Defendant's Attorney: J. Scott Ballenger, Alexandra P. Shechtel, Katherine A. Lauer, Andrew A. Warth, W. David Bridgers, Wells Trompeter, for Appellee St. Mark’s Hospital.
Matthew L. Knowles, M. Miller Baker, Shamis Beckley and Alexander
J. Kritikos, Alan C. Bradshaw,Sammi V. Anderson, and Christopher M. Glauser Asher D. Funk, for Appellee Intermountain Healthcare, Inc. and Intermountain Medical Center.
Blaine J. Benard and Gregory Goldberg on the brief for Appellees Sherman Sorensen M.D., and Sorensen Cardiology Group.
Sarah Carroll, Attorney, Appellate Staff, Civil Division, United States Department of Justice, Washington, DC (Chad A. Readler, Acting Assistant Attorney General, United States Department of Justice, Washington, DC; John W. Huber, United States Attorney
for the District of Utah, Salt Lake City, Utah; Douglas N. Letter and Michael S. Raab,
Attorneys, Appellate Staff, Civil Division, United States Department of Justice,
Washington, DC), appearing for Intervenor and Amicus Curiae United States of America.
Description: This is a qui tam action alleging violations of the False Claims Act (“FCA”), 31
U.S.C. §§ 3729–33, involving fraudulent reimbursements under the Medicare Act, 42
U.S.C. §§ 1395–1395ccc. Plaintiff Gerald Polukoff, M.D., is a doctor who worked with
Defendant Sherman Sorensen, M.D. After observing some of Dr. Sorensen’s medical
practices, Dr. Polukoff brought this FCA action, on behalf of the United States, against
Dr. Sorensen and the two hospitals where Dr. Sorensen worked (collectively,
“Defendants”). Dr. Polukoff alleges Dr. Sorensen performed thousands of unnecessary
heart surgeries and received reimbursement through the Medicare Act by fraudulently
certifying that the surgeries were medically necessary. Dr. Polukoff further alleges the
hospitals where Dr. Sorensen worked were complicit in and profited from Dr. Sorensen’s
fraud. The district court granted Defendants’ motions to dismiss, reasoning that a
medical judgment cannot be false under the FCA. Exercising jurisdiction pursuant to 28
U.S.C. § 1291, we REVERSE and REMAND for further proceedings.
A. Statutory Background
“The FCA ‘covers all fraudulent attempts to cause the government to pay out sums
of money.’” United States ex rel. Conner v. Salina Regional Health Ctr., Inc., 543 F.3d
1211, 1217 (10th Cir. 2008) (quoting United States ex rel. Boothe v. Sun Healthcare
Grp., Inc., 496 F.3d 1169, 1172 (10th Cir. 2007)). Specifically, any person who:
(A) knowingly presents, or causes to be presented, a false or
fraudulent claim for payment or approval;
(B) knowingly makes, uses, or causes to be made or used, a false
record or statement material to a false or fraudulent claim;
(C) conspires to commit a violation of subparagraph (A), (B), (D),
(E), (F), or (G); [or]
. . .
(G) 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,
is liable to the United States Government for a civil penalty [and
31 U.S.C. § 3729(a)(1). The FCA defines the “knowingly” scienter requirement as
(A) mean[s] that a person, with respect to information—
(i) has actual knowledge of the information;
(ii) acts in deliberate ignorance of the truth or falsity of the
(iii) acts in reckless disregard of the truth or falsity of the
(B) require[s] no proof of specific intent to defraud . . . .
Id. § 3729(b)(1).
There are two options to remedy a violation of the FCA. “First, the Government
itself may bring a civil action against the alleged false claimant.” Vt. Agency of Nat. Res.
v. United States ex rel. Stevens, 529 U.S. 765, 769 (2000). “Second, as is relevant here, a
private person (the relator) may bring a qui tam civil action ‘for the person and for the
United States Government’ against the alleged false claimant, ‘in the name of the
Government.’” Id. (quoting 31 U.S.C. § 3730(b)(1)). If a relator files a qui tam civil
action, the government may intervene and take over the case. 31 U.S.C. § 3730(b)(2).
“If the government elects not to proceed with the action,” the relator “shall have the right
to conduct the action.” Id. § 3730(c)(3). Depending on the specific circumstances of the
qui tam suit, the government and the relator divide any proceeds derived from the suit.
Id. § 3730(d).
