United States ex rel. Phalp v. Lincare Holdings, Inc.
116 F. Supp. 3d 1326
S.D. Fla.2015Background
- Relators (former employees) challenged six exemplar Medicare claims where Diabetic Experts (d/b/a of Lincare/Lineare) sold diabetic testing supplies to beneficiaries and billed Medicare; beneficiaries had previously received Lineare oxygen supplies within 15 months.
- Diabetic Experts operated as a d/b/a (subpart) of Lineare; Lineare enrolled the Missouri Diabetic Experts location with CMS/NSC and obtained NPIs/NSC numbers; revenues reported under Lineare’s TIN; consent forms (AOBs) signed by beneficiaries were on file with Lineare.
- Relators alleged FCA violations: (Count I) presentment of false claims arising from alleged unlawful unsolicited calls and improper use of Lineare AOBs; (Count II) make-or-use theory based on Holdings sharing Lineare patient leads and AOBs with Diabetic Experts.
- Key regulatory issues: (1) whether Diabetic Experts was a separate supplier (requiring different AOBs and telephone-contact analysis), (2) whether the items billed (test strips, lancets, solution, disposable lancet devices) were “equipment” requiring new item-specific AOBs, and (3) scienter for FCA liability.
- The court granted Relators additional discovery on other issues but resolved summary judgment as to the six exemplars: struck expert legal-opinion portions, treated Diabetic Experts as a Lineare subpart, held the calls fell within the 15‑month exception, and found the billed items were supplies (not equipment).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Diabetic Experts is a separate DMEPOS supplier | Diabetic Experts operated and billed separately (own NPI, account numbers), so it was a distinct supplier; calls and AOB use thus unlawful | Diabetic Experts is a d/b/a/subpart of Lineare (same legal supplier); CMS rules allow subparts to have NPIs/NSC numbers; therefore Lineare’s prior furnishing triggers the 15‑month exception and AOBs remain effective | Held: Diabetic Experts is a subpart of Lineare as a matter of law; not a separate supplier |
| Whether unsolicited calls violated 42 U.S.C. §1395m(a)(17) exception | Calls to Diabetic Experts’ customers violated the prohibition because Diabetic Experts had not previously furnished DMEPOS to those beneficiaries | Because Lineare furnished an item within 15 months, the exception applies even where a subpart (Diabetic Experts) made the call | Held: Calls were permissible under the 15‑month exception because Lineare had furnished covered items within that period |
| Whether AOBs used by Diabetic Experts were insufficient/false | AOBs were not item-specific and were given to Lineare, not Diabetic Experts; therefore claims were legally false and FCA‑actionable | AOBs signed for Lineare (or “supplier and affiliates”) could be maintained on file and were effective; supplies shipped were not new equipment requiring new AOBs | Held: AOBs valid for use by Diabetic Experts (as Lineare subpart); supplies were nondurable (consumables), so no new item‑specific AOB required |
| Whether Relators proved scienter for FCA liability | Corporate emails and internal discussion about AOBs show actual knowledge or reckless disregard | Defendant’s interpretation of regulations was reasonable; internal compliance discussions show monitoring, not knowing submission of false claims | Held: Relators failed to present evidence creating a genuine dispute on scienter; summary judgment for defendants on the six exemplars |
Key Cases Cited
- United States ex rel. Walker v. R & F Props. of Lake Cnty., Inc., 433 F.3d 1349 (11th Cir. 2005) (overview of Medicare program context)
- United States ex rel. Wilkins v. United Health Group, Inc., 659 F.3d 295 (3d Cir. 2011) (implied‑certification theory and limits on its expansion)
- Urquilla‑Diaz v. Kaplan Univ., 780 F.3d 1039 (11th Cir. 2015) (False Claims Act scienter standard and summary judgment principles)
- Mikes v. Straus, 274 F.3d 687 (2d Cir. 2001) (condition‑of‑payment analysis and caution against expansive FCA application for regulatory violations)
- Clausen v. Laboratory Corp. of Am., 290 F.3d 1301 (11th Cir. 2002) (FCA requires a link between regulatory noncompliance and claims submitted)
- McNutt ex rel. United States v. Haleyville Med. Supplies, Inc., 423 F.3d 1256 (11th Cir. 2005) (regulatory violations can make claims false where compliance is prerequisite to payment)
- United States ex rel. Hobbs v. MedQuest Assocs., Inc., 711 F.3d 707 (6th Cir. 2013) (FCA is not a vehicle to police mere regulatory noncompliance but recognizes administrative remedies)