Summary
The United States Court of Appeals for the Fourth Circuit affirmed the dismissal of Liesa Kyer’s False Claims Act qui tam complaint against Thomas Health System and related defendants. The court held that the complaint failed to plead with particularity that claims submitted to the government were false or that the alleged Stark Law and Anti-Kickback Statute violations established False Claims Act liability, and it also affirmed the denial of post-judgment leave to amend.
Topics
Practice areas
Questions Presented
- Whether Kyer pleaded with the particularity required by Federal Rule of Civil Procedure 9(b) that defendants presented false or fraudulent claims to the government.
- Whether the amended complaint plausibly alleged a Stark Law violation based on physician compensation allegedly tied to the volume or value of referrals.
- Whether the amended complaint plausibly alleged a violation of the Anti-Kickback Statute.
- Whether the conspiracy and reverse-false-claim counts stated claims when the underlying alleged claims were not adequately pleaded as false.
- Whether the district court abused its discretion by denying post-judgment vacatur and leave to amend.
Holdings
- A False Claims Act relator must plead the presentment of false claims with particularity by alleging either the time, place, and contents of the false representations and the identity of the person making them, or a pattern of conduct that necessarily resulted in submission of false claims. Kyer's claim tables and certifications did not establish how or whether the claims were fraudulent.
- To plead a Stark Law violation, a relator must plausibly allege a physician with a prohibited financial relationship made a referral for a designated health service and that a hospital submitted a Medicare claim for that service. Kyer did not plausibly allege that the physicians' compensation varied with or took into account the volume or value of hospital referrals.
- To plead an Anti-Kickback Statute violation, a relator must plausibly allege remuneration offered or paid by defendants with the knowing and willful intent that at least one purpose was to induce referrals for federally reimbursed items or services. Kyer did not adequately plead either the hospital-to-physician-group transfers or physician compensation and marketing stipends as prohibited inducements.
- The conspiracy count failed because the complaint did not adequately allege an underlying false claim or an agreement to make a materially false statement. The reverse-false-claim count also failed because it depended on the inadequately pleaded false claims.
- The district court did not abuse its discretion in denying vacatur and post-judgment leave to amend based on prejudice, delay, repeated failure to cure deficiencies, and the absence of a proposed amended complaint showing how amendment would cure the defects.
Key quotations
“Thus, to plead an Anti-Kickback Statute violation, Kyer must plausibly allege that (1) there was remuneration (2) offered or paid by the defendants, (3) with the requisite knowing-and-willful intent that at least one purpose of the remuneration was to induce referrals (4) for items or services payable under a federal healthcare program.” (24)
“When so much time, access, and guidance have failed to nudge the complaint along, the district court may reasonably put its foot down rather than permit another round because of yet another vague promise of clarity.” (30)
Factual background
Kyer, a former nurse at Thomas Memorial Hospital, alleged that Thomas Health entities and former executive Brian Ulery submitted Medicare claims tainted by violations of the Stark Law and Anti-Kickback Statute. The health system used provider-based billing, employed physicians through THS Physician Partners, and compensated some physicians using work relative value units, with operating deficits of the physician group covered through transfers from the parent or hospitals. Kyer relied on claim tables, compensation allegations, cash transfers, physician marketing stipends, and statements attributed to Ulery to plead False Claims Act violations.
Procedural history
Kyer filed the qui tam action under seal in November 2020. After the United States declined to intervene, Kyer filed an amended complaint in March 2024. The district court dismissed the amended complaint for failure to plead fraud with particularity under Rule 9(b), then denied Kyer's motions to vacate the judgment and for leave to amend. The Fourth Circuit affirmed both rulings.