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False Claims Act

Kellogg Brown & Root v. United States ex rel. Carter (S.Ct.)

Issue

The issues on appeal in this case under the False Claims Act (FCA) are (a) whether the Wartime Suspension of Limitations Act (WSLA), 18 U.S.C. § 3287, applies to claims of civil fraud brought by private relators and (b) whether the FCA “first-to-file” bar, 31 U.S.C. § 3730(b)(5), requires dismissal of a subsequent lawsuit if no prior related suit is pending (or has been resolved on the merits) at the time the qui tam defendant asks the court to impose the bar and dismiss the case.

AMA interest

The AMA is to seek modification or repeal of the Federal False Claims Act, as well as restrictions on its use.

Case summary

Kellogg, Brown & Root (KBR) provided logistical services to the United States military in Iraq under a government contract. Benjamin Carter worked for KBR as a reverse osmosis water purification unit operator at two camps in Iraq in early 2005. Carter contended that during part of this period KBR was not purifying water but was repeatedly misrepresenting to the United States that it was. He also maintained that he and other KBR employees were instructed to submit false time sheets, so that KBR could overbill the government. As a result, according to Carter, the United States paid KBR for work not actually performed.

Carter brought a qui tam action on June 2, 2011. He alleged that KBR systematically submitted false claims to the United States, pursuant to the scheme above, and thereby violated the FCA. At that time, other qui tam cases were pending, which alleged similar misrepresentations by KBR. Those other qui tam suits were dismissed, without prejudice, after Carter filed his suit.

On a motion of KBR, the trial court found that Carter’s suit was barred under the first-to-file rule. The court further found that the FCA has a six-year Statute of Limitations, and the allegedly fraudulent claims had been filed after that period had lapsed. Consequently, the suit was also barred under the Statute of Limitations. Accordingly, the court dismissed Carter’s suit on both of these grounds, with prejudice.

Carter appealed to the United States Court of Appeals for the Fourth Circuit. As to the first to file bar, the court held that Carter’s suit would have been barred if the prior pending cases had been maintained or resolved on the merits before resolution of Carter’s suit. However, because the prior pending suits were dismissed without prejudice while Carter’s suit was still alive, Carter could still pursue his action.

As to the Statute of Limitations issue, the court noted that the WSLA suspends the running of the period of limitations “[w]hen … Congress has enacted a specific authorization for the use of the Armed Forces … until 5 years after the termination of hostilities.” The WSLA applies to “any offense … involving fraud or attempted fraud against the United States.” The narrow question was whether the word “offense” in the WLSA referred only to crimes, which is what Carter advocated, or whether “offense” also encompassed civil wrongdoings, such as civil violations of the FCA. Based on its analysis of the legislative history, the court held that the WLSA should also apply to civil actions, as in this case.

Consequently, the Court of Appeals reversed the district court dismissal and ordered that the case be reinstated. The case is now being appealed to the United States Supreme Court.

AMA involvement

The AMA joined in an amicus brief organized by the United States Chamber of Commerce.

United States Supreme Court brief

Swafford v. Borgess Medical Center, 24 Fed.Appx. 491 (6th Cir. 2001)

Also under Fraud and Abuse

Outcome:     Very favorable

Issue

The issue in this case was whether physicians could be held liable for a violation of the False Claims Act (FCA) under a theory of “false implied certification.”

AMA interest

The AMA believes that FCA liability should require a violation of definite and understandable laws.

Case summary

Plaintiff Swafford was a registered vascular technologist employed in defendant Borgess Medical Center’s vascular ultrasound department. Plaintiff analyzed the results, through videotape, of venous ultrasound studies ordered by defendant physicians for patients with suspected deep vein thrombosis. Plaintiff performed the ultrasound tests, examined the data for five risk factors identified by the physicians, and indicated on a worksheet the presence or absence of the risk factors. The physicians reviewed the worksheets and prepared a final report, setting forth findings and conclusions.

Plaintiff filed a qui tam lawsuit, which the government declined to join. Plaintiff alleged that the defendant physicians billed Medicare for conducting venous ultrasound tests although, in fact, they did not provide those services. Plaintiff insisted that the doctors did not really interpret the test results, as the physicians represented to Medicare, but rather plagiarized the worksheets prepared by plaintiff and other technicians and submitted them as “interpretations.” Plaintiff further alleged that Borgess Medical Center was aware of these practices and conspired with the physicians.

The district court granted defendants summary judgment. It ruled that plaintiff failed to demonstrate that the claims submitted were, in fact, false. The HCFA Provider Guidelines do not include a billing code for venous ultrasound studies, so the physicians had to exercise their professional judgment in choosing the most appropriate billing code. The defendants had sufficient information to form a professional opinion regarding the test results. The court also found that the defendants’ readings of the test results were within the standard of care and therefore constituted a proper submission. Further, insufficient evidence existed to suggest that defendants possessed the requisite scienter to render them liable under the False Claims Act. The plaintiffs appealed to the Sixth Circuit.

On December 21, 2001, the Sixth Circuit affirmed. Swafford petitioned the Supreme Court for certiorari, but the Court denied that request on May 28, 2002.

Litigation Center involvement

The Litigation Center, along with the Michigan State Medical Society filed an amicus brief in support of the defendants.

United States Court of Appeals for the Sixth Circuit brief

United States ex rel. Mikes v. Straus, 274 F.3d 687 (2d Cir. 2001)

Also under Fraud and abuse

Outcome:    Very favorable

Issue

The issue in this case was whether physicians could be held liable for a violation of the False Claims Act (FCA) under a theory of “false implied certification.”

