[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
____________________________ FILED
U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
No. 01-14291 January 28, 2003
Non-Argument Calendar THOMAS K. KAHN
____________________________ CLERK
D. C. Docket No. 00-02521-CV-FAM
UNITED STATES OF AMERICA, ex rel.,
VALENTIN SARASOLA,
MARIO CARDOSO, qui tam,
Plaintiffs-Appellees,
versus
AETNA LIFE INSURANCE COMPANY, a
foreign corporation,
Defendant-Appellant.
____________________________
Appeal from the United States District Court
for the Southern District of Florida
____________________________
(January 28, 2003)
Before TJOFLAT and KRAVITCH, Circuit Judges, and DOWD*, District Judge.
TJOFLAT, Circuit Judge:
In United States ex rel. Body v. Blue Cross & Blue Shield of Alabama, Inc.,
156 F.3d 1098 (11th Cir. 1998), we held that an insurance company occupying the
role of “fiscal intermediary” in processing Medicare Part A claims is immune from
liability, under 42 U.S.C. § 1395h(i)(3), in a qui tam suit brought under the False
Claims Act, 31 U.S.C. § 3729(a), for knowingly approving false or fraudulent Part
A claims for payment by the United States government. The interlocutory appeal
in this qui tam action presents the question of whether such immunity bars a claim
that the fiscal intermediary breached its obligation to audit the records of a
Medicare service provider.
I.
A.
Medicare is a federal health insurance program for the aged and disabled. 42
U.S.C. §§ 1395 et seq. Administered by the Centers for Medicare & Medicaid
Services (“CMS”),1 a division of the Department of Health and Human Services
*
Honorable David D. Dowd, Jr., United States District Judge for the
Northern District of Ohio, sitting by designation.
1
CMS is the successor to Health Care Financing Administration (“HCFA”). 42 C.F.R. §
400.200. Although the events that gave rise to the instant litigation occurred while HCFA was
administering the Medicare program, for sake of continuity we refer to HCFA as CMS
2
(“HHS”), Part A provides benefits for “hospital, related post-hospital, home health
services, and hospice care.” Id. § 1395c. To participate in the Medicare program,
a health care provider must enter into an agreement (“Provider Agreement”) with
the Secretary of HHS (“Secretary”). Id. § 1395cc. After entering into such an
agreement, the provider is reimbursed directly for the reasonable cost of services
provided to Medicare patients.
CMS fulfills its administrative duties under Part A by contracting with third
parties – typically large private insurance companies – to serve as fiscal
intermediaries. See id. § 1395h. The fiscal intermediaries have one central
function: reimburse providers for the reasonable cost of health care services on
behalf of Medicare beneficiaries. Id. §§ 1395h, 1395u. In carrying out this
function, the fiscal intermediaries are obligated to audit the records of health care
providers “as necessary” to ensure that proper payments are made. 42 C.F.R. §
421.100(c); see also 42 U.S.C. § 1395h(a).
To understand how the auditing function fits within a fiscal intermediary’s
duties, it is necessary to understand how the reimbursement scheme operates.2
throughout this opinion.
2
Recent changes to the Medicare statute altered the reimbursement scheme
as it pertains to home health services in particular. See 42 U.S.C. § 1395fff. The
statute directs the Secretary of HHS to develop a prospective payment scheme for
home health services to replace the cost reimbursement scheme described in our
3
After providing health care services to a Medicare beneficiary, the provider files a
claim for reimbursement with the fiscal intermediary. The intermediary, in turn,
reimburses the provider “as often as possible,” 42 § C.F.R. 413.60(c), and on a
“most expeditious schedule,” id. § 413.64(a). Accordingly, fiscal intermediaries
make pre-audit payments known as periodic interim payments (“PIPs”) at least
monthly. 42 U.S.C. § 1395g(e); 42 C.F.R. § 413.60. The PIP amount is an
estimate derived from projections of the services the provider is likely to render in
the current fiscal year (“FY”).3 These PIPs are necessary to enable the providers to
continue day-to-day operations and avoid the cash-flow shortage that would stem
from a prolonged delay between the time a service is provided to a beneficiary and
the time the provider is reimbursed for the service. See River Garden Hebrew
Home for the Aged v. Califano, 507 F. Supp. 221, 223 (M.D. Fla. 1980). PIPs
usually account for the bulk of the providers’ receipts in any given fiscal year.
