On December 11, 2017, the United States District Court for the District of Columbia granted in part and denied in part defendant Boston Heart Diagnostics Corporation’s (Boston Heart) motion to reconsider the court’s ruling on Boston Heart’s motion to dismiss the relator’s claims under the False Claims Act and pendent State false claims. The district court corrected its prior ruling to clarify that that although laboratories are required by statute to certify the medical necessity of the tests at issue, they are not required to independently determine the medical necessity of the tests. The court nonetheless found that the relator had sufficiently alleged that Boston Heart submitted false claims and denied its request to dismiss the relator’s remaining claims.

The relator in the FCA action is a medical director at United Healthcare. The relator’s second amended complaint against Boston Heart, a clinical laboratory, alleged violations under the FCA and pendent State false claims for allegedly billing for medically unnecessary tests to screen for cardiac-related issues and predict future cardiac risk. The United States, along with the 27 states and the District of Columbia on whose behalf the relator asserted false claims act violations, declined to intervene in the qui tam action.

On June 9, 2017, the district court declined to dismiss the relator’s presentment and false statements claim under the FCA, as well as her analog presentment and false statements claims under various State false claims act statutes, but dismissed relator’s “reverse false claims” under the FCA and the analog State statutes.

With respect to the relator’s presentment claim, the court found, among other things, that relator alleged an express false certification under the FCA by alleging that Boston Heart failed to comply with the Medicare rules restricting covered services to those that are medically necessary, despite Boston Heart’s express certification to the contrary on the CMS-1500 form. The court found that Boston Heart “has an obligation to establish that the tests for which it seeks government reimbursement are medically necessary because when it submits the CMS-1500 form, it certifies that the tests performed were medically necessary.”  The court also found that the relator sufficiently pled that Boston Heart knew that its tests were medically unnecessary by alleging that Boston Heart engaged in a “systematic and fraudulent scheme” to encourage providers to order the medically unnecessary tests through, among other things, written marketing materials and pre-printed test forms that increase the number of tests that the laboratory conducts by including a number of medically unnecessary tests. Lastly, the court found that the relator sufficiently alleged that Boston Heart made false statements under the FCA when it certified that its tests were medically necessary on the CMS-1500 form.

On June 23, 2017, Boston Heart filed a motion for reconsideration of the court’s order on the motion to dismiss, requesting that the court reconsider its conclusion “that Boston Heart has an obligation to establish that the tests for which it seeks government reimbursement are medically necessary,” which Boston Heart contended underlay the court’s conclusions with respect to both falsity and knowledge as to relator’s presentment and false statements allegations.

In its December 11, 2017 memorandum opinion, the court concluded that it must grant in part and deny in part Boston Heart’s motion for reconsideration. The court clarified that “a laboratory may rely on the ordering physician’s determination of medical necessity in the laboratory’s certification to HHS on the CMS-1500 form,” but nonetheless concluded that despite its correction, the court’s denial of Boston Heart’s motion to dismiss the relator’s federal and state presentment and false statements claims was proper.

In correcting its conclusion on medical necessity, the court reviewed OIG guidance cited by Boston Heart, which provided that “laboratories do not and cannot treat patients or make medical necessity determinations.”  The court concluded that “it overstated a laboratory’s obligation to establish that the tests for which it seeks government reimbursement are medically necessary,” reasoning that the OIG guidance “would have explicitly included that obligation among its recommended compliance processes if it had intended to impose such an obligation on laboratories, and to suggest otherwise would entirely contradict that explicit language of the OIG Guidance.” 

The court also reconsidered a Medicare regulation cited by Boston Heart in support of its motion to dismiss regarding documentation and recordkeeping requirements. The court noted that it did not consider the regulation in the context of the negotiated rulemaking that produced it, which addressed the “tension between Medicare’s statutory medical necessity requirement,” and the “special circumstances related to laboratories.”  Upon review of HHS’s explanations of the regulation, the court concluded that HHS’s view supported the court’s conclusion that although laboratories are required by statute to certify the medical necessity of the tests at issue, they are not required to independently determine the medical necessity of the tests billed.

Despite its clarification that Boston Heart is not required to independently determine the medical necessity of tests ordered by physicians, the court disagreed with Boston Heart that this conclusion meant that the relator failed to allege sufficient facts establishing the falsity and knowledge elements of her Federal and State presentment and false statement claims. The court found that the relator’s allegation that Boston Heart engaged in a scheme to encourage non-cardiology physicians to order medically unnecessary tests through a false marketing campaign and pre-printed test requisition forms “would constitute a knowing violation of its legal duty to ensure that it is not submitting false or incorrect claims to Government payors.” 

The case is United States ex rel. Groat v. Boston Heart Diagnostics Corp., Case No. CV 15-487 (RBW), 2017 WL 6327540 (D.D.C. Dec. 11, 2017). The court’s December 11, 2017, memorandum opinion is available here.