Rule 9(b) Demands “How” FCA Claims Are False: wRVU Productivity Pay and Provider-Based Subsidies Don’t Plead Stark/AKS Violations Without Referral-Linked Remuneration

I. Introduction

In United States ex rel. Liesa Kyer v. Thomas Health System, Inc. (4th Cir. June 4, 2026), relator Liesa Kyer—a former nurse at Thomas Memorial Hospital—brought a qui tam action under the False Claims Act (FCA) against a hospital system (Thomas Health System, Inc., two hospitals, a physician group, and an executive). She alleged that, from 2013–2022, the defendants submitted federally reimbursed claims that were “false” because they were allegedly tainted by violations of the Stark Law (physician self-referral restrictions) and the Anti-Kickback Statute (AKS).

The central issues on appeal were pleading issues: whether the amended complaint satisfied Rule 9(b)’s heightened particularity requirement for FCA fraud, and whether the district court properly denied post-judgment vacatur and leave to amend.

II. Summary of the Opinion

The Fourth Circuit affirmed dismissal under Rule 12(b)(6) for failure to plead fraud with particularity under Rule 9(b), and also affirmed denial of post-judgment vacatur and leave to amend on prejudice grounds.

Although the relator attached extensive tables of billed claims and pointed to annual cost-report certifications of Stark/AKS compliance, the Court held she failed to plead how any particular claim (or any necessary pattern of conduct) was fraudulent. The Court further held the complaint did not plead a Stark violation because it failed to plausibly allege a prohibited “financial relationship” (i.e., compensation varying with or taking into account referrals), and did not plead an AKS violation because alleged subsidies and physician compensation were at least as consistent with lawful provider-based billing economics and ordinary compensation practices as with kickbacks.

III. Analysis

A. Precedents Cited

1. Pleading standards (Rule 8 plausibility and Rule 9(b) particularity)

  • Ashcroft v. Iqbal and Bell Atl. Corp. v. Twombly: The Court used these to reiterate that allegations consistent with lawful conduct do not plausibly state a claim; conclusory labels do not count as facts.
  • Harrison v. Westinghouse Savannah River Co.: Provided the Fourth Circuit’s articulation of Rule 9(b)’s purposes in FCA cases—notice to defendants and assurance the relator has substantial prediscovery evidentiary support.
  • United States ex rel. Nathan v. Takeda Pharm. N. Am., Inc., United States ex rel. Grant v. United Airlines Inc., United States ex rel. Nicholson v. MedCom Carolinas, Inc., and Wheeler v. Acadia Healthcare Co.: These formed the backbone of the Court’s “presentment” analysis. The Court reaffirmed that a relator must plead either (a) the specific “who/what/when/where/how” of false claims, or (b) a pattern of conduct that “would necessarily have led” to submission of false claims. The tables here provided “who/what/when/where,” but not “how” any claim was false.
  • E.I. du Pont de Nemours & Co. v. Kolon Indus., Inc.: Cited for the principle that appellate review looks to the complaint and its attachments when assessing plausibility.

2. Stark Law framework and “referrals”/compensation linkage

  • United States ex rel. Drakeford v. Tuomey Healthcare Sys., Inc. (Tuomey I): Used to describe how facility-fee components can constitute “designated health services” referrals even when a physician performs the professional component.
  • United States ex rel. Drakeford v. Tuomey (Tuomey II): The relator leaned on Tuomey II to argue productivity pay could be a referral proxy. The Court distinguished it: Tuomey II involved collections-based compensation tied to hospital facility fees; here, wRVUs measure physician work effort, and the Stark “volume or value” test requires referrals be a variable in the compensation formula.
  • United States ex rel. Bookwalter v. UPMC: The Court cited Bookwalter to illustrate what stronger “above-market” allegations can look like (multiples of 90th percentile, extraordinary bonuses, growth), and to emphasize that mere reference to the 90th percentile—without more—does not plausibly show remuneration for referrals.
  • Loper Bright Enterprises v. Raimondo: Noted for the post-Chevron environment; the Court declined to address deference to Stark regulations because the parties did not challenge them.

