Opinion ID: 3013742
Heading Depth: 1
Heading Rank: 1

Heading: Premier Participant purchased more than

Text: the total number of implants it had In his first amended complaint, purchased the year before, each additional which is at issue in this appeal, Schmidt implant could be purchased for a reduced purported to allege FCA violations against price of $200. In addition, the contract both Zimmer and M ercy Health Systems allegedly provided that each Premier (“Mercy”).1 In particular, Schmidt alleged Participant would receive a 2% bonus on that Zimmer entered into a contract with implant purchases if the Premier Participant met the pre-set market share and volume purchase commitments. 1 Finally, the contract allegedly provided for Mercy is a Pennsylvania corporation additional incentives “targeted to offset the that owns and operates hospitals and other costs associated with com petitive health care facilities, including Mercy conversion.” Each Premier Participant Fitzgerald Hospital, Mercy Hospital of would forfeit the foregoing rewards if they Philadelphia a/k/a M isericordia Hospital, failed to meet the commitments pre-set by Mercy Haverford Hospital, Mercy Zimmer. Community Hospital, Mercy Catholic Medical Center, and Mercy Suburban Schmidt further alleged that the Hospital. 2 rewards provided under the contract were paid to Mercy and the other Premier Participants “in cash or cash equivalents,” Furthermore, if services and that these payments are a classic identified by this report example of “kickbacks.” Moreover, it was were provided or procured alleged that Zimmer and Mercy induced through the payment directly certain of its physicians and orthopedic or indirectly of a kickback departments to assist in meeting Zimmer’s or were otherwise illegal, prescribed volume and market share levels criminal, civil and by sharing with them all or part of the administrative action, fines, rewards received from Zimmer under the and/or imprisonment may contract. result. J.A. at 35-36. The form also requires the According to Schmidt, each following certification by an officer or Premier Participant reported its costs administrator of the health care provider: associated with the purchase of orthopedic I hereby certify that I have implants in annual cost reports that were read the above statement submitted to the United States Government and that I have examined the under the Medicare program. The accompanying electronically reporting form, United States Department filed or manually submitted of Health and Human Services’s Form cost report and the Balance HCFA-2552, required a health care Sheet and Statement of provider to certify that the costs being Revenue and Expenses submitted were true and correct, and that prepared by . . . (Provider the provider had complied with all laws Name(s) and Number(s)) for and regulations regarding the provision of the cost reporting period health care services.2 Such certification, beginning . . . and ending . . . and that to the best of my knowledge and belief it is a 2 Specifically, Form HCFA-2552, true, correct and complete according to the first amended complaint, statement prepared from the provides that: books and records of the M i s r e p r e s e n ta t i o n or provider in accordance with falsification of any applic able instruc tion s, information contained in except as noted. I further this cost report may be certify that I am familiar punishable by criminal, civil with the laws and and administrative action, regulations regarding the fine and/or imprisonment provision of health care under federal law. services and that the 3 Schmidt alleged, was a cond ition alleged to have violated § 1320a-7b(b)(1) precedent for Premier Participants to by knowingly and wilfully soliciting or obtain Medicare funds from the federal receiving such unlawful remunerations, government and to retain Medicare funds and Zimmer was alleged to have violated advanced by the federal government. § 1320a-7b(b)(2) by knowingly and Schmidt alleged that, despite these wilfully paying or offering to pay such requirements, the cost reports submitted by unlawful remunerations.4 Both Mercy Mercy and the other Premier Participants did not disclose the rewards that they allegedly received from Zimmer under the 4 42 U.S.C. § 1320a-7b(b) provides, in contract.3 Schmidt further alleged that relevant part, that: Mercy and the other Premier Participants (1) whoever knowingly and also falsely certified on their cost reports willfully solicits or receives that they were in compliance with all laws any remuneration (including and regulations regarding the provision of any kickback, bribe, or health care services. rebate) directly or indirectly, overtly