United States District Court, D. Massachusetts
UNITED STATES OF AMERICA ex rel. JAMES F. ALLEN, Plaintiffs,
ALERE HOME MONITORING, INC., ROCHE HEALTH SOLUTIONS, INC., ADVANCED CARDIO SERVICES, CARDIOLINK CORP., MDINR, LLC, PATIENT HOME MONITORING, INC., TAMBRA INVESTMENTS, INC., and U.S. HEALTHCARE SUPPLY, LLC, Defendants.
MEMORANDUM AND ORDER
B. Saris Chief United States District Judge.
False Claims Act ("FCA") case pertains to Medicare
reimbursements for at-home blood-testing kits. The kits allow
patients on blood-thinning medication to monitor their
blood's clotting time at home rather than traveling to a
hospital or clinic. The eight Defendants all supply these
kits to patients and get reimbursed through Medicare.
However, Defendants only provide kits to patients who test
two to four times per month. According to Relator, this
business practice of requiring two to four monthly tests as a
precondition to providing kits induces doctors to order
medically unnecessary tests. Thus, Defendants run afoul of
the FCA because they get reimbursed by Medicare for tests
they know are not medically necessary.
hearing and careful consideration, the motions to dismiss by
Roche Health Solutions, Inc. ("Roche") (Dkt. No.
57), U.S. Healthcare Supply, LLC ("USHS") (Dkt. No.
87), Patient Home Monitoring, Inc. ("PHM") (Dkt.
No. 91), and mdlNR, LLC ("mdlNR") (Dkt. No. 93) are
ALLOWED. The motions by Alere Home
Monitoring, Inc. ("Alere") (Dkt. No. 95),
Cardiolink Corp. ("Cardiolink") (Dkt. No. 97), and
Advanced Cardio Services ("ACS") (Dkt. No. 85) are
ALLOWED IN PART and
DENIED IN PART. The Court takes no
action on the motion to dismiss filed by Tambra Investments,
Inc. ("Tambra") (Dkt. No. 101), as the case against
it has been stayed. Dkt. No. 136.
following facts are drawn from the First Amended Complaint
(Dkt. No. 17) ("FAC") and attached documents, with
all reasonable inferences drawn in favor of Relator.
Allegations focused on specific Defendants are discussed
Relator, Warfarin, and Blood
James Allen is a 70-year-old former Marine who lives in
western New York. FAC ¶¶ 14, 32, 39. Since 2010,
Allen has taken the blood-thinner warfarin to treat atrial
fibrillation and depressed left ventricle function.
See FAC ¶¶ 33, 73. Because warfarin
affects the blood's ability to clot, patients taking it
must regularly monitor how long it takes for their blood to
clot to ensure it remains within an acceptable
range. FAC ¶¶ 74-78. The correct range
varies based on the condition being treated and each
patient's reaction to specific doses of the drug. FAC
¶¶ 76-78. Therefore, testing is typically more
frequent at the outset of a warfarin regimen. FAC ¶ 78.
Once a proper dosage is determined and the patient
stabilizes, testing can be less frequent, often once a month.
FAC ¶¶ 78, 82.
blood testing for warfarin patients was done via blood draw
at an outpatient clinic. FAC ¶ 85. In the 1980s,
companies began to develop portable machines and accompanying
supplies that allowed patients to do this testing at home.
FAC ¶ 86. In 2002, the Centers for Medicare and Medicaid
Services ("CMS") began allowing those companies to
seek Medicare reimbursements for at-home testing, but only
for very narrow categories of patients. FAC ¶ 87.
2008, after lobbying by a group that included Defendant Roche
and a predecessor to Defendant Alere, CMS expanded its
coverage for at-home testing. FAC ¶¶ 89-91. The new
CMS determination permitted reimbursement for at-home testing
for additional categories of patients and for up to one test
per week. FAC ¶¶ 91, 93. In 2008, CMS paid a total
of $5.5 million to all home-testing providers. FAC ¶ 8.
In 2015, CMS paid over $116 million for at-home testing to
the named Defendants, who received over 90 percent CMS's
payments for such testing that year. FAC ¶ 7.
