On December 7, 2020, the United States Supreme Court declined review of the U.S. Court of Appeals for the Fifth Circuit’s affirmation to dismiss a $61.8 million False Claims Act case alleging Medicare overbilling against a Texas hospital system. The lawsuit, initially brought by relator Integra Med Analytics (Integra) against Baylor Scott & White Health (Baylor), alleged that Baylor engaged in a scheme to overbill Medicare by fraudulently increasing the use of certain “secondary” diagnosis codes for complications and comorbidities, which result in higher Medicare reimbursement on the claim. The Supreme Court’s decision not to undertake review of the Fifth Circuit’s decision signals that the nation’s highest court has no aims to alter the legal landscape of the False Claims Act’s pleading standard at this time.

The underlying lawsuit alleged, among other things, that Baylor enacted a scheme through trainings and other initiatives to fraudulently increase the use of secondary diagnosis codes for complications or comorbidities, evidenced in part with statistical analysis comparing Baylor to its peer institutions. The district court, however, found that such allegations could not survive a motion to dismiss because “such a scheme is not in and of itself one to submit false claims and is equally consistent with a scheme to improve hospital revenue through accurate coding of patient diagnoses in a way that will be appropriately recognized and reimbursed by CMS commensurate with the type and amount of services rendered.” The Fifth Circuit agreed; finding that the facts pleaded are consistent with both the claimed misconduct and a legal and “obvious alternative explanation” that Baylor was “ahead of most healthcare providers” in accurately coding these scenarios.

In its petition for review before the Supreme Court, Integra noted that the Fifth Circuit’s decision “signals an impossible standard for FCA relators relying in part on statistical analyses, as they would need to anticipate and rule out every possible alternative explanation . . . .” But, the Supreme Court’s denial of Integra’s petition for review signals its intention to leave the pleading standard landscape for False Claims Act cases undisturbed.

The case is U.S., Ex Rel. Integrated Med v. Baylor Scott, et al., U.S., No. 20-581 (petition denied Dec. 7, 2020). The Supreme Court’s list of cert denials from December 7, 2020 is available here. The Fifth Circuit’s opinion is available here. Previous coverage from King & Spalding of this case can be found here.