United States Ex Rel. Conner v. Salina Regional Health Center, Inc.

FILED
United States Court of Appeals
Tenth Circuit

October 2, 2008
Elisabeth A. Shumaker
PUBLISH Clerk of Court

UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

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.,
Nos. 07-3033 and 07-3035
Defendant–Appellee and
Cross–Appellant.

----------------------------------------------

HEALTHCARE ADMINISTRATION
RESPONSIBILITY PROJECT AND
JUST HEALTH,

Amicus Curiae in support of
Plaintiff–Appellants and
Cross–Appellees.

Appeal from the United States District Court
for the District of Kansas
(D.C. No. 01-CV-2269-CM)

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., Chartered 1 (“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

*
The Honorable Gregory K. Frizzell, United States District Court Judge,
Northern District of Oklahoma, sitting by designation.
1
Brian E. Conner, M.D., Chartered employs Conner and is the professional
association through which Conner practices medicine.

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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.

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 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.

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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 F. App’x 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,

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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 Medicare 4 conditions of participation at all times from 1987 until the

present day. 5 Conner’s complaint describes some of these alleged violations in

2
All further references to the plaintiff’s complaint refer to the Fourth
Amended Complaint unless otherwise specified.
3
Although Conner’s complaint also alleged violations of § 3729(a)(3) and
(7), he does not appeal the district court’s dismissal of his claims under these
subsections.
4
Conner’s arguments apply equally to Medicare and Medicaid because
hospitals participating in Medicaid must meet the standards of participation for
Medicare. See 42 C.F.R. § 482.1(a)(5). For simplicity, we use “Medicare” to
refer to participation in both programs.
5
Specifically, Conner asserts that SRHC violated the following statutes and
regulations: 42 C.F.R. § 482.1 et seq. (setting forth conditions of participation
for hospitals participating in Medicare); 42 U.S.C. § 1395dd (requirements for
examination and treatment of emergency medical conditions); § 2000d
(prohibition against discrimination in federally assisted programs);
§ 1320a-7(b)(6)(B) (allowing the Secretary of Health and Human Services to
(continued...)

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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,

5
(...continued)
exclude from Medicare participation those facilities failing “to meet
professionally recognized standards of health care”).

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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, 1236 (10th Cir. 2007). Dismissal is appropriate only if

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the complaint, viewed in the light most favorable to plaintiff, “lacks ‘enough facts

to state a claim to relief that is plausible on its face.’” Id. (quoting Bell Atl.

Corp. v. Twombly, 127 S. Ct. 1955, 1974 (2007)).

A

The FCA “covers all fraudulent attempts to cause the government to pay

out sums of money.” United States ex rel. Boothe v. Sun Healthcare Group, Inc.,

496 F.3d 1169, 1172 (10th Cir. 2007) (quotation omitted). Under the qui tam

provision of the statute, any individual can sue on behalf of the United States

government to recover for the government’s payment of fraudulent claims. 31

U.S.C. § 3730(b). Invoking this provision, Conner alleges that SRHC violated

two subsections of the FCA, those which create liability for

[a]ny 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 . . . .

31 U.S.C. § 3729(a)(1)-(2). Although Conner brings separate claims for

violations of each subsection, his assertions share a common element that proves

fatal to his theory of the case: Connor has not alleged that SRHC submitted a

legally fraudulent or false claim, as required by the FCA. See Mikes v. Straus,

274 F.3d 687, 695-96 (2d Cir. 2001) (noting that both § 3729(a)(1) and (a)(2)

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require proof of a false or fraudulent claim).

The FCA recognizes two types of actionable claims—factually false claims

and legally false claims. In a run-of-the-mill “factually false” case, proving

falsehood is relatively straightforward: A relator must generally show that the

government payee has submitted “an incorrect description of goods or services

provided or a request for reimbursement for goods or services never provided.”

Id. at 697. By contrast, in a claim based on an alleged legal falsehood, the relator

must demonstrate that the defendant has “certifie[d] compliance with a statute or

regulation as a condition to government payment,” yet knowingly failed to

comply with such statute or regulation. Id. (emphasis added); see also Shaw v.