or covertly, in cash According to Schmidt, the or in kind – remunerations paid by Zimmer to Mercy (A) in return for referring an and the other Premier Participants under individual to a person for the contract were made in violation of the the furnishing or arranging federal Anti-Kickback Act, 42 U.S.C. § for the furnishing of any 1320a-7b. In particular, Mercy was item or service for which payment may be made in services identified in whole or in part under a this cost report were Federal health care program, provided in or c o m p l i a nc e wit h (B) in return for purchasing, such laws and l e a s in g , or d e r in g, o r regulations. arranging for or J.A. at 36. recommending purchasing, leasing, or ordering any 3 With the exception of Mercy, good, facility, service, or Schmidt’s first amended complaint did not item for which payment may identify any other Premier Participant who be made in whole or in part was alleged to have filed a false Form under a Federal health care HCFA-2552 cost report. Nor did the program, complaint indicate the number of cost shall be guilty of a felony reports that were allegedly submitted by and upon conviction thereof, Mercy or any other Premier Participant. shall be fined not more than 4 and Zimmer were alleged to have violated § 1320a-7b(a)(3) by failing to disclose to the federal government the allegedly $ 2 5 , 0 0 0 o r unlawful remunerations.5 imprisoned for not more than five years, or both. and (2). (2) whoever knowingly and 5 willfully offers or pays any 42 U.S.C.§ 1320a-7b(a)(3) provides, in remuneration (including any relevant part, that: kickback, bribe, or rebate) Whoever . . . having directly or indirectly, overtly knowledge of the or covertly, in cash or in occurrence of any event kind to any person to induce affecting (A) his initial or such person – continued right to any (A) to refer an individual to [benefit or payment under a a person for the furnishing Federal health care program o r arrang ing for th e (as defined in subsection (f) furnishing of any item or of this section)], or (B) the service for which payment initial or continued right to may be made in whole or in any such benefit or payment part under a Federal health of any other individual in care program, or whose behalf he has applied (B) to purchase, lease, order, for or is receiving such or arrange for or benefit or payment, conceals recommend purchasing, or fails to disclose such leasing, or ordering any event with an intent good, facility, service, or fraudulently to secure such item for which payment may benefit or payment either in be made in whole or in part a greater amount or quantity under a Federal health care than is due or when no such program, benefit or payment is shall be guilty of a felony authorized, . . . shall (i) in and upon conviction thereof, the case of such a statement, shall be fined not more than representation, concealment, $25,000 or imprisoned for failure, or conversion by any not more than five years, or person in connection with both. the furnishing (by that In addition, § 1320a-7b(b)(3) provides person) of items or services certain exceptions to, and safe harbors for, for which payment is or may acts within the scope of § 1320a-7b(b)(1) be made under the program, 5 Schmidt’s first amended complaint complaint alleged that there was a also alleged that both Mercy and Zimmer “financial relationship” between Mercy violated the Anti-Self-Referral Act (also and certain physicians that worked at known as the “Stark Act”), 42 U.S.C. § Mercy’s facilities, and that such a 1395nn, by presenting, or causing to be relationship also existed between Mercy presented, Medicare reimbursement claims and Zimmer. Despite these alleged for services furnished pursuant to financial relationships, according to the prohibited referrals.6 Specifically, the complaint, Mercy nonetheless unlawfully sought Medicare reimbursements for services furnished under prohibited be guilty of a felony referrals. and upon conviction thereof fined not Finally, based on these alleged more than $25,000 or violations of the Anti-Kickback Act and imprisoned for not the Stark Act, Schmidt alleged that more than five years Mercy’s certifications of compliance with or both, or (ii) in the federal health care law, contained in its case of such a annual cost reports submitted to the federal s t a t e m e n t , representation, concealment, failure, conversion, or 1395nn(a)(1)(A), a physician may not refer provision of counsel Medicare patients to an entity for or assistance by any “designated health services,” including other person , be inpatient and outpatient hospital services, guilty of a if the referring physician has a nonexempt misdemeanor and “financial relationship” with such entity. u p o n c o n v ic t i o n Under § 1395nn(a)(1)(B), the entity is thereof fined not prohibited from presenting or causing to more than $10,000 or be presented a Medicare claim for services imprisoned for not furnished pursuant to a prohibited referral. more than one year, With certain exceptions, “financial or both. relationship” is defined as (1) an ownership or investment interest in the 6 The Stark Act prohibits the entity, or (2) a compensation arrangement presentation of a claim to Medicare for a with the entity. 