Opinion ID: 220093
Heading Depth: 3
Heading Rank: 3

Heading: Violations of Medicare Marketing Regulations

Text: As we already have indicated, appellants contend that United Health personnel engaged in marketing practices which violated several Medicare marketing regulations, including: (1) using marketing flyers and forms that CMS did not approve; (2) engaging in marketing activities in the waiting rooms of clinics and doctors' offices; (3) allowing non-licensed individuals to engage in marketing activities; (4) using an excessive number of sales representatives at presentations in an attempt to overwhelm the public; (5) asking persons to raise their hands at Medicare presentations if they were dual eligible for Medicare and Medicaid; (6) chasing people in supermarkets to ask whether they were dual eligible; (7) using agents to engage in door-to-door solicitation; and (8) giving out prizes at Medicare presentations in excess of $15 in value. The District Court held that appellants' allegations that United Health engaged in illegal marketing did not state a claim for relief under either an express or implied false certification theory. According to the Court, these allegations did not state a claim under an express false certification theory inasmuch as appellants failed to plead a single instance of United Health submitting a false claim for payment to the Government: Without an allegation of a claim, Relators' False Claims Act claim is like a battery without a touching, or a defamation without a statement. Wilkins, 2010 WL 1931134, at , 2010 U.S. Dist. LEXIS 47080, at . In support of its holding, the Court cited to our opinion in Rodriguez, but appellants and amicus curiae contend that the District Court mischaracterized the holding of Rodriguez, and we agree. [16] In Rodriguez, we based our holding affirming the district court's Rule 12(b)(6) dismissal of the relators' FCA action on their failure adequately to plead, under an implied false certification theory, that the defendant violated a law or regulation connected to the Government's decision to pay the defendant's claims rather than on the relators' failure to identify a specific claim for payment that the defendant submitted to the Government. 552 F.3d at 304. It is true that to recover under the FCA, we have recognized that ultimately a plaintiff must come forward with at least a single false [or fraudulent] claim that the defendants submitted to the Government for payment. U.S. ex rel. Quinn v. Omnicare Inc., 382 F.3d 432, 440 (3d Cir.2004). Thus, in Quinn we held that the district court correctly granted the defendant's Federal Rule of Civil Procedure 56(f) motion for summary judgment based on the plaintiff's failure to identify a single claim for payment to the Government arising from defendant's alleged Medicare fraud. Id. But to our knowledge we never have held that a plaintiff must identify a specific claim for payment at the pleading stage of the case to state a claim for relief. See Fowler v. UPMC Shadyside, 578 F.3d 203, 213 (3d Cir.2009) (It is axiomatic that the standards for dismissing claims under Fed. R.Civ.P. 12(b)(6) and granting judgment under . . . Fed.R.Civ.P. 56 are vastly different.). In any event, as appellants correctly point out, the question of whether a plaintiff, at the pleading stage, must identify representative examples of specific false claims that a defendant made to the Government in order to plead an FCA claim properly is a requirement under the more particular pleading standards of Rule 9(b). See Ebeid, 616 F.3d at 998-99 (listing cases and noting disagreement among courts of appeals). But here, as we stated above, the District Court explicitly declined to analyze appellants' claims under the pleading requirements of Rule 9(b). Nevertheless, we see no need to decide whether appellants' marketing claims satisfied the pleading requirements of Rule 9(b), because, despite our rejection of the District Court's reasoning with respect to appellants' claim under an express false certification theory, we will affirm its holding dismissing appellants' claims predicated on the Medicare marketing regulations on the same ground that the Court provided for denying appellants' claims under an implied false certification theory. Thus, we will affirm the District Court's order rejecting appellants' claims predicated on the violation of Medicare marketing regulations because appellants' allegations that appellees violated the regulations do not state a plausible claim for relief under the FCA inasmuch as the Government's payments of appellees' Medicare claims were not conditioned on their compliance with the marketing regulations. As we stated above, to plead a claim upon which relief could be granted under a false certification theory, either express or implied, a plaintiff must show that compliance with the regulation which the defendant allegedly violated was a condition of payment from the Government. Rodriguez, 552 F.3d at 304; Mikes, 274 F.3d at 698. In determining whether compliance with a regulation was a condition of payment from the Government, courts have distinguished between regulations which are conditions of participation in the Medicare programs and conditions of Government payment of Medicare funds. Conner, 543 F.3d at 1220; Mikes, 274 F.3d at 697 (Since the Act is restitutionary and aimed at retrieving ill-begotten funds, it would be anomalous to find liability when the alleged noncompliance would not have influenced the government's decision to pay.). The Court of Appeals for the Tenth Circuit explained the difference between conditions of participation and conditions of payment: Conditions of participation . . . are enforced through administrative mechanisms, and the ultimate sanction for violation of such conditions is removal from the government program, while [c]onditions of payment are those which, if the government knew they were not being followed, might cause it to actually refuse payment. Conner, 543 F.3d at 1220. Appellants assert that 42 C.F.R. § 423.509, pursuant to which CMS may terminate a contract with a Medicare sponsor that fails to comply with the applicable marketing guidelines, demonstrates [t]he relevancy and materiality of compliance with the marketing guidelines. Appellants' br. at 23. Indeed, section 423.509 states that CMS may at any time terminate a contract if CMS determines that the Part D plan sponsor . . . [s]ubstantially fails to comply with . . . [m]arketing requirements in subpart V of this part. 42 C.F.R. § 423.509(a)(8)(i); 42 C.F.R. § 422.510(a)(11) (same for MA organization). The same regulation, however, provides that before CMS may issue a notice of intent to terminate a Medicare contract it will provide a plan sponsor a reasonable opportunity of at least 30 calendar days to develop and implement a corrective action plan to correct the deficiencies. 