Tort/Negligence – False Claims Act – State Acts – Medical Lab Kickback Scheme

United States ex rel. Lutz v. Berkeley Heartlab, Inc. (Lawyers Weekly No. 002-128-17, 9 pp.) (Richard Mark Gergel, J.) 9:14-cv-00230; D.S.C.

Holding: Common sense and the weight of analogous authority suggests that evidence that medical claims are tainted by an illegal kickback scheme in which providers are bribed for referrals would be material to a state’s decision to pay claims. The question of materiality is both fact-intensive and context-specific, and there is at least a genuine dispute of material fact here, so defendant Mallory is not entitled to summary judgment on the plaintiff-relators’ state-law false claims act causes of action.

Mallory’s motion for summary judgment is granted with regard to the relators’ claims arising under insurance statutes in California and Illinois; otherwise, the motion is denied.

In support of her argument that the relators cannot show that her kickback scheme caused damage with respect to the relators’ state-law false claims act causes of action, Mallory claims that in excess of 40 percent of Health Diagnostics Laboratory’s customers did not receive processing and handling (P&H) fees at all. The court reads this as a tacit admission that the majority of HDL’s customers did receive such payments.

At least some of the claims HDL submitted to state Medicaid programs were linked to tests ordered by physicians who received P&H fees from HDL. There is clearly a genuine dispute of material fact about how many of the claims submitted to the state healthcare programs were tainted by the alleged kickback scheme, and this question must be submitted to a jury.

A rational trier of fact could conclude that the evidence shows that (1) Mallory willfully entered into an agreement with defendants Dent and Johnson with the goal of obtaining reimbursement for false claims, (2) one conspirator performed an overt act to execute that scheme, and (3) the state governments suffered damages when they reimbursed false claims. Therefore, Mallory is not entitled to summary judgment on the relators’ conspiracy claims.

However, the relators do not dispute Mallory’s argument that there is no evidence that HDL or Singulex submitted (or were reimbursed for) claims to private insurers with clients in California or Illinois. The relators have created no genuine dispute of material fact about whether Mallory violated the insurance statutes in Illinois or California.

Motion granted in part, denied in part.