The FCA is applicable to many statutes that provide for federal reimbursement of
expenses. One such statute is the Medicare Act,1 which imposes requirements for
reimbursement of medical expenses. As relevant here, the Medicare Act states that “no
payment may be made . . . for any expenses incurred for items or services” that “are not
reasonable and necessary for the diagnosis or treatment of illness or injury or to improve
the functioning of a malformed body member.” 42 U.S.C. § 1395y(a)(1)(A) (emphasis
added). Physicians and medical providers who seek reimbursement under the Medicare
Act must “certify the necessity of the services and, in some instances, recertify the
continued need for those services.” 42 C.F.R. 424.10(a) (Oct. 1, 2013) (emphasis added);
see also 42 U.S.C. §§ 1395f(a), 1395n(a) (listing the various certifications).
The Secretary of Health and Human Services decides “whether a particular
medical service is ‘reasonable and necessary’ . . . by promulgating a generally applicable
rule or by allowing individual adjudication.” Heckler v. Ringer, 466 U.S. 602, 617
(1984) (emphasis added). The former course involves a “national coverage
determination” that announces “whether or not a particular item or service is covered
1 The amended complaint also references the “TRICARE/CHAMPUS Program.”
App’x at 521–22. This healthcare program benefits retired military personnel and
dependents of both active and retired military personnel. Id. at 521; see also Baptist
Physician Hosp. Org., Inc. v. Humana Military Healthcare Servs., Inc., 368 F.3d 894,
895 (6th Cir. 2004). The amended complaint alleges that Defendants “submitted
Requests for Reimbursement to TRICARE/CHAMPUS that were based on their
submissions to Medicare.” App’x at 522. We do not distinguish this program from
Medicare and Medicaid in our analysis because Defendants failed to argue for any
nationally.” 42 U.S.C. § 1395ff(f)(1)(B). In the absence of a national coverage
determination, local Medicare contractors may issue a “local coverage determination”
that announces “whether or not a particular item or service is covered” by that contractor.
Id. § 1395ff(f)(2)(B).
The latter course allows “contractors [to] make individual claim determinations,
even in the absence of [a national or local coverage determination], . . . based on the
individual’s particular factual situation.” 68 Fed. Reg. 63,692, 63,693 (Nov. 7, 2003). In
making an individual claim determination about whether to reimburse a medical provider,
“[c]ontractors shall consider a service to be reasonable and necessary if the contractor
determines that the service is: [(1)] Safe and effective; [(2)] Not experimental or
investigational . . .; and [(3)] Appropriate.” Centers for Medicare & Medicaid Services
(“CMS”),2 Medicare Program Integrity Manual § 13.5.1 (2015) (describing local
coverage determinations); see also id. § 13.3 (incorporating § 13.5.1’s standards for
individual claim determinations). One factor that contractors consider when deciding
whether a service is “appropriate” is whether it is “[f]urnished in accordance with
accepted standards of medical practice for the diagnosis or treatment of the patient’s
condition or to improve the function of a malformed body member.” Id. § 13.5.1.
2 CMS is an agency within Health and Human Services, see Protocols, LLC v.
Leavitt, 549 F.3d 1294, 1295 (10th Cir. 2008), and this agency administers the Medicare
Act, see United States ex rel. Sikkenga v. Regence Bluecross Blueshield of Utah, 472
F.3d 702, 705 & n.1 (10th Cir. 2006).
B. Factual Background
“At the motion-to-dismiss stage, we must accept all the well-pleaded allegations of
the complaint as true and must construe them in the light most favorable to the plaintiff.”
Albers v. Bd. of Cty. Comm’rs of Jefferson Cty., 771 F.3d 697, 700 (10th Cir. 2014)
(quotation omitted). As a result, we rely on Dr. Polukoff’s amended complaint.3
1. The PFO closure procedure
This case involves two very similar cardiac conditions: patent foramen ovale
(“PFO”) and atrial septal defect (“ASD”). Both PFOs and ASDs involve a hole between
the upper two chambers of the heart, but they have different causes. Most people are
born with a PFO, as it helps blood circulate throughout the heart while in the womb, but
for 75% of the population, the hole closes soon after birth. ASDs, on the other hand, are
an abnormality. Regardless, both PFOs and ASDs allow blood to flow in the wrong
direction within the upper chambers of the heart. In rare cases, they can lead to a variety
of dangerous complications, including stroke. Physicians can “close” ASDs and PFOs
through ASD and PFO closures (collectively, “PFO closures”), a percutaneous surgical
procedure involving cardiac catheterization. In layman’s terms, physicians insert a thin
tube into a blood vessel to access the heart, rather than performing open heart surgery.
