[00:00:00] Speaker 01: case number 23-7139. [00:00:01] Speaker 01: United States of America, X-Rail Terry R. Winnon and State of Texas, X-Rail Terry R. Winnon and Terry Winnon at balance versus Romero Lozano, also known as Romero G. Lozano Jr. [00:00:15] Speaker 01: at L. Ms. [00:00:17] Speaker 01: Simpson for the balance, Mr. Cass for the appellee Lozano at L, Ms. [00:00:21] Speaker 01: McDermott for the appellee Rehab Care Group East. [00:00:27] Speaker 05: Ms. [00:00:27] Speaker 05: Simpson, good morning. [00:00:29] Speaker 02: Good morning, Judge Katzis. [00:00:30] Speaker 02: May it please the court. [00:00:32] Speaker 02: My name is Kendall Simpson from Ms. [00:00:34] Speaker 02: Terry Wenin, the relator in this case. [00:00:38] Speaker 02: I'd like to focus today on the inapplicability of the public disclosure bar and even if the bar applied, why relator here is an original source having added new and material information and time permitting a few points pertaining to the sufficiency of relator's claims under 9B. [00:00:56] Speaker 02: First, the district court aired in applying the public disclosure bar [00:00:59] Speaker 02: to Relator's claims against rehab care because there was not a public disclosure of the fraud that is the basis for her claims. [00:01:06] Speaker 02: And even if there was, Relator is an original source. [00:01:10] Speaker 02: This case involves a unique who, rehab care, and the SNFs, a unique what, unlawful kickbacks, and up coding at these specific SNFs, a unique when, January 2009 through at least 2016, and a unique where, these specific SNFs in South Texas. [00:01:30] Speaker 02: Indeed, this case involves entirely distinct claims, which are the sine qua non of the False Claims Act, the word issue in Halpin. [00:01:39] Speaker 02: The public disclosure bar was intended to prevent parasitic plaintiffs, and that underlying policy is not implicated by a relator who brings unique claims based on information she learned in her job, not from the face of a prior lawsuit. [00:01:52] Speaker 03: But what do you really distinguish between the Halpin case, because you have [00:01:57] Speaker 03: only a lot of overlapping time periods. [00:02:01] Speaker 03: And I think it was by calculation less than seven and a half months of the overlap. [00:02:07] Speaker 03: So you're looking at what's material during that period of time, or are you suggesting that overlapping in the help and settlement that they were materially different claims as well? [00:02:19] Speaker 02: Your honor, thank you for that question. [00:02:21] Speaker 02: We are suggesting that notwithstanding the overlap in the period of time, [00:02:25] Speaker 02: that the two actions are sufficiently different to preclude the application of the public disclosure bar, including the timeframe in which they overlap. [00:02:34] Speaker 03: Well, you've got several chances to amend your complaint, but the district court still felt like you didn't meet the sufficiency or adequacy of the allegations. [00:02:42] Speaker 03: So, can you tell us what you believe they were still looking for? [00:02:47] Speaker 03: Because you do have a federal rule 9b particularity, high extent of pleading. [00:02:53] Speaker 02: Yes, Your Honor. [00:02:54] Speaker 02: Would you like me to move to the 9B sufficiency allegations argument then? [00:02:58] Speaker 02: That's fine. [00:02:59] Speaker 02: OK. [00:03:00] Speaker 02: Your Honor, our points there are that the district court did err in dismissing relator's claims against the appellees, specifically Lozano, Ballentine, and the Sniffs, first for using illegal remuneration to induce patient referrals. [00:03:14] Speaker 02: And there are really two buckets of analysis that are applicable in 9B. [00:03:18] Speaker 02: We have the remuneration allegations, but then we also have the up-coding allegations. [00:03:22] Speaker 02: but to take on the remuneration allegations first. [00:03:26] Speaker 02: A few discrete points here. [00:03:28] Speaker 02: Applies rely on Nunnally, a Fifth Circuit opinion for the proposition that actual inducement in this case in the form of actual referrals [00:03:36] Speaker 02: is an element of an AKS violation, and this was something that the district court relied on in its opinion as well. [00:03:43] Speaker 02: But Nunnally was rejected by the Southern District of Texas in Parique, citing the decision as unpublished, not binding, and at odds with both the language of the AKS precedent, applying that statute, and even itself. [00:03:55] Speaker 02: Harik explicitly concluded that the AKS makes it unlawful for a defendant to pay a kickback with the intent to induce a referral, whether or not a particular referral results. [00:04:04] Speaker 02: So to the extent the district court was looking for that, that is an error. [00:04:07] Speaker 02: And Relator has pleaded facts, both as to marketing gifts and medical directorships, that adequately allege an intent to induce a referral, and thus reliable indicia leading to a strong inference that false claims were submitted. [00:04:20] Speaker 02: But I think the issue has become the connection [00:04:22] Speaker 03: you know, to indicate that there was a definite increase in referrals that you can tie the gifts, the marketing scheme, the medical directorship directly to the patients that increased during that certain period of time. [00:04:34] Speaker 02: Yes, Your Honor. [00:04:35] Speaker 02: And under the AKS, it's more about the intention to induce the referrals, which is what Parikh made clear, as opposed to the actual referrals that result in itself. [00:04:44] Speaker 02: And from the facts that Relator has pleaded, we say there's reliable indicia that lead to the strong