On August 4, 2019, U.S. District Judge David A. Ezra dismissed with prejudice a $61.8 million False Claims Act (FCA) case brought by relator Integra Med Analytics LLC (Plaintiff) against Baylor Scott & White Health, Baylor University Medical Center-Dallas, Hillcrest Baptist Medical Center, Scott & White Hospital-Round Rock, and Scott & White Hospital Temple (Baylor Scott & White Health). The complaint alleged a fraudulent scheme by Baylor Scott & White Health to overbill Medicare during a seven-year period by: (1) increasing the use of Complication or Comorbidity codes (CCs) or Major Complication or Comorbidity codes (MCCs) in order to increase revenue; (2) pressuring doctors to change diagnoses by sending them “queries” encouraging doctors to “specify” or amend their diagnoses when the initial diagnoses did not warrant a CC or an MCC code; and (3) providing unnecessary treatment in order to permit MCC coding. The U.S. Government had previously declined to intervene in the action.

The Court based its decision to grant Baylor Scott & White Health’s motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) on Plaintiff’s failure to plead fraud with particularity as required by Rule 9(b) and its failure to state a plausible claim for relief as required by Rule 8(a). As the Court explained:

The essence of Plaintiff’s allegations is that [Defendants’ medical director for coding and utilization] enacted a scheme to increase the number of patients whose services were coded for CCs and MCCs. That alleged scheme took several forms, including training doctors to document the medical record in a way that would permit coding for CCs and MCCs, training staff to be on the lookout for opportunities to code for CCs and MCCs and providing doctors with tip sheets and diagnosis clarification sheets that encouraged them to diagnose in ways that could permit coding for CCs and MCCs. But such a scheme is not in and of itself one to submit false claims and is equally consistent with a scheme to improve hospital revenue through accurate coding of patient diagnoses in a way that will be appropriately recognized and reimbursed by CMS commensurate with the type and amount of services rendered.

In granting the motion to dismiss, the Court relied heavily on statements made by CMS in the Federal Register during the changes to the hospital Inpatient Prospective Payment System for fiscal year 2008, of which the Court took judicial notice. In particular, the Court noted that “CMS ‘encourage[s] hospitals to engage in complete and accurate coding’ and has ‘reaffirm[ed its] view that hospitals focus their documentation and coding efforts to maximize reimbursement.’” The Court further pointed out that CMS does “not believe there is anything inappropriate, unethical or otherwise wrong with hospitals taking full advantage of coding opportunities to maximize Medicare payment that is supported by documentation in the medical record.” In short, “the mere fact that Defendants took targeted steps to increase their coding of CCs and MCCs to increase hospitals revenues is neither fraudulent, nor improper per se.”

As for Plaintiff’s allegations regarding pressure to revise diagnosis codes to include CCs or MCCs, the Court found that the allegations were nothing more than “naked assertions.” At most, the complaint revealed “that Defendants made targeted efforts to encourage and incentivize diagnosing patients in a way that permitted the coding of CCs and MCCs.” However, this did not “implicate[] a conclusion that these targeted efforts requested, demanded, or encouraged doctors and staff to diagnose in a way that was not justified by the physicians own medical opinions, judgments, and the medical record….” This is consistent with the Court’s findings on Plaintiff’s allegations regarding treatment provided to permit MCC coding.

This case is another in a recent string of decisions out of the federal courts taking a hard look at FCA complaints and dismissing the complaints in their entirety if appropriate. The case is United States ex rel. Integra Medical Analytics, LLC v. Baylor Scott & White Health et al., Case No. 5:17-CV-886-DAE. A copy of the decision can be found here.