An Ever Widening Gap: Circuit Split on the Applicable Pleading Standard for the False Claims Act

Many areas of the False Claim Act are subject to legal interpretation and have been subject to Circuit splits, sometimes resulting in rulings from the Supreme Court.  In the United States, there are thirteen federal circuit courts that provide intermediate appellate review of the federal district courts in several states.  The decision by a circuit court has binding authority on the district courts within its jurisdiction.  When there is a conflict between circuit courts on an important issue it creates the basis for review by the Supreme Court.

One such area that is currently subject to a Circuit split is the standard to which a relator or the government must plead their case for the False Claims Act.  The Federal Rules of Civil Procedure, Rule 9(b), requires that when alleging fraud or mistake, “a party must state with particularity the circumstances constituting fraud or mistake.” F.R.C.P. Rule 9(b).

The Third, Fifth, Seventh, Ninth and Tenth Circuits have adopted a broader reading of the pleading requirements in a False Claims Act, finding that a relator must only “offer[] particular and reliable indicia that false bills were actually submitted” to the government as result of a particular scheme.  U.S. ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 188-89 (5th Cir. 2009).  However, the First, Sixth and Eleventh Circuits have adopted a much stricter interpretation set forth by the First Circuit in U.S. ex rel. Karvelas v. Melrose-Wakefield Hospital.  In Karvelas, the Court found

a relator must provide details that identify particular false claims for payment that were submitted to the government…[D]etails concerning the dates of the claims, the content of the forms or bills submitted, their identification numbers, the amount of money charged to the government, the particular goods or services for which the government was billed, the individuals involved in the billing, and the length of time between the alleged fraudulent practices and the submission of claims based on those practices.  U.S. ex rel. Karvelas v. Melrose-Wakefield Hospital, 360 F.3d 220, 232-33 (1st Cir. 2044), abrogated on other grounds by Allison Engine Co., 553 U.S. 662.

As of now, the 2nd Circuit has not yet opined on the particularity standard.  However, the District Courts in New York have analyzed the Circuit split in several cases and have adopted the stricter standard as set forth in the First, Sixth and Eleventh Circuits.  See, U.S. ex. rel. Mooney v. Americare, Inc., 2013 WL 1346022 (E.D.N.Y. 2013); United States ex rel. Siegel v. Roche Diagnostics, Corp., 988 F. Supp. 2d 341, 346 (E.D.N.Y. 2013); United States ex rel. Moore v. GlaxoSmithKline, LLC, 2013 WL 6085125, at *5 (E.D.N.Y. October 18, 2013); U.S. ex rel. Osmose, Inc. v. Chemical Specialties, Inc., 2014 WL 234819 (W.D.N.Y. 2014); U.S. v. Wells Fargo Bank, N.A., 2013 WL 5312564 (S.D.N.Y. Sept. 24, 2013); U.S. v. Dialysis Clinic Inc., 2011 WL 167246 (N.D.N.Y. 2011).  Two recent cases in the District Courts of New York have also adopted this stricter standard.  In U.S. ex rel. Kester v. Novartis Pharmaceuticals Corp., 2104 WL 2324465 (S.D.N.Y. May 29, 2014) the Court stated,

Though no Second Circuit opinion addresses the degree of particularity with which a plaintiff asserting an FCA claim must plead the submission of a false claim, the court has issued a summary order on the subject. In Wood ex rel. United States v. Applied Research Associates, Inc., 328 Fed. App’x 744 (2d Cir.2009), the court affirmed the district court’s dismissal of an FCA action on the basis that the plaintiff failed to satisfy Rule 9(b)….Wood lacks precedential value, but it strongly suggests that the Second Circuit would approve a pleading rule comparable to the “identification” standard articulated in Karvelas. Kester, supra *13. 

Recently, the Court in U.S. ex rel. Corporate Compliance Associates, also adopted the heightened pleading standard as set forth in the First, Sixth and Eleventh Circuits, finding that “[t]his Court agrees that Grubbs would likely not be accepted as the law of this Circuit. Clausen and Karvelas are more consistent with decades of Second Circuit precedent.” U.S. ex rel. Corporate Compliance Associates v. NY Soc. for the Relief of the Ruptured and Crippled, Maintaining the Hospital for Special Surgery, 2014 WL 3905742, *15 (S.D.N.Y. Aug. 7, 2014). 