AAA Eng’g & Drafting, Inc., 213 F.3d 519, 531 (10th Cir. 2000) (allowing

§ 3729(a)(1) liability to attach under a theory of false certification for invoices

submitted for payment where contractor failed to comply with specific

requirements within its contract with the government). Conner’s claims fall in the

latter category.

In this circuit, legally false certification claims can rest one of two

theories—express false certification, and implied false certification. Id. An

express false certification theory applies when a government payee “falsely

certifies compliance with a particular statute, regulation or contractual term,

where compliance is a prerequisite to payment.” Mikes, 274 F.3d at 698. This

promise may be any false statement that relates to a claim, whether made through

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certifications on invoices or any other express means. See U.S. ex rel. Hendow v.

Univ. of Phoenix, 461 F.3d 1166, 1172 (9th Cir. 2006) (“So long as the statement

in question is knowingly false when made, it matters not whether it is a

certification, assertion, statement, or secret handshake; False Claims liability can

attach.”).

Under an implied false certification theory, by contrast, courts do not look

to the contractor’s actual statements; rather, the analysis focuses on the

underlying contracts, statutes, or regulations themselves to ascertain whether they

make compliance a prerequisite to the government’s payment. See United States

ex rel. Siewick v. Jamieson Sci. & Eng’g, Inc., 214 F.3d 1372, 1376 (D.C. Cir.

2000); see also Shaw, 213 F.3d at 531-33. If a contractor knowingly violates

such a condition while attempting to collect remuneration from the government,

he may have submitted an impliedly false claim. See Id., at 531-32.

Conner is adamant on appeal that he proceeds only under a theory of

express false certification. When an the express certification does not state that

compliance is a prerequisite to payment, we must look to the underlying statutes

to surmise if they make the certification a condition of payment. See United

States v. Southland Mgm’t Corp., 288 F.3d 668, 679 (5th Cir. 2002); cf. Harrison

v. Westinghouse Savannah River Co., 176 F.3d 776, 786 (4th Cir. 1999). The

district court evaluated the underlying Medicare regulations and statutes and

concluded that they did not condition payment on the certification of compliance

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within the annual cost report. See Conner, 459 F. Supp. 2d at 1086-87. Conner

effectively concedes on appeal that the regulations do not contain such a

condition, either implicitly or explicitly, but urges us to look to the certification

contained in SRHC’s annual cost reports. According to Conner, this certification,

standing alone, explicitly conditions Medicare payments on compliance with all

applicable Medicare statutes and regulations.

To explain why the FCA cannot support such expansive liability in the

absence of an underlying statute or regulation that conditions payment on

compliance with the certification, we begin with an explanation of how medical

providers submit claims for Medicare payment. When a hospital provides a

service, it submits individual Medicare reimbursement forms to an intermediary

for the government, which calculates and dispenses estimated periodic payments

for the services rendered by the provider. See United States ex rel. Schell v.

Battle Creek Health Sys., 419 F.3d 535, 539 (6th Cir. 2005). These periodic

payments are not considered final payments, however, because the actual monies

due to the provider are calculated based on actual costs, which are calculated on

an annual basis. See 42 U.S.C. §§ 1395x(v)(1)(A) & 1395f(b). The provider is

thus required to submit an annual cost report to the government, which contains

comprehensive information on Medicare costs and services provided in the

previous year. See In re TLC Hosps., Inc., 224 F.3d 1008, 1011 (9th Cir. 2000).

The government’s intermediary then audits the expenses noted, relying on the

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revised cost report, and determines whether the government has overpaid or

underpaid the provider for the year. Id. at 1011-12; see also 42 C.F.R. §

405.1803(a). After the audit is completed, the intermediary credits or charges the

provider for the difference between its estimated and final Medicare

reimbursement. 42 C.F.R. § 405.1803(c).

It is within the annual cost report that Conner urges us to find an express

false certification. By regulation, the provider’s administrator or chief financial

officer must make the following certification with each annual cost report:

I hereby certify that I have read the above certification statement and
that I have examined the accompanying electronically filed or
manually submitted cost report and the Balance Sheet Statement of
Revenue and Expenses prepared by ______ (Provider Name(s) and
Number(s)) for the cost reporting period beginning ___ and ending
___ and that to the best of my knowledge and belief, this report and
statement are true, correct, complete and prepared from the books
and records of the provider in accordance with applicable
instructions, except as noted. I further certify that I am familiar with
the laws and regulations regarding the provision of health care
services, and that the services identified in this cost report were
provided in compliance with such laws and regulations.

