When Rule 15, Not Rule 16, Governs Leave to Amend—and Why IRF Preadmission “Process” Allegations Don’t State FCA Fraud: Commentary on Gentry v. Encompass Health

Introduction

This Fifth Circuit decision addresses two recurring issues in False Claims Act (FCA) litigation: (1) what it takes to plead fraud with the particularity Rule 9(b) requires—especially in the healthcare context where admissions decisions and clinical judgments are involved; and (2) which Federal Rule of Civil Procedure governs leave to amend when a relator seeks to replead before a scheduling order’s deadline expires. The case arises from a qui tam suit brought by a former sales representative, Deidra Gentry, against Encompass Health Rehabilitation Hospital of Pearland, an inpatient rehabilitation facility (IRF) reimbursed by Medicare under a prospective payment system.

Gentry alleged that Encompass (a) trained nonclinical sales staff to function as “clinical screeners” in the IRF preadmission process and (b) induced physicians to “rubberstamp” admissions, leading to false Medicare claims. The district court dismissed under Rule 12(b)(6) with prejudice, finding the complaint did not meet the plausibility threshold of Rule 8(a) or the particularity required by Rule 9(b), and denied leave to amend as futile. The Fifth Circuit affirmed. Although it flagged the district court’s error in applying Rule 16 rather than Rule 15 to the relator’s timely pre-deadline request for leave to amend, the panel deemed the error harmless because amendment would be futile.

Summary of the Opinion

Pleading failure under Rules 8(a) and 9(b): The relator did not adequately plead falsity or connect the alleged preadmission practices to the submission of false claims. Nonclinical personnel may gather preadmission screening information for IRFs, so allegations centered on who collected data, without facts showing actual falsehoods or a physician’s abdication of clinical judgment, are insufficient.
No strong inference of claim submission under Grubbs: The complaint lacked the reliable indicia necessary to infer that false claims were submitted. Timing-based speculation that physicians did not meaningfully review preadmission materials could not bridge the gap.
Leave to amend—Rule 15 vs. Rule 16: Where a movant seeks leave to amend before the scheduling order’s pleading deadline, Rule 15—not Rule 16—governs. The district court erred in applying Rule 16’s “good cause” standard, but the error was harmless because amendment would have been futile.
Conspiracy claim: Without a viable underlying FCA violation, the conspiracy claim necessarily fails.
Dismissal: Affirmed with prejudice as to the relator (but without prejudice to the United States).
Concurrence: Judge Ho signaled readiness to revisit the constitutionality of the FCA’s qui tam scheme in an appropriate case, referencing prior skepticism in other courts, though the panel applied controlling Fifth Circuit precedent (Riley) and did not address constitutionality here.

Key Holdings and Rules

Nonclinical participation in IRF preadmission screening—specifically information gathering and compilation—is permitted and not, by itself, fraudulent, so long as clinicians evaluate the information and make the final admission decision (MBPM ch. 1 § 110.1.1; CMS 2009 IRF coverage call transcript).
Rule 9(b) requires either particularized allegations of an actually submitted false claim or particularized “scheme” details paired with “reliable indicia” giving rise to a strong inference that claims were submitted (Grubbs). Mere speculation or timing-based inferences about physician review is inadequate.
When a party seeks leave to amend before the scheduling order’s amendment deadline, Rule 15’s liberal standard applies; Rule 16’s “good cause” standard applies only to untimely motions filed after the deadline.
Amendment may be denied as futile under either Rule 15 or Rule 16 if the proposed amendment would fail to state a claim.
FCA conspiracy requires an underlying FCA violation; without it, the conspiracy claim fails.