The amended complaint makes specific reference to industry guidelines published
by the American Heart Association and American Stroke Association (the “AHA/ASA
3 Although Dr. Polukoff filed a motion (and later, an amended motion) for leave to
file a second amended complaint, the district court denied the amended motion. Thus,
Dr. Polukoff’s amended complaint is the operative complaint.
Guidelines”) in 2006 and 2011, related to PFO closures.4 The 2006 AHA/ASA
Guidelines observed that “[s]tudies have found an association between PFO and
cryptogenic stroke.”5 App’x at 2077. They noted “conflicting reports concerning the
safety and efficacy of surgical PFO closure” to treat cryptogenic stroke, but after
reviewing several studies, also noted that each reported “no major complications.” Id.
The 2006 AHA/ASA Guidelines concluded: “Insufficient data exist to make a
recommendation about PFO closures in patients with a first stroke and a PFO. PFO
closure may be considered for patients with recurrent cryptogenic stroke despite optimal
medical therapy . . . .” Id. at 2079. In other words, the 2006 AHA/ASA Guidelines
advised that (1) for patients with two or more cryptogenic strokes, PFO closures may be
considered; (2) for patients with only one cryptogenic stroke, there was insufficient data
to make a recommendation; and (3) for patients without a single cryptogenic stroke, the
AHA/ASA Guidelines did not contemplate the potential for PFO closures.
The 2011 AHA/ASA Guidelines are similarly inconclusive. In a table titled
“Recommendations for Stroke Patients With Other Specific Conditions,” the guidelines
stated: “There are insufficient data to make a recommendation regarding PFO closure in
patients with stroke and PFO . . . .” Id. at 2125. The 2011 AHA/ASA Guidelines did,
however, observe that recent “studies provide[d] new information on options for closure
4 The amended complaint also references the 2014 AHA/ASA Guidelines. Those
guidelines, however, were published after all relevant conduct occurred in this case, and
thus are irrelevant.
5 A “cryptogenic stroke” describes a stroke for which the cause is unknown.
of PFO and generally indicate[d] that short-term complications with these procedures are
rare and for the most part minor.” Id. at 2126.
Relying on the AHA/ASA Guidelines, the amended complaint alleges “[t]here has
long been general agreement in the medical community that PFO closure is not medically
necessary, except in the limited circumstances where there is a confirmed diagnosis of a
recurrent cryptogenic stroke or TIA, despite optimum medical management.” Id. at
2. The Defendants’ conduct
Dr. Sorensen practiced medicine as a cardiologist in Salt Lake City, Utah. He was
the principal shareholder of Sorensen Cardiovascular Group (“SCG”). Dr. Sorensen,
through SCG, provided cardiology services at two hospitals: (1) Intermountain Medical
Center and (2) St. Mark’s Hospital (“St. Mark’s”). Intermountain Medical Center is part
of a large network of hospitals in Utah principally owned by Intermountain Healthcare,
Inc., a not-for-profit corporation (collectively, with Intermountain Medical Center,
“Intermountain”). St. Mark’s, on the other hand, is a for-profit corporation owned by
HCA, Inc. Dr. Polukoff is a practicing cardiologist who worked with Dr. Sorensen at
both St. Mark’s and Intermountain.
Dr. Sorensen started providing cardiology services at Intermountain in December
2002. Later, in 2008, he began working at St. Mark’s as well. Part of his practice
included performing a relatively high number of PFO closures. For example, “[t]he
6 A “TIA” is a “transient ischemic attack,” which is a brief interruption of blood
flow to the brain that causes stroke-like symptoms.
Cleveland Clinic reported that it had performed 37 PFO closures in 2010; during that
same time period [Dr.] Sorensen’s billing records indicate that he had performed 861.”