42 C.F.R. § 413.24(f)(4)(iv) (emphasis added).

Although this certification represents compliance with underlying laws and

regulations, it contains only general sweeping language and does not contain

language stating that payment is conditioned on perfect compliance with any

particular law or regulation. Nor does any underlying Medicare statute or

regulation provide that payment is so conditioned. Thus, by arguing that the

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certification’s language is adequate to create an express false certification claim,

Conner fundamentally contends that any failure by SRHC to comply with any

underlying Medicare statute or regulation during the provision of any Medicare-

reimbursable service renders this certification false, and the resulting payments

fraudulent. Lest there be any doubt about the potential impact of this proposed

theory, Conner estimates that the United States has been damaged by SRHC in an

amount exceeding $100,000,000 per year in reliance on allegedly false

certifications.

“[L]iability [under the FCA] does not arise merely because a false

statement is included within a claim, but rather the claim itself must be false or

fraudulent.” United States ex rel. A+ Homecare, Inc. v. Medshares Mgm’t Group,

Inc., 400 F.3d 428, 443 (6th Cir. 2005). A false certification is therefore

actionable under the FCA only if it leads the government to make a payment

which it would not otherwise have made. See, e.g., United States ex rel. Hopper

v. Anton, 91 F.3d 1261, 1266 (9th Cir. 1996). Or, put another way, the “false

statement must be material to the government’s decision to pay out moneys to the

claimant.” Hendrow, 461 F.3d at 1172; see also United States ex rel. Marcy v.

Rowan Cos., 520 F.3d 384, 389 (5th Cir. 2008); Medshares, 400 F.3d at 442-43;

United States ex rel. Costner v. United States, 317 F.3d 883, 886-87 (8th Cir.

2003); United States ex rel. Berge v. Bd. of Trs. of the Univ. of Ala., 104 F.3d

1453, 1459-60 (4th Cir. 1997). But see United States ex rel. Cantekin v. Univ. of

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Pittsburgh, 192 F.3d 402, 415 (3d Cir. 1999) (declining to decide if materiality is

an element of an FCA claim). 6 If the government would have paid the claims

despite knowing that the contractor has failed to comply with certain regulations,

then there is no false claim for purposes of the FCA.

This brings us to a related and significant distinction. Where a contractor

participates in a certain government program in order to perform the services for

which payments are eventually made—in this case, Medicare—courts are careful

to distinguish between conditions of program participation and conditions of

payment. See United States ex rel. Gross v. AIDS Research Alliance-Chicago,

415 F.3d 601, 604 (7th Cir. 2005) (“An FCA claim premised upon an alleged

false certification of compliance with statutory or regulatory requirements . . .

requires that the certification of compliance be a condition of or prerequisite to

6
Although we have not previously stated that the plaintiff must show
materiality in FCA cases, see Shaw, 213 F.3d at 534, numerous courts have
observed that certification analysis is essentially a way to determine whether
compliance was material to the government’s decision to pay. See, e.g.,
Hendrow, 461 F.3d at 1173 (explaining false certification in terms of materiality);
United States ex rel. Landers v. Baptist Mem’l Health Care Corp., 525 F. Supp.
2d 972, 979 (W.D. Tenn. 2007); United States ex rel. Pogue v. Diabetes
Treatment Ctrs. of Am., Inc., 238 F. Supp. 2d 258, 264 (D.D.C. 2002) (“The
implied certification theory essentially requires a materiality analysis.”).
Although we now explicitly adopt a materiality requirement in the context of false
certification claims, we do not address whether materiality is an element of the
criminal false claims provision or under other theories of FCA liability. See
Medshares, 400 F.3d at 444 n.12 (noting that “[w]ith regard to materiality, the
language of the civil [FCA] provision is substantially different than its criminal
counterpart”).

