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Qui Tam Claim – Medical Billing

By: Derek Hawkins//October 19, 2021//

Qui Tam Claim – Medical Billing

By: Derek Hawkins//October 19, 2021//

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7th Circuit Court of Appeals

Case Name: United States of America, et al., v. Molina Healthcare of Illinois, Inc., et al.,

Case No.: 20-2243

Officials: SYKES, Chief Judge, and WOOD and HAMILTON, Circuit Judges.

Focus: Qui Tam Claim – Medical Billing

Sophisticated players in the healthcare market know that services come at a cost; providers charge fees commensurate with the services rendered; and payors expect to receive value for their money. There are many options from which to choose when designing a payment scheme, including fee-for-service, prepaid services using the health-maintenance organization model (HMO), and capitation payments, to name just a few. Each of these models attempts to balance expected services against expected costs.

The present case involves a capitation system, which is similar to the traditional HMO approach in which parties agree to a fixed per-patient fee that covers all services within the scope of a governing plan. Molina Healthcare of Illinois (Molina) contracted with the state’s Medicaid program (which in turn is largely funded by the federal government, see Illinois Medicaid, https://www.benefits.gov/benefit/1628) to provide multiple tiers of medical-service plans with scaled capitation rates. Among those, the Nursing Facility (NF) plan required Molina to provide Skilled Nursing Facility (SNF) services. Molina itself, however, did not deliver those services; instead, it subcontracted with GenMed to cover this obligation. Molina received a general capitation payment from the state, out of which it was to pay GenMed for the SNF component. But little time passed before Molina breached its contract with GenMed and GenMed terminated the contract. After GenMed quit, Molina continued to collect money from the state for the SNF services, but it was neither providing those services itself nor making them available through any third party. Molina never told the government about this breakdown, nor did it seek out a replacement service provider.

Thomas Prose, the founder of GenMed, brought this qui tam action under both the federal and the state False Claims Acts. See 31 U.S.C. § 3729 et seq.; 740 ILCS 175/1 et seq. (Because the state law does not differ in any meaningful way from the federal law, we refer in this opinion only to the federal law for the sake of simplicity.) Prose alleged that Molina submitted fraudulent claims for payments to the Department (which was for the most part just a conduit for federal funds—a point we will not repeat) for skilled nursing facility services. Although the district court agreed with Prose that the SNF services were material to the contract, it dismissed the case at the pleading stage because it found that the complaint insufficiently alleged that Molina knew that this condition was material. But on our independent reading of the complaint, we conclude that it plausibly alleges that as a sophisticated player in the medical-services industry, Molina was aware that these kinds of services play a material role in the delivery of Medicaid benefits. We therefore reverse and remand for further proceedings.

Reversed and remanded

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Derek A Hawkins is Corporate Counsel, at Salesforce.

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