In an unpublished, per curiam opinion issued on Monday, the appellate court sided with the defendant hospice facility finding that two former employees (the relators) who brought a False Claims Act (FCA) complaint did not meet the heightened pleading standards associated with fraud allegations.
The qui tam action arose from the relators’ accusation that Bethany Hospice and Palliative Care LLC, its corporate relative, and its owners submitted false claims when they billed the government for services provided to illegally-referred patients in violation of the federal Anti-Kickback Statute.
The appellate panel explained the relators’ core allegation: Bethany Hospice paid physicians remuneration for Medicare and Medicaid patient referrals that provided substantial returns to the company. Doctors would allegedly purchase ownership in Bethany Hospice and were paid kick-backs through monthly salaries, bonuses, and dividends.
According to the complaint, that compensation was not paid for the fair market value of the physician’s services but, instead, “as inducement for or reward for referrals of patients, which constitute kickbacks.” The appellate opinion noted that previously the district court dismissed the relators’ complaint with prejudice based on their failure to “plead with particularity the submission of an actual false claim to the government.”
In its analysis of the case, the panel first determined that the relators failed to “identify even a single, concrete example of a false claim submitted to the government.” While not alone fatal to the relators’ contentions, the court explained that the appellants failed to otherwise back it up. Additionally, the opinion stated, the relators neither claimed to have observed the submission of an actual false claim, nor did they personally participate in the submission thereof.
The court further determined that the appellants’ reliance on “Bethany Hospice’s business model and Medicare claims data lends no credence to their allegation that Bethany Hospice submitted a false claim.” The panel so reasoned because, based on circuit precedent, an FCA claimant cannot use “mathematical probability” to conclude that a defendant must have submitted a false claim at some point. Finally, because of their failure to adequately plead Bethany Hospice’s kickback scheme, the relators’ submission of a false claim, and certification of a false statement claims fell away too.