McNutt Ex Rel. United States v. Haleyville Medical Supplies, Inc.

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT
FILED
________________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
September 9, 2005
No. 04-14458
THOMAS K. KAHN
________________________ CLERK

D. C. Docket No. 01-03156-CV-AR-J

BRENT MCNUTT,
for the use and benefit of United States of
America ex rel,

Plaintiff-Appellee,

versus

HALEYVILLE MEDICAL SUPPLIES, INC.,
CITY PHARMACY OF HALEYVILLE,
CARE MEDICAL OF JASPER, INC.,
CARE PHARMACY, INC.,
WINFIELD MEDICAL SUPPLY, INC.,
GERALD MAX BURLESON,
FRANCES R. BURLESON,

Defendants-Appellants.

________________________

Appeal from the United States District Court
for the Northern District of Alabama
_________________________

(September 9, 2005)
Before CARNES and PRYOR, Circuit Judges, and FORRESTER *, District Judge.

PRYOR, Circuit Judge:

The question in this interlocutory appeal is whether a violation of the Anti-

Kickback Statute can form the basis for a qui tam action under the False Claims

Act. Gerald and Frances Burleson routinely provided medical services for which

they submitted claims for reimbursement to Medicare, and each year, the

Burlesons certified that they complied with the Anti-Kickback Statute. Because it

is undisputed that a violator of the Anti-Kickback Statute is disqualified from

participating in a Medicare program, the government stated a claim, under the

False Claims Act, when it alleged that the Burlesons had submitted claims for

Medicare reimbursement with knowledge that they were ineligible for that

reimbursement. We affirm the district court.

I. BACKGROUND

In December 2001, Brent McNutt, a former employee of a medical services

company owned by the Burlesons, filed a qui tam action against the Burlesons and

five medical services companies that they owned, Haleyville Medical Supplies,

City Pharmacy, Care Medical, Care Pharmacy, and Winfield Medical, for

violations of the False Claims Act. 31 U.S.C. § 3729(a). In 2002, the United

*
Honorable J. Owen Forrester, United States District Judge for the Northern District of
Georgia, sitting by designation.

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States Attorney for the Northern District of Alabama opened parallel criminal and

civil investigations of the Burlesons’ activities. The district court ordered a stay of

discovery pending the criminal investigation and any later criminal proceeding,

unless all defendants waived their Fifth Amendment privilege against self-

incrimination.

The government filed a complaint in intervention. The government alleged

that Medicare providers are required to enter a provider agreement with the

government, and under the terms of the agreement, the Medicare provider certifies

that it will comply with all laws and regulations concerning proper practices for

Medicare providers. One of the laws included in this certification is the Anti-

Kickback Statute. 42 U.S.C. § 1320a-7b(b). The government alleged that a

Medicare “provider’s compliance with its provider agreement is a condition for

receipt of payments from the Medicare program.”

The government also alleged detailed facts about the Burlesons’ activities.

The government alleged that the companies owned by the Burlesons were

Medicare providers and the Burlesons violated the Anti-Kickback Statute by

paying kickbacks camouflaged as rental payments and commissions to pharmacists

and other individuals. The Burlesons issued monthly checks to referring

phamacists. The amount of the checks were a percentage, typically 20 to 25

3
percent, of the amount the Burlesons received from Medicare for services provided

to the patients referred by those pharmacists. To conceal the nature of the

kickback payments, the Burlesons characterized each check as “rent” in the

“memo” portion of the check.

The government also alleged that the Burlesons paid kickbacks to two

respiratory therapists and a doctor’s patient representative for referring Medicare

patients to the Burlesons. The government identified specific claims submitted by

the Burlesons to Medicare for reimbursement for services, which had been

rendered to patients referred by the individuals receiving kickbacks:

An example of such a transaction is found in Patient A, who received
a prescription dated April 24, 2001. Burleson submitted the claim
form on June 11 and/or 13, 2001 for reimbursement for patient A.
Another example of the said transactions is found in Patient B who
received a prescription dated September 30, 2001. Burleson
submitted the claim form on November 16, 2001. Vicky Wesson
received a commission for the referral of patients A and B.
...
Patient C . . . received a prescription dated August 18, 1999. Burleson
submitted the claim form on November 17, 1999, for reimbursement
for Patient C. . . . Patient D . . . received a prescription dated February
26, 1999. Burleson submitted the claim for on March 10, 1999.
Higgins received commissions on the referral of patients C and D.

