Relator Had Knowledge of Misconduct but Not Actual False Claims; United States District Court for the Northern District of Ohio No. 1:15cv2355, U.S. ex rel. Girishwar Sharma v. Miraca Life Sciences Inc.

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The district court granted the defendants’ motion to dismiss a qui tam case alleging healthcare fraud, with prejudice. While the defendant submitted a volume of evidence suggesting the defendants knowingly had unlicensed pathologists review and approve diagnostic tests that required the signature of a licensed professional, the court found the relator failed to connect this activity to the submission of any false claims. While the relator asserted that claims must have been submitted, the court found his general statements insufficient support for his allegations. The court noted that the relator admitted he had no knowledge of the defendants’ billing practices and had not engaged in conversation with anyone who did. Further, the complaint did not differentiate between the number of claims that might have been submitted to Medicare and those that might have been submitted to other insurers. Although the relator plausibly alleged the underlying conduct, he failed to present any knowledge of actual claims.

Defendants Miraca Holdings Inc., Miraca Life Sciences Inc., and Metroplex Pathology Associates moved to dismiss a qui tam complaint alleging they falsely certified that surgical pathology specimens had been reviewed and interpreted by a licensed pathologist.

Plaintiff/Relator Girishwar Sharma filed a complaint alleging the defendants violated the federal False Claims Act and the California and North Carolina False Claims Act statutes. Neither the federal nor state governments opted to intervene.

Sharma was hired as a pathologist associate to perform preliminary interpretations of surgical pathology specimens which would then be re-read by a licensed pathologist. However, Sharma alleged that during his employment, he was directed to interpret pathology studies and sign them out under licensed pathologists’ names, even though he read and interpreted the studies. While Sharma had completed a medical degree, he was not licensed to practice medicine in his state. The relator made similar claims at the state level.

According to the complaint, Medicare paid around $100 per study. In total, the relator estimated Medicare paid between $3,500,000 and $5,250,000 for fraudulently billed and presented claims between January 2010 and January 2013 for urine cytology studies reviewed and signed out by an unlicensed pathologist under a licensed pathologist’s name. However, the relator acknowledged this total could include studies billed to other insurers.

Sharma also alleged that pathologists were directed to sign out on computer-generated test results relating to cancer diagnostic studies without ever examining the underlying data. According to the relator, the pathologists who would ultimately sign out the molecular reports had no significant involvement in the operations of the molecular lab and had no supervisory role over the lab. The pathologists would simply be sent a list of the final reports. For studies involving patients from states with a requirement that the interpreting pathologist be licensed in that state, the pathologists signed out the results using the name of a pathologist so licensed.

The relator also alleged similar conduct involving different diagnostic tests. Sharma alleged that this practice resulted in the submission of false and fraudulent claims under the FCA because, although the studies were performed by laboratory scientists or technicians, they were signed out by physicians and were billed to Medicare as a physician performed interpretation though they were not interpreted by physicians. According to Sharma, company management was aware of these practices and the conduct continued after his original employer was acquired by another company.

In support, the relator provided emails that appeared to identify specific cases or studies for his signature, including instructions for which licensed physician’s name should be used. Other emails appeared to identify results that required signatures, allegedly without providing the underlying data for review.

The defendants moved to dismiss, first arguing that the relator failed to allege facts showing that MLS is liable for the alleged pre-2013 conduct of Sharma’s original employer under principles of successor liability. Second, the defendants argued the relator failed to plead his case with particularity, because he failed to allege a single example of a false claim that was actually submitted to Medicare for payment.

The court considered the particularity argument first. The defendants argued that Sharma failed to show that MLS actually submitted, and that Medicare actually paid, any false claims. They also argued the relator failed to sufficiently allege the nature of the services for which reimbursement was sought, noting numerous instances in the complaint where the relator hypothesized regarding the services that were presented to Medicare for payment. They also argued the relator failed to allege who submitted the claims or describe Metroplex’s role in the billing process.

In response, the relator acknowledged that he cannot identify the individual claims that were submitted to Medicare, as he did not work in MLS’s accounting or billing departments. However, he argued that the facts he alleged strongly suggested the submission of false claims. The relator argued his complaint described (1) the types of claims submitted to Medicare; (2) the specific individuals involved; (3) the dates and numbers of the claims; and (4) the defendants’ knowledge of the submission of fraudulent claims.

The defendants argued that there are limitations to the personal knowledge exception to the requirement a relator submit a representative false claim. According to the defendants, a relator must have specific personal knowledge that relates directly to billing practices, supporting a strong inference that a claim was submitted. The defendants argued the relator never alleged he had any such personal knowledge and failed to assert the place, time, and content of the alleged scheme.

The court agreed that the personal knowledge exception is narrow, and requires a relator to allege the submission of a false claim for payment, not just instances of fraudulent activity. The court engaged in a lengthy analysis of Prather, and found it distinguishable from this case. Unlike the relator in Prather, Sharma did not allege any personal knowledge regarding the billing practices and/or claims submission processes of the defendants, nor allege he had any personal knowledge based on interactions with individuals working in their billing or claims departments. Rather, the complaint expressly states Sharma is in no position to know which claims were submitted to Medicare for payment.

The court also noted the complaint did not differentiate between claims that could have been submitted to Medicare and those that could have been submitted to other insurers. Further, while Sharma’s exhibits—including emails directing him to validate test results using the name of a licensed pathologist—strongly suggested the alleged scheme, they failed to show the actual submission of claims. The court therefore declined to apply the relaxed standard and found the allegations were insufficient to create a strong inference that false claims were submitted for payment.

The defendants also moved to dismiss claims of false statements and records, arguing they were not pled with particularity. The court granted the motion, again finding the defendant failed to connect the allegedly fraudulent statements to the submission of false claims. The court also granted the motion to dismiss the conspiracy claim, as the underlying claims already failed. Finally, the court granted the motion to dismiss the state claims for the same reasons.

The relator filed a request to amend, which the court denied. The court noted the relator had already amended his complaint once after the initial complaint was dismissed. At that time, the relator had the opportunity to review and consider the defendants’ arguments, which were generally repeated here. Because the relator failed to correct the deficiencies in his complaint, despite having notice of these weaknesses, the court found no meaningful reason he should be provided another chance to amend.

FCA - Sharma v. Miraca Life