opinion. Id. The prospective payment scheme reimburses home health agencies
by a predetermined amount instead of on a reasonable cost basis. According to the
statute, the prospective payment scheme would take effect for cost reporting
periods beginning on or after October 1, 1999 (subsequently amended to October
1, 2000), with provisions for up to a four-year transition period. See id. Thus, the
reimbursement scheme described in our opinion today was in effect for home
health services during the time period from which the claims before us arise. It
remains in effect for other health care services reimbursed under Medicare Part A.
3
The projections are based on the historical level of service for the provider
(and other adjustments). 42 C.F.R. § 413.64(e).
4
A reconciliation process begins at the end of a provider’s fiscal year to
determine whether the provider was overpaid or underpaid for its actual costs as a
result of the estimated PIPs. To begin, the provider is required to submit a fiscal
year-end cost report that details the costs incurred for Medicare beneficiaries. 42
C.F.R. §§ 413.20, 413.24(f). Absent obvious errors, the fiscal intermediary
assumes the cost report to be correct and makes “an initial retroactive adjustment.”
Id. § 413.64(f)(2). The adjustment “bring[s] the interim payments made to the
provider during the . . . [previous year] into agreement with the reimbursable
amount payable to the provider for the services furnished to program beneficiaries .
. . .” Id. § 413.64(f)(1). If the provider was underpaid during the year, the fiscal
intermediary remits the appropriate amount to the provider. On the other hand, if
the provider was overpaid, the provider either returns the overpayment amount or
the fiscal intermediary adjust downward the provider’s current-year PIP payments
to recoup the overpayment. See id. § 405.1803(c). The fiscal intermediary
thereafter conducts an audit of the provider’s year-end cost report and issues a
notice setting forth the total amount of reimbursement due under the program. Id.
§ 405.1803(a). A final retroactive adjustment is made to account for any
outstanding overpayment or underpayment. See id. § 413.64(f)(2).
Because the reimbursement scheme calls for estimated payments based on a
5
provider’s representations, the auditing function is a critical part of the overall
scheme to administer Part A of Medicare. The Medicare statute requires the
Secretary to develop standards, criteria, and procedures for evaluating the overall
performance of fiscal intermediaries. As part of this performance evaluation, fiscal
intermediaries are judged in part for their ability to make “[c]orrect coverage and
payment determinations.” 42 C.F.R. § 421.120(a)(1).
In carrying out its functions, a fiscal intermediary is shielded in part from
lawsuits by a grant of statutory immunity. The immunity section provides:
(1) No individual designated pursuant to an agreement
under this section as a certifying officer shall, in the
absence of gross negligence or intent to defraud the
United States, be liable with respect to any payments
certified by him under this section.
(2) No disbursing officer shall, in the absence of gross
negligence or intent to defraud the United States, be
liable with respect to any payment by him under this
section if it was based upon a voucher signed by a
certifying officer designated as provided in paragraph (1)
of this subsection.
(3) No such agency or organization shall be liable to the
United States for any payments referred to in paragraph
(1) or (2).
42 U.S.C. § 1395h(i) (emphasis added).
B.
Until its dissolution in 1995, St. Johns Home Health Agency, Inc. (“St.
6
Johns”), a Florida not-for-profit corporation, operated as a home health agency
under a Florida license. Arnold Friedman was its chief executive officer. In 1976,
St. Johns entered into a Provider Agreement with CMS4 to act as a provider of
home health services to homebound patients under Part A of the Medicare
Program. The home health services rendered by St. Johns included skilled nursing
care, physical therapy, occupational and speech therapy, medical social services,
and home health aides’ services.
