77 (2d Cir.1995),
cert. denied, --- U.S. ----,
116 S. Ct. 1836,
134 L. Ed. 2d 939
(1996). At a minimum, Rule 9(b) requires that a plaintiff set
forth the "who, what, when, where, and how" of the alleged fraud.
Williams v. WMX Tech., Inc.,
112 F.3d 175, 179 (5th Cir.1997).
Thompson argues, however, that the pleading requirements of Rule
9(b) are relaxed where, as here, the facts relating to the alleged
fraud are peculiarly within the perpetrator's knowledge. Although
9
we have held that fraud may be pled on information and belief under
such circumstances, we have also warned that this exception "must
not be mistaken for license to base claims of fraud on speculation
and conclusory allegations." See Tuchman v. DSC Communications
Corp., 14 F.3d 1061, 1068 (5th Cir.1994). In addition, even where
allegations are based on information and belief, the complaint must
set forth a factual basis for such belief. Kowal v. MCI
Communications Corp.,
16 F.3d 1271, 1279 n. 3 (D.C.Cir.1994);
Neubronner v. Milken,
6 F.3d 666, 672 (9th Cir.1993).
In his complaint, Thompson provided no factual basis for his
belief that defendants submitted claims for medically unnecessary
services other than his reference to statistical studies. There is
no indication, however, that these studies directly implicate
defendants. Thompson's allegations, therefore, amount to nothing
more than speculation, and thus fail to satisfy Rule 9(b).3
III.
Defendants ask us to affirm parts of the district court's
order of dismissal on grounds raised but not considered below.
Although we may consider alternative grounds for upholding the
district court's decision, Henderson v. Century Fin. Co., Inc., 577
F.2d 997, 1002 n. 5 (5th Cir.1978), we decline to do so in this
3
The district court declined to grant Thompson leave to amend
his complaint to conform with the requirements of Rule 9(b) and
entered judgment in favor of defendants on all claims against them.
Thompson has not challenged the district court's decision in this
regard on appeal, and therefore we do not review it. See United
States v. Bigler, 817 F.2d 1139, 1140 (5th Cir.1987) (court will
not consider issues not raised on appeal except those relating to
jurisdiction).
10
case.
Accordingly, for the reasons set out above, we affirm the
district court's order to the extent it dismisses Thompson's claims
based on his allegations that defendants submitted claims for
medically unnecessary services. We vacate the remainder of the
order and remand for further proceedings consistent with this
opinion.
AFFIRMED in part; VACATED and REMANDED in part.
11
