United States ex rel Lemon v. Nurses To Go, Incorporated
924 F.3d 155
5th Cir.2019Background
- Relators (former Nurses To Go employees) alleged that hospice provider group led by Walter Crowder submitted false Medicare claims by certifying patients as eligible for hospice when statutory/regulatory requirements (certifications, physician narratives, face-to-face encounters, individualized plans of care) were not met.
- Specific allegations included failing to complete/maintain certifications and physician narratives, allowing non‑medical staff to prepare required documents, conducting improper staff encounters (nurses instead of physicians/NPs), billing for services to deceased patients, and routinely enrolling new patients in costly "continuous home care" without clinical crises.
- Lemon reported the overbilling; after retraining, continuous care billable hours in the Austin office dropped sharply, and headquarters later pressured local staff to resume automatic continuous care for new admissions.
- Relators filed a qui tam FCA suit; the Government declined intervention. Defendants moved to dismiss under Rule 12(b)(6), arguing the alleged regulatory violations were immaterial under the FCA and that fraud was not pleaded with Rule 9(b) particularity.
- The district court dismissed for immateriality and on perceived Rule 9(b) deficiencies; the Fifth Circuit reviewed de novo and limited its decision to the materiality question under the FCA, vacating any Rule 9(b) dismissal and remanding for proper analysis.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether alleged Medicare certification and documentation failures are "material" under the False Claims Act | The false certifications and overbilling (including improper continuous care and billing for deceased patients) concern statutory/regulatory requirements that are conditions of payment; the Government would not have paid had it known | The violations are immaterial because some claims reflect services actually provided and CMS guidance shows nonpayment investigation is limited; relators lack particularized knowledge for non‑employer entities | Reversed: Allegations plausibly plead materiality — certifications are conditions of payment under 42 U.S.C. § 1395f(a)(7); government enforcement history and the nature/seriousness of alleged violations support inference that government would deny payment |
| Whether continued government payment despite knowledge defeats materiality at pleading stage | Materiality need not be negated by alleging government inaction; relators need not plead prior government enforcement actions to survive a motion to dismiss | Defendants relied on CMS Program Integrity Manual language to argue government does not investigate matters that don't affect payment | Held: Government's alleged enforcement against similar hospice fraud supports materiality; absence of direct evidence of routine government payment despite knowledge does not defeat the complaint at pleading stage |
| Whether noncompliance alleged is "minor or insubstantial" | Certifications of terminal illness and limits on continuous care go to eligibility and are not minor; improper certifications can cause payment that otherwise would not be made | Defendants argue they billed for services provided, not for nonexistent services, so violations are not fraudulent or are insubstantial | Held: Violations as alleged are not minor — false terminal illness certifications and inappropriate continuous care can naturally influence payment decisions |
| Whether dismissal for failure to plead fraud with particularity under Rule 9(b) was proper | Relators argued complaint alleged specific patients, dates, and practices sufficient for Rule 9(b) scrutiny | Defendants argued relators lacked particularized knowledge as to non‑employer entities | Held: Court vacated Rule 9(b)-based dismissal and remanded for district court to apply Grubbs and Fifth Circuit Rule 9(b) standards in the first instance |
Key Cases Cited
- Universal Health Servs., Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016) (Supreme Court clarified FCA materiality for implied false certification claims and listed non‑exclusive factors)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (established plausibility standard for pleadings)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (applied Twombly plausibility standard to factual allegations)
- United States ex rel. Harman v. Trinity Indus. Inc., 872 F.3d 645 (5th Cir. 2017) (discussed Escobar's heightened materiality standard in Fifth Circuit context)
- United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180 (5th Cir. 2009) (Fifth Circuit Rule 9(b) pleading particularity guidance)