Sixth Circuit in MedQuest: No FCA Liability for Violation of Medicare Conditions of Participation Without Violation of Conditions of Payment

by Chambliss, Bahner & Stophel, P.C.

On April 1, 2013, the U.S. Court of Appeals for the Sixth Circuit overturned an $11.1 million False Claims Act (FCA) judgment by the U.S. District Court for the Middle District of Tennessee against MedQuest Associates, Inc., a large provider of diagnostic imaging services, and three of its Nashville, TN-area facilities. The decision, which analyzed Medicare regulations concerning conditions of participation and conditions of payment, further clarifies for health care providers that, in the Sixth Circuit’s view and similar to the views of some other circuits, violations of Medicare conditions of participation, absent violations of conditions of payment, are not a basis for FCA liability. Moreover, the decision clarifies the Sixth Circuit’s view that violations of certain Medicare requirements should not be construed as violations of Medicare conditions of payment.


The district court held that MedQuest violated the FCA under three theories, the first two being express and implied false certification theories. MedQuest facilities made 343 claims for diagnostic tests supervised by physicians that were not listed in its Medicare enrollment forms. 

First, the court concluded that MedQuest violated an express certification that the physicians listed in its Medicare enrollment forms would be supervising tests.  Independent diagnostic testing facilities (IDTFs) are required to identify supervising physicians in their enrollment applications.  Each IDTF signs a certification that it will notify its Medicare contractor if any information in its enrollment form becomes inaccurate and is required to notify Medicare in the event that its list of supervising physicians changes. 

Second, the court concluded that MedQuest later implicitly, and falsely, certified that those tests were provided in accordance with Medicare regulations and by physicians approved by Medicare when it submitted claims for reimbursement. 

Lastly, under an additional theory, the lower court found that MedQuest violated the FCA by failing to update Medicare enrollment forms to reflect that it had recently acquired one of its facilities and also by continuing to use the former owner’s billing number after the acquisition.  After acquiring the entity, MedQuest operated it like a subsidiary, submitted 945 claims using the former owner’s billing number and failed to re-enroll the facility in a timely manner.

The Sixth Circuit’s Opinion

The Sixth Circuit reversed the judgment of the lower court under all three theories, holding that a false certification theory only applies where the regulation violated is a Medicare condition of payment, as opposed to a condition of participation.  With respect to express certification, the court noted that the government could not point to any express certification made by MedQuest that it was in compliance with applicable physician supervision requirements.  Moreover, in any case, the certification language in the enrollment form did not itself condition payment on compliance with any particular law or regulation.

The Sixth Circuit held that the implied false certification theory also failed because the supervising physician requirements and other requirements applicable to IDTFs were not conditions of payment.  Although the government had linked the Medicare supervising physician requirements to the separate Medicare “reasonable and necessary” requirement, which is a condition of payment, the Sixth Circuit said this was a strained reading of regulations that did not actually refer to the “reasonable and necessary” requirement.  The “reasonable and necessary” standard, as a condition of payment, only required that MedQuest provide an appropriate level of supervision by qualified physicians, generally.  However, although MedQuest had failed to provide supervision via physicians listed in its enrollment forms, it had not failed to provide the appropriate level of supervision via qualified physicians, generally.  Therefore, MedQuest had not violated a Medicare condition of payment and FCA liability was inappropriate.

Lastly, the Sixth Circuit held that MedQuest had not violated a condition of payment in failing to re-enroll the facility it acquired and in using the former owner’s billing number.  In the court’s view, the government had failed to point to any regulation in effect at the time of MedQuest’s actions that conditioned payment on having an accurate, updated enrollment form reflecting current ownership.  Although the government had pointed to a Medicare regulation requiring that the facility performing services be an IDTF and although the MedQuest facility was not formally approved and enrolled as an IDTF, the Sixth Circuit stated that, based on its interpretation of the applicable regulations, enrollment and approval are not required for an entity to be an IDTF and therefore satisfy the applicable condition of payment.  Also in the court’s view, the government had failed to provide support for the proposition that the purchaser of a corporate practice is not legally entitled to use the corporation’s billing number.  The court stated that there was no reason to believe that the corporation, which was enrolled with Medicare, was dissolved by the acquisition.  Thus, there was no reason to conclude that MedQuest, as the acquirer of the corporation, was not entitled to use its billing number. 

Notably, in assessing MedQuest’s conduct as a whole, the Sixth Circuit stated that it appeared MedQuest ignored Medicare regulations and took actions that were at odds with the goals and aims of the Medicare program.  However, it concluded that although MedQuest’s conduct was addressable through Medicare administrative sanctions, the FCA was an inappropriate tool for enforcing compliance with the technical requirements at issue.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Chambliss, Bahner & Stophel, P.C. | Attorney Advertising

Written by:

Chambliss, Bahner & Stophel, P.C.

Chambliss, Bahner & Stophel, P.C. on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.