Justia U.S. 6th Circuit Court of Appeals Opinion SummariesArticles Posted in Government Contracts
Rahimi v. Rite Aid Corp.
Rite Aid’s “Rx Savings Program” provides generic prescription drugs at reduced prices. The program is free and widely available but excludes customers whose prescriptions are paid by publicly funded healthcare programs like Medicare or Medicaid. Federal regulations require pharmacies to dispense prescriptions for beneficiaries of those programs at their “usual and customary charge to the general public” (U&C rate). Rahimi alleged that Rite Aid overbilled the government programs because the amounts it charged did not take into account the lower Rx Savings Program prices. Rahimi claimed Rite Aid's submission of bills for those covered by publicly funded health insurance, representing the price to be the U&C rate, violated the False Claims Act, 31 U.S.C. 3729(a).The Sixth Circuit affirmed the dismissal of Rahimi’s claim. The Act’s public disclosure bar precludes qui tam actions that merely feed off prior public disclosures of fraud. From the beginning, communications about the Rx Savings Program have stated that publicly funded health care programs were ineligible for the discounted prices. Before Rahimi’s disclosures, Connecticut investigated membership discount prices; the Department of Health and Human Services announced that it would review Medicaid claims for generic drugs to determine the extent to which large chain pharmacies are billing Medicaid the usual and customary charges for drugs provided under their retail discount generic programs; and a qui tam action was unsealed in California, describing an identical scheme. View "Rahimi v. Rite Aid Corp." on Justia Law
Felten v. William Beaumont Hospital
In 2010, Felten filed a qui tam complaint alleging that his then-employer, Beaumont Hospital, was violating the False Claims Act (FCA), 31 U.S.C. 3730(h), and the Michigan Medicaid False Claims Act by paying kickbacks to physicians and physicians’ groups in exchange for referrals of Medicare, Medicaid, and TRICARE patients. Felten also alleged that Beaumont had retaliated against him by threatening and “marginaliz[ing]” him for insisting on compliance with the law. After the government intervened and settled the case against Beaumont, the district court dismissed the remaining claims, except those for retaliation and attorneys’ fees and costs.Felten amended his complaint to add allegations of retaliation that took place after he filed his initial complaint: he was terminated after Beaumont falsely represented to him that an internal report suggested that he be replaced and that his position was subject to mandatory retirement. Felten further alleged that he had been unable to obtain a comparable position in academic medicine because Beaumont “intentionally maligned [him].”The district court dismissed the allegations of retaliatory conduct occurring after Felten’s termination. The Sixth Circuit vacated. The FCA’s anti-retaliation provision protects a relator from a defendant’s retaliation after the relator’s termination. View "Felten v. William Beaumont Hospital" on Justia Law
Ohio v. United States Department of Education
The 1936 Randolph-Sheppard Vending Stand Act (RSA), 20 U.S.C. 107(a), authorizes blind persons to operate vending facilities on federal property. The Department of Education prescribes RSA regulations and designates the state agency for issuing RSA licenses. Ohio expands the RSA to state properties. Ohio’s Bureau of Services for the Visually Impaired (BSVI) implements the RSA and Ohio-RSA.Cyrus, a blind vendor, has participated in the Ohio RSA program since 1989. Pursuant to Grantor Agreements with Lucas County and the University of Toledo, Cyrus paid $504,000 in commissions to the university and county. In 2014, the Ohio Attorney General issued a formal opinion that conditioning RSA-vending at state-affiliated universities on commission payments was illegal. Cyrus filed a grievance and stopped making payments to the university. BSVI notified the university that the commission requirement "is void.” BSVI denied Cyrus’s grievance and took no action on the county commissions. A state hearing officer denied relief. Cyrus filed an arbitration complaint under the RSA’.An RSA panel found that BSVI breached its duties by requiring commission payments to both locations The Sixth Circuit held that the RSA prohibits commissions, even for facilities on county-owned properties; prospective relief was appropriate. RSA arbitration panels are enough like civil litigation in Article III courts that sovereign immunity applies. Ohio has not waived its immunity from RSA damages awards imposed by federal arbitration panels. The panel, therefore, exceeded its authority in awarding damages and interest. View "Ohio v. United States Department of Education" on Justia Law
Maur v. Hage-Korban
