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From Health Law Daily, May 14, 2015

Suit based on expired drug billing sufficiently states FCA claim

By Mary Damitio, J.D.

A nurse’s allegations against her former hospital employer for submitting false Medicare and Medi-Cal bills were sufficient to state a claim under the False Claims Act (FCA) (31 U.S.C. §§3729-3733) and the California False Claims Act (Cal. Gov. Code Sec. 12650), a district court found in denying the employer’s motion to dismiss. The nurse was not required to state how she learned of all the facts contained in her complaint in order to survive a motion to dismiss, but it was sufficient that she set forth enough specific details to put the defendants on notice of the claims (United States v. Marshall Medical Center, May 11, 2015, Mendez, J.).

Colleen Herren worked as Clinical Nursing Director for Specialty Clinics at Marshall Medical Center in California from 2010 until 2011. At the center, physicians and other staff performed a variety of services that included chemotherapy infusions. Within weeks of beginning her employment, she noticed problems with the center’s practices, including lack of oversight, double billing, and billing for expired and contaminated chemotherapy drugs. She was subsequently terminated from her position, a move that she alleged was retaliatory based upon her attempts to notify her supervisors of the problems. As a result, she brought suit against the Marshall Medical Center, the Marshall Foundation for Community Health, and the physicians and their medical practice (El Dorado Hematology and Medical Oncology), alleging that the center knowingly double-billed Medicare and Medi-Cal, billed for services never rendered, and also billed for contaminated or expired chemotherapy drugs. She also alleged that the hospital retaliated against her for raising concerns over the practices by terminating her employment. Herren’s claims were brought under the False Claims Act (31 U.S.C. §§3729-3733) and the California False Claims Act (Cal. Gov. Code Sec. 12650) for retaliation and improper Medicare and Medi-Cal billing.

Blood Transfusions. Herren sufficiently set forth facts to state a claim based upon the blood transfusion services that were allegedly never provided, the court held. The pleadings rules do not require her complaint to detail how Herren learned of every fact. Factual basis does not mean personal knowledge, and a plaintiff can survive a motion to dismiss based on stating facts rather than circumstances. Herren sufficiently alleged that the doctors billed under certain codes that required 25-40 minute patient visits when the doctors did not visit the patients and therefore the billed claims were false. She also alleged that the doctors were fully aware that the billing was false and were determined to continue submitting false claims.

Rural hospital exemption. The court did not need to determine whether the hospital was “small” or “rural” and thus exempt from the CMS physician supervision requirements because the hospital did not provide any evidence that it applied for the designation or received the designation.

Direct supervision requirement. The question of whether the defendants were required to have a physician supervise the services that were billed to Medicare is a question of fact that cannot be decided on a motion to dismiss, the court stated. The direct supervision requirement had been a condition of payment since 2000, and thus any claims that pre-2010 violations were not actionable are without merit and not a basis for dismissing the complaint.

False Claims Act. Pursuant to the FCA, an individual is liable 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; [or] (C) conspires to commit a violation of subparagraph (A) [or] (B)” (31 U.S.C. § 3729(1)). Herren adequately pleaded that the physicians knowingly violated billing rules because as participants in Medicare and Medi-Cal they were charged with understanding proper billing procedures. The allegations stated that the physicians were made aware of their colleagues’ concerns over the billing practices and opted to ignore them,

SDVs. Herren’s complaint provided sufficient details of the doctors’ double billing for drugs in single-dose vials (“SDVs”) and thus provides adequate notice to the defendants. Also, her allegations relating to the physician’s use of expired portions of SDVs were sufficient to state a claim that the SDV billing procedures violated CMS billing rules. The manner in which the physicians billed and whether the drugs were expired was a question to be resolved a later stage.

Expired drugs. Herren based her claims on 42 U.S.C. §§ 1395n; 1395y(a)(1)(A), and 22 C.C.R section 51305, which states that drugs must be “reasonable and necessary” to be covered by Medicare (42 U.S.C. § 1395y(a)(1)(A)), which also means that the drugs must be safe and effective. Herren’s complaint alleged that expired drugs were mixed with viable drugs, making them contaminated and unsafe, and therefore, billing for them was improper. As a result, the physician’s alleged administration of unsafe drugs was in violation of Medicare billing requirements.

The case is No. 2:12-cv-00098.

Attorneys: George F. Allen (Law Office of George F. Allen), Louisa O. Kirakosian (Waters Kraus & Paul) and Matthew E. Kreiser, PHV (Joseph, Greenwald and Laake, P.A.) for Colleen Herren. Patric Hooper (Hooper, Lundy & Bookman) for Marshall Medical Center. Kathryn Ellen Doi (Hanson Bridgett LLP) for El Dorado Hematology & Medical Oncology II, Inc.

Companies: Marshall Medical Center; El Dorado Hematology & Medical Oncology II, Inc.

MainStory: TopStory QuiTamNews FCANews BillingNews CaliforniaNews

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