Id. at 542. The amended complaint alleges that Dr. Sorensen performed so many PFO
closures because of “his medically unsupported belief that PFO closures would cure
migraine headaches or prevent strokes.” Id. In addition, “Dr. Sorensen knew that
Medicare and Medicaid would not pay for PFO closures to treat migraines, so he chose to
represent that the procedures had been performed based upon indications set forth in the
AH[A]/ASA stroke guidelines—the existence of confirmed recurrent cryptogenic
The amended complaint describes Dr. Sorensen’s medical notes and reasons for
the large number of PFO closures:
Dr. Sorensen’s notes in his patients’ medical records indicate that
[Dr.] Sorensen fully understands, but rejects, the standard of care for
PFO/ASD closures set forth in the [AHA/ASA] Guidelines
described above. For example, Dr. Sorensen notes that closures are
considered medically necessary only for recurrent cryptogenic
strokes or TIA, secondary to paradoxical embolization despite
medical therapy, but argues that while “[w]e do have experience
with the two strokes first and then closure approach, we found this
very unsatisfactory as a very high number of patients were disabled
and disability is not reversed by closure.” Dr. Sorensen notes that
“[w]e therefore follow a preventative strategy and risk stratify the
patient. . . .” Dr. Sorensen notes that he considers waiting for a
stroke or TIA to reoccur before proceeding to closure is “unethical.”
Id. at 607.
In early 2011, several doctors at Intermountain objected to Dr. Sorensen’s
approach to PFO closures, claiming Dr. Sorensen was violating Intermountain’s internal
guidelines for PFO closures. In March 2011, in response to the objections, Intermountain
adopted new internal guidelines for PFO closures that mirrored the AHA/ASA
Guidelines. In May 2011, Intermountain conducted an investigation into Dr. Sorensen’s
practice and internally released an audit of the 47 PFO closures Dr. Sorensen performed
in April 2011. The audit concluded that “the guidelines had been violated in many of the
47 cases reviewed.” Id. at 535.
On June 27, 2011, following the internal investigation, Intermountain suspended
Dr. Sorensen’s cardiac privileges. The suspension was effective until July 11, 2011. On
July 12, 2011, Dr. Sorensen returned to Intermountain, but continued to violate the
hospital’s internal guidelines for PFO closures. Intermountain discovered the continued
violations, and subsequently entered into a settlement agreement with Dr. Sorensen to
avoid his permanent suspension. Intermountain later found that Dr. Sorensen had
violated the terms of the settlement agreement and moved to permanently suspend Dr.
Sorensen, but Dr. Sorensen tendered his resignation in September 2011.
After Dr. Sorensen left Intermountain, he moved his entire practice to St. Mark’s.
St. Mark’s knew of Dr. Sorensen’s suspension from Intermountain, but courted his
moving his practice anyway. St. Mark’s allowed Dr. Sorensen to continue his cardiology
practice until he retired from medical practice altogether a few months later, on
December 9, 2011.
Dr. Polukoff—the relator in this case—worked at both Intermountain and St.
Mark’s, but not directly for Dr. Sorensen until 2011. On June 11, 2011, Dr. Polukoff
signed an employment agreement with SCG to learn PFO closures from Dr. Sorensen,
and on August 17, 2011, actually began working for Dr. Sorensen at St. Mark’s. While
working for Dr. Sorensen, Dr. Polukoff “personally observed [Dr.] Sorensen perform
medically unnecessary PFO closures on patients at St. Mark’s.” Id. at 536. He alleges to
have “observed [Dr.] Sorensen create a PFO by puncture of the atrial septum in patients
who were found to have an intact septum during surgery.” Id.
The amended complaint further alleges that St. Mark’s and Intermountain “signed
or caused to be executed provider agreements with Medicare that permitted each
Defendant to submit claims and accept payment for services.” Id. at 518. Both hospitals
“allowed and encouraged Dr. Sorensen to perform and submit claims to federal health
benefit programs for PFO and ASD procedures despite clear compliance red flags,
including, but not limited to, the fact that Dr. Sorensen was performing these procedures
at a rate that far exceeded that of any other institution or physician.” Id. at 507.
C. Procedural Background
On December 6, 2012, Dr. Polukoff filed this qui tam action under seal in the
United States District Court for the Middle District of Tennessee against: (1) Dr.
Sorensen; (2) Sorensen Cardiovascular Group; (3) Intermountain Healthcare, Inc.; (4) St.
Mark’s Hospital; and (5) HCA, Inc. On June 15, 2015, the government filed its notice of
election to decline intervention. On June 19, 2015, the district court unsealed the qui tam
complaint. All Defendants moved to dismiss the action.
Dr. Polukoff then filed an amended complaint against all Defendants previously
named, and added Intermountain Medical Center. The amended complaint alleged four
separate violations of the FCA, corresponding to four separate subsections of the FCA.
