United States v. Vora

1

United States of America Plaintiff v. Kishor N. Vora Defendant

No. 4:20-cv-66-BJB

United States District Court, W.D. Kentucky, Owensboro Division

January 7, 2022

OPINION & ORDER

Benjamin Beaton, District Judge

This is the second motion to dismiss filed by the defendant, Dr Kishor Vora, in this False Claims Act case. The government alleges that a laboratory paid Vora kickbacks so he would order unnecessary and unauthorized tests, including more than one thousand tests that Medicare reimbursed. The Court agrees in part with Vora that the government hasn't adequately pled a critical element of its claim: materiality. The amended complaint doesn't include plausible non-conclusory allegations that Vora concealed regulatory violations that were material to the government's decision to pay those lab claims. But the Court agrees with the government that it has adequately pled materiality regarding the express-but allegedly false-certifications that Dr. Vora's test orders were medically necessary.

I. Prior Proceedings

The United States accused Dr. Vora of ordering unnecessary lab tests for his Medicare patients between May 2012 and March 2013 because a lab, known as NMTC, was paying him kickbacks. Complaint (DN 1) ¶¶ 3, 15. These payments allegedly violated the Anti-Kickback Statute, which is civilly enforceable under the False Claims Act. 42 U.S.C. § 1320a-7b(g). Vora moved to dismiss those counts, but a previous order (which explains the factual allegations much more fully than this order does) held they survived. United States v. Vora, 488 F.Supp.3d 554, 563 (W.D. Ky. 2020) (“Vora I”). The government adequately alleged the kickbacks were at least “one purpose” (if not the only purpose) motivating Dr. Vora to order these tests, which Medicare reimbursed the lab for performing, and which could give rise to liability under the False Claims Act. Id. at 562-64.

The government has also alleged that these same claims were fraudulent under the FCA for a separate reason: Vora falsely certified that the medical tests were medically necessary, even though he didn't actually believe they were, and even though he violated Medicare rules in ordering them. Vora certified the claims' eligibility for reimbursement in two ways, according to the government. First, he caused the lab to “expressly” certify their eligibility for payment when the lab signed Medicare claim forms, asserting that the tests were “medically indicated and necessary for the health of the patient.” First Amended Complaint (FAC) (DN 38) ¶ 141; Oral Arg. Tr. (DN 49) at 5:3-20. Second, he caused the lab to “impliedly” certify the claims' truthfulness because the submissions did not disclose noncompliance with underlying regulations. FAC ¶ 90; Tr. at 5:23-6:11. This, the government says, created the false impression that the claims were reimbursable. Both theories can provide a basis for liability under the FCA. Universal Health Servs., Inc. v. United States ex rel. Escobar, 579 U.S. 176, 186 (2016).

A previous order of this Court construed the original complaint to assert only an implied-certification theory, not an express false statement to the government that the tests were necessary. “The actual medical necessity of the tests, ” the Court explained in response to the first motion to dismiss, “is not relevant under the Government's theory of liability.” Vora I, 488 F.Supp.3d at 570 (emphasis in original). And that order questioned whether the government had adequately pled that the three alleged regulatory violations at issue were “material” to Medicare's decision to pay the claims. See Id. at 571.

In response to the Court's order, the government filed an amended complaint that asserted that it wouldn't have paid if it knew about the violations. FAC ¶¶ 90- 91, 142-143, 145, 148, 151. But aside from these self-serving and conclusory allegations, discussed below, the amended complaint offered only a single factual allegation in support of the materiality of these violations: the government's post-payment review of some of the claims at issue in this case, Id. ¶ 92; Tr. at 34:16-19, which concluded that the claims shouldn't have been paid and shows, according to the government, that these violations were in fact “material, ” Id. ¶ 140, 146.

