Dr. John Pepe and Dr. Richard Sherman (“Relators”), acting as whistleblowers, brought a qui tam action against Fresenius Medical Care Holdings, Fresenius Vascular Care, Inc., and Dr. Gregg Miller (“Defendants”).  Relators’ complaint alleged that the Defendants engaged in fraudulent billing practices under the False Claims Act (“FCA”) and analogous state laws.  Last week, the United States District Court for the Eastern District of New York dismissed Relators’ case because they failed to plead their allegations with particularity as required by Federal Rule of Civil Procedure 9(b).

Relators accused Defendants of systematically defrauding Medicare and Medicaid by performing unnecessary medical procedures and billing the government for these services.  The alleged fraudulent activities included: (1) scheduling follow-up visits for patients without proper referrals from treating physicians; (2) billing for medically unnecessary x-rays and other procedure; (3) falsifying patient records to include non-existent or insufficient reasons for the follow-up visits; and (4) creating prohibited financial incentive policies to encourage unnecessary procedures.

The court’s analysis revolved around the application of Rule 9(b), which requires that allegations of fraud be pleaded with particularity.  A complaint must provide detailed information about the who, what, when, where, and how of the alleged fraudulent activities.  Here, the court found that the Relators failed to meet this standard for several reasons:

• A Lack of Specific Examples:  While Relators provided examples of fraudulent activities involving six patients, these examples were limited to a small geographic area. The court determined that these examples were insufficient to support allegations of nationwide fraud.

• Generalized Allegations:  Relators’ claims were often based on generalized assertions and speculation rather than specific, detailed facts.  For instance, Relators alleged that Fresenius’s financial incentive policies encouraged fraud but did not provide concrete examples linking these policies to specific claims.

• Insufficient Connection to Billing:  The court noted that Relators failed to connect the alleged fraudulent activities to specific claims submitted to the government.  Without this connection, the court could not reasonably infer that the fraud was widespread.

This holding underscores the importance of pleading fraud with particularity and the difficulties of proving nationwide fraud without detailed, specific allegations.  Going forward, individuals and entities targeted with qui tam actions can point to this case as setting a high bar for pleading FCA violations with particularity.

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