3. Anti-Kickback Statute intent and FCA linkage

  • United States v. Mallory: Supported the “one purpose” test—AKS is violated if one purpose of remuneration is to induce referrals.
  • United States ex rel. Nicholson v. MedCom Carolinas, Inc.: Cited for the statutory bridge that AKS-tainted claims can constitute FCA false claims under 42 U.S.C. § 1320a-7b(g).
  • Circuit split cases—United States ex rel. Cairns v. D.S. Med. LLC, United States ex rel. Martin v. Hathaway, United States v. Regeneron Pharmaceuticals, Inc., and United States ex rel. Greenfield v. Medco Health Solutions, Inc.: The Court flagged (but did not resolve) whether “resulting from” requires but-for causation or merely a link, because it found no plausible AKS violation at the threshold.

4. Conspiracy and reverse false claims

  • Allison Engine Co. v. United States ex rel. Sanders: Provided the requirement that conspirators agree that a false statement would materially affect the government’s payment decision.
  • United States ex rel. Foreman v. AECOM: The Court cited Foreman to note an unresolved question: whether “mirror-image” reverse false claims are redundant where they simply restate the direct false-claim theory.

5. Post-judgment vacatur and amendment

  • Daulatzai v. Maryland and Laber v. Harvey: Established the procedural rule that post-judgment amendment requires vacatur, and that Rule 59(e)/Rule 15(a) analysis may collapse into the Rule 15(a) amendment factors.
  • Smith v. Bounds: Used for Rule 60(b)(6) relief factors, including absence of prejudice to the opposing party.
  • Glaser v. Enzo Biochem, Inc., Foman v. Davis, and Willner v. Dimon: Supported denying amendment where there is undue delay, repeated failure to cure deficiencies, and where the plaintiff does not show how an amendment would cure defects—especially after substantial access to information and motion-to-dismiss “roadmaps.”
  • Banister v. Davis: Cited for timing/interaction of post-judgment motions and appeal deadlines.
  • Am. C.L. Union v. Holder: Cited in a footnote questioning prolonged seal extensions (though not dispositive to the holding).

B. Legal Reasoning

1. “Presentment” is not enough; Rule 9(b) requires “how” the claim was false

The Court accepted that the relator’s appendices plausibly identified claims submitted and paid (including time and payment information), and that hospitals submitted annual cost reports certifying Stark/AKS compliance. But those allegations only established submission and payment, not falsity. Under Nathan/Grant/Nicholson/Wheeler, the relator had to connect specific claims (or a necessarily claim-generating pattern) to a pleaded Stark or AKS violation with particularity. She did not.

2. Stark Law: the complaint failed at the “financial relationship” (volume/value) step

The Court worked through Stark’s elements and focused on the key missing link: allegations that physician compensation “varies with, or takes into account,” the volume or value of referrals to the hospitals.

  • Designated health services / facility use theory: The Court suggested the complaint might allow an inference that hospital facility services could have been billed in parallel under provider-based billing (even if the relator’s tables showed physician-group billing). But the complaint did not do the necessary work of identifying which services were designated health services, and largely asked the Court to infer too much from unexplained codes.
  • wRVUs are not referrals: The Court held that wRVU-based compensation measures physician work and does not include referrals as a variable. Stark excludes services the physician “personally performs” from the definition of “referral,” and the regulation’s “takes into account” test requires referrals to appear as a variable that positively correlates compensation with referrals.
  • Tuomey II distinguished: The Court rejected the analogy because Tuomey II involved collections-based compensation tied to facility-fee revenue generated by the physician’s hospital-based procedures—direct linkage to hospital referral revenue not alleged here.
  • Supervision credit and mid-level practitioners: Credit for work by supervised nonphysician practitioners did not plausibly become a referral proxy; supervision is itself physician work required by state law, and the complaint did not explain how such credits tracked referral volume/value rather than supervised practice volume.
  • Other “smoke” allegations insufficient: Tracking referral revenues internally, physician group losses, transfers, intermittent 90th percentile compensation, and suggestive statements about “owning referrals” did not plausibly allege compensation varied with referrals.

