The US District Court for the Middle District of Tennessee recently refused the request of MedQuest Associates, Inc (“MedQuest”), an operator of diagnostic testing centers, to dismiss a false claim suit. The suit alleged that MedQuest failed to properly supervise procedures and improperly submitted bills under a former entity’s Medicare number. See U.S. ex rel. Hobbs v. MedQuest Assocs., Inc., et al., 2010 WL 1169773 (M.D. Tenn. Mar. 24, 2010)(Judge Haynes). In its intervening complaint, the United States alleged that when MedQuest conducted diagnostic testing at its independent diagnostic testing facility (IDTF), it did not provide the required and appropriate direct physician supervision. Instead, MedQuest provided only general supervision, which is the less stringent requirement when the same tests are performed in hospitals or physician offices. Additionally, the government alleged that, following the conversion of MedQuest’s physician office location to an IDTF, MedQuest did not change the Medicare enrollment classification of the physician’s office location to an IDTF. Rather, MedQuest continued billing its testing services using its physician’s office location.

The Court held that failure to comply with supervision requirements could result in the submission of a false claim, as could failure to appropriately change the Medicare facility classification associated with a billing number. In ruling on MedQuest’s motion to dismiss, the Court looked beyond the allegations of the complaint and considered evidence in the form of documents attached to the complaint, e.g., copies of prior refunds by MedQuest to Medicare and MedQuest’s own internal memoranda suggesting that MedQuest did indeed know that its failure to correctly follow supervision requirements would lead to a false claim. On the issue of MedQuest’s improper facility designation, the Court rejected MedQuest’s argument that its failure to timely change its facility designation was harmless error because physician’s offices and IDTFs use the same fee schedule for testing.

While this decision only denied MedQuest’s motion to dismiss and did not address the merits of the FCA claims, it is clear that billing for tests that were not correctly supervised in the first instance or billing under an incorrect Medicare facility designation may be used as grounds for FCA liability, especially when the facility operator is shown to have knowledge of the correct treatment and billing compliance elements. Health care providers should ensure that they understand the current myriad supervision requirements for all types of procedures and practitioners, as the applicable rules are varied and evolving. Furthermore, they should review all of their Medicare enrollment documents to ensure that they are correct and updated.