Available outside my office.
Median: 26
Mean: 26.14
High: 36
Plaintiffs Jaime Vargas (“Vargas”) and Francis Alvarez (“Alvarez”) assert three counts of violations of the False Claim Act (“FCA”). As to Count I (upcoding scheme), the motion should be denied.
Pleading Standard
A 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted tests the legal or factual sufficiency of a claim for relief. A court can dismiss with prejudice (with leave to replead) or without prejudice (with leave to replead).
A court on a 12(b)(6) motion examines the four corners of the complaint, FRCP 12(d), to determine whether it pleads sufficient facts to show that the pleader’s legal rights have been violated and that he may be entitled to recovery. The court must take the well-pleaded facts as true and draw all reasonable inferences in favor of the plaintiff. Vullo.
Ordinarily, a claim for relief must satisfy FRCP 8(a)(2), requiring a “short and plain statement of the claim showing that the pleader is entitled to relief.” This requires that a pleading give the defendant “fair notice” of the claim and the grounds on which it rests. Twombly; Conley. The plaintiff must provide sufficient non-conclusory facts to show a “plausible” entitlement to recovery, Twombly, meaning the court—drawing on judicial experience and common sense—can draw a reasonable inference of liability from non-conclusory facts. Iqbal. Plaintiff must plead nonconclusory facts. “Bald” legal conclusion—repeating the conclusion the plaintiff seeks—is insufficient. Iqbal. Nonconclusory allegations accepted as true must identify a real-world transaction or occurrence, describing specific action by specific individuals.
But when a party alleges fraud or mistake, FRCP 9(b) requires “heightened pleading”—a pleader must “state with particularity the circumstances constituting fraud or mistake.” This requires the pleading to describe the who, what, when, where, and how of the fraudulent conduct--what the fraudulent statements or actions were, who made them, and how they were made or communicated to the plaintiff, and why they were fraudulent.
Although controversial, the general view is that harm to a defendant’s business and reputation and the “in terrorem” effect of a fraud accusation justifies the demand that a plaintiff present more and more-specific factual detail at the outset of litigation. Those fears may compel defendants to settle actions for an inflated value to avoid reputational injury.
FRCP 9(b) allows malice, intent, and other allegations of state of mind to be alleged generally. That means state of mind must be pleaded in line with the requirements of FRCP 8(a)(2), as interpreted in Twombly and Iqbal.
The False Claims Act prohibits presenting fraudulent claims for payment to the government. § 3729(a). Private individuals—known as “relators”--may sue on behalf of the government, recover a percentage of the government’s loss. § 3730(a), (d); Yates. Because fraud is part of the statute, plaintiffs must plead with particularity under FRCP 9(b).
Count I:
Count I focuses on a scheme to code CPAP batteries as ventilator batteries and submit payment requests based on those improper codes. Because Tricare reimburses for life-sustaining ventilator batters but not non-life-sustaining CPAP batters (Compl. ¶¶ 44-48), the different coding resulted in payments to defendants that they otherwise would not have received.
A person is liable if knowingly presents a fraudulent claim for payment or approval. § 3729(a)(1)(A). The relator must allege a scheme that led to actual false claims submitted to the government. Plaintiff must identify a clear link between the alleged scheme, the actual claims submitted for payment, and the falsity of those claims. Hopper (11th Cir. 2009). The relator must show submission of claims and the falsity of those claims. Id. Submission requires sufficient indicia of reliability that the claims were submitted. Id.
Relators satisfy 9(b)’s heightened pleading standard by detailing the who, what, when, where, and how of the upcoding scheme.
The Complaint identifies 273 claims from 2022-24. For example, ¶¶ 53-56 describe the claim for Patient A. Relators allege Patient A’s sleep apnea diagnosis and the provision of CPAP supplies through a CFT. They specify the claim submitted—including the Claim Record Number, the code used (identified as the ventilator-battery code), the payment of the claim, and the amount paid. It also alleges that Optigen provided Patient A with a CPAP battery and not a ventilator battery. The complaint repeats this information for another 272 patients. These allegations particularly detail Optigen’s fraudulent claims to the government.
Relators also sufficiently plead the reliability of their allegations. A relator “can establish reliability by demonstrating first-hand knowledge of defendant’s billing practices and of specific false claims submitted to the government.” Hopper (11th Cir.). This requires personal knowledge of the claims submitted, not second-hand rumors or opinions about improper billing. Atkins (11th Cir. 1988). Vargas and Alvarez identified their jobs at Optigen and Lincare (Compl. ¶¶ 4-5) and their responsibility for auditing and reviewing patient files. (Compl. ¶¶ 29-30). “As part of their job responsibilities, Vargas and Alvarez audited patient files, including reviewing billing correspondence, payment authorizations, and reimbursement requests.” (Compl. ¶ 31).
Finally, the allegations allow the plausible inference that Optigen knowingly submitted false claims. Relators describe consistent billing practices--entering incorrect codes for products--for more than 200 patients. Drawing on common sense and experience and drawing reasonable inferences in plaintiff's favor, it is plausible that Optigen did not make more than 200 unintentional coding errors and knowingly submitted the fraudulent claims.
