apply the wrong standard when it was ruling on defendants motion to dismiss the rd amended complaint instead of accepting the allegations in the complaint as true and drawing any reasonable inferences in favor of or later the district court accepted whatever inference defend it put forward almost as fact and then what the district court did is that it seemed no no not yet we're at the very beginning and i think in order to understand some of the errors because there were there were quite a few it's important to talk a little briefly about the background of this case  alleging fraud in connection with defendants admittance into the critical access health program so what this is it's a it's a special limited medicare program that seeks to encourage hospitals to be operated in rural and remote areas places where probably there wouldn't be hospitals otherwise there's not a whole lot going on and so it does that by paying extra money in order you know to to reimburse the hospitals for operating in those locations the hospitals get one hundred and one percent of their actual costs which is something that doesn't happen under the regular medicare program there are basically two important requirements here and there are those are the location requirements and what it is is it has to be a hospital so that you have to actually have a hospital twenty four hour emergency etc but it has to be located in a rural area and it has to be a certain distance from the nearest acute care hospital so normally that is thirty five miles  or in what's relevant in this case in the case of mountainous terrain or in areas with only secondary roads available than that limit is reduced to fifteen miles now the statu shrouds so right you know it's of the it does that make any rational sense that you would care if it was secondary for fifteen miles the whole way and you would care if it was mountainous for fifteen miles the whole way but if it's fourteen miles mountainous and one secondary then different rules should apply to that isn't any rational basis for that distinction well that's what the that's how the law is written but i don't think we get there i don't even think we get there because the definition if you didn't interpret ing a rule we certainly would look at whether or not it makes any sense at all i've just explained to me why from any conceivable policy point of view that would be a rational reading that you would care about fifteen miles of one and fifteen miles of the other but not fourteen of one and one of the other explain to me why that would should make a difference well because the idea is to try and keep the program limited it isn't to reach every last hospital in the rural area and that's because it is so very expensive but more importantly what we point out in our papers is that we don't get to the mixing and matching because there were no properly designated miles of mountainous terrain so there is nothing to add to the secondary before you go on to that point or fall upon judge cause question has h h s taken a position on the mixing and matching question i believe so because the reason that they feel i say shit out of you got to be really clear are they taking a really clear position or you just think that the the better reading of their manuals and their guidelines is that you can't mix and match their manuals instruct that hospital or regional office is supposed to subtract unless they're secondary roads they don't say that at all and you could you could you could also interpreted to mean you subtract non qualifying miles except that it doesn't say that it doesn't say that and it does give an example it would give you numbers if you just came back and said we think that you can mix and match but you violation of chevron step one would with this court with this court be raised have to have to overrule h h s if it took that position in a regulation or just agree with you on that point if we thought that it was ambiguous and that h h s could take the position and h h s and if we thought that h h s hasn't yet taken an absolutely clear position then does that does that do anything for the scienter here but if the hospital hospital is looking at this and if the hospital had a conversation says you know i'm not sure we really got fifteen miles of mountainous terrain and i'm not sure we got fifteen miles of secondary of mountainous terrain under the definition they don't have any miles of mountainous terrain so they the really the only the only definition they can look to the secondary roads of the a question from judge  any portion of highway eighteen was mountainous terrain and so by the time you have had the june two thousand and seventeen concert report you now have a different definition something that tightened the the definition for mountainous terrain well i don't know that that is the only thing that i would add i mean i think that we allege sufficient facts showing showing scienter and i also think that we allege the question facts showing materiality you have anything that you would add to a th amendment complaint on either of those points that stand right here i cannot think of anything else but what do you have to what do you have to to prove in order to prove materiality to prove yeah well what we have to prove is that the government is taking a signal change the government actually considers this to be an important matter in order for it to make its payment decision so that yes but it's our it's our contention that the rural office it's basically a group that relies on the hospitals it relies on on people to be honest to tell them exactly how the roads work in that particular area but if they're certified when they certify there's sort of find somebody check the box is that what they're sort of i believe so we believe there certifying that we believe that there certifying if there is a statement about here's the address here's how you get to out that that's hungama trickle can just be that if the regional office is certifying this but they're willing to do it just based on sort of you know if you're in the ballpark we know the lake arrowhead up in the mountains so it's got to be a long way because well we don't believe that that's how they are certifying that we have we believe that the way that the certifying it is if they are given a certain route if they are looking at google maps for example in the google maps to take you up highway eighteen d into you get to highway one hundred and seventy three and if you look at it that way they might look at that and accept that whatever representation the hospital makes in order to determine whether or not you actually meet the exception you have to go up there and drive the streets you have to see what the they say and the weight she conceded that when it when it talked about when he did it steady and it said that the data set that they were using couldn't tell them exactly whether or not certain paula fight a secondary roads for example and that was one of the problems that they had and the union has you have a problem list this hospital is