Dakshesh Parikh v. Citizens Medical Center

Case: 13-41088 Document: 00512789415 Page: 1 Date Filed: 10/01/2014
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
October 1, 2014
No. 13-41088
Lyle W. Cayce
Clerk
UNITED STATES OF AMERICA, ex rel; M.D. DAKSHESH KUMAR
PARIKH; M.D. HARISH CHANDNA; M.D. AJAY GAALLA,
Plaintiffs–Appellees
UNITED STATES OF AMERICA,
Intervenor–Appellee
v.
DAVID BROWN; DR. WILLIAM CAMPBELL,
Defendants–Appellants
Appeal from the United States District Court
for the Southern District of Texas
U.S.D.C. No. 6:10-CV-64
Before SMITH, WIENER, and PRADO, Circuit Judges.
EDWARD C. PRADO, Circuit Judge: *
IT IS ORDERED that the petition for panel rehearing is GRANTED and
the opinion previously filed in this case is WITHDRAWN. The following
opinion is substituted therefore:
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
Case: 13-41088 Document: 00512789415 Page: 2 Date Filed: 10/01/2014
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In this False Claims Act (“FCA”) qui tam suit, relators Drs. Dakshesh
Parikh, Harish Chandna, and Ajay Gaalla (collectively, the “Relators”) sued
Citizens Medical Center (“CMC”), David Brown (“Brown”), and Dr. William
Campbell, Jr. (“Campbell”). Brown and Campbell (collectively, “Appellants”)
moved to dismiss the complaint based upon qualified immunity, and the
district court denied the motion. We affirm.
I. FACTUAL AND PROCEDURAL BACKGROUND
Relators are cardiologists who formerly practiced at CMC. CMC is a
county-owned hospital in Victoria, Texas. Brown is the hospital’s
administrator, and Campbell is a cardiologist employed by the hospital. As
Brown and Campbell are the only defendants in this appeal, we briefly
summarize the facts and proceedings that pertain to them.
In their complaint, Relators alleged Appellants committed numerous
FCA violations concerning improper incentives for patient referrals. The
alleged FCA violations fall into three general categories.
First, Relators alleged that CMC, at Brown’s direction, knowingly and
willfully paid bonuses to emergency room physicians in exchange for referral
of Medicare and Medicaid patients to CMC’s chest pain center. Specifically,
the bonuses were paid by way of an equal split, between CMC and the referring
emergency room physicians, of the chest pain center revenues. The bonuses
were thus tied to the “volume, value, and revenue generated” from these
referrals, which made up the entirety of the chest pain center’s patients.
Brown “personally designed” this bonus system and was in charge of
implementing and administering it.
Second, Relators alleged that Brown offered, and Campbell accepted, an
above-market guaranteed salary and discounted office space rental in
exchange for Medicare and Medicaid patient referrals to CMC. CMC paid
Campbell “many times more in salary than [he] earned in private practice” and
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rented office space to Campbell “at a significantly reduced rate below the fair
market value.” Prior to this arrangement, Campbell transferred Medicare and
Medicaid patients out of CMC to other hospitals for treatment. Once he
entered this arrangement, however, he began referring “nearly all Medicare
and Medicaid heart surgery patients to CMC and its exclusive cardiac
surgeon.”
Third, Relators alleged that Brown implemented a bonus system
wherein gastroenterologists who participated in CMC’s colonoscopy screening
program received bonus compensation for referring patients to CMC.
Specifically, CMC operated a program offering insured patients, including
Medicare and Medicaid patients, colonoscopy screenings. A gastroenterologist
would be assigned to a screening day and would perform the screenings for
that day. The gastroenterologist would then be compensated by billing any
charges to the patients’ insurer, and CMC would be compensated by billing
separately for its hospital charges. CMC also compensated the
gastroenterologist an additional $1,000 “directorship” fee for each day the
gastroenterologist participated in the screening program. But Relators alleged
that the gastroenterologist did not assume any “additional work or oversight”
to receive the directorship fee—“[t]here are absolutely no director
responsibilities or duties for participating physicians.” Because Brown
awarded more screening days to physicians who referred more patients to
CMC, screening gastroenterologists received bonuses tied to the number of
patients referred to CMC.
Based upon these allegations, Relators asserted causes of action under
the FCA. According to Relators’ complaint, Appellants submitted, or conspired
to submit, claims for payment from Medicare and Medicaid for these services
in violation of the FCA because such claims were knowingly falsely certified to
be in compliance with healthcare laws and regulations. Relators alleged that
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Appellants knew that these quid pro quo arrangements violated the Anti-
kickback Statute (“AKS”) for federal health care programs, 42 U.S.C. § 1320a–
7b, and the Stark Law, 42 U.S.C. § 1395nn, which prohibits submitting claims
to federal health care programs if the services were furnished pursuant to
referrals from physicians with whom the servicing entity has a financial
relationship.
Brown and Campbell moved to dismiss the complaint based upon
qualified immunity. The district court denied the motion, finding qualified
immunity categorically unavailable against FCA claims. Brown and Campbell
timely appeal.
