U.S. ex rel. Thompson v. Columbia/HCA Healthcare Corp.

• Decision Date: 23 October 1997
• Docket Number: No. 96-40868,96-40868
• Citation: 125 F.3d 899
• Parties: UNITED STATES ex rel. James M. THOMPSON, Plaintiff-Appellant, v. COLUMBIA/HCA HEALTHCARE CORPORATION, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 899

125 F.3d 899

39 Fed.R.Serv.3d 251

UNITED STATES ex rel. James M. THOMPSON, Plaintiff-Appellant, v. COLUMBIA/HCA HEALTHCARE CORPORATION, et al., Defendants-Appellees.

No. 96-40868.

United States Court of Appeals, Fifth Circuit.

Oct. 23, 1997.

Rehearing Denied Jan. 14, 1998.

Renea Hicks, George, Donaldson & Ford, Austin, TX, Edward A. Mallett, Houston, TX, John E. O'Neill, Clements, O'Neill, Pierce & Nickens, Houston, TX, Gerald M. Birnberg, Matt E. Rubin, Williams, Birnberg & Andersen, Houston, TX, David L. Perry, Patricia Shackelford, Perry & Haas, Corpus Christi, TX, Rene A. Haas, Corpus Christi, TX, for Plaintiff-Appellant.

Paul Pearce Dodson, Alan Clifton Gordon, White, Huseman, Pletcher and Powers, Corpus Christi, TX, Donald O. Colleluori, Monica L. Luebker, Ernest E. Figari, Jr., Figari & Davenport, Dallas, TX, Patric Hooper, Jonathan P. Neustadter, William Bradley Tully, Hooper, Lundy & Bookman, Los Angeles, CA, for Defendants-Appellees.

Scott S. Dahl, Department of Justice, Civil Division, Appellate Staff, Washington, DC, Barbara C. Biddle, U.S. Department of Justice, Appellate Staff, Washington, DC, for Amicus Curiae U.S.

David Elliot Halperin, Washington, DC, for U.S. Representative Pete Stark, Amicus Curiae.

Appeal from the United States District Court for the Southern District of Texas.

Before REYNALDO G. GARZA, HIGGINBOTHAM and DAVIS, Circuit Judges.

W. EUGENE DAVIS, Circuit Judge:

Relator, James M. Thompson, M.D., a physician in private practice in Corpus Christi, Texas, brought this qui tam action pursuant to the federal False Claims Act ("FCA"), 31 U.S.C. §§ 3729 et seq., against defendants Columbia/HCA Healthcare Corporation and certain affiliated entities (collectively, "Columbia/HCA") and Corpus Christi Bay Area Surgery, Ltd. The district court dismissed Thompson's complaint for failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure. For the reasons set out below, we affirm in part, vacate in part, and remand for further proceedings.

I.

In his second amended complaint, at issue in this appeal, Thompson alleged that defendants submitted false or fraudulent claims under the FCA by submitting Medicare claims for services rendered in violation of the Medicare anti-kickback statute, ¹ 42 U.S.C. § 1320a-7b, and two versions of a self-referral statute, 42 U.S.C. § 1395nn commonly known as the "Stark" laws after the statute's congressional sponsor, United States Representative Fortney H. "Pete" Stark. He further alleged that defendants made false statements to obtain payment of false or fraudulent claims in violation of the FCA by falsely certifying in annual cost reports that the Medicare services identified therein were provided in compliance with the laws and regulations regarding the provision of healthcare services. Finally, Thompson alleged that defendants violated the FCA by submitting Medicare claims for medically unnecessary services.

The district court granted defendants' motions to dismiss Thompson's second amended complaint for failure to state a claim. The court held that Thompson's allegations that defendants submitted Medicare claims for services rendered in violation of the anti-kickback statute and the Stark laws were insufficient, by themselves, to state a claim for relief under the FCA. The court also held that Thompson's allegations that defendants falsely certified in annual cost reports that the Medicare services identified therein were provided in compliance with the laws and regulations regarding the provision of healthcare services were insufficient to state a claim for release under the FCA. The court concluded that these allegations were insufficient because Thompson had not alleged that defendants submitted false certifications to obtain payment of false or fraudulent claims, i.e., claims or claim amounts that the government would not have paid but for the alleged fraud. Finally, the court held that Thompson's allegations that defendants submitted claims for medically unnecessary services were insufficient to state a claim because he failed to plead his allegations with particularity as required by Rule 9(b) of the Federal Rules of Civil Procedure.

II.