Dr. Korban and his medical practice Delta, practice diagnostic and interventional cardiology. In 2007, Dr. Deming filed a qui tam action under the False Claims Act (FCA), 31 U.S.C. 3729(a)(1)(A)–(C), (G) against Korban, Jackson Regional Hospital, and other Tennessee hospitals, alleging “blatant overutilization of cardiac medical services.” The United States intervened and settled the case for cardiac procedures performed in 2004-2012. Korban entered into an Integrity Agreement with the Office of Inspector General, effective 2013-2016 that was publicly available and required an Independent Review Organization. The U.S. Department of Justice issued a press release that detailed the exposed fraudulent scheme and outlined the terms of Korban’s settlement. In 2015, Jackson Regional agreed to a $510,000 settlement. The Justice Department and Jackson both issued press releases.In 2017, Dr. Maur, a cardiologist who began working for Delta in 2016, alleged that Korban was again performing “unnecessary angioplasty and stenting” and “unnecessary cardiology testing,” paid for in part by Medicare. In addition to Korban and Jackson, Maur sued Jackson’s corporate parent, Tennova, Dyersburg Medical Center, and Tennova’s corporate parent, Community Health Systems. The United States declined to intervene. The district court dismissed, citing the FCA’s public-disclosure bar, 31 U.S.C. 3730(e)(4). The Sixth Circuit affirmed. Maur’s allegations are “substantially the same” as those exposed in a prior qui tam action and Maur is not an “original source” as defined in the FCA. View "Maur v. Hage-Korban" on Justia Law
United States v. Bailey
A jury convicted Sandra, Calvin, and their son Bryan Bailey of conspiring to commit healthcare fraud and other related crimes (18 U.S.C. 371, 1343, 1347; 42 U.S.C. 1320a-7b). The three, working for medical equipment companies, used fraud, forgery, and bribery to sell power wheelchairs and other equipment that was not medically necessary. The district court sentenced Sandra to 120 months’, Calvin to 45 months, and Bryan to 84 months’ imprisonment.The Sixth Circuit affirmed the convictions and the sentence imposed on Bryan. The court rejected challenges to the sufficiency of the evidence and to various evidentiary rulings and upheld the admission of certain out of court statements made in furtherance of the conspiracy. The district court miscalculated Sandra’s Guidelines-range sentence when it erroneously imposed a two-level increase in her offense level for using “mass marketing” in her scheme and incorrectly calculated the loss amount for which Calvin was responsible—and by extension, his Guidelines-range sentence—by holding him responsible for losses beyond those he agreed to jointly undertake. View "United States v. Bailey" on Justia Law
Armstrong v. Michigan Bureau of Services for Blind Persons
The Randolph-Sheppard Act, 20 U.S.C. 107, requires government agencies to set aside certain contracts for sight-challenged vendors. States license the vendors and match them with available contracts. In 2010, Michigan denied Armstrong’s bid for a contract to stock vending machines at highway rest stops. A state ALJ ruled in Armstrong’s favor and recommended that she get priority for the next available facility/location. The state awarded Armstrong an available vending route later that year. Armstrong nonetheless requested federal arbitration, seeking nearly $250,000 in damages to account for delays in getting the license. The arbitrators ruled that Armstrong was wrongfully denied the location she sought and ordered Michigan to immediately assign Armstrong the Grayling vending route but declined to award damages, reasoning that her request was “too speculative.”The district court upheld the arbitration award and rejected Armstrong’s 42 U.S.C. 1983 claims, concluding that the Randolph-Sheppard Act created the sole statutory right to relief under federal law. Michigan subsequently granted her the Grayling license. The Sixth Circuit affirmed. The unfavorable arbitration decision was not arbitrary or capricious under the Administrative Procedure Act. Armstrong may not sue under 42 U.S.C. 1983 to vindicate her rights under the Randolph-Sheppard Act. View "Armstrong v. Michigan Bureau of Services for Blind Persons" on Justia Law
United States v. Kozerski
Kozerski owned two construction companies in Detroit. He formed the second one, CA, to bid on Veterans Administration contracts set aside for small businesses owned by service-disabled veterans. Kozerski does not have a service-related disability. He convinced J.R., a service-disabled veteran, to pretend to be the company’s owner. CA handled six contracts. Kozerski forged J.R.’s signature and sent the government emails supposedly from J.R.. For five contracts, Kozerski did not pay J.R. anything, lying to him that CA did not receive any contracts after the first one.The government eventually discovered the scheme and charged Kozerski with wire fraud, 18 U.S.C. 1343. Kozerski pleaded guilty. The PSR recommended a loss amount of $9.5 million to $25 million, calculated by adding the amounts the government paid CA on all six contracts without crediting the value of the work performed on the contracts: $11,891,243.45, resulting in a Guidelines range of 37-46 months. Kozerski argued the loss should be the amount of profit a qualifying veteran-owned business would receive from the contract, yielding a guidelines range of eight-14 months. The district court adopted Kozerski’s formula and sentenced him to a year and a day. The Sixth Circuit affirmed, upholding the district court’s calculation of the loss as the aggregate difference between Kozerski’s bids and the next-lowest bids, about $250,000. View "United States v. Kozerski" on Justia Law
Holloway v. Heartland Hospice, Inc.