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government payment.”); Mikes, 274 F.3d at 701-02 (discussing conditions of

participation versus payment in an implied certification context). Conditions of

participation, as well as a provider’s certification that it has complied with those

conditions, are enforced through administrative mechanisms, and the ultimate

sanction for violation of such conditions is removal from the government

program. See Mikes, 274 F.3d at 701-02; 42 C.F.R. § 424.535(a)(1) (providing

for revocation of Medicare bill privileges based on provider noncompliance).

Conditions of payment are those which, if the government knew they were not

being followed, might cause it to actually refuse payment.

A brief review of the scheme for managing Medicare participation will

demonstrate that the annual cost report certification does not condition the

government’s payment on perfect compliance with all underlying statues and

regulations, but rather seeks assurances that the provider continues to comply

with the conditions of participation originally agreed upon. Reading the FCA

otherwise would undermine the government’s own administrative scheme for

ensuring that hospitals remain in compliance and for bringing them back into

compliance when they fall short of what the Medicare regulations and statutes

require.

Before participating in the Medicare program, hospitals must undergo

inspections, which may be conducted by private accreditation organizations. See

42 C.F.R. § 488.5(a). They must also complete a Medicare Participation

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Certification, which includes a representation that the provider has complied with

all applicable laws and regulations. 7 After the organization is accredited, the

government may at any time initiate a “validation survey,” which may be

conducted by a state agency, § 488.10(c), that ensures ongoing compliance with

Medicare conditions. § 488.7. These surveys may be initiated on a

“representative sample basis,” or in the case of specific suspected violations, such

as those Conner alleges here, “in response to “substantial allegations of

noncompliance.” § 488.7(a). A provider’s ultimate compliance with a particular

requirement or condition of participation “depends upon the manner and degree to

which the provider or supplier satisfies the various standards within each

condition.” § 488.26(b).

Even if, as the result of the survey, a provider appears noncompliant, the

government does not immediately suspend Medicare enrollment or billing

privileges. Rather, the relevant regulations permit the provider to create a plan of

correction, and allow a reasonable period of time—usually 60 days—to address

any deficiencies. See § 488.28(a), (c) & (d). These procedures grant “[a]ll

7
For the first time on appeal, Conner maintains that this certification,
contained in “Form 855A,” creates FCA liability based on a theory of promissory
fraud. “[W]e have repeatedly declined to allow parties to assert for the first time
on appeal legal theories not raised before the district court, even when they fall
under the same general rubric as an argument presented to the district court,”
United States v. A.B., 529 F.3d 1275, 1280 n.4 (10th Cir. 2008), and we again
decline to do so here.

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providers and suppliers . . . an opportunity to correct the deficient compliance . . .

before a final determination to revoke billing privileges.” § 424.535(a)(1). Only

after finding that the provider has not “substantially” complied may the

government, at its discretion, terminate a Medicare participation agreement. 42

U.S.C. § 1395cc(b)(2); see also Evelyn v. Kings County Hosp. Ctr., 956 F. Supp.

288, 292 (E.D.N.Y. 1997). And even in those cases, Conner cites no regulations

or case law indicating that the government normally seeks retroactive recovery of

Medicare payments for services actually performed on the basis that the

noncompliance rendered them fraudulent.

It follows that the certification in the annual cost report represents the

provider’s assurance that it continues to comply with the requirements of

Medicare participation. Implied in this certification is the recognition that the

provider could face consequences through the administrative procedures described

above if it falls short of substantial compliance. Based on the fact that the

government has established a detailed administrative mechanism for managing

Medicare participation, we are compelled to conclude that although the

government considers substantial compliance a condition of ongoing Medicare

participation, it does not require perfect compliance as an absolute condition to

receiving Medicare payments for services rendered.

By contrast, consider if Conner’s view of the certification were correct. An

individual private litigant, ostensibly acting on behalf of the United States, could

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prevent the government from proceeding deliberately through the carefully crafted

remedial process and could demand damages far in excess of the entire value of

Medicare services performed by a hospital. If successful, the consequences of

such an action would likely be catastrophic for hospitals that provide medical

services to the financially disadvantaged and the elderly. See Evelyn, 956 F.