In July 1982, Aetna Life Insurance Company (“Aetna”) entered into a
contract with CMS to serve as the fiscal intermediary for the State of Florida. As
such, Aetna was responsible for fulfilling the supervisory and administrative
responsibilities set forth in the Medicare Act and accompanying federal
regulations. Thus, Aetna was responsible for processing and disbursing payments
to St. Johns for services rendered in the form of the bi-weekly PIPs, and also for
conducting necessary audits and making appropriate adjustments for overpayment
or underpayment to St. Johns.
C.
Before turning to the qui tam case before us, it is necessary to understand the
4
As noted supra, the Centers for Medicare & Medicaid Services is the
division of HHS that administers the Medicare program and was known at the time
of its contracting with St. Johns as the Heath Care Financing Administration.
7
history of the relationship between St. Johns, Aetna, and CMS. During 1992 and
1993, Aetna and St. Johns were in substantial disagreement over the dollar amount
of the Medicare reimbursements St. Johns was entitled to receive during FYs 1990
through 1993.5 In 1992, Aetna issued a notice, indicating that St. Johns had been
overpaid nearly $2.8 million for FYs 1990 and 1991, which St. Johns contested.
Because of overpayment, Aetna altered the formula by which it calculated St.
Johns’s PIPs for FY 1993. After St. Johns complained about the new formula,
Aetna made a lump-sum payment in January 1993 to compensate for the lower
PIPs St. Johns received during the first half of FY 1993. In July 1993, Aetna
advised St. Johns that it was “skeptical” that St. Johns had, in fact, made all of the
home health care visits that it had claimed during FY 1993 and, furthermore,
would not recognize certain “transcription” charges as reasonable, and thus
reimbursable, under the Medicare program.
On September 15, 1993, St. Johns brought suit in the United States District
Court for the Middle District of Florida against Aetna and the Secretary of HHS,
seeking a writ of mandamus, injunctive relief, and damages.6 The gist of St.
5
St. Johns’s fiscal years ran from July 1 to June 30. Thus, FY 1990 ran
from July 1, 1989 to June 30, 1990.
6
Case No. 93-1608-CIV-T. St. Johns’s 1993 complaint is part of the record
of the proceedings in the qui tam suit Relators brought in 1995 against Aetna and
8
Johns’s complaint, which was framed in three counts, was that Aetna, in
collaboration with the Secretary, had been arbitrarily withholding PIPs over a
substantial period of time,7 and that Aetna had been unduly late in completing its
adjustments to St. Johns’s cost reports for FYs 1990 and 1991 and in issuing its
NPR for FY 1992, thereby violating the Medicare statutes and regulations as well
as the substantive and procedural components of the Due Process Clauses of the
Fifth and Fourteenth Amendments.
St. Johns asked the court, in Count I, to issue a preliminary and permanent
injunction restraining the defendants from withholding from its PIPs
reimbursements costs it had incurred in rendering covered services to program
St. Johns in the Southern District of Florida, Case No. 95-1278-CIV-MORENO, as
described in the text infra. The instant qui tam suit is a continuation of that
lawsuit. For that reason, we supplemented the record on appeal in the instant case
with the record of the proceedings before the district court in Case No. 95-1278-
CIV-MORENO.
7
The complaint alleged that, on July 22, 1993, Aetna informed St. Johns that
it was withholding the PIPs because, among other things, it was “skeptical that St.
Johns had in fact made [the] 1,150,000 Medicare home health visits in FY 1993" it
claimed to have made. Such withholding, the complaint continued, was depriving
St. Johns of badly needed operating capital.
An affidavit executed on October 13, 1995 by the Section Chief in the
Payment and Recovery Branch, Division of Medicare, of CMS’s Regional Office
in Atlanta, and subsequently filed in the case, indicates that CMS agreed with
Aetna’s decisions regarding St. Johns’s costs reimbursements, and that Aetna’s
Program Integrity Unit had notified CMS that its investigation indicated that many
of St. Johns’s claims for reimbursement may be fraudulent.
9
beneficiaries, and to award it damages and other appropriate relief. In Count II, St.
Johns asked the court to issue a writ of mandamus directing the defendants to
“comply with the Medicare statutes and regulations and to reimburse . . . $3.9
million for costs that [they are] wrongfully withholding . . . .” In Count III, St.
