Capitated payments doom whistleblower's qui tam, but not her retaliation claim

by Ben Vernia | March 24th, 2011

On March 3, W.D.Wash. Judge Ricardo S. Martinez granted an HMO’s motion to dismiss qui tam allegations a whistleblower lodged against it, but declined to dismiss the woman’s wrongful retaliation claims. In the suit, the whistleblower, a former ophthalmologist employed by the HMO, alleged that the firm failed to follow Medicare guidelines for preoperative examinations for cataract surgery patients.

The HMO argued, and Judge Martinez agreed, that because the firm received fixed capitated payments for its Medicare Advantage patients regardless of their utilization of services, there could be no false claim as the relator had alleged. Judge Martinez wrote:

The scheme alleged is difficult to construe as a violation of the FCA upon a consideration of the capitated payment system, in which a health care provider is paid a contracted or fixed rate per patient regardless of the number of type of services provided to the enrolled member. Under such a system, it cannot be said that false claims are being made, since payments remain the same regardless of whether a surgery is performed or not. While Plaintiff puts forth that by incurring higher costs, Defendants may receive higher capitated payments for managed care beneficiaries in the future, it nonetheless remains the case that those costs are self-incurred, and the government continues to pay a flat rate.

He likewise rejected her argument that the HMO violated the False Claims Act by falsely certifying compliance, reasoning that “[s]ince the conduct alleged did not alter the payments made by the government, it cannot be said that any alleged false statement was material to the government’s decision to pay.”

Judge Martinez nevertheless denies the HMO’s motion to dismiss the doctor’s wrongful retaliation claims. He found that she had sufficiently alleged a good-faith belief that the HMO’s actions violated the Medicare guidelines, he wrote, and this – along with allegations that she discussed these concerns with her supervisors and received negative performance reviews because of her complaints – sufficed to allege a viable claim under 31 U.S.C. 3730(h).

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