UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
____________________________________
)
UNITED STATES OF AMERICA, et al., )
)
ex rel. TINA D. GROAT, )
)
Plaintiffs, )
)
v. ) Civil Action No. 15-487 (RBW)
)
BOSTON HEART DIAGNOSTICS )
CORPORATION, )
)
Defendant. )
____________________________________)
MEMORANDUM OPINION
The plaintiff/relator, Tina D. Groat, M.D., brings this qui tam action against the
defendant, Boston Heart Diagnostics Corporation (“Boston Heart”), under the federal False
Claims Act, 31 U.S.C. § 3729 (2012), and various analog state false claims statutes. See
Relator’s Second Amended Complaint Pursuant to the Federal False Claims Act, 31 U.S.C.
§§ 3729 et seq. and Pendent State False Claims Acts (“2d Am. Compl.”) ¶ 1. Currently before
the Court are the Relator’s Motion for Judicial Notice (“Relator’s Mot.”) and Boston Heart
Diagnostics Corporation’s Motion to Dismiss Relator’s Second Amended Complaint (“Def.’s
Mot.”), which seeks dismissal of the plaintiff’s Second Amended Complaint pursuant to Federal
Rules of Civil Procedure 9(b) and 12(b)(6). See Def.’s Mot. at 2. Upon careful consideration of
the parties’ submissions, 1 the Court concludes that it must grant the relator’s motion for judicial
notice and grant in part and deny in part Boston Heart’s motion to dismiss.
1
In addition to the filings already identified, the Court considered the following submissions in rendering its
decision: (1) the Memorandum of Law in Support of Boston Heart Diagnostics Corporation’s Motion to Dismiss
(continued . . . )
I. BACKGROUND
A. Statutory Background
A brief overview of the Medicare program will help elucidate the relator’s allegations in
this case. Medicare is a federal health insurance program for the elderly and people with
disabilities. See 42 U.S.C. § 1395c (2012). Medicare Part B, which provides outpatient
coverage for, among other things, diagnostic laboratory tests, see 42 C.F.R. § 410.32 (2016),
only covers medical services that are “reasonable and necessary for the diagnosis or treatment of
illness or injury or to improve the functioning of a malformed body member,” 42 U.S.C.
§ 1395y(a)(1)(A). “[Laboratory t]ests that are performed in the absence of signs, symptoms,
complaints, personal history of disease, or injury are not covered except when there is a statutory
provision that explicitly covers tests for screening as described.” Medicare Claims Processing
Manual: Chapter 16—Laboratory Services § 120.1, available at https://www.cms.gov/
Regulations-and-Guidance/Guidance/Manuals/downloads/clm104C16.pdf (last visited May 16,
2017).
Medicare establishes its national payment policy for covered items or services through
national coverage determinations, which are formal decisions by the Secretary of Health and
Human Services regarding whether, and under what circumstances, Medicare covers a particular
item or service. See 42 U.S.C. § 1395ff(1); 42 C.F.R. § 405.1060(a). National coverage
determinations are binding on both Medicare contractors and administrative law judges, who
preside over Medicare coverage appeals. See 42 U.S.C. § 1395ff(1)(A)(i); 42 C.F.R
( . . . continued)
Relator’s Second Amended Complaint (“Def.’s Mem.”); (2) the Relator’s Oppos[i]tion to Defendant’s Motion to
Dismiss Relator’s Second Amended Complaint (“Relator’s Opp’n”); and (3) Boston Heart Diagnostics
Corporation’s Reply in Support of its Motion to Dismiss Relator’s Second Amended Complaint (“Def.’s Reply”).
2
§ 405.1060(a). Medicare contractors process and pay Medicare claims within a specified
jurisdiction on behalf of the Centers for Medicare and Medicaid Services (“CMS”), and have
authority to issue local coverage determinations for that jurisdiction. See 42 U.S.C.
§ 1395ff(f)(2); see also id. § 1395m-1(g)(noting that Medicare contractors may issue local
coverage determinations regarding clinical diagnostic laboratory tests under the same process).
Local coverage determinations, like national coverage determinations, govern Medicare
coverage for a particular item or service. See id. § 1395ff(f)(2)(b). Administrative law judges
“give substantial deference” to local coverage determinations, but they are not bound by them.
42 C.F.R. § 405.1062.
An entity seeking reimbursement for services provided to Medicare patients must submit
a CMS-1500 form to the Medicare contractor. See United States ex rel. Hobbs v. MedQuest
Assocs., Inc., 711 F.3d 707, 711 (6th Cir. 2013). “The[ CMS-1500] form[] reflect[s] the
treatment or services provided and identif[ies] the [entity that] provided them. Tests, supplies,
and services are correlated to a series of unique numbers, called CPT codes, which quickly
convey to the [claims processor] what reimbursable expenses the [entity] has incurred.” Id. at
711. The CMS-1500 form requires the entity to certify that, among other things, “the services on
this form were medically necessary.” Health Insurance Claim Form (“CMS-1500”) at 2,
available at https://www.cms.gov/Medicare/CMS-Forms/CMS-Forms/Downloads/CMS1500.pdf
(last visited May 16, 2017).
B. Factual Background and Procedural History
The relator is a medical doctor and the National Medical Director of Women’s Health
and Genetics at United Healthcare (“United”), 2d Am. Compl. ¶ 6, which is a health insurance
company that offers Medicare and Medicaid insurance coverage, TriCare health insurance
3
coverage, as well as employer-sponsored and individual health insurance coverage, id. ¶ 23. The
relator alleges the following in her Second Amended Complaint.
Boston Heart is a clinical laboratory located in Framingham, Massachusetts, which
“provides diagnostic testing related to cardiovascular health,” 2d Am. Compl. ¶ 24, by
“conducting laboratory tests that are ordered by doctors and other healthcare providers,” id.
¶ 50. 2 “To facilitate the ordering of those tests, [Boston Heart] supplies doctors with pre-printed
test requisition forms which that doctor fills out and sends to the [Boston Heart] laboratory along
with the patient’s specimen that is to be tested.” Id.
These test requisition forms include a list of the tests that the lab[oratory] performs
for the doctor to select based on the doctor’s examination of the patient and
subsequent diagnosis. The form also groups certain tests together in test panels,
which allows the doctor to easily order several tests at once simply by checking one
box on the form.
Id. ¶ 51. “After the lab[oratory] conducts the tests ordered, it bills the government [or
government intermediary] . . . for tests performed for Medicare [and other government health
insurance] patients.” Id. ¶ 55.
The relator alleges that various genetic and non-genetic tests 3 performed by Boston Heart
are not medically necessary for patients with the following four diagnostic codes: (1) routine
general medical examination at a health care facility; (2) essential hypertension (high blood
pressure); (3) other and unspecified hyperlipidemia (high cholesterol); and (4) other malaise and
2
For simplicity’s sake, the Court will refer to these health care providers only as “doctors.”
