United States v. United Healthcare Insurance Co., No. 13-56746 (9th Cir. 2016)
Annotate this CaseThe Centers for Medicare & Medicaid Services (CMS) pays Medicare Advantage organizations fixed monthly amounts for each enrollee. Medicare Advantage organizations have a financial incentive to exaggerate an enrollee’s health risks by reporting diagnosis codes unsupported by the enrollee’s medical records, and therefore, Medicare regulations require a Medicare Advantage organization to certify that the risk adjustment data is submits are accurate and truthful. Qui Tam Relator James Swoben filed a third amended complaint alleging that Medicare Advantage organizations performed biased retrospective medical record reviews, which rendered Defendants’ periodic certifications false, in violation of the False Claims Act. Defendants moved to dismiss Swoben’s claims. In response, Swoben sought to amend his complaint. The district court dismissed the third amended complaint with prejudice, concluding that Swoben failed to allege a claim with particularity as required by Fed. R. Civ. P. 9(b). The court also denied leave to amend, citing both futility of amendment and undue delay. The Ninth Circuit vacated the district court’s judgment, holding that the dismissing Swoben’s third amended complaint without leave to amend based on futility of amendment and undue delay and that leave to amend was proper in this case.
Court Description: Medicare. The panel amended the opinion, filed August 10, 2016, and vacated the district court’s judgment dismissing qui tam relator James Swoben’s third amended complaint, which alleged that defendant Medicare Advantage organizations submitted false certifications in violation of the False Claims Act, and remanded with instructions to afford Swoben leave to file a proposed fourth amended complaint. The Centers for Medicare & Medicaid Services (“CMS”) pays Medicare Advantage organizations fixed monthly amounts for each enrollee, and CMS calculates the payment for each enrollee based on various “risk adjustment data” as reflected in submitted diagnoses codes. Medicare regulations require a Medicare Advantage organization to certify that the data it submits are “accurate, complete, and truthful.” 42 C.F.R. § 422.504(l), (l)(2). Swoben alleged that the defendant organizations submitted false certifications by performing biased retrospective medical record reviews designed not to identify erroneously reported diagnosis codes. The panel held that the district court abused its discretion by denying leave to amend on the ground of futility of amendment. The panel held that the theory alleged here – that the defendants designed their retrospective review procedures to not reveal erroneously reported diagnosis codes – adequately alleged that the defendants’ § 422.504(l) 4 SWOBEN V. UNITED HEALTHCARE certifications were false and stated a cognizable legal theory under the False Claims Act. The panel held that the proposed fourth amended complaint alleged sufficient factual matter to satisfy Fed. R. Civ. P. 8, 9(b) and 12(b)(6), or may be amended to do so. The panel held that with respect to defendants United Healthcare and HealthCare Partners, the allegations adequately identified the details of the misconduct charged, and afforded each defendant notice of its alleged role in a fraudulent scheme; and therefore, satisfied Rule 9(b). The panel further held that with respect to defendants Aetna, WellPoint and Health Net, the allegations lacked sufficient detail to satisfy Rule 9(b), but Swoben should be afforded leave to amend to cure this deficiency. The panel held that the district court also abused its discretion by denying leave to amend based on undue delay. The panel held that leave to amend was proper in this case where the litigation against the defendants was at an early stage, Swoben did not seek to assert a new legal theory, and this was Swoben’s first attempt to cure deficiencies in his pleadings.
This opinion or order relates to an opinion or order originally issued on August 10, 2016.
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