Allen initially began his warfarin treatment in 2010, he
tested at a Department of Veterans Affairs facility near his
home in Buffalo, New York. FAC ¶ 34. In 2013, Allen
transferred his care to Dr. Brian Riegel at Buffalo
Cardiology & Pulmonary Associates ("BCPA"). FAC
¶ 35. BCPA has a clinic dedicated to blood testing for
warfarin patients, and this is where Allen would go for his
tests. See FAC ¶¶ 36, 39. The clinic uses
an algorithm to determine the appropriate testing frequency
for each patient. FAC ¶ 36. Once a patient has received
two consecutive in-range results, the patient is considered
stable, and the algorithm directs testing once every four
weeks. FAC ¶ 38. Relator remained in this system until
2014. See FAC ¶ 39.
makes several general allegations against all eight
Defendants. He alleges that once a patient's
blood-clotting time has stabilized, testing more often than
monthly is rarely necessary. FAC ¶¶ 80-83. But
Defendants allegedly coerce patients and their doctors to
agree to weekly testing (the maximum for which Medicare will
reimburse) or to two tests per month without regard to
whether those frequencies are medically necessary. FAC
¶¶ 109-16. They pressure doctors chiefly by
removing less-frequent testing options from their pre-printed
enrollment forms. FAC ¶¶ 118-21, 125-27. They also
allegedly encourage the ordering of more tests than necessary
through marketing material. FAC ¶¶ 128-29. For
example, some marketing material references studies intended
to lead patients and doctors to believe that more-frequent
testing will lead to better health outcomes. FAC ¶¶
130-31. Relator questions the validity and accuracy of these
studies. FAC ¶¶ 130-41.
also challenges the test-result reporting protocols of Alere,
ACS, PHM, and mdlNR. These companies' enrollment forms
permit the prescribing physician to choose to receive reports
(1) only monthly, or (2) only if the results are
out-of-range. FAC ¶ 251. According to Allen, any
Medicare reimbursement for a test whose result is not
communicated to the prescribing physician violates Healthcare
Common Procedure Coding System ("HCPCS") Billing
Code GO249. FAC ¶¶ 252-53. Such reimbursements
constitute payment for services not rendered. FAC ¶ 253.
filed his complaint under seal in June 2016. Dkt. No. 1. He
filed the FAC in June 2017. Dkt. No. 17. The FAC alleges five
counts against all eight Defendants:
- Count I: presentment theory, 31 U.S.C. § 3729(a) (1)
- Count II: false statements theory, 31 U.S.C. §
- Count III: reverse false claims theory, 31 U.S.C. §
- Count IV: payment under mistake of fact; and Count V:
United States declined to intervene in November 2017, and the
case was unsealed. Dkt. Nos. 21-22. Each of the eight
Defendants have filed motions to dismiss. Dkt. Nos. 57, 85,
87, 91, 93, 95, 97, 101. Allen opposed the motions in a joint
filing. Dkt. No. 127. Before the hearing on the motions, the
Court stayed the case against Tambra, per the parties'
request. Dkt. No. 136.
False Claims Act
relies on three provisions of the FCA that target three
distinct types of false claims. First, under the presentment
theory, the FCA "penalizes those who present, or cause
to be presented, 'false or fraudulent claim[s] for
payment or approval' to the federal government."
Hagerty ex rel. United States v. Cyberonics,
Inc., 844 F.3d 26, 31 (1st Cir. 2016) (alteration in
original) (quoting 31 U.S.C. § 3729(a)(1)(A)). Under
this theory, fraud "has two components: the defendant
must submit or cause the submission of a claim for payment to
the government, and the claim for payment must itself be
false or fraudulent." Id. Second, under a false
statements theory, the FCA punishes those who knowingly make
or use "a false record or statement material to a false
or fraudulent claim." 31 U.S.C. § 3729(a)(1)(B).
Third, under a reverse false claims theory, the FCA imposes
liability on those who knowingly conceal or improperly avoid
an obligation to pay or transmit money or property to the
government. Id. § 3729(a) (1) (G) .
other circuits, the First Circuit has "rejected rigid
divisions between factual and legal falsity, and express and
implied certification, noting that the text of the FCA does
not make such distinctions." United States ex rel.
Jones v. Brigham & Women's Hosp., 678 F.3d 72,
85 (1st Cir. 2012). Instead, this Circuit "take[s] a
broad view of what may constitute a false or fraudulent
statement." Id. The scope of the FCA, then, is
circumscribed primarily by "'strict enforcement of
[its] materiality and scienter requirements.'"
Id. at 85-86 (quoting United States ex rel.