3
The specific genetic tests at issue are: (1) prothrombin, coagulation factor II; (2) coagulation factor V; (3) 5,
10-methylenetetrahydrofolate reductase; (4) cytochrome P450, family 2, subfamily C, polypeptide 19;
(5) genotyping to determine cytochrome p450, family 2, subfamily C, polypeptide 19 and vitamin K epoxide
reductase subunit C1 genetic polymorphisms for the purpose of managing the administration and dosing of warfarin;
and (6) molecular pathology procedure, Level 2, used for apolipoprotein E genotyping. 2d Am. Compl. at 18–19.
The specific non-genetic tests at issue are: (1) additional cholesterol particles testing for LDL and HDL subspecies;
(2) high-sensitivity c-reactive protein; (3) fibrinogen; (4) FFA/NEFA; (5) cystatin-c; (6) omega 3; and
(7) AspirinWorks. Id. at 19.
4
fatigue (collectively, “the four diagnostic codes”). See id. ¶¶ 57–59. Specifically, the relator
alleges:
when any of these four [ ] diagnostic codes are given to a patient in the absence of
other diagnostic codes, the tests set forth above are . . . known to be medically
unnecessary because they (1) do not and cannot predict the patient’s risk of future
heart disease, (2) do not and cannot screen for any currently existing heart disease
in the patient, and (3) provide no additional information regarding the
cardiovascular-related diagnoses sometimes used to justify these tests, such as
hypertension, hyperlipidemia, or malaise and fatigue, and (4) have no bearing on
any potential treatments for those diagnoses.
Id. ¶ 59. According to the relator, when these tests are ordered for patients with some or all of
the four diagnostic codes, they are used solely for screening purposes on adults who do not
exhibit “signs, symptoms, complaints, or personal history of heart disease,” and thus are not
covered by Medicare or other government health care programs. Id. ¶ 70; see also id. ¶ 67. To
support her allegation, the relator relies on the Guideline for Assessment of Cardiovascular Risk
in Asymptomatic Adults in November 2010 (the “Guideline”), jointly published by the American
Heart Association and the American College of Cardiology, id. ¶¶ 61–62 (noting that the
Guideline “specifically recommends against certain of these tests to assess the risk of developing
heart disease”), as well as various national and local coverage determinations made by the
government and its contractors, respectively, id. ¶¶ 67–69, 73–74.
The relator also relies on the data examined by her team at United, which, in order to
“evaluat[e] the drivers of increased costs in women’s care and genetic testing[,] . . . examined the
volume and type of genetic testing purportedly related to cardiac risk performed for thousands of
patients by hundreds of laboratories that bill to United.” Id. ¶ 119. “Because [United] provides
and services [health insurance plans that] are funded by Medicare and Medicaid dollars, [the
r]elator received and evaluated [United] data that showed that Boston Heart submitted claims to
[United] on behalf of patients insured under [government health insurance plans] for the tests at
5
issue here.” Id. ¶ 136. “[B]y examining data for the year 2013,” id. ¶ 120, the relator “identified
a combination of seven tests that are frequently performed and billed by Boston Heart and
specifically compared Boston Heart’s billing of that combination to other laboratories,” id. ¶ 121.
According to the relator, the comparison revealed that “Boston Heart was an extreme outlier in
the frequency of billing this combination of seven tests,” id. ¶ 122, and that examination “of
specific claims submitted to United [ ] show that Boston Heart was billing for medically
unnecessary tests to screen for cardiac-related issues and predict future cardiac risk,” id. ¶ 124.
The relator alleges that “Boston Heart encourages providers to order these medically unnecessary
tests,” id. ¶ 132, through marketing materials and test panels on pre-printed test requisition
forms, see id. ¶¶ 52, 94, 127, 132, and that “General Practitioners and other non-cardiology
physicians are Boston Heart’s primary target” for its allegedly false marketing statements
regarding the medical necessity of its tests, id. ¶ 127, and their ability “to predict cardiac risk,”
id. ¶ 131. Ultimately, the relator met with Boston Heart’s CEO and its Vice President of Payer
Innovation and Strategy on August 15, 2014, and told them “that their test panels included many
unnecessary tests.” Id. ¶ 128–30; see also Relator’s Opp’n at 35 (identifying the Boston Heart
meeting attendees as the CEO and Vice President of Payor Innovation and Strategy).
Based on these factual allegations, the relator filed her original complaint under seal on
February 3, 2015. 4 See Relator’s Complaint Pursuant to the Federal False Claims Act, 31 U.S.C.
§§ 3729 et seq. and Pendent State False Claims Acts at 1, ECF No. 1. On May 11, 2015, the
relator filed her first amended complaint. See Relator’s Amended Complaint Pursuant to the
Federal False Claims Act, 31 U.S.C. §§ 3729 et seq. and Pendent State False Claims Acts at 10,
4
The relator originally filed her Complaint in the United States District Court for the Eastern District of Virginia,
which subsequently transferred the case to this Court on the United States’ motion to change venue. See Civil
Docket for Case #: 1:15-cv-00121-GBL-JFA, ECF No. 9 (docket entry dated April 2, 2015).
6
ECF No. 19. On August 19, 2016, the United States, along with the twenty-seven states and the
District of Columbia on whose behalf the relator asserted false claims act violations, declined to
intervene in this case, see Notice of Election to Decline Intervention and to Dismiss Claims
Asserted on [ ] Behalf of Maryland (Aug. 19, 2016), ECF No. 28, and the Court dismissed the
“claims brought by the relator on behalf of the State of Maryland” and ordered that the case be
unsealed, Order at 1–2 (Aug. 24, 2016), ECF No. 29. 5
On October 27, 2016, the relator filed her Second Amended Complaint. See 2d Am.
Compl. at 1. Count I of the Second Amended Complaint alleges both a violation of 31 U.S.C.
§ 3729(a)(1)(A), the “false claims” provision of the False Claims Act, as well as a violation of 31
U.S.C. § 3729(a)(1)(B), the “false statements” provision. See 2d Am. Compl. ¶¶ 143–44. Count
II alleges a violation of 31 U.S.C. § 3729(a)(1)(G), the “reverse false claims” provision of the
False Claims Act. See 2d Am. Compl. ¶ 150. Counts III through XXXI allege violations of
twenty-seven states’ and the District of Columbia’s false claims statutes. See id. ¶¶ 154–381.
The defendant now moves to dismiss all of the relator’s claims pursuant to Federal Rules of Civil
Procedure 9(b) and 12(b)(6).
II. STANDARD OF REVIEW
A complaint must contain “a short and plain statement of the claim showing that the
pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). Thus, to survive a motion to dismiss for
“failure to state a claim upon which relief can be granted,” Fed. R. Civ. P. 12(b)(6), the
complaint “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that
5
The Court dismissed the claims on behalf of Maryland because that state’s false claims statute only allows an
action to proceed if the state intervenes. See Notice of Election to Decline Intervention and to Dismiss Claims
Asserted on [ ] Behalf of Maryland at 1 (Aug. 19, 2016), ECF No. 28 (quoting Md. Code Ann., Health-Gen.
§ 2-604(a)(7) (2015)).
