BY Phuong Nguyen and Beth Anne Jackson, Brown and Fortunato
Early this year, a jury concluded a vascular surgery physician group (Group) violated the False Claims Act (FCA) by billing Medicare for services it had not fully performed at the time they were billed. While Medicare would typically deny a claim when the services are not fully performed, the Court, in response to the Group’s motion for judgment as a matter of law, ruled that damages should take into account that the services were eventually performed.
The Department of Justice (DOJ) investigated the allegations but declined to intervene in the case, and the relators proceeded with the case on their own. On February 16, 2022, the jury returned a verdict in favor of relators, finding the Group had submitted over 7,000 false claims, causing $2.7M in damages which, when trebled, totaled approximately $8.1M. In addition, relators asked for statutory penalties of almost $22M. The Group asked the Court to set aside the jury’s verdict and grant it judgment as a matter of law.
In considering the Group’s request, the Court discussed the issue of materiality: that is, whether the false statements underlying the claims must be material to the Government’s decision to pay the claims. The Group 
first argued that its submission of global billing codes prior to the professional component being completed was a “timing issue” and immaterial to the Government’s decision to pay the claims. Medicare, they argued, would have paid the claims eventually as the services were subsequently provided in full. The Court, however, rejected the argument, noting that a false claim for reimbursement is actionable under the FCA even if the services are provided as claimed or the damage is minimal or even non-existent because fraudulent claims hinder the integrity and effective administration of federal health care programs. Here, there was evidence, including the Group’s internal compliance documents, indicating Medicare would not have paid the claims if it had known that the services were incomplete.
Second, the Group argued the false statements were not material because the Government continued payment of claims even after it investigated the allegations and declined to intervene in the suit. The Court, however, stated that the DOJ’s decision to intervene is not relevant to whether the false statements were material, especially since the FCA was designed to allow relators to proceed with a qui tam action even after the DOJ declined to intervene. Also, the Court pointed out that the investigation occurred after the alleged conduct had already taken place, and by then, the Group had changed its billing practices. The analysis might be different if the Government continued payment after having contemporaneous and actual knowledge that the claim was false.
Turning to damages, the Group argued that the Government suffered no damages because the services were eventually performed. The Court, however, noted that Medicare does not make partial payments for partially completed services. Had Medicare known that the services were incomplete, it would have denied the claims. The Court stated, “Nonetheless, in considering damages, the Court cannot simply disregard that fact that the services for which … [the Group] submitted claims were actually performed in every case.”
The Court stated that by seeking payment from the Government prior to completing the services, the Group took advantage of the benefit of receiving payment now rather than later. The Government suffered damages stemming from the time value of money between the date the government paid the false claim and the date the claim was determined to be false. Using a median payment date of December 2, 2015, the Court estimated damages between $560k to $2.3M, with treble damages estimated at $1.7M to $7M. The Court then instructed the parties to confer over the proper method of assessing damages and to submit a joint advisory indicating their proposed models for evaluating damages. As of this writing, the parties have not filed the joint advisory on damages.
What can we learn from this case? Submitting a claim for incomplete services is a false claim. This case is interesting in that the calculation of damages must, according to this Court, consider whether the services were eventually completed. It is not clear how this ruling could apply to Medicare audits. The Court accepted that Medicare would have appropriately denied the claims entirely when the claims were submitted. If Medicare audits a claim and finds that the service was incomplete on the date of the claim, may it recoup the entire claim, or will it need to take into account whether the services were later completed? But even if damages can be reduced when the services are eventually performed, the trebling of damages, statutory penalties, and other potential consequences (e.g., exclusion) still serve as ample deterrence against false claims.