In United States ex rel Hobbs v. Medquest Associates, Inc., 2013 WL 1285590 (6th Cir. April 1, 2013), the Sixth Circuit reversed an $11 million False Claims Act judgment and rejected the Government's attempt to turn a health care provider's breach of its Medicare enrollment agreement into a False Claims Act violation. In so doing, the Sixth Circuit limits False Claims Act liability arising from violations of "express and implied certifications" in Medicare contracts. Rather, the Medquest Court reaffirmed that the "False Claims Act is not a vehicle to police technical compliance with complex federal regulations" and that the statute's "hefty fines and penalties make them an inappropriate tool for ensuring compliance with technical and local program requirements."
In Medquest, the relator and later the Government alleged that Medquest, a diagnostic testing company that operated testing facilities, violated the False Claims Act ("FCA") by (1) "using supervising physicians who had not been approved by the Medicare program and the local Medicare carrier to supervise the range of tests offered" at testing sites; and (2) after acquiring a physician's practice in Charlotte, "fail[ing] to properly re-register the facility to reflect the change [in Medquest's] ownership and to enroll the facility in the Medicare program" and instead "continue to use the former owner's payee ID number." On the "supervising physician" issue, the District Court found that Medquest had expressly certified to Medicare that the "physicians listed in its
[enrollment] application [to Medicare] would supervise" diagnostic testing and had implicitly certified that in billing Medicare, the "tests were
provided in accordance with applicable Medicare regulations and by
physicians approved by Medicare." By using "non-supervising personnel" to monitor diagnostic tests and by billing for such tests, the District Court found that Medquest violated these certifications, thus giving rise to FCA liability. According to the District Court, Medquest's failure to re-register the practice it acquired also constituted a "false certification" which together with Medquest's continued use of the former practice's billing number qualified as an FCA violation as well. The District Court entered summary judgment against Medquest.
Though it expressed "little sympathy" for Medquest, the Sixth Circuit overturned the summary judgments, finding that the regulations underlying the certifications were "not conditions of payment" and did "not mandate the extraordinary remedies of the FCA." Rather, such violations, the Court observed, were "instead addressable by the administrative sanctions available." The Court found that Medquest's Enrollment Application statement that it was "in compliance with supervising-physician requirements" did not "constitute certifications that would support an FCA action." Moreover, the Court noted, "the certification does not contain language conditioning payment with any particular law or regulation." As for Medquest's failure to transfer the practice into its own name and its continued use of the prior physician's billing number, the Court rejected the Government's claim that this represented a "failure to enroll problem," stating that "[t]his case, at most, represents a failure to update enrollment information, which we have held is not a violation of a condition of payment."
The Medquest decision is a powerful antidote to those decisions that seek to characterize every enrollment agreement breach or violation of a Medicare regulation as a violation of an express or implied condition of payment that gives rise to FCA liability. Rather, in the absence of specific contractual or regulatory language making Medicare payments contingent on fulfilling Medicare enrollment or participation conditions, the Sixth Circuit clearly applies a common sense approach, reserving the FCA's "extraordinary penalties" for more egregious regulatory violations.
A. Brian Albritton
April 9, 2013