While not settled in the 2nd Circuit, it appears that most of the District Courts have sided with the First, Sixth and Eleventh Circuits in adopting a heightened pleading standard for qui tam actions, further deepening the Circuit split on the issue and making it a ripe issue for the Supreme Court to address.  The impact of the decision by the Supreme Court on this issue would have a tremendous effect on parties in False Claims Act litigation.

For more information, please contact the author, Danielle Holley.  She can be reached by calling (518) 462-5601 or by email at  

Leave a Comment

Filed under False Claims Act, Federal Case Updates, Fraud and Abuse

Expanding Their Arsenal: Criminal Prosecution of HIPAA Breaches on the Rise

Over the past year, the Office of Civil Rights (“OCR”) has taken a more aggressive stance in enforcing the provisions of the Health Insurance Portability and Accountability Act (HIPAA).  The largest settlement for a data breach to date was just announced earlier this year between OCR and New York Presbyterian Hospital and Columbia University. However, high civil penalties are not the only concern anymore – individuals who commit a breach are also subject to criminal prosecutions. Continue reading

Leave a Comment

Filed under HIPAA

FDA Seeks to Regulate Laboratory Developed Tests

On July 31, 2014, the Food and Drug Administration (“FDA”) announced that it would begin regulating laboratory developed tests (LDTs).  According to the FDA, LDTs are designed, manufactured, and used within a single lab, and include some genetic tests and tests that are used by various health care professionals.  These tests are developed by hospitals, academic, and clinical laboratories in response to unmet clinical needs to ensure patients receive the best possible care.  The FDA considers these tests to be medical devices.

Continue reading

Leave a Comment

Filed under Laboratories

Absher v. Momence: A Mixed Decision—Limiting and Expanding the False Claims Act

In the ever-expanding area of the federal False Claims Act, the recent decision by the 7th Circuit in Absher v. Momence Meadows Nursing Center Inc., limited pursuing a False Claims Act violation under the worthless services theory but potentially expanded what administrative reports do not trigger the public disclosure bar of the False Claims Act.

Former nurses of the nursing home brought a qui tam suit against Momence Meadows Nursing Center, Inc. (“Momence”), an Illinois nursing home, alleging that Momence had submitted “‘thousands of false claims to the Medicare and Medicaid program”.  U.S. ex rel. Absher v. Momence Meadows Nursing Center, Inc., 2014 WL 4092258, *3 (7th Cir. 2014).    The case went to trial and earlier in February 2014, a jury found that Momence had violated the False Claims Act and provided worthless services, with the court entering a verdict of $9 million.  Momence appealed to the 7th Circuit, which issued its ruling on August 20, 2014.  The 7th Circuit addressed several issues including public disclosure, the scope of the worthless services theory, and scope of false certification under the False Claims Act.  The 7th Circuit ultimately vacated the decision and remanded.  Continue reading

Leave a Comment

Filed under False Claims Act, Fraud and Abuse

Cardiology Group to Pay More than $1.33 Million to Settle Allegations of Stark Law and False Claims Act Violations

According to United States Attorney Richard Hartunian of the Northern District of New York, Cardiovascular Specialists, P.C., has agreed to pay the federal government $1,336,636.98 plus interest to settle allegations that it violated the federal Physician Self-Referral Law (also known as the Stark Law) and the federal False Claims Act by knowingly compensating its physicians in a manner that violated federal law. Cardiovascular Specialists is a group practice of cardiologists with offices throughout upstate New York does business as New York Heart Center (NYHC).

USDOJ alleges that NYHC used a compensation system that violated the Stark Law, and thereby the False Claims Act, by compensating each NYHC partner-physician using a formula that took into account the volume or value of that physician’s referrals for nuclear scans and CT scans.   Continue reading

Leave a Comment

Filed under False Claims Act, Stark Law

CMS Audit of OPWDD ICFs Seeks Recovery of $1.26 Billion from New York State

New York State is appealing to the Secretary of the United States Department of Health and Human Services (“HHS”) for reconsideration of a July 25, 2014 Centers for Medicare and Medicaid Services (“CMS”) final audit report that found the State liable for $1,257,499,670 in federal Medicaid overpayments.  In its letter to the State, CMS indicated it would be initiating similar reviews of the State’s two subsequent fiscal years based upon the audit findings.  To make matters worse, this federal cost recovery  is in addition to an agreement between the State and CMS to lower Medicaid rates for developmental disability centers, effective April 1, 2013, resulting in an approximately $1.1 billion reduction in federal Medicaid funding annually. Continue reading

