Tenth Circuit Clarifies False Claims Act Immunity and 'Causing to be Presented' Standard

Tenth Circuit Clarifies False Claims Act Immunity and 'Causing to be Presented' Standard

Introduction

In United States ex rel. Sikkenga v. Regence BlueCross BlueShield of Utah, the United States Court of Appeals for the Tenth Circuit addressed significant issues pertaining to the interpretation of the False Claims Act (FCA). Edyth L. Sikkenga, a former employee of Regence BlueCross BlueShield of Utah ("Regence"), filed a qui tam lawsuit alleging that Regence, along with its managers and Associated Regional and University Pathologists ("ARUP"), engaged in fraudulent activities that resulted in false Medicare claims being submitted to the government. Additionally, Sikkenga claimed wrongful termination in retaliation for her whistleblowing activities. This case delves into the nuances of FCA immunity provisions, the definition of "person" under the FCA, and the standards for causation in false claim presentations.

Summary of the Judgment

The Tenth Circuit reviewed several claims brought forth by Sikkenga under the FCA and state law. The district court had dismissed most of Sikkenga's claims, citing immunity provisions and failure to meet pleading standards. However, the appellate court found grounds to reverse certain dismissals:

  • Reversed: Dismissal of Sikkenga's claim that Regence and its managers caused ARUP to submit false claims, as well as her state law wrongful termination claim.
  • Affirmed: Dismissal of the FCA false budget claim, whistleblower retaliation claim, and CPEP score manipulation claim.
  • Remanded: For further proceedings consistent with the appellate opinion.

Notably, the court held that Regence does not have absolute immunity under the FCA's §1395u(e)(3) when acting with gross negligence or intent to defraud. Furthermore, ARUP was determined to be a "person" under the FCA and not an arm of the state, making it liable for the alleged fraudulent claims.

Analysis

Precedents Cited

The judgment heavily referenced several key cases to support its interpretations:

  • Body v. Blue Cross and Blue Shield of Alabama: Interpreted FCA immunity as absolute under §1395u(e)(3).
  • Stevens: Clarified that state-related entities can be considered sovereigns under the FCA, thereby not being "persons."
  • STURDEVANT v. PAULSEN: Established criteria to determine if an entity is an arm of the state.
  • Hess v. Port Authority Trans-Hudson: Discussed arm-of-the-state considerations under the Eleventh Amendment.
  • United States ex rel. Marcus v. Hess: Interpreted "causing to be presented" within the FCA's scope.

These precedents were instrumental in shaping the court's interpretation of the FCA's provisions, particularly regarding immunity and the definition of "person."

Legal Reasoning

The court undertook a meticulous statutory interpretation of the FCA, focusing on:

  • FCA Immunity (§1395u(e)(3)): Contrary to the Eleventh Circuit's absolute immunity stance in Body, the Tenth Circuit concluded that §1395u(e)(3) does not grant absolute immunity. Instead, immunity is negated in cases of gross negligence or intent to defraud, aligning the carrier's immunity with that of its certifying and disbursing officers.
  • 'Causing to be Presented' Standard: The court emphasized that causing a false claim requires more than passive knowledge. It necessitates affirmative action or a proximate causal relationship between the defendant's conduct and the presentation of the false claim.
  • Definition of 'Person': ARUP was scrutinized under the "person" definition in the FCA. The court determined that ARUP operates as a commercial entity with substantial autonomy and financial independence, thereby classifying it as a "person" liable under the FCA, and not as an arm of the state.
  • Statute of Limitations: The court clarified that the tolling provisions under §3731(b)(2) of the FCA do not apply to private qui tam relators. This interpretation limits tolling to actions brought by the government, ensuring that relators adhere to the six-year statute of limitations without benefiting from the three-year tolling provision.

Impact

This judgment has profound implications for future FCA litigation:

  • FCA Immunity Interpretation: Carriers are now clearly held liable under the FCA when acting with gross negligence or intent to defraud, closing a loophole that previously rendered them nearly immune.
  • Causation Standard Refinement: The establishment of a proximate causation requirement prevents courts from imposing FCA liability on entities that passively allow false claims to be submitted, thereby tightening the criteria for FCA claims.
  • Definition of 'Person' under FCA: Clarifying that commercially independent entities like ARUP are "persons" under the FCA expands the scope of potential defendants, holding more organizations accountable for fraudulent activities.
  • Statute of Limitations Clarification: By limiting tolling provisions to government actions, relators are encouraged to pursue claims promptly, ensuring timely resolution of fraud cases.

Collectively, these interpretations strengthen the FCA's enforcement mechanisms, ensuring that entities cannot evade liability through corporate structuring or passive conduct.