7
is plausible on its face,’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). Although the Court “must
treat the complaint’s factual allegations as true [and] must grant [the] plaintiff the benefit of all
reasonable inferences from the facts alleged,” Trudeau v. Fed. Trade Comm’n, 456 F.3d 178,
193 (D.C. Cir. 2006) (first alteration in original) (citation omitted), legal allegations devoid of
factual support are not entitled to this assumption, see, e.g., Kowal v. MCI Commc’ns Corp., 16
F.3d 1271, 1276 (D.C. Cir. 1994). Moreover, a plaintiff must provide more than “a formulaic
recitation of the elements of a cause of action.” Hinson ex rel. N.H. v. Merritt Educ. Ctr., 521 F.
Supp. 2d 22, 27 (D.D.C. 2007) (quoting Twombly, 550 U.S. at 555). “And, ‘[i]n determining
whether a complaint states a claim, the court may consider the facts alleged in the complaint,
documents attached thereto or incorporated therein, and matters of which it may take judicial
notice.’” Farah v. Esquire Magazine, 736 F.3d 528, 534 (D.C. Cir. 2013) (alterations in original)
(quoting Abhe & Svoboda, Inc. v. Chao, 508 F.3d 1052, 1059 (D.C. Cir. 2007)).
Fraud claims are also subject to the heightened pleading requirement of Rule 9(b), which
provides that “[i]n alleging fraud or mistake, a party must state with particularity the
circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b); see also United States ex rel.
Heath v. AT & T, Inc., 791 F.3d 112, 123 (D.C. Cir. 2015) (applying Rule 9(b) to claims filed
pursuant to the False Claims Act). “The rule serves to ‘discourage[] the initiation of suits
brought solely for their nuisance value, and safeguards potential defendants from frivolous
accusations of moral turpitude.’” Heath, 791 F.3d at 123 (alteration in original) (quoting United
States ex rel. Williams v. Martin-Baker Aircraft Co., 389 F.3d 1251, 1256 (D.C. Cir. 2004)).
8
Further, “the complaint must be particular enough to ‘guarantee all defendants sufficient
information to allow for preparation of a response.’” Id. (quoting Williams, 389 F.3d at 1256).
“Rule 9(b) is not an antithesis of Rule 8(a)’s ‘short and plain statement’ requirement, but rather a
supplement to it.” Baker v. Gurfein, 744 F. Supp. 2d 311, 315 (D.D.C. 2010) (Walton, J.) (citing
Williams, 389 F.3d at 1256). Accordingly, in order to withstand a motion to dismiss for failure
to plead a False Claims Act claim with the degree of particularity required by Rule 9(b), a
“complaint must . . . provide a defendant with notice of the who, what, when, where, and how
with respect to the circumstances of the fraud.” Stevens v. InPhonic, Inc., 662 F. Supp. 2d 105,
114 (D.D.C. 2009) (Walton, J.) (internal quotation marks and citations omitted)).
III. ANALYSIS
A. Count I
1. The Presentment Claim Allegation
“The False Claims Act imposes civil liability on any person who knowingly submits false
claims to the government.” United States ex rel. Digital Healthcare, Inc. v. Affiliated Comput.
Servs., Inc., 778 F. Supp. 2d 37, 44–45 (D.D.C. 2011) (Walton, J.) (citing 31 U.S.C. §§ 3729–
3733). Section 3729(a)(1)(A) creates liability for “any person who . . . knowingly presents, or
causes to be presented, a false or fraudulent claim for payment or approval.” 31 U.S.C.
§ 3729(a)(1)(A). The elements for a “presentment claim” violation are “(1) the defendant
submitted or caused to be submitted a claim to the government, (2) the claim was false, and (3)
the defendant knew the claim was false.” United States ex rel. Morsell v. Symantec Corp., 130
F. Supp. 3d 106, 118 (D.D.C. 2015) (quoting United States ex rel. Tran v. Comput. Scis. Corp.,
53 F. Supp. 3d 104, 121–22 (D.D.C. 2014)).
9
a. Whether Boston Heart Submitted Claims to the Government
Boston Heart argues that the relator failed to plead that Boston Heart submitted claims for
government payment with the degree of particularity required by Rule 9(b) because “[s]he
plead[ed] no information to identify any single claim that Boston Heart submitted to Medicare,”
Def.’s Mem. at 37, such as the specific individuals who submitted the allegedly false claims, see
id., or “the amount of reimbursement Boston Heart received from Medicare as a result of alleged
false claims,” id. at 38; see also id. at 26–27 (arguing that the relator failed to plead that Boston
Heart submitted claims for payment). The relator argues in response that she is not “required to
plead the facts or details of the fraudulent claims,” such as the actual amount of false claims, nor
the identity of any individual at Boston Heart with knowledge of the fraud, to satisfy Rule 9(b),
Relator’s Opp’n at 44, and that, in any event, she did plead “that Boston Heart submitted false
claims to Medicare Advantage Plans and Managed Medicaid Plans, which are funded by
Medicare and Medicaid dollars,” id. at 36–37 (citing 2d Am. Compl. ¶ 136). The Court agrees
with the relator that she has sufficiently pleaded the submission of claims to the government.
The District of Columbia Circuit has made clear that although Rule 9(b) requires the
relator to “state with particularity the circumstances constituting fraud,” Heath, 791 F.3d at 123
(emphasis added) (quoting Fed. R. Civ. P. 9(b)), she is not required “to plead representative
samples of claims actually submitted to the government [because that] would require relators,
before discovery, to prove more than the law requires to be established at trial,” id. at 126; see
also id. at 126–27 (“We decline to read Rule 9(b) as requiring more factual proof at the pleading
stage than is required to win on the merits.” (footnote omitted)). Nor is the relator required to
identify specific individuals at Boston Heart allegedly responsible for the fraud, because she has
alleged fraud at the corporate level. See id. at 125 (noting that “Heath does identify a specific
10
actor—AT & T itself. . . . The complaint makes clear, in other words, that corporate levers were
pulled; identifying precisely who pulled them is not an exorable requirement of Rule(9)(b) in all
cases”); see also 2d Am. Compl. ¶¶ 6, 52, 94, 127, 132 (detailing Boston Heart’s alleged scheme
to induce general practitioners to order medically unnecessary tests through marketing materials
and pre-printed test requisition forms).
What the relator pleads is that, based on her review of United data regarding Boston
Heart laboratory tests in 2013, Boston Heart submitted over $369,000 in claims to United alone
for the genetic tests at issue on behalf of patients with the four relevant diagnoses insured under
both Medicare and Medicaid, see id. ¶¶ 136–38, and that Boston Heart also submitted claims for
the nongenetic tests at issue for similar patients, see id. ¶ 139. In other words, the relator
“corroborated” her allegation that Boston Heart submitted claims to the government by providing
a “concrete example” of a portion of the representative claims submitted to United for Medicare
and Medicaid patients “that follow[] the [Second Amended C]omplaint’s pattern.” See Heath,
791 F.3d at 126 (“Heath’s complaint passes th[e Rule 9(b)] test. He provides factual specificity
concerning the type of fraud, how it was implemented, and the training materials used, all of
which is then corroborated by the concrete example of the Detroit audit documenting the very
type of overbilling that follows the complaint’s pattern.”). Accordingly, the relator sufficiently
pleaded that Boston Heart submitted claims to the government for payment. 6
6
Boston Heart also argues that the claims alleged in Counts I and II as to other federal health care programs besides
Medicare should be dismissed because the relator “alleges no law or facts” regarding claims submitted for patients
insured by those health care programs. Def.’s Mem. at 41. The Court agrees with the relator that because she has
sufficiently “alleged that Boston Heart was in the business of conducting laboratory tests on patients with all types of
health insurance and earned revenue by being paid by those health insurers for the tests in conducted,” Relator’s Opp’n
at 43 n.25, the Court “must grant [the relator] the benefit of [the] reasonable inference,” Trudeau, 456 F.3d at 193,
that, “in addition to submitting claims for the tests at issue here directly to Medicare [and Medicaid plans], Boston
Heart also submitted claims to TRICARE and the Veterans Administration,” Relator’s Opp’n at 43 n.25.
