UNITED STATES OF AMERICA, EX REL. MICHAEL L. DAVIS, AND MICHAEL L. DAVIS, APPELLANT v. DISTRICT OF COLUMBIA, APPELLEE
No. 14-7060
United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT
Decided July 10, 2015
Argued April 7, 2015; Consolidated with 14-7061
Sara M. Lord argued the cause for appellant/cross-appellee. With her on the briefs were Tenley A. Carp and Jeffrey S. Jacobovitz.
Stacy L. Anderson, Senior Assistant Attorney General, Office of the Attorney General for the District of Columbia, argued the cause for appellee/cross-appellant. With her on the
Before: ROGERS and GRIFFITH, Circuit Judges, and GINSBURG, Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge ROGERS.
ROGERS, Circuit Judge: Upon remand of Michael L. Davis‘s qui tam lawsuit, see United States ex rel. Davis v. District of Columbia, 679 F.3d 832 (D.C. Cir. 2012) (”Davis I“), the district court ruled that the District of Columbia violated the False Claims Act when it submitted a Medicaid reimbursement claim for FY 1998 and imposed the maximum penalty of $11,000. United States ex rel. Davis v. District of Columbia, 34 F. Supp. 3d 30 (D.D.C. 2014) (”Davis II“). Davis appeals, contending the district court erred in ruling the District submitted only one false claim. The District cross appeals, contending it is entitled to summary judgment because it made no false claim. The relevant federal regulations, which were incorporated into the District‘s Medicaid State Plan, required the District to maintain records supporting its Medicaid reimbursement claims that could be produced for audit. Pursuant to contractual obligations, Davis‘s firm, Davis & Associates, Inc., was to prepare the FY 1998 interim Medicaid claims and year-end cost report, and consequently his firm, not the District, had physical possession of the underlying documentation supporting the District‘s claim. Given this arrangement, the District reasonably understood when it submitted the claim for payment that it could, through Davis & Associates, make the supporting records available for audit. Accordingly, we reverse and remand the case with instructions to enter judgment for the District.
The District of Columbia is eligible for reimbursement by the federal government for a portion of the cost of providing health-related services to Medicaid-eligible children pursuant to the Individuals with Disabilities Education Act,
Pursuant to these principles, Medicaid reimbursement operated in two stages. Throughout the fiscal year, providers of health-related services such as DCPS submitted interim claims to the D.C. Medical Assistance Administration (“MAA“) and received interim payments based on fixed estimates of their actual costs. See
The principles of reasonable cost reimbursement further required providers such as DCPS, upon penalty of suspension of payments,
In 1995, DCPS awarded Health Management Systems, Inc., a contract to design, develop, and implement a “Medicaid Reimbursement Recovery Program” for DCPS‘s special education program. Davis‘s firm, Davis & Associates, was a subcontractor that, for a period of years, “acting on behalf of DCPS,” was responsible for collecting and submitting data to MAA for the payment of interim claims, reconciling approved, denied, and pending claims, and “maintaining original claim documentation for audit purposes.” Davis & Associates prepared, submitted, and retained supporting documentation for interim claims by DCPS‘s special education program during FY 1998. It was informed in December 1998 that the firm‘s contract would not be renewed and that it would be replaced by Maximus, Inc., beginning in FY 1999. Davis & Associates prepared a year-end cost report for FY 1998, but DCPS declined to submit it. Davis & Associates retained previously collected supporting documentation provided by DCPS that Davis avers was sufficient and appropriate to justify the reimbursement request his firm prepared.