inference that false claims were, in fact, submitted such that they were tainted by that intention to induce those referrals. [00:04:57] Speaker 02: And I'm happy to go into some of those facts that that would be helpful. [00:05:00] Speaker 03: But in the case that you cite, the Parikh, I want to believe, wasn't there evidence of the actual medical referral or the allegation of the actual tying to the patient? [00:05:13] Speaker 03: I'll be a little more specific. [00:05:14] Speaker 03: I think it's what the district court is trying to get you to, not just saying, oh, on these occasions, there were lots of gifts provided. [00:05:22] Speaker 03: And therefore, there must have been an intent to influence without tying it to [00:05:26] Speaker 03: during that period of time, there was actually an uptick in the increase in patients. [00:05:32] Speaker 02: Your Honor, I'm not entirely certain about the specifics of whether or not there was proof in Perique of actual referrals that were induced as a result of the remuneration that was offered. [00:05:47] Speaker 02: But what the legal standard that Perique established was that that's not required. [00:05:51] Speaker 02: And they cited to the plain language of the AKS for that proposition. [00:05:55] Speaker 02: The facts that we believe lead to that reliable indicia, as far as the marketing gifts are concerned, is that for years, these SNFs paid out thousands of dollars in self-proclaimed marketing gifts, and they were specifically targeted at hospital personnel in a position to refer patients to the SNFs. [00:06:11] Speaker 02: And this is important. [00:06:12] Speaker 02: That was all done against the backdrop of a Medicare regime that requires SNF services to be ordered by a referring physician. [00:06:20] Speaker 02: There are also allegations that the SNFs sought to increase the Medicare [00:06:24] Speaker 02: census, and at least four of these referring physicians were also hired and compensated as medical directors. [00:06:31] Speaker 02: Turning to the medical directorships as shams, Empire Spanish Methods and Brownsville employed five medical directors, despite having fewer beds than the Katy facility, which employed one. [00:06:41] Speaker 02: The San Antonio facility employed multiple medical directors simultaneously, notwithstanding the legal requirement to only employ a medical director. [00:06:51] Speaker 02: The Katie facility paid one doctor as a medical director and also an additional $3,000 per month as a nursing consultant. [00:06:58] Speaker 02: The medical directors were paid amounts invoiced, notwithstanding the fact that those invoices contained no information about time worked or services rendered. [00:07:06] Speaker 02: And we know that there was an increasing outlay of costs for these SNFs paying these medical directors ranging from 2009 to 2012. [00:07:14] Speaker 02: And we contend that these facts collectively plead reliable and to see that the SNFs submitted false claims [00:07:20] Speaker 02: tainted by illegal remuneration. [00:07:22] Speaker 02: Turning to your question, as it pertains to the up-coding allegations, I would point the court to U.S. [00:07:37] Speaker 02: Ex-Role Harris versus Bernard as informative. [00:07:39] Speaker 02: The citation for that is in our brief, but just for your convenience, it's 275 FSUP 2D1, and specifically looking at pages seven through nine. [00:07:49] Speaker 02: In that case, the government alleged that defendants engaged in up coding, that they submitted claims with codes that represented a level of care higher than the defendants actually provided. [00:08:00] Speaker 02: The government reviewed the defendants' Medicare billings, which is publicly available information, and from that data, computed that Dr. Bernard had billed 92.68% of his claims at the two highest levels, levels four and five, [00:08:13] Speaker 02: and the defendant entity billed 94.32% of its claims at these levels. [00:08:18] Speaker 02: The government then buttressed these statistics with 12 sample patient cases, which the district court, to your questions, Judge Childs, is one of the things that it said it was looking for and it seemed to be lacking from relator's case here. [00:08:32] Speaker 02: But I think the implication [00:08:35] Speaker 02: was made in some of the briefing is that those 12 patient sample cases were provided to offer information about those patients' medical conditions and to show why the up coding was unnecessary. [00:08:48] Speaker 02: But that's not what those 12 patient sample cases offered in that case. [00:08:54] Speaker 02: Instead, the government showed that Dr. Bernard's submitted claims did not correspond with the treatment that he administered and documented. [00:09:01] Speaker 02: And here we have an analogous allegation. [00:09:04] Speaker 02: Specifically, we've pointed to rehab care invoices cited by the relator showing that while the SNFs were billing exclusively for higher reimbursing levels of therapy, rehab care was providing patients and invoicing the SNFs for lesser levels of therapy. [00:09:20] Speaker 02: And if this was enough to survive in Bernad under Rule 9B, we contend that it is also enough to survive here. [00:09:27] Speaker 03: How do you get to original source? [00:09:30] Speaker 02: So original source, thank you for that question, is an exception to the public disclosure bar issue, which is a slightly different issue than what we've been discussing. [00:09:38] Speaker 02: So if I could, I'll turn to that. [00:09:42] Speaker 02: We get to original source as an exception to the application of the public disclosure bar. [00:09:47] Speaker 02: So it assumes at that point, that inquiry assumes that the court is in agreement [00:09:54] Speaker 02: that the allegations are substantially similar between Halpin and here. [00:09:57] Speaker 02: And they say that's fine, but there's also a chance to survive that finding if the relator has brought new and material allegations, notwithstanding the fact that they are substantially similar to those alleged in a prior disclosure. [00:10:14] Speaker 02: And here we contend that that is the case. [00:10:17] Speaker 05: Whose burden is it to plead and prove original source? [00:10:21] Speaker 05: I would think it's yours. [00:10:24] Speaker 02: The public disclosure, the application of the public disclosure bar is an affirmative defense. [00:10:27] Speaker 05: Public disclosure bar is an affirmative defense, but original source is an exception to the defense. [00:10:35] Speaker 02: Correct. [00:10:36] Speaker 02: So to the extent that that is our burden, we contend that we've met that. [00:10:45] Speaker 02: First, relator's knowledge was independent of any purported public disclosure, which we [00:10:49] Speaker 02: which we claim at pages 20 through 21 of our brief. [00:10:52] Speaker 05: What is the information for which you claim to be an original, an independent source? [00:11:01] Speaker 05: I had thought it was just this exhibit E of your complaint. [00:11:08] Speaker 02: We also look, I believe it's exhibit G to the complaint as well, which are some rehab care invoices that we cite to. [00:11:18] Speaker 02: Your honor, I'll point you to join appendix 50 through 51 as kind of laying out where we later learned of her information that is independent knowledge, specifically that she came to a ledge in her complaint via her access to the invoices sent by rehab care to Appley-Sniffs. [00:11:35] Speaker 02: She ran internal reports as part of her job duties based on monthly facility data. [00:11:39] Speaker 02: and disclose these reports to the government. [00:11:41] Speaker 02: And none of this information was publicly available. [00:11:44] Speaker 05: 50 and 51? [00:11:45] Speaker 02: Yes, Your Honor. [00:11:46] Speaker 05: Yeah, that's where I am. [00:11:47] Speaker 05: And at the top of 51, you cite to exhibit E. I would also point, Your Honor, to exhibit G as well. [00:11:56] Speaker 02: But yes, that is the relevant citation that I have prepared for you today. [00:12:04] Speaker 02: The second prong of that inquiry, if you're ready for me to move on to it. [00:12:09] Speaker 05: Can we just back? [00:12:10] Speaker 05: Well, go ahead. [00:12:11] Speaker 05: Why don't you finish up on original source, because I want to ask you about public disclosure also. [00:12:16] Speaker 02: Yes, Your Honor. [00:12:16] Speaker 02: Thank you for that time. [00:12:17] Speaker 02: The second prong, an inquiry relevant to the original source exception, is that relator's allegations are material additions to the allegations in the helping complaint and intervention. [00:12:30] Speaker 02: This circuit has not yet defined when information is material for purposes of the original source exception. [00:12:37] Speaker 02: But other court's definitions may prove helpful. [00:12:40] Speaker 02: And they include whether they would affect the government's decision making, whether the allegations, the new allegations are significant, and whether they add value for the government. [00:12:50] Speaker 02: In our case, Relator has materially added at a minimum to the who and the where, adding SNFs both as defendants and as novel locations for the fraud. [00:12:59] Speaker 02: who are neither named specifically nor referenced abstractly in the help and complaint, nor are they amongst the 498 sniffs in the help and settlement. [00:13:08] Speaker 02: And we contend that this standing on its own is sufficient to apply the exception. [00:13:12] Speaker 05: One thing that seems pretty clear from the case law that goes your way on materially add that recognizes materially add can't collapse into substantially similar. [00:13:26] Speaker 02: Yes, your honor. [00:13:27] Speaker 05: And yet those cases say one thing that doesn't count as materially adding [00:13:33] Speaker 05: is just providing an additional instance of a disclosed pattern of fraud. [00:13:40] Speaker 02: Yes. [00:13:40] Speaker 02: This would seem to fit that to a T. Your Honor, I would disagree with that for the following reason. [00:13:45] Speaker 02: So in the Halpen complaint, and I think what you're getting at is it's really. [00:13:52] Speaker 05: The mechanism of fraud is that a therapy provider [00:13:57] Speaker 05: Um, inflates the codes to, you know, either give treatment that's a little bit unnecessary for the last 10 minutes, or they didn't give the treatment for the last 10 minutes. [00:14:09] Speaker 05: and passes that on to the SNF who builds the government. [00:14:15] Speaker 05: And that's the scheme we're talking about. [00:14:17] Speaker 05: And the bad actor we're talking about is rehab care. [00:14:22] Speaker 05: And the allegation involves 500 SNFs. [00:14:27] Speaker 05: And that's not enough to make the government suspicious that if you have an SNF dealing with rehab care on [00:14:37] Speaker 05: Are there like rug codes? [00:14:39] Speaker 05: Like maybe you should look at that? [00:14:41] Speaker 02: So I think what the relevant inquiry is, and what I would point you to, is not so much is the government suspicious of rehab care's conduct. [00:14:51] Speaker 02: Is it on the trail, rather, of the particular fraud that Relator has alleged here? [00:14:57] Speaker 02: I agree with you, and we can see that at the highest level of generality, the conduct that's at issue, particularly as it pertains to rehab care, [00:15:08] Speaker 02: in the Halpen complaint is similar to that which is