United States ex rel. Polukoff v. St. Mark's Hospital

          Appeal from the United States District Court for the District of Utah (D.C. No. 2:16-CV-00304-JNP-EJF)

          Tejinder Singh, Goldstein & Russell, P.C., Bethesda, Maryland (Thomas C. Goldstein, Goldstein & Russell, P.C., Bethesda, Maryland; Rand P. Nolen, George M. Fleming, Sylvia Davidow, Gregory D. Brown, David Hobbs, and Jessica A. Kasischke, Fleming, Nolen & Jez, LLP, Houston, Texas, with him on the briefs), appearing for Appellant.

          J. Scott Ballenger, Latham & Watkins LLP, Washington DC (Alexandra P. Shechtel, Latham & Watkins LLP, Washington DC; Katherine A. Lauer, Latham & Watkins LLP, San Diego, California; Andrew A. Warth, W. David Bridgers, and Wells Trompeter, Waller Lansden Dortch & Davis LLP, Nashville, Tennessee, with him on the brief), appearing for Appellee St. Mark's Hospital.

          Matthew L. Knowles, McDermott Will & Emery LLP, Boston, Massachusetts (M. Miller Baker, McDermott Will & Emery LLP, Washington, DC; Shamis Beckley and Alexander J. Kritikos, McDermott Will & Emery LLP, Boston, Massachusetts; Alan C. Bradshaw, Sammi V. Anderson, and Christopher M. Glauser, Manning Curtis Bradshaw & Bednar, PLLC, Salt Lake City, Utah; Daniel S. Reinberg and Asher D. Funk, Polsinelli PC, Chicago, Illinois, with him on the brief), appearing for Appellee Intermountain Healthcare, Inc. and Intermountain Medical Center.

          Blaine J. Benard, Holland & Hart LLP, Salt Lake City, Utah, and Gregory Goldberg, Holland & Hart LLP, Denver, Colorado, on the brief for Appellees Sherman Sorensen M.D., and Sorensen Cardiology Group.

          Sarah Carroll, Attorney, Appellate Staff, Civil Division, United States Department of Justice, Washington, DC (Chad A. Readler, Acting Assistant Attorney General, United States Department of Justice, Washington, DC; John W. Huber, United States Attorney for the District of Utah, Salt Lake City, Utah; Douglas N. Letter and Michael S. Raab, Attorneys, Appellate Staff, Civil Division, United States Department of Justice, Washington, DC), appearing for Intervenor and Amicus Curiae United States of America.

          Before TYMKOVICH, Chief Judge, BRISCOE and HARTZ, Circuit Judges.

          BRISCOE, CIRCUIT JUDGE.

         This is a qui tam action alleging violations of the False Claims Act ("FCA"), 31 U.S.C. §§ 3729-33, involving fraudulent reimbursements under the Medicare Act, 42 U.S.C. §§ 1395-1395ccc. Plaintiff Gerald Polukoff, M.D., is a doctor who worked with Defendant Sherman Sorensen, M.D. After observing some of Dr. Sorensen's medical practices, Dr. Polukoff brought this FCA action, on behalf of the United States, against Dr. Sorensen and the two hospitals where Dr. Sorensen worked (collectively, "Defendants"). Dr. Polukoff alleges Dr. Sorensen performed thousands of unnecessary heart surgeries and received reimbursement through the Medicare Act by fraudulently certifying that the surgeries were medically necessary. Dr. Polukoff further alleges the hospitals where Dr. Sorensen worked were complicit in and profited from Dr. Sorensen's fraud. The district court granted Defendants' motions to dismiss, reasoning that a medical judgment cannot be false under the FCA. Exercising jurisdiction pursuant to 28 U.S.C. § 1291, we REVERSE and REMAND for further proceedings.

         I

         A. Statutory Background

         "The FCA 'covers all fraudulent attempts to cause the government to pay out sums of money.'" United States ex rel. Conner v. Salina Regional Health Ctr., Inc., 543 F.3d 1211, 1217 (10th Cir. 2008) (quoting United States ex rel. Boothe v. Sun Healthcare Grp., Inc., 496 F.3d 1169, 1172 (10th Cir. 2007)). Specifically, any person who:

(A) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval;

(B) knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim;

(C) conspires to commit a violation of subparagraph (A), (B), (D), (E), (F), or (G); [or]

(G) 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 pay or transmit money or property to the Government, is liable to the United States Government for a civil penalty [and treble damages].

31 U.S.C. § 3729(a)(1). The FCA defines the "knowingly" scienter requirement as follows:

(A) mean[s] that a person, with respect to information-

(i) has actual knowledge of the information;

(ii) acts in deliberate ignorance of the truth or falsity of the information; or

(iii) acts in reckless disregard of the truth or falsity of the information; and (B) require[s] no proof of specific intent to defraud . . . .

Id. § 3729(b)(1).

