Court Opinion

ID: 4093672
Source: CourtListenerOpinion
Date Created: 2016-10-28 18:00:56.252985+00
Date Added: 2024-06-11T14:36:47.383828
License: Public Domain

Case: 15-20629   Document: 00513738048     Page: 1    Date Filed: 10/28/2016

        IN THE UNITED STATES COURT OF APPEALS
                 FOR THE FIFTH CIRCUIT   United States Court of Appeals
                                                  Fifth Circuit

                                                                     FILED
                                                                October 28, 2016
                                 No. 15-20629
                                                                  Lyle W. Cayce
                                                                       Clerk
United States of America, State of California, State of Delaware, District of
Columbia, State of Florida, State of Georgia, State of Hawaii, State of Illinois,
State of Indiana, State of Louisiana, Commonwealth of Massachusetts, State
of Michigan, State of Montana, State of Nevada, State of New Hampshire,
State of New Jersey, State of New Mexico, State of New York, State of
Oklahoma, State of Rhode Island, State of Tennessee, State of Texas,
Commonwealth of Virginia, ex rel, SUSAN RUSCHER, qui tam relator,

             Plaintiff - Appellant

v.

OMNICARE, INCORPORATED; ACCU-MED SERVICES, L.L.C.; ACCU-
MED SERVICES OF WASHINGTON, L.L.C.; ACCU-MED,
INCORPORATED; OMNICARE PHARMACY OF TEXAS 2, L.P.;
OMNICARE PHARMACY OF FLORIDA, L.P.; ARLINGTON ACQUISITION
I, INCORPORATED; ASCO HEALTHCARE, L.L.C.; BADGER
ACQUISITION OF TAMPA, L.L.C., doing business as Bay Pharmacy; DR
PHARMACARE, doing business as Omnicare of Louisville, Kentucky, doing
business as Omnicare of Lexington, Kentucky; NCS HEALTHCARE OF
MICHIGAN, INCORPORATED; NCS HEALTHCARE OF MINNESOTA,
INCORPORATED; NCS HEALTHCARE OF MISSOURI, INCORPORATED;
NCS HEALTHCARE OF NEW HAMPSHIRE, INCORPORATED; NCS
HEALTHCARE OF NORTH CAROLINA, INCORPORATED,

             Defendants - Appellees

                Appeals from the United States District Court
                     for the Southern District of Texas
                          USDC No. 4:08-CV-3396
     Case: 15-20629      Document: 00513738048         Page: 2    Date Filed: 10/28/2016

                                      No. 15-20629

Before JOLLY, HAYNES, and GRAVES, Circuit Judges.
PER CURIAM:*
       Susan Ruscher (“Relator”) appeals the district court’s grant of summary
judgment to Omnicare, Inc., on her False Claims Act (“FCA”) claims and
analogous state law claims (collectively, “FCA claims”) and her Reverse False
Claims Act (“Reverse FCA”) claim, and denial of four discovery motions. For
the reasons explained below, we AFFIRM.
                                    I. Background
       Omnicare is the nation’s largest provider of pharmacy services to long-
term care facilities. It specializes in servicing geriatric patients living in
nursing homes, referred to formally as skilled nursing facilities (“SNFs”),
among other long-term care institutions.             SNFs provide around-the-clock
medical, nursing, and therapy services to residents, who usually have their
pharmacy and drug costs reimbursed by Medicare Part A (“Part A”), Medicare
Part D (“Part D”), or Medicaid.
       Part A benefits last for 100 days. To collect drug costs covered by Part
A, Omnicare bills the SNFs. SNFs are compensated for Part A costs under a
prospective system, whereby SNFs are paid a per diem amount for each Part
A resident to cover the costs associated with caring for the resident, including
pharmacy services. The per diem amount is based on the historical costs
reported by all SNFs, and this amount may or may not cover all of the patient’s
expenses. To track allowable costs and determine per diem amounts, SNFs
are required to submit annual cost reports identifying the costs incurred for a
given reporting period, including costs that have yet to be paid. SNFs have
one year following the end of the cost reporting period in which liability is

       * Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.

