United States Ex Rel. Hutcheson v. Blackstone Medical, Inc.
2011 U.S. App. LEXIS 10972
| 1st Cir. | 2011Background
- Hutcheson worked as a Blackstone Regional Manager from 2004 to 2006.
- She filed a qui tam action on September 29, 2006, alleging Blackstone paid kickbacks to doctors nationwide to induce use of its devices.
- The United States did not intervene but supported Hutcheson as amicus.
- The district court dismissed the FCA claim under Rule 12(b)(6), finding hospital claims non-false and physician claims not materially false.
- The district court identified a framework distinguishing factually vs. legally false claims and express vs. implied certifications.
- Hutcheson contends AKS compliance is a Medicare payment precondition and the Provider Agreement/Hospital Cost Report imply non-submitting entities’ conduct can trigger FCA liability.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether AKS as a precondition of payment can support FCA liability | Hutcheson asserts AKS compliance is a payment precondition for Medicare. | Blackstone argues no precondition of payment exists expressly or impliedly under governing statutes/regulations. | AKS precondition can support liability; form language suffices. |
| Whether implied misrepresentations by non-submitting parties can make a submitting entity's claim false | Hutcheson argues non-submitting conduct can render claims false when impliedly conditioning payment. | Blackstone argues implied false certification applies only when clearly tied to express preconditions in statutes/regulations and not to non-submitting conduct. | Non-submitting conduct can yield FCA liability; implied misrepresentation doctrine can extend beyond express statutory preconditions. |
| Whether hospital misrepresentations on Provider Agreement/Hospital Cost Report are actionable | Hutcheson contends these forms create representations of AKS compliance for payment. | Blackstone contends the forms do not specific enough to create express certification or imply non-submitting conduct. | Models of misrepresentation on these forms can be false or fraudulent. |
| Whether physician claims can be false or fraudulent based on kickback-induced services | Hutcheson asserts physician claims reflect improper AKS-related preconditions. | Blackstone contends services themselves, not devices, drive payment and may not reflect misrepresentation of AKS compliance. | Physician claims can be false or fraudulent where underlying AKS violations render payment ineligible. |
| Whether materiality is satisfied by alleged kickbacks influencing Medicare payment | Hutcheson argues kickbacks have a natural tendency to influence payment decisions. | Blackstone argues certain payment mechanisms (e.g., DRGs) neutralize the impact of AKS non-compliance. | Materiality is shown where misrepresentations are capable of influencing payment decisions; cannot be dismissed as immaterial as a matter of law. |
Key Cases Cited
- Mikes v. Straus, 274 F.3d 687 (2d Cir. 2001) (implied false certification requires express compliance in underlying statute/regulation)
- SAIC, Corp. v. United States, 626 F.3d 1257 (D.C. Cir. 2010) (non-express contract terms can create material preconditions of payment)
- Hess v. United States, 317 U.S. 537 (Supreme Court, 1943) (non-submitting liability for causing government to pay fraudulent claims)
- United States v. Bornstein, 423 U.S. 303 (Supreme Court, 1976) (liability for causing submission of claims by others for mislabelled goods)
- Murray & Sorenson v. United States, 207 F.2d 119 (1st Cir. 1953) (unlawful acts by non-submitting entities may give rise to liability)
- Rivera v. United States, 55 F.3d 703 (1st Cir. 1995) (false claim may be presented through an innocent third party)
- Loughren v. Unum Group, 613 F.3d 300 (1st Cir. 2010) (materiality requirement applies to FCA claims)
- United States ex rel. Conner v. Salina Regional Health Center, 543 F.3d 1211 (10th Cir. 2008) (implied false certification theory requires express preconditions in underlying statutes/regulations)