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Ebeid ex rel United States v. Lungwitz

August 9, 2010

SADEK R. EBEID, M.D., EX REL. UNITED STATES OF AMERICA, PLAINTIFF-APPELLANT,
v.
THERESA A. LUNGWITZ; EDWARD C. IRBY (MRS.), AKA MARGARET IRBY, INDIVIDUALLY AND DBA HEALTH RESOURCE CENTER; HOME HEALTH RESOURCES, INC., AN ARIZONA CORPORATION; THE CROSSING HOSPICE CARE, INC., AN ARIZONA CORPORATION, DEFENDANTS-APPELLEES.



Appeal from the United States District Court for the District of Arizona. Susan R. Bolton, District Judge, Presiding. D.C. No. 2:08-cv-00544-SRB.

The opinion of the court was delivered by: McKEOWN, Circuit Judge

FOR PUBLICATION

OPINION

Argued and Submitted March 9, 2010 -- San Francisco, California.

Before: J. Clifford Wallace, Susan P. Graber, and M. Margaret McKeown, Circuit Judges.

OPINION

In this appeal under the False Claims Act ("FCA"), 31 U.S.C. §§ 3729-3731, Sadek Ebeid claims that Theresa Lung-witz submitted false certifications to the federal government in connection with Medicare payments for three health care businesses: Health Resource Center, LLC (the "Clinic"), Home Health Resources, Inc. (the "Home Healthcare Agency") and The Crossing Hospice Care, Inc. (the "Hospice"). (We refer to the defendants collectively as "Lungwitz," except where it is necessary to identify individual defendants.) Central to Ebeid's claims are the allegations that Lungwitz engaged in the "unlawful corporate practice of medicine" and that referrals among the health care businesses were unlawful, which allegedly makes fraudulent every claim for Medicare reimbursement during that period.

"The FCA was enacted during the Civil War with the purpose of forfending widespread fraud by government contrac- tors who were submitting inflated invoices and shipping faulty goods to the government." United States ex rel. Hopper v. Anton, 91 F.3d 1261, 1265-66 (9th Cir. 1996). To encourage insiders to disclose fraud and thereby bolster enforcement, the FCA contains a qui tam provision that permits private persons (known as "relators") to bring civil actions on behalf of the United States and claim a portion of any award. See 31 U.S.C. § 3730(b), (d) (2008); Hopper, 91 F.3d at 1266 n.7. At the time that Ebeid filed his Second Amended Complaint,*fn1 the FCA imposed liability on anyone who, inter alia:

(1) knowingly presents, or causes to be presented, to an officer or employee of the United States Government . . . a false or fraudulent claim for payment or approval;

(2) knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government;

(3) conspires to defraud the Government by getting a false or fraudulent claim allowed or paid . . . .

31 U.S.C. § 3729(a) (2008).

Ebeid, a private physician in Arizona, is not an insider in Lungwitz's businesses and does not raise a typical FCA claim that Lungwitz overcharged the government for services provided, or that she made express false certifications to the government to receive payment. Instead, Ebeid alleges that all of the Medicare billing submitted by Lungwitz was unlawful under a theory of implied false certification. Ebeid alleges that the illegal corporate structure of the health care businesses gave Lungwitz a prohibited amount of control over the medical decisions of physicians employed in the various enterprises and that the health care businesses illegally referred patients amongst themselves.

Ebeid raises a theory of implied false certification, "based on the notion that the act of submitting a claim for reimbursement itself implies compliance with governing federal rules that are a precondition to payment." United States ex rel. Mikes v. Straus, 274 F.3d 687, 699 (2d Cir. 2001). Although we reserved the issue of whether this theory was viable in United States ex rel. Hendow v. University of Phoenix, 461 F.3d 1166, 1172 n.1 (9th Cir. 2006), we now join our sister circuits in recognizing a theory of implied certification under the FCA. See United States ex rel. Conner v. Salina Reg'l Health Ctr., Inc., 543 F.3d 1211, 1217-18 (10th Cir. 2008); United States ex rel. McNutt v. Haleyville Med. Supplies, Inc., 423 F.3d 1256, 1259 (11th Cir. 2005); United States ex rel. Augustine v. Century Health Services, Inc., 289 F.3d 409, 415 (6th Cir. 2002); Mikes, 274 F.3d at 699. Nonetheless, even under this theory of implied false certification, Ebeid fails to plead fraud with sufficient particularity to satisfy the ...


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