U.S. ex rel. Corporate Compliance Assocs. v. N.Y. Soc’ty for the Relief of the Ruptured and Crippled, Maintaining the Hosp. for Special Surgery (Summary)

FALSE CLAIMS ACT – QUI TAM CASE

U.S. ex rel. Corporate Compliance Assocs. v. N.Y. Soc’ty for the Relief of the Ruptured and Crippled, Maintaining the Hosp. for Special Surgery, No. 07 Civ. 292 (PKC) (S.D. N.Y. Aug. 7, 2014)

The United States District Court for the Southern District of New York dismissed a relator’s qui tam action brought under the False Claims Act (“FCA”) against an orthopedic hospital, holding that the relator’s complaint failed to satisfy the pleading requirements set forth in Federal Rule of Civil Procedure 9(b). The relator, a general partnership with no relationship to the hospital, brought a qui tam action under the FCA alleging that the hospital submitted fraudulent claims for Medicare and Medicaid reimbursement, and violated the Stark Law and the Anti-Kickback Statute by inducing physicians’ referrals with monetary incentives. Specifically, the relator alleged, based on information it apparently received from unnamed former officers of the hospital, that the hospital purposely overbilled Medicare and Medicaid by miscoding 335,000 claims and that the hospital paid excessive compensation to its physicians through annual payments for performing clinical, administrative, research and academic services in order to induce in-house service referrals. The relator alleged that these false claims caused $788,000,000 in damages to the United States, which, if treble damages were to apply, would amount to over $2 billion.

The court held that the relator’s complaint failed to satisfy the pleading requirements set forth in Federal Rule of Civil Procedure 9(b). The court explained that Rule 9(b) requires a complaint to allege the particulars of the false claims themselves. This includes the dates that the claims were submitted, the amounts charged in the claims, their allegedly false contents, and the hospital’s standard billing practices. Here, the relator failed to identify the dates or amounts of any allegedly false claims, their false contents, or even how the hospital fraudulently certified them and made only general allegations of a fraudulent scheme.