Federal District Court Clarifies False Claims Act Liability for Regulatory Violations

The United States District Court for the Northern District of New York recently dismissed with prejudice a complaint by a whistleblower against Dialysis Clinic, Inc. on the grounds that the relator could not plead details of any alleged false billing.  United States v. Dialysis Clinic, Inc., 5:09-CV-00710, 2011 WL 167246 (N.D.N.Y. Jan. 19, 2011).

The relator claimed that the services failed to comply with regulatory requirements—and thus were legally false claims.  The court rejected these arguments, making two important clarifications to prior rulings on express and implied certification.

First, the court rejected the relator’s claim that the provider’s Medicare Enrollment Form makes compliance with Medicare regulations a precondition to payment because the Form includes a certification that Dialysis Clinic would comply with Medicare laws, regulations, and instructions.  Prior federal court decisions have held that certification of future compliance can be the basis of False Claims Act liability if the provider makes such a certification knowing it will violate the statute, and later submits claims which are not in compliance with the statute.  In this case, the relator failed to allege that when Dialysis Clinic signed the enrollment form it knew it would be submitting false claims.

Second, the court distinguished between conditions of participation and conditions of payment in holding that the regulations at issue related to conditions of participation, but not to conditions of payment that would trigger False Claims Act liability.

This post was contributed by Charles Dunham.