U.S. ex rel. Mastej v. Health Mgmt. Assocs., Inc. (Summary)

FRAUD AND ABUSE

U.S. ex rel. Mastej v. Health Mgmt. Assocs., Inc., No. 13-11859 (11th Cir. Oct. 30, 2014)

The United States Court of Appeals for the Eleventh Circuit affirmed in part and reversed in part a district court’s dismissal of a qui tam complaint against a hospital. The complaint alleged that the hospital had entered into illegal financial relationships with ten physicians, in violation of the False Claims Act, the Stark Law, and the Anti-Kickback Statute. The financial relationships allegedly included lucrative on-call contracts for six neurosurgeons who were not required to provide on-call services and a golf trip benefit for all ten physicians.

The qui tam relator who filed the claim was formerly the CEO at one of the hospital’s campuses; prior to that, he served as the Vice President of Acquisitions and Development. By virtue of these positions, the relator was familiar with the hospital’s billing practices and with its policies on the use of corporate jets. According to the relator, the hospital sought payment from Medicare for services rendered to patients who had been illegally referred by the ten physicians. In addition, the hospital illegally certified to the government that it was supplying medical services in compliance with applicable laws.

The hospital did not contest that the financial incentives were paid as alleged. Rather, it argued that the complaint had failed to state fraud with particularity. Under the federal rules of civil procedure, lawsuits alleging fraud must explain the circumstances of the fraud with “particularity” – i.e., must explain the fraud with a certain fullness of detail. The hospital argued that the complaint failed to establish that any of the ten physicians ever referred patients, or that the hospital ever submitted any false claim for an illegally referred patient, or that the government ever paid any false claim for an illegally referred patient.

The court focused on the significance of the relator’s former roles and duties as an employee of the hospital. It concluded that his complaint had adequately established the existence of fraudulent claims during his time as an employee; however, it agreed with the hospital that the complaint gave “no factual basis” for his claim that the physicians continued to refer patients or submit false claims after he left.

The relator attempted to overcome this by invoking a new version of the False Claims Act. The court was unpersuaded. It noted that the relator had never mentioned the newer version of the False Claims Act in any part of his complaint, and explained that even under the newer law he would still need more evidence to prove that false claims were made after he left the hospital. Consequently, it affirmed the district court’s dismissal of those claims that occurred after the relator left his employment with the hospital, but reversed the district court’s dismissal of the other claims and remanded the case for further proceedings.