one that was noncompliant it did not and do you know what you know i actually looked at the data for this hospital it doesn't look that they did but what the i g report does say in the very beginning is it says that it it couldn't determine which roads were secondary and so it basically decided that any state road would be considered secondary just for the purposes of their analysis which was to discuss necessary providers and if the court does not have any questions i'd like to reserve the rest of my time for rebuttal thank you  heard from or later is counseled that the hospitals the critical access hospitals in this program are giving the regional office certain routes to evaluate certain addresses  that that there's a reliance on the critical access hospital well that's not the regulatory scheme at all and i think that's critical for every aspect of this case the leaders council cannot point to anything on that in fact if you look at the excerpts of record and you look at some of the guidance this has been issued on this you have the critical access re certification evaluation by the regional office and that's at two x or the record one hundred and forty eight and so there's a checklist there where the regional office is directed to drive the road to consult google maps to look at the routes to go obtain a letter if they think that there's a problem with the distance requirements and this happens both at the regional office on the initial make the determination as to whether it meets the location requirements the distance requirements c m s is reid's office makes that determination mountains doesn't it does determination based on representations you submit to them will your honor what representations were submitted that relate or has pointed out but no in the actual representations actual him the hospital qualifies as a critical access hospital ca is that the only place that they have to sort of find check the box correct there's no there's no subcategory that says are you either thirty five miles from another hospital or fifteen miles by mountainous or or secondary road no your honor it does not ask do you qualify as a critical access hospital because you yourself have told a route or until then what does what does the regional office do with this with this service self serving cation issued in two thousand and fifteen it's actually quite clear that the regional office goes through and before they do anything before they do the certifications like the joint commission certification surveys where they see if the hospital meets all the other hospital requirements or before they check to see if the hospital truly offers twenty four hour emergency care the regional office looks at that distance and they do that  is that there is some type of reliance and so if if the relator had given you that same or any mountains community hospital district or any of the other critical access hospitals that this very same later is suing on the very same theory with absolutely no knowledge or connection of those hospitals there are at least four that we know of and they're likely more under seal so but but if that relator had come forward and said look mountain's lied about which route the regional office should evaluate well and i think maybe maybe we could be here  but he didn't do that and he can't do that because critical access hospitals don't give a route for evaluation this is soley a regional office the terminations and relator once to make it into the critical access hospitals requirement to come forth and i guess hire their own road engine ears at sakura to look at their to look at their distance every single year so we don't have a case where they do that on their own or do they do that in response to your assertion that you need it and then they have to check it i mean did they did they just think if you did you represent that you met this requirement no no there is no such representation at any point at any point except for except that they qualify impatient rehab facility are you are you this sorry that it's really a demographic check the box because c m s is gathering these costs were born and you were not designated as a c h correct r some earlier point and then you became certified yes two thousand how did it occur that you st became certified in two thousand the mountains mountains and all other critical access hospitals and this is not in front of this court on this record you apply for something for a designation that is not a representation that you meet the ignition criteria roger and under this entire regulatory scheme it's the regional offices job to  st evaluate that and we have the haitian form in the record now we do know but you know so i'm fifty six if i apply for social security and they give it to me because they they say i'm sixty five i can keep the money i that's right and understand how there isn't a representation if you asked for the certification why isn't there an implied representation in the application that you meet the criteria i didn't create to form your  for this then i think there's an implied representation that i sat as i meet the criteria that's why i want you to or your order get this to me if you believe there is an implied representation by mountains in two thousand and two when they when they initially applied for this and see a massive valuated their application well at that time actually have anything in the record you don't have to have you seen this form this application form no ok so you actually don't know what's on that for thousand and two so relator hasn't done that it and i'd like to point out the relator also is on their rd or th route that should have been evaluated if the relator was the regional office for c m s housing or c enter in this category when the regional office you know we don't know what route they evaluated we don't provide them that route none of the critical hospitals provide them direct the route to evaluate their guidance says that the regional office has primary responsibility for all these matters and as we can see related themselves cannot even settle on which route to evaluate that relator also makes a lot of noise here i would say about well there's no proper or mountainous terrain designation in fact in the record it's cal caltrans for a sponsor though i g and says yeah we do maintain h t m l s mountainous terrain designation i'm going to go back to what you said about you know it's their burden on the form and show the representation i'm looking at your one hundred and twenty six and it's paragraph thirty of the thirty minute complain it says after they found out about the benefits it says on  about may th two thousand and two the hospital applied for c h status by making the affirmative representation that it messed the distance requirement that it go down further specifically mountain c e o james haas answered the following question under the heading of compliance with federal criteria infirmity of quote is your facility more than a rd and then it lists out the criteria so how can you say that they've not alleged