On 28 August 2019 the US government filed a brief in opposition to Sutter Health's 14 June 2019 motion to dismiss the Department of Justice's (DOJ's) complaint in intervention in a False Claims Act suit alleging that Sutter knowingly submitted and caused the submission of unsupported diagnosis codes for Medicare Advantage organisation patients in order to inflate Medicare reimbursements. On the same day, the relator, Kathy Ormsby, filed a similar brief in opposition to Sutter's motion to dismiss (for further details please see "Sutter Health files motion to dismiss, criticising DOJ's outdated False Claims Act theories in Medicare Advantage case" and "DOJ files complaint in intervention in Medicare Advantage case against Sutter Health").
The government's brief opposing Sutter's motion argued that the United States' complaint set out "well-pleaded facts sufficient to show violations of the False Claims Act" because it included "detailed allegations, which the Court must accept as true" that satisfied the falsity and scienter elements of "direct and reverse [False Claims Act] violations". Specifically, the DOJ pointed to allegations that Sutter had engineered a campaign to pad risk scores and ignored audit results, physician warnings and "other red flags". Further, the DOJ argued that there was no materiality issue because the United States alleged that the Centre for Medicare and Medicaid Services (CMS) "would have taken action up to refusal of payment" if it had known the facts. As support, the DOJ cited similar allegations in United States ex rel Swoben v United Healthcare Ins Co,(1) which the Ninth Circuit considered and "found a cognizable legal theory".
Importantly, the DOJ argued that Sutter's reliance on UnitedHealthcare Insurance Co v Azar(2) was misplaced. In Azar, the US District Court for the District of Columbia vacated a portion of CMS's 2014 final overpayment rule applicable to the Medicare Advantage programme because, among other things, the rule failed to account for known errors in the data (from traditional Medicare) used to calculate payments to Medicare Advantage plans, which the court found to violate the statutory mandate of "actuarial equivalence" (for further information see "Court vacates Medicare Advantage overpayment rule and curtails DOJ's pursuit of False Claims Act damages"). The DOJ argued that the actuarial equivalence arguments that Sutter advanced in its motion were meritless because Azar is non-binding and "concerns an administrative rule that applies different standards, most notably a different knowledge standard, than the [False Claims Act]". The DOJ also argued that, unlike in Azar, the United States was seeking to recover damages for alleged fraud and Azar itself disavowed the argument that Medicare Advantage participants are permitted to knowingly and recklessly submit erroneous diagnosis codes.
Further, the DOJ argued that Sutter had misstated the holding in United States ex rel Poehling v UnitedHealth Grp, Inc.(3) In Poehling, the court found that, in light of the decision in Azar and the lack of any binding authority in the Ninth Circuit, it could not conclude that the federal regulations unambiguously required UnitedHealth to delete unsupported diagnosis codes. The DOJ argued that the court in Poehling "only found ambiguity" about whether the Medicare Advantage organisation must clearly delete known unsupported diagnoses codes and "never found that the [Medicare Advantage organisation] was free to maintain unsupported diagnoses". Instead, the DOJ argued that the Ninth Circuit's decision in Swoben, which held that diagnosis codes must be supported by properly documented medical records, was the precedent.
The DOJ's brief reinforces its increasingly aggressive enforcement of the Medicare Advantage space under the False Claims Act and provides important insights into the DOJ's strategy for distinguishing its cases from Azar and Poehling.
A copy of the DOJ's brief can be found here.
Endnotes
(1) 848 F.3d 1161 (9th Cir 2016).
(2) 330 F Supp 3d 173 (DDC 2018).
(3) 2019 WL 2353125 (CD Cal 28 March 2019).
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