Detailed Analysis

1) Precedents and Authorities Cited

Ashcroft v. Iqbal, 556 U.S. 662 (2009): Reaffirmed plausibility pleading. The panel relied on Iqbal to strip conclusory assertions from the complaint and to insist on “sufficient factual matter.”
United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180 (5th Cir. 2008): Clarifies Rule 9(b) in FCA cases—either particularized claim details or a detailed scheme plus reliable indicia that strongly infer submission. The court found Gentry’s allegations “nowhere close” to satisfying Grubbs.
Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899 (5th Cir. 1997): The “who, what, when, where, and how” formulation for Rule 9(b) fraud pleading.
Colonial Oaks Assisted Living Lafayette, L.L.C. v. Hannie Dev., Inc., 972 F.3d 684 (5th Cir. 2020): Courts may not “make guesses to fill in the blanks”; speculation cannot substitute for factual allegations.
United States ex rel. Longhi v. Lithium Power Techs. Inc., 575 F.3d 458 (5th Cir. 2009): Elements of FCA liability—false statement or fraudulent course of conduct, scienter, materiality, and causation.
United States ex rel. Guth v. Roedel Parsons Koch Blache Balhoff & McCollister, 626 F. App’x 528 (5th Cir. 2015): Elements for false-presentment and false-record claims under § 3729(a)(1)(A) and (B) are the same.
Stripling v. Jordan Prod. Co. LLC, 234 F.3d 863 (5th Cir. 2000): Futility as a basis to deny leave to amend—applies under Rule 15 and Rule 16.
S&W Enters., L.L.C. v. SouthTrust Bank of Ala., NA, 315 F.3d 533 (5th Cir. 2003); Banks v. Spence, 114 F.4th 369 (5th Cir. 2024); Olivarez v. T-Mobile USA, Inc., 997 F.3d 595 (5th Cir. 2021): Rule 16’s “good cause” standard applies to untimely motions to amend; by contrast, pre-deadline requests are governed by Rule 15.
Tummel v. Milane, 787 F. App’x 226 (5th Cir. 2019); United States ex rel. Durcholz v. FKW Inc., 189 F.3d 542 (7th Cir. 1999); United States v. Murphy, 937 F.2d 1032 (6th Cir. 1991): FCA conspiracy claims fail absent an underlying FCA violation; general civil conspiracy principles inform FCA conspiracy.
United States ex rel. Williams v. Bell Helicopter Textron Inc., 417 F.3d 450 (5th Cir. 2005): Dismissals of qui tam actions operate without prejudice to the United States unless the Government has been heard on the merits.
CMS IRF Coverage Requirements (MBPM ch. 1 §§ 110.1.1 et seq.; 42 C.F.R. § 412.622): Subregulatory guidance and regulations governing IRF preadmission screenings; CMS emphasizes completeness and accuracy of the preadmission record over the internal organization of the process.

2) The Court’s Legal Reasoning

Falsity and the IRF Preadmission Process

The relator’s core theory conflated “who” performs the preadmission screening tasks with “what” is false about the information supplied to CMS. The Fifth Circuit emphasized that Medicare permits nonclinical personnel to gather and compile preadmission information for IRFs. What matters for coverage and payment is that clinicians evaluate the information and make the admission decision. The MBPM expressly states that CMS focuses on the completeness, accuracy, and the extent to which the preadmission screening supports the appropriateness of IRF admission—not on “how the process is organized.”

On the complaint’s own terms, the relator described herself as compiling narratives and being trained to “tailor clinical language.” But she did not plead facts showing that the narratives contained false statements, misrepresented patient conditions, or resulted in admission of patients who did not meet IRF criteria. Nor did she allege that physicians lacked or ignored other clinical inputs. The fact that some physician approvals were entered “within one minute” of request did not plausibly establish that physicians abdicated their role or that the preadmission screenings were false. The court declined to “guess to fill in the blanks.”

Submission of False Claims—Grubbs and Reliable Indicia

Even if a relator cannot plead claim-by-claim details, Grubbs permits survival at the pleading stage when a complaint offers particularized scheme allegations paired with reliable indicia that strongly support an inference of actual claim submission. Here, however, the complaint lacked that indicia. It did not identify a single specific claim, patient encounter, billing code, date of service, or internal billing record tying the alleged screening practices to a false claim. Instead, the relator asserted that Medicare was “routinely billed,” which the court treated as conclusory and insufficient. The absence of a “rational connection” between the alleged process flaws and a submitted claim doomed the pleading.

