On October 30, 2014, the Eleventh Circuit issued a 41-page unpublished opinion affirming in part the dismissal of an FCA complaint under Rule 9(b), holding that the relator failed to plead sufficient “indicia of reliability” with respect to his claims based on conduct allegedly occurring after his employment by the defendants ended.
The relator, Mastej, was the former CEO of defendant Naples Hospital, which was owned by defendant Health Management Associates. Mastej alleged that the defendants had improper financial relationships with ten physicians, and as a result falsely certified their compliance with the Stark and Anti-Kickback Statutes on interim claim forms for patients of the physicians, and in the hospitals’ cost reports. While the relator alleged the details of the alleged payments with detail, he did not allege details of specific false claims. In evaluating the relator’s allegations, the Eleventh Circuit began by reciting certain established principles: that the submission of a false claim must be pleaded with particularity, that “Rule 9(b) ‘does not permit a False Claims Act plaintiff merely to describe a private scheme in detail but then to allege simply and without any stated reason for his belief that claims requesting illegal payments must have been submitted, were likely submitted or should have been submitted to the Government,’ and that “some indicia of reliability must be given in the complaint to support the allegation of an actual false claim for payment being made to the Government.” “[W]hether the allegations of a complaint contain sufficient indicia of reliability to satisfy Rule 9(b)” is evaluated “on a case-by-case basis.” Furthermore, the court explained, “[p]roviding exact billing data—name, date, amount, and services rendered—or attaching a representative sample claim is one way a complaint can establish the necessary indicia of reliability that a false claim was actually submitted,” but “there is no per se rule that an FCA complaint must provide exact billing data or attach a representative sample claim.” With regard to the “other means” of showing the required indicia of reliability, the court noted that while “there are no bright-line rules. . . a relator with direct, first-hand knowledge of the defendants’ submission of false claims gained through her employment with the defendants may have a sufficient basis for asserting that the defendants actually submitted false claims.” “By contrast,” the court continued, “a plaintiff-relator without first-hand knowledge of the defendants’ billing practices is unlikely to have a sufficient basis for such an allegation.”
Turning to the specific allegations of this case, the court acknowledged that Mastej had not alleged details concerning even a single specific “false claim” relating to any patient treated by one of the physicians alleged to have had an improper financial relationship with the defendants. “Rather than submit examples or a representative false interim claim,” the panel noted, “Mastej’s complaint focuses on his personal knowledge gained in his roles and duties as Vice President of Defendant HMA for six years until February 2007 and as CEO of the Collier Boulevard campus from February 2007 until October 2007. Mastej states that his personal ‘knowledge of Defendants’ practices and actions [was] gained by his own efforts as an employee of Defendants and their affiliates, including serving as Chief Executive Officer for a hospital owned by [Defendant] Naples HMA.’” The court held that taking all of the allegations into account, “Mastej’s complaint contains sufficient indicia of reliability for his personal knowledge that the Defendants actually submitted interim claims to Medicare for patients referred to the Medical Center as part of the on-call incentive scheme during 2007.” Given his position at the time and his alleged participation in meetings in which the illegal conduct was discussed, the panel concluded that Mastej “has sufficiently articulated how he allegedly gained his direct, first-hand knowledge of the Defendants’ submission of false interim claims to the government and the government’s payment of such claims.”
In addition to relying on Mastej’s “insider” status, the court also pointed to the nature of the fraud allegations at issue. “[T]he type of fraud alleged here does not depend as much on the particularized medical or billing content of any given claim form. In other FCA cases, the allegation is that a defendant’s Medicare claim contained a false statement because the claim sought reimbursement for particular medical services never rendered to the patient, or for medical services that were unnecessary, overcharged, or miscoded, or for improper prescriptions, or for services not covered by Medicare. In those types of cases, representative claims with particularized medical and billing content matter more, because the falsity of the claim depends largely on the details contained within the claim form—such as the type of medical services rendered, the billing code or codes used on the claim form, and what amount was charged on the claim form for the medical services.” In this case, by contrast, the falsity of the claims turned upon referral activity with which Mastej claimed personally to be familiar.
Nevertheless, the Court concluded that Mastej’s complaint failed to satisfy Rule 9(b) with respect to allegations of illegal conduct after his employment ended in October 2007. “After his employment ended, Mastej was no longer privy to information about the Defendants’ business practices, Medicare patients, referrals of patients, the billing of services to Medicare, or revenue from Medicare reimbursements. The indicia of reliability that existed while Mastej served as Vice President and then CEO disappeared when he left the Defendants’ employment in October 2007.” The panel specifically stated that this holding did “not suggest, much less hold, that a qui tam plaintiff-relator can never base his case on false claims submitted after he left a defendant’s employ.” Rather, the court simply concluded that in the particular context of this case, Mastej’s allegations failed to provide ”the required indicia of reliability for his general allegation” that false claims were submitted after his employment ended “because the reliability of Mastej’s general allegation derives from his highly significant employment roles and duties during 2007.” “Removed from this vantage point and from his access to critical billing and revenue information, Mastej has articulated no factual basis for his assertion that the particular doctors continued to refer patients or that the Defendants submitted interim claims for such patients after Mastej left—other than speculation that claims ‘must have been submitted, were likely submitted or should have been submitted to the Government.’”
A copy of the court’s opinion in U.S. ex rel. Mastej v. Health Management Associates, Inc., can be found here. While – as the court expressly notes – the case does not stand for the blanket proposition that relators cannot plead claims based on post-employment conduct, it does provide support for the view that such allegations must be based on more than simply an argument that conduct that occurred at one point in time likely continued indefinitely into the future.