         There are two options to remedy a violation of the FCA. "First, the Government itself may bring a civil action against the alleged false claimant." Vt. Agency of Nat. Res. v. United States ex rel. Stevens, 529 U.S. 765, 769 (2000). "Second, as is relevant here, a private person (the relator) may bring a qui tam civil action 'for the person and for the United States Government' against the alleged false claimant, 'in the name of the Government.'" Id. (quoting 31 U.S.C. § 3730(b)(1)). If a relator files a qui tam civil action, the government may intervene and take over the case. 31 U.S.C. § 3730(b)(2). "If the government elects not to proceed with the action," the relator "shall have the right to conduct the action." Id. § 3730(c)(3). Depending on the specific circumstances of the qui tam suit, the government and the relator divide any proceeds derived from the suit. Id. § 3730(d).

         The FCA is applicable to many statutes that provide for federal reimbursement of expenses. One such statute is the Medicare Act, ^[1] which imposes requirements for reimbursement of medical expenses. As relevant here, the Medicare Act states that "no payment may be made . . . for any expenses incurred for items or services" that "are not 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) (emphasis added). Physicians and medical providers who seek reimbursement under the Medicare Act must "certify the necessity of the services and, in some instances, recertify the continued need for those services." 42 C.F.R. 424.10(a) (Oct. 1, 2013) (emphasis added); see also 42 U.S.C. §§ 1395f(a), 1395n(a) (listing the various certifications).

         The Secretary of Health and Human Services decides "whether a particular medical service is 'reasonable and necessary' . . . by promulgating a generally applicable rule or by allowing individual adjudication." Heckler v. Ringer, 466 U.S. 602, 617 (1984) (emphasis added). The former course involves a "national coverage determination" that announces "whether or not a particular item or service is covered nationally." 42 U.S.C. § 1395ff(f)(1)(B). In the absence of a national coverage determination, local Medicare contractors may issue a "local coverage determination" that announces "whether or not a particular item or service is covered" by that contractor. Id. § 1395ff(f)(2)(B).

         The latter course allows "contractors [to] make individual claim determinations, even in the absence of [a national or local coverage determination], . . . based on the individual's particular factual situation." 68 Fed. Reg. 63, 692, 63, 693 (Nov. 7, 2003). In making an individual claim determination about whether to reimburse a medical provider, "[c]ontractors shall consider a service to be reasonable and necessary if the contractor determines that the service is: [(1)] Safe and effective; [(2)] Not experimental or investigational . . .; and [(3)] Appropriate." Centers for Medicare & Medicaid Services ("CMS"), ^[2] Medicare Program Integrity Manual § 13.5.1 (2015) (describing local coverage determinations); see also id. § 13.3 (incorporating § 13.5.1's standards for individual claim determinations). One factor that contractors consider when deciding whether a service is "appropriate" is whether it is "[f]urnished in accordance with accepted standards of medical practice for the diagnosis or treatment of the patient's condition or to improve the function of a malformed body member." Id. § 13.5.1.

         B. Factual Background

         "At the motion-to-dismiss stage, we must accept all the well-pleaded allegations of the complaint as true and must construe them in the light most favorable to the plaintiff." Albers v. Bd. of Cty. Comm'rs of Jefferson Cty., 771 F.3d 697, 700 (10th Cir. 2014) (quotation omitted). As a result, we rely on Dr. Polukoff's amended complaint.^[3]

         1. The PFO closure procedure

         This case involves two very similar cardiac conditions: patent foramen ovale ("PFO") and atrial septal defect ("ASD"). Both PFOs and ASDs involve a hole between the upper two chambers of the heart, but they have different causes. Most people are born with a PFO, as it helps blood circulate throughout the heart while in the womb, but for 75% of the population, the hole closes soon after birth. ASDs, on the other hand, are an abnormality. Regardless, both PFOs and ASDs allow blood to flow in the wrong direction within the upper chambers of the heart. In rare cases, they can lead to a variety of dangerous complications, including stroke. Physicians can "close" ASDs and PFOs through ASD and PFO closures (collectively, "PFO closures"), a percutaneous surgical procedure involving cardiac catheterization. In layman's terms, physicians insert a thin tube into a blood vessel to access the heart, rather than performing open heart surgery.

         The amended complaint makes specific reference to industry guidelines published by the American Heart Association and American Stroke Association (the "AHA/ASA Guidelines") in 2006 and 2011, related to PFO closures.^[4] The 2006 AHA/ASA Guidelines observed that "[s]tudies have found an association between PFO and cryptogenic stroke."^[5] App'x at 2077. They noted "conflicting reports concerning the safety and efficacy of surgical PFO closure" to treat cryptogenic stroke, but after reviewing several studies, also noted that each reported "no major complications." Id. The 2006 AHA/ASA Guidelines concluded: "Insufficient data exist to make a recommendation about PFO closures in patients with a first stroke and a PFO. PFO closure may be considered for patients with recurrent cryptogenic stroke despite optimal medical therapy . . . ." Id. at 2079. In other words, the 2006 AHA/ASA Guidelines advised that (1) for patients with two or more cryptogenic strokes, PFO closures may be considered; (2) for patients ...