Mikes v. Straus
274 F.3d 687, 2001 WL 1628486 (2001)
Rule of Law:
A healthcare provider's claim for reimbursement under the False Claims Act (FCA) is "legally false" only if the provider certifies compliance with a statute or regulation that is an express condition of government payment, and not merely a condition of program participation or a general standard of care.
Facts:
- In 1991, defendants Dr. Marc J. Straus, Dr. Jeffrey Ambinder, and Dr. Eliot L. Friedman, specialists in oncology and hematology, formed Pulmonary and Critical Care Associates to expand their practice to pulmonology.
- In July 1991, the defendants hired Dr. Patricia S. Mikes, a board-certified pulmonologist, to provide pulmonary and critical care services in their Westchester and Putnam Counties, New York offices.
- In September 1991, Dr. Mikes discussed with Dr. Straus her concerns regarding spirometry tests being performed in the defendants' offices, including alleged failures to calibrate machines and improper administration by untrained medical assistants.
- Dr. Mikes was fired three months later, with the parties disputing the reason: Mikes claimed it was due to her questioning how defendants conducted their medical practice, while defendants stated she was terminable-at-will and had difficulty procuring hospital privileges.
- Spirometry is an easy-to-perform pulmonary function test used to detect lung diseases, involving patients blowing into a mouthpiece to measure pressure changes, with defendants using portable machines in their offices.
- Guidelines from the American Thoracic Society (ATS) recommend daily calibration of spirometers using a three-liter syringe, performance of three successive trials, and appropriate training for technicians to ensure accuracy.
- Dr. Mikes personally observed medical assistants failing to calibrate spirometers daily and was informed they could not recall the last calibration, and noted defendants did not possess a three-liter calibration syringe.
- Defendants, however, claimed reliance on the spirometer's instruction manual, which indicated daily calibration was not required, only 'periodical checks,' and a product booklet stating conformity to ATS guidelines and identifying a calibration syringe as an 'optional item.'
Procedural Posture:
- On April 16, 1992, Dr. Patricia S. Mikes commenced litigation against Drs. Marc J. Straus, Jeffrey Ambinder, and Eliot L. Friedman in the United States District Court for the Southern District of New York, asserting claims for retaliatory discharge, unlawfully withheld wages, and a qui tam suit under the False Claims Act.
- On April 19, 1993, the United States Attorney notified the district court that it declined its statutory right to substitute for Mikes in the prosecution of the qui tam litigation.
- In May 1994, District Court Judge Vincent L. Broderick dismissed Mikes' qui tam cause of action, finding fraud had not been pleaded with particularity as required by Fed.R.Civ.P. 9(b).
- Mikes then filed an amended complaint, reasserting the spirometry, retaliation, and wage claims, and also asserting that defendants improperly received Medicare reimbursement for referrals to Magnetic Resonance Imaging (MRI) facilities in which they held a financial interest.
- District Court Judge William C. Conner denied a motion to dismiss the False Claims Act causes of action relating to spirometry and MRI claims and ordered arbitration of the employment-based claims.
- Mikes filed a second amended complaint in March 1996, eliminating the claim for improperly withheld wages, and later filed a three-count supplemental complaint on July 20, 1999, containing only the spirometry claims under the False Claims Act.
- On November 18, 1999, District Court Judge Colleen McMahon granted defendants' motion for summary judgment on the spirometry claims, ruling that submitting a claim for a service not performed in accordance with the relevant standard of care does not make that claim false or fraudulent for False Claims Act purposes, and that defendants did not implicitly certify quality nor was the requisite scienter shown.
- Mikes' motion for reconsideration of the summary judgment ruling was denied.
- After Mikes' complaint had been dismissed, defendants sought attorneys' fees under the Act; the district court conducted a two-day bench trial and found Mikes' withdrawn MRI claims were vexatious but her spirometry claims were not, awarding defendants Ambinder and Friedman a default sum of $5000 in attorneys' fees.
- Plaintiff Dr. Mikes appealed the grant of summary judgment on the spirometry claims and the award of attorneys' fees for defendants.
- Defendants Drs. Straus, Ambinder, and Friedman cross-appealed with respect to the amount of the attorneys' fees award.
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Issue:
Does a healthcare provider's submission of Medicare reimbursement claims for spirometry tests, allegedly performed below professional standards of care due to lack of calibration and proper training, constitute a "false or fraudulent claim" under the False Claims Act (FCA), when compliance with such standards is not an express precondition to government payment but rather a condition of Medicare program participation?
Opinions:
Majority - Cardamone, Circuit Judge
No, a healthcare provider's submission of Medicare reimbursement claims for services that allegedly fail to meet professional standards of care, or are of insufficient quality, does not constitute a "false or fraudulent claim" under the False Claims Act (FCA) unless compliance with those specific standards is an express precondition to government payment. The court affirmed the district court's grant of summary judgment, clarifying the scope of "legally false" claims under the False Claims Act, particularly in the healthcare context. A claim is "legally false" only when a party certifies compliance with a statute or regulation as an express condition for government payment. This is distinct from "factually false" claims, which involve incorrect descriptions or non-provision of services. Regarding express false certification, the HCFA-1500 form's certification of "medical necessity" pertains to the level of service (i.e., whether the procedure was appropriate for the patient's condition, not its quality) and not to the qualitative standard of care; Dr. Mikes’ allegations challenged the quality of spirometry performance. Regarding implied false certification, the court adopted a narrow approach for healthcare, requiring that the underlying statute or regulation explicitly state that compliance is a precondition to payment for a claim to be implicitly false. While 42 U.S.C. § 1395y(a)(1)(A) (requiring services to be "reasonable and necessary") is an express condition of payment, it addresses the appropriateness of selecting a procedure, not the quality of its execution. Conversely, 42 U.S.C. § 1320c-5(a) (requiring services to meet "professionally recognized standards of health care") is a condition of participation in the Medicare program, not an express condition of payment for individual services. Violations of § 1320c-5(a) lead to sanctions like exclusion from the program or repayment as a condition of continued eligibility, not the automatic falsity of individual claims. Allowing qui tam suits based on such quality standards would improperly federalize medical malpractice. The court also addressed "worthless services" claims, a distinct theory where services are so deficient they are equivalent to no performance. While such claims are actionable if submitted knowingly, Dr. Mikes failed to show that the defendants knowingly submitted claims for worthless services. The defendants presented ample evidence, including reliance on the spirometer manual (which suggested only periodic checks, not daily calibration), periodic servicing, and training from sales technicians, supporting their good faith belief in the medical value of their spirometry tests, thereby negating the requisite scienter for an FCA violation. Finally, the court affirmed the district court's award of attorneys' fees to the defendants for Dr. Mikes' withdrawn MRI claims, finding them "objectively vexatious" due to lack of factual support, and affirmed the limited amount of the award ($5000) because the MRI and spirometry claims were severable, and defendants' documentation failed to adequately delineate time spent on each.
Analysis:
This case significantly narrows the scope of "legally false" claims under the False Claims Act in the healthcare industry, particularly concerning allegations of substandard medical care. By distinguishing between conditions of participation and express conditions of payment, the Second Circuit limits the ability of qui tam relators to use the FCA as a mechanism to enforce general medical standards of care. This ruling discourages the federalization of medical malpractice claims, emphasizing that quality of care issues are generally best addressed by state, local, or private medical bodies. It highlights the high bar for proving "scienter" in FCA cases, especially for "worthless services" claims, requiring proof of knowing falsity rather than mere negligence or non-compliance with guidelines.