We review a district court's ruling on a motion to dismiss for failure to state a claim de novo. Morin v. Caire, 77 F.3d 116, 120 (5th Cir.1996). A district court may not dismiss a complaint for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts that would entitle him to relief. Lowrey v. Texas A & M Univ. Sys., 117 F.3d 242, 247 (5th Cir.1997). A dismissal for failure to plead fraud with particularity under Rule 9(b) is treated as a dismissal for failure to state a claim under Rule 12(b)(6). Lovelace v. Software Spectrum, Inc., 78 F.3d 1015, 1017 (5th Cir.1996).

The FCA provides, in relevant part:

(a) Liability for certain acts.--Any person who--

(1) knowingly presents, or causes to be presented, to an officer or employee of the United States Government ... a false or fraudulent claim for payment or approval ...; [or]

(2) knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government ...

* * * * * *

is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, plus 3 times the amount of damages which the Government sustains because of the act of that person....

31 U.S.C. § 3729(a)(1), (2).

A. Thompson's Claims Predicated on Statutory Violations

Thompson alleged that defendants violated the FCA by submitting Medicare claims for services rendered in violation of the Medicare anti-kickback statute and the Stark laws. The Medicare anti-kickback statute prohibits (1) the solicitation or receipt of remuneration in return for referrals of Medicare patients, and (2) the offer or payment of remuneration to induce such referrals. 42 U.S.C. § 1320a-7b(b).

The first Stark law, commonly known as "Stark I," was in effect between January 1, 1992 and December 31, 1994. Stark I prohibited physicians from referring Medicare patients to an entity for clinical laboratory services if the referring physician had a nonexempt "financial relationship" with such entity. 42 U.S.C.A. § 1395nn(a)(1)(A) (West 1992). Stark I also prohibited the entity from presenting or causing to be presented a Medicare claim for services furnished pursuant to a prohibited referral. 42 U.S.C.A. § 1395nn(a)(1)(B) (West 1992). With certain exceptions, "financial relationship" was defined as (1) an ownership or investment interest in the entity, or (2) a compensation arrangement with the entity. 42 U.S.C.A. § 1395nn(a)(2) (West 1992). Stark I expressly prohibited payment of Medicare claims for services rendered in violation of its provisions. 42 U.S.C.A. § 1395nn(g)(1) (West 1992).

Stark II became effective January 1, 1995, and prohibits physicians from referring Medicare patients to an entity for certain "designated health services," including inpatient and outpatient hospital services, if the referring physician has a nonexempt "financial relationship" with such entity. 42 U.S.C. § 1395nn(a)(1), (h)(6). Like its predecessor, Stark II provides that the entity may not present or cause to be presented a Medicare claim for services furnished pursuant to a prohibited referral, and expressly prohibits payment of Medicare claims for services rendered in violation of its provisions. 42 U.S.C. § 1395nn(a)(1), (g)(1).

We agree with the district court that claims for services rendered in violation of a statute do not necessarily constitute false or fraudulent claims under the FCA. In United States ex rel. Weinberger v. Equifax, Inc., 557 F.2d 456, 460-61 (5th Cir.1977), we held that claims submitted by a government contractor who allegedly violated the Anti-Pinkerton Act ² did not necessarily constitute false or fraudulent claims under the FCA. In so holding, we observed that the FCA is not an enforcement device for the Anti-Pinkerton Act. We recognized, however, that the FCA "interdicts material misrepresentations made to qualify for government privileges or services." Id. at 461.

The Ninth Circuit has taken a similar approach concerning the scope of the FCA. In United States ex rel. Hopper v. Anton, 91 F.3d 1261, 1266 (9th Cir.1996), the court held that "[v]iolations of laws, rules, or regulations alone do not create a cause of action under the FCA." The court concluded, however, that false certifications of compliance create liability under the FCA when certification is a prerequisite to obtaining a government benefit.

Thus, where the government has conditioned payment of a claim upon a claimant's certification of compliance with, for example, a statute or regulation, a claimant submits a false or fraudulent claim when he or she falsely certifies compliance with that statute or regulation.

Thompson alleged that, as a condition of their participation in the Medicare program, defendants were required to certify in annual cost reports that the services identified therein were provided in compliance with the laws and regulations regarding the provision of healthcare services. He further alleged that defendants falsely certified that the services identified in their annual cost reports were provided in compliance with such laws and regulations. Thus, Thompson fairly alleged that the government's payment of Medicare claims is conditioned upon certification of compliance with the laws and regulations regarding the provision of healthcare services, including the anti-kickback statute and the Stark laws, and that defendants submitted false claims by falsely certifying that the services identified in their annual cost reports were rendered in compliance with such laws and regulations.

Columbia/HCA argues that the certifications of compliance contained in annual cost reports are not a prerequisite to payment of Medicare claims...