11
b. Whether the Claims Were False
Under the False Claims Act, a claim may be either factually false, “in which
a . . . claimant submits information that is untrue on its face,” United States v. Kellogg Brown &
Root Servs., Inc., 800 F. Supp. 2d 143, 154 (D.D.C. 2011), or legally false, in which the claim
“rest[s] on a false representation of compliance with an applicable federal statute, federal
regulation, or contractual term,” id. (quoting United States v. Sci. Applications Int’l Corp., 626
F.3d 1257, 1266 (D.C. Cir. 2010) (“SAIC”)). “A legally false claim, also known as a ‘false
certification,’ can be either ‘express’ or ‘implied.’” Id. (quoting SAIC, 626 F.3d at 1268). “An
express false certification occurs when a claimant explicitly represents that he or she has
complied with a contractual condition, but in fact has not complied.” Id. An implied false
certification, on the other hand, occurs when a claimant “makes no affirmative representation but
fails to comply with a contractual or regulatory provision ‘where certification was a prerequisite
to the government action sought.’” Id. (quoting SAIC, 626 F.3d at 1266). Under either an
express or implied false certification claim, the plaintiff must plead that the defendant
“knowingly violated a requirement that the defendant knows is material to the Government’s
payment decision.” Universal Health Servs., Inc. v. United States, __ U.S. __, __, 136 S. Ct.
1989, 1996 (2016). The False Claims Act defines “material” as “having a natural tendency to
influence, or be capable of influencing, the payment or receipt of money or property.” 31 U.S.C.
§ 3729(b)(4).
Boston Heart argues that the relator failed to plausibly allege that the claims it submitted
for payment were false for four reasons. The Court will consider each argument in turn.
12
i. Boston Heart’s Alleged Failure to Comply with Regulations or
Submission of False Information
Boston Heart argues that because the relator does not plead “that any information on any
claim submitted by Boston Heart was factually inaccurate,” the relator has failed to plausibly
allege falsity. Def.’s Mem. at 15. The Court is unpersuaded by this argument because, as
discussed above, “legally false” claims are also viable under the False Claims Act. See, e.g.,
Kellogg Brown & Root Servs., 800 F. Supp. 2d at 154–55 (discussing the difference between
factually false and legally false claims). The Second Amended Complaint makes clear that the
relator is alleging that Boston Heart’s claims were “legally false” because, according to the
relator, Boston Heart certified that the tests it performed were medically necessary even though
they were not medically necessary for certain populations. See 2d Am. Compl. ¶¶ 57–74. And,
contrary to Boston Heart’s assertion, see Def.’s Mem. at 15, the relator does allege that Boston
Heart failed to comply with the Medicare rules restricting covered services to those that are
medically necessary, see 2d Am. Compl. ¶¶ 32–43, 121–24; see also Gulfcoast Med. Supply, Inc.
v. Sec’y, Dep’t of Health & Human Servs., 468 F.3d 1347, 1349 (11th Cir. 2006) (“[Medicare]
Part B coverage only extends to those medical services that are medically ‘reasonable and
necessary’ for the beneficiary.” (citing 42 U.S.C. § 1395y(a); 42 C.F.R. § 411.15(k)); United
States ex rel. Riley v. St. Luke’s Episcopal Hosp., 355 F.3d 370, 376 n.6 (5th Cir. 2004) (“That
the services [billed are] medically necessary is a condition for payment under the [Medicare]
regulations.”). Accordingly, the relator does allege that Boston Heart failed to comply with
Medical regulations despite its express certification to the contrary on the CMS-1500 form, see
2d Am. Compl. ¶¶ 33, 143, which, if true, would constitute an express false certification, see
SAIC, 626 F.3d at 1266.
13
ii. Boston Heart’s Tests for Screening Purposes
Boston Heart argues that the relator did not plead that the claims it submitted were false
because she “fails to allege any facts demonstrating that physicians ordered the Boston Heart
[t]ests merely for screening purposes,” Def.’s Mem. at 16, and fails to identify a single patient
who did not warrant the specific tests ordered, see id. at 17. The relator argues in response that
she alleged that the tests at issue are not medically necessary for patients with the four diagnostic
codes, and thus were legally false. See Relator’s Opp’n at 22.
The Court agrees with the relator that she has pleaded sufficient facts to support her claim
that the tests were ordered for medically unnecessary screening purposes. The Second Amended
Complaint states that, based upon the relator’s examination of “the volume and type of genetic
testing purportedly related to cardiac risk performed for thousands of patients by hundreds of
laboratories that bill to United,” 2d Am. Compl. ¶ 119, including Boston Heart, for the year
2013, see id. ¶ 120, “[t]he vast majority of the Boston Heart tests at issue here are being used for
screening purposes (i.e. to discover whether the patient currently has heart disease) or to assess
whether the patient has a risk of developing cardiac illness and potential cardiac complications in
the future (cardiac risk),” id. ¶ 58. Further, the relator pleaded that “only one or some or all of
the [four diagnostic codes] . . . are commonly seen in patients whose specimens have been
submitted to the Boston Heart lab[oratory] for testing,” id., but that, for patients without “other
diagnostic codes, the[] tests [at issue] are worthless, of no therapeutic or predictive value
whatsoever and known to be medically unnecessary,” id. ¶ 59. The relator supported her
allegations regarding lack of medical necessity by citing the Guideline, id. ¶¶ 61–64, the
Medicare statute and regulations, id. ¶ 67, and local coverage determinations, id. ¶¶ 68–69, 74,
14
77–78, 84, 90, 99–109, 111–17. 7 The relator also provided an example of a specific claim
Boston Heart submitted to United, in which Boston Heart billed United for twenty-four tests
performed for a patient identified as having high cholesterol, high blood pressure, and Type II
diabetes. See id. ¶ 124. According to the relator, none of these tests “predict cardiac risk” or
“provide any relevant medical information” for that patient. Id. Accordingly, the Court
concludes that the relator has sufficiently pleaded facts demonstrating falsity because, based on
her review of United’s data regarding Boston Heart tests ordered for United insureds who have
government health insurance, Boston Heart allegedly billed for tests that were used merely for
screening purposes for patients with the four diagnostic codes, cited government and scientific
authority to support those facts, and provided a specific example of Boston Heart tests ordered
for a particular patient.
