Nicholas A.F. Sarokhanian is an Associate in our Dallas office.
In United States ex rel. Crockett v. Complete Fitness Rehabilitation, Inc., No. 16-2544, 2018 WL 327453 (6th Cir. Jan. 9, 2018), the court of appeals affirmed the dismissal of FCA claims for Complete Rehab, a provider of physical rehabilitation services to Medicare patients, but reversed the dismissal of the relator's FCA retaliation claim. The relator was employed by Complete Rehab as a certified occupational therapist and as a manager of skilled nursing facility managed by a non-party, Bortz Health Care Facilities (Bortz). The relator filed a qui tam action on behalf of the U.S., alleging that Complete Rehab had a policy of "upcoding" Medicare Parts A and B patients into the highest possible Resource Utilization Group (RUG) subcategories, which the relator contended may have led to false claims submitted to Medicare. As such, the relator alleged three FCA violations: (1) submitting false claims by inducing the government to pay for more services than Complete Rehab's patients required; (2) a reverse FCA claim based on Complete Rehab's alleged concealment of overpayments by the government; and (3) a conspiracy between Complete Rehab and Bortz to overbill Medicare. The court agreed with the dismissal of the relator's FCA claims because the relator admitted that Complete Rehab would bill Bortz, which would then bill Medicare, yet disavowed any knowledge of what Bortz did with Complete Rehab's bills (e.g., revise them, submit them with alleged upcoding and so forth). The court agreed that the relator's circumstantial allegations failed to meet Federal Rule of Civil Procedure 9(b)'s particularity requirements, and that the relator's failure to actually allege that false claims were submitted to Medicare was fatal to her FCA claims. However, the court reversed the dismissal of the relator's retaliation claim because the relator's allegations met the lower plausibility pleading standard under Federal Rule of Civil Procedure 8. The court found that the relator's allegations relating to several emails she and her supervisor exchanged regarding the appropriate RUG subcategories for Complete Rehab's patients created the plausibility necessary to survive a motion to dismiss on her retaliation claim, i.e., that it was plausible that the relator's allegations of upcoding to her supervisor grew out of a reasonable belief in such fraud. Finally, the court agreed with the dismissal of a state law statutory retaliation claim because the state statute only applied in the absence of another statutory retaliation prohibition, and the FCA provided such a prohibition.
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