Instead of using the report prepared by Davis & Associates, DCPS submitted two FY 1998 cost-settlement reports prepared by Maximus: one in January 2000 setting forth DCPS‘s expenditures on health-related services for special education students (the “Special Education Cost Report“) and another between January and May 2000 stating its expenditures on transportation for those students (the “Transportation Cost Report“). The Transportation Cost Report stated that it had been
MAA informed DCPS in May 2000 that its auditor, Bert Smith & Company, was auditing the final cost reports for fiscal years 1996, 1997, and 1998. See
In 2002, MAA advised the Centers for Medicare and Medicaid Services (“CMS“), the federal agency administering the Medicaid program, “that it was encountering difficulties in determining final reimbursement amounts to DCPS for services rendered from 1996 through 1998 because the cost information from DCPS was incomplete.” CMS, Focused Financial Management Review 1 (2003). After performing a “brief FM review,” spending a day and a half at Bert Smith and examining its process, CMS concluded that Bert Smith had, in the face of “incomplete and insufficiently detailed cost information” from DCPS, “applied sensible, practical testing and conservative
On April 4, 2006, Davis filed a qui tam lawsuit alleging that the District violated the False Claims Act,
In moving for summary judgment, Davis argued in his memorandum of points and authorities that DCPS did not possess service documentation supporting the Maximus FY 1998 year-end cost reports. He asserted in the statement of material facts supporting his motion for summary judgment that DCPS is required to maintain both cost documentation, showing a provider‘s expenditures on health-related services, and service documentation, such as medical records and progress notes that show a Medicaid-eligible child received a reimbursable service on a given day. The District opposed Davis‘s motion and also moved for summary judgment, arguing that Davis‘s claims were barred by the statute of limitations and that Davis had failed, after discovery, to present any evidence the District had
The district court agreed with the District that Davis‘s claims regarding the FY 1998 Special Education Cost Report were time barred, Davis II, 34 F. Supp. 3d at 38-41, and Davis has not appealed. The court agreed with Davis that the District made a false claim when DCPS submitted the FY 1998 Transportation Cost Report for payment because Davis & Associates, not DCPS, had physical possession of the required supporting documentation at that time, id. at 43; the maintenance of such documentation was material to the federal government‘s decision to pay the reimbursement requested, id. at 44-45; and DCPS submitted the false claim knowingly, id. at 46-47. The court rejected the District‘s position that it had constructive possession under an implied agency theory, finding there was no evidence that “the Maximus Reports were prepared or submitted in reliance on documents in Davis‘s possession,” and “the District had already fired Davis” when it submitted the Transportation Cost Report to MAA in 2000. Id. at 43. The court imposed the maximum $11,000 penalty for one false claim. Id. at 48-49.
Both parties appeal, and our review is de novo, see United States ex rel. Folliard v. Gov‘t Acquisitions, Inc., 764 F.3d 19, 25-26 (D.C. Cir. 2014), although in view of our disposition of the District‘s cross appeal, there is no need to address Davis‘s appeal of the number of false claims.
II.
To establish a violation of the False Claims Act,
Davis does not challenge that DCPS provided the claimed services to Medicaid-eligible special education students. Davis I, 679 F.3d at 840. In response to the District‘s cross appeal, he contends only that DCPS falsely certified when it submitted the FY 1998 Transportation Cost Report that it had the records to verify the services were provided on a particular day. Because the record shows that DCPS had arranged with Davis & Associates to maintain appropriate documentation supporting its Medicaid claims, in compliance with the federal document retention requirements incorporated into the District‘s State Plan, and that DCPS reasonably understood when it submitted the FY 1998 Transportation Cost Report that it could produce the underlying documentation for audit, the Transportation Cost
The federal regulations incorporated into the District‘s State Plan required providers to maintain adequate documentation for audit. Providers were to produce for examination “such records and documents as are necessary to ascertain information pertinent to the determination of the proper amount of program payments due.”