Vora again moved to dismiss the claims-this time because, in Vora's view, the amended complaint failed to allege the materiality of the Medicare regulations he allegedly violated. See Partial Motion to Dismiss (DN 43). He initially read the amended complaint (like Judge McKinley had read the original complaint) to assert only an implied-certification theory. Id. at 3. But the government's opposition brief pointed to allegations of express and implied certifications that it contended the amended complaint contained. Brief in Opposition (DN 44) at 16 (citing FAC ¶ 142). So Vora's reply brief (DN 45 at 5) broadened his attack on the amended complaint: whether its theory was viewed as express or implied or both, the government hadn't adequately alleged that the purported certifications were material to the government's decision to pay these claims back in 2012 and 2013.

At oral argument each side clarified its position on important questions.

The government clarified its position on the relationship between materiality and regulatory violations. Although its pleadings might be read more broadly, the government didn't maintain that any reimbursement request that violated a Medicare regulation or guideline automatically violated the False Claims Act, subjecting erroneous billers to the prospect of treble damages and civil penalties. Tr. at 12:11-13:14. Such an argument would stand in some tension with the Sixth Circuit's ruling that the FCA “is not a vehicle to police technical compliance with complex federal regulations.” United States ex rel. Williams v. Renal Care Grp., 696 F.3d 518, 532 (6th Cir. 2012); see also Escobar, 579 U.S. at 196 (FCA doesn't police “insignificant regulatory or contractual violations” with treble-damages fraud liability).

Instead, the government agreed that a violation of healthcare regulations or guidelines, standing alone, does not necessarily violate the FCA. That requires an attempt to defraud the government, not just a billing error. In this context an actionable false claim, in the government's view, requires a violation that the provider knowingly masks by falsely certifying compliance, despite also knowing that the government would not pay the claim if it knew the truth. Tr. at 12:14-22; see also Escobar, 579 U.S. at 181 (“What matters is … whether the defendant knowingly violated a requirement that the defendant knows is material to the Government's payment decision.”).

Vora, for his part, conceded that the statutory “reasonable and necessary” requirement is material. Reply at 1; Tr. at 29:5-25. But he maintained that the particular regulatory violations identified in the amended complaint were not material, even though the government purported to deem any claims not in compliance with these regulations as not “reasonable and necessary.” Tr. at 29:5- 30:14.

II. False Claims Act

The False Claims Act applies to “any person who knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval” to the U.S. government. 31 U.S.C. § 3729(a)(1)(A). A successful claim requires that “(1) the defendant made”-or, in this case, caused to be made, see § 3729(a)(1)(B)-“a false statement or created a false record; (2) with scienter; (3) that was material to the Government's decision to make the payment sought in the defendant's claim; and (4) that the defendant submitted to the U.S. government causing it to pay the claim.” United States ex rel. Prather v. Brookdale Senior Living Communities, Inc., 892 F.3d 822, 830 (6th Cir. 2018) (citing 31 U.S.C. § 3729(a)(1)(A)-(B)).

The only element at issue now is materiality. As defined by Congress, that means the violations would have “a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property.” 31 U.S.C. § 3729(b)(4). And as described by the Supreme Court, the FCA's materiality requirement is “rigorous” and “demanding.” Escobar, 579 U.S. at 192-93. At argument, Vora made clear that his pending motion to dismiss doesn't implicate the scienter element, though he disputes that the government can establish it. See Tr. at 53: 9-17; see also Id. at 53:1-8 (government agreeing scienter not raised by this motion). But his second motion to dismiss, at issue here, addresses the issue of materiality only. See MTD at 4.

III. Implied-Certification Claims

Reviewing the amended complaint, either in isolation or alongside the original, reveals the government hasn't sufficiently pled materiality with respect to its implied-certification theory. Its allegations are largely conclusory, and therefore count for nothing under Iqbal and Twombly. The court must accept as true all factual assertions, but needn't accept “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). To say nothing of Rule 9's heightened standard requiring plaintiffs to plead fraud with “particularity.” Fed.R.Civ.P. 9(b). Stripped of its legal conclusions, the amended complaint's single factual assertion, even accepting it as true, is inadequate to indicate that the Medicare rules were in fact material to the government's payment decisions.

A. Specific regulatory violations. The amended complaint alleges that Vora violated three Centers for Medicare & Medicaid Services requirements. What converts those violations to false claims, according to the government, is that Vora implicitly certified that he had not violated any regulations...