The Eleventh Circuit affirmed a district court’s dismissal of a qui tam complaint alleging violations of the Anti-Kickback Statute and False Claims Act. The relators alleged that their former employment made improper payments to physicians to induce them to make referrals of Medicare and Medicaid beneficiaries. While the relators alleged they had inside information about the referral payments and subsequent billings, the courts found the allegations were not supported by factual claims about the nature of the kickback incentives and how much Bethany paid for referrals. Further, despite their access to billing records, the relators failed to provide the dates and amounts of these payments or identify patients who were referred by the doctors. While a relator need not provide a specific claim, the court found that the relators should have been able to provide some specifics, given their alleged inside information. The relators argued that the defendants must have submitted false claims, because most of the defendants’ patients were Medicare beneficiaries, but the court found mathematical probability was not enough to allege the existence of false claims.
Relators Debbie Helmly and Jolie Johnson appealed the dismissal of their qui tam complaint alleging that Bethany Hospice and Palliative Care LLC and its related entities paid physicians for Medicare and Medicaid patient referrals, in violation of the Anti-Kickback Statute and False Claims Act. The district court dismissed the claims for failing to meet the particularity standard and the relators filed this appeal.
The relators were employed by Bethany as a hospital administrator and marketing professional. The relators alleged that the defendants made financial arrangements with new physicians to encourage them to refer Medicare and Medicaid patients to the hospital and its associated entities. Helmly alleged that she also was offered compensation based on this kickback scheme. During employment negotiations, Helmly was allegedly told that the hospital would add compensation similar to payments made to doctors for their referrals.
Under that arrangement, Helmly was invited to make a below-market ownership investment in Bethany that would provide “huge returns” based on the number of referred patients. Helmly further alleged that she was told that the hospital paid all the medical directors who owned shares in Bethany Hospice according to this same formula, and the payments varied depending on the volume of referrals.
The relators also alleged that the defendants acknowledged that the compensation structure was designed to avoid getting caught for FCA violations. While the kickbacks were improper, the defendants acknowledged that they were the best way to get referrals.
The relators alleged that physicians who participated in the scheme purchased ownership interests in Bethany Hospice and were paid kickbacks for referrals through a monthly salary, dividends, and/or monthly bonuses. The relators identified one physician who purchased a 5 percent interest in Bethany for $20,000, which he resold 7 years later for $300,000, as well as four other physicians who participated.
The relators alleged these physicians referred most or all of their patients to Bethany Hospice. They also alleged that the accessed Bethany’s internal billing software to confirm that Bethany Hospice tracked each patient admission and the doctor who referred that patient for the purpose of paying those doctors kickbacks. The relators alleged that any claims tainted by the kickbacks were false by definition.
The relators alleged that most or all of Bethany’s patients were covered by government health insurance programs. In support, they alleged they had access to patient and billing records and that they had communicated with other Bethany employees who possessed knowledge of the defendants’ billing process. The complaint included government Medicare claims data that showed that Bethany Hospice derived nearly all of its revenue from the Medicare program monies, and provided a breakdown of Medicare referrals from the Bethany Hospice doctors.
The district court granted Bethany’s motion to dismiss with prejudice. Bethany argued that the allegations were conclusory and that the relators failed to plead their claims with particularity. The district court agreed that the relators did not plead sufficiently particular facts, including facts about the precise nature of the kickback incentives and how much Bethany paid for referrals. Further, despite their access to billing records, the relators failed to provide the dates and amounts of these payments or identify patients who were referred by the doctors in exchange for the payments. The court also found no factual support for the assertion that 95 percent of Bethany’s referrals came from Bethany doctors, and found that the relators had not provided evidence that Bethany undervalued ownership shares sold to physicians.
The district court also concluded that the relators failed to plead the submission of a false claim with particularity. First, the court noted the relators did not present any sample claims. Second, the court found the relators did not provide enough evidence to support their claim of internal knowledge. The relators: (1) failed to describe Bethany Hospice’s billing operations in sufficient detail, (2) failed to describe a single example of when the relators observed a false claim being submitted, (3) did not themselves participate in the submission of false claims. Lastly, the district court explained that, under Eleventh Circuit precedent, courts may not rely on mathematical probability to conclude that a defendant submitted a false claim.
In their appeal, the relators argued that the district court erred. The relators conceded that their complaint did not include any details about specific claims submitted to the government, but argued that they met the pleading threshold because their complaint contained sufficient indicia of reliability to support their claim that Bethany Hospice submitted false claims to the government.
The relators reiterated that they access to and knowledge of Bethany’s billing practices. Further, the relators argued that they had shown that Bethany doctors made referrals to Bethany and that all or nearly all of Bethany’s patients were Medicare or Medicaid beneficiaries.
The appeals court disagreed, first finding that the relators failed to allege any specifics about actual claims submitted to the government. Despite alleging intimate familiarity with and access to Bethany Hospice’s billing practices, the relators failed to identify even a single, concrete example of a false claim submitted to the government.
While a sample claim is not always required when a relator alleges sufficient personal knowledge, the court found the relators did not even attempt to provide any particular facts about a representative false claim. Further, the court found the relators did not have the personal knowledge or level of participation that could give rise to some indicia of reliability. The court concluded that managerial positions, attendance at review meetings, and a review of billing systems were insufficient to support the relators’ claims with particularity. The relators’ failure to provide any specific details, even with their alleged inside knowledge, proved fatal to their complaint. Further, the relators did not claim they observed the submission of any actual false claims or that they participated in the scheme.
While the relators alleged that nearly all of Bethany’s patients were Medicare participants and that their doctors referred a significant number of patients, the court found this information unavailing. According to the court, relators cannot rely on mathematical probability to conclude that a defendant must have submitted a false claim at some point.
The relators countered that Bethany billed nearly all of its business to the government, but the court was not persuaded. The court explained that under the FCA and Rule 9(b), a false claim cannot be inferred from the circumstances. Rather, the burden remains on a relator alleging the submission of a false claim to allege specific details about false claims to establish the indicia of reliability.