On March 9, 2011, the United States District Court for the Northern District of Texas issued a decision dismissing eleven of twelve counts brought against VistaCare Hospice Care, Inc. (VistaCare) by a former employee (Relator) of VistaCare’s Denton, Texas facility for alleged violations of the federal False Claims Act (FCA) and the FCAs of various states (State FCAs), and for wrongful discharge. U.S. ex rel. Wall v. VistaCare, Inc., Civil Action No. 3:07-CV-604-M (Filed March 9, 2011). In her complaint, Relator alleged that VistaCare had violated the FCA and State FCAs by:
- Fraudulently enrolling Medicare and Medicaid patients for hospice services who were not eligible for hospice;
- Failing to provide hospice services (e.g., physical therapy) required under Medicare’s hospice condition of participation regulations;
- Making false Medicare and Medicaid claims for unnecessary medical equipment; •Providing illegal kickbacks to patients, nursing homes, and suppliers; and
- Retaliating against Relator after she complained about the above activities by demoting and eventually terminating her.
The court dismissed Relator’s fraudulent enrollment claim without prejudice under Rule 9(b) of the Federal Rules of Civil Procedure for failing to plead fraud with particularity. The complaint, according to the court, failed to, among other things, identify “any individuals who participated in the alleged fraud; state that persons purposefully acting for VistaCare acted with the requisite intent in making false statements or preparing false records to obtain reimbursement from the government; or identify whether the hospice patients identified, in fact have Medicare or Medicaid (“who” and “what”).”
The court dismissed Relator’s claim that VistaCare failed to provide services required by Medicare’s hospice conditions of participation without prejudice under Rule 12(b)(6). Although the court found Relator’s pleadings sufficient to meet Rule 9(b), the court held that VistaCare’s alleged non-compliance with hospice conditions of participation was not “material” to the government’s decision to pay VistaCare. Per the court’s analysis, “[a] sustainable FCA allegation premised on a false certification of compliance with statutory or regulatory requirements must be based upon a ‘condition of payment,’ not a condition of participation.” The court rejected Relator’s contention that VistaCare’s signing of the CMS-855A form—in which hospice providers acknowledge that payment is conditioned on compliance with conditions of participation—renders non-compliance with hospice conditions of participation material under the FCA. The court reasoned that “if merely signing this form converts a condition of participation into a condition of payment, then every hospice provider not fully complying with all conditions of participation may be held liable under the FCA, thus undermining the distinction between conditions of payment and participation, as well as Medicare’s internal administrative structure to deal with violations of conditions of participation.” However, after noting that falsely certifying the performance of certain services could, in certain circumstances, violate a condition of payment under Medicare, the court granted Relator leave to amend this claim “by pleading what specific services are conditions of payment that were not met.”
Based on Relator’s concession that her FCA claim based on VistaCare’s provision of unnecessary medical equipment to hospice patients was without merit because VistaCare is paid on a per-diem basis, the court dismissed this claim with prejudice.
The court also dismissed Relator’s corollary State FCA claims. Relator’s Massachusetts, Indiana, Nevada, and New Mexico State FCA claims were dismissed without prejudice based on the court’s finding that the specific facts alleged in her pleadings related only to VistaCare’s Denton, Texas facility at which she worked and such facts cannot be used to “support by inference her general pleading, ‘upon information and belief,’ that similar frauds were also perpetrated in Indiana, Massachusetts, Nevada, and New Mexico, in alleged violation of those states’ laws against false claims.” Relator’s Indiana FCA claim was dismissed with prejudice because VistaCare’s alleged fraudulent conduct occurred prior to the Indiana legislature’s enactment of that statutory provision. The court dismissed Relator’s Texas FCA claim without prejudice because, at the time period relevant to Relator’s complaint, that statute required dismissal in the event the state of Texas elected not to intervene and that the state of Texas had elected not to intervene.
Finally, the court dismissed Relator’s FCA and Texas FCA retaliation claims with prejudice and dismissed her common-law wrongful discharge claim without prejudice. Applying the Texas Whistleblower Act’s 180-day statute of limitations period, the court found that Relator’s FCA and Texas FCA retaliation claims were time-barred. The court dismissed Relator’s wrongful discharge claim because her pleadings undermined the allegation that her refusal to engage in criminal conduct was the sole reason for her termination by VistaCare, as required under Texas law. Nonetheless, the court granted her leave to amend in the event that she is able to plead, in good faith, that she was terminated by VistaCare solely on the basis of her refusal to commit a specifically identified illegal act.
The only count the court did not dismiss was Relator’s FCA claim based on VistaCare’s alleged provision of illegal kickbacks to patients, nursing homes, and suppliers. The court noted that the Fifth Circuit had held that a kickback violation can form the basis of a cause of action under the FCA. The court found that Relator had complied with Rule 9(b) by providing a general description of the kickback scheme and had identified the initials of a specific patient who received a kickback, and the initials of a patient who had been referred as a result of the kickback. The court also concluded that Relator had sufficiently alleged that VistaCare had certified compliance with the anti-kickback statute based on its completion of the CMS 855A form, which required VistaCare to certify its understanding that compliance with the anti-kickback statute was a condition of payment.
A copy of the court’s opinion is available by clicking here.