Supp. at 292 (noting the parties’ agreement that defendant’s termination from the

Medicare program “would effectively shut down a public hospital since it could

not operate without federal funds”). Further, rather than relying on the

experience of state agencies to survey compliance, such a broad reading of the

FCA and the certification would burden the federal courts with deciding whether

medical services were performed in full compliance with a host of Medicare

statutes and regulations. As the Second Circuit has cautioned, “courts are not the

best forum to resolve medical issues concerning levels of care.” Mikes, 274 F.3d

at 700. It is therefore with good reason that the agencies of the federal

government, rather than the courts, manage Medicare participation in the first

instance in cooperation with the states and accreditation organizations. See id.

(“[P]ermitting qui tam plaintiffs to assert that defendants’ quality of care failed to

meet medical standards would promote federalization of medical malpractice, as

the federal government or the qui tam relator would replace the aggrieved patient

as plaintiff.”). And when an individual plaintiff is harmed, state tort law remains

a powerful incentive for hospital to provide quality care. There is thus no basis in

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either law or logic to adopt an express false certification theory that turns every

violation of a Medicare regulation into the subject of an FCA qui tam suit.

Although we are the first circuit to squarely reject Conner’s sweeping

annual cost report false certification theory, other courts have reached similar

holdings that support our conclusion. Perhaps most on point is Hopper. There, a

relator sued a school district under the FCA, claiming that it had violated the

Individuals with Disabilities Education Act (“IDEA”), 20 U.S.C. § 1400 et seq.,

with respect to its handling of special education students. Hopper, 91 F.3d at

1263. The relator alleged that, among other things, the district had submitted a

triennial certificate stating that it would “‘meet all applicable requirements of

state and federal law and regulations,’ including ‘general compliance’ with the

IDEA.” Id. at 1265. This certification, she argued, made all claims for

government special education funding false because the district had, in fact, failed

to meet the requirements imposed by IDEA regulations. Id. The court disagreed,

holding that there was no “false claim” under the FCA. Id. at 1267. In reasoning

that “[m]ere regulatory violations do not give rise to a viable FCA action,” the

Ninth Circuit was careful to observe that there were “administrative and other

remedies for regulatory violations.” Id. Because the government’s payment was

not itself conditioned on the certification, the court recognized that the FCA was

not an appropriate avenue for the relator to pursue a cause of action based in

allegations of regulatory noncompliance. Id.

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 This reasoning applies equally to Conner’s broad proposition that, by virtue

of the cost report certification, Medicare payments are expressly conditioned on

perfect ongoing compliance with all regulations at all times. Nevertheless, as

other courts have recognized, some regulations or statutes may be so integral to

the government’s payment decision as to make any divide between conditions of

participation and conditions of payment a “distinction without a difference.”

Hendrow, 461 F.3d at 1177. In Hendrow, which provides a telling contrast to the

present case, a relator filed an FCA action against a university, alleging that it

falsely promised to comply with Title IV’s ban on “incentive compensation”

simply to become eligible for Title IV federal funds. 461 F.3d at 1168-69. The

court held that the incentive compensation ban was material to the government’s

payment decision. It observed that, in the absence of FCA liability, “the

University would be virtually unfettered in its ability to receive funds from the

government while flouting the law.” Id. at 1176. It was careful, however, to

“completely distinguish[]” this scenario from the Medicare context, where

relevant regulatory compliance is “ensured by peer review and extensive

monitoring.” Id. at 1177.

Moreover, unlike Hendrow, not only is it far from clear that the government

intended the cost report certification to condition payment on full regulatory

compliance, but the government has also created a complex monitoring and

remedial scheme that ends Medicare payments only as a last resort. It would thus

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be curious to read the FCA, a statute intended to protect the government’s fiscal

interests, to undermine the government’s own regulatory procedures. We

therefore emphasize that our resolution of this case does not preclude the

possibility that certain Medicare statutes or regulations might expressly or

implicitly condition payment on certification of compliance under a false

certification theory.

Conner relies heavily on United States ex rel. Thompson v. Columbia/HCA

Healthcare Corp., 20 F. Supp. 2d 1017 (S.D. Tex. 1998), where a district court

held that compliance with the Anti-kickback statute was a condition of payment,

and that violations of that statute rendered the certification in the annual cost

report false. Id. at 1047. Conner would have us read Thompson more

expansively to support his broader proposition. Even if we were inclined to adopt

the Thompson court’s narrow holding regarding express certification and the

Anti-kickback statute, however, it would not lend any weight to the argument

advanced in this case. That court’s reasoning extended only to violations of the

Anti-kickback statute, and not the broader theory that a cost report certification

could expressly condition all Medicare payments on compliance with the full host

of technical Medicare requirements, including quality of care standards. Id. at

1046-47. 8

8
Because, as we will explain, Conner’s Anti-kickback statute claims fail
(continued...)

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 The other cases cited by Conner generally involve classic fraud scenarios

and do not support his broad theory. For example, United States ex rel.