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incurred to pay providers, such as Omnicare. If providers are not paid within
one year and the payment period is not extended under an exception, then
SNFs must amend their cost reports through a “worksheet A-8 adjustment.”
Once Part A benefits are exhausted, Part D and Medicaid benefits begin
covering the drug costs incurred by covered patients.
      Omnicare grew rapidly in the early 2000s by acquiring a series of long-
term care pharmacies. From 2002 to 2005, Omnicare nearly doubled in size.
Many of the new pharmacies, however, used disparate billing systems, some of
which failed to closely track and record payments to invoices. The SNFs
involved in this lawsuit began actively auditing their Omnicare bills to identify
erroneous charges, and these disputes sometimes took years to resolve.
      Relator worked in Omnicare’s collections department from July 2005
until August 2008, collecting past-due accounts receivables from SNFs.
According to the parties, Omnicare and SNFs routinely entered into preferred
provider agreements, which designated Omnicare as the SNFs’ preferred
provider of pharmacy services and set forth, among other things, pricing,
payment terms, and billing mechanisms.              Relator became suspicious of
Omnicare’s contract negotiations with clients owing past-due accounts
receivables and expressed her concerns about potential Medicare fraud to
superiors. She claims that her “resistance” to Omnicare’s contract negotiations
eventually led to her termination.
      Relator filed a qui tam action on behalf of the United States and twenty-
two states against Omnicare and its affiliates,1 alleging that Omnicare violated
the FCA and twenty-two analogous state statutes by purportedly making, and
causing    SNFs     to   make,    false   claims    for   Medicare    and    Medicaid

      1 Relator also included the SNFs as defendants in her original complaint but later
dismissed them from the lawsuit.
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reimbursements that allegedly resulted from kickbacks in violation of the Anti-
Kickback Statute (“AKS”).2 Relator also brought a claim under the Reverse
FCA, alleging that Omnicare violated an obligation to disclose a “reportable
event” of Medicare fraud to the Office of the Inspector General for the
Department of Health and Human Services (“OIG-HHS”) pursuant to a 2006
Corporate Integrity Agreement (“CIA”).3               The district court limited the
relevant time period for the FCA claims to those arising out of alleged
kickbacks paid between January 1, 2005, and December 31, 2008. The United
States and the twenty-two state governments declined to intervene.
       The district court granted summary judgment to Omnicare and
dismissed all of Relator’s claims. Relator timely appealed.
                              II. Standard of Review
       This court reviews “an order granting summary judgment de novo,
applying the same standard as the district court.” Cooley v. Hous. Auth. of City
of Slidell, 747 F.3d 295, 297 (5th Cir. 2014). Summary judgment is appropriate
when “there is no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” FED. R. CIV. P. 56(a). A disputed fact
is material if it has the potential to “affect the outcome of the suit under the
governing law.” See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
A district court’s discovery decisions are reviewed for an abuse of discretion.
Moore v. Willis Indep. Sch. Dist., 233 F.3d 871, 876 (5th Cir. 2000).