iii. Whether Boston Heart Must Determine Medical Necessity
As stated above, the relator supported her allegations that the tests at issue are not
medically necessary for patients with the four diagnostic codes by citing the Guideline. See 2d
Am. Compl. ¶¶ 61–65. Boston Heart contends that because a doctor, and not a laboratory such
as Boston Heart, determines the medical necessity of a particular test, it “is not in a position to
7
After Boston Heart filed its motion to dismiss, the relator filed her motion for judicial notice, requesting that the
Court take judicial notice of various local coverage determinations, see generally Relator’s Mot, which are available
on CMS’s website, see Indexes, Centers for Medicare & Medicaid Services, https://www.cms.gov/medicare-
coverage-database/indexes/national-and-local-indexes.aspx (last visited June 2, 2017). Pursuant to Local Rule 7(m),
the relator’s counsel contacted Boston Heart’s counsel, who indicated that Boston Heart opposed the relator’s
motion. See id. ¶ 12. Boston Heart, however, did not file an opposition to the relator’s motion. Accordingly, the
Court will grant the relator’s motion as conceded, see Local Rule 7(b) (noting that if a memorandum in opposition to
a motion is not filed within fourteen days, “the Court may treat the motion as conceded”), and take judicial notice of
the local coverage determinations, see Farah v. Esquire Magazine, 736 F.3d 528, 534 (D.C. Cir. 2013) (stating that a
court may consider “matters of which it may take judicial notice” in resolving a motion to dismiss), because
“[c]ourts in this jurisdiction have frequently taken judicial notice of information posted on official public websites of
government agencies,” Pharm. Research & Mfrs. of Am. v. United States Dep’t of Health & Human Servs., 43 F.
Supp. 3d 28, 33 (D.D.C. 2014) (taking judicial notice of a page on the FDA’s website); see also United States ex rel.
Modglin v. DJO Global Inc., 114 F. Supp. 3d 993, 1001 n.34 (C.D. Cal. 2015) (taking judicial notice of a national
coverage determination).
15
apply [the Guideline] to any particular patient or test ordered, nor is it required to do so.” Def.’s
Mem. at 18. Consequently, Boston Heart contends, the Guideline is inapposite. See id. at 17.
According to Boston Heart, “[w]hen a laboratory bills Medicare for testing ordered by a
physician, it must only (1) maintain ‘documentation [it] receives from the ordering physician’;
and (2) ensure that ‘the information that it submitted with the claim accurately reflects the
information it received from the ordering physician.’” Id. at 9–10 (quoting 42 C.F.R.
§ 410.32(d)(2)(ii)(A)-(B)). Boston Heart contends that the CMS-1500 form “certification does
not require that the billing laboratory make [the medical necessity] determination. Instead, under
the Medicare Part B framework, the laboratory certifies that the services are medically necessary
by relying on the clinical determination of the treating physician.” Def.’s Reply at 21 n.26. The
relator argues in response that Boston Heart “has an independent duty to ensure the medical
necessity of the tests it performs,” and that “[b]lind deference to the ordering physician is not
allowed when the lab[oratory] itself is performing, and being paid by the Government for, the
service.” Relator’s Opp’n at 26; see also id. at 10–12 (arguing that Boston Heart, as the entity
submitting the claim for payment, “must certify the medical necessity of the services for which
[it is ] seeking reimbursement”).
The Court agrees with the relator that Boston Heart has an obligation to establish that the
tests for which it seeks government reimbursement are medically necessary because when it
submits the CMS-1500 form, it certifies that the tests performed were medically necessary. See
CMS-1500 at 2 (requiring the billing entity to certify that, among other things, “the services on
this form were medically necessary”). Boston Heart’s reliance on the Medicare regulation
regarding documentation and recordkeeping requirements is unavailing because that provision
does not address the entity’s certification of medical necessity on the CMS-1500 form. See 42
16
C.F.R. § 410.32(d)(2). Although Boston Heart is correct that the provision requires both the
doctor ordering the service and the entity submitting the claim for payment to maintain
documentation regarding medical necessity, see id. § 410.32(d)(2)(i)-(ii), the CMS-1500 form
requires the entity submitting the claim, be it a “physician or supplier,” to certify the medical
necessity, CMS-1500 at 2 (emphasis added). The regulation simply does not state that only the
ordering physician, and not the entity submitting the claim, has the obligation to certify the
medical necessity of the tests at issue when submitting claims for payment. See 42 C.F.R.
§ 410.32(d)(2)-(3). In sum, the regulation, which concerns recordkeeping, has no bearing on the
certification of medical necessity on the CMS-1500 form.
Moreover, the regulatory scheme “places the burden of establishing the medical necessity
of diagnostic tests on the entity submitting the claim.” Garcia v. Sebelius, No. CV 10-8820 PA
(RZx), 2011 WL 5434426, at *7 (C.D. Cal. Nov. 8, 2011) (citing 42 C.F.R. §§ 410.32(d)(2)(ii),
(d)(3)); see also Nephropathology Assocs., PLC v. Sebelius, No. 4:12CV00233JLH, 2013 WL
3285685, at *4 (E.D. Ark. June 27, 2013) (“According to the Secretary, the burden remains on
the entity submitting the claim to demonstrate that the services at issue were reasonable and
necessary . . . . The Secretary’s interpretation is not unreasonable.” (citing 42 U.S.C. § 1395l(e);
42 C.F.R. § 424.5(a)(6)). Boston Heart’s argument to the contrary is belied not only by court
decisions reviewing Medicare coverage determinations for claims submitted by laboratories in
which the government determined that the tests at issue were not medically necessary, and the
laboratories, not the ordering physicians, argued to the contrary, see, e.g., KGV Easy Leasing
Corp. v. Sebelius, No. 09-56393, 2011 WL 490990, at *1 (9th Cir. Feb. 14, 2011) (affirming the
Secretary’s determination that the diagnostic testing services performed by KGV, and
independent diagnostic testing facility, “were not reimbursable by Medicare because KGV failed
17
to demonstrate that the tests were medically reasonable and necessary” (emphasis added));
Strand Analytical Labs., LLC v. Burwell, No. 1:13-cv-00645-LJM-DKL, 2015 WL 4603258, at
*1 (S.D. Ind. July 30, 2015) (affirming the Secretary’s decision to deny Medicare coverage for
the laboratory’s DNA test after concluding that it was not medically necessary), appeal docketed,
No. 15-3133 (7th Cir. Sept. 25, 2015), but also by other False Claims Act actions against
laboratories for allegedly submitting claims for medically unnecessary tests, see, e.g., United
States ex rel. Merena v. SmithKline Beecham Corp., 205 F.3d 97, 98 (3d Cir. 2000) (describing
the laboratory’s “scheme that allowed them to bill the federal government for unauthorized and
unnecessary laboratory tests . . . [by] ‘bundl[ing] a standard grouping of blood tests with some
additional tests and . . . market[ing] this grouping to doctors by leading them to believe that the
additional tests would not increase costs to Medicare and other government-sponsored health
programs”); United States v. Berkeley Heartlab, Inc., __ F. Supp. 3d __, __, 2016 WL 7851459,
at *2–3, 18 (D.S.C. Mar. 28, 2016) (declining to dismiss the government’s False Claims Act
allegations against the laboratory for “encourag[ing] physicians to order tests that were medically
unnecessary”); see also Press Release, Department of Justice Office of Public Affairs, Justice
Department Recovers over $4.7 Billion from False Claims Act Cases in Fiscal Year 2016 (Dec.
