False Claims Act • Kickbacks • Medicare

Hericks v. Lincare Inc., PICS Case No. 14-0507 (E.D. Pa. March 25, 2014) Sanchez, J. (30 pages).

Where a plaintiff alleging submission of fraudulent Medicare claims by a durable medical equipment company failed to allege with particularity the facts constituting the fraud and failed to connect the alleged fraud to the Medicare submissions, the court ruled that the plaintiff failed to plead with particularity as required by Fed.R.Civ.P. 9(b). Granted.

Plaintiff Margaret Hericks, former employee of defendant Lincare, brought this action on behalf of the U.S. for violations of the False Claims Act, arising from alleged kickbacks from Lincare to doctors through its Care Check program, by which Lincare employees induced physicians and patients to generate referrals for medical equipment and service by Lincare, which would be reimbursed by Medicare.

Hericks alleged that Lincare violated the False Claims Act by having made kickbacks to healthcare beneficiaries, providers, and employees with intent to obtain referrals to supply oxygen equipment to be reimbursed by Medicare, by having caused the submission of false claims based on noncompliance with Medicare regulations forbidding DME suppliers from participating in qualifying oxygen tests, and by having made kickbacks to healthcare beneficiaries, providers, and employees with intent to induce physicians to switch their patients from MDIs not covered by Medicare to UD medications covered by Medicare.

The court noted that, pursuant to Rule 9(b) a claim alleging fraud must state with particularity the circumstances constituting fraud, although malice, intent and knowledge could be alleged generally.

As to Hericks’ first claim, the court held that her allegations of kickbacks consisting to free services to physicians were not accompanied with the particular circumstances necessary for the claim to meet the standards of Rule 9(b). The court found that Hericks never described the specific nature of the kickbacks, or specified particular circumstances in which those kickbacks were provided. The court also determined that some of the alleged kickbacks were not actually kickbacks at all. The court also found that Hericks failed to plead that Lincare knew or should have known that its Medicare claims were false or fraudulent.

The court further held that Hericks failed to plead her second claim with particularity as to how the alleged free home oxygen tests violated Medicare regulations. The court noted that Hericks alleged that after Lincare performed a home oxygen test, it would recommend that the patient’s physician order the required independent testing facility test in order to qualify the prescription for home oxygen for Medicare reimbursement. The court also found that Hericks failed to plead facts regarding specific instances of fraud, or Lincare’s knowledge that its activity was prohibited by regulation.

Finally, the court dismissed Hericks’ claim that Lincare violated the FCA by providing kickbacks for switching patients to Medicare-covered medication. It found that Hericks only alleged acts during her term of employment from May 2004 to May 2005. However, the court noted that the statute of limitations for FCA claims was six years, which meant that her complaint should have been filed by May 2011. Hericks’ complaint was not filed until March 2013, and the court ruled that these claims did not relate back to her original complaint filed in January 2007. Therefore, the court dismissed Hericks’ third claim for untimeliness.