Holloway, the qui tam relator, sued Heartland Hospice and related entities under the False Claims Act (FCA), 31 U.S.C. 3729-3733, for orchestrating a corporate-wide scheme to submit false claims for payments from Medicare and Medicaid to cover hospice care. Heartland allegedly enrolled patients in hospice when they were not terminally ill and kept them there, even when employees like Holloway urged their release and allegedly paid bonuses for the recruitment of hospice patients. Heartland argued that Holloway is not a genuine whistleblower, that her claims are drawn from prior allegations against Heartland so that her qui tam action is prohibited by the FCA’s public-disclosure bar. In the alternative, Heartland argued that Holloway has not satisfied the FCA’s heightened pleading standard for allegations of fraud or the limited exception to that standard.The Sixth Circuit affirmed the dismissal of Holloway’s action as barred in light of prior public disclosures. Even if South Carolina complaints, dismissed in 2008, were focused on a single hospice facility, the allegations against Heartland as a whole were sufficiently general and alike to those alleged here such that the government was put on notice of the corporate-wide conduct alleged in this case. Holloway’s claims are barred by the pre-amendment public-disclosure bar. View "Holloway v. Heartland Hospice, Inc." on Justia Law
Saginaw County. v. STAT Emergency Medical Services, Inc.
Saginaw County has nearly 200,000 residents. A single company, Mobile Medical, has provided the county’s ambulance services since 2009. The county guaranteed Mobile the exclusive right to operate within its borders; Mobile pledged to serve all eight of Saginaw County’s cities and incorporated villages and its 27 rural townships. In 2011, STAT, a competing ambulance company, entered the Saginaw market, providing patient-transport services for an insurer as part of a contract that covered six Michigan counties. A municipality, dissatisfied with Mobile’s response times and fees, hired STAT. When Saginaw County proposed to extend Mobilel’s contract in 2013, STAT objected, arguing that the arrangement violated state law, federal antitrust law, and the Fourteenth Amendment. The county approved Mobile's new contract and enacted an ordinance that codified the exclusivity arrangement but never enforced the ordinance. STAT continued to insist that Michigan law permitted it to offer ambulance services. Saginaw County sought a federal declaratory judgment that Michigan law authorizes the exclusive contract and that it does not violate federal antitrust laws or the U.S. Constitution by prohibiting STAT from operating in the county. The Sixth Circuit affirmed the dismissal of the claim for lack of jurisdiction. The county failed to establish an actual or imminent injury. Federal courts have the power to tell parties what the law is, not what it might be in potential enforcement actions. View "Saginaw County. v. STAT Emergency Medical Services, Inc." on Justia Law
United States v. Daneshvar
Medicare pays for doctors’ home visits if a patient is homebound. Mobile Doctors offered physician services to homebound Medicare beneficiaries, hiring doctors who assigned their Medicare billing rights to the company. Upon receipt of payment, Mobile would pay the physician-employee a percentage of what Mobile received from billing Medicare. Many of Mobile’s patients did not actually qualify as homebound. Some doctors signed certifications for additional unneeded treatment from companies that provided at-home nursing or physical therapy services—companies that had referred the patients to Mobile. Mobile submitted Medicare codes for more serious and more expensive diagnoses or procedures than the provider actually diagnosed or performed. Mobile instructed physicians to list at least three diagnoses in the patient file; if the doctors did not list enough, a staff member added more. Mobile only paid the physicians if they checked at least one of the top two billing codes. Doctors who billed for the higher of the top two codes were paid more. Mobile also paid for “standing orders” for testing, although Medicare prohibits testing done under standing orders. Daneshvar joined Mobile as a physician in 2012. After following Mobile’s policies Daneshvar was convicted of conspiracy to commit healthcare fraud but found not guilty of healthcare fraud; he was sentenced to 24 months' imprisonment. The Sixth Circuit affirmed. Daneshvar’s trial was fair; none of the district court’s rulings during that proceeding should be reversed. There was no reversible error with his sentencing. View "United States v. Daneshvar" on Justia Law