Nuances of Liability: Conditions of Payment vs. Conditions of Participation Under the False Claims Act

In yesterday’s post, we reviewed two concepts that often serve as the basis of a whistleblower’s complaint under the False Claims Act. The first is known as a condition of payment violation, which occurs when a provider knowingly submits a claim for reimbursement to Medicare or Medicaid in violation of an administrative code or regulation, upon which payment is explicitly conditioned. The second is known as a condition of participation, which pertains more generally to the safety and protocol measures required of participating Medicare and Medicaid doctors and specialists.

In today’s post, we review how the courts have analyzed these concepts, including a look at why ‘condition of payment’ claims seem to fare better in the federal courts than ‘condition of participation’ claims.

First Circuit blurs distinction between conditions of payment vs. participation

In a recent case decided by the First Circuit Court of Appeals, the court was faced with a difficult set of facts involving the unlicensed provision of mental health “care” to a minor Massachusetts Medicaid recipient. According to the evidence, the teenager saw a series of unlicensed and/or unsupervised mental health providers, including one nurse who held herself out as a board certified psychiatrist. Pursuant to this interaction, the nurse prescribed powerful bipolar medication to the child, which resulted in the onset of a fatal seizure.

In the subsequent claim by the estate under the False Claims Act, the trial court deemed the center’s violations as conditions of participation in the Medicaid program as opposed to actual violations of any condition of payment. At trial, the court dismissed any False Claims Act allegations in favor of traditional negligence and misrepresentation claims, stating that the violations, while horrendous, did not actually violate any conditions of repayment and were therefore not actionable under the False Claims Act.

On appeal, the First Circuit disagreed, holding that the center impliedly agreed to uphold the Medicaid regulations at issue simply by virtue of submitting a claim. More specifically, the court found:

We ask simply whether the defendant, in submitting a claim for reimbursement, knowingly misrepresented compliance with a material precondition of payment. Preconditions of payment, which may be found in sources such as statutes, regulations, and contracts, need not be ‘expressly designated’. Rather, the question whether a given requirement constitutes a precondition to payment is a ‘fact-intensive and context-specific inquiry….

After conducting its own context-specific inquiry, the court found that – even though Medicaid repayment guidelines do not expressly state the requirement – failure to properly supervise mental health professionals is an implied condition of compliance, and therefore an implied condition for repayment.

Conditions of participation held not actionable under False Claims Act

In other cases, the courts have found the opposite: a violation of a condition of participation does not automatically create a violation of a condition of payment absent clear and obvious deviation from the repayment rules. In U.S. ex rel. Conner v. Salina Regional Health Center, Inc., the 10th Circuit held that “it would be both inappropriate and premature for the government to refuse to pay otherwise appropriate claims on the basis that the provider failed to fulfill all conditions of participation.”

In that case, an eye doctor accused a local hospital of failing to supervise the employees and allegedly hiring a team of “under-qualified scrub staff.” U.S. ex rel. Conner v. Salina Regional Health Center, Inc. 543 F.3d 1211, 1217 (10th Cir. 2008). In response, the hospital encouraged the doctor to contract with his own scrub staff, and False Claims Act litigation ensued. Ultimately, the court held that the dispute between the doctor and hospital amounted to a possible condition of participation issue and was therefore not an appropriate claim under the False Claims Act.

Not sure? Contact a whistleblower attorney today.

If you are not sure whether the facts at hand amount to a negligence issue or a False Claims Act violation, please contact the qui tam attorneys of Berger Montague today.