Hutcheson v. Blackstone Med., Inc., 647 F.3d 377, 388
(1st Cir. 2011)).
[FCA] defines 'material' to mean 'having a
natural tendency to influence, or be capable of influencing,
the payment or receipt of money or property.'"
Universal Health Servs., Inc. v. United States, 136
S.Ct. 1989, 1996 (2016) (quoting 31 U.S.C. § 3729(b)
(4)) . "The materiality standard is demanding."
Id. at 2003. "A misrepresentation cannot be
deemed material merely because the Government designates
compliance with a particular statutory, regulatory, or
contractual requirement as a condition of payment."
Id. Nor is this element satisfied "where
noncompliance is minor or insubstantial." Id.
[P]roof of materiality can include, but is not necessarily
limited to, evidence that the defendant knows that the
Government consistently refuses to pay claims in the mine run
of cases based on noncompliance with the particular
statutory, regulatory, or contractual requirement.
Conversely, if the Government pays a particular claim in full
despite its actual knowledge that certain requirements were
violated, that is very strong evidence that those
requirements are not material. Or, if the Government
regularly pays a particular type of claim in full despite
actual knowledge that certain requirements were violated, and
has signaled no change in position, that is strong evidence
that the requirements are not material.
Id. at 2003-04.
[FCA's] scienter requirement defines 'knowing'
and 'knowingly' to mean that a person has 'actual
knowledge of the information,' 'acts in deliberate
ignorance of the truth or falsity of the information,' or
'acts in reckless disregard of the truth or falsity of
the information.'" Id. at 1996 (quoting 31
U.S.C. § 3729(b)(1)(A)).
Medicare Rules and Regulations
statute, Medicare only covers tests 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. § l395y(a)(1)(A). By regulation,
all diagnostic tests "must be ordered by the physician
who is treating the beneficiary, that is, the physician who
furnishes a consultation or treats a beneficiary for a
specific medical problem and who uses the results in the
management of the beneficiary's specific medical
problem." 42 C.F.R. § 410.32(a). "Tests not
ordered by the physician who is treating the beneficiary are
not reasonable and necessary." Id.
in order to be eligible for Medicare coverage, the at-home
testing program described above must be prescribed by a
treating physician as provided in 42 C.F.R. § 410.32(a)
. See CMS, National Coverage Determination Manual,
Chapter 1, Part 3, § 190.11 ("NCD §
190.11"). Four other criteria must also be met: (1) the
patient must have been anticoagulated for at least three
months prior to use of the home-testing device; (2) the
patient must undergo a face-to-face educational program on
anticoagulation management and must have demonstrated the
correct use of the device prior to its use in the home; (3)
the patient continues to correctly use the device; and (4)
self- testing with the device should not occur more
frequently than once a week. Id.
reimbursements for at-home testing use at least three billing
codes, including HCPCS Billing Codes GO248, GO249, and G0250.
See CMS Manual System, Pub. 100-04, Transmittal
1562, July 25, 2008, Attachment: Business Requirements, at 2.
The FAC focuses primarily on Billing Code GO249, which
permits companies to bill Medicare for the "[p]rovision
of test materials and equipment for home [blood coagulation]
monitoring of [a] patient with either mechanical heart
valve(s), chronic atrial fibrillation, or venous
thromboembolism who meets Medicare coverage criteria."
Id. It "includes [the] provision of materials
for use in the home and reporting of test results to [a]
physician; not occurring more frequently than once a
Standard of Review
analyzing whether a complaint has stated a claim sufficient
to satisfy Rule 12(b)(6) of the Federal Rules of Civil
Procedure, the Court must set aside any statements that are
merely conclusory and examine the factual allegations to
determine if there exists a plausible claim upon which relief
may be granted. Foley v. Wells Fargo Bank, N.A., 772
F.3d 63, 75 (1st Cir. 2014). The Court must draw reasonable
inferences in the pleader's favor. Id.
FCA claims sound in fraud, Rule 9(b) of the Federal Rules of
Civil Procedure requires relators to allege their claims with
particularity -- that is, with the "who, what, when,
where, and how of the alleged fraud." Hagerty,
844 F.3d at 31 (quoting United States ex rel. Ge v.
Takeda Pharm. Co., 737 F.3d 116, 123 (1st Cir. 2013)).
That said, the First Circuit has "repeatedly emphasized
that there is no checklist of mandatory requirements ...