Opinion ID: 873494
Heading Depth: 2
Heading Rank: 2

Heading: The FCA Allegations Against BSC

Text: On October 16, 2008, Elaine Bennett filed a qui tam action against BSC in the United States District Court for the own.' Rost, 507 F.3d at 727 n.4 (quoting Rockwell Int'l Corp. v. United States, 549 U.S. 457, 463 n.2 (2007)). 4 BSC acquired Guidant in 2006. For simplicity, we refer to Guidant and BSC as BSC throughout this opinion. -4- District of Maryland.5 In that action, Bennett, a former employee of BSC, claimed that between 2003 and early October 2008, BSC engaged in an unlawful kickback scheme within its Cardiac Rhythm Management (CRM) division to induce physicians and hospitals to use BSC's pacemakers, internal cardiac defibrillators, and cardiac resynchronization therapy (CRT), thereby increasing the company's market share of these devices. BSC has allegedly offered various types of renumeration to hospitals and physicians in exchange for their use of BSC's devices in violation of the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b, and has caused physicians who received kickbacks to make false claims for reimbursement under Medicare in violation of the FCA. BSC furthers its alleged kickback scheme in a number of ways: first, by provid[ing] doctors and hospitals with kickbacks in the form of follow-up medical services in exchange for the providers' use of BSC's cardiac rhythm devices; second, by induc[ing] doctors and hospitals to bill for medical services and procedures they d[id] not perform; third, by requir[ing] BSC sales personnel to provide medical care in the absence of a licensed physician or staff member; fourth, by improperly conduct[ing] Medicare billing for physicians and hospitals through non-licensed, non-medical staff; fifth, by provid[ing] monetary 5 Donald Boone, a Virginia resident and Guidant employee from 1986 to 1996, joined the Bennett Complaint as a relator. -5- 'grants' to foundations set up by physicians and physician groups in return for favored status by such physicians, and; sixth, by sponsor[ing] dinner meetings for implanting physicians to invite potential 'referring physicians' to, in order for the implanting physician to increase the number of patients he receives for implants from those referring physicians. In most instances, the benefitting implanting physician also receives an 'honorarium' for speaking about his or her expertise at the program. BSC provides physicians access to an internet-based monitoring system called The Latitude Patient Management System (Latitude), which allows patients to receive post-implant care from their residences without having to meet with a physician inperson. Latitude transmits information obtained from the implanted device through the internet to the physician's office. The physician can then use the information to determine whether the device is working properly, and whether any adjustments are necessary. Part of BSC's representatives' follow-up care for a patient's device includes office visits, phone checks, and driving to rural areas to conduct follow-up site visits. Because phone checks cost less than office visits, BSC representatives often conduct more phone consultations so that physicians can increase their billing to Medicare. BSC representatives advise physicians' offices on how to bill Medicare for the maximum reimbursement for Latitude services. -6- In addition, BSC organizes networking events where surgeons can meet physicians who might provide referrals. The host surgeon is allegedly paid as if the event were a speaking engagement when in fact it is simply a marketing ploy to increase the surgeon's and BSC's business. BSC incentivizes the use of [its] devices by planning and funding dinner programs held by implanting physicians. BSC identifies implanting physicians and organizes and pays for lavish dinner programs so that the physician in question can network with potential referring physicians. In many instances, BSC improperly pays the benefitting physician 'honoraria' for 'speaking' at these dinner programs. On September 28, 2011, the United States declined to intervene in Bennett's case. One month later, the government and Bennett agreed to voluntarily dismiss the matter. The district court dismissed the case and the seal was lifted.6 6 Before Bennett filed her October 16, 2008 complaint, she filed a complaint (under her previous name, Elaine George) against BSC in November 2006. United States ex rel. Bennett v. Bos. Scientific Corp., No. 07-2467, 2011 WL 1231577, at  (S.D. Tex. Mar. 31, 2011). The complaint, originally filed in the United States District Court for the Northern District of Illinois, was transferred to the United States District Court for the Southern District of Texas in July 2007. On July 10, 2009, Bennett filed an amended complaint (the George Complaint). The George Complaint alleged inter alia that BSC and Guidant violated the FCA through an off-label marketing campaign and the use of illegal kickbacks that caused physicians to perform an increased number of inpatient surgical ablation procedures when less invasive and less expensive procedures could have been performed. The George Complaint was dismissed without prejudice for failure to satisfy Rule 9(b). Id. -7-
