A federal appeals court has thrown out a whistleblower’s complaint that a lab discount arrangement paid improper kickbacks to physicians for referrals to the hospital. In the case of United States ex rel. Nunnally v. West Calcasieu Cameron Hospital
, the U.S. Court of Appeals for the Fifth Circuit ruled that the qui tam relator did not provide specifics sufficient to meet the requirements of the federal False Claims Act (FCA). The decision upheld a Louisiana lower court’s dismissal of the complaint on similar grounds. Dent T. Nunnally stated that the hospital was charging reduced lab test fees to physicians who referred the work to the hospital but would charge Medicare patients much more than patients not on Medicare for the same tests. These referrals, he said, were improper, violated the anti-kickback law, and thus constituted false claims.
An FCA complaint must allege specific indicia of a fraudulent scheme to collect payment from the government, even if the details of each false claim are unknown.
The appeals court said his complaint failed to show how physicians were induced into referring patients to the hospital, located in Sulphur, La., or how the hospital provided improper kickback payments to the referring physicians. Further, the court said he failed to allege with any particularity that the defendant certified compliance with the anti-kickback law, nor did he identify any specific Medicare claims submitted to the government for payment. The court said that FCA pleading standards are “context specific and flexible” but still need to “set forth ‘the who, what, when, where, and how’ of the alleged fraud.” An FCA complaint need not provide specific details of “each false claim” the court said, but still “requires the relator to provide other reliable indications of fraud and to plead a level of detail that demonstrates that an alleged scheme likely resulted in bills submitted for government payment.” The court said Nunnally failed this pleading standard. His allegations regarding “verbal agreements” between physicians and the hospital for improper referrals were “conclusory . . . without a shred of detail or particularity.” While he provided an example of the hospital charging physicians $3.60 for a particular blood test, while charging Medicare $10.60 for the same test, the court said this did not show how physicians were given kickbacks for referrals, and no other details of any agreement, or referral payments, were provided. Perspectives on the Ruling
In comments to NIR
, attorney Robert E. Mazer with Ober/Kaler in Baltimore, said, “Although the decision was based on the lack of specificity in the complaint, the court indicated that charging physicians less than Medicare should not in itself result in violation of the federal anti-kickback statute. Generally, for a lab or hospital to violate the law, it must offer or pay ‘remuneration’ to a physician or other referral source. According to the court, the mere fact that the amount charged to the physician was less than the amount billed to Medicare did not indicate that the hospital had provided the physician with ‘remuneration’. “The court determined that the relator had not alleged that the hospital had expressly certified that it was in compliance with federal law, and stated that it had never recognized the theory of ‘implied certification’. The court indicated that without such a certification, a violation of the anti-kickback law could not result in liability under the FCA. “This is no longer the case. As a result of legislation enacted after the complaint was filed—the Affordable Care Act and the Health Care and Education Reconciliation Act of 2010—a violation of the anti-kickback law now constitutes a false or fraudulent claim under the FCA.”