District Court Rejects FCA Claim Against Healthcare Provider That Submitted False Claims But Did So Without Necessary Mental State
Healthcare provider Fresenius Medical Care North America claimed victory in a False Claims Act (“FCA”) lawsuit recently when a federal district court ruled that there was no evidence that its practice of billing for “overfill” medications was anything more than negligent, and therefore did not satisfy the knowledge requirement of the FCA.
On October 30, 2015, the U.S. District Court for the Northern District of Georgia granted summary judgment to Defendant Fresenius. The qui tam case arose out of allegations that Fresenius violated the FCA, 31 U.S.C. § 3729, on a regular basis when it submitted requests for reimbursement for lucrative dialysis drugs that it had received for free. The whistle-blower, former Fresenius employee Relator Chester Saldivar, alleged that Fresenius billed Medicare for administration of “overfill”—a varying amount of extra medicine contained in individual vials, the purpose of which is to facilitate extraction of the labeled amount on the vial. More specifically, Saldivar accused the company of fraudulently billing Medicare for overfill amounts of the drugs Epogen and Zemplar from 2005 through 2010.
In a previous decision issued in September 2013, the court had held that Fresenius’s practice of billing for overfill medication amounts was a false claim because overfill did not represent a cost incurred by Fresenius and, accordingly, Fresenius’s overfill billing practices were impermissible under the applicable Medicare rules and regulations from 2006 through 2010. At that point, however, the court did not determine whether Fresenius knowingly submitted those false claims.
The Centers for Medicare & Medicaid Services (“CMS”) issued a regulation effective January 1, 2011, expressly stating that providers could not bill Medicare for overfill medication. (42 C.F.R. 414.904(a)(3)(iii)). The 2011 regulation wasn’t retroactive, but the CMS states that it was a clarification of existing Medicare billing regulations, rather than a new policy. In her October 30 decision, Judge Amy Totenberg said that the Medicare billing regulations were ambiguous during the relevant time periods, and that evidence showed that Fresenius executives and counsel believed that billing for overfill medication was permissible.
In order to prevail on an FCA claim, in addition to proving the submission of false claims, the Relator must also prove that Fresenius knowingly submitted the false claims. Under the FCA, “knowingly” “means that a person, with respect to information (i) has actual knowledge of the information; (ii) acts in deliberate ignorance of the truth or falsity of the information; or (iii) acts in reckless disregard of the truth or falsity of the information.” 31 U.S.C. § 3729(b)(1)(A).
The court ruled that, although the record does contain some evidence that Fresenius had the necessary information at its disposal to deduce that billing for overfill was impermissible, there was no evidence that Fresenius actually knew that billing for administered overfill was impermissible. The court further found that there was insufficient evidence from which a reasonable jury could find that Fresenius acted with deliberate ignorance or reckless disregard as to the impermissibility of billing for administered overfill.
The case is: United States ex rel. Chester Saldivar v. Fresenius Medical Care Holdings, Inc., No. 1:10-CV-1614-AT, (N.D. Ga. 2015).