Johns asked for the same coercive relief sought in Counts I and II and damages for
the defendants’ infringement of St. Johns’s substantive and procedural due process
rights.
On August 23, 1993, while its suit was pending, St. Johns sought Chapter 11
relief in the bankruptcy court for the Southern District of Florida. Immediately
after filing its Chapter 11 petition, St. Johns, as debtor in possession, filed an
emergency motion for authority to assume, as an executory contract, its Provider
Agreement with the Secretary pursuant to 11 U.S.C. § 365. The Secretary opposed
the motion on the grounds that St. Johns “ha[d] not adequately proposed a means of
curing existing defaults or providing adequate assurance of future performance
under . . . § 365,” and that the court did not have “jurisdiction over [CMS]’s
calculation of amounts owed under the Medicare program or recovery of
overpayments made pursuant thereto until a provider has exhausted its
administrative remedies, pursuant to 42 U.S.C. § 405(h).”
The court denied St. Johns’s motion in a written order dated September 23,
10
1994.8 It agreed with the Secretary that it lacked jurisdiction to entertain the motion
because St. Johns had not exhausted its administrative remedies. Assuming that it
had jurisdiction, the court added, it could not “grant effective relief . . . under 11
U.S.C. § 365 without fundamentally and impermissibly altering the contractual
relationship between St. Johns and the Secretary which incorporates the statutory
and administrative scheme imposed by the Medicare Program.”
The court’s decision was St. Johns’s death knell. On November 10, 1994, the
court entered an order approving the sale of St. Johns’s assets (except the above-
mentioned lawsuit pending against the Secretary and CMS) to Amitan Health
Services, Inc.9 On August 21, 1995, St. Johns moved the court to convert its
Chapter 11 case to a Chapter 7 liquidation.10 The court granted its motion.
8
In its order, the court characterized St. Johns’s request as one for a
bankruptcy court determination of, “at least on a ‘provisional’ basis, the amount of
existing defaults under the Provider Agreement . . . [and] a ruling . . . that the
overpayment subject to recovery [by Aetna] is far less than the $11,657,059
estimated by [Aetna’s] preliminary audit. If the amount . . . is less than the amount
already withheld by Aetna,” St. Johns would have the court issue an order
prohibiting “[CMS] and Aetna [from] withholding postpetition reimbursement
payments.”
9
By an order dated August 14, 1995, the court authorized the debtor to
distribute approximately $738,633 (which was not included in the sale to Amitan
Health Services, Inc.) to the holders of the Chapter 11 administrative claims.
Other than the lawsuit mentioned above, this exhausted St. Johns’s assets.
10
As of that date, the pending claims of creditors included a claim by the
United States in excess of $70 million.
11
II.
With the necessary background in place, we turn to the qui tam action before
us and its somewhat complicated history. Relators Mario Cardoso and Valentine
Sarasola worked for St. Johns during the early to mid 1990s. Cardoso was the
company’s auditor. Sarasola was the night shift supervisor.11 On March 8, 1994,
while St. Johns’s Chapter 11 case was pending, Relators went to the Federal Bureau
of Investigation and reported what they had observed while working for St. Johns –
that St. Johns, as directed by its chief executive officer, Arnold Friedman, was
defrauding the United States by seeking Medicare reimbursement from Aetna for
home health care services that it had not provided. Some fifteen months later, on
June 14, 1995, they brought a qui tam action in the United States District Court for
the Southern District of Florida against St. Johns, Friedman,12 and Aetna.13 Their
complaint alleged that St. Johns, at Friedman’s direction, violated the provisions of
11
According to an affidavit Sarasola executed on August 25 and filed in the
qui tam action on August 29, 1995, he was employed by St. Johns from February
21, 1993 to October 14, 1994. As far as we can tell, other than what is alleged in ¶
35 of the Amended Complaint, the record does not indicate the period of Cardoso’s
employment at St. Johns.