alleged here, but the transactions in the false claims are not. [00:15:15] Speaker 02: And that matters because in the Halpen complaint, you are taking issue with Rehab Care's conduct, as you pointed out. [00:15:21] Speaker 02: There are 23 SNFs identified in that complaint. [00:15:25] Speaker 02: The 498 SNFs are identified in the settlement. [00:15:29] Speaker 02: There is nothing from the face of the Halpen complaint or from the face of the Halpen settlement [00:15:35] Speaker 02: that would put the government on the trail of the fraud that relator has alleged at these specific sniffs in South Texas. [00:15:44] Speaker 02: And this is important is that the false claims, the transactions that are at issue and happen or in in relator's complaint are claims that are submitted by the sniffs. [00:15:57] Speaker 02: those claims do not make that connection. [00:16:00] Speaker 02: There's nothing on the face of those claims that make that connection with rehab care between SNFs, these SNFs and rehab care, suggesting that rehab care is involved in the provision of therapy at those SNFs. [00:16:14] Speaker 02: It is that information that is specific to relator's role as an insider. [00:16:18] Speaker 02: She is the one who is able to connect the dots because the government cannot, it cannot be on the trail from claims that don't make that connection for it. [00:16:28] Speaker 05: I mean, make sure I understood that the claims that these SNF's would have submitted to the government for payment that you say you're fraudulent. [00:16:41] Speaker 05: Don't they say this is for treatment to one of our patients provided by a therapist [00:16:52] Speaker 05: with whom we contract for such and such therapy for such and such service for such and such amount. [00:16:59] Speaker 05: But they don't say that the therapist was rehab care. [00:17:02] Speaker 02: That is correct. [00:17:03] Speaker 02: So what these claims do is they submit based on certain reimbursant Medicare codes, whether it's the RUX code, the RUL code, which we've tied to the Katie facility, they submit reimbursements for those codes. [00:17:15] Speaker 02: And those codes, the different letters in those codes indicate what kind of therapy was provided, the level, the number of minutes. [00:17:24] Speaker 02: And that last letter is really about [00:17:27] Speaker 02: a bit about the patient's condition and what would have prompted the need for that kind of therapy. [00:17:32] Speaker 02: Nothing on the face of those claims identifies rehab care at all. [00:17:38] Speaker 03: Are you splitting hairs with respect to the different codes assessed to these particular patients? [00:17:46] Speaker 03: Like in other words, how does that fit into the scheme if the health and settlement would have covered certain codes with certain patients and all we have is just a different code with other patients? [00:17:58] Speaker 03: But it's still the same scheme. [00:18:00] Speaker 02: So an important distinction there, your honor, is that the help and action. [00:18:04] Speaker 02: This is one of the ways in which they're different. [00:18:07] Speaker 02: There aren't allegations specifically about You know the highest reimbursing codes like what we're later has made here. [00:18:15] Speaker 02: The help and action is specific to the provision of ultra-high therapy, very high therapy, and there's some overlap in the conduct there. [00:18:23] Speaker 02: But that is actually a distinction and a different level of detail that Relator brings to the table that's applicable to these eight SNFs. [00:18:31] Speaker 02: Again, [00:18:31] Speaker 02: who aren't mentioned in the help and complaint, who you can't look at the help and complaint and make the connection between them and rehab care and the same is true for the settlement. [00:18:41] Speaker 03: But isn't the help and settlement pretty broad with respect to the rug appending? [00:18:48] Speaker 03: Just generally that particular claim. [00:18:51] Speaker 02: So what the help and settlement does. [00:18:55] Speaker 02: Yes, I understood your question. [00:18:57] Speaker 02: Thank you, your honor, for the clarification. [00:18:59] Speaker 02: What the help and settlement does is they say this settlement applies to 498 SNFs. [00:19:05] Speaker 02: And what we're going to do is we're going to appoint an independent review organization to monitor rehab, a sampling of rehab care's contracts with these third party SNFs. [00:19:15] Speaker 02: which contracts that independent review organization is able to access and look over is completely dependent on rehab cares provision of those contracts to them. [00:19:26] Speaker 02: And so in that process as well, there's nothing from the face of the corporate integrity agreement, the settlement, where we have any indication that again, rehab cares work with these SNFs in South Texas would have ever been on the government's radar, if that makes sense. [00:19:45] Speaker 03: If the health and settlement covered certain claims, and then you as the relator are able to just be a little more specific about those same claims that were already settled, does that then get you to a lawsuit? [00:19:58] Speaker 02: Well, so these are different claims. [00:20:00] Speaker 02: And I think that's the really important point that you've raised, which is the Halpen settlement doesn't take issue with any SNFs claims that were submitted to Medicare. [00:20:09] Speaker 02: There are no SNFs that are defendants in the Halpen complaint. [00:20:13] Speaker 02: What's different here is that we are taking issue with claims that were submitted by these eight SNFs to the extent they were improperly influenced by either the illegal remuneration or the upcoding. [00:20:30] Speaker 