949 F.3d 533
10th Cir.2020Background
- Relator Stacey Janssen (successor to original relator Megen Duffy) sued Lawrence Memorial Hospital (LMH) under the False Claims Act, alleging two schemes to obtain improper Medicare funds: falsifying patient "arrival times" and falsely certifying compliance with Section 6032 of the Deficit Reduction Act (DRA).
- LMH participates in CMS programs (IQR, OQR, HVBP) that use certain arrival-time–based measures affecting Medicare reimbursement; arrival time sometimes was recorded to match EKG times and interim triage forms were allegedly discarded.
- Evidence included staff testimony about instructions to delay registration or match arrival time to EKG, and statistics showing a measurable share of records with arrival times equal to or later than EKG times; but the record did not show how extensively reporting errors altered program scores or payments.
- LMH signed Data Accuracy Acknowledgments and DRA attestations; some New Associate handbooks lacked detailed FCA/DRA discussion, and some executives admitted signing attestations without review.
- CMS (via NCI AdvanceMed) investigated allegations after a hotline report and was made aware of a "quality issue," but CMS has not sought repayment, adjusted reporting practices, or ceased payments; the DOJ declined to intervene. The district court granted LMH summary judgment for lack of materiality; the Tenth Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Were alleged falsified arrival times "material" to Medicare payment decisions under the FCA? | Janssen: falsified arrival times affected IQR/OQR reporting and HVBP scores that influence reimbursement; materiality can be shown objectively or subjectively. | LMH: any inaccuracies were limited in scope, affected only a subset of measures, and CMS continued paying despite allegations. | Not material — evidence insufficient to show the inaccuracies likely influenced CMS’s payment decision; CMS inaction and the narrow scope weigh toward immateriality. |
| Were alleged false certifications of compliance with Section 6032 (DRA) material to payment? | Janssen: DRA compliance is a prerequisite for receiving >$5M in federal payments; attestations were false or unreliable. | LMH: any handbook or attestation deficiencies were limited and routine regulatory noncompliance, not undermining payments. | Not material — limited noncompliance and no evidence it affected CMS payment decisions; FCA not a tool for garden‑variety regulatory lapses. |
| What is the correct materiality standard? | Janssen: advocates a broader objective/subjective standard untethered to recipient reaction. | LMH: follows Escobar’s recipient‑focused approach. | The court applies Escobar: materiality is rigorous and focuses on the likely or actual behavior of the recipient (CMS); objective/subjective evidence is relevant only as it illuminates recipient reaction. |
| What weight does government conduct (DOJ declination, NCI/CMS inaction) carry on materiality? | Janssen: DOJ non‑intervention and CMS awareness do not resolve materiality. | LMH: CMS’s continued payments and lack of corrective action indicate immateriality. | CMS/NCI inaction is significant evidence of immateriality; DOJ declination is given little weight. |
Key Cases Cited
- United States v. Escobar, 136 S. Ct. 1989 (2016) (FCA materiality focuses on likely/actual behavior of the claim recipient; rigorous requirement)
- United States v. Bornstein, 423 U.S. 303 (1976) (historical purpose of the FCA)
- U.S. ex rel. Conner v. Salina Reg'l Health Ctr., 543 F.3d 1211 (10th Cir. 2008) (FCA not a vehicle for policing minor Medicare regulatory noncompliance)
- U.S. ex rel. Polukoff v. St. Mark's Hosp., 895 F.3d 730 (10th Cir. 2018) (elements of an FCA claim)
- United States v. Brookdale Senior Living Cmtys., 892 F.3d 822 (6th Cir. 2018) (government conduct relevant to materiality inquiry)
- United States v. Triple Canopy, Inc., 857 F.3d 174 (4th Cir. 2017) (cover‑up can support inference of materiality)
- U.S. ex rel. McBride v. Halliburton Co., 848 F.3d 1027 (D.C. Cir. 2017) (actual government behavior after allegations bears on materiality)