The government alleged that, by virtue of these acts, the Burlesons knowingly

presented, or knowingly caused to be presented, false or fraudulent claims for

payment in violation of the False Claims Act.

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The Burlesons filed a motion to dismiss for failure to state a claim upon

which relief could be granted. The district court denied the motion, but

encouraged the Burlesons to request the court to certify the question for

interlocutory appeal. After the Burlesons filed that request, the district court

certified the following question for interlocutory appeal: “whether a violation of

the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b)[,] can form a basis for a claim

pursuant to the False Claim[s] Act, 31 U.S.C. § 3729(a)(1) and 31 U.S.C. §

3729(a)(3).” This Court then granted the Burlesons’ petition for interlocutory

appeal.

II. STANDARD OF REVIEW

We review de novo questions of statutory interpretation and the denial of a

motion to dismiss for failure to state a claim. See Swann v. Southern Health

Partners, Inc., 388 F.3d 834, 835 (11th Cir. 2004); Rodriguez v. Lamer, 60 F.3d

745, 747 (11th Cir. 1995). Because this appeal is from the denial of a motion to

dismiss for failure to state a claim, we “view the allegations of the complaint in the

light most favorable to the plaintiff[], consider the allegations of the complaint as

true, and accept all reasonable inferences therefrom.” Tello v. Dean Witter

Reynolds, Inc., 410 F.3d 1275, 1288 n.12 (11th Cir. 2005).

III. DISCUSSION

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The False Claims Act is the primary law on which the federal government

relies to recover losses caused by fraud. Avco Corp. v. Dept. of Justice, 884 F.2d

621, 622 (D.C. Cir. 1989). The Act creates civil liability for making a false claim

for payment by the government:

Any person who–
(1) knowingly presents, or causes to be presented, to an officer or
employee of the United States Government or a member of the Armed
Forces of the United States a false or fraudulent claim for payment or
approval; [or]
....
(3) conspires to defraud the Government by getting a false or
fraudulent claim allowed or paid;
....
is liable to the United States Government. . . .

31 U.S.C. § 3729(a). The Act also permits private citizens to bring qui tam suits to

enforce the Act. Id. § 3730(b).

The Anti-Kickback Statute makes it a felony to offer kickbacks or other

payments in exchange for referring patients “for the furnishing of any item or

service for which payment may be made in whole or in part under a Federal health

care program.” 42 U.S.C. § 1320a-7b(b)(2)(A). Neither party disputes that

compliance with federal health care laws, including the Statute, is a condition of

payment by the Medicare program. The Burlesons do not dispute that their failure

to comply with the Statute, if true, disqualified them from receiving payment as

part of a Medicare program.

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The Burlesons argue that the government seeks to hold them liable for

nothing more than falsely certifying on a Medicare enrollment form that they

would comply with the Statute. The Burlesons contend that the government “has

failed to identify a false claim.” We disagree.

When a violator of government regulations is ineligible to participate in a

government program and that violator persists in presenting claims for payment

that the violator knows the government does not owe, that violator is liable, under

the Act, for its submission of those false claims: “The False Claims Act does not

create liability merely for a health care provider’s disregard of Government

regulations or improper internal policies unless, as a result of such acts, the

provider knowingly asks the Government to pay amounts it does not owe.” United

States ex rel. Clausen v. Laboratory Corp. of America, Inc., 290 F.3d 1301, 1311

(11th Cir. 2002). The violation of the regulations and the corresponding

submission of claims for which payment is known by the claimant not to be owed

makes the claims false under sections 3729(a)(1) and (3).

The government has alleged a valid claim against the Burlesons. The

government has alleged that the Burlesons violated the Anti-Kickback Statute;

compliance with the Statute is necessary for reimbursement under the Medicare

program; and the Burlesons submitted claims for reimbursement knowing that they

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were ineligible for the payments demanded in those claims. This allegation is not

general or speculative: the government has identified as false numerous specific

claims the Burlesons made to the federal government. Although the Burlesons

raise several additional arguments for reversal, those arguments are also without

merit.

IV. CONCLUSION

Because the government has alleged that the Burlesons submitted claims for

payment knowing that the government did not owe the requested amounts, the

district court properly denied the Burlesons’ motion to dismiss.

AFFIRMED.