Not all failures to comply with a federal statute or regulation expose a provider to liability under the False Claims Act. “[A] false certification of compliance with a statute or regulation cannot serve as the basis for a qui tam action under the [False Claims Act] unless payment is conditioned on that certification.” Siewick, 214 F.3d at 1376. In other words, a defendant may be held liable under the False Claims Act for falsely certifying it complied with a statute or regulation only if “certification was a prerequisite to the government action sought.” Id. The parties dispute whether the regulations the District allegedly violated are conditions of payment, rather than conditions of participation in the Medicaid program. Several of our sister circuits have recognized the difference and cautioned against treating all Medicare and Medicaid regulations as conditions of payment. E.g., United States ex rel. Hobbs v. MedQuest Assocs., Inc., 711 F.3d 707, 714 (6th Cir. 2013); United States ex rel. Wilkins v. United Health Grp., Inc., 659 F.3d 295, 310-11 (3d Cir. 2011); United States ex rel. Conner v. Salina Reg‘l Health Ctr., Inc., 543 F.3d 1211, 1220 (10th Cir. 2008); Mikes v. Straus, 274 F.3d 687, 699-700 (2d Cir. 2001).
We need not decide whether the regulations at issue here are “prerequisites” to payment because, even if they are, Davis has not met his burden to show that the District was in knowing violation of these regulations when DCPS submitted the FY 1998 Transportation Cost Report. Nothing in the District‘s State Plan or the Medicaid regulations on which Davis relies conditioned payment on DCPS‘s physical possession of documentation supporting its year-end cost reports. DCPS was required only to “maintain” documentation such that the information could be “obtained” for audit. See
Davis has failed to show a “genuine dispute,”
Davis‘s position that, unlike in FY 1996, Davis & Associates was not under contract with DCPS when it submitted the Transportation Cost Report, and therefore DCPS could not reasonably expect his firm to produce the underlying documentation for audit, is belied by the record, which shows that Davis & Associates was the contractor responsible for DCPS‘s FY 1998 Medicaid claims. In his disclosure statement Davis averred that Davis & Associates prepared DCPS‘s interim Medicaid claims and a year-end cost report for FY 1998, and he alleged in his amended complaint that his firm prepared that report “[p]ursuant to the terms of its contract,” Am. Compl. ¶ 13. Davis also averred in his disclosure statement that he informed DCPS that “Maximus had not been the DCPS Medicaid contractor for FY98,” Davis Statement at 2, and he admitted in moving for summary judgment that Maximus was not hired until May 1999, Pl.‘s Statement Material Facts ¶ 11. Davis has failed to show that Davis & Associates did not have a continuing contractual duty to complete the work relating to DCPS‘s FY 1998 Medicaid claims.
There is no dispute that Davis & Associates‘s duties “on behalf of DCPS” included “maintaining original claim documentation for audit purposes,” Def.‘s Statement Material Facts Not in Dispute ¶ 15; Pl.‘s Resp. Def.‘s Statement Facts ¶ 15; see Davis Statement at 1, and that the records in the firm‘s possession were the property of DCPS. Furthermore, Davis
Davis‘s suggestion, first raised during oral argument, that DCPS was required as a condition of payment not only to maintain the underlying service documentation for audit, but to generate the FY 1998 Transportation Cost Report directly from that documentation, comes too late. Generally, arguments raised for the first time at oral argument are forfeited. See, e.g., Trumpeter Swan Soc‘y v. EPA, 774 F.3d 1037, 1043-44 (D.C. Cir. 2014); Williams v. Romarm, SA, 756 F.3d 777, 782-83 (D.C. Cir. 2014). Davis neither raised this argument in the district court nor in his briefs on appeal, and he offers no explanation, much less exceptional circumstances, to excuse his failure to do so, see Adams v. Rice, 531 F.3d 936, 944-45 (D.C. Cir. 2008); cf. Lesesne v. Doe, 712 F.3d 584, 588 (D.C. Cir. 2013); Meijer Inc. v. Biovail Corp., 533 F.3d 857, 867 (D.C. Cir. 2008). Such sandbagging is not sanctioned by the court. E.g., Williams, 756 F.3d at 783; cf. Se. Mich. Gas Co. v. FERC, 133 F.3d 34, 39 n.2 (D.C. Cir. 1998).