Tenth Circuit Says Intentionally Falsified Data is Not Material

By | Published On: February 11, 2020

On February 7, 2020, the U.S. Court of Appeals for the Tenth Circuit affirmed summary judgment for the defendant hospital in a False Claims Act (“FCA”) case premised on falsified data.  The case—United States, ex rel. Janssen v. Lawrence Memorial Hosp., 2020 BL 44705 (10th Cir. Feb. 07, 2020)— involved Lawrence Memorial Hospital’s (“LMH’s”) alleged engagement in two fraudulent schemes to receive higher Medicare reimbursement.  The relator alleged that LMH falsified the arrival times of its patients to increase Medicare reimbursement under certain pay-for-reporting and pay-for-performance programs the government uses to assess (and reward) quality of care.  By falsifying arrival times, and thereby creating the appearance of reduced patient wait times, LMH ostensibly received better quality scores and correspondingly higher Medicare reimbursement.  The relator further alleged that LMH’s management falsely certified compliance with the Deficit Reduction Act—specifically a requirement that its employee handbooks contain requisite detail about the False Claims Act.

Regarding the first allegation, the Court acknowledged, as did the district court, that “numerous pieces of evidence in the record support the contention that ‘LMH knowingly falsified patient records with the intent of causing abstracted ‘arrival times’ to be later than they would have been absent the falsification.’”   For example, interim forms and triage sheets were “discarded” so that recorded arrival times did not enter patients’ hospital records.  And a witness testified she was “trained and instructed to delay registration of patients until after the administration of electrocardiograms . . . in order to obtain Medicare compensation.”  The Court also noted that arrival time statistics further supported these allegations.

Notwithstanding this evidence suggesting that LMH cheated on its metrics with the intent to obtain higher, and potentially unwarranted, Medicare reimbursement, the Tenth Circuit determined LMH’s actions weren’t sufficient to trigger FCA liability.  The Court pointed to the “rigorous” and “demanding” materiality standard outlined in Univ. Health Servs., Inc. v. U.S. ex rel. Escobar, 136 S. Ct. 1989 (2016) and determined that the relator had failed to meet this standard.  Specifically, the Court found that the allegedly falsified data was only one of many data points that fed into the pay-for-reporting and pay-for-performance programs, and that the relator had not established how, or if, the falsified data changed LMH’s quality scores, and thus its Medicare reimbursement.  Additionally, the Court pointed to CMS’ inaction after learning of LMH’s conduct, noting that “[t]o this day, CMS has done nothing in response and continues to pay LMH’s Medicare claims.”   This, the Court found, “suggests [relator’s] allegation are immaterial.”  The Court also found that relator’s second theory, which relied on false certifications by LMH management, was a mere “regulatory compliance” issue that did not “translate into FCA liability.”

The opinion exemplifies the importance, post-Escobar, of establishing that the alleged misrepresentations “are material to the Government’s payment decision.”  In False Claims Act cases premised on falsified data—especially data that fuels performance or quality metrics—the successful case will need to establish that (1) the falsified data actually moved the needle on the relevant metrics; and (2) that the falsified metrics actually increased government payments received by the defendant.  This is not an easy task given the complicated nature of healthcare reimbursement in Medicare, Medicaid, and other publicly-funded benefit programs—much of which is based on dizzyingly complex provider-submitted data sets. Establishing materiality in such cases will undoubtedly require substantial expert work and testimony that ties falsified data or information to the “essence of the bargain” between the government and the defendant and thus to the government’s ultimate decision to pay.

The decision also highlights the importance of CMS’ action, or inaction, in the face of False Claims Act actions based on novel theories of data manipulation.  Here, the Court noted that the relator’s theory was the first of its kind and that CMS’ “behavior in this case suggests [relator’s] allegations are immaterial” given that the agency had neither taken action against LMH nor decreased or cut off payment “in the face of detailed allegations.”


Rosie Dawn Griffin is a senior associate in the firm’s Litigation and Government Investigations practice group and has years of experience working on False Claims Act matters. She can be reached at rgriffin@feldesmantucker.com or (202) 466-8960 if you have any questions.


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