United States Ex Rel. Prather v. Brookdale Senior Living Cmtys., Inc., 892 F.3d 822

Background

Relator Marjorie Prather, a utilization-review nurse at Brookdale, alleged Brookdale submitted Medicare claims where physician certifications required by 42 C.F.R. § 424.22(a)(2) were obtained months after the plan-of-care (sometimes after the 60-day episode ended).
Brookdale created a "Held Claims Project" to clear a backlog of unbilled claims; staff used checklists and sought late physician signatures (including paying physicians and obtaining attestations).
Prather raised compliance concerns internally; she alleges supervisors instructed cursory reviews and pressured staff to release claims quickly.
Prather originally filed a qui tam FCA suit in 2012; the panel in Prather I (6th Cir.) held late certifications could render claims "impliedly false" if the delay was unjustified and reversed dismissal on falsity/particularity grounds.
On remand after the Supreme Court's Escobar decision, Prather filed a Third Amended Complaint alleging implied false-certification FCA claims (false claims and retention of overpayments); the district court dismissed for failure to plead materiality under Escobar.
This panel reverses the district court: holds Prather pleaded materiality and scienter (reckless disregard) sufficiently to survive dismissal and remands for further proceedings.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether § 424.22(a)(2) timing requirement is an express condition of Medicare payment	Prather: § 409.41(b) incorporates § 424.22; (a)(2) is part of the certification that conditions payment	Brookdale: § 424.22 introductory clause limits express conditions to (a)(1) and (b)(2), not timing in (a)(2)	Court: § 424.22(a)(2) is an express condition of payment (factor favoring materiality)
Whether the alleged omission (untimely certifications and lack of justification) is material under Escobar	Prather: timing requirement prevents fraud; HHS/CMS/OIG guidance emphasizes timeliness, so the requirement goes to the essence of the bargain	Brookdale: government’s payment practices and billing process show CMS/MACs don’t expect disclosure at billing; no evidence government would refuse payment	Court: materiality sufficiently alleged—timing is an express condition, government paid without knowledge (so past payments irrelevant), and timing is an anti-fraud mechanism emphasized in guidance
Whether relator must plead prior government refusals/payments to show materiality	Prather: not required at pleading stage; materiality is holistic	Brookdale: absence of any example where CMS denied payment for late certifications shows non-materiality	Court: not required to plead government enforcement history; district court erred to infer non-materiality from absence of such allegations
Whether scienter (knowledge/reckless disregard) is pleaded adequately	Prather: facts show Brookdale instructed cursory reviews, ignored internal warnings, rebilled RAPs after cancellations, and knew physicians might refuse late signatures—supporting reckless disregard	Brookdale: conduct consistent with negligence or efforts to obtain signatures; no evidence of knowledge that timing was material	Court: Prather pleaded facts permitting inference of reckless disregard—sufficient at motion-to-dismiss stage

Key Cases Cited

Universal Health Servs., Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (U.S. 2016) (clarifies FCA materiality for implied false-certification claims; materiality is "demanding" and holistic)
United States ex rel. Prather v. Brookdale Senior Living Cmtys., Inc., 838 F.3d 750 (6th Cir. 2016) (Prather I) (held unexplained late certifications can render claims impliedly false; interpreted "as soon thereafter as possible")
United States ex rel. Marlar v. BWXT Y-12, L.L.C., 525 F.3d 439 (6th Cir. 2008) (Rule 9(b) particularity standards for FCA fraud pleading)
United States ex rel. Wall v. Circle C Constr., L.L.C., 697 F.3d 345 (6th Cir. 2012) (reckless disregard may satisfy FCA scienter)