Claims Against Healthcare Providers in New Mexico Survive Summary Judgment (Part III-Causation and Non-Intervened Claims)

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This is Part III of a three-part series summarizing the court’s summary judgment ruling in United States ex rel. Baker v. Community Health Systems, Inc. (D.N.M. May 16, 2014). In this post, we focus on the court’s analysis of the causation element and public disclosure defense. A description of the history of the case can be found here, and summaries of earlier parts of the decision are here and here. 

As we explained previously:

the crux of the allegations are that the defendant hospitals caused New Mexico to submit false statements to the federal government as part of the Medicaid program—which is a program jointly funded by the states and the federal government—because the reports included donations made by the hospitals to the state. The complaint alleges that because these donations had a “direct or indirect relationship” to the Medicaid payments received by the hospitals from the Medicaid program, they should not have been counted as part of New Mexico’s contribution to the Medicaid program.

Causation: When a claim under the False Claims Act is premised on a party causing another to submit a false claim, it is not enough to establish that the party failed to prevent another from submitting a false claim, but instead “liability [only] attaches to ‘affirmative acts’ that cause or assist the presentation of false claims.” (citing United States ex rel. Sikkenga v. Regence BlueCross BlueShield of Utah, 472 F.3d 702, 714 (10th Cir. 2006)). Relying on Sikkenga, the court held that a party “‘causes’ a false claim where the submission of the claim was the foreseeable and intended result” of the party’s actions. However, the affirmative act that triggers liability under the False Claims Act need not be “wrongful or illegal in itself.”

The defendants contended that there was no evidence that they had any influence over the state’s allegedly false submission to Medicare. The defendants argued that since the donations were not in and of themselves illegal, and since they had no influence over how the state reported those donations, their actions did not “cause” the submission of false claims.

The plaintiffs argued, on the other hand, that the defendant hospitals made the donations with the intent that the state not report them to Medicare. In particular, plaintiffs pointed to evidence that the defendant hospitals’ donations appeared to be part of a scheme to increase the amount of Medicare money available to them.

The court ultimately ruled that the plaintiffs had presented enough evidence to create a plausible inference that the defendant hospitals made the donations with the expectation that the state would not report them as non-bona fide contributions on its Medicare forms.

False Record Claims: The defendants also sought to dismiss the plaintiff’s claims under 31 U.S.C. § 3729(a)(2) (the so called “false records claims”), in which the government had not intervened. The defendants argued that the facts underlying those claims had been publicly disclosed before the relator brought them and that the relator was not an original source.

The court noted that the public disclosure bar “involves four questions, which can be summed up as asking whether the relator’s complaint is ‘based upon’ ‘public disclosure,’ and if so, whether the relator qualifies as an ‘original source’ under the provision.” The court recognized that a public disclosure occurs when “‘allegations of fraud are revealed to members of the public with no prior knowledge thereof.’” (quoting United States ex rel. Ramseyer v. Century Healthcare Corp., 90 F.3d 1514, 1521 (10th Cir. 1996).)

Relying on extensive newspaper articles detailing the relationship between various defendants and other parties, which formed the core basis of the false records claims, the court dismissed those claims based on the public disclosure bar. Additionally, the court found that the relator was not an original source of that information and was never in a position to be an original source. Because the relator had left his position before the activities in question had even occurred, the court concluded the relator could not have been an original source.

The court’s opinion also addressed a hot topic in False Claims Act jurisprudence: how to apply the amendments to the public disclosure bar in the Fraud Enforcement and Recovery Act (FERA) and the extent to which such amendments are retroactive. Those amendments allow the government to essentially veto any dismissal of claims based on the public disclosure bar. The court originally ruled that FERA’s retroactivity language would not apply to the false record claims, but as we reported on here, the court later modified its ruling based on subsequent precedent and found FERA’s amendments did apply to the claims, which were all filed after the operative date.