Sixth Circuit Revives $35 Million Whistleblower Action Against Senior Living Centers
In a divided opinion, the Sixth Circuit Court of Appeal overturned a lower court order dismissing a $35 million whistleblower suit against Brookdale Senior Living Communities. The suit was filed by a former employee of Brookdale who was tasked with reviewing Medicare claims prior to their submission. The whistleblower alleged that it was Brookdale’s policy to enroll as many residents as possible in home health care services that were billed to Medicare, even when the treatments were not medically necessary. She also alleged that Brookdale submitted claims to Medicare without obtaining the required physician certification of need, or that Brookdale obtained the certifications after the fact.
The trial court dismissed the whistleblower’s case, finding that she had not adequately pleaded that the false claims were material or that the defendant intentionally submitted false claims. The Sixth Circuit reversed.
First, the Sixth Circuit found that the misrepresentations were material. Relevant regulations indicated that physician certifications were an express condition of payment. And guidance documents issued by the Department of Health Human Services supported the whistleblower’s allegations that the requirements were important to the government and went to the essence of its bargain with Brookdale. The Sixth Circuit also found that the whistleblower was not required to make allegations that the government had previously denied claims for payment that lacked physician certifications. “Although a relator in a qui tam action faces a demanding standard at the motion to dismiss stage with respect to pleading materiality, she is not required to make allegations regarding past government action.”
Second, the court found that the whistleblower had adequately alleged scienter, i.e., that Brookdale had knowingly violated a requirement that it knew was material to the government’s payment decision. The whistleblower had alleged that she and other nurses employed to review claims were instructed to review them only cursorily. She also alleged that she was told to ignore any problems with the Brookdale’s compliance with Medicare regulations. Finally, the Brookdale sent an email acknowledging that not all physicians would be comfortable with signing untimely certifications.
Notably, the whistleblower was pursuing this case on her own, with her own private attorneys. The government declined to intervene in the action. The court noted that the government’s decision not to intervene did not defeat the whistleblower’s allegations of materiality.