3. Anti-Kickback Statute: lawful explanations defeated plausibility and particularity

  • Subsidizing the physician group: Even if hospitals covered the physician group’s deficit, the complaint did not plausibly allege the transfers were intended to induce referrals; they were at least as consistent with lawful provider-based billing economics and intra-system financial alignment.
  • “Above market” compensation: Sporadic compensation at or above the 90th percentile did not, without additional pleaded facts, plausibly support an inference of inducement.
  • Marketing stipend misfit: A stipend encouraging physicians to market their own practices to referral sources was not pleaded as remuneration inducing those physicians to refer to the hospitals. The complaint “had it backwards” on who was inducing whom.

4. Conspiracy and reverse false claim counts fell with the absence of falsity

Without a pleaded Stark/AKS violation making claims false, there was no plausible agreement to submit false claims (conspiracy). Likewise, the reverse false claim theory was not viable because it depended on the same unpleaded falsity/overpayment predicate.

5. Post-judgment amendment properly denied for prejudice

The Court emphasized the extraordinary delay and the relator’s access to extensive information (including hundreds of thousands of pages produced under government subpoena), plus repeated opportunities to cure defects after motions to dismiss. The relator did not propose a concrete amended complaint or explain, with specificity, how she would bridge the inferential gaps. Under Laber, Daulatzai, Foman, and Willner, the district court acted within its discretion in concluding further amendment would prejudice defendants.

C. Impact

  • Sharper boundary between productivity pay and referral-based remuneration (Stark): The opinion reinforces that wRVU productivity compensation—without referral variables or facility-fee-based collections linkage—is not plausibly pleaded as “volume or value” referral compensation.
  • Provider-based billing economics are not, standing alone, kickbacks (AKS): Subsidies and operating losses common to integrated systems using provider-based billing will not support AKS inferences without concrete facts showing intent to induce referrals.
  • Rule 9(b) gatekeeping in healthcare FCA cases: Large claim tables and compliance certifications may satisfy “presentment” detail, but they do not substitute for pleading “how” the claim is false—i.e., the particular Stark/AKS mechanism that taints the claims.
  • Amendment discipline after long seals and extensive document access: The decision signals that courts may be less receptive to post-judgment “one more try” requests when relators had years, substantial information, and dismissals explaining deficiencies, yet still cannot articulate a curative amendment.
  • Issues preserved for future litigation: The Court flagged but did not decide (a) AKS “resulting from” causation (but-for vs link) and (b) whether reverse false claims can be redundant when they merely mirror a direct false-claim theory.

IV. Complex Concepts Simplified

  • Qui tam / relator: A private whistleblower sues on behalf of the United States under the FCA and may share in any recovery.
  • FCA “presentment”: The FCA targets fraud that results in claims for government payment. Pleading must connect alleged misconduct to actual claims (or an inevitable claim-submission pattern).
  • Rule 9(b) particularity: Fraud must be pleaded with specifics—enough detail to show the concrete mechanics of the fraud, not just suspicions, labels, or “must have happened” assertions.
  • Stark Law (self-referral): Generally prohibits physicians from referring Medicare patients for certain “designated health services” to an entity with which the physician has a prohibited financial relationship, unless an exception applies.
  • Designated health services / facility fees: Stark can treat a physician’s use of hospital facilities as a referral for the facility component, even when the physician personally performs the professional service.
  • wRVUs: “Work relative value units” quantify physician work effort. Paying physicians based on wRVUs is typically tied to productivity, not necessarily to referrals.
  • Provider-based billing: A structure where physician professional services and hospital facility overhead can be billed separately; it may shift revenue within a health system and generate physician group “losses” that are later subsidized.
  • Anti-Kickback Statute: Bars paying or offering remuneration to induce referrals for federally reimbursed items/services; even “one purpose” to induce referrals can violate the AKS.
  • Reverse false claim: Liability for improperly avoiding an obligation to pay money to the government (often tied to retaining overpayments).

V. Conclusion

The Fourth Circuit’s decision underscores a practical pleading rule for healthcare FCA litigation: relators must do more than allege a “scheme,” attach dense claim tables, and point to compliance certifications. They must plead—under Rule 9(b)—the specific Stark or AKS mechanism that makes claims false, including a plausible referral-linked compensation/remuneration theory. The opinion also reinforces that productivity-based compensation and common integrated-system subsidy practices will not, without more, plausibly establish unlawful referral inducement. Finally, it affirms that post-judgment amendment is not a reset button where years of delay, extensive access to information, and repeated opportunities still produce only vague promises of future specificity.