Law360 (August 9, 2022, 7:46 PM EDT) — The Ninth Circuit on Tuesday revived a whistleblower’s suit alleging that medical device maker Kinetic Concepts Inc. flouted the False Claims Act by miscategorizing Medicare charges for wound therapy, saying the district court was too quick to find that there was no factual issue of false claims.
The three-judge appellate panel reversed a California federal judge’s ruling granting Kinetic Concepts summary judgment in the whistleblower lawsuit brought by former employee Steven J. Hartpence, finding that there are facts that a judge or jury will have to work out before determining whether the company scammed Medicare, according to the 30-page published opinion.
Hartpence — who worked at Kinetic Concepts from 2001 until 2007 as vice president and then senior vice president of business systems — accuses the company of submitting reimbursement claims for its vacuum-assisted, accelerated wound-healing devices to Medicare using a payment modifier code allowing for automatic payments. That code allowed Kinetic Concepts to avoid strict review and rejection of its claims for uses that weren’t covered under Medicare, the complaint states.
In her June 2019 summary judgment order, U.S. District Judge Christina Snyder determined that there was no “triable issue as to materiality and scienter” because Kinetic Concepts’ use of the modifier code wasn’t material to the government’s decision to pay, according to the opinion.
But the panel said a trier of fact could easily come to the opposite conclusion.
“Given the above described structure of the coverage determination system, it would be reasonable to conclude that the government attaches importance, in making a payment decision, to a provider’s certification of compliance with the relevant criteria,” the panel wrote, adding that the inference is supported by Kinetic Concepts’ persisting use of the modifier to ensure prompt payments.
“Unless the summary judgment record contains undisputed evidence that would refute such an inference, summary judgment for [Kinetic Concepts] would be inappropriate because a rational jury could find … that the use of the KX [payment modifier code] was material to the payment of stalled-cycle claims,” the panel said.
The district court concluded that the use of the code didn’t mean that Kinetic Concepts would be paid automatically because evidence in the record showed that some claims submitted with the modifier were not paid, according to the opinion. That reasoning doesn’t support a finding that the code wasn’t material.
Most of the claims with the modifier weren’t subject to audits and payment of those claims was effectively automatic, the opinion states.
“The fact that the KX modifier was not accepted at face value in case-specific auditing does not mean that compliance … was not material to most payment decisions,” the panel said.
The panel also found that the district court erred in ruling that there wasn’t enough evidence to show that Kinetic Concepts acted with scienter, noting that the lower court reached the wrong conclusion because its premise concerning materiality was wrong.
“[Kinetic Concepts] was plainly aware that using the KX modifier avoided a costly review and appeals process that it would sometimes win and sometimes lose,” the panel wrote.
“More generally, a reasonable jury could conclude that [Kinetic Concepts’] deliberate insistence on using the KX modifier when it knew that the [requirements were] not met was driven precisely by its desire to be paid promptly and without the hassle and risks of case-specific review,” it added. “That further confirms that a rational trier of fact could find that [Kinetic Concepts] knew that its misuse of the KX modifier was material to payment.”
The panel reversed the district court’s grant of summary judgment, instructing the lower court to take a fresh look at the case.
“We are grateful for the Ninth Circuit’s opinion, which agreed with the relator’s arguments on the law and the evidence,” Hartpence’s attorney, Michael A. Hirst of Hirst Law Group PC, told Law360 on Tuesday.
3M, Kinetic Concepts’ parent company, told Law360 in a statement Tuesday that it was disappointed with the panel’s decision to return the case to the district court.
“We stand by our patients and will continue to transparently support their needs while vigorously defending our record,” the company said.
U.S. Circuit Judges Bobby R. Baldock, Marsha S. Berzon and Daniel P. Collins sat on the panel that reached Tuesday’s decision.
The relator is represented by Michael A. Hirst of Hirst Law Group PC and Patrick J. O’Connell.
Kinetic Concepts Inc. is represented by Gregory M. Luce and Matthew E. Sloan of Skadden Arps Slate Meagher & Flom LLP.
The case is U.S. ex. rel. Steven J. Hartpence v. Kinetic Concepts Inc. et al., case number 19-55823, in the U.S. Court of Appeals for the Ninth Circuit.
–By Lauren Berg; Editing by Jay Jackson Jr.
Read more at: https://www.law360.com/compliance/articles/1519597/9th-circ-revives-whistleblower-s-medicare-fraud-suit?nl_pk=ee91858d-8ba2-47bd-9ccc-92b22f95f103&utm_source=newsletter&utm_medium=email&utm_campaign=compliance&utm_content=2022-08-10?copied=1