United States v. Deming Hospital Corp.
992 F. Supp. 2d 1137
D.N.M.2013Background
- Mimbres Memorial Hospital operated a CLIA-certified laboratory; relator Sally Hansen, a medical technologist, alleged widespread CLIA violations (personnel, quality control, calibration, documentation) discovered after she began work in May 2010.
- Hansen alleges defendants concealed violations during CLIA reaccreditation (2009, 2011), falsified records, and misrepresented compliance to the Joint Commission and inspectors.
- Hansen reported concerns internally (lab director, HR, corporate compliance officer, CEO) and to the state health department; after complaints she was threatened, placed on administrative leave ~July 2010–Feb 2011, reassigned, and ultimately resigned.
- The United States and New Mexico declined to intervene in Hansen’s qui tam suit under the False Claims Act (FCA); Hansen proceeded and filed a First Amended Complaint alleging: (1) false/fraudulent claims under 31 U.S.C. § 3729(a)(1)(A)-(B), (2) reverse false claims, (3) retaliation under § 3730(h), and (4) state-law analogues.
- Defendants moved to dismiss under Rule 12(b)(6); court accepted well-pleaded facts but dismissed federal FCA claims with prejudice and declined supplemental jurisdiction over state claims (dismissed without prejudice).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Implied false certification (legal falsity) — whether CLIA noncompliance is a condition of payment | Hansen: CLIA compliance is a prerequisite to payment; submitting claims while noncompliant was an implied false certification material to payment | Defendants: CLIA rules are conditions of participation with an administrative remedial scheme, not conditions of payment | Dismissed — CLIA compliance is a condition of participation, not payment; implied-certification theory fails |
| Express false certification (CMS Form 1500) — whether Form 1500 certifies CLIA/legal compliance | Hansen: CMS Form 1500 certification makes claims false when provider is noncompliant | Defendants: The Form certification only attests that the claim form information is true; it does not certify regulatory compliance as a condition of payment | Dismissed — Form 1500 does not certify CLIA/regulatory compliance as a condition of payment |
| Promissory fraud (fraud in the inducement of accreditation/participation) — whether alleged fraud made participation/payment material | Hansen: Fraudulent recertification and falsified records induced CLIA accreditation (phase-one) making later payment claims false (phase-two) or show intent not to comply | Defendants: CLIA renewal and enforcement are discretionary with remedial options; allegations do not show that accreditation would have been denied absent fraud | Dismissed — allegations do not plausibly show materiality or that participation would have been denied; promissory fraud fails |
| Worthless-services / factual falsity — whether lab testing was so deficient as to be worthless | Hansen: Defective QC and verification rendered tests unreliable and dangerous | Defendants: (challenged later) first amended complaint did not plead this theory or meet Rule 9(b) / show services were entirely devoid of value | Dismissed (not pleaded) — complaint fails to allege tests were "equivalent of no performance"; no fair notice of this theory |
| Reverse false claims (§ 3729(a)(1)(G)) — whether defendants had an obligation to repay government funds and made false records material to that obligation | Hansen: conclusory allegations asserting reverse false claims based on conduct | Defendants: No pleaded obligation to pay/transmit money; pleadings lack factual support and Rule 9(b) specificity | Dismissed — no factual allegations that defendants owed or failed an obligation to repay the government |
| Retaliation under § 3730(h) — whether Hansen engaged in protected activity and put employer on notice of efforts to stop FCA violations | Hansen: reporting CLIA violations internally and to state department constituted protected activity under the post‑FERA § 3730(h) | Defendants: Hansen did not give notice she was engaged in efforts to stop fraud or pursue an FCA action; pre‑FERA standard required clearer notice and nexus | Dismissed — allegations show reporting of regulatory noncompliance but not notice to employer that she was trying to stop fraud on the government; § 3730(h) claim fails |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (legal standard for plausible pleading)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading must do more than state legal conclusions)
- U.S. ex rel. Conner v. Salina Reg’l Health Ctr., Inc., 543 F.3d 1211 (10th Cir. 2008) (distinguishing conditions of participation from conditions of payment in FCA context)
- U.S. ex rel. Hendow v. Univ. of Phoenix, 461 F.3d 1166 (9th Cir. 2006) (false certification and promissory fraud framework)
- U.S. ex rel. Lemmon v. Envirocare of Utah, Inc., 614 F.3d 1163 (10th Cir. 2010) (materiality and false certification principles)
- Mikes v. Strauss, 274 F.3d 687 (2d Cir. 2001) (distinguishing factual vs. legal falsity; worthless-services discussion)
- U.S. ex rel. Main v. Oakland City Univ., 426 F.3d 914 (7th Cir. 2005) (promissory fraud in HEA context)
- U.S. ex rel. Lee v. SmithKline Beecham, Inc., 245 F.3d 1048 (9th Cir. 2001) (worthless-services theory discussion)