Qui tam suit against USC hospital dismissed for failure to state a claim

by Ben Vernia | March 5th, 2013

On February 19, Central District of California Judge Dean D. Pregerson, in U.S. ex rel. Zeman v. U.S.C. Univ. Hosp., granted the defendant hospital’s motion to dismiss the relator’s complaint under Fed. R. Civ. P. 12(b)(6). The whistleblower, a woman who underwent foot surgery at the hospital, was covered by “a Medicare managed plan administered by third party companies,” and she alleged that she received bills that were improper because they were for services within ninety days of her operation, and were for services not provided at any hospital facility.

The hospital moved to dismiss, and Judge Pregerson granted the motion. He concluded that the whistleblower’s complaint failed to allege that the hospital submitted any claims to the United States. He disagreed with the relator’s argument that she had adequately met the standard by alleging that she received Medicare services through the managed care plan, reasoning that “[t]he mere fact that Plaintiff received a bill, however, does not necessarily establish that the service was covered by Medicare in the first instance or indicate that the Hospital submitted any claims, let alone false or fraudulent claims, to the United States.”

Comment: This appears to be the correct result for the wrong reason. If the whistleblower’s bill showed the submission of claims by the hospital to the Medicare managed care plan, that should suffice under the the FCA, 31 USC 3729(b)(2)(A)(ii), which defines claim to include those made to government contractors. The real problem, however, is that the plaintiff is probably describing a Medicare Advantage plan, which receives a fixed premium per month for each beneficiary covered (a “capitated” rate), and so individual costs are not passed on to the government. This would raise other questions – i.e., lack of causation (because the bill to the Medicare Advantage carrier would not result in a demand on the Treasury), and materiality.

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