Paul Allen Olson v. Fairview Health Services of MN, 831 F.3d 1063

Background

Paul Olson, a former Minnesota Department of Human Services (MDHS) payment-policy manager, filed qui tam claims under the federal False Claims Act (FCA) and Minnesota False Claims Act (MFCA) alleging University of Minnesota Medical Center (UMMC)/Fairview secured and retained Medicaid reimbursements by treating its children’s unit as a statutorily exempt “children’s hospital.”
In 2011 Minnesota reduced most inpatient Medicaid payments by 10% but exempted “children’s hospitals whose inpatients are predominantly under 18 years of age.” The statute did not define “children’s hospital.”
UMMC (a licensed hospital) has a children’s unit that is not separately licensed; MDHS applied the exemption to UMMC retroactively after meetings and issued a reimbursement (~$500,000). MDHS later audited, concluded the exemption likely was improper, and sought recovery; the legislature subsequently retroactively amended the statute to cover UMMC in 2014.
Olson alleges UMMC fraudulently induced MDHS to treat its children’s unit as a children’s hospital and then submitted or retained false claims and concealed an obligation to repay overpayments.
The district court dismissed Olson’s amended complaint under Rule 12(b)(6) and Rule 9(b), finding the statutory language ambiguous and UMMC’s interpretation reasonable; Olson’s motion to amend was denied as futile. Olson appeals; the Eighth Circuit affirms.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether UMMC presented false claims under 31 U.S.C. § 3729(a)(1)(A) by treating its children’s unit as a “children’s hospital.”	Olson: the statutory exemption unambiguously excludes UMMC’s unit; claims were false and knowingly presented.	UMMC: the statute is ambiguous; its interpretation that the unit qualified was reasonable.	Affirmed dismissal — statute ambiguous; reasonable interpretation defeats FCA liability for false claims.
Whether UMMC violated § 3729(a)(1)(B) by making/using false records/statements material to claims.	Olson: billing and representations were false and material to overpayments.	UMMC: no fraudulent misrepresentation; only a reasonable statutory interpretation.	Affirmed dismissal — plaintiff failed to plead who/what/when/how with Rule 9(b) particularity beyond a reasonable statutory interpretation.
Whether UMMC violated reverse‑false‑claims § 3729(a)(1)(G) by concealing an obligation to repay overpayments.	Olson: UMMC knew it was not entitled to the exemption and concealed/retained overpayments.	UMMC: lacked the requisite knowledge; conduct was not fraudulent; obligation was not established when funds were received.	Affirmed dismissal — plaintiff did not plead with sufficient particularity that UMMC knowingly concealed an established obligation; no adequately pleaded fraudulent conduct.
Whether leave to amend should be allowed (futility).	Olson: proposed amendments would identify specific false statements and provider agreement evidence.	UMMC: amendments would not cure the core defect (reasonableness of interpretation).	Affirmed denial of leave — amendments would be futile; argument waived and, in any event, would not change legal defect.

Key Cases Cited

Rockwell Int’l Corp. v. United States, 549 U.S. 457 (Sup. Ct.) (explaining qui tam origin and FCA background)
Summerhill v. Teminix, Inc., 637 F.3d 877 (8th Cir. 2011) (Rule 9(b) heightened pleading standard review de novo)
U.S. ex rel. Joshi v. St. Luke’s Hosp., Inc., 441 F.3d 552 (8th Cir.) (fraud pleading must identify who, what, where, when, how)
Costner v. URS Consultants, Inc., 153 F.3d 667 (8th Cir.) (FCA liability attaches to claim for payment)
U.S. ex rel. Costner v. United States, 317 F.3d 883 (8th Cir.) (materiality requirement for falsehood in claim)
Bell Atl. Corp. v. Twombly, 550 U.S. 544 (Sup. Ct.) (plausibility pleading standard)
Ashcroft v. Iqbal, 556 U.S. 662 (Sup. Ct.) (pleading must contain sufficient factual matter to state plausible claim)
U.S. ex rel. Hixson v. Health Mgmt. Sys., Inc., 613 F.3d 1186 (8th Cir.) (reasonable statutory interpretation negates FCA knowledge)
Universal Health Servs., Inc. v. U.S. ex rel. Escobar, 136 S. Ct. 1989 (Sup. Ct.) (FCA is not an all-purpose antifraud statute)