Sixth Circuit Applies Strict Precondition Of Payment Requirement To Reverse $11.1 Million FCA Judgment

The U.S. Court of Appeals for the Sixth Circuit, in United States ex rel. Hobbs v. MedQuest Associates, Inc., 711 F.3d 707 (6th Cir. April 1, 2013), recently reversed an $11.1 million False Claims Act ("FCA") judgment, rejecting the government's argument that MedQuest, a diagnostic testing company that operates testing facilities, violated the FCA by failing to meet certain Medicare enrollment requirements. While acknowledging that MedQuest's actions "clearly were at odds with the goals and aims of the Medicare program in several respects," the Court stressed that "the bluntness of the FCA's hefty fines and penalties make them an inappropriate tool for ensuring compliance with technical and local program requirements."

The Sixth Circuit's decision overturned the U.S. District Court for the Middle District of Tennessee's grant of summary judgment to the relator and the government, which had intervened, in 2011. The government argued that MedQuest violated the FCA in two respects: (1) MedQuest used supervising physicians who had not been approved by the Medicare program and the local Medicare carrier to supervise the range of tests offered at two testing facilities, and (2) MedQuest failed to properly re-register a facility it acquired to reflect the change in ownership and continued to use the former owner's Medicare payee ID number to file Medicare claims. The district court granted summary...