U.S. ex rel. Conner v. Salina Regional Health

• Decision Date: 02 October 2008
• Docket Number: Nos. 07-3033, 07-3035.,s. 07-3033, 07-3035.
• Citation: 543 F.3d 1211
• Parties: UNITED STATES of America, ex rel. Brian E. CONNER, M.D., and Brian E. Conner, M.D., Chartered, Plaintiffs-Appellants and Cross-Appellees, v. SALINA REGIONAL HEALTH CENTER, INC., Defendant-Appellee and Cross-Appellant. Healthcare Administration Responsibility Project and Just Health, Amicus Curiae in support of Plaintiff-Appellants and Cross-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

543 F.3d 1211

UNITED STATES of America, ex rel. Brian E. CONNER, M.D., and Brian E. Conner, M.D., Chartered, Plaintiffs-Appellants and Cross-Appellees, v. SALINA REGIONAL HEALTH CENTER, INC., Defendant-Appellee and Cross-Appellant.

Healthcare Administration Responsibility Project and Just Health, Amicus Curiae in support of Plaintiff-Appellants and Cross-Appellees.

Nos. 07-3033, 07-3035.

United States Court of Appeals, Tenth Circuit.

October 2, 2008.

Ronald H. Clark, Arent Fox, Washington, D.C. (Randall A. Brater, Arent Fox, Washington, D.C., and Douglas L. Carter, Kansas City, Missouri, with him on the briefs), for the Plaintiffs-Appellants and Cross-Appellees.

James D. Griffin, Blackwell Sanders Peper Martin, LLP, Kansas City, Missouri (Stephen J. Torline and Lori J. Sellers, Blackwell Sanders Peper Martin, LLP, Kansas City, Missouri; John W. Mize and Peter S. Johnston, Clark, Mize & Linville, Chtd., Salina, Kansas, with him on the briefs), for Defendant-Appellee and Cross-Appellant.

Sharon J. Arkin, Arkin & Glovsky, Lake Forest, California, on the brief for Amicus Curiae.

Before LUCERO and EBEL, Circuit Judges, and FRIZZELL,^* District Court Judge.

LUCERO, Circuit Judge.

Brian E. Conner, M.D., and Brian E. Conner, M.D., Chartered¹ ("Conner") brought this qui tam action on behalf of the United States and against Salina Regional Health Center, Inc. ("SRHC"), alleging, among other things, violations of the False Claims Act ("FCA"), 31 U.S.C. § 3729 et seq. Conner asserted that SRHC violated the FCA by seeking payment for Medicare services rendered while in violation of a host of Medicare regulations and statutes. His theory of falsity under the FCA is premised on the observation that each time SRHC files an "annual cost report" with the government, it certifies within that report that it has complied with Medicare laws and regulations. Conner alleges that SRHC therefore submitted false claims to the government because it was not in total compliance with those laws and regulations. Following a motion by SRHC to dismiss for failure to state a claim, the district court rejected this theory and dismissed Conner's FCA claims.

On appeal, we must decide whether a qui tam plaintiff, proceeding under the FCA, can maintain a cause of action against a Medicare provider based on an allegation that the provider's certification of compliance with Medicare statutes and regulations, contained in the annual cost report, renders all claims submitted for reimbursement by that provider false within the meaning of the FCA. Like the district court, we hold that the FCA cannot be stretched this far, and affirm the dismissal of Conner's FCA claims. We also affirm the dismissal of Conner's related allegation that SRHC submitted false claims by violating the Medicare Anti-kickback statute, 42 U.S.C. § 1320a-7b ("Anti-kickback statute"), for failure to state a violation of the Anti-kickback statute.

On cross-appeal, SRHC challenges the district court's conclusion that several state law claims pursued by Conner were not barred by the Kansas statute of limitations. We agree with SRHC that the district court erred in finding these claims timely filed under Kansas law and in its use of Rule 15 of the Federal Rules of Civil Procedure, and thus remand to the district court for the limited purpose of dismissing Conner's state law claims with prejudice.

I

For 18 years, Conner, an opthamologist and eye surgeon, worked as a member of the medical staff at SRHC's facilities in Salina, Kansas. Many of Conner's patients qualified for Medicare or Medicaid, and SRHC is a provider in the Medicare and Medicaid healthcare programs. As a result, SRHC received payments from the government as remuneration for services provided to patients served by these programs.

During the mid-1990s, Conner and SRHC developed a contentious relationship. SRHC administrators challenged Conner's practices in the operating room and his treatment of hospital scrub staff. Conner complained to the hospital that it hired underqualified scrub staff, provided inadequate facilities and equipment, failed to meet required standards of care, and failed to investigate or review complaints concerning quality-of-care issues. In 1995, as the result of a dispute over surgery performed on a particular patient, SRHC suspended Conner's privileges to perform certain ophthalmic procedures at its facilities.