       2“The AKS provides no private right of action; therefore, a private plaintiff may not
sue a health care provider under the AKS alone.” United States ex rel. Nunally v. W.
Calcasieu Cameron Hosp., 519 F. App’x 890, 893 n.5 (5th Cir. 2013) (citing 42 U.S.C. § 1320a–
7b(b)(1–2)); see also Ameritox, Ltd. v. Millennium Labs., Inc., 803 F.3d 518, 522 (11th Cir.
2015) (noting that the AKS does not provide a private right of action).
       3Relator also alleged a “False Records or Statements” claim and a “Conspiracy” claim
under the FCA, but does not challenge the dismissal of those claims on appeal.
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                               III. Discussion
   A. Discovery Motions
      Relator claims that she was deprived of the necessary discovery to
support her claims; she alleges that the district court abused its discretion
when it denied relief on four separate discovery motions: (1) a motion to compel
Omnicare to produce all documents regarding potential CIA violations; (2) a
motion to “reopen the 30(b)(6) deposition” due to too many objections from
Omnicare in the original deposition; (3) a motion for leave to depose Omnicare’s
former Chief Compliance Officer, who headed an internal committee
responsible for CIA compliance; and (4) a motion seeking in camera review of
Omnicare’s privilege log because a transcript from a prior Omnicare case
indicated Omnicare may have improperly asserted privilege in the present case
(“Privilege Log Motion”).
      A district court’s discovery decisions are reviewed for abuse of discretion,
and this court “will affirm such decisions unless they are arbitrary or clearly
unreasonable.” Moore, 233 F.3d at 876. We have held that there was “nothing
arbitrary or unreasonable” about denying a discovery motion for additional
discovery when the lawsuit was pending for fourteen months before summary
judgment, and the plaintiffs made a conclusory argument that “they should
have been allowed to ‘fully explore the Defendants’ conduct . . . by taking their
depositions,’ but d[id] not state what relevant evidence they expected to
uncover with additional discovery.” Id.; see also United States ex rel. Taylor-
Vick v. Smith, 513 F.3d 228, 233 (5th Cir. 2008) (similar).
      Relator argues that the district court’s denial of her discovery motions
seeking evidence “central to her claims” constitutes reversible error. But she
fails to “state what relevant evidence [she] expected to uncover with additional
discovery.” See Moore, 233 F.3d at 876. Instead, her arguments as to the first
three motions amount to conclusory assertions that she “should have been

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allowed to ‘fully explore [Omnicare’s] conduct.’” See id. Relator also failed to
show that the district court abused its discretion in rejecting her claims of
Omnicare’s non-compliance with discovery obligations. She instead offered
evidence demonstrating, at most, a difference of opinion with the district court.
Relator’s case was pending for more than seven years before summary
judgment; absent evidence showing what she expected to uncover with
additional discovery, it was neither arbitrary nor unreasonable for the district
court to deny Relator’s discovery motions. See id.
      As to the Privilege Log Motion, the district court declined to order in
camera review based on conduct in another Omnicare case because there was
not enough information about the other case to infer misconduct in the present
case. The district court’s order also reveals that “Relator identified only seven
individual documents that she believed may have been improperly withheld as
privileged,” and Omnicare promptly determined that two of the seven
documents were not privileged and gave those documents to Relator.
Omnicare explained the basis of privilege for the remaining five documents,
“and Relator [did] not challenged those explanations.”       The district court
refused to infer improper conduct from the two wrongly withheld emails
because “even a careful privilege review could misclassify some documents.”
The record does not reflect arbitrary or clearly unreasonable decision making.
Accordingly, we hold that the district court did not abuse its discretion in
denying these motions. We thus turn to the merits of the summary judgment
rulings.
   B. FCA Claims
      The FCA imposes civil liability and treble damages on any person who
“knowingly presents, or causes to be presented, a false or fraudulent claim for
payment or approval” to the United States government. 31 U.S.C.
§ 3729(a)(1)(A); see also United States ex rel. Steury v. Cardinal Health, Inc.,

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625 F.3d 262, 267 (5th Cir. 2010). We have required plaintiffs to prove four
elements to prevail on an FCA claim: “(1) . . . there was a false statement or
fraudulent course of conduct; (2) made or carried out with the requisite
scienter; (3) that was material; and (4) that caused the government to pay out
money or to forfeit moneys due (i.e., that involved a claim).” United States ex
rel. Longhi v. United States, 575 F.3d 458, 467 (5th Cir. 2009) (quotation marks
omitted).
      FCA claims can be either legally false or factually false. E.g., United
States v. Sci. Applications Int’l Corp., 626 F.3d 1257, 1266 (D.C. Cir. 2010)
(recognizing factually false claims as “the paradigmatic case” and legally false
claims as the “certification theory”).       A claim is factually false when the
information provided to the government for reimbursement is inaccurate. See,
e.g., United States ex rel. Conner v. Salina Reg’l Health Ctr., Inc., 543 F.3d
1211, 1217 (10th Cir. 2008). A claim is legally false when “a claimant . . . falsely
certifies compliance with [a] statute or regulation.” See United States ex rel.
Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 902 (5th Cir.
1997).
      Here, Relator primarily argues that Omnicare made legally false
Medicare and Medicaid claims. She contends that Omnicare knowingly made,
or caused SNFs to make, false certifications of compliance with the AKS when
submitting claims for reimbursement. For the alleged Part A claims, however,
Relator also contends that Omnicare caused the SNFs to submit factually false
claims.     In support of this contention, she points to evidence purportedly
showing that the SNFs failed to accurately report drug costs on Part A cost
reports.
      As to her claim that Omnicare falsely certified compliance with the AKS,
Relator bears the burden at the summary judgment stage to create a genuine
issue of material fact about whether Omnicare violated the AKS. See Malacara

