US, ex rel. Escobar v. Universal Health Services, Inc
780 F.3d 504
| 1st Cir. | 2015Background
- Arbour Counseling Services, a MassHealth provider, faced FCA claims based on unlicensed staff and supervision failures at its Lawrence satellite clinic.
- Relators allege MassHealth claims were false because Arbour failed to meet satellite-specific supervision and licensure requirements.
- The district court dismissed under Rule 12(b)(6), applying a participation-versus-payment framework for alleged regulatory noncompliance.
- MassHealth regulations at 130 CMR 429.439 and related sections condition reimbursement on proper supervision and staff qualifications.
- DPH and Board actions found multiple regulation violations, including unlicensed personnel and insufficient supervision; Arbour entered settlements and consent agreements.
- Relators appealed, arguing that supervision failures constitute a material condition of payment and that counts are pleaded with particularity.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether noncompliance with MassHealth supervision rules is a falsity of payment claims | Relators: violations are material conditions of payment | UHS: distinctions between conditions of payment/participation apply | Yes; noncompliance is a payment condition and supports FCA falsity |
| Whether MassHealth section 429.439 creates a precondition of payment for satellites | Relators: section 429.439 ties reimbursement to standards | UHS: limits apply only to autonomous satellites | Section 429.439, read with other regs, imposes payment conditions for satellites |
| Whether Counts I–IV and VIII–XI are pleaded with the required particularity | Relators connect claims to specific dates, codes, and staff | Arbour argues insufficient linkage and unidentified staff | Counts I–IV and VIII–XI adequately plead falsity with particularity |
| Whether Counts VII–XIV alleging psychiatrist staffing violate material payment conditions | Relators: staffing violations are material to payment | UHS: staffing requirements not properly enforced or identified | Counts VII and XIV survive to the extent addressing psychiatrist staffing; others limited (per note) |
| Whether Counts V–VI and XII–XIII fail for lack of identification of staff | Relators rely on agency reports and nonexhaustive staff list | Arbour: claims lack individuals’ identifications | Counts V–VI and XII–XIII survive given concrete agency corroboration and context |
Key Cases Cited
- Hutcheson v. Blackstone Med., Inc., 647 F.3d 377 (1st Cir. 2011) (rejects rigid express/implied theories; focuses on materiality and preconditions of payment)
- Amgen Inc. v. United States ex rel. Hofmann, 652 F.3d 103 (1st Cir. 2011) (broad view of falsity; material preconditions of payment)
- Karvelas v. Melrose-Wakefield Hosp., 360 F.3d 220 (1st Cir. 2004) (requires FCA fraud allegations to be tied to specific claims (particularity))
- Loughren v. Unum Grp., 613 F.3d 300 (1st Cir. 2010) (defines falsity materials and scienter standards in FCA context)
- Ge v. Takeda Pharm. Co. Ltd., 737 F.3d 116 (1st Cir. 2013) (illustrates linking fraud to government payment and sufficiency of claims)