02: You're welcome. [00:20:31] Speaker 02: I see that I'm past my time. [00:20:32] Speaker 02: I don't want to overstep your honors. [00:20:35] Speaker 02: Okay, we'll give you a thank you very much. [00:20:44] Speaker 05: Mr Cass morning, your honor. [00:20:52] Speaker 06: May please the court Luke Cass on behalf of Mr Lozano, Mr Ballantine and the skilled nursing facilities. [00:20:59] Speaker 06: I'll be addressing the district courts ruling under 9B and my colleague, Ms. [00:21:03] Speaker 06: McDermott, will be addressing the public disclosure bar on behalf of rehab care, which we would argue equally apply to us. [00:21:12] Speaker 06: The relator in this case was a former math teacher hired as a bookkeeper, eventually rising to be a controller and an executive assistant to Mr. Lozano. [00:21:23] Speaker 06: She worked for two of the eight facilities at issue here, [00:21:27] Speaker 06: that she's suing for seven years and she's amended her complaint three times. [00:21:32] Speaker 06: And that background is important in two overarching respects. [00:21:37] Speaker 06: First, despite that insider level of access, seven years, the right-hand person of the chief executive, she has not and cannot plead how this alleged scheme worked. [00:21:49] Speaker 06: That's the problem. [00:21:49] Speaker 06: She cannot connect the dots. [00:21:52] Speaker 06: Instead, she resorts to group pleading and speculation that's implausible in light of alternative explanations. [00:21:59] Speaker 06: Second, she has no medical experience whatsoever, yet questions the medical necessity of a number of different things throughout her second amended complaint. [00:22:12] Speaker 06: And just to touch on the standard, I believe this is what Judge Childs was asking about. [00:22:16] Speaker 06: Rule 9B under this court's jurisprudence is context specific and flexible. [00:22:21] Speaker 06: It doesn't pre-ordain a checklist of certain things you do have to have, but it is clear you have to have the who, the what, the when, the where, the how, and then plus a reliable indicial leading to a strong inference that claims were actually submitted. [00:22:36] Speaker 06: And if you look at the Solicitor General's opinion in Bethany Hospice, they say for AKS-based False Claims Act claims, you need to show specific patients that were subject to those claims. [00:22:49] Speaker 06: You need to show the doctors that those claims were referred by doctors, and you need to show when for each of those two things. [00:22:55] Speaker 06: That's a properly pled claim. [00:22:57] Speaker 06: And that is not evident based on the allegations here. [00:23:03] Speaker 06: I'll go to medical directorships briefly and hit all the different alleged illegal remuneration. [00:23:12] Speaker 06: But going to medical directorships, the claim is generally, these are sham medical directorships. [00:23:17] Speaker 06: They just pay them. [00:23:19] Speaker 06: They refer patients. [00:23:20] Speaker 06: There's no contracts. [00:23:21] Speaker 06: There's no invoices. [00:23:23] Speaker 06: We don't even know if they show up and do work. [00:23:26] Speaker 06: A couple of different problems with that. [00:23:30] Speaker 06: There are contracts. [00:23:31] Speaker 06: They were filed below at documentary 68-3, at least for Dr. Molinas and Dr. Hover. [00:23:38] Speaker 06: The contract says for Dr. Molinas, he gets $1,500 per month. [00:23:42] Speaker 06: He's got to work 10 to 25 hours per month. [00:23:45] Speaker 06: Dr. Hover is a little bit more. [00:23:47] Speaker 06: He gets $5,000. [00:23:49] Speaker 06: He's got to work a certain number of hours. [00:23:52] Speaker 06: So there are medical agreements. [00:23:56] Speaker 06: These facilities are required by CMS regulation to have medical directors. [00:24:02] Speaker 06: I don't think you can infer, as the relator does, that a certain number of beds means that you have to have a certain number of medical directors. [00:24:12] Speaker 06: CMS does not specify what the staffing levels are. [00:24:15] Speaker 06: I think it sort of depends on the facility. [00:24:17] Speaker 06: So for example, the Katie facility, which services Houston, a large area. [00:24:23] Speaker 06: They specialize in ventilators. [00:24:24] Speaker 06: They have a ventilator wing. [00:24:25] Speaker 06: They have a tracheostomy wing. [00:24:26] Speaker 06: It's not uncommon to have medical directors for each. [00:24:29] Speaker 06: If there's an outbreak, God forbid, at one of these facilities, staff or scabies, not uncommon to bring in a medical director to correct those particular issues. [00:24:42] Speaker 05: You talk about the gifts struck me as the stronger, stronger part of their claim from the directorships. [00:24:52] Speaker 05: Yes, your honor. [00:24:53] Speaker 05: The gifts have the directorship. [00:24:56] Speaker 05: As you say, there are lots of there are very legitimate reasons for giving money to these doctors in the form of having the medical director. [00:25:08] Speaker 05: Don't seem to be any [00:25:11] Speaker 05: good or lawful reasons for giving the gifts in connection with your advertising? [00:25:17] Speaker 06: Well, it sort of depends on the context. [00:25:20] Speaker 06: A lot of the supposed gifts, I'll use that term, that are listed have to do with, first of all, some of them just list doctors and they don't specify who. [00:25:30] Speaker 06: The other ones list the medical directors. [00:25:33] Speaker 06: I don't think there's anything that leads to an inference of fraud if you're providing a medical director with [00:25:39] Speaker 06: a gift basket around the holidays. [00:25:41] Speaker 06: Some of them are. [00:25:41] Speaker 06: There's six