42 U.S.C. § 1395nn(a)(2). designated health service by an entity See generally United States ex rel. where the service was furnished pursuant Thompson v. Columbia/HCA Healthcare to a prohibited referral by a physician that Corp., 125 F.3d 899, 901-02 (5th Cir. has a financial relationship with the entity. 1997) (describing the operation of the See 42 U.S.C. § 1395nn(a). Under § Stark Act). 6 government on Form HCFA-2552, were it caused Mercy to submit false. Mercy’s false certifications, an allegedly false cost according to the complaint, constituted report. But the Amended violations of three provisions of the FCA, Complaint does not allege rendering both Mercy and Zimmer liable: Zimmer reviewed, (1) 31 U.S.C. § 3729(a)(1), which approved, or received copies prohibits knowingly presenting, or causing of Mercy’s cost reports or to be presented, to an officer or employee p a r t i c i p a t e d i n t h e ir of the United States Government a false preparation; nor does it claim for payment or approval, (2) § allege Zimmer certified the 3729(a)(2), which prohibits knowingly truthfulness of Mercy’s cost making, using and/or causing to be made reports. or used a false record, claim, or statement to get a false claim paid or approved by the Courts have found a party federal government, and (3) § 3729(a)(7), caused the submission of a barring false certifications intended to false claim by another party conceal, avoid, or decrease an obligation only where the nonto refund Medicare payments made by the submitting party purposely federal government. and intentionally duped the submitting party to submit Both Mercy and Zimmer responded the false claim. to the complaint by filing a motion to dismiss. Zimmer’s motion to dismiss was J.A. at 6-7 (citing United States v. granted with prejudice; Mercy’s motion Bornstein, 423 U.S. 303 (1976)). was granted without prejudice and Schmidt was allowed to file a second II. amended complaint against it. Ultimately, Schmidt’s claim against Mercy was We exercise plenary review over settled, and he filed this appeal of the the District Court’s dismissal of a claim order granting Zimmer’s motion to for failure to state a cause of action under dismiss. Fed. R. Civ. P. 12(b)(6). Pinker v. Roche Holdings Ltd., 292 F.3d 361, 374 n.7 (3d The District Court explained its Cir. 2002). 7 “A court should not dismiss a decision to dismiss Schmidt’s FCA claim against Zimmer in the following manner: 7 The District Court had jurisdiction It is undisputed that Zimmer over this case under 28 U.S.C. § 1331 and never submitted any cost 31 U.S.C. § 3732, which specifically reports: Zimmer could be confers jurisdiction for actions brought liable under the FCA only if under the FCA. We have jurisdiction over 7 complaint under Rule 12(b)(6) for failure muster under the Anti-Kickback and Stark to state a claim for relief ‘unless it appears Acts. We therefore conclude that these beyond doubt that the plaintiff can prove issues cannot be resolved in the context of no set of facts in support of his claims a motion to dismiss. Accordingly, like the which would entitle him to relief.’” Pryor District Court, we assume without v. National Collegiate Athletic Ass’n, 288 deciding for purposes of this appeal that F.3d 548, 559 (3d Cir. 2002) (quoting Zimmer’s marketing program violated Conley v. Gibson, 355 U.S. 41, 45-46 both Acts. (1957)). “In evaluating the propriety of the dismissal, we accept all factual Zimmer insists that the Antiallegations as true, construe the complaint Kickback Act provides a safe harbor for in the light most favorable to the plaintiff, marketing programs offering discounts to and determine whether, under any health care providers and that its program reasonable reading of the complaint, the was designed to take advantage of this safe plaintiff may be entitled to relief.” Pinker, harbor. See 42 U.S.C. § 1320a292 F.3d at 374 n.7 (citing Colburn v. 7b(b)(3)(A); 42 C.F.R. § 1001.952(h). Upper Darby Township, 838 F.2d 663, When the record is fully developed, this 665-66 (3d Cir.1988)). may turn out to be the case, but the complaint alleged that the rewards given to