Woulda, Coulda, Shoulda: Allegation of What Defendants “Would Have Done” Insufficient to Support Knowledge of False Claims; United States District Court for the Southern District of New York No. 12 Civ. 5103 (LGS), U.S. ex rel. Michael I. Levine M.D. v. Vascular Access Centers L.P. et al.


The district court granted motions to dismiss by various physicians named in a qui tam complaint alleging the provision of medically unnecessary procedures and office visits, and a self-referral scheme. Generally, the court found the complaint failed on particularity, as it did not identify any claims with specificity. For example, the relator alleged that certain post-surgery office visits were medically unnecessary but provided no evidence other than his belief, and identified several patients but not the doctors who treated them. The relator also alleged certain physician defendants were aware of the improper office visits because they would have reviewed patients’ charts, but the court found an allegation of what the defendants “would have done” was not sufficient to support the claims.

A group of individually named physician defendants moved to dismiss a qui tam complaint alleging healthcare fraud for failure to state a claim and for failure to plead the allegations with particularity.

Relator Michael I. Levine M.D. alleged that Vascular Access Centers L.P., multiple individually named physicians, and several dialysis centers engaged in a self-referral scheme. According to the complaint, the government’s reimbursement rules require that primary or treating nephrologists at dialysis centers—not interventionists at vascular access centers—maintain responsibility for monitoring an ESRD patient’s vascular access and determining whether follow-on visits or procedures are themselves necessary. The relator alleged that the physicians named in the complaint—who owned vascular access centers—referred patients for follow-up visits at their facilities, even though a primary or treating nephrologist had not made such a referral.

The relator asserted that when he was employed at a dialysis center owned by Robert Matalon, he observed that many patients had follow-up appointments at vascular access centers, even though neither he nor the other healthcare professionals referred these patients for such appointments. The relator alleged Robert Matalon acknowledged the impropriety of the referrals and that he would direct subordinates to redirect patients to another of the defendants.

Robert Matalon once remarked to Relator that decisions to refer patients to such centers must meet a “[w]hat’s in it for me?” test, and at another time, acknowledged that a number of the facilities were “shady.” Relator also noticed that Robert Matalon — in cases where he learned patients were to receive access procedures by doctors other than Dr. Shams — would instruct support staff at the Chinatown Dialysis Unit to redirect patient transport to Dr. Shams and the Beth Israel Union Square Center. Daniel and Albert Matalon had “full knowledge” of these arrangements and their patients’ unnecessary procedures, because among other reasons, they would have looked at their patients’ charts, which include information on procedures performed at the access centers.

The relator also alleged the defendants directed patients to schedule unnecessary follow-up appointments after certain procedures, even though general practice was to have patients return only if complications were apparent.

Based on these alleged facts, the realtor alleged that Dr. Joseph Shams submitted claims for Medicare and Medicaid reimbursement, and received payments for “self-referred” procedures and appointments in violation of the government’s reimbursement rules. The relator also alleged Shams performed unnecessary procedures and submitted duplicative bills for office visits when he already billed for the procedures performed during those visits, or conducted exams that had already been performed by the patient’s primary physician. In support, the relator noted that the number of Medicare beneficiaries seen by Dr. Shams increased modestly from 371 in 2012 to 427 in 2017, his Medicare billings increased from approximately $300,000 to nearly $3.2 million in the same period.

The complaint also alleged that Robert Matalon and other co-defendants submitted false claims to Medicare because they failed to prevent their patients from being seen by fraudulent access centers, and instead fed their patients to these centers and farmed out their monitoring responsibilities. According to the relator, the Matalon defendants therefore fraudulently accepted monthly capitated payments, which are intended to reimburse nephrologists for ongoing assessment of relevant health issues.

The government intervened in the case and settled with Vascular Access Centers L.P. The relator opted to continue his case against the other defendants.

Shams moved to dismiss under the pre-2010 version of the public disclosure bar, which he argued applies to his claims. He also moved for failure to state a claim and for failure to plead with particularity.

First, the court disagreed that the claims were barred by the public disclosure bar. Prior to 2010, the bar was jurisdictional, but that year the Patient Protection and Affordable Care Act removed the jurisdictional bar. The court found it unnecessary to conclude which version of the FCA applied to these claims, because the bar does not foreclose the claims regardless of the accrual date.

The court explained that under the pre-2010 bar, the action must be based on a public disclosure made in a criminal, civil, or administrative hearing, unless the action is brought by the Attorney General or the person bringing the action is an original source of the information. Shams’ argument relied on a similar qui tam action against a different entity, but the court found this other complaint was not a disclosure barring the allegations against him, as Shams was not the subject of it.

However, the court agreed that the relator failed to plead his allegations against Shams with particularity. The complaint alleged Shams submitted claims for medically unnecessary procedures and appointments for Medicare and Medicaid reimbursement, but the court found few allegations were specific to the defendant. The complaint failed to provide representative examples of Dr. Shams’ false claims or cases where he allegedly carried out his self-referral scheme sufficient to satisfy the Rule 9(b) particularity requirement.

The complaint alleged that the increase in Shams’ Medicare billing gave rise to an inference of fraud because of the quantity and types of claims and the amount reimbursed. It also asserted that certain office visits must have been medically unnecessary solely because the relator believed there was no reason to schedule the visits. The court found this information insufficiently particularized to identify any false claims. Lacking even a patient name and date of service, the court found the allegations inadequately pled. Similarly, a single phone call about an office visit the relator believed unnecessary was not enough to support the claims.

Next, the court considered the motion to dismiss of the Matalon defendants, who argued the complaint failed to state a claim and failed on particularity. The complaint alleged the Matalon defendants caused the false claims submitted by Dr. Shams and they submitted their own false claims for capitation payments.

The court again found the complaint failed on particularity, as if failed to allege fraudulent conduct specific to Albert Matalon or Daniel Matalon. Instead, the complaint broadly alleged that, among other reasons, patient feedback made it “virtually inevitable” that all of the Matalon Defendants would be aware of the unnecessary procedures occurring at these centers. Other statements about the defendants were conclusory, such as allegations that they knew of the alleged misconduct because they “would have” reviewed patient records. The court explained that allegations on what individuals “would have” done are allegations of “custom and practice” that are insufficiently specific.

Regarding Robert Matalon, the court found the allegations failed to demonstrate where and when he allegedly committed the fraud. The complaint alleged Robert Matalon allowed or did not stop patients from undergoing medically unnecessary appointments; that he instructed staff to redirect patients to Shams; and that he acknowledged that a number of vascular centers were acting unethically. The court found this insufficient. The complaint identified a few anonymized patients, but did not state which of the three Matalon defendants was the treating physician. The court found those allegations equivalent to group-pleaded allegations and therefore insufficiently particular as to Dr. Robert Matalon.