12
Friedman died on May 8, 1997. On August 25, 1997, the district court, on
Relators’ motion, ordered the executor of his estate, Dorothy Friedman, substituted
for Friedman as a defendant. We refer to her herein interchangeably as Arnold
Friedman or Friedman.
13
Case No. 95-1278-CIV-MORENO.
12
31 U.S.C. § 3729 by presenting to Aetna for subsequent presentation to CMS “false
or fraudulent claims for Medicare reimbursement payment or approval,” which
were supported by “false records or statements.” Some of these claims were for
services provided to “fictitious, deceased, or otherwise ineligible persons,” for
services that were not “medically justified,” and for services “never provided.”
The complaint alleged that Aetna, “in its capacity as the fiscal intermediary,”
“aided and abetted” this fraudulent conduct by approving St. Johns’s claims “for
payment” and by presenting them to CMS for “Medicare reimbursement.” The
1995 complaint described Aetna’s aiding and abetting activity as follows:
24. Aetna knew when it presented the claims or with the
exercise of the slightest care before presenting the claims,
Aetna should and would have known of the falsity of the
claims it was presenting.
25. Aetna had actual knowledge of the falsity of the
claims it submitted, acted in deliberate ignorance of the
falsity of the claims, or acted in reckless disregard of the
falsity of the information in that Aetna maintained a
“Benefit Integrity Unit” and other administrative checks
which resulted in actual disclosure to Aetna of the . . .
false claims. Alternatively, the fraud on the part of St.
Johns and Friedman was so pervasive, open and obvious
that the most cursory of spot checks would and should
have disclosed its existence had Aetna exercised even
slight care in the fulfillment of its responsibilities as fiscal
intermediary.
As relief, the complaint demanded judgment against the defendants as
13
follows: a civil penalty of not less that $5,000 and not more than $10,000 for each
statutory violation; treble the amount of damages the Government sustained as a
result of the defendants’ fraud; and costs and attorneys’ fees pursuant to 31 U.S.C. §
3730(d).
On August 22, 1995, the United States filed an unopposed motion to stay
Relators’ action until a criminal investigation and any resulting prosecutions
involving the fraudulent activity alleged in Relators’ complaint were concluded.
The district court granted the motion the next day, with the proviso that the
Government report the status of the criminal proceedings every ninety days.
On August 30, 1995, while the court’s stay order was in effect, the court
dismissed St. Johns as a party defendant in response to a notice of dismissal
previously filed by the Relators. On October 2, 1995, the court granted Aetna’s
motion to dismiss Relators’ complaint for failure to plead fraud with particularity,
as required by Rule 9(b) of the Federal Rules of Civil Procedure. Relators filed an
amended complaint on November 2, 1995. The amended complaint essentially
replicated Relators’ initial complaint, in particular the allegations that Aetna aided
and abetted the St. Johns/Friedman fraud as described and quoted above. The
amended complaint also alleged that Aetna’s presentation of St. Johns’s claims to
CMS for reimbursement was “part of a scheme by St. Johns, Friedman and Aetna to
14
defraud the United States.” Aetna moved to dismiss the amended complaint; the
court, however, never ruled on its motion.
Meanwhile, the Government filed the required status reports every ninety
days. The final such report, filed on March 12, 1999, indicated that on December
17, 1998 a Southern District of Florida grand jury returned an indictment charging
twenty-six defendants with racketeering offenses, submission of false claims to
Medicare, and money laundering. Sixteen of the defendants pled guilty to one or
more of these offenses, and nine were to be tried in September 1999. Other
individuals were still under investigation.
On June 14, 2000, the district court entered an order dismissing Relators’ qui
tam suit against Aetna, and directing the clerk to close the case. The order (1)
recited that the United States had elected not to pursue Relators’ allegations against
Aetna, and (2) instructed Relators to file a new complaint by July 14 if they wished
to proceed against Aetna. Relators filed a new complaint on July 14;14 it was
practically verbatim the amended complaint they had filed on November 2, 1995.
The new complaint replicated Relators’ initial complaint (filed on June 14,
1995), in particular the “aiding and abetting” allegations that described Aetna’s
14
Because the court had dismissed Relators’ qui tam suit one month earlier,
it assigned a new case number for the suit Relators filed on July 14, Case No. 00-
2521-CIV-MORENO.