Complex Concepts Simplified

False Claims Act (FCA)

The FCA is a federal law aimed at combating fraud against government programs like Medicare. It allows private individuals, known as "relators," to sue on behalf of the government and share in any recovered funds.

Immunity Provision (§1395u(e)(3))

This provision protects Medicare administrative contractors from liability for payments made, unless those payments involve gross negligence or intentional fraud. The Tenth Circuit clarified that immunity is not absolute and aligns the carrier's immunity with that of its officers.

'Causing to be Presented'

Under the FCA, merely knowing about false claims is insufficient for liability. "Causing to be presented" requires active participation or a direct link between the defendant's actions and the submission of the fraudulent claim.

Proximate Causation

Proximate causation in FCA cases refers to a direct and substantial connection between the defendant's conduct and the false claim submitted. It ensures that liability is imposed only when the defendant's actions are a significant factor in the fraud.

'Person' under the FCA

The term "person" in the FCA encompasses both individuals and organizations that can be held liable for submitting false claims. The court's determination that ARUP is a "person" means it can be sued under the FCA for fraudulent activities.

Statute of Limitations

The FCA imposes deadlines within which suits must be filed. The Tenth Circuit clarified that relators must adhere to the six-year limit and cannot benefit from the three-year tolling provision reserved for government actions.

Conclusion

The Tenth Circuit's decision in United States ex rel. Sikkenga v. Regence BlueCross BlueShield of Utah significantly refines the application of the False Claims Act. By narrowing the scope of immunity provisions and clarifying the standards for causation and the definition of "person," the court reinforced the FCA's role as a robust tool against healthcare fraud. This judgment not only holds carriers accountable for intentional or grossly negligent actions but also broadens the landscape of potential defendants, ensuring that more entities can be held liable for fraudulent claims. Additionally, the clarification of the statute of limitations upholds the integrity of the FCA by encouraging timely enforcement while preventing protracted legal timelines. Overall, this case strengthens the government's ability to combat fraud effectively and ensures greater accountability within the healthcare insurance sector.

Case Details

Year: 2006
Court: United States Court of Appeals, Tenth Circuit.

Judge(s)

Carlos F. LuceroHarris L. Hartz

Attorney(S)

Arthur J. England, Jr., Greenberg Traurig, L.L.C., Miami, Florida; and Daniel L. Day, Murray, Utah (David K. Isom, Greenberg Traurig, L.L.C., Denver, Colorado; Matthew R. Howell, Fillmore Spencer, L.L.C., Provo Utah; Roger H. Hoole, Hoole King, L.C., Salt Lake City, Utah, with them on the briefs) for Plaintiffs-Appellants. Robert K. Huffman, Miller Chevalier Chartered, Washington, D.C., (Randy L. Dryer and James T. Blanch, Parsons Behle Latimer, Salt Lake City, Utah, with him on the brief), for Defendants-Appellees Regence Bluecross Blueshield of Utah, John P. Mitchell, Jed H. Pitcher, and Frank Brown. James Jardine, Ray Quinney Nebeker, P.C., Salt Lake City, Utah for Defendant-Appellee Associated Regional and University Pathologists, Inc. Charles W. Scarborough, Appellate Division, Department of Justice, Washington, D.C., (Paul M. Warner, United States Attorney, District of Utah, Sail; Lake City, Utah; Peter D. Keisler and Douglas N. Letter, Department of Justice, Civil Division, Washington, D.C., with him on the brief), for amicus curiae the United States of America on behalf of Plaintiffs-Appellants. James Moorman, and Joseph E.B. White, Taxpayers Against Fraud Education Fund, Washington, D.C., filed an amicus curiae brief for Taxpayers Against Fraud Education Fund on behalf of Plaintiffs-Appellants. Michael S. Lee, General Counsel to the Governor, Salt Lake City, Utah, for amicus curiae Jon M. Huntsman, Jr., Governor of Utah on. behalf of Defendant-Appellee Associated Regional and University Pathologists, Inc. Gary L. Ayers, Foulston Siefkin, L.L.P., Wichita, Kansas, filed an amicus curiae brief for Adminastar Federal, Inc., Bluecross Blueshield Association, Blue Cross and Blue Shield of Alabama, Blue Cross and Blue Shield of Kansas, Bluecross Blueshield of Montana, Bluecross Blueshield of Nebraska, Bluecross Blueshield of Tennessee, Healthnow New York Inc., Mutual of Omaha Insurance Company, Noridian Mutual Insurance Company, Premera Bluecross, United Government Services, L.L.C., and Wisconsin Physicians Service Insurance Corporation on behalf of Defendant-Appellee Regence Bluecross Blueshield of Utah.

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