14, 2016), available at https://www.justice.gov/opa/pr/justice-department-recovers-over-47-
billion-false-claims-act-cases-fiscal-year-2016 (last visited May 9, 2017) (noting that “[o]f the
$4.7 billion recovered, $2.5 billion came from the health care industry, including . . .
laboratories” (emphasis added)). Accordingly, the Court concludes that the relator pleaded facts
sufficient to support her claim that Boston Heart’s certifications of medical necessity were
18
legally false because it had an independent obligation to certify that the tests for which it
requested government reimbursement were medically necessary. 8
iv. Whether Boston Heart’s Tests Are Medically Necessary
Boston Heart further argues that the medical literature it cites in its opposition “regarding
the efficacy of . . . testing renders wholly implausible any assertion that Boston Heart was
submitting false claims,” and that “[a] mere difference of clinical judgment does not suffice to
allege either falsity or knowledge under the [False Claims Act].” Def.’s Mem. at 19. The relator
argues in response that Boston Heart’s arguments regarding the medical necessity of these tests
raise “an evidentiary question [that] is plainly inappropriate [for resolution] at the motion to
dismiss stage,” Relator’s Opp’n at 22; see also id. at 30 (stating that Boston Heart is “ask[ing]
the Court to disregard [the r]elator’s factual allegations and simply accept Boston Heart’s
assertion that its tests have medical utility. This is inappropriate at the pleading stage, where the
purported evidence proffered by Boston Heart is irrelevant”).
The Court declines Boston Heart’s invitation to weigh the medical literature it cites that
purportedly conflicts with the Guideline and other sources cited by the relator in her Second
8
Boston Heart also argues that the national coverage determinations “are irrelevant to [the relator’s] claims and
misleading” because (1) one “covers lipid tests that are not among the Boston Heart [t]ests challenged in this
action,” and (2) the other refers to a Warfarin response test that “Boston Heart does not offer or perform.” Def.’s
Mem. at 21. In the Court’s view, the relator does challenge lipid testing, see 2d Am. Compl. ¶¶ 57, 98 (including
non-genetic tests for lipid particles in its list of tests at issue), and the parties’ disagreement as to whether or not
Boston Heart offers the genetic test for Warfarin response, see Def.’s Mem. at 21, is inappropriate to resolve at the
motion to dismiss stage, see Trudeau, 456 F.3d at 193 (noting that the Court “must treat the complaint’s factual
allegations as true [and] must grant [the] plaintiff the benefit of all reasonable inferences from the facts alleged”
(first alteration in original) (citation omitted)). Boston Heart further argues that the local coverage determinations
cited do not cover Massachusetts, where Boston Heart is located, id. at 22. The Relator argues in response that it
“has alleged that [n]ational [c]overage [d]eterminations [ ] and [local coverage determinations] very specifically and
directly state that Boston Heart’s tests are not medically necessary,” Relator’s Opp’n at 28, and states that it cited to
local coverage determinations outside of Massachusetts “because they contain a thorough examination and
consideration of the state of the science when reaching a conclusion on when a test can be considered medically
necessary,” id. The Court agrees with the relator that she cited the local coverage determinations not to allege that
they were binding on Boston Heart, but as further support for her contention that the specific tests for patients with
the four diagnostic codes at issue are not medically necessary.
19
Amended Complaint to determine the medical necessity of the challenged tests for the patients at
issue, because to do so would require it to “resolv[e] questions of fact not before it upon a
motion to dismiss.” Covad Commc’ns Co. v. Bell Atl. Corp., 398 F.3d 666, 676 (D.C. Cir.
2005). Although the Court agrees with Boston Heart that “the prevailing view of courts is that
‘contradiction based on clinical judgment or opinion alone cannot constitute falsity under the
[False Claims Act] as a matter of law,’” Def.’s Mem. at 19 (quoting United States v. AseraCare
Inc., 176 F. Supp. 3d 1282, 1286 (N.D. Ala. 2016), then citing United States ex rel. Morton v. A
Plus Benefits, Inc., 139 F. App’x 980, 983 (10th Cir. 2005); United States ex rel. Wall v. Vista
Hospice Care, Inc., No. 3:07-cv-00604-M, 2016 WL 3449833 at *17 (N.D. Tex. 2016); United
States v. Prabhu, 442 F. Supp. 2d 1008, 1033 (D. Nev. 2006); United States ex rel. Harris v.
Bernad, 275 F. Supp. 2d 1, 6–7 (D.D.C. 2003)), the Court simply cannot determine, without
weighing the evidence, whether the relator’s allegations regarding medical necessity constitute a
“contradiction based on clinical judgment or opinion alone,” AseraCare, 176 F. Supp. 3d at
1286.
Indeed, many of the cases that Boston Heart cites in support of its position that the
relator’s allegations regarding medical necessity should be dismissed as a matter of law due to
differences in clinical judgment are opinions issued at the summary judgment stage. See Wall,
2016 WL 3449833 at *16–21 (granting the defendants’ motion for summary judgment because
the relator failed to demonstrate falsity); AseraCare, 176 F. Supp. 3d at 1284 (granting summary
judgment in favor of the defendant after granting a new trial because the government “failed to
point the court to any admissible evidence to prove falsity”); Prabhu, 442 F. Supp. 2d at 1032,
1036 (granting the defendant’s motion for summary judgment because the government failed to
“establish falsity as a matter of law”). And the cases Boston Heart relies on regarding
20
differences in clinical judgment that were decided at the motion to dismiss stage are
distinguishable. First, in Harris, another member of this Court “agree[d] that mere disagreements
over scientific opinion, methodology, and judgments do not amount to claims under the [False
Claims Act],” but that language amounted to dicta because the Court denied the defendants’
motion to dismiss due to the fact that the government sufficiently alleged that the defendants
“knowingly upcoded by fraudulently claiming [ ] levels of services on the [predecessor form of
the CMS-1500] form that were higher than the [ ] levels of service they actually provided.” 275
F. Supp. 2d at 6. In Morton, the Tenth Circuit affirmed the district court’s dismissal of the
relators’ False Claims Act claims because the relators’ claim that medical care provided to a
premature infant was “therapeutic” rather than “custodial” was “inherently ambiguous.” 139 F.