15
conduct.15 Aetna moved the court to dismiss the complaint, contending that it is
immune from liability under 42 U.S.C. § 1395h(i)(3) for payments its officers
certify and disburse to Medicare providers and under our decision in United States
ex rel. Body v. Blue Cross & Blue Shield of Alabama, Inc., 156 F.3d 1098 (11th
Cir. 1998), which interpreted and applied section 1395(i)(3) in a similar context.
Conceding, in their response to Aetna’s motion, that “[t]he holding in Body applies
squarely to the claim as presently stated against Aetna,” Relators sought leave to
amend their complaint. The court granted them leave, and they filed an amended
complaint.
The amended complaint repeats the allegations of the dismissed complaint
which Body foreclosed – that is, the allegations that Aetna aided and abetted St.
Johns’s fraud, as described above – while introducing new allegations about
Aetna’s failure to audit in accord with its obligations to CMS. After citing 42
15
Like the November 2, 1995 amended complaint, the new complaint
alleged that Aetna’s conduct in approving St. Johns’s claims and presenting them
to CMS for Medicare reimbursement was “part of the scheme by St. Johns,
Friedman and Aetna to defraud the United States.”
16
U.S.C. § 1395h(a)16 and 42 C.F.R. § 421.100(c)17 for the proposition that Aetna, as
a fiscal intermediary, had the responsibility to audit St. Johns’s records to ensure
that the services for which St. Johns was seeking reimbursement had actually been
provided and were covered by Medicare, the amended complaint alleged the
following:
43. Aetna willfully failed and refused to fulfill its . . .
audit responsibilities as fiscal intermediary yet continued
to misrepresent that it had done so, falsely claiming
entitlement to . . . payments [under its contract with CMS]
and accepting such payments without rendering the
services for which the payments were being made.
44. By charging the United States for “phantom services”
and accepting payment for services never rendered, Aetna
. . . caused damage to the United States in the amount of
such payments in addition to costing the United States
money it would have recovered had the services been
rendered.
45. By its conduct set forth herein, Aetna has denied
[CMS] the meaningful opportunity to evaluate both
16
Section 1395h(a) authorizes the Secretary to contract with a fiscal
intermediary for the determination of the payments to be made to providers of Part
A Medicare benefits, and provides that such contracts may include a provision
requiring the fiscal intermediary “to make such audits of the records of providers
as may be necessary to insure that proper payments are made under [Part A] . . . .”
17
Section 421.100, “Intermediary functions,” states that “[a]n agreement
between [CMS] and a[ ] [fiscal] intermediary specifies the functions to be
performed by the intermediary, which must include, but are not necessarily limited
to . . . (c) Provider audits. The intermediary must audit the records of providers of
services as necessary to assure proper payments.”
17
Aetna’s performance and the performance of those health
care services providers whom Aetna was charged with
monitoring and as warranted, to hire a more qualified
fiscal intermediary who would have prevented the loss of
substantial amounts of Medicare funds. Upon information
and belief, had Aetna not actively concealed the
deficiencies in its performance as fiscal intermediary from
[CMS], another intermediary would have been hired.
...
47. By its conduct herein, Aetna has misrepresented its
capacity and its intention to perform its duties under the
[CMS] contract and has used false pretenses to obtain
payments of government funds to which Aetna was not
entitled.
48. Defendant Aetna has knowingly submitted false or
fraudulent claims for payment, or caused false or
fraudulent claims for payment for its services to be
submitted, to officials of the United States government, in
violation of 31 U.S.C. § 3729(a)(1).
49. Defendant Aetna has knowingly made or used, or
caused to be made or used, false records or statements to
get false or fraudulent claims paid or approved by the
officials of the United States government, in violation of
31 U.S.C. § 3729(a)(2).
50. Defendant Aetna has knowingly made or used, or
caused to be made or used, false records or statements to
conceal, avoid, or decrease an obligation to pay or
transmit money or property to the United States
government, in violation of 31 U.S.C. § 3729(a)(7).