that in two thousand and two when you saw the  designation that they didn't you didn't make a representation that you met the criteria well in two thousand and two your honor the only guidance out there was mountainous terrain or secondary roads question was how can you say as you just said that they did not allege in their complaint that you asserted that you met these criteria in two thousand and two when you applied doesn't what i just read to you make that but your honor back to two thousand and two or back to today the guidance is very clear that it's the regional offices responsibility to make these determinations it's the regional offices that is consult google maps if there's a problem to make some type of determination to seek a letter if they think there's ambiguity as to whether there's mountainous terrain etc it's not a hospital your honor it's not this critical abscess hospital and not any of the other critical access hospitals that are being sued on this exact same theri right now and we do have a real rule health care crisis in this country right now and frankly critical access hospitals mountains included should not be having to defend against something that really has no no no sounding in fraud that's what a false claims act action is about and so here we don't know which route the regional office about you waited that's not our job it's never been our job it's never been any critical access hospitals and i think when you when you start going through all the different elements with everything that has occurred in the critical access hospital program it's impossible due to find materiality it's impossible to find c enter think about materiality we have a natural experiment in materiality in two thousand thirteen though i g issued a report saying most critical access hospitals would not be able to reenroll if if they were recertified today and they double down on the regional offices going out and surveying the hospitals there are requirements and there's never been any allegation there's never been anything from the regional office or from c m s saying that mounds has not met these distance requirements and said we have a relator nd guessing the regional office that's not the basis for the false claims act or with this again back to materiality what's happened what's happened since two thousand and thirteen after though i g found widespread  noncompliance nothing's happened your are now what has happened and what has been pointed out is that c m s has demonstrated that it actually does prevent hospitals that it thinks don't meet the standards from enrolling is critical access hospitals and those are the cases cited by relat god there's a few things to address and as i do i do have the application and if i were to amend i could attach that application to the complaint and that question about whether or not you meet the distance requirement is asked and that box is checked and the numbers are are part of that question the miles that are required in the paragraph thirty of your current rent a complaint that i am but what i didn't do  attach it is an exhibit to the complaint but that that could be done and so what i'm going to address several of the points that he makes but what i wanted to point out is that the only way for defendant to defeat the complaint at this stage is to make a number of factual representations different representations and to ask the court to accept those factual representations as true and to then make reasonable inferences based on those representations and that is what a court cannot do so for example one of the things that that defendant said is  defendant can make that that statement that it's an additional factual statement that he's making there's no support for it the oh i g report as we pointed out in the brief talked about the necessary provider exception to the statute so that isn't noncompliance the necessary providers don't have to comply and so what it what the report points out is how expensive this program is and the fact that so many hospitals that don't wouldn't meet the requirements for this for this program if they had to reapply shows that perhaps this necessary provider exception is being abused and it  regional office is responsible for served on well the regional office is responsible for certifying but what the defendant asked the court to infer is that there are zero statements from from mountains in connection with that that the still a critical access hospital which we submit requires a hospital in order to check that box because there's hundreds of thousands of dollars that they get from checking that box possibly a one million and that they have to be aware of what the requirements are and have to be aware of whether or not they qualify and one of the cases that we cite in the brief it's the thomson case in texas that talks about how if they if they understand it they've made an application and it has been reviewed by the regional office and nothing really has changed the roads haven't changed since last year we didn't put a superhighway into lake arrowhead in the last year then they can think in some way they may be able to rely on in this i think this goes perhaps but certainly to scienter but probably also to to materiality and if there's if there's if there's an intermediary here on behalf of the government that is responsible for investigating and verifying these things which has been doing this year after year after year and there hasn't been any material change in the nature of the roads in the interim can they rely on that doesn't go to the question of scienter and perhaps to materiality it goes to the definition there was a different definition in two thousand and two there wasn't a definition so they checked the box but there is a definition there was one in november two thousand and five when it's a temper two thousand and seven in the one in april rd team and one mountains mountains knows from its experience with the sole community hospital is that when it when the policies change they could find themselves suddenly outside of the program and it's their duty to be aware of the law to look at the law and when they are making these representations and getting a lot of money because of it hundreds of thousands of dollars we multiply that by the one thousand three hundred dollars critical access hospitals that is extremely expensive the shows that they have that what we're showing is a complete reckless and what relator knew because he worked there is that they purpose avoided checking on laws having a compliance department and making sure that they were it would be sufficient for you to show that a general obligation was right that's one of the that's one of the three ways that you is either actual knowledge it is deliberate ignorance it's a reckless disregard for the truth or falsity of the statement they can't just keep checking the box and just you know refusing to to look at it deeper because they're afraid they might find out that they don't comply thank you couch thank you the case just argued to be submitted