Conspiracy Claim Falls with Substantive FCA Claims

Because the relator failed to state a substantive FCA violation, her § 3729(a)(1)(C) conspiracy claim necessarily failed as well. Multiple circuits recognize that FCA conspiracy requires an underlying fraud; no such violation was sufficiently alleged here.

Leave to Amend—Clarifying Rule 15 vs. Rule 16

The panel clarified an important procedural point: when a party seeks leave to amend before the scheduling order’s deadline for amended pleadings expires, Rule 15—the liberal amendment rule—governs. Rule 16’s “good cause” standard applies to untimely motions filed after the deadline. The district court erred by applying Rule 16 merely because it ruled after the deadline had passed. That reading was “unfair to the plaintiff,” who cannot control when the court takes up the motion, and it conflicts with Fifth Circuit authority (S&W Enterprises; Banks; Olivarez).

The error was harmless. Denial of leave was proper under Rule 15 because amendment would be futile: after two rounds of amendments and two motions to dismiss explaining the defects, the relator neither supplied the missing facts nor identified what additional facts she could plausibly allege to cure the deficiencies. The court observed that if the relator could not discern how to fix the factual gaps at this stage, “the requisite facts probably do not exist.”

3) Impact and Implications

For FCA Relators and Counsel

Process irregularities are not enough: Alleging that nonclinical personnel participate in preadmission screenings will not, by itself, establish falsity where CMS allows nonclinical information gathering. Complaints must identify concrete inaccuracies or misrepresentations and a clinician’s abdication of judgment—not just workflow structure.
Particulars or reliable indicia: To meet Rule 9(b) under Grubbs, plead specific false claims or allege a detailed scheme coupled with reliable indicia of submission—e.g., internal billing records, dates, patient identifiers (appropriately anonymized), claim forms, or admissions that connect the process to billing.
Don’t rely on timing alone: Rapid physician sign-offs, without more, do not plausibly allege “rubberstamping” or absence of clinical evaluation. Corroborating communications, policies instructing physicians to skip review, or audits finding noncompliance would strengthen an inference.
Conspiracy is derivative: Without a viable underlying FCA count, a conspiracy claim will not stand.

For Healthcare Providers (IRFs and Beyond)

Validation of compliant division of labor: The decision acknowledges CMS’s allowance for nonclinical staff to gather preadmission information, provided clinicians evaluate and decide. Providers should document physician review and decision-making to forestall “rubberstamp” allegations.
Compliance documentation matters: Maintain auditable trails—e.g., physician review notes, timestamps contextualized by the totality of the record reviewed, sources consulted, and any clarifications sought—to rebut inferences drawn from approval speed.
Training guardrails: Train nonclinical staff to avoid making clinical judgments and to accurately relay facts. Ensure narratives prepared by nonclinicians are expressly framed as compilations for clinician evaluation.

For District Courts and Litigators—Procedural Practice Point

Timing controls the standard: When a party moves to amend before the scheduling order’s amendment deadline, apply Rule 15; reserve Rule 16 for motions filed after the deadline. This decision clarifies that the court’s later ruling date does not retroactively trigger Rule 16.
Futility remains a backstop: Even under Rule 15’s liberal standard, leave may be denied where proposed amendments cannot cure substantive defects.

Constitutional Cross-Currents—Judge Ho’s Concurrence

Judge Ho’s concurrence does not affect the outcome but signals an appetite to reconsider the constitutionality of qui tam under Article II, echoing concerns aired by Justices and courts in recent years (e.g., separate opinions in Polansky and district court decisions like Zafirov). Fifth Circuit law remains that qui tam suits are constitutional (Riley, en banc). But the concurrence, along with Judge Duncan’s earlier call in Montcrief, suggests renewed en banc interest. Litigants challenging or defending qui tam’s structure should take note, particularly on issues of Executive control and accountability over relators.

