No Injury, No Violation of FCA, No Conspiracy
Post 4980
See the full video at https://rumble.com/v6co8xs-no-injury-no-violation-of-fca-no-conspiracy.html and at https://youtu.be/mQEJ3vw2cw4
Qui tam relators MSP WB, LLC and Michael Angelo sued 316 private insurers and an insurance-industry service provider, Insurance Services Office, Inc., purportedly on behalf of the United States of America and several states. Relators alleged that Defendants had engaged in a scheme to defraud Medicare and Medicaid in violation of the False Claims Act and related state false claims acts. The district court granted the motion to dismiss.
In United States Of America ex rel. State Of Michigan, et al., No. 24-1379, United States Court of Appeals, Sixth Circuit (January 15, 2025) resolved the dispute.
QUI TAM SUIT
In the past, Medicare paid first (as the “primary payer”), while the private insurer would take care of the rest (as the “secondary payer”). The Medicare Secondary Payer Act of 1980 flipped those roles, making the private insurer the primary payer, and Medicare or a non-governmental Medicare Advantage Organization (MAO) the secondary payer.
Even though Medicare is the secondary payer, Congress authorized Medicare to pay expenses up front when the primary payer does not promptly meet its obligations, so long as the primary payer eventually reimburses Medicare for any amounts it overpaid. This might happen, for example, when the primary payer is contesting its liability to cover an incurred expense. Congress also has created reporting requirements to cut down on fraud and assist with the coordination of benefits.
Relator Michael Angelo owns and operates a lawyer referral service, as well as health care facilities nationwide, including a medical transportation company, radiology clinics, a pharmacy, and a surgery center.
On behalf of the United States and several states, Relators filed a qui tam action against 316 private insurers (the Insurer Defendants) and ISO. Relators claimed that Defendants engaged in a scheme to defraud the Medicare and Medicaid programs. Asserting a “reverse False Claims Act (FCA)” violation, Relators alleged that the insurers knowingly made false records or statements in violation of § 111 in order to decrease or avoid a payment owed to the government or an MAO.
The Insurer Defendants and ISO moved to dismiss. The district court subsequently granted the motion to dismiss in its entirety and denied Relators’ motion for leave to file a second amended complaint. Relators now appeal.
THE APPEAL
A reverse FCA claim is one in which the person knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government.
In contrast to a prototypical FCA claim, which penalizes a party for falsely obtaining money from the government, a reverse FCA claim is premised on a party’s false or fraudulent effort to avoid a payment owed to the government.
In United States ex rel. Angelo v. Allstate Insurance Co., the same relators (MSP WB and Angelo) sued numerous private insurers and ISO, raising the same reverse FCA claim based on analogous purported violations-failing to comply with § 111, resulting in underpayment or nonpayment to the government. The panel in Allstate concluded that the allegations against Allstate were insufficient to state a reverse FCA claim.
Comparing the allegations against these five insurers to the allegations made in Allstate shows that they are materially identical and Allstate controls. As in Allstate, the complaint fails to plead with specificity that the insurers were liable for the underlying medical expenses, that Medicare made conditional payments for those expenses, or that the insurers had any obligation to reimburse the government. Allstate requires dismissal of the reverse FCA claim against the five Insurer Defendants for which the complaint provided specific examples of alleged fraud.
Therefore, the district court did not err by dismissing Relators’ reverse FCA claim against the Insurer Defendants.
Dismissal of Relators’ conspiracy claim was appropriate for two reasons. Relators have failed to establish a violation of the FCA. And without an FCA violation, there is no injury and no viable conspiracy claim.
Qui Tam suits allow a citizen to sue on behalf of the government. They are not designed, nor is it appropriate to file a qui tam suit to profit the relators. Since the Relators were unable to establish a violation of the False Claims Act, the FCA. Without an FCA violation, there is no injury and no viable conspiracy claim. The relators were apparently concerned that the insurers were proactively paying the excessive claims of the health care entities the Relators owned.
(c) 2025 Barry Zalma & ClaimSchool, Inc.
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