II. JURISDICTION AND STANDARD OF REVIEW
To the extent an order denying qualified immunity turns on an issue of
law, this court has jurisdiction to consider an interlocutory appeal of that order.
Cantrell v. City of Murphy, 666 F.3d 911, 918 (5th Cir. 2012). We review de
novo the denial of a motion to dismiss based upon qualified immunity grounds.
Id. In so doing, we accept all well-pleaded facts as true and draw all reasonable
inferences in favor of the nonmoving party. Id.
III. DISCUSSION
The parties largely dispute the categorical availability of qualified
immunity against FCA suits, but we expressly decline to resolve this dispute.
Instead, assuming arguendo that qualified immunity is an available defense,
we hold on the merits that Brown and Campbell are not entitled to qualified
immunity against these FCA claims.
The FCA permits the United States, or a private person on the
government’s behalf (a “relator”), to sue a person who has presented a false
claim for payment to the United States. 31 U.S.C. §§ 3729(a), 3730(b).
Liability attaches to any person who, inter alia, “knowingly presents, or causes
to be presented, a false or fraudulent claim for payment or approval,” or
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“knowingly makes, uses, or causes to be made or used, a false record or
statement material to a false or fraudulent claim.” Id. §§ 3729(a)(1)(A),
3729(a)(1)(B). The FCA defines “knowingly” to mean that the defendant “has
actual knowledge of the information” underlying the claim, “acts in deliberate
ignorance of the truth or falsity of the information,” or “acts in reckless
disregard of the truth or falsity of the information.” Id. § 3729(b)(1)(A). A
defendant found liable may be subject to civil penalties and treble damages.
Id. § 3729(a)(1). See generally United States ex rel. Spicer v. Westbrook, 751
F.3d 354, 364 (5th Cir. 2014).
Qualified immunity shields from suit all but the “plainly incompetent or
those who knowingly violate the law.” Brumfield v. Hollins, 551 F.3d 322, 326
(5th Cir. 2008) (citation and internal quotation marks omitted). The plaintiff
must bear the burden of proving, in two familiar steps, that a government
official is not entitled to qualified immunity. See Atteberry v. Nocona Gen.
Hosp., 430 F.3d 245, 253 (5th Cir. 2005). First, a plaintiff must show that he
“plead[ed] facts showing . . . that the official violated a statutory or
constitutional right.” Ashcroft v. al–Kidd, 131 S. Ct. 2074, 2080 (2011) (citing
Harlow v. Fitzgerald, 457 U.S. 800, 818 (1982)); Atteberry, 430 F.3d at 253. If
the plaintiff makes this first showing, then the second step is to determine
whether “the defendants’ actions were objectively unreasonable in light of the
law that was clearly established at the time of the actions complained of.”
Atteberry, 430 F.3d at 253. Courts have discretion to decide which of the two
prongs of qualified immunity to address first. Pearson v. Callahan, 555 U.S.
223, 236 (2009). Both prongs are met here.
A. Statutory Violation
Relators have borne their burden on the first step of the qualified
immunity analysis. As the district court found, Relators sufficiently pleaded
that Appellants violated the FCA by submitting, or conspiring to submit,
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claims for payment while knowingly falsely certifying compliance with the
AKS and the Stark Law. Brown and Campbell do not dispute the sufficiency
of the complaint in this regard.
We take these well-pleaded facts as true—including the well-pleaded fact
that Appellants knowingly falsely certified compliance with the AKS and the
Stark Law—and inquire next whether it was clearly established at the time
that such a claim for payment violated the FCA.
B. Objectively Unreasonable in Light of Clearly Established Law
The courses of conduct allegedly taken by Brown and Campbell were
objectively unreasonable in light of clearly established law. A defendant’s
conduct is objectively unreasonable when, at the time of the challenged
conduct, the contours of the violated right were “sufficiently clear that every
reasonable official would have understood that what he is doing violates that
right.” al–Kidd, 131 S. Ct. at 2083 (citation and internal quotation marks
omitted). Although “the term clearly established does not necessarily refer to
commanding precedent that is factually on all-fours with the case at bar,”
Atteberry, 430 F.3d at 256 (citation and internal quotation marks omitted),
“existing precedent must have placed the statutory or constitutional question
beyond debate,” al–Kidd, 131 S. Ct. at 2083 (citation omitted).
Appellants argue that the alleged violations of the AKS and the Stark
Law were not clearly established at the time of the instant offenses. However,
such an argument presumes that Relators asserted causes of action under the
AKS and Stark Law, but they have not. Although AKS and Stark Law
violations underlie Relators’ FCA claims, we do not focus on these underlying
violations. 1 After all, “the [FCA] attaches liability . . . to the claim for
1The pleadings before us would also support the conclusion that Appellants’ course of
conduct was in clear violation of the AKS and the Stark Law. See, e.g., United States ex rel.
Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 903 (5th Cir. 1997) (noting that
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payment,” “not to the underlying fraudulent activity.” United States ex rel.
Longhi v. Lithium Power Techs., Inc., 575 F.3d 458, 467 (5th Cir. 2009)
(citation and internal quotation marks omitted). Properly focused on the claim
for payment here, the relevant pleading that we have taken as true is that
Appellants knew their compliance certification was false.