On November 10, 2009, while the Bennett complaint was still pending and under seal, Heineman-Guta filed a qui tam complaint under seal alleging BSC violated the FCA. Heineman-Guta amended her complaint on January 30, 2012. Like Bennett, Heineman-Guta made numerous allegations concerning BSC's kickback scheme. Heineman-Guta, a former account manager in BSC's heart failure management group from April 2003 until November 2007, claimed that over her four-year employment with BSC, it defrauded the Government by engaging in a scheme to provide kickbacks in various forms to physicians to encourage them to both implant its cardiac rhythm management devices and refer patients that would be implanted with such devices. Specifically, Heineman-Guta says that BSC instructed her to provide lavish trips and entertainment to physicians in order to encourage them to refer patients for implantation of Guidant cardiac rhythm management devices. BSC offered physicians allexpense paid trips and used expensive meals to induce them to at , . In the present case, BSC argued in its motion to dismiss that the previously dismissed George Complaint, in addition to the Bennett Complaint, served as a preclusive first-filed complaint. Agreeing with Heineman-Guta, the district court rejected the notion that the George Complaint could serve as a preclusive first-filed complaint because it did not allege a kickback scheme to promote the sale of cardiac rhythm management devices. United States ex rel. Heineman-Guta v. Guidant Corp. et al., 874 F. Supp. 2d 35, 38 (D. Mass. 2012). Since BSC does not challenge that conclusion, the George Complaint is not at issue in this appeal. -8- insist on the implantation of BSC devices or refer patients for implantation. BSC required sales representatives to prepare customer management plans on how to retain customers, grow their business or win back their support and gain market share from them. BSC paid physicians as speakers to gain their loyalty, repeatedly paying one high-volume implanting physician between $1200 and $2500 per engagement over the course of two years. A July 2005 company power point presentation on sales-representative training allegedly instructed that best practices at the company included compensating physicians by providing them with speaking opportunities. BSC used case reviews to funnel money to referring physicians and to provide a steady stream of patient referrals for implanting physicians who were loyal to BSC. Under the case review program, BSC invited an implanting physician along with several referring physicians to an expensive dinner. At the dinner, the implanting physician reviewed cases for possible referral. In addition to paying for the dinner, BSC allegedly paid each referring physician a $250 fee for each patient chart they brought to the dinner. BSC used the case review program as a means to not only funnel money to referring physicians, but also to ensure the commitment of participating implanting physicians to implant BSC cardiac rhythm management devices. -9- In addition, BSC conducted sham clinical trial programs. Heineman-Guta pointed to one specific sham program called ADVANCENT, which was an observational registry of patients with certain symptoms of cardiac failure. Through this program, BSC allegedly targeted physicians who were loyal to BSC and paid them for each patient they entered into the database who had those symptoms. BSC also assisted fellows in finding employment in practices that primarily implanted BSC devices. BSC helped place fellows in certain practices and hospitals in exchange for promises from those practices and hospitals that they would mainly use BSC devices. According to the amended complaint, these kickbacks caused certain physicians to implant or recommend the use of BSC devices. In addition to providing the initials of the specific referring and implanting physicians, the initials of the patients who received implantations due to the purported scheme and the dates and places of implantation, the amended complaint detailed the trips, meals and hotel reimbursements for physicians who implanted BSC devices. BSC, knowing that Medicare would pay for the vast majority of these implants, allegedly promoted the highly lucrative nature of implanting its devices by pointing out to implanting physicians the extent to which Medicare would provide reimbursement for implantations and the profit margins physicians -10- could make from such reimbursement. Lastly, Heineman-Guta claimed that BSC caused physicians and hospitals, who must certify compliance with the federal Anti-Kickback Statute, to make false certifications that were material to the government's decision to pay for the implantation of the companies' cardiac devices.
On July 5, 2012, about nine months after the government and Bennett voluntarily dismissed the Bennett Complaint, the district court in this case granted BSC's motion to dismiss Heineman-Guta's amended complaint for lack of subject matter jurisdiction under Rule 12(b)(1). Guidant Corp., 874 F. Supp. 2d at 41. The court held that the first-to-file rule under 31 U.S.C. § 3730(b)(5) barred consideration of the amended complaint because it alleged the same essential facts of the kickback scheme as the Bennett Complaint. Id. at 38-39, 41. The court found that the essential facts contained in the Bennett Complaint provided the government sufficient notice that it was the potential victim of fraud worthy of investigation and, that as a result, it served as the preclusive first-filed complaint for the purposes of § 3730(b)(5). Id. at 40-41. Despite the fact that the Bennett Complaint had been voluntarily dismissed in another court which had not been called upon to examine its Rule 9(b) sufficiency, Heineman-Guta's main argument below was that the Bennett Complaint did not satisfy that -11- rule's particularity requirements. She contended that the Bennett Complaint lacked specific details about the alleged kickback scheme such as dates, places and names of physicians involved. According to Heineman-Guta, the Bennett Complaint's failure to satisfy Rule 9(b) pleading requirements meant it could not serve as a preclusive first-filed complaint under § 3730(b)(5) to bar her qui tam action. The district court, recognizing we had yet to rule on whether preclusive first-filed complaints must comply with Rule 9(b), rejected her argument. Id. at 40 n.10. In doing so, it adopted the reasoning of the D.C. Circuit in United States ex rel. Batiste v. SLM Corp., 659 F.3d 1204, 1210 (D.C. Cir. 2011), which held that a complaint need not satisfy Rule 9(b) requirements to serve as a preclusive first-filed complaint under § 3730(b)(5). Id. at 40. Heineman-Guta timely appealed.