App’x at 983–94. The Tenth Circuit, however, made clear that its holding was limited to the
facts of that case, noting that it was “not prepared to conclude that in all instances, merely
because the verification of a fact relies upon clinical medical judgments, . . . the fact cannot form
the basis of a [False Claims Act] claim.” Id. (noting that “not all clinical diagnoses and
characterizations of medical care are intrinsically ambiguous”). Here, the Court cannot
determine that the relator’s allegations regarding medical necessity necessarily involve a
difference of clinical judgment because to do so would require the Court to weigh the evidence,
which is inappropriate at this stage of the litigation. See United States v. Toyobo Co. Ltd., 811
F. Supp. 2d 37, 47–48 (D.D.C. 2011) (“Toyobo’s argument raises questions of fact that are more
appropriately resolved after discovery closes . . . . Thus, these factual issues will not be resolved
at the motion to dismiss stage of the litigation, where the plaintiff’s factual allegations are
accepted as true.”); but see United States ex rel. Polukoff v. St. Mark’s Hosp., No. 2:16-cv-
00304-JNP-EJF, 2017 WL 237615, at *11 (D. Utah Jan. 19, 2017) (granting the defendant’s
21
motion to dismiss a False Claims Act suit alleging that a doctor billed the government for a
medically unnecessary procedure because, upon application of Morton, the court found that the
medical necessity standard for that procedure “is inherently ambiguous, [and thus] these
representations cannot be objectively false”). Rather, treating the relator’s factual assertions as
true, as it must, the Court concludes that the relator has sufficiently alleged that Boston Heart’s
claims were false, based on her allegation that it sought payment for medically unnecessary
services.
c. Boston Heart’s Knowledge
The False Claims Act defines the knowledge element of a false claim or false statement
action as requiring a defendant to have “actual knowledge of the information” or to “act[] in
deliberate ignorance . . . [or] reckless disregard of the truth or falsity of the information. 31
U.S.C. § 3729(b)(1)(A). Importantly, the statutory definition of “knowledge” does not require
“proof of specific intent to defraud.” Id. § 3729(b)(1)(B). Accordingly, “[b]ecause Rule 9(b)
permits knowledge to be pled generally, there is no basis for dismissal for failure to plead
knowledge with particularity.” United States v. Honeywell Int’l, Inc., 798 F. Supp. 2d 12, 22
(D.D.C. 2011).
Boston Heart argues that the relator “makes no plausible allegation that Boston Heart
knowingly submitted false claims,” Def.’s Mem. at 24, because, according to Boston Heart, “a
laboratory has no obligation to question a physician’s medical judgment regarding whether
testing is necessary for any particular patient,” id. at 26. The relator argues in response that
Boston Heart does have “an independent duty to ensure the medical necessity of the tests it
performs and to maintain documentation evidencing the medical necessity.” Relator’s Opp’n at
26. The Court concludes, for the reasons discussed above, see Part III.A.1.b.3, that Boston Heart
22
has an independent obligation to certify that the tests for which it bills the government are
medically necessary.
Boston Heart also argues that the relator “fail[ed] to identify a single person who had the
requisite knowledge with respect to the allegations.” Def.’s Mem. at 37. The relator contends in
response that she specifically alleged that Boston Heart’s CEO and its Vice President of Payor
Innovation and Strategy were on notice that its tests were not medically necessary after the
relator met with them on August 15, 2014, see id. at 35; see also 2d Am. Compl. ¶¶ 128–30
(alleging that the relator met with Jeff Craven and Susan Hertzberg “on behalf of Boston Heart”),
and that “[a]t the very least, [the r]elator has sufficiently alleged that Boston Heart submitted
claims for tests in deliberate ignorance or with reckless disregard that they were not medically
necessary” given “clear industry guidelines,” id. at 36.
The Court agrees with the relator’s position that she has sufficiently pleaded that Boston
Heart knew that its tests were medically unnecessary because she alleges that Boston Heart
engaged in a “systematic and fraudulent scheme,” 2d Am. Compl. ¶ 6, in which “General
Practitioners and other non-cardiology physicians are [the] primary target” of Boston Heart’s
“false marketing statements as to the benefits of and scientific validation of its tests,
recommendations, purported leadership in the cardiac testing field[,] and structure of its claim
form,” id. ¶ 127. Specifically, the relator alleges that “Boston Heart encourages providers to
order these medically unnecessary tests through, inter alia, written marketing materials,” id.
¶ 132, and pre-printed test panel forms that “increase the number of tests that the laboratory
conducts” by “including a number of medically unnecessary tests,” id. ¶ 52; see also id. ¶ 94
(“Boston Heart promotes each of these genetic tests individually and through test panels that
group together only a few medically justified tests with many medically unnecessary tests,
23
including cardiac genetic tests, in order to increase the number of these medically unnecessary
and worthless tests . . . .”). Because Rule 9(b) allows knowledge to “be alleged generally,” Fed.
R. Civ. P. 9(b), and the District of Columbia Circuit has approved complaints alleging that a
corporation itself made false statements, see Heath, 791 F.3d at 125, the Court is satisfied that
the Second Amended Complaint sufficiently pleads that Boston Heart itself had a scheme to
knowingly target doctors who were not cardiac specialists and encourage them to order specific
tests that were medically unnecessary for patients with specific diagnoses. Accordingly, because
the relator adequately pleaded all three elements of a presentment claim violation under 31
U.S.C. § 3729(a)(1)(A), the Court declines to dismiss this claim.
2. The False Statements Allegation
Section 3729(a)(1)(B) of the False Claims Act creates liability for “any person
who . . . knowingly makes, uses, or causes to be made or used, a false record or statement
material to a false or fraudulent claim.” 31 U.S.C. § 3729(a)(1)(B). The purpose of the false
statements provision is to “prevent those who make false records or statements . . . from escaping
liability solely on the ground that they did not themselves prevent a claim for payment or
approval.” Morsell, 130 F. Supp. 3d at 122 (quoting Totten v. Bombardier Corp., 380 F.3d 488,
501 (D.C. Cir. 2004)). To establish a “false statements” violation, the relator must show that
“(1) the defendant made or used [or caused to be made or used] a ‘record or statement;’ (2) the
record or statement was false; (3) the defendant knew it to be false; and (4) the record or
statement was ‘material’ to a false or fraudulent claim” Id. (alterations in original) (footnote
omitted) (quoting United States ex rel. Hood v. Satory Global, Inc., 946 F. Supp. 2d 69, 85
(D.D.C. 2013).
24
Boston Heart argues that Count I of the Second Amended Complaint, in which the relator
alleges that Boston Heart made false statements in violation of 31 U.S.C. § 3729(a)(1)(B), should
be dismissed because the relator did not allege that Boston Heart’s certification that its laboratory
tests were medically necessary, which it made on the CMS-1500 form, constitute false
statements. Def.’s Reply at 21. Boston Heart further argues that if the Court does determine that
the relator made this allegation in the Second Amended Complaint, Boston Heart’s certification
of medical necessity on the CMS-1500 was not a false statement for the same reasons that
Boston Heart’s claims were not legally false under § 3729(a)(1)(A). Def.’s Reply at 21. The
relator argues in response that she did allege that Boston Heart made a false claim by certifying
on the CMS-1500 form that its services were medically necessary, Relator’s Opp’n at 39
(quoting 2d Am. Compl. ¶ 33), “[a]nd for all of the reasons stated above regarding falsity and
scienter with respect to a presentment claim under 31 U.S.C. § 3729(a)(1)(A), [she] has properly
ple[ade]d the elements of a ‘false statements’ claim,” id. at 40.
