10th Circuit Agrees that Inaccurate Patient Arrival Time Data Reporting to Medicare Did Not Meet False Claims Act Materiality Requirement

The Tenth Circuit recently affirmed a district court’s grant of summary judgment to the defending Hospital in an action under the False Claims Act (FCA) because the relator could not show that reporting allegedly inaccurate patient arrival time data to Medicare was material under the FCA.

The underlying case involved three programs that Medicare uses to determine reimbursement rates for reporting hospitals.  Under the first two programs, hospitals are awarded an “annual increase” in the amount they are reimbursed for “timely and accurately reporting” of certain factors, which include patient arrival times.  Hospitals that fail to properly report data receive a reduction in their reimbursement rate.  Under the third program, Medicare ranks participating hospitals based on a group of factors, including patient arrival time, and pays out a withheld percentage of funds each year based on the ranking. 

The relator alleged that the defendant Hospital delayed the registration of patients and reported inaccurate and false arrival time data to receive higher Medicare reimbursements through the reimbursement programs. The relator also alleged that the Hospital made false certifications that the Hospital complied with the Deficit Reduction Act (DRA), which requires a specific discussion of the FCA in employee handbooks. 

The key question in the case was whether the relator’s allegations were sufficient to meet the materiality requirement of the FCA.  To address this question, the Tenth Circuit relied on a list of non-exhaustive factors provided by the Supreme Court’s decision in Universal Health Services, Inc. v. United States ex rel. Escobar.  These factors include “(1) whether the Government consistently refuses to pay similar claims based on noncompliance with the provision at issue, or whether the Government continues to pay claims despite knowledge of the noncompliance; (2) whether the noncompliance goes to the ‘very essence of the bargain’ or is only ‘minor or insubstantial;’ and (3) whether the Government has expressly identified a provision as a condition of payment.”

First, the Court of Appeals found the practice of continuously paying the Hospital’s claims even though the claims did not comply with Medicare’s regulatory scheme “demonstrate[d] [the] immateriality” of the inaccurate patient data. The court relied heavily on the fact that despite years of litigation and an investigation by Medicare into the allegations brought by the relator, Medicare continued to pay the Hospital’s claims for reimbursement. 

The court also found that the alleged inaccurate reporting of patient arrival times was “minor or insubstantial.”  First, the court identified that Medicare has an administrative scheme to bring hospitals into compliance.  Moreover, because less than 16% of inpatient records and less than 5% of outpatient records were allegedly inaccurate based on the relator’s allegations, the court held that the relator did not show “sufficiently widespread deficiencies” in reporting under the programs such that the inaccuracies would affect Medicare’s decision to pay claims.  The court further found that patient arrival time data made up only one factor for the programs’ rate determinations, and that the relator did not show how inaccuracies in that factor would impact Medicare’s ultimate rate determination.  Finally, the court determined that the relator did not allege a “cover-up,” which may have allowed an inference of materiality. 

The relator argued that certain attestations in Medicare claim forms related to the accuracy of data reporting was evidence of a cover-up.  The Tenth Circuit disagreed, finding that “these boilerplate compliance documents are part of the complex Medicare regulatory system and fail to elevate potentially less-than-perfect compliance to FCA liability.”  In addition, the court observed that none of the deposition testimony used by the relator identified certifications where the party had knowledge of the inaccuracies sufficient to show a cover-up.  Thus, the Tenth Circuit determined the allegations did not “go to the essence of the bargain” between the Hospital and Medicare.

Finally, assuming the statutory scheme required accurate reporting, the Tenth Circuit held that there was not sufficient evidence to establish materiality because “generic regulatory requirements fall short of establishing the materiality of perfect compliance therewith, especially when encased in a complex regulatory system with separate administrative remedies.”  Hence, the Court of Appeals found the district court correctly granted summary judgment for the defendant on this issue.

Turning to the DRA-based FCA claim, the Tenth Circuit noted that under the DRA, participating parties must include a “specific discussion” and provide “detailed information about the False Claims Act.”  In this case, the Hospital made yearly certifications that the Hospital was in compliance with the DRA as a condition of receiving Medicare funds.  Despite these yearly certifications, the relator alleged that the Hospital’s “new associate” handbook did not have a detailed discussion of the False Claims Act.  The court found that the relator showed “limited compliance issues, not a wholesale failure” of compliance since a complex regulatory scheme existed to ensure compliance, and because the handbooks did contain references to other employee resources with information related to the FCA.  Ultimately, the court found that the relator failed to establish that noncompliance with the DRA would impact Medicare’s decision to pay, thereby failing to establish materiality under the FCA.  Thus, the Court of Appeals affirmed the district court’s grant of summary judgment on this issue as well.