or seven or eight of them that are not around the holidays. [00:25:45] Speaker 06: But it's limited to one facility, the Brownsville facility, and only for a 27-month period, which I think is interesting because if you're alleging an enterprise-wide fraud scheme, this is what they do. [00:25:57] Speaker 06: This is how they commit fraud and build the taxpayers. [00:26:00] Speaker 06: You would expect to see that at all eight facilities for the entire seven years that she's been there, not in this just limited area, if it's systemic. [00:26:09] Speaker 06: Additionally, your honor, she doesn't have firsthand knowledge of any of these gifts. [00:26:12] Speaker 06: She never saw gifts being provided. [00:26:14] Speaker 06: She never provided gifts herself. [00:26:16] Speaker 06: She's just relying on this one document that has this list. [00:26:19] Speaker 06: And I would submit, taking it as true that these were provided, she still has to show a referral that resulted as a result of these. [00:26:27] Speaker 06: And they're not all liquor, your honor. [00:26:29] Speaker 06: I agree the liquor is a bigger red flag, but some of them are lunches. [00:26:33] Speaker 06: The inference that she's asking for is sort of a double causation, sometimes triple causation inference. [00:26:38] Speaker 06: Let's take the Valley Hospital luncheon. [00:26:43] Speaker 06: Because of that sandwich provided in that hospital basement or cookies or whatever it was, it led to a medical professional referring. [00:26:53] Speaker 06: That patient was referred to one of the facilities and that patient was referred to Medicaid or Medicare services. [00:26:59] Speaker 06: There's three links in that chain in order for her to make out [00:27:03] Speaker 06: a colorable, um, allegation, um, which is beyond reliable condition. [00:27:10] Speaker 06: It's my point there. [00:27:14] Speaker 06: And if you see a case, your honor, like, um, go heel where meals and gift baskets were based on the volume of the business generated, there's no such allegations here. [00:27:23] Speaker 06: Um, in fact, [00:27:25] Speaker 06: C. M. S. Provides H. H. S. O. I. G. Excuse me, provides guidance on speaker programs and warns about providing alcohol. [00:27:35] Speaker 06: But they say that is not in itself indicia of an anti kickback statute. [00:27:39] Speaker 06: You need to show an ensuing referral for an A. K. S. Base False Claims Act. [00:27:46] Speaker 06: I would. [00:27:46] Speaker 06: Yes, you do, Your Honor. [00:27:48] Speaker 05: What? [00:27:48] Speaker 05: makes it unlawful is the gift is given in order to encourage the referral. [00:27:57] Speaker 05: And what makes it fraud is the knowingly false certification that they implied with those rules. [00:28:05] Speaker 06: I think for an AKS, that would be true, Your Honor. [00:28:07] Speaker 06: But for an AKS-based or Stark law-based false claims act, I think she would need to show the referral. [00:28:13] Speaker 06: Because not all these facilities take Medicare patients. [00:28:16] Speaker 06: Some of them are private insurance. [00:28:17] Speaker 06: Show damages? [00:28:18] Speaker 06: to plead damages? [00:28:21] Speaker 06: To make out just the false claims act allegation, yeah. [00:28:29] Speaker 06: I'll touch rug, the resource utilization group allegations briefly. [00:28:34] Speaker 06: She relies on a 2010 report from CMS that has to do with a different timeframe than the allegations here, 2006 to 2008. [00:28:45] Speaker 06: Here were 2009 to 2016. [00:28:48] Speaker 06: It doesn't make a finding that the claims were either necessary or appropriate. [00:28:55] Speaker 06: She just lists out a series of suspicions and says that they received too much therapy or for longer than was necessary based on the fact that Katie was the highest top 1% in 2014. [00:29:09] Speaker 06: There's a number of different [00:29:10] Speaker 06: institutions that are in that top five, top 10 list. [00:29:14] Speaker 06: And according to the Relators Theory, any one of those could be amenable to False Claims Act suits just by virtue of the fact that they cater to high acuity, large volume patients. [00:29:26] Speaker 03: She does focus on, as I indicated earlier, about seven months or so that occur after the fact. [00:29:34] Speaker 03: Are you suggesting that there could not be any False Claim Act [00:29:39] Speaker 03: for a period that's occurring after the help and settlement? [00:29:45] Speaker 06: You know, Your Honor, I was concentrating on the 9B, so I believe it would apply. [00:29:51] Speaker 06: I just don't have specifics for you. [00:29:55] Speaker 06: I apologize. [00:29:56] Speaker 06: But maybe Ms. [00:29:57] Speaker 06: McDermott can answer that for me. [00:30:03] Speaker 06: If there are no questions, we can yield the remainder of our time. [00:30:06] Speaker 05: Thank you, Counselor. [00:30:18] Speaker 04: Morning, Your Honors. [00:30:19] Speaker 04: Good morning. [00:30:20] Speaker 05: Ms. [00:30:20] Speaker 04: Dermott, please proceed. [00:30:23] Speaker 04: Your Honor, I am going to answer that question. [00:30:25] Speaker 04: I'd just like to sort of start with a context, though, in this particular appeal. [00:30:29] Speaker 04: There's no greater nightmare for a health care provider than to ink a settlement, enter into a five-year corporate integrity agreement, and get a copycat qui tom. [00:30:40] Speaker 04: The first question in the boardroom they'll ask you or a doctor will ask you is, if I reluctantly sign this settlement, [00:30:47] Speaker 04: and go through this five-year corporate integrity agreement, am I gonna go through this turmoil all over again because of the notoriety of the allegation? [00:30:58] Speaker 04: The answer