42 C.F.R. § 423.509(c)(1)(i); 42 C.F.R. § 422.510(c)(1)(i). The regulation further provides, in section (c)(2)(iii), an exception for the 30-day correction period if the termination is based on credible evidence, [that the Plan Sponsor] has committed or participated in false, fraudulent, or abusive activities affecting the Medicare, Medicaid, or other State or Federal health care programs, including submission of false or fraudulent data. 42 C.F.R. § 423.509(a)(4); 42 C.F.R. § 422.510(c)(2)(iii) (referring to 42 C.F.R. § 422.510(a)(4)). The regulation also contains an exception to the requirement that a sponsor be allowed a 30-day correction period where CMS's delay in termination, or the financial difficulties of the Plan Sponsor, pose an imminent and serious risk to the health of the individuals enrolled in the sponsor's plan. 42 C.F.R. § 423.509(c)(2)(i)-(ii); 42 C.F.R. § 422.510(c)(2)(i)-(ii). Thus, sections 423.509 and 422.510 clearly demonstrate that compliance with the marketing regulations is a condition of participation and not a condition of payment as the regulations draw a line between the type of violations which are correctable and, if corrected, will allow the sponsor to continue as a Medicare program participant and the type of violations which lead to immediate termination of a CMS contract. Accordingly, the fundamental flaw in appellants' allegations is that the amended complaint does not cite to any regulation demonstrating that a participant's compliance with Medicare marketing regulations is a condition for its receipt of payment from the Government. Nor do appellants cite examples, in case law or otherwise, of the Government seeking recovery of Medicare payments for services that a provider actually performed on the basis that its lack of compliance with marketing regulations rendered those services fraudulent. Appellants offer no evidence beyond a CMS published statement that the guidelines were developed after careful consideration by CMS of current industry practices, recent advancements in communication technology, and how best to protect the interests of Medicare beneficiaries. Appellant's br. at 21; app. at 210. This statement, however, does not indicate that a participant's compliance with marketing regulations is a condition for Government payment under the federal health care programs. Moreover, we think that it is appropriate for us to presume that the CMS surely develops all of its regulations after careful consideration of these and other relevant factors no matter what it determines should be the consequences of a participant's non-compliance with the regulations. [17] Further, considering that the Government has established an administrative mechanism for managing and correcting Medicare marketing violations which includes remedies for violations other than the withholding of payment otherwise due, it is clear that, although the Government considers substantial compliance with the marketing regulations a condition of ongoing Medicare participation, it does not require perfect compliance as an absolute condition for receiving Medicare payments for services rendered. Conner, 543 F.3d at 1221. Furthermore, we think that anyone examining Medicare regulations would conclude that they are so complicated that the best intentioned plan participant could make errors in attempting to comply with them. Moreover, it is ironical that if we allowed appellants, though they are ostensibly acting on behalf of the Government, to bring suit based on United Health's non-compliance with marketing regulations, we would short-circuit the very remedial process the Government has established to address non-compliance with those regulations. It would . . . be curious to read the FCA, a statute intended to protect the government's fiscal interests, to undermine the government's own regulatory procedures. Id. at 1222. Finally, like the District Court in this case and the courts of appeals in Conner and Mikes, we question the wisdom of regarding every violation of a Medicare regulation as a basis for a qui tam suit. Conner, 543 F.3d at 1221; Mikes, 274 F.3d at 699-700. Federal agencies are unquestionably better suited than federal courts to ensure compliance with Medicare marketing regulations. In the circumstances, we believe that by permitting qui tam plaintiffs to file suit based on the violation of regulations which may be corrected through an administrative process and which are not related directly to the Government's payment of a claim, courts unwisely would shift the burden of enforcing the Medicare regulations to themselves even though the administration of the vast and complicated Medicare program is best left to the administrators. [18] In this regard, we point out that if we adopted appellants' broad theory of FCA liability, every time a plan participant's agent gave out a prize worth over $15.00, or asked Medicare participants eligible for Medicaid to raise their hands at a meeting, assuming that these are improper marketing techniques, the agent's conduct could be the basis for a federal court action. We do not think that this is the purpose of 42 C.F.R. § 423.509, 42 C.F.R. § 422.510, the marketing regulations, or the FCA. In sum, inasmuch as compliance with the Medicare marketing regulations is not a condition for Government payment under the federal health insurance programs, the District Court properly dismissed appellants' FCA claims based on appellees' violations of those regulations for failure to state a claim upon which relief could be granted.