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v. Garber, 353 F.3d 393, 404 (5th Cir. 2003) (“To survive summary judgment,
the nonmovant must submit or identify evidence in the record to show the
existence of a genuine issue of material fact as to each element of the cause of
action.”). To this end, Relator primarily contends that Omnicare paid unlawful
kickbacks to SNFs by both not collecting Part A debt and offering prompt
payment discounts (“PPDs”) “to induce the SNFs to refer patients to Omnicare
who were covered under Part D and Medicaid.”4
       The AKS prohibits the following conduct:
              knowingly and willfully offer[ing] or pay[ing] any
              remuneration (including any kickback, bribe, or
              rebate) directly or indirectly, overtly or covertly, in
              cash or in kind to any person to induce such person . . .
              to refer an individual to a person for the furnishing . . .
              of any item or service for which payment may be made
              in whole or in part under a Federal health care
              program.

42 U.S.C. § 1320a-7b(b)(2)(A). “This statute criminalizes the payment of any
funds or benefits designed to encourage an individual to refer another party to
a Medicare provider for services to be paid for by the Medicare program.”
United States v. Miles, 360 F.3d 472, 479 (5th Cir. 2004). Relator need only
show that one purpose of the remuneration was to induce such referrals. See
United States v. Davis, 132 F.3d 1092, 1094 (5th Cir. 1998). There is no AKS

       4 Relator’s other arguments are too speculative to create a fact issue as to Omnicare’s
intent. Simmons v. Willcox, 911 F.2d 1077, 1082 (5th Cir. 1990) (“[S]peculative allegations
. . . are insufficient to create a genuine issue of material fact precluding summary
judgment.”). For example, Relator claims that Omnicare’s intent to induce referrals can be
inferred from evidence of negotiations for pharmacy acquisitions occurring simultaneously
with negotiations over provider agreements, and evidence of large accounts receivables
occurring simultaneously with an SNF’s purchase of new facilities. But Relator provides no
evidence linking these disparate activities and circumstances. Absent such evidence,
Relator’s arguments amount to mere speculation and are therefore insufficient to create a
genuine issue of material fact as to Omnicare’s intent.

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violation, however, where the defendant merely hopes or expects referrals from
benefits that were designed wholly for other purposes. E.g., United States v.
McClatchey, 217 F.3d 823, 834 (10th Cir. 2000). Accordingly, the OIG-HHS
explained in comments to the AKS’s safe harbor provision that PPDs were not
included among the safe harbors because “by definition, [PPDs] are designed
to induce prompt payment, and thus do not appear to violate the statute.”
Medicare and State Health Care Programs: Fraud and Abuse; OIG Anti-
Kickback Provisions, 56 Fed. Reg. 35952, 35979 (July 29, 1991).
       Here, Relator’s evidence regarding Omnicare’s treatment of SNFs’ Part
A debt does not support a finding that Omnicare offered benefits to SNFs that
were designed to induce Medicare and Medicaid referrals. Relator’s evidence
primarily shows Omnicare trying to collect verifiable debt and settle billing
disputes without unnecessarily aggravating SNF clients in the midst of
ongoing or anticipated contract negotiations. At best, the evidence supports a
finding that Omnicare did not want unresolved settlement negotiations to
negatively impact its contract negotiations with SNF clients and was, likewise,
avoiding confrontational collection practices that might discourage SNFs from
continuing to do business with Omnicare.5 None of the evidence, however,