is yes. [00:30:59] Speaker 04: The answer is yes. [00:31:00] Speaker 04: In this case, the nightmare happened. [00:31:02] Speaker 04: The good news is the public disclosure bar, as the lower court found, aptly applies in this particular situation because of the, not just substantial similarity of the allegation, but really the sameness of it. [00:31:16] Speaker 04: It's about medically unnecessary therapy services that have been up-coded to the highest rug level. [00:31:23] Speaker 04: And there's a consistent, continuous public disclosure of this particular type of conduct, really from 2010, as the relator suggests in their brief, all the way up to 2020 when they followed their second amended complaint. [00:31:40] Speaker 04: There's OIG reports. [00:31:41] Speaker 04: There's newspaper articles, some of which mention rehab care. [00:31:46] Speaker 04: There's also the government's 2015 complaint that asserts nationwide allegations of this exact type of fraud for rehab care and the conduct in all their facilities. [00:31:59] Speaker 04: There's a subsequent settlement in 2016, medically unnecessary therapy services. [00:32:06] Speaker 04: And that's exactly what the subsequent complaint is. [00:32:10] Speaker 04: Whether that was filed in 2017, we haven't [00:32:14] Speaker 04: We don't believe the original complaint's unsealed. [00:32:17] Speaker 04: So it's just kind of not unusual, but interesting. [00:32:20] Speaker 04: So if you look at the second amended complaint, that's the first time the rehab allegations appear, which we've noted, and it's not been disputed. [00:32:28] Speaker 04: But even if there is a gap, would the public disclosure bar apply to the continuation after the settlement, Your Honor, which was your question? [00:32:37] Speaker 04: And the answer is yes, it should. [00:32:39] Speaker 04: Because the purpose of the public disclosure bar is to alert the government [00:32:44] Speaker 04: to the potential of the fraud, not to prove the fraud, not to confirm the fraud, but to give some indication, to put them on the tail, if you will, of potential conduct. [00:32:55] Speaker 04: It's not to resolve every potential issue associated with that particular party. [00:33:04] Speaker 04: So some of the case law has suggested the continuation. [00:33:08] Speaker 04: The Oliver case suggested it could be 40 years in the case of tobacco mispricing. [00:33:13] Speaker 04: And more recently, Judge Chuckin-Below in the O'Connor case suggested that the continuation is simply not an element that would preclude application. [00:33:25] Speaker 04: And there you had a very short period between a declined quittam. [00:33:30] Speaker 04: Here we have an intervened quittam. [00:33:33] Speaker 04: And in those circumstances, then, the continuation was not viewed as significant. [00:33:38] Speaker 04: Our facts are even more compelling for that point. [00:33:41] Speaker 05: Did the claims here, would the claims here have alerted the government that these claims involved services from rehab care specifically? [00:33:57] Speaker 05: I would have thought the answer to that is obviously yes, but your colleague told me no. [00:34:03] Speaker 05: It seems like it's a pretty important distinction. [00:34:06] Speaker 04: Well, Your Honor, I respectfully disagree, but there didn't have to be an identification of every claim. [00:34:11] Speaker 05: Well, just tell me whether or not there was. [00:34:14] Speaker 04: Well, Your Honor, it's hard to know. [00:34:16] Speaker 04: There was a, the original quetamin happen was filed in 2011. [00:34:21] Speaker 04: So there was a pre-intervention investigation period. [00:34:24] Speaker 04: In 2015, the government goes public with a complaint and intervention that's nationwide. [00:34:30] Speaker 04: And I think that's enough under the public disclosure bar to presume the government's aware [00:34:35] Speaker 04: of all of the facilities that rehab care is associated with. [00:34:40] Speaker 04: And in fact, it's highly likely if there's to be any inference at all. [00:34:44] Speaker 04: But we don't have to prove that under the public disclosure bar. [00:34:47] Speaker 04: The very fact that it was alleged a nationwide scheme involving 1,000 of their facilities would be sufficient to invoke the public disclosure bar. [00:34:58] Speaker 04: The government is on the tail. [00:35:00] Speaker 04: The government just isn't on the tail, Your Honor. [00:35:02] Speaker 04: They caught the dog. [00:35:04] Speaker 04: They leashed it and it's an obedience training. [00:35:08] Speaker 04: If you look at, you know, what's happened in 2016, which is both the settlement and the corporate integrity agreement. [00:35:15] Speaker 05: So in that. [00:35:16] Speaker 05: Yeah, I understand that. [00:35:18] Speaker 05: If you start from Albin. [00:35:23] Speaker 05: If you start from this case and the government is getting, the government is getting claims from an SNF and the claim just says, we engaged a therapist to provide the following services. [00:35:44] Speaker 05: Does that tend to alert the government that this might implicate the pattern [00:35:55] Speaker 05: addressed in the other case. [00:35:58] Speaker 05: I'm not sure. [00:36:00] Speaker 04: Well, you're right. [00:36:00] Speaker 04: In this case, we have a corporate integrity agreement as the Sixth Circuit and Mars suggested that heightened scrutiny of the provider, that monitoring, that auditing, and it's not just external auditing of random sampling. [00:36:14] Speaker 04: It's also internal auditing is mandated training policies and procedures all focused on [00:36:20] Speaker 04: medically unnecessary services. [00:36:23] Speaker 04: So in that context, again, the government has the