51. Because of [Aetna’s] conduct set forth above, the
United States has suffered actual damages.
18
As relief, the amended complaint demanded “treble the amount of the United
States’ damages, plus civil penalties of not less than $5,000 and not more than
$10,000 for each false claim,” costs, attorneys’ fees, Relators’ expenses in
prosecuting the case, and such other relief as may be appropriate.
Aetna moved the district court to dismiss the amended complaint on the
grounds (1) that the Body decision foreclosed Relators’ allegations relating to
Aetna’s involvement in the approval and payment of St. Johns’s fraudulent claims
for Medicare reimbursement, and (2) that the remaining allegations – those
contained in paragraphs 43 through 51– constituted an attempt to “substitute an
entirely new claim for the previously asserted claims that are concededly precluded
by Body.” The new claim, Aetna contended, did not relate back to the allegations
of the initial and amended complaints Relators filed in 1995 and was therefore time-
barred. Moreover, “[t]hese new allegations broadly assert that Aetna ‘falsely
claim[ed] entitlement to contract payments and accept[ed] such payments without
rendering the services for which the payments were being made’ . . . [but] fail to
identify a single false claim submitted by Aetna or a single service billed for
[something] not provided.” For this reason, the amended complaint was subject to
dismissal because Relators’ new claim had not been pled with particularity, as
required by Rule 9(b).
19
On June 26, 2001, the district court denied Aetna’s motion. Aetna now
appeals the court’s ruling.
III.
A.
In denying Aetna’s motion to dismiss, the district court made three rulings.
First, Aetna is not entitled to immunity under 42 U.S.C. § 1395h(i)(3). Second, the
Relators’ claim that Aetna was paid for auditing services it either did not perform or
performed inadequately is cognizable under the False Claims Act. Third, the
Relators’ allegations of fraud are sufficient to satisfy the “particularity” requirement
of Rule 9(b).18 Because Aetna is appealing an interlocutory order, which the district
court did not certify for immediate appeal under 28 U.S.C. § 1292(b), our
jurisdiction must lie under the collateral order doctrine. While 28 U.S.C. § 1291
gives this court jurisdiction only over “final decisions” of the district courts, the
collateral order doctrine provides a narrow exception to this rule. The Supreme
Court explained that a nonfinal order is appealable when it (1) “conclusively
determine[s] the disputed question”; (2) “resolve[s] an important issue completely
separate from the merits of the action”; and is (3) “effectively unreviewable on
appeal from a final judgment.” Coopers & Lybrand v. Livesay, 437 U.S. 463, 468,
18
Fed. R. Civ. P. 9(b) states, in pertinent part: “In all averments of fraud . . .
, the circumstances constituting fraud . . . shall be stated with particularity.”
20
98 S. Ct. 2454, 2458, 57 L. Ed. 2d 351 (1978).
We conclude that the collateral order doctrine provides us with jurisdiction to
review the question whether Aetna has immunity with respect to any of the
amended complaint’s allegations. The doctrine does not, however, give us
jurisdiction to review the district court’s second and third rulings. Nonetheless, we
believe that what we say about the immunity issue should inform the district court’s
task in dealing with what will remain of Relators’ case at this juncture – that is,
Relators’ claim that Aetna breached its contract obligation to audit St. Johns’s
records “as necessary to assure proper payments.”19 We intimate no view as to
whether Relators’ allegations of such breach suffice to state a claim under the False
Claims Act and, if so, whether their allegations pass Rule 9(b) muster. See, e.g.,
United States ex rel. Clausen v. Laboratory Corp. of America, 290 F.3d 1301 (11th
Cir. 2002) (holding that claims arising under the False Claims Act must satisfy the
dictates of Rule 9(b)’s particularity requirement).
B.
We need not tarry long in holding that, under our decision in United States ex
rel. Body v. Blue Cross & Blue Shield of Alabama, Inc., 156 F.3d 1098 (11th Cir.
19
Aetna’s contract with the Secretary is neither attached to the amended
complaint nor part of the record. All we have is Relators’ allegation that a formal
contract, establishing Aetna as a fiscal intermediary, exists.