       5 For example, Omnicare’s email about an SNF named Shoreline shows that resolving
billing disputes between Omnicare and Shoreline was difficult, and failing to resolve the
dispute “ha[d] the potential to derail [Omnicare’s] efforts to secure the [Shoreline] business.”
Another email shows that Omnicare wanted to continue negotiating an acceptable payment
plan for a delinquent Shoreline facility rather than “immediately” cutting off services to that
facility because of its relationship to the larger Shoreline business and the ongoing
negotiations for a new provider agreement with Shoreline. Similarly, an email about an SNF
named Five Star shows that Omnicare adjusted its collection practices for “extremely old
balances” but continued normal collection practices for immediate balances because it did not
want the “extremely old balances that are in dispute” to become a “source of division.” In
another instance, with an SNF named Harborside, Omnicare decided not to issue a demand
letter on a delinquent account because it did not want to “introduce an irritant that might
impede progress on picking up [Harborside’s] newly acquired KY facilities.” Instead, it opted
to wait another month before addressing the issue with Harborside because Omnicare
already had a meeting scheduled with Harborside that next month.
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shows that Omnicare designed its settlement negotiations and debt collection
practices to induce SNF clients to continue making Medicare and Medicaid
referrals to Omnicare.6 Indeed, there is no evidence that the SNFs were told
they were getting special benefits from Omnicare’s settlement negotiations and
debt collection practices, let alone that any such benefits were tied to Medicare
and Medicaid referrals.7 If the purported benefits were designed to encourage
SNFs to refer Medicare and Medicaid patients to Omnicare, one might expect
to find evidence showing that the SNFs at least knew about those benefits.
Although Omnicare may have hoped for Medicare and Medicaid referrals,
absent any evidence that Omnicare designed its settlement negotiations and
debt collection practices to induce such referrals, Relator cannot show an AKS
violation.
       Similarly, the PPDs offered by Omnicare did not violate the AKS because
there is no evidence that they were designed to induce referrals. Much of
Relator’s evidence simply shows that PPDs were offered in contract

       6  The closest question involves a two-year contract for monthly credit payments
between Omnicare and Harborside. Relator argues that a March 2004 email shows that
there was a billing dispute between Omnicare and Harborside, and that Omnicare wanted to
resolve the dispute by offering monthly credits against Harborside’s future bills contingent
upon a multi-year contract renewal. Omnicare and Harborside ultimately entered into a two-
year provider agreement, effective October 1, 2004, whereby Omnicare promised to pay
Harborside $37,500 in monthly credits for a maximum of twenty-four months. Even if we
were to assume arguendo that this evidence shows that Omnicare designed its promise of
monthly credit payments to induce a multi-year contract for future referrals, the alleged
inducement occurred in 2004, which is outside the relevant time period for this litigation.
Moreover, Relator points to no evidence showing how the agreement was carried out, if at all,
during the relevant time period. Accordingly, this evidence does not support an AKS
violation during the relevant time period and thus cannot support her FCA claims in this
litigation.
       7 Relator also points to an email that says that settling billing disputes might give
Omnicare the “‘goodwill’ necessary to receive serious consideration for the Seacrest business.”
This comment alone, without more, is not enough to show that Omnicare designed its
negotiations to encourage Medicare and Medicaid referrals. It does not indicate, for example,
that Omnicare planned to offer special benefits to produce this result, or that Seacrest
believed Omnicare was offering special benefits.
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negotiations and included in new contracts. But these documents fail to show
that the PPDs were offered for the illegitimate purpose of inducing referrals
rather than the legitimate purpose of inducing payments. See Medicare and
State Health Care Programs: Fraud and Abuse; OIG Anti-Kickback Provisions,
56 Fed. Reg. at 35979.     Moreover, where PPDs were taken despite late
payment, there was either additional consideration provided in the form of
prompt payment of past-due accounts receivables or billing disputes that
prevented SNFs from making prompt payments.            Relator cannot survive
summary judgment on this record.
      Relator also claims that Omnicare caused one SNF to submit factually
false Part A cost reports because it did not pay for the reported costs within
one year following the end of the reporting period.        As Relator’s expert
explained, all reported costs must be paid “within 1 year after the end of the
cost reporting period in which the liability is incurred.” Relator provided
evidence that one of the SNFs filed a cost report reflecting $30,191 in drug
expenses for the reporting period of November 1 to December 31, 2007, but
paid nothing to Omnicare during that period. She argues that a September
2008 Omnicare aging report showing that this SNF “owed $228,774.17 past
due by 271+ days” proves that it never paid the drug expenses within one year
after the cost reporting period ended.
      Relator’s evidence does not support her argument. The SNF had until
the end of 2008 to pay the $30,191 in drug expenses because the reporting
period for those expenses ended on December 31, 2007. But Relator’s evidence
only shows past-due accounts receivable through September 2008. It does not
address the remaining three months of the 2008 calendar year, and thus does
not show whether the SNF paid the drug expense before the end of the year.
Relator provides no additional evidence in support of this claim. We therefore
agree with the district court that Relator’s claim cannot survive summary

