United States District Court Dismisses False Claim Act Case

The United States District Court for the District of New Jersey recently gave us another look at the interplay of the False Claims Act (FCA) and the Medicare Secondary Payer Act (MSPA) in the case of United States ex rel. DiLello v. Hackensack Meridian Health. As we previously discussed here, False Act claims are nothing new in the Medicare Secondary Payer field. This case, however, gives us an interesting perspective on what happens when both Medicare and the primary payer pay for the same treatment.

In this qui tam action, Relator Keith DiLello sued numerous healthcare providers alleging violations of the False Claims Act and similar state laws arising from claims billed to Medicare and the primary payer following an automobile accident. At the time of the accident, Relator was covered by a no-fault personal injury protection (PIP) policy. Multiple treatments that Relator received related to the accident were billed to both Medicare and Relator’s PIP coverage. Because of these allegedly duplicate payments, Relator argued that the Defendant healthcare providers violated the FCA by billing CMS when other insurance was available and by failing to return payment to CMS after payment by the other insurance. Relator argues that CMS should never have been billed when there was PIP coverage and that he should not have to repay CMS from his settlement.

In assessing whether the elements of the False Claim Act violation were met, the Court started with an evaluation of falsity. As the Third Circuit noted, “FCA falsity simply asks whether the claim submitted to the government was reimbursable, based on the conditions for payment as set by the government.” The Court noted that the Medicare Secondary Payer Act plainly allows payment for the remainder of a service charge where payment for an item or service by a primary plan is less than the amount of the charge for such item or service and is not payment in full. Accordingly, the Court then looked to determine if the claims submitted by Defendants were false or fraudulent.

In determining whether each charge submitted was fraudulent, the Court analyzed the amount billed and paid for each date of service/provider at issue. In the case of the first two Defendants, the Court determined that when combined, the amounts that Medicare and the PIP policy paid totaled the fee schedule amount. The Court noted that the fact that these providers billed Medicare for the charges not paid by the primary payer was a reasonable explanation for the Medicare payments at issue. Accordingly, the Court determined that the facts did not establish any inference, let alone a “strong inference” that false claims were submitted. Therefore, the Court could not find that the Relator sufficiently pled falsity as to the first two providers.

As for the third Defendant, it was undisputed that the provider billed both Medicare and the PIP insurance $30,623 each for the same hospital stay. However, the timing of the bills and the payments were at issue and turned out to be a critical factor in determining whether the bill was fraudulent. The Defendant argued that the requested payment from Medicare was permissible, as the primary plan did not make prompt payment. In fact, the PIP policy did not pay for the treatment until more than seven months after the claimant was discharged from the hospital. Ultimately, the Court determined that because the PIP policy did not make payment until well past the 120-day prompt period noted in the CMS regulations, it was plausible that the Conditional Payment exception applied. Because Relator did not include any other facts or allegations that suggest CMS fraudulently paid the bill within the prompt pay period before the PIP policy paid, the allegations were determined to be insufficient to plead falsity as to the third Defendant.

As to the fourth Defendant, while Relator alleges that the provider billed both the PIP policy and Medicare, there was no allegation that Medicare actually paid the charge. Accordingly, because there was no loss suffered by CMS with respect to this charge, the fourth Defendant was dismissed.

After considering the falsity aspect, the Court went on to discuss materiality. To incur liability for submitting a false claim, that claim must be material to the government’s decision to pay. To meet this element, Relator was required to allege facts showing that the Government’s decision to pay would have been influenced by the knowledge that Defendants had not complied with secondary payer obligations under the MSPA. The Court found that the complaint did not allege that CMS would not have paid the claims at issue had it known that the PIP policy was the primary insurer and that it had paid a portion of some of the claims or the entire bill for the other. Accordingly, the materiality aspect was also left unsatisfied.

The Court also reviewed the Relator’s reverse False Claim Act and state law claim, however, neither claim was sufficient to proceed.

Given the above, the Defendant’s motions to dismiss were granted. However, Relator was given 30 days to cure the decencies, so this may not be the last of that we see of this case. As always, we will keep you apprised of any and all updates.