The Court agrees with the relator that she alleged that Boston Heart made false
statements when it certified that its tests were medically necessary on the CMS-1500 form. The
Second Amended Complaint states that Boston Heart “billed government insurers for these
medically unnecessary tests.” 2d Am. Compl. ¶ 6; see also id. ¶¶ 19 –22. The relator also
alleged that, “in submitting reimbursement claims form CMS-1500 to obtain reimbursement
from Medicare or other Federal health care programs, laboratories expressly certify that “that the
services shown on [the] form were medically indicated and necessary for the health of the
patient.” Id. ¶ 33 (alterations in original). Finally, the relator repeatedly alleges that the
laboratory tests at issue in this case are not medically necessary for patients with the four
diagnostic codes. See, e.g., id. ¶¶ 5, 8, 46, 55, 57, 70, 73, 96. Reading these allegations together,
25
and in light of the Court’s prior determination that the relator has adequately pleaded that Boston
Heart knew that its certifications regarding medical necessity were legally false, see Part
III.A.1.b-c, the Court concludes that the relator sufficiently alleged that Boston Heart made false
statements in conjunction with its claims for payment by certifying on CMS-1500 forms that its
tests for the patients with the four diagnostic codes were medically necessary. 9 Further, the
Court concludes that these allegedly false statements regarding medical necessity “hav[e] a
natural tendency to influence” the government’s payment, see 31 U.S.C. § 3729(b)(4), because
the government will not pay for medically unnecessary services, see Riley, 355 F.3d at 376 n.6
(noting that medical necessity is a condition for payment of Medicare claims). Accordingly,
because the relator adequately pleaded that Boston Heart made false statements, the Court
declines to dismiss this component of Count I.
B. Count II
Section 3729(a)(1)(G) of the False Claims Act, known as the “reverse false claims”
provision, creates liability for “any person who . . . knowingly makes, uses, or causes to be made
or used, a false record or statement material to an obligation to pay or transmit money or
property to the Government, or knowingly conceals or knowingly and improperly avoids or
decreases an obligation to . . . the Government.” 31 U.S.C. § 3729(a)(1)(G). “[A] typical false
claim action involves a defendant knowingly making a false statement in order to avoid having
9
Boston Heart also argues that the false statements violation alleged in Count I should be dismissed because it is not
sufficiently pleaded with particularity as required by Rule 9(b). See Def.’s Mem. at 39 (arguing that the relator
failed to identify when and where false statements were made, and who made them, and noting that its argument is
made “[f]or many of the same reasons discussed above” regarding the false claims violation). Because the Court has
already rejected Boston Heart’s particularity argument with regard to the false claims violation, see supra Part.
III.A.1.a, the Court concludes that the relator’s false statements allegations are sufficiently particular under Rule
9(b), see Hood, 946 F. Supp. 2d at 85–86 (rejecting the defendant’s particularity argument regarding the relator’s
false statements allegations because the Court had already rejected the “effectively identical” argument regarding
the relator’s false claims allegations).
26
to pay the government when payment is otherwise due.” Pencheng Si v. Laogai Research
Found., 71 F. Supp. 3d 73, 88 (D.D.C. 2014).
Boston Heart alleges that Count II should be dismissed because the relator has not “set
forth any facts supporting this conclusory assertion” that it violated the reverse false claims
provision. Def.’s Mem. at 32. The relator argues in response that “where there are sufficient
allegations of violations of the [False Claims Act] and of submitted false claims under Rules
12(b)(6) and 9(b), the allegations of failure to report overpayments and to repay under 31 U.S.C.
§ 3729(a)(1)(G) should be sustained under those Rules as well.” Relator’s Opp’n at 40.
Two members of this Court have determined that
[a] reverse false claim may not rest, however, on the argument “that an obligation
arose out of [the d]efendants’ concealment of their allegedly fraudulent activity,”
because “by this logic, just about any traditional false statement or presentment
action would give rise to a reverse false claim action; after all, presumably any false
statement actionable under sections 3729(a)(1)(A) or 3729(a)(1)(B) could
theoretically trigger an obligation to repay the fraudulently obtained money.”
United States ex rel. Scollick v. Narula, 215 F. Supp. 3d 26, 41 (D.D.C. 2016) (quoting
Pencheng Si, 71 F. Supp. 3d at 97); see also id. (“Like the Court in Pencheng Si, this Court finds
that the fraudulent actions alleged here do not trigger an obligation to repay the fraudulently
obtained money.”).
The Court agrees with its colleagues and therefore concludes that Count II must be
dismissed because the Second Amended Complaint does not plead any monetary obligation
owed by Boston Heart to the government independent of its “concealment of [its] allegedly
fraudulent activity.” Id. To the extent that the relator argues that Boston Heart had an obligation
to repay any government funds gained as a result of its allegedly fraudulent activity, that
argument “is the same as that which was rejected in Pencheng Si [and Scollick].” Id. at 42.
Accordingly, the Court will dismiss Count II.
27
C. Counts III Through XXXI
Boston Heart argues that because the relator “alleges no new facts in support of [the state
false claims act c]ounts and because they suffer from the same deficiencies as the [federal False
Claims Act counts], Counts III through XXXI should also be dismissed” for failing to meet the
federal pleading standards outlined above. See Def.’s Mem. at 41. In addition, Boston Heart
argues that Count XIV, brought on behalf of the State of Maryland, see 2d Am. Compl. ¶¶ 240–
47, should be dismissed because the Court’s August 24, 2016 Order dismissed with prejudice
“claims brought by the relator on behalf of the State of Maryland.” Def.’s Mem. at 42 (citing
Order at 1 (Aug. 24, 2016), ECF No. 29. The relator argues in response that she “has stated her
claims under the Federal [False Claims Act] and the various state false claims acts cited with the
requisite particularity.” Relator’s Opp’n at 45.
Regarding Count XIV, the Court agrees with Boston Heart that the Court already
dismissed any claim brought on behalf of Maryland. See Order at 1 (Aug. 24, 2016), ECF No.
29. As for the twenty-seven remaining state law claims, neither party has presented any
argument specific to any of those particular statutes independent from the arguments concerning
the federal claims. See Def.’s Mem. at 41; Relator’s Opp’n at 45. Accordingly, the Court
concludes that both parties agree that any count that is deficient under the federal statute is
similarly deficient under the analog state statutes. As a result, because the Court has concluded
that Count II, the federal “reverse false claims” allegation, must be dismissed, see supra at III.C,
the Court will grant Boston Heart’s motion to dismiss any state “reverse false claims” violations
alleged in Counts III through XXXI.
28
IV. CONCLUSION
For the foregoing reasons, the Court grants the relator’s motion for judicial notice and
grants in part and denies in part Boston Heart’s motion to dismiss the Second Amended
Complaint. Specifically, the Court grants the motion as to Count II, Count XIV, and any
“reverse false claims” violations alleged in Counts III through XXXI, but denies the motion in all
other respects.
SO ORDERED this 9th day of June, 2017. 10
REGGIE B. WALTON
United States District Judge
10
The Court will contemporaneously issue an Order consistent with this Memorandum Opinion.
29
United States Ex Rel. Groat v. Boston Heart Diagnostics Corp.
Court: District Court, District of Columbia
Date filed: 2017-06-09
Citations: 255 F. Supp. 3d 13
Copy CitationsCombined Opinion