provider wrapped in review, investigation, and auditing. [00:36:34] Speaker 05: So it's just- That might be a great argument to get your primary client rehab care out of this case. [00:36:45] Speaker 05: But right now at the podium, you're speaking for the SNFs as well. [00:36:51] Speaker 04: On the SNFs, I think that when you look at, you have to be providing therapy to somebody and the patients are in the SNF. [00:37:04] Speaker 05: Providing therapy is very different from providing therapy through rehab care, which is the subject of this now notorious nationwide settlement. [00:37:17] Speaker 04: I hope we agree, Your Honor, that for rehab care, we're out. [00:37:21] Speaker 05: Spotting purposes of my question. [00:37:24] Speaker 04: Understood. [00:37:25] Speaker 04: I think that in the context of the allegation, you can't have medically unnecessary therapy related to up-coated rugs unless it's done in a skilled nursing facility. [00:37:37] Speaker 04: So I think it's completely realistic to expect that if the therapy provider [00:37:44] Speaker 04: has provided medically unnecessary services, although they deny that, that anyone that's their customer is in the zone of alertness, the zone of potential. [00:37:56] Speaker 04: I called zone of alertness, there's a lot of cliches, your honor, but alerting the government to the potential for wrongful conduct. [00:38:06] Speaker 04: And I think that in that context, the rehab provider and the skilled nursing facility [00:38:14] Speaker 04: are together. [00:38:15] Speaker 04: So if I were representing the skilled nursing facilities, I would say they are equally beneficiary of the public disclosure bar. [00:38:24] Speaker 04: But for rehab care, we had a lot more. [00:38:26] Speaker 04: We had newspaper articles with the Wall Street Journal in 2015 that did mention the... I understand as to rehab care. [00:38:37] Speaker 05: Okay. [00:38:38] Speaker 05: Jake Shy, something else? [00:38:39] Speaker 05: Do you have five words? [00:38:41] Speaker 04: Okay. [00:38:41] Speaker 04: I see. [00:38:41] Speaker 04: Thank you. [00:38:42] Speaker 04: Thank you, Your Honor. [00:38:43] Speaker 05: question. [00:38:44] Speaker 05: Did you have a conclusion? [00:38:46] Speaker 04: Oh, your honor, only that I don't think we're rescued by the original source. [00:38:50] Speaker 04: Uh and we would urge [00:39:02] Speaker 02: Just a few points, Your Honor. [00:39:03] Speaker 02: Thank you very much. [00:39:05] Speaker 02: First of all, I want to point out that the amendments that were done at the district court level were not in response to dismissal in regards for a 9B sufficiency analysis. [00:39:13] Speaker 02: They were to add defendants, to add allegations in the First Amendment, and for the Second Amendment to remove information that was inadvertently included. [00:39:21] Speaker 02: As far as the gifts go, I do want to make sure that we don't fall into the trap of minimizing exactly what those gifts were. [00:39:32] Speaker 02: The complaint details marketing gifts from Empire Spanish Meadows. [00:39:36] Speaker 02: Yes, which by the way, remuneration is a collective issue. [00:39:40] Speaker 02: I don't want to parse out which type of remunerations apply to which entities for purposes of the actual allegation itself. [00:39:48] Speaker 02: But specific to the marketing gifts, they were given specifically to physicians and hospital discharge personnel in positions to make patient referrals [00:39:56] Speaker 02: Those patient referrals, as my colleague noted, are a prerequisite for patients to be admitted to a SNF. [00:40:03] Speaker 02: The gifts included advertisements for the ballet school for a physician's daughter. [00:40:07] Speaker 02: liquor for physicians, personal and marketing parties and marketing meals. [00:40:11] Speaker 02: They're self-described as marketing, and I'm not quite sure what purpose would come from marketing other than please send us your patients. [00:40:17] Speaker 02: The total value of those gifts over the course of two years was significant. [00:40:22] Speaker 02: It was not de minimis. [00:40:23] Speaker 02: It was totaling $23,463.81. [00:40:27] Speaker 02: and the most plausible and the most reasonable inference, and the one in light most favorable to relator here, which is what 9B requires, is that these gifts identified by date, amount, and recipient were intended to induce patient referrals. [00:40:42] Speaker 02: The up coding. [00:40:44] Speaker 05: You need to show ensuing referrals? [00:40:47] Speaker 02: No, Your Honor, we do not. [00:40:48] Speaker 02: Just as I stated in my initial argument, the AKS does not require actual referrals as a showing. [00:40:54] Speaker 05: Not for liability. [00:40:56] Speaker 05: not for the fraudulent certification aspect of this, but what about for damages under the False Claims Act? [00:41:06] Speaker 02: Well, we've as far as damages under the False Claims Act go, I think the government suffered a monetary loss. [00:41:15] Speaker 02: What is required at the 9B stage is the more lenient pleading standard that this court adopted in Heath. [00:41:23] Speaker 02: And that is that actual claims aren't required, not for purposes of surviving 9B, not for purposes of damages. [00:41:29] Speaker 02: It's to allege that there is reliable indicial leading to the strong inference that false claims were submitted. [00:41:37] Speaker 02: Once we get further down the road, sure, the probative requirements are different. [00:41:43] Speaker 02: But at this stage, Heath controls. [00:41:46] Speaker 05: Any other questions from my colleagues? [00:41:50] Speaker 05: Thank you. [00:41:50] Speaker 05: Thank you, Your Honor. [00:41:51] Speaker 05: Case is submitted.