20 F.4th 295
7th Cir.2021Background
- Relator Dr. John Mamalakis, an anesthesiologist, sued TeamHealth (Anesthetix Management LLC and parent) under the False Claims Act, alleging Medicare/Medicaid upcoding: billing the higher “medical-direction” anesthesia code when only the lower “medical-supervision” rate was warranted.
- TeamHealth took over anesthesia services at All Saints Hospital in 2010, introduced a 100% medical-direction billing policy, employed nurse anesthetists, and instructed anesthesiologists to document checks every 15 minutes.
- Mamalakis alleged widespread noncompliance with the seven regulatory requirements for medical direction (e.g., lack of preanesthetic exams, absence during critical portions, failure to prescribe plans) and that TeamHealth knowingly billed nonetheless; he complained internally and was later terminated.
- The magistrate judge dismissed the original complaint under Fed. R. Civ. P. 9(b) for lack of fraud particularity, gave Mamalakis leave to amend, and required representative examples of fraudulent billing.
- Mamalakis’ amended complaint added ten detailed examples (identifying doctors, procedures, and facts showing failures to meet medical-direction requirements); six examples expressly allege billing at the medical-direction rate; four rely on the asserted uniform billing policy.
- The magistrate again dismissed with prejudice as insufficient under Rule 9(b). The Seventh Circuit reversed, holding the ten representative examples (read with the background allegations) satisfied Rule 9(b) and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument (Mamalakis) | Defendant's Argument (TeamHealth) | Held |
|---|---|---|---|
| Whether the amended complaint pleaded FCA fraud with the particularity required by Rule 9(b) (false claims via improper use of medical-direction code) | Ten representative examples + background show who, what, when, where, how; relator’s personal knowledge supports plausible inference of false claims | Allegations are generalized, lack specific false invoices and particularized billing allegations for most examples; orientation comments do not show intent to defraud | Reversed: the ten detailed examples (six with specific billing allegations) plus background satisfy Rule 9(b); claim may proceed to discovery |
| Whether dismissal with prejudice was appropriate and whether other counts survived | Sought to proceed on §3729(a)(1)(A); did not contest magistrate’s dismissal of unargued counts on appeal | Urged dismissal of whole complaint for failure to plead fraud particularity | Magistrate’s dismissal on §3729(a)(1)(A) was erroneous; other counts were summarily dismissed below and not challenged on appeal, so decision focuses on the pleaded §3729(a)(1)(A) claim |
Key Cases Cited
- United States ex rel. Presser v. Acacia Mental Health Clinic, LLC, 836 F.3d 770 (7th Cir. 2016) (upcoding allegations can satisfy Rule 9(b) when billing code misuse is alleged with specificity)
- United States ex rel. Lusby v. Rolls‑Royce Corp., 570 F.3d 849 (7th Cir. 2009) (Rule 9(b) requires particularity but invoices need not be produced at the pleading stage)
- United States ex rel. Bogina v. Medline Indus., Inc., 809 F.3d 365 (7th Cir. 2016) (allegations “on information and belief” are generally insufficient under Rule 9(b))
- Universal Health Servs., Inc. v. United States ex rel. Escobar, 579 U.S. 176 (2016) (materiality requirement for FCA claims is rigorous)
- United States ex rel. Prose v. Molina Healthcare of Ill., Inc., 17 F.4th 732 (7th Cir. 2021) (distinguishes express false statements from implied‑certification theories)