• Tenth Circuit Rejects False Claims Act Theory Based on Annual Cost Report Certification of Compliance
  • October 26, 2008 | Author: Michael E. Paulhus
  • Law Firm: King & Spalding LLP - Atlanta Office
  • On October 2, 2008, the Tenth Circuit in United States ex Rel. Conner v. Salina Regional Health Center, Inc., Nos. 07-3033 & 07-3035, rejected claims by a physician relator, Brian Conner, that a hospital’s certification of compliance with Medicare laws and regulations on its annual cost report renders all claims submitted for reimbursement false for purposes of False Claims Act (“FCA”) liability if there is not total compliance with such regulations by the hospital. The Court of appeals affirmed the district court’s dismissal for failure to state a claim under the FCA because the government’s payment to the hospital was not conditioned on compliance with the statutes cited by Conner.

    Conner’s qui tam complaint alleged that the hospital violated Medicare’s conditions of participation for hospitals (42 C.F.R. § 482.1 et seq.); requirements for treatment of emergency medical conditions (42 U.S.C. § 1395dd); anti-discrimination provisions for federally assisted programs (42 U.S.C. § 2000d); and cited to the authority of the Secretary of Health and Human Services to exclude from Medicare participation providers that “fail to meet professional recognized standards of health care” (42 U.S.C. § 1320a-7(b)(6)(B)). Op. at 6-7 n.5. Conner argued that every claim submitted to the government was false because the hospital certified that “the services identified in this cost report were provided in compliance with such laws and regulations.” Id. at 13. The Tenth Circuit rejected this theory, noting that the certification “contains only general sweeping language and does not contain language that payment is conditioned on perfect compliance with any particular law or regulation.” Id. The court provided an extended discussion of hospital reimbursement by Medicare and outlined the “complex monitoring and remedial scheme” for ensuring compliance with conditions of participation. Id. at 15-21. The court concluded that “the annual cost report certification does not condition the government’s payment on perfect compliance with all underlying statutes and regulations, but rather seeks assurances that the provider continues to comply with the conditions of participation originally agreed upon.” Id. at 16. The alleged false certification was not actionable under the FCA because it could not meet the requirement of being “material to the government’s decision to pay out moneys to the claimant.” Id. at 14 (citation omitted).

    As the court noted, this is “the first circuit to squarely reject [relator’s] sweeping annual cost report false certification theory,” Id. at 20, and it is likely to have a significant impact on hospitals defending FCA suits based on false certification theories of liability.