Inconclusive Studies, Reasonable Difference of Medical Opinion No Basis for FCA Claims; United States District Court for the Central District of California No. 8:18-cv-01250-JLS-DFM, U.S. et al. v. DaVita Inc., et al.


The district court granted the defendants’ motion to dismiss a qui tam case alleging they provided medically unnecessary treatments, finding the relator failed to adequately plead falsity, materiality, and scienter. The relator based his allegations almost solely on several publicly available studies that indicated the treatments at issue had no medical benefit unless patients presented specific symptoms. According to the relator, the defendants knew of these studies, yet prescribed certain treatments before these indications were present, rendering them medically unnecessary. However, the court found the studies themselves stated they were not conclusive and that differences of medical opinion existed about when treatments should start, and therefore the relator could not establish the falsity of the treatments or claims. The court also found the relator failed to identify any express or implied certification made by the defendants regarding these treatments or any Medicare rule governing them, and therefore had not pled materiality. Because he had not shown falsity or materiality, the relator’s complaint logically failed to demonstrate scienter.

Defendants DaVita Inc., DaVita Kidney Care, and DaVita Rx LLC moved to dismiss a qui tam complaint alleging healthcare fraud.

Relator Charles M. Holzner, M.D., alleged he became aware of three fraudulent schemes while engaged in business interactions with the defendants as a representative of CareMore Health Plan. The defendants provide dialysis and pharmacy services. Holzner alleged the fraud was perpetuated through the Medicare Advantage program, which gives beneficiaries the option to receive benefits through private health plans as an alternative to traditional Medicare.

The complaint described three separate but interrelated schemes to submit claims for payment for medically unnecessary end-stage renal disease treatments. The defendants were alleged to have (1) initiated medically unnecessary prophylactic dialysis treatments, (2) prescribed and furnished the medically unnecessary drug Sensipar, and (3) prescribed and furnished the medically unnecessary drug Renagal.

The relator alleged the defendants conspired to provide improper and premature dialysis for patients from six months to one year before the treatment would have any feasible medical benefit. The relator based his allegation on the 2010 publication of a multi-year study that concluded that dialysis treatments were unnecessary and provided no medical benefit if performed before the appearance of certain medical indications. Because the treatments were unnecessary, the relator argued that the defendants’ claims for payment were necessarily false.

Second, the relator alleged that the defendants prescribed Sensipar despite a lack of medical benefit. Third, the relator alleged that the defendants allowed prescriptions for Renagel, despite the fact that due to its high costs, it could not be legitimately certified as medically necessary for the vast majority of DKC’s ESRD patients. The relator argued there are less expensive but equally safe and effective over-the-counter alternatives to Renagel.

Generally, the relator alleged the defendants prescribed these treatments and medications for the sole purpose of boosting profits. In support, the relator noted that when CMS bundled the two drug treatments into fixed-cost reimbursement plan—thereby converting prescriptions from a separately billable cost to a non-recoverable cost—the defendants stopped recommending and providing them.

The court granted the motion to dismiss, finding the relator failed to plausibly allege the requisite elements of false claims in connection with each of the three schemes identified in the TAC. Generally, the court found that the basis for each allegation was a single, publicly-available and inconclusive study regarding the medical necessity of each treatment. The court found the relator failed to plausibly allege the requisite elements of falsity, materiality, and scienter to make out an FCA claim, and that the failure to allege even one of those elements would be enough to support dismissal.

The court examined each allegation and its basis in turn. For example, the claim that the defendants prescribed dialysis treatments long before they were medically necessary was based on a single study that suggested these treatments had no medical benefit until patients exhibited certain symptoms. However, the court found that study did not support plausible allegations of falsity, materiality, or scienter.

The complaint did not otherwise assert the defendants made any express or implied certifications to obtain reimbursement for providing the treatments, and the study did not support the relator’s contention that any claims were necessarily false. While the relator described the study as conclusive, the study itself did not purport to make definitive findings. Further, the study acknowledged that, at its time of publication, there was a significant difference of opinion as to the proper time to initiate dialysis. The relator’s subjective difference of opinion with other physicians on the medical necessity of certain treatments was not enough to support his claim.

The court also held the relator failed to plead materiality, other than to state Medicare would not have reimbursed the defendants for the treatments in question had it known they were medically unnecessary. The court explained that this kind of conclusory allegation did not satisfy the FCA’s demanding materiality standard. While the relator asserted that the study findings left the medical community with no choice but to cease all dialysis prior to onset of clinical symptoms, he did not assert that CMS was unaware of the study or that the defendants benefited from superior knowledge. He also did not assert the government had established any payment guidelines based on the study findings.

Finally, the court found the relator had not demonstrated scienter. Because the study—the entire foundation of the allegation—was inconclusive, there was no basis to find the defendants’ diagnoses and treatments contradicted it and therefore no basis to conclude they knowingly provided medically unnecessary treatments or falsely billed Medicare.

The court generally found the allegations regarding the pair of prescription drugs failed on the same bases.

The court did grant the relator leave to amend his pleading to correct the deficiencies, noting that he may not continue to rely on the studies the court has already found insufficient to support his allegations.