On September 30, the US Court of Appeals for the Sixth Circuit reversed dismissal of a relator’s False Claims Act (FCA) claims against providers of home health services in U.S. ex rel. Prather v. Brookdale Senior Living Communities, Inc. et al. The relator was a utilization review nurse who alleged that physician certifications of patient need for home health care were not signed until well after the care had been provided, in violation of 42 C.F.R. § 424.22(a)(2), which requires that such certifications be completed at the time a plan of care is established or “as soon thereafter as possible.” While the regulation does not define “as soon thereafter as possible,” the Sixth Circuit held that the relator’s allegations that the requisite certifications were not completed for several months were sufficient to allege violations of both the regulation and the FCA.

The Sixth Circuit reasoned that the phrase “as soon thereafter as possible” “suggests plainly that the analysis of whether a certification complies requires that the reason for any delay be examined.” The court went on to announce the following rule: “Certification of need may be completed after the plan of care is established, but only if an analysis of the length of delay, the reasons for it, and the home health agency’s efforts to overcome whatever obstacles arose suggests that the home health agency obtained the certification ‘as soon thereafter as possible.’” The Sixth Circuit held that the relator’s complaint satisfied this standard, because she alleged that the certifications were not completed for months due solely to a backlog of Medicare claims that arose because of the defendants’ allegedly aggressive solicitation of residents for treatment.

A strong dissent from Judge David McKeague’s took issue with the majority’s holding, which he characterized as inappropriate rulemaking:

As an initial matter, the regulations do not require that anyone examine ‘the reason for any delay’ in securing signatures – let alone the federal judiciary. . . . Without a rule on point, the majority makes a curious and disturbing move: it somehow construes the absence of a requirement for defendants to explain any delay as a license for the court to create one. …It is Congress’s job to pass statutes, the agencies’ job to write regulations, and our job to interpret them. It is not our job to create new rules – especially when our creations would, as in this case, be applied retroactively to result in massive liability. . . . [T]he majority chides defendants for failing to meet a requirement in 2010 and 2011 that the court only invented today.

The dissent further decried the practical burdens and uncertainties associated with the majority’s new rule: “Medicare and courts would have to proceed on a case-by-case basis to examine the validity of proffered reasons for delay without a guide as to what an ‘acceptable’ reason might be.” Finally, the dissent highlighted the fact that the majority effectively allowed FCA claims to go forward based on a mere violation of an administrative regulation: “But even if Prather is deemed to have adequately alleged a ‘falsity,’ it is merely technical noncompliance and not truly a ‘fraudulent scheme.’ . . . At the end of the day, this case is about late signatures, not false claims.”

Notably, the Sixth Circuit did not apply the standards for implied certification cases announced by the US Supreme Court in Escobar; the court observed that the Supreme Court’s opinion was issued after the briefs were filed, and the parties did not press the issue. It is questionable whether the relator’s complaint would have survived under the Escobar standard—it is far from obvious that the alleged delay in signing the certifications would have been “material” to the government’s payment decisions, particularly given that the regulatory scheme provided no specific deadline. Moreover, the Second Amended Complaint contained only conclusory allegations of materiality of the type the Supreme Court held were insufficient.

As a final note, the majority adopted an exception to Rule 9(b)’s heightened pleading standard where relators cannot identify the specifics of the allegedly false claims but are able to “plead facts supporting a strong inference that claims were submitted.” The court made clear, however, that the claim details would be required “in the majority” of FCA cases.

It is likely that the defendants will seek rehearing en banc, and we will provide an update if the Sixth Circuit grants it.