U.S. ex rel. Sikkenga v. Regence Bluecross

• Decision Date: 05 December 2006
• Docket Number: No. 05-4088.,05-4088.
• Parties: UNITED STATES of America, ex rel. Edyth L. SIKKENGA, and Edyth L. Sikkenga, on her own behalf, Plaintiffs-Appellants, v. REGENCE BLUECROSS BLUESHIELD OF UTAH, formerly known as Blue Cross and Blue Shield of Utah; Associated Regional and University Pathologists, Inc.; John P. Mitchell; Jed H. Pitcher; and Frank Brown, Defendants-Appellees. United States of America; Taxpayers Against Fraud Education Fund; Adminastar Federal, Inc.; Bluecross Blueshield Association; Blue Cross and Blue Shield of Alabama; Blue Cross and Blue Shield of Kansas; Bluecross Blueshield of Montana; Bluecross Blueshield of Nebraska; Bluecross Blueshield of Tennessee; Healthnow New York, Inc.; Mutual of Omaha Insurance Company; Noridian Mutual Insurance Company; Premera Bluecross; United Government Services, L.L.C.; Wisconsin Physicians Service Insurance Corporation; Jon M. Huntsman, Jr., Governor of Utah, Amici Curiae.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 702

472 F.3d 702

UNITED STATES of America, ex rel. Edyth L. SIKKENGA, and Edyth L. Sikkenga, on her own behalf, Plaintiffs-Appellants, v. REGENCE BLUECROSS BLUESHIELD OF UTAH, formerly known as Blue Cross and Blue Shield of Utah; Associated Regional and University Pathologists, Inc.; John P. Mitchell; Jed H. Pitcher; and Frank Brown, Defendants-Appellees.

United States of America; Taxpayers Against Fraud Education Fund; Adminastar Federal, Inc.; Bluecross Blueshield Association; Blue Cross and Blue Shield of Alabama; Blue Cross and Blue Shield of Kansas; Bluecross Blueshield of Montana; Bluecross Blueshield of Nebraska; Bluecross Blueshield of Tennessee; Healthnow New York, Inc.; Mutual of Omaha Insurance Company; Noridian Mutual Insurance Company; Premera Bluecross; United Government Services, L.L.C.; Wisconsin Physicians Service Insurance Corporation; Jon M. Huntsman, Jr., Governor of Utah, Amici Curiae.

No. 05-4088.

United States Court of Appeals, Tenth Circuit.

December 5, 2006.

COPYRIGHT MATERIAL OMITTED

Arthur J. England, Jr., Greenberg Traurig, L.L.C., Miami, Florida; and Daniel L. Day, Murray, Utah (David K. Isom, Greenberg Traurig, L.L.C., Denver, Colorado; Matthew R. Howell, Fillmore Spencer, L.L.C., Provo Utah; Roger H. Hoole, Hoole & King, L.C., Salt Lake City, Utah, with them on the briefs) for Plaintiffs-Appellants.

Robert K. Huffman, Miller & Chevalier Chartered, Washington, D.C., (Randy L. Dryer and James T. Blanch, Parsons Behle & Latimer, Salt Lake City, Utah, with him on the brief), for Defendants-Appellees Regence Bluecross Blueshield of Utah, John P. Mitchell, Jed H. Pitcher, and Frank Brown.

James Jardine, Ray Quinney & Nebeker, P.C., Salt Lake City, Utah for Defendant-Appellee Associated Regional and University Pathologists, Inc. Charles W. Scarborough, Appellate Division, Department of Justice, Washington, D.C., (Paul M. Warner, United States Attorney, District of Utah, Salt Lake City, Utah; Peter D. Keisler and Douglas N. Letter, Department of Justice, Civil Division, Washington, D.C., with him on the brief), for amicus curiae the United States of America on behalf of Plaintiffs-Appellants.

James Moorman, and Joseph E.B. White, Taxpayers Against Fraud Education Fund, Washington, D.C., filed an amicus curiae brief for Taxpayers Against Fraud Education Fund on behalf of Plaintiffs-Appellants.

Michael S. Lee, General Counsel to the Governor, Salt Lake City, Utah, for amicus curiae Jon M. Huntsman, Jr., Governor of Utah on behalf of Defendant-Appellee Associated Regional and University Pathologists, Inc.

Gary L. Ayers, Foulston Siefkin, L.L.P., Wichita, Kansas, filed an amicus curiae brief for Adminastar Federal, Inc., Bluecross Blueshield Association, Blue Cross and Blue Shield of Alabama, Blue Cross and Blue Shield of Kansas, Bluecross Blueshield of Montana, Bluecross Blueshield of Nebraska, Bluecross Blueshield of Tennessee, Healthnow New York Inc., Mutual of Omaha Insurance Company, Noridian Mutual Insurance Company, Premera Bluecross, United Government Services, L.L.C., and Wisconsin Physicians Service Insurance Corporation on behalf of Defendant-Appellee Regence Bluecross Blueshield of Utah.

Before LUCERO, PORFILIO, and HARTZ, Circuit Judges.

LUCERO, Circuit Judge.