Leave a Comment

Filed under Health Care Reform, HHS OIG, Medicaid, New York State Agencies

NYC HRA Sued under False Claims Act by Whistleblower; Settles with US DOJ for $1.05 Million

According to United States Attorney Richard S. Hartunian, the City of New York (NYC) has agreed to pay the United States Department of Justice (US DOJ) $1.05 million to settle allegations that the NYC Human Resources Administration (HRA) violated the federal False Claims Act by causing various managed care organizations (MCOs) to provide Medicaid coverage to individuals that HRA knew, or should have known, were ineligible to receive New York State Medicaid benefits because they had moved outside New York State. The case was brought by a whistleblower and investigated by the US DOJ and United States Department of Health and Human Services Office of the Inspector General (OIG). Continue reading

Leave a Comment

Filed under False Claims Act, Fraud and Abuse, HHS OIG, Medicaid, Medicaid Fraud, New York State Agencies, NY Office of Medicaid Inspector General, NYC HRA

UPDATE: OMIG Releases Revised Compliance Guidance to OASAS Providers

The Office of the Medicaid Inspector General (“OMIG”) has issued Revised Compliance Guidance for use by providers regulated by the New York State Office of Alcoholism and Substance Abuse Services (“OASAS”). 

The revision clarifies that the Compliance Guidance examples are taken from OMIG Audit Protocols for OASAS Chemical Dependence Programs and Services for dates of service prior to the date that the Ambulatory Patient Group (“APG”) regulations (14 NYCRR Part 822) went into effect.  Once OMIG audit protocols are developed for the APG reimbursement system, OMIG may update this compliance alert.

Check out our original post for more information about this Compliance Guidance.

The Revised OMIG Compliance Guidance for OASAS providers is available here.

Kathleen Evers wrote this post.  For more information, please contact David R. Ross, who served as Acting New York State Medicaid Inspector General under governors Pataki and Spitzer, as well as General Counsel, Deputy Medicaid Inspector General, and Director of Audits and Investigations for the Office of the Medicaid Inspector General.  Prior to his service at the OMIG, David held several positions at the New York State Office of Alcoholism and Substance Abuse Services, including Acting General Counsel, Deputy Counsel, and Associate Counsel.  He can be reached at (518) 462-5601 or via e-mail at

Leave a Comment

Filed under NY Office of Medicaid Inspector General

Congressional Panel Hears HHS OIG Testimony About Increasing Oversight of New York State’s Medicaid Program

The United States Congress House Committee on Oversight and Government Reform, Subcommittee on Energy Policy, Health Care and Entitlements, held a hearing on July 29, 2014 entitled “Examining the Federal Government’s Failure to Curb Wasteful State Medicaid Financing Schemes.” Mr. John Hagg, Director of Medicaid Audits for the United States Department of Health and Human Services Office of Inspector General (OIG), testified, and, at the Subcommittee’s request, focused on the State of New York’s alleged Medicaid compliance issues. Continue reading

Leave a Comment

Filed under Fraud and Abuse, Medicaid, Medicaid Fraud, NY Office of Medicaid Inspector General

Congress Questions ONC’s Authority to Pursue Health IT Safety Center

The House of Representatives has grown increasingly skeptical of the Office of the National Coordinator for Health Information (“ONC”) and its plans to expand its programming and reach.  House members have questioned whether the ONC has the authority to make changes it has recently proposed.

In a June 3, 2014, letter to the Office of the National Coordinator for Health Information Technology (“ONC”), the United States House Committee on Energy and Commerce (“Committee”) asked the agency to explain its presumed authority to implement new regulatory measures in the realm of Health Information Technology (“Health IT”).  The letter, signed by Chairman Fred Upton (R-MI), Vice Chairman Marsha Blackburn (R-TN), Subcommittee on Health Chairman Joseph R. Pitts (R-PA), and Subcommittee on Communications and Technology Chairman Greg Walden (R-OR), asked ONC to respond to a number of questions, including “When the authorization for the Medicare and Medicaid Incentive program expires, under what statutory authority does ONC believe it is able to regulate Health IT and electronic health records, particularly in (but not limited to) non-Meaningful Use areas?” Continue reading

Leave a Comment

Filed under HIPAA