On October 2, 2008, the U.S. Court of Appeals for the Tenth Circuit became the self-acclaimed "first circuit to squarely reject [relator's] sweeping annual cost report false certification theory." The relator, an ophthalmologist who had developed a contentious relationship with the hospital where he worked, alleged that the hospital violated the False Claims Act (FCA) by seeking payment for Medicare services rendered while in violation of a number of Medicare laws and regulations. The appeals court rejected the physician relator's claim that the hospital's allegedly false certification of compliance in its Medicare cost report renders all claims submitted for reimbursement false for purposes of the FCA liability. The appeals court said "there is no basis in either law or logic to adopt an express false certification theory that turns every violation of a Medicare regulation into the subject of an FCA qui tam suit." The court explained that for an express false certification theory to apply, the particular statute, regulation or contractual term for which the government payee falsely certifies compliance must be one for which compliance is a prerequisite to payment.
The appeals court affirmed the federal district court's dismissal for failure to state a claim under the FCA because the government's payment for services rendered was not conditioned on the certification of compliance within the annual cost report. Although the relator conceded on appeal the district court's conclusion that the Medicare statutes and regulations do not condition payment on the certification of compliance within the annual cost report, the relator urged the court to look solely to the certification as explicitly conditioning Medicare payments on compliance with all applicable Medicare statutes and regulations. In rejecting this contention, the appeals court stated that although "the certification represents compliance with underlying laws and regulations, it contains only general sweeping language and does not contain language stating that payment is conditioned on perfect compliance with any particular law or regulation." The appeals court concludes that "based on the fact that the government has established a detailed administrative mechanism for managing Medicare participation, we are compelled to conclude that although the government considers substantial compliance a condition of ongoing Medicare participation, it does not require perfect compliance as an absolute condition to receiving Medicare payments for services rendered." The hospital was not liable under the FCA for the alleged false certification because it was not "material to the government's decision to pay out moneys to the claimant."