Concerned that "two companies [were] bilking the United States out of millions of dollars," Edyth Sikkenga brought suit under the False Claims Act ("FCA"), 31 U.S.C. § 3729(a), alleging that her former employer, Regence BlueCross BlueShield of Utah ("Regence"), three Regence managers, and Associated Regional and University Pathologists ("ARUP") presented false Medicare claims to the Government. Sikkenga also presented the claim that Regence submitted a false budget payment request to the Health Care Financing Authority ("HCFA"),¹ the agency that manages Medicare, and fraudulently avoided adverse contract action by HCFA by backdating and falsifying documents to manipulate its contract performance ratings. She also alleged that Regence retaliated against her by terminating her employment after she took actions to stop this "fraud." The district court dismissed her claim against ARUP, finding that it was not a "person" subject to liability under the FCA because it is an arm-of-the-state. The court dismissed all claims against Regence and the Regence employees, finding that Regence was immune from suit under 42 U.S.C. § 1395u(e), and that Sikkenga did not trigger the whisteblower provision of 31 U.S.C. § 3730(h) because she did not allege that she notified Regence of her intent to file an FCA claim. Sikkenga's state law claim was also dismissed on the basis that she failed to allege a clear and substantial public policy offended by Regence in Sikkenga's termination. Exercising jurisdiction under 28 U.S.C. § 1291, we AFFIRM the district court's dismissal of Sikkenga's false budget claim, its dismissal of her whistleblower claim, and its dismissal of her contract performance score manipulation claim. We REVERSE the lower court's dismissal of Sikkenga's claim against ARUP, her claim that Regence and its managers caused false claims to be presented, and her state law claim for wrongful termination, and REMAND for further proceedings consistent with this decision.

I

Medicare is a federal insurance program which provides health benefits for elderly and disabled individuals. See 42 U.S.C. §§ 1395 et seq. The program is administered through private organizations contracted by the Department of Health and Human Services.² Medicare Part A provides for basic in-patient hospital services, nursing home and hospice care, and, in some instances, home health services. Part B, a voluntary supplemental program, provides reimbursement for outpatient hospital services, services of physicians and other health care professionals, and certain durable medical supplies and equipment. For five years, Sikkenga worked for Regence, the Medicare carrier for the State of Utah. Sikkenga's job included reviewing claims submitted by medical service providers, including laboratories such as ARUP, a laboratory entirely owned by, and located at the University of Utah Medical Center. After complaining internally that ARUP was presenting false claims for Medicare reimbursement, and that Regence had failed to take appropriate action to stop this "fraud," Sikkenga filed suit as a qui tam relator³ under the FCA, 31 U.S.C. § 3729(a), against Regence, three Regence managers,⁴ and ARUP. In her individual capacity, Sikkenga also brought an FCA whistleblower retaliation suit and several state law actions against Regence and its managers.

Sikkenga brought four claims under the FCA, including a whistleblower claim, and several state law claims. In her first FCA cause of action ("Claim 1"), Sikkenga alleged that Regence and ARUP violated the FCA when Regence paid claims for laboratory testing submitted by ARUP that were improper under Medicare Part B. Specifically, Sikkenga alleged that ARUP used a diagnostic code to falsely document the medical necessity of thousands of claims where ARUP did not obtain that code from the referring physician and the code did not document the true medical necessity of the test performed. Sikkenga also claimed that ARUP falsely submitted to Regence, a Medicare Part B carrier, various claims related to renal failure under a code suggesting that the patient was involved in a kidney transplant, when such a procedure should have been paid through Medicare Part A, not Part B. After amending her complaint, Sikkenga also asserted that Regence "caused" ARUP to present these false claims.⁵ She further argued that Regence's query of a Medicare database amounted to an independent presentation of a false claim to the government, or the use of a false record to get a false claim paid by the government under the FCA.

In her second FCA cause of action ("Claim 2"), Sikkenga alleged that Regence directly submitted a false budget request in 1992, in connection with an Early Claims Review process. Her third cause of action ("Claim 3") alleged that Regence fraudulently avoided Contractor Performance Evaluation Program ("CPEP") score reductions by backdating a letter involving a Comprehensive Medical Review and paying ARUP's claims as "adjustments" rather than "reviews." In essence, Sikkenga claimed that by manipulating its CPEP scores, Regence was able to obtain unmerited renewals of its contract as the Medicare Part B carrier for Utah, and that all claims for administrative costs under the contract thereafter were fraudulent. Finally, Sikkenga also asserted an FCA Whistleblower retaliation claim ("Claim 4"). Sikkenga abandons most of her state law claims, appealing only the district court's dismissal of her wrongful termination in violation of public policy claim.⁶

The district court dismissed Claim 1 because it determined that both Regence and the Regence managers were immune from suit and that ARUP was not a "person" under the FCA; Claim 2 because it was barred by the FCA's statute of limitations; Claim 3 because Sikkenga failed to allege fraud with the particularity required under Federal Rule of Civil Procedure 9(b); and Claim 4 because Sikkenga had not alleged that she had notified Regence of her intent to file an FCA claim. Because there were no grounds to suggest that Sikkenga's termination was in violation of a clear and substantial public policy absent an underlying FCA claim, the court dismissed her state law wrongful termination claim as well. We review Sikkenga's appeal of each of these dismissals.

II

Sikkenga contends that the district court made three errors in dismissing Claim 1, her FCA claim that ARUP submitted "false" claims to Regence and that Regence paid them. First, she argues that the district court erred in ruling that Medicare Part B's immunity provision, 42 U.S.C. § 1395u(e),⁷ provided Regence with absolute immunity from any suit premised on its payment of ARUP's claims. Second, Sikkenga contends that the...