950 F.3d 277
5th Cir.2020Background
- BestCare Laboratory Services, founded by Karim Maghareh, provided clinical testing for nursing-home and homebound Medicare patients through regional labs and specimen centers.
- BestCare routinely shipped specimens one-way by plane with no technician on board but billed Medicare for round-trip technician mileage (P9603) and often failed to prorate multi-sample trips.
- A competitor relator, Drummond, filed a qui tam suit; the United States intervened and alleged fraud, unjust enrichment, payment by mistake, and False Claims Act violations.
- The Government’s expert estimated excess Medicare payments of approximately $10.6 million for certain large-mileage claims (sampling method) and sought treble damages under the FCA totaling ~$30.6 million for an overlapping period.
- The district court granted summary judgment for the United States; the Fifth Circuit affirmed, holding the statutory text precluded BestCare’s billing, rejecting reliance on CMS Manual guidance, and affirming Maghareh’s personal liability.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether billing for miles when no technician traveled violated Medicare reimbursement law | BestCare billed for travel expenses not actually incurred, violating 42 U.S.C. § 1395l(h)(3) | Billing complied with CMS Claims Processing Manual and represented permissible travel allowance | Court: Statute limits reimbursement to personnel travel; billing for shipped-only specimens violated the statute — summary judgment for U.S. |
| Whether CMS Manual or sub-regulatory guidance authorized BestCare’s billing | CMS Manual does not override statute; it must be read consistent with statutory limits | Defendants relied on CMS Manual language to justify mileage claims | Court: CMS Manual is nonbinding and cannot justify clear statutory violation; no plausible reading permits billing for miles nobody traveled |
| Whether defendants lacked requisite scienter due to good-faith reliance on guidance/administrators | Defendants acted in good faith, reasonably relying on CMS Manual and third-party administrators | Government: defendants knowingly, recklessly, or with deliberate ignorance submitted false claims | Court: No genuine fact issue — no reasonable reading of guidance supports billing practice; scienter established for FCA purposes |
| Whether Maghareh can be held personally liable | United States: Maghareh caused false claims to be presented and signed enrollment forms promising no reckless submissions | Maghareh: corporate veil/state-law standards or lack of personal involvement/benefit absolve him | Court: Federal FCA reaches any person who knowingly causes false claims; Maghareh signed forms, directed billing, and is jointly/severally liable |
| Whether damages calculation or double recovery undermines judgment | Government: treble damages under FCA for specified period (~$30.6M); alternative $10.6M unjust-enrichment award subsumed | Defendants: challenge accuracy of $10.6M and procedural issues | Court: Affirmed $30.6M FCA award; $10.6M award moot/duplicative because recovery cannot be double-counted |
Key Cases Cited
- Biloxi Reg'l Med. Ctr. v. Bowen, 835 F.2d 345 (D.C. Cir. 1987) (describing Medicare reimbursement law as a "labyrinth")
- Clarian Health West, LLC v. Hargan, 878 F.3d 346 (D.C. Cir. 2017) (sub-regulatory guidance has no binding legal effect)
- Int'l Shortstop, Inc. v. Rally's, Inc., 939 F.2d 1257 (5th Cir. 1991) (state of mind as element and summary judgment considerations)
- United States ex rel. Longhi v. Lithium Power Techs., Inc., 575 F.3d 458 (5th Cir. 2009) (affirming summary judgment where defendants acted with reckless disregard under FCA)
- United States ex rel. Compton v. Midwest Specialties, Inc., 142 F.3d 296 (6th Cir. 1998) (summary judgment for Government under FCA on scienter grounds)
- United States v. Krizek, 111 F.3d 934 (D.C. Cir. 1997) (supervisory delegation does not necessarily absolve FCA liability)
- United States v. Aerodex, Inc., 469 F.2d 1003 (5th Cir. 1972) (joint and several liability where multiple parties commit fraud on government)
- In re United States ex rel. Drummond, 886 F.3d 448 (5th Cir. 2018) (mandamus directing district court to rule on pending motion)