No liability of the FCA when the fraudulently obtained contract did not involve the United States | McGuireWoods LLP

In US ex rel. Freedman v. Bayada Home Health Care, Inc., No.3: 19-cv-18753-FLW-ZNQ, 2021 WL 1904735 (DNJ May 12, 2021), a New Jersey district court found that the relator did not plead a known theory of liability under FCA based on defendant Bayada Home Health Care, Inc. (“Bayada”) allegedly fraudulently acquired a home care agency which subsequently billed Medicare for apparently legitimate claims.

In 2011, the Ocean County Board of Health (“Ocean County”) began to consider selling its home care agency. That fall, Bayada asked George Gilmore, a lawyer and local Republican Party chairman, to “lobby” on his behalf in his attempt to buy the Ocean County home care agency. Gilmore has embarked on various efforts to this end and signed a retention agreement for legal services in March 2012. Additionally, days before Bayada submitted his proposal to Ocean County, Bayada’s COO offered Gilmore a “success fee” in addition to his retention agreement. . Bayada did not notify Ocean County of its contingency fee deal with Gilmore, despite the RFP and New Jersey state regulations prohibiting paying lobbyists in this manner. Bayada won the contract, despite an offer of $ 500,000 less than the other bidder. Bayada was licensed from Ocean County in December 2014, registered as a health insurance provider in January 2015, and has billed approximately $ 36 million in health insurance claims to the federal government until in 2019.

Relator (a former Bayada employee) filed a complaint alleging that Bayada’s conduct violated the FCA and advanced theories of fraudulent inducement and false certification theory. The Relator argued that because Bayada fraudulently acquired the Ocean County home health care agency, every subsequent claim Bayada submitted to Medicare was fraudulently induced. The court rejected the Relator’s argument, finding that it had failed to demonstrate how Bayada’s acquisition of the Ocean County home care agency “affects or concerns the United States, or induces an impact on the United States. action on its part, other than by authorizing Bayada to register as a service provider with [the Center for Medicare & Medicaid Services (“CMS”)] seven months later. The tribunal also found that Relator had not cited any facts showing “that the United States would place much less importance – much less decisively – on how Bayada paid its lobbyist, if it was discovered, or that Bayada would have violated municipal contractual provisions / state regulations. respecting contingency fees in the acquisition of the Ocean County Health Care Agency.

The court also rejected the Relator’s false certification theory. Regarding the expression of a false certification, the court found that Bayada did not explicitly state that it complied with the anti-contingency charge provisions of the RFP or similar New Jersey regulations. Regarding the implied false certification, the court concluded that Bayada had only certified the accuracy of its billing information and the veracity of the statements and documents actually included in the claim, and not the certification of “the entire sequence of events leading up to Bayada’s Medicare enrollment. . “

While the court found troubling Bayada’s alleged behavior in fraudulently obtaining the Ocean County home care agency, this case demonstrates the importance of alleging that a fraudulently induced contract affects or relates to United States. As the court reiterated from the Supreme Court decision in Universal Health Services, Inc. v. United States ex. rel. Escobar, 126 S. Ct. 1989, 2003 (2016), the FCA “is not an all-purpose anti-fraud law, nor a means to punish contract violations or regulatory violations of garden varieties”.

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