AMA interest

The AMA believes that FCA liability should require a violation of definite and understandable laws.

Case summary

Patricia S. Mikes, MD, sued Mark J. Straus, MD, and two other physicians under the FCA qui tam (“whistleblower”) provisions. The defendants were partners in a medical group specializing in problems of oncology and hematology. Mikes was a former employee of the defendants, and she had been involuntarily terminated.

The defendants had submitted Medicare claims for spirometry tests, which measure breathing capacity. According to Mikes, these tests were performed improperly, because the measuring equipment was calibrated incorrectly and the technicians who performed the tests were insufficiently trained to do so. Mikes contended that the defendants’ protocol for calibrating the measuring equipment fell beneath the standards recommended by the American Thoracic Society (ATS).

The trial court held for the defendants. It found that, when they submitted their payment claims, the defendants had neither explicitly nor implicitly promised that the tests met any specific standard of care. The defendants had complied with the standards set forth by the equipment manufacturer, which were less rigorous than the ATS recommendations, and this was sufficient. The court rejected Mikes’s theory that, by submitting the claims, the defendants implied that they satisfied the customary standard of care.

Mikes appealed, and the Second Circuit affirmed.

Litigation Center involvement

The Litigation Center, along with the Medical Society of the State of New York and several specialty medical societies, filed an amicus brief in support of the defendants.

United States v. Vargo (D. Mont.)

Also under Abusive litigation against physicians and Fraud and abuse

Outcome:    Somewhat favorable

Issue

The issue in this case was whether a physician had knowingly over billed for medical services.

AMA interest

The AMA strives to avoid the expansion of liability theories against physicians, which can lead to overzealous and abusive litigation.

Case summary

This civil False Claims Act case contended that Dr. Patsy Vargo knowingly over-billed the United States Air Force for medical services performed on an independent contractor basis for four years. The United States previously had brought a criminal suit against Dr. Vargo for the same activities, but voluntarily dropped the criminal charges after it hired an independent medical expert, Dr. Glenn D. Littenberg, to review Dr. Vargo’s records. Dr. Littenberg, a long time member of the AMA’s Current Procedural Technology panel, determined that Dr. Vargo had complied with the regulations in effect and billed properly for her services.

In the civil suit, Dr. Vargo retained Dr. Littenberg as her expert, but the prosecution hired its own experts to oppose him. Dr. Vargo also obtained a number of written testimonials from physicians who worked with her and, in some cases, in more senior positions, while she rendered her services.

The case ultimately settled, pursuant to a confidential settlement agreement and an undisclosed payment from Dr. Vargo.

Litigation Center involvement

The Litigation Center paid a small portion of Dr. Vargo’s defense costs. Although the monetary contribution was modest, the Litigation Center wanted Dr. Vargo and others to know that her fellow physicians supported her.

United States ex rel. Walker v. R & F Properties, 433 F.3d 1349 (11th Cir. 2005)

Also under Fraud and abuse

Outcome:    Unfavorable

Issue

The issue in this case was whether the federal False Claims Act (FCA) was violated by physicians submitting claims to Medicare for services rendered by non-physicians when physicians were not on the premises.

AMA interest

The AMA believes that FCA liability should require a violation of definite and understandable laws.

Case summary

In this qui tam (“whistleblower”) action under the FCA, Karyn Walker contended that the defendant physicians should have been bound by the Medicare Carrier's Manual (MCM) rules for the billing of "incidental" services, even though those rules were not set forth in the Medicare Act or the Code of Federal Regulations.

R & F Properties of Lake County, Inc. was a medical corporation in Lake County, Florida, which provided family care. Most of its patients were covered by Medicare. R & F formerly employed Karyn Walker as a nurse practitioner. From time to time, R & F used its physician assistants/nurse practitioners, including Walker, to service its Medicare patients without a physician's being physically present on the premises. The physicians were, however, available by telephone or pager. R & F’s billings to Medicare included charges for the services rendered by the physician assistants/nurse practitioners.

At the time covered by the lawsuit (prior to 2002), the relevant federal regulation stated:

"Medicare Part B pays for services and supplies incident to a physician's professional services … if the services or supplies are of the type that are commonly furnished in a physician's office or clinic, and are commonly … included in the physician's bill."

The Medicare regulations did not explicitly say whether a physician had to be physically present on the premises in order to qualify as "incidental" services for payment. However, the MCM stated that services rendered by non-physicians could be deemed "incident to a physician's professional service" only if the physician were "present in the office suite and immediately available to provide assistance and direction throughout the time that the aide is performing services."

Walker filed a qui tam action, alleging that R & F had violated the FCA by billing for services of non-physicians while physicians had not been physically present. She claimed that R & F was bound by the MCM requirement that a physician be physically present on the premises when the services were rendered.

The trial court entered summary judgment for R & F. It held that, during the relevant time period, "neither the Medicare statutes nor the regulations provided much guidance on the level of supervision required in order to bill … services … as 'incident to.'" R & F had complied with the federal law and regulations in existence at the time of the billings, and the MCM requirements did not carry the force of law. The court noted that its holding was consistent with Florida law, which encouraged physicians to delegate health care tasks to qualified assistants.

Walker appealed to the Eleventh Circuit, which reversed the trial court’s opinion. While the appellate court acknowledged that the Medicare regulations did not fully define the term “incident to” during at least the majority of the time at issue, it held that Walker should be allowed to introduce evidence as to how the industry and CMS defined that term.

Litigation Center involvement

The Litigation Center filed a brief amicus curiae in the Eleventh Circuit to support R&F.

United States Court of Appeals for the Eleventh Circuit brief