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judgment because her evidence fails to support a finding that the drug costs
were not paid within the legally authorized time period.
      Relator additionally argues that evidence showing pre-2006, past-due
accounts receivables also supports her factual falsity claim. This evidence,
however, merely shows a settlement agreement regarding allegations that
Omnicare overcharged an SNF for pharmacy services. It does not show that
the SNF filed cost reports on the disputed overcharges. Even if it did, the
evidence would still fail to support Relator’s factual falsity claim because it
does not show that the SNF failed to file a worksheet A-8 adjustment after the
one-year payment period ended.       Accordingly, this evidence also fails to
support a finding that the cost reports were factually false.
      For the foregoing reasons, we affirm the district court’s dismissal of
Relator’s FCA claims.
   C. Reverse FCA Claim
      The Reverse FCA imposes liability on “any person who . . . knowingly
makes, uses, or causes to be made or used, a false record or statement to
conceal, avoid, or decrease an obligation to pay or transmit money or property
to the Government.” United States ex rel. Bain v. Ga. Gulf Corp., 386 F.3d 648,
652–53 (5th Cir. 2004) (quoting 31 U.S.C. § 3729(a)(7)). “In a reverse false
claims suit, the defendant’s action does not result in improper payment by the
government to the defendant, but instead results in no payment to the
government when a payment is obligated.” Id. at 653.
      Under Omnicare’s 2006 CIA with the OIG-HHS, Omnicare was required
to disclose to the OIG-HHS in writing any “reportable events,” and then
summarize such events in an annual report at the end of every reporting
period. Reportable events include any “matter that a reasonable person would
consider a probable violation of criminal, civil, or administrative laws
applicable to any Federal health care program.”

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      Relator claims that her December 2007 email alleging that one of
Omnicare’s customers was committing Medicare fraud constituted a
“reportable event” under the CIA.       Accordingly, the argument continues,
Omnicare’s failure to disclose this “reportable event” in its annual report to the
OIG-HHS made the report a false record used to conceal an obligation to pay
money to the government.
      The email Relator relies on relates to purported fraudulent Part A cost
reports. Relator’s email, however, does not show a probable violation of federal
health care laws. It says, in relevant part, that customers with past-due
accounts receivables will be committing Medicare fraud if Omnicare forgives
their debt because “[t]hey have been reimbursed a[n]d they need to pay.” But
cost reports use accrual-based accounting, which requires the participant to
report costs incurred during the reporting period, regardless of when payment
occurs. If costs are not liquidated within one year and the payment period is
not extended under an exception, then an amended cost report should be filed
through a worksheet A-8 adjustment. Thus, even assuming that the Part A
debt was never paid, there is still no “probable violation” of the Part A health
care program unless Relator had information to believe that the customer in
question would not be submitting a worksheet A-8 adjustment to reflect
changes made to its reported Part A costs. The email does not indicate Relator
had this information, and Relator provides no evidence indicating otherwise.
We therefore affirm the district court on the Reverse FCA claim.
      For the foregoing reasons, we AFFIRM the summary judgment, and we
AFFIRM the denial of Relator’s discovery motions raised in Relator’s brief on
appeal.

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