Complex Concepts Simplified

FCA falsity: Not every regulatory lapse or disliked workflow is “false.” FCA falsity requires a misrepresentation or fraudulent conduct that matters to payment. Here, who gathers preadmission data is not determinative; what matters is whether the information is accurate and whether clinicians actually evaluate it.
Rule 9(b) particularity: Fraud must be pled with specifics—who did what, when, where, and how. If you lack specific claim details, you must still plead a detailed scheme plus reliable indicators that claims were actually submitted (emails, billing logs, etc.).
Materiality and scienter (not reached): FCA also requires that the falsity be material to the Government’s payment decision and that the defendant acted knowingly (actual knowledge, deliberate ignorance, or reckless disregard). The court did not reach these here because falsity and claim submission were not plausibly alleged.
Rule 15 vs. Rule 16: Rule 15 governs pre-deadline motions to amend (liberal standard). Rule 16 governs post-deadline motions (good-cause standard). The clock that matters is the filing date of the motion for leave, not the court’s ruling date.
Dismissal “with prejudice”: Ends the relator’s case and bars her from refiling the same claims; but in the qui tam context, such dismissals do not prejudice the United States unless the Government has been heard on the merits.

What the Decision Does Not Decide

Materiality: The panel did not reach whether any alleged noncompliance would be material to Medicare payment. Future IRF FCA cases will still need to grapple with materiality if falsity and claim submission are adequately pled.
Weight of subregulatory guidance: The opinion cites the MBPM and a CMS call transcript to confirm permissible roles in preadmission screenings, but it does not resolve broader questions about the binding effect of subregulatory guidance in FCA cases.
Constitutionality of the FCA’s qui tam provisions: The concurrence invites reexamination, but Riley remains binding in the Fifth Circuit unless and until overruled en banc or by the Supreme Court.

Practical Takeaways and Drafting Tips

For relators:
- Anchor allegations in verifiable particulars: identify sample patients, dates of service, claim numbers (or equivalent), DRGs/HIPPS codes for IRFs, and who submitted the claims.
- Tie the process to the payment: articulate how the challenged step produced a false certification or claim for a patient who did not meet IRF criteria, and show that Medicare actually paid.
- Substantiate “rubberstamping”: provide emails, policies, or audit findings showing physicians were instructed to approve without review or lacked access to necessary information.
For providers:
- Document physician review: brief but explicit notations reflecting clinical judgment, sources reviewed, and basis for decision mitigate “rubberstamp” narratives.
- Segregate roles: clearly delineate nonclinical compilation from clinical evaluation; train staff and maintain written policies to that effect.
- Audit preadmission files: periodic internal audits comparing preadmission screenings to clinical records can validate compliance with CMS expectations.
For all litigants:
- Amend early: move to amend before scheduling deadlines to preserve Rule 15’s more generous standard.
- Confront futility head-on: be prepared to specify new facts you will add; courts may infer futility if you cannot describe how you will cure Rule 9(b) defects.

Conclusion

Gentry v. Encompass Health reinforces two core messages in FCA practice. Substantively, allegations that target the organization of preadmission workflows in IRFs—without concrete facts showing false statements, abdication of clinical judgment, and a reliable nexus to submitted claims—will not satisfy Rules 8(a) and 9(b). Procedurally, the motion’s filing date controls whether Rule 15 or Rule 16 governs leave to amend; pre-deadline motions are assessed under Rule 15 even if the court rules later. The decision thus tightens the path for qui tam relators challenging IRF admissions practices and clarifies amendment standards in the Fifth Circuit. Meanwhile, Judge Ho’s concurrence signals a live constitutional debate over qui tam’s structure—one that may resurface en banc, but that does not alter the controlling framework applied here. The upshot: FCA complaints must move beyond process critiques to pled specifics of falsity and claim submission, and litigants should mind the calendar when seeking to amend.