In U.S. ex rel. Freedman v. Bayada Home Health Care, Inc., No. 3:19-cv-18753-FLW-ZNQ, 2021 WL 1904735 (D.N.J. May 12, 2021), a New Jersey District Court found that the relator failed to plead a cognizable theory of liability under the FCA based on defendant Bayada Home Health Care, Inc. (“Bayada”) allegedly fraudulent acquisition of a home health agency that subsequently billed Medicare for seemingly legitimate claims.

In 2011, the Ocean County Board of Health (“Ocean County”) began considering whether to sell its home healthcare agency. That fall, Bayada asked George Gilmore, an attorney and local Republican Party chair, to “lobby” on its behalf in its attempt to purchase Ocean County’s home healthcare agency. Gilmore engaged in various efforts to that end, and signed a retention agreement for legal services in March 2012. Additionally, days before Bayada submitted its proposal to Ocean County, Bayada’s then-COO offered Gilmore a “success fee” on top of his retention agreement. Bayada did not inform Ocean County of its contingency fee arrangement with Gilmore, despite the fact that the RFP and New Jersey state regulations prohibit paying lobbyists in that way. Bayada was awarded the contract, despite bidding $500,000 less than the other bidder. Bayada obtained Ocean County’s license in December 2014, enrolled as a Medicare provider in January 2015, and billed approximately $36 million in Medicare claims to the federal government through 2019.

Relator (a former employee of Bayada) filed suit contending that Bayada’s conduct violated the FCA and advanced theories of fraudulent inducement and false certification theory.  The Relator argued that because Bayada fraudulently acquired Ocean County’s home healthcare agency, every subsequent claim Bayada submitted to Medicare was fraudulently induced. The court rejected the Relator’s argument, finding that he failed to demonstrate how Bayada’s acquisition of Ocean County’s home healthcare agency “touches or concerns the United States, or induced action on its part, other than by permitting Bayada to enroll as a service provider with [the Center for Medicare & Medicaid Services (“CMS”)] seven months later.” The court also found that Relator failed to plead any facts showing “that the United States would place any—much less decisive—significance on how Bayada paid its lobbyist, if discovered, or on the fact that Bayada allegedly violated municipal contract provisions/state regulations regarding contingency fees in acquiring Ocean County’s healthcare agency.”

The court similarly rejected the Relator’s false certification theory. As to express false certification, the court found that Bayada did not explicitly represent compliance with the RFP’s anti-contingency fee provisions or New Jersey’s analogous regulations. As to implied false certification, the court found that Bayada certified only the accuracy of its billing information and the veracity of the statements and documents actually included in the application, not certification as to “the entire sequence of events leading up to Bayada’s enrollment in Medicare.”

Although the court found Bayada’s alleged behavior in fraudulently obtaining Ocean County’s home healthcare agency troubling, this case demonstrates the importance of alleging that a fraudulently induced contract touches or concerns the United States. As the court reiterated from the Supreme Court’s holding in Universal Health Services, Inc. v. United States ex. rel. Escobar, 126 S. Ct. 1989, 2003 (2016), the FCA “is not an all-purpose antifraud statute, or a vehicle for punishing garden-variety breaches of contract or regulatory violations.”

If you have any questions about the contents of this alert or your organization’s compliance with the FCA, please contact the author or any member of the McGuireWoods healthcare team.