First Circuit Opines on Scienter Element, Holds Defendant Didn’t Have Duty to Verify Allegedly False Claims

The relator alleged that the defendant violated the False Claims Act (FCA) by submitting claims for medically unnecessary PCR tests for urinary tract infections (UTIs). The relator argued that the defendant had a duty to independently verify the medical necessity of the tests, claiming the defendant knowingly submitted false claims to Medicare. The court found that the defendant could rely on the doctor’s orders to establish the reasonableness and necessity of the tests, ultimately concluding that the relator did not meet the burden of establishing the required scienter to prevail on the FCA claim.

United States ex rel. Omni Healthcare, Inc. v. MD Spine Solutions LLC, United States Court of Appeals, 1st Cir., No. 25-1110

• Background – The relator, Omni Healthcare, a medical provider, filed a qui tam action against the defendant, MD Labs, alleging violations under the federal Anti-Kickback Statute and the FCA by submitting claims for PCR tests that were medically unnecessary. The relator contended that these tests were more expensive than traditional methods but provided no greater benefit. The district court granted the defendant’s motion for summary judgment, leading the relator to appeal on the issue of medical necessity.
• Duty to Verify Claims – The relator argued that the defendant should have independently verified the medical necessity of the tests, breaching their duty under the FCA. The court ruled that laboratories are not required to determine medical necessity but may rely on the physician’s order as evidence of necessity. This reliance creates a presumption that the tests are reasonable and necessary, shifting the burden to the relator to prove otherwise.
• Scienter Requirement – The court examined the relator’s burden to establish scienter, which requires proof that the defendant “knowingly” submitted false claims. The court held that the relator failed to offer sufficient evidence that the defendant acted with intent, recklessness, or deliberate ignorance regarding the falsity of the claims. The evidence presented by the relator did not demonstrate that the defendant had any basis for second-guessing the medical necessity determined by the ordering physician.
• Impact of Medical Literature – The relator referenced medical literature that questioned the necessity of PCR testing following the tests’ approval. The court stated that future medical guidelines do not retroactively affect the defendant’s compliance at the time claims were submitted. As the FCA focuses on the defendant’s knowledge at the moment of billing, evolving medical standards could not establish liability retrospectively.