Augustine v. Century Health Services, Inc., 136 F. Supp. 2d 876 (M.D. Tenn.

2000), involved an FCA claim alleging that a health provider had billed Medicare

for certain employee stock ownership plan contributions for which it was not

entitled to reimbursement. Id. at 878. The issue in Augustine was simply

whether certain expenses, for which the provider sought reimbursement, were

actually allowable costs under Medicare. Id. at 887. In such a case, where the

validity of actual costs is at issue, there can be little question that had the

government known of the alleged fraud, it would not have made the payments.

See also In re Cardiac Devices Qui Tam Litigation, 221 F.R.D. 318, 346-47 (D.

Conn. 2004) (“To the extent that defendants included in their Cost Reports

payments for non-covered items, this would render their certifications false. . . .

8
(...continued)
for other reasons, we do not decide whether we would adopt the Thompson
court’s reasoning. We note, however, that several other courts have followed
Thompson’s reasoning and reached similar conclusions. See, e.g., United States
ex rel. McNutt v. Haleyville Med. Supplies, Inc., 423 F.3d 1256, 1260 (11th Cir.
2005) (holding that violations of the Anti-kickback statute are actionable as false
statements under the FCA); United States ex rel. Schmidt v. Zimmer, Inc., 386
F.3d 235, 243 (3d Cir. 2004) (same); United States v. Rogan, 459 F. Supp. 2d
692, 717 (N.D. Ill. 2006) (“Falsely certifying compliance with the Anti-kickback
Statute in a Medicare cost report is actionable under the FCA.” (citations
omitted)); United States ex rel. Barrett v. Columbia/HCA Healthcare Corp., 251
F. Supp. 2d 28, 32 (D.D.C. 2003); United States ex rel. Kneepkins v. Gambro
Healthcare, Inc., 115 F. Supp. 2d 35, 43 (D. Mass. 2000).

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To hold otherwise would give defendants free reign to submit claims for any and

all types of non-covered services.”).

B

Conner also asserts that SRHC violated the FCA by submitting claims

while failing to comply with the Anti-kickback statute. We need not decide

whether violations of the Anti-kickback statute are actionable through the FCA,

see Thompson, 20 F. Supp. 2d at 1047, because Conner has not alleged a kickback

within the meaning of the Anti-kickback statute. 9

The Anti-kickback statute forbids “any remuneration knowingly and

willfully offered, paid, solicited, or received in exchange for Medicare or

Medicaid patient referrals.” United States v. LaHue, 261 F.3d 993, 996 (10th Cir.

2001); see also 42 U.S.C. § 1320a-7b(b)(1)(A). Its prohibition applies both to

kickbacks offered as cash and those provided “in kind.” § 1320a-7b(b)(1).

Conner alleges that SRHC violated the statute by “forc[ing]” him to provide scrub

staff at his own expense, in exchange for the receipt of hospital privileges and the

attendant lucrative right to receive Medicare referrals.

A careful reading of Conner’s complaint reveals that he has not stated an

actionable claim under the FCA based on the Anti-kickback statute. Conner and

9
As noted, SRHC has not contested as a legal matter Conner’s assertion
that a violation of the Anti-kickback statute could serve as a predicate for FCA
liability.

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SRHC disagreed regarding whether SRHC had hired qualified scrub staff trained

to assist in “more difficult or specialized surgeries.” (Compl. ¶ 47). As Conner’s

issues with the scrub staff became a barrier to his reappointment, SRHC proposed

a compromise: If Conner did not like the scrub staff the hospital provided, he

could provide his own. Even Conner admits that he was not required to furnish

scrub staff at his own expense, but rather that the hospital allowed him to “furnish

scrub personnel . . . or else passively accept whatever persons and facility

provisions that SRHC chose to provide his surgery patients.” (Compl. ¶ 53). In

fact, SRHC did not even require Conner to choose between accepting the

hospital’s staff or providing his own; rather, it explicitly offered to provide

additional training to scrub staff with Conner’s assistance.