21
1998), Aetna enjoys absolute immunity under section 1395h(i)(3) for approving for
payment the allegedly fraudulent claims that St. Johns presented for reimbursement.
Relators recognized this when, in responding to Aetna’s motion to dismiss, they
acknowledged that Body foreclosed their claim as pled. In amending their
complaint, however, they apparently decided to give it another go. Instead of
abandoning the allegations that were concededly foreclosed by Body, they instead
repeated them in toto and then tacked on paragraphs 43 through 45 and 47 through
51, quoted supra. Relators’ prayer for relief then asks for “treble the amount of the
United States’ damages.”
We assume, and we believe the district court did likewise, that Relators
believe that their previous allegations of fraud are part and parcel of their new cause
of action; otherwise, they would not have included them in their amended
complaint. Given the prayer for damages quoted above, Relators evidently believe
that they can, even in the face of Body, recover – from Aetna – the value of the
funds St. Johns fraudulently received from the Medicare program (or, indeed, treble
that amount). It is obvious, of course, that to allow such a recovery would render
section 1395h(i)(3) immunity and the Body decision virtual nullities.
Relators’ amended complaint, in effect, seeks recovery for the very conduct
deemed immune in Body – payment of fraudulent claims by a fiscal intermediary –
22
simply by recasting the theory of recovery from “aiding and abetting” to some sort
of contractual res ipsa loquitur – something akin to “Aetna was being paid by the
government to conduct audits, fraudulent claims were paid, therefore Aetna must
have not properly performed audits.” If Relators’ view were the law, all that a qui
tam relator would have to do to circumvent Body and state a cause of action under
the False Claims Act against a fiscal intermediary would be to allege that the fiscal
intermediary approved a provider’s fraudulent claims for reimbursement and that
the intermediary approved the claims because it failed properly to audit the
provider’s books. Thus, “but for” the intermediary’s failure to do its job, the false
claims would not have been paid and the United States would have suffered no loss.
We held in Body that “fiscal intermediaries themselves will not be liable to
the Government for any of the payments . . . certified by [its] certifying officers and
disbursed by disbursing officers.” 156 F.3d at 1111. This absolute immunity was,
we held, a recognition of the unique administrative function that fiscal
intermediaries play in the operation of the Medicare system and Congress’s
unwillingness to impose liability for the vast amounts of federal money they
disburse. Id. at 1112. Relators may not circumvent this immunity and recover for
fraudulently disbursed payments by simply alleging a failure to audit.
23
In our Body decision, we noted that the statutory immunity is not so broad as
to foreclose all claims against fiscal intermediaries. See 156 F.3d at 1112, n.26.
Our decision today is not to the contrary. If Aetna, in fact, failed to fulfill its
contractual obligation to properly audit St. Johns’s records, then it might be liable to
the United States, or a qui tam relator, under the False Claims Act for submitting a
claim for payment for auditing services never rendered. The legal or factual
feasibility of such a claim is not before us, however, in this interlocutory appeal.
In sum, Relators’ allegations that St. Johns presented false claims to Aetna –
pursuant to a scheme fashioned by St. Johns, Friedman, and Aetna to defraud the
United States – and that Aetna knowingly, recklessly, or negligently approved such
claims for payment are not actionable due to Aetna’s statutory immunity, and we
instruct the district court to strike them from the amended complaint.20 Relators’
qui tam claim, if they indeed have one under the False Claims Act, is limited to the
false claims, if any, Aetna presented to the Secretary (within the statute of
limitations time period) for auditing St. Johns’s records.
SO ORDERED.
20
We refer, in particular, to paragraphs 30 through 46, and 52 through 55.
This is not to say, however, that the factual content of these allegations might not
be relevant circumstantial evidence of Aetna’s failure to audit St. Johns’s records.
We intimate no view regarding this evidentiary issue.
24
United States Ex Rel. Sarasola v. Aetna Life Insurance
Court: Court of Appeals for the Eleventh Circuit
Date filed: 2003-01-28
Citations: 319 F.3d 1292
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