In AmSurg, plaintiffs alleged that defendant-Amsurg, a for-profit corporation that provides management services to ambulatory service centers, violated federal and state False Claims Acts. Ambulatory service centers (“ASCs”) are modern health care facilities focused on providing same-day surgical care that do not require overnight hospital stay. In Amsurg, patients seeking same-day surgical care would go to an ASC managed by Amsurg and meet with their surgeon. Prior to beginning a surgical procedure, surgeons were required to perform assessments of the patient and “place in the patient’s record: 1) a medical history and physical assessment; 2) pre-surgical assessment; and 3) anesthetic risk assessment.” Id. at 4. Here, qui tam relators--employees who worked as Certified Registered Nurse Anesthetists-- were responsible for “reviewing pre-surgical assessments and providing anesthesia to patients.” Id. at 3. Plaintiffs alleged that surgeons at an Amsurg managed facility failed to perform these assessments yet certified that such assessments occurred prior to the commencement of surgical care. Plaintiffs asserted that, on multiple occasions, they expressed their concerns regarding failure to perform these procedures, however, no corrective action was taken. Plaintiffs therefore alleged that, by falsely certifying that such assessments were completed, defendants submitted false claims to the Centers for Medicare and Medicaid (CMS).
In evaluating the defendants’ motion to dismiss, the court outlined the elements of a federal FCA case. Plaintiffs must prove, “(1) a false statement or fraudulent course of conduct (2) that the defendant knew was fraudulent, (3) and was material, causing (4) the government to pay out moneys due.” Id. at 14. The court found that plaintiffs’ complaint adequately alleged each element. The only troubling part of the court’s analysis was its discussion of materiality and why this element was satisfied by the “condition of payment” rule.
In Mikes v. Straus, 274 F.3d 687, 700 (2d Cir. 2001), the Second Circuit stated that, in order to prove a FCA violation, the falsity must involve a “condition of payment rather than a condition of participation.” Id. at 15. Mikes described conditions of payment as “prerequisites to receiving reimbursement.” Id. In other words, defendants must satisfy certain conditions in order to receive reimbursement for performing surgical procedures on Medicare and Medicaid covered patients. Conditions of participation, on the other hand, are described as prerequisites to participating in a federal health care program (Medicare or Medicaid) that offers reimbursements for medical services. Because these definitions are strikingly similar, the Ninth Circuit held that “the distinction between a condition of participation and condition of payment was a ‘distinction without difference.’” See United States v. University of Phoenix, 461 F.3d 1176-1178 (9th Cir. 2006). Despite this holding, the court in AmSurg analyzed the issue of materiality and held that the plaintiffs’ complaint would meet the condition of payment distinction, “should it apply.” Id. at 16.
While the court in AmSurg was correct in analyzing the issue of materiality on the grounds that the implied certification theory applied, application of the so-called “condition of payment” was unnecessary due to the Ninth Circuit’s holding that the condition of payment and condition of participation concepts are practically identical. The court in AmSurg nonetheless attempted to explain why plaintiffs met the condition of payment test. The court reasoned that, because the CMS form explained that defendants would only receive Medicare payment contingent on the defendants’ compliance with Medicare laws, the condition of payment test was met. Id. However, when analyzing the facts in Amsurg, it is also correct to state that compliance with all Medicare laws would be a prerequisite condition that all ASCs must meet prior to participate in this federal health care program. It follows that, in analyzing the condition of payment separate from the condition of participation, the Eastern District unnecessarily separated two concepts that have been confirmed to be the same by the Ninth Circuit. This analysis was therefore unnecessary to determine if the element of materiality was met. The court’s application of the condition of payment test, although dicta, risks creating confusion for plaintiffs dealing with health care fraud.