Sixth Circuit reverses summary judgment against MedQuest for diagnostic imaging claims

by Ben Vernia | April 2nd, 2013

On April 1, the Sixth Circuit Court of Appeals, in U.S. ex rel. Hobbs v. Medquest Assoc., Inc., et al., reversed summary judgment by the Middle District of Tennessee in favor of the government and a qui tam relator, regarding two sets of claims that MedQuest violated the False Claims Act.

The case involved diagnostic imaging claims submitted by MedQuest. The first set of claims, the government alleged, violated the FCA because no physician listed as a supervising physician on the enrollment forms for MedQuest’s independent diagnostic testing facilities (IDTF) in the Nashville area supervised the contrast MRI and CT scans. The second set, the government alleged, violated the FCA because they were submitted under the provider number of the physician from whom MedQuest had purchased a radiology practice. The District Court granted the government and relator summary judgment and entered judgment against them in an amount over $11.1 million.

On appeal, the Sixth Circuit concluded that because the rules MedQuest violated were conditions of participation in Medicare, and not conditions of payment for individual claims, they could not form the basis for FCA liability.

Taking the sets of claims one at a time, the Court first reviewed those lacking supervision by one of the listed physicians. It rejected the government’s argument that the IDTFs’ enrollment forms comprised an express certification of compliance with the regulation – the Court reasoned that the claim must be assessed at the time it was made, and the government had neither argued nor provided evidence that the company intended to violate the rule, and the form did not make condition payment of a claim on compliance with any law or regulation.

The Court then reviewed the same set of claims under an implied certification theory, but concluded that the regulations with which the claims’ submission implied compliance were not conditions of payment, as is required under such a theory. Reaching such a conclusion, the Court wrote, is only possible “by weaving together isolated phrases from several sections of the complex scheme of Medicare regulations,” and it was not reasonable, the Court wrote, to expect providers to do this to ensure compliance with the FCA. “The ‘blunt[ness] of the FCA’s hefty fines and penalties makes them an inappropriate tool for ensuring compliance with technical and local program requirements like the special supervision requirements at issue in this case,” the Court wrote.

Turning to the claims submitted under the former physician/owner’s provider number, the Court rejected the government’s arguments that his practice ceased to exist when MedQuest purchased it, or that it was not an IDTF until it was enrolled with Medicare.

Having concluded that the decision had to be reversed, the Sixth Circuit did not reach MedQuest’s argument that the judgment violated the Eighth Amendment’s Excessive Fines clause.

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