Importantly, taking all reasonable inferences in favor of the Relators as
we must, Relators’ pleadings allege a simple, brazen kickback scheme: Brown
and Campbell directed CMC to pay doctors cash bonuses and other benefits in
exchange for referrals of Medicare and Medicaid patients. These factual
allegations support the Relators’ claim that, when Brown and Campbell
certified compliance with the AKS and the Stark Law, they “knowingly and
willfully made, used, or caused to be made or used, a false record or statement
material to a false or fraudulent claim to the government.” The FCA punishes
“knowingly” making a false claim, which includes (1) acting with actual
knowledge of falsity (2) with deliberate indifference toward the truth or falsity
the Stark Law “prohibits physicians from referring Medicare patients to an entity for certain
‘designated health services,’ including inpatient and outpatient hospital services, if the
referring physician has a nonexempt ‘financial relationship’ with such entity” and the AKS
prohibits “(1) the solicitation or receipt of remuneration in return for referrals of Medicare
patients, and (2) the offer or payment of remuneration to induce such referrals”); United
States v. Rogan, 459 F. Supp. 2d 692, 711 (N.D. Ill. 2006), aff’d, 517 F.3d 449 (7th Cir. 2008)
(“The Stark Statute establishes the clear rule that the United States will not pay for items
or services ordered by physicians who have improper financial relationships with a
hospital.”); Medicare and Medicaid Programs; Physicians’ Referrals to Health Care Entities
With Which They Have Financial Relationships, 66 Fed. Reg. 856-01, 871–80 (Jan. 4, 2001)
(clarifying definitions of, inter alia, referral and physician compensation). Appellants argue
that these statutes are “confusing, complicated, over-reaching, too complex, and intrusive,”
as well as “ambiguous; arcane; and very vague.” Steven D. Wales, The Stark Law: Boon or
Boondoggle? An Analysis of the Prohibition on Physician Self-Referrals, 27 L. & Psychol. Rev.
1 (2003) (cited by Appellants). We can imagine situations that implicate these statutes’
complexity—where due to the laws’ exceptions or safe harbor provisions the alleged unlawful
conduct was reckless or inadvertent. But according to the factual allegations, the Appellants
in this case allegedly perpetrated an audacious kickback scheme. This conduct is at the core
of the prohibitions of the FCA, the Stark Law, and the AKS. This is not a case at the margins
where qualified immunity may apply, an issue on which we express no opinion.
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or (3) with reckless disregard of the truth or falsity of the information provided.
Longhi, 575 F.3d at 465. Because the well-pleaded complaint alleges that
Brown and Campbell certified claims with “actual knowledge of their falsity,”
we need not address the more difficult question whether qualified immunity
may be available for other FCA violations on a lesser scienter showing, namely
deliberate indifference or recklessness.
The key question, then, is whether the contours of the FCA were
sufficiently clear at the time such that every reasonable official would have
understood that—as Relators pleaded in their complaint—presenting claims
for payment, while knowingly falsely certifying compliance with the AKS and
Stark Law, violated the FCA. Based on circuit precedent, we answer in the
affirmative.
In United States ex rel. Thompson v. Columbia/HCA Healthcare Corp.,
125 F.3d 899 (5th Cir. 1997), this court considered whether a claim for services
rendered in violation of the AKS and the Stark Law constituted a false claim
within the purview of the FCA. Id. at 901–03. We first noted that “claims for
services rendered in violation of a statute do not necessarily constitute false or
fraudulent claims under the FCA.” Id. at 902 (emphasis added). However,
under a false certification theory, the FCA may be implicated “where the
government has conditioned payment of a claim upon a claimant’s certification
of compliance with, for example, a statute or regulation.” Id. In this scenario,
“a claimant submits a false or fraudulent claim when he or she falsely certifies
compliance with that statute or regulation.” Id. We then found that the relator
had alleged (1) “as a condition of their participation in the Medicare program,
defendants were required to certify in annual cost reports that the services
identified therein were provided in compliance with the laws and regulations
regarding the provision of healthcare services,” and (2) “defendants falsely
certified that the services identified in their annual cost reports were provided
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in compliance with such laws and regulations.” Id. This, we held, stated a
cognizable cause of action under the FCA. Id. at 902–03.
In light of our decision in Thompson, every reasonable official would
understand that the FCA is violated when (1) “the government has conditioned
payment of a claim upon a claimant’s certification of compliance with, for
example, a statute or regulation,” and (2) the official “falsely certifies
compliance with that statute or regulation.” Id. at 902. This clearly
established statutory right is precisely what Relators alleged Appellants to
have violated.
Accordingly, we hold that as a matter of law Brown and Campbell are
not entitled to qualified immunity. 2
IV. CONCLUSION
We AFFIRM the district court’s denial of Brown and Campbell’s motion
to dismiss based upon qualified immunity.
2 Relators also alleged that Brown and Campbell violated the FCA “directly” by
providing unnecessary or worthless medical services. Because Brown and Campbell do not
assert qualified immunity as to these claims, we need not address the matter.
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