Such a proposal does not resemble an illegal kickback arrangement and

belies any allegation of willful and knowing intent. It may be true that a devious

Medicare provider could create a kickback scheme in which it avoided hiring

scrub staff and thus falsely profited at the government’s expense by forcing

doctors to provide their own staff in return for privileges and referrals. But,

Conner’s allegations depart from this hypothetical scheme in two significant

ways. First, there is no suggestion in the complaint that SRHC ever refused, or

threatened to refuse, to provide scrub staff. SRHC provided scrub staff, and

Conner simply disapproved of them. Thus, the only issue was Conner’s opinion

that the hospital’s scrub staff fell below the requirements of Medicare

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participation. If Conner was correct, SRHC would be subject to the usual

consequences for violating Medicare regulations, including ultimately a possible

loss of accreditation or termination of its Medicare participation agreement. His

refusal to use this allegedly sub-par staff and SRHC’s attempt to accommodate

this refusal, however, does not amount to a kickback.

Second, SRHC’s letters to Conner discuss conditions under which Conner’s

appointment would be renewed. They do not, in any way, address his ability to

receive Medicare referrals. Although it is true that the hospital would presumably

not refer Medicare patients to Conner if he was not reappointed to the hospital’s

staff, this was merely a collateral consequence of a decision that, fundamentally,

involved Conner’s underlying right to associate with SHRC. The hospital’s

decision not to reappoint Conner prevented him from operating on any patient at

SRHC, not just Medicare patients referred by the hospital or another doctor. It

applied equally to a patient paying out of pocket or with private insurance.

Conner’s dispute with SRHC thus involved only his underlying appointment on

the hospital’s medical staff, and not his right to receive Medicare referrals.

SRHC’s attempt to broker a private compromise with an independent physician

who was dissatisfied with the hospital’s accommodations is not a solicitation for a

kickback within the meaning of the statute. The district court therefore properly

dismissed this count for failure to state a claim.

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 III

SRHC cross-appeals the district court’s ruling that Conner’s state law

claims were not barred by the applicable statutes of limitations. 10 When

determining whether state law claims are timely commenced, we look to state

law. Burham v. Humphrey Hospitality Reit Trust, Inc., 403 F.3d 709, 712 (10th

Cir. 2005). Our review of the district court’s application of the state statute of

limitations is de novo. Bass v. Potter, 522 F.3d 1098, 1102 (10th Cir. 2008).

The parties agree that Conner’s state law claims accrued at the latest on

October 17, 1997, when the SRHC Board of Trustees affirmed the decision to

deny Conner’s application for reappointment. Conner filed a state lawsuit that

included these claims within the relevant limitations period, but voluntarily

dismissed the state case on February 12, 2004. Because the state case was

dismissed “otherwise than upon the merits,” Kansas law allowed Conner six

months to commence a new action which included those claims. See Kan. Stat.

Ann. § 60-518. This means that Conner’s claims survive only if he commenced

this action by August 12, 2004.

For purposes of Kansas’s statutes of limitations, an action is “commenced”

10
Despite this conclusion, the district court declined to exercise
supplemental jurisdiction over these claims and later dismissed them without
prejudice. Under the circumstances, SRHC has standing to appeal the dismissal
on the merits because a holding in its favor would likely prevent Conner from
refiling these claims in state court. Amazon, Inc. v. Dirt Camp, Inc., 273 F.3d
1271, 1275-76 (10th Cir. 2001).

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on the date a complaint is filed, but only if the plaintiff serves the complaint

within 90 days of filing. § 60-203(a)(1). In the event the party fails to make

service within 90 days, the action is commenced on the day that service is

actually effected. § 60-203(a)(2). In this case, Conner filed his First Amended

Complaint on June 1, 2001, but did not add the challenged state law claims until

his Third Amended Complaint, which was filed on June 16, 2004. He did not

serve SRHC with that complaint until September 21, 2004, 97 days after he filed

that complaint and over three years after he filed the First Amended Complaint.