On May 6, 1996, SRHC's Chief Executive Officer sent Conner a letter regarding the circumstances under which the hospital would restore Conner's privileges:

Many disputes have arisen with you over after-hours staffing for retinal reattachment procedures. If surgical scrub staff assigned to work for you do not meet your needs, you will be responsible for contracting with preferred scrub staff for your procedures.

The letter also explained that the hospital would adopt Conner's recommendation that he work with SRHC's surgery department to provide additional training to the hospital's scrub staff, because staff "with more experience are preferred by you." Conner later refused to sign a "cooperation agreement" that required him to provide his own scrub staff when he was not satisfied with SRHC staff, and the hospital in turn refused to lift his suspension. He continued, however, to perform other types of surgery until early 1997, when SRHC declined to reappoint him to its medical staff.

Upon the hospital's refusal to reappoint him to its medical staff, Conner began litigating a variety of claims against SRHC. He first filed suit in Kansas state court in 1997, unsuccessfully seeking an order enjoining SRHC from denying his application for reappointment. In 1999, Conner sued SRHC in federal district court, alleging violations of 42 U.S.C. § 1983 and asserting claims for breach of contract, tortious interference, and injunctive relief. The court dismissed the § 1983 claim and declined to exercise supplemental jurisdiction over the state law claims. We affirmed the dismissal. See Conner v. Salina Reg'l Health Ctr., Inc., 56 Fed.Appx. 898 (10th Cir. Feb. 12, 2003) (unpublished). Conner refiled the state law claims in a Kansas court in 2000 but voluntarily dismissed this second state case in February 2004.

Conner brought the present qui tam lawsuit on June 1, 2001, alleging violations of the FCA. The United States has declined to intervene. On June 16, 2004, Conner filed a Third Amended Complaint, which added the state law claims from the lawsuit he voluntarily dismissed in February 2004. He later filed the now-operative Fourth Amended Complaint,² which contained the same claims.

Only a few of the nine counts in Conner's complaint are at issue in this appeal. Conner's federal law causes of action allege that SRHC violated two sections of the FCA by presenting false or fraudulent claims for Medicare reimbursement. See 31 U.S.C. § 3729(a)(1) & (2).³ These counts actually comprise two distinct legal arguments. Conner first claims that SRHC presented false claims because it was in violation of various regulations and statutes establishing Medicare⁴ conditions of participation at all times from 1987 until the present day.⁵ Conner's complaint describes some of these alleged violations in detail. Conner next alleges that SRHC presented false claims because it was in violation of the Anti-kickback statute. He suggests that SRHC violated this statute by asking Conner to provide his own surgical scrub staff if he was unhappy with those employed by the hospital. In addition to the FCA-related claims, Conner's complaint asserts claims arising under Kansas law, including breach of contract and tortious interference. He also seeks injunctive relief.

SRHC moved to dismiss all claims under Federal Rule of Civil Procedure 12(b)(6) and, alternatively, for summary judgment under Federal Rule of Civil Procedure 56. The district court disposed of the case in two orders. In the first order, it ruled that Conner had failed to state a claim under the FCA for SRHC's alleged failure to comply with Medicare statutes and regulations because the government's payment for services rendered was not conditioned on such compliance. See United States ex rel. Conner v. Salina Reg'l Health Ctr., Inc., 459 F.Supp.2d 1081, 1086-87 (D.Kan.2006). It also dismissed his claim under the Anti-kickback statute, concluding that Conner's complaint failed to allege that the hospital had solicited a kickback in return for Medicare referrals. Id. at 1090. According to the court, Conner "merely allege[d] a dispute between two healthcare providers about valid and legal ways to provide surgical support, which does not affect Medicare payments." Id.

As to the state law claims, the court declined to dismiss those claims as time barred under the applicable Kansas statute of limitations. The court concluded that the claims — which were part of an amended complaint that Conner did not serve until September 21, 2004 — were timely because, under Federal Rule of Civil Procedure 15(c), they related back to conduct alleged in the original federal pleading in this case. The amended claims were thus timely, it reasoned, because they commenced as of June 1, 2001, the date Conner filed his first complaint. Id. at 1093-94. In a subsequent order, however, the district court declined to exercise supplemental jurisdiction over the state law claims and dismissed them without prejudice.

Conner now appeals the district court's rulings on his FCA claims, and SRHC cross-appeals the district court's decision that the statute of limitations did not bar Conner's state law claims. We have jurisdiction pursuant to 28 U.S.C. § 1291.

II

Relying on Rule 12(b)(6), the district court dismissed Conner's claims under the FCA for failure to state a claim and refused to dismiss the state law claims as time barred under the same Rule 12(b)(6) standard. We review a district court's application of Rule 12(b)(6) de novo. Trentadue v. Integrity Comm'n, 501 F.3d 1215,...