Opinion ID: 2786807
Heading Depth: 2
Heading Rank: 2

Heading: Establishing falsity

Text: The district court — whose decision we review de novo, Amgen, 652 F.3d at 109 — acknowledged our rejection in Hutcheson of judicially created formal categories, 647 F.3d at 385, but held that the distinction between conditions of participation and conditions of payment nonetheless survived; only misrepresentation of compliance with the latter would establish that a claim was false within the meaning of the FCA. The court reasoned that, because the holdings of both decisions were framed in terms of 11 But see, e.g., Mikes v. Straus, 274 F.3d 687, 700 (2d Cir. 2001) (FCA claim proceeding under theory that defendant misrepresented compliance with program requirement is appropriate[] . . . only when the underlying statute or regulation upon which the plaintiff relies expressly states the provider must comply in order to be paid). -15- conditions of payment, Hutcheson and the subsequent case of Amgen at least implicitly accepted the condition of payment/condition of participation dichotomy. Escobar, 2014 WL 1271757, at ; see Amgen, 652 F.3d at 110 (To survive [a] 12(b)(6) motion, [plaintiffs] . . . . must show that the claims at issue in [the] litigation misrepresented compliance with a material precondition of Medicaid payment such that they were false or fraudulent.); Hutcheson, 647 F.3d at 379 ([W]e hold that [the] complaint, in alleging that the hospital and physician claims represented compliance with a material condition of payment that was not in fact met, states a claim under the FCA . . . .). The court also pointed to cases from other circuits that have adopted such a framework. Escobar, 2014 WL 1271757, at  n.1 (citing cases from Second and Sixth Circuits). To be sure, Hutcheson and Amgen held that a plaintiff states a claim under the FCA when he or she alleges that a recipient of government funds has misrepresented its compliance with a condition of payment. But while the district court concluded that only claims premised on misrepresentation of compliance with a condition of payment are cognizable under the FCA, we find that any payment/participation distinction is not relevant here. As in Amgen, the provisions at issue in this case clearly impose conditions of payment. -16- Section 429.439 of the MassHealth regulations expressly provides that [s]ervices provided by a satellite program are reimbursable only if the program meets the standards described below [in subsections (A) through (D)]. Subsection (A) pertains to parent centers' supervision of satellite programs, while subsection (B) addresses the supervision that must occur within autonomous satellites, which must provide supervision and inservice training to all noncore staff employed at the satellite program.12 Subsection (C) further demands that all satellites employ a full-time clinical director who meets the qualifications required of core staff members in his or her discipline, as set forth in section 429.424; in addition, supervisors at dependent satellites must receive regular supervision and consultation from qualified core staff at the parent center. Relying on subsection (B), the district court read section 429.439 as imposing internal supervision requirements only on autonomous satellites. In so doing, the district court overlooked a critical interaction between section 429.439 and other substantive provisions of the MassHealth regulations: subsection (C) specifies that the clinical director of both autonomous and dependent satellites must meet all of the requirements in 130 CMR 12 130 Mass. Code Regs. § 429.402 defines a core team as a group of three or more mental-health professionals that must include a psychiatrist and one each of at least two of the following professionals: clinical or counseling psychologist, psychiatric social worker, or psychiatric nurse. -17- 429.423(B). Section 429.423(B), in turn, delineates the clinical director's responsibilities, including, inter alia, overall supervision of staff performance. Therefore, the MassHealth regulations explicitly condition the reimbursement of satellites' claims on the clinical director's fulfillment of his or her regulatory duties, regardless of whether the satellite is autonomous or dependent. Section 429.423(B) makes plain that one of those duties is ensuring appropriate supervision. Indeed, the cost of staff supervision is automatically built into MassHealth reimbursement rates. See 130 Mass. Code Regs. § 429.408(C)(3). That supervision at Arbour was either grossly inadequate or entirely lacking is the core of Relators' complaint. Insofar as Relators have alleged noncompliance with regulations pertaining to supervision, they have provided sufficient allegations of falsity to survive a motion to dismiss.