Under a straightforward application of Kansas law, Conner’s state law claims are

untimely because the action was not commenced until service on September 21,

2004, which was more than a month after the six-month refiling period had run.

Nevertheless, the district court concluded that Federal Rule of Civil

Procedure 15(c)(1)(B) obviates the need for timely notice under Kansas law when

a claim is added in an amended complaint. Rule 15(c)(1)(B) provides:

An amendment to a pleading relates back to the date of the original
pleading when . . . the amendment asserts a claim or defense that
arose out of the conduct, transaction, or occurrence set out—or
attempted to be set out—in the original pleading . . . .

Applying Rule 15(c), the district court concluded that Conner’s Third Amended

Complaint “related back” to the original complaint filed on June 1, 2001, because

it arose out of the same conduct alleged in Conner’s original federal pleading, and

consequently ruled that the state law claims were timely.

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 We cannot agree. It may well be that the amended complaint related back

under Rule 15(c), but this has nothing to do with the timely service requirement

of Kansas’s statute of limitations. Federal courts apply state rules concerning

statutes of limitations because such statues embody “a substantive decision by

that State that actual service on, and accordingly actual notice by, the defendant is

an integral part of the several policies served by the statute of limitations.”

Walker v. Armco Steel Corp., 446 U.S. 740, 751 (1980); see also Hanna v.

Plumer, 380 U.S. 460, 463 n.1 (1965) (holding that a federal rule governing the

means of service trumped a state rule, noting that the federal rule, like the state

rule, aimed to provide actual notice to a defendant).

Only where there is a direct conflict between a federal and state rule must

the federal rule prevail. Walker, 446 U.S. at 744. Here, this is no conflict; Rule

15(b) governs relation-back of pleadings, and the Kansas rule creates an actual

notice requirement for statute of limitations purposes. Notably, Kansas has its

own relation-back rule, Kan. Stat. Ann. § 60-215(c), which we have recognized as

“essentially identical” to Rule 15(c). Prime Care of Ne. Kan., LLC v. Humana

Ins. Co., 447 F.3d 1284, 1289 n.6 (10th Cir. 2006). Kansas applies this rule in

conjunction with, not instead of, § 60-203(c)’s service requirement. See Housh v.

Hay, 128 P.3d 409, 411 (Kan. Ct. App. 2006). In Housh, the court held that when

a time-barred amended complaint related back to a timely initial complaint, § 60-

203(a)(1) required the plaintiff to make service of the amended complaint within

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90 days of the original timely complaint. Id. If Kansas construes its version of

Rule 15(c) as consistent with § 60-203(c), then we must adhere to that

construction. 11

Rule 15(b) determines when amended pleadings “relate back” to the

original pleading; it does not change the conditions under which an action is

“commenced” for the purposes of the state statute of limitations. The federal rule

does not preempt § 60-203(a), and § 60-203(a) plainly requires timely service or

actual notice to a defendant. Thus, regardless of whether Rule 15(c) applies, the

unavoidable fact remains that Conner did not serve SRHC within 90 days of either

the First or Third Amended Complaints. His state law claims are barred by the

statute of limitations because the refiling period had run when he first served

SRHC. Consequently, the district court should have dismissed the pendant claims

with prejudice. 12

IV

11
It would also be a curious result if a plaintiff in a federal action could
avoid serving a defendant with notice of a complaint until years after the
limitations period ended, but be barred from proceeding in a state case with an
identical procedural history.
12
In an alternative argument, Conner maintains that because qui tam FCA
cases must be filed under seal, the statute of limitations should have been tolled
until the district court unsealed Conner’s complaint. See 31 U.S.C. § 3730(b)(2)
(requiring a qui tam plaintiff to file FCA complaint in camera, and prohibiting
service on the defendant until the court so orders). But this argument was neither
presented to, nor ruled on by, the district court, and we will not consider it on
appeal. Meyerhoff v. Michelin Tire Corp., 70 F.3d 1175, 1182 (10th Cir. 1995).

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 For the reasons stated, we AFFIRM the district court’s dismissal of

Conner’s FCA claims. We VACATE the dismissal of his state law claims

without prejudice, however, and REMAND with instructions to dismiss those

claims with prejudice.

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