Federal law prohibits the payment of healthcare expenses under Medicare that “are not reasonable and necessary for the diagnosis or treatment of illness or injury to improve the functioning of a malformed body member.” See 42 U.S.C. § 1395y(a)(1)(A). This means that medical providers who bill Medicare for unnecessary medical procedures may be in violation of the False Claims Act. This issue – the unnecessary billing of Medicare – was one of the issues addressed by the Fifth Circuit Court of Appeals in its 2004 decision U.S. ex rel. Riley v. St. Lukes Episcopal Hospital, et al., 355 F.3d 370 (5th Cir. 2004).

The whistleblower in Riley (a nurse), sued her employer, St. Lukes Episcopal Hospital, and various defendants alleging they filed false claims under Medicare. The whistleblower in Riley claimed the defendants violated the False Claims Act by billing Medicare for services that were medically unnecessary. According to her complaint, the defendants in Riley performed unnecessary heart transplants that were paid for by Medicare. Id. at 374.

The district court dismissed the plaintiff’s complaint. According to the lower court, the plaintiff’s claim did not allege false claims under the False Claims Act, but instead merely challenged “scientific judgment about which reasonable minds may differ.” Id.

To allege a false claim under subsection (a)(1) of the False Claims Act, the whistleblower in Riley had to allege that the defendants knowingly made a false or fraudulent claim to the United States government. See 31 USC 3729(a)(1). For the plaintiff in Riley to state a claim under section (a)(2) of the FCA, she must allege that the defendants knowingly made or used a false record or statement to get a false or fraudulent claim paid by the government. See 31 USC 3729(a)(2). The whistleblower in Riley claimed the defendants violated subsections (a)(1) and (a)(2) of the FCA by admitting and upgrading patients unnecessarily and “covering up for medical bills submitted for services of an unlicensed doctor.”

The Fifth Circuit began its analysis noting that “claims for medically unnecessary treatment are actionable” under the False Claims Act. Id. at 376. The appellate court agreed with the district court’s conclusion that the False Claims Act requires that a statement made must be knowingly false, “which means a lie is actionable, but not an error.” The appellate court disagreed, however, with the district court’s assessment of whether the plaintiff had properly alleged a claim. Id.

The appellate court, in reviewing the plaintiff’s complaint in Riley, noted that the complaint alleged that defendants made statements that were known to be false, “rather than just erroneous.” Id. at 376. The complaint in Riley alleged that the defendants ordered services which they knew were unnecessary. Specifically, the complaint alleged that patients were unnecessarily admitted to the hospital and that their organ transplant status was artificially upgraded. Id. The court, in reversing the district court, noted that the district court should only dismiss “if it appears beyond doubt that Plaintiff can prove ‘no set of facts’ in support of her claim.” Id. at 377. By dismissing the complaint, the appellate court found that the district court was preventing the plaintiff from proving facts to support her claim. Id.

---------------------------------------------------------------------------------------------------------------------

Jason Cornell is an attorney who represents whistleblowers with the law firm Clark Fountain LaVista Prather Keen & Littky-Rubin. Clark Fountain represents plaintiffs in various matters throughout the United States. If you have questions regarding the issues addressed in this or other posts, you can reach Jason at jcornell@clarkfountain.com.