Id. at 611–14 (citing 31 U.S.C. § 3729(a)(1)(A)–(C), (G)). All Defendants moved to
dismiss the amended complaint. The district court dismissed the claims against HCA,
and concluded that, without HCA, venue in the United States District Court for the
Middle District of Tennessee was no longer proper. Consequently, the district court
transferred the case to the United States District Court for the District of Utah, without
ruling on the motions to dismiss as to the remaining Defendants—Dr. Sorensen (both as
an individual and the Sorensen Cardiovascular Group); Intermountain (both the
individual hospital and the nonprofit that owned it); and St. Mark’s.
The remaining Defendants filed renewed motions to dismiss. Oral arguments
were scheduled for November 10, 2016. The day before oral arguments, Dr. Polukoff
filed a motion for leave to file an amended complaint. The district court heard oral
arguments as scheduled. Before the district court ruled on the motions to dismiss, Dr.
Polukoff filed an amended motion for leave to file a second amended complaint on
January 18, 2017. The next day, the district court granted Defendants’ motions to
dismiss, with prejudice, and denied Dr. Polukoff’s motion for leave to amend.
As relevant to this appeal, the district court first addressed Defendants’ Rule 9(b)
argument that Dr. Polukoff had failed to plead with particularity. The district court
determined that the proper standard was “whether Dr. Polukoff has pled the who, what,
when, where and how of a fraudulent scheme perpetrated by each of the defendants.” Id.
at 2519. “In addition, the court must decide whether the operative complaint provides ‘an
adequate basis for a reasonable inference that false claims were submitted as part of that
scheme.’” Id. (quoting United States ex rel. Lemmon v. Envirocare of Utah, Inc., 614
F.3d 1163, 1172 (10th Cir. 2010)). The court concluded that Dr. Polukoff had adequately
pled his claims against Dr. Sorensen and St. Mark’s but not against Intermountain
because he failed to identify a “managing agent” involved in the conspiracy at
Intermountain. Id. at 2519–22.
The court then turned to Defendants’ Rule 12(b)(6) argument. Relying on
language from this court’s unpublished decision in United States ex rel. Morton v. A Plus
Benefits, Inc., 139 F. App’x 980 (10th Cir. 2005), the district court concluded that “Dr.
Polukoff must show that the defendants knowingly made an objectively false
representation to the government that caused the government to remit payment.” App’x
at 2526. It observed that “Dr. Polukoff’s FCA causes of action rest upon his contention
that the defendants represented (either explicitly or implicitly) that the PFO closures
performed by Dr. Sorensen were medically reasonable and necessary and that this
representation was false.” Id. at 2524. But, because “[o]pinions, medical judgments, and
‘conclusions about which reasonable minds may differ cannot be false’ for the purposes
of an FCA claim,” id. at 2526 (quoting Morton, 139 F. App’x at 983), Dr. Sorensen’s
representations to the government could not be false absent “a regulation that clarifies the
conditions under which it will or will not pay for a PFO closure,” id. at 2528. Thus, Dr.
Polukoff’s “FCA claims fail[ed] as a matter of law and the court dismisse[d] all causes of
action asserted against the defendants.” Id. at 2529. The court further determined that
“leave to amend would be futile,” id., so it dismissed the amended complaint with
Dr. Polukoff timely appealed. The government filed an amicus brief in his
support. All three Defendants— Dr. Sorensen, St. Mark’s, and Intermountain—filed
response briefs. Of particular note, in Intermountain’s brief, it argued that the qui tam
provisions of the FCA violate Article II of the U.S. Constitution. The government
intervened thereafter, pursuant to 28 U.S.C. § 2403(a), to respond to Intermountain’s
constitutional argument in an additional brief as intervenor.
The district court relied upon Rules 12(b)(6) and 9(b) to dismiss Dr. Polukoff’s
amended complaint with prejudice. We address the district court’s holdings in turn.7
A. Rule 12(b)(6)
We first address the district court’s conclusion that, absent a specific regulation
addressing the necessity of the treatment, a physician’s medical judgment concerning the
necessity of a treatment could not be “false or fraudulent” under the FCA. As a result of
this conclusion, the district court dismissed Dr. Polukoff’s amended complaint under
Rule 12(b)(6), believing it failed to state a claim as a matter of law, and then denied leave
to amend, believing amendment would have been futile. We disagree.
7 Intermountain argues, for the first time on appeal, that “at least where the
Government has not intervened, a private relator’s prosecution of an FCA case on behalf
of the Government violates the separation of powers.” Intermountain Br. at 54.
Intermountain concedes it “did not assert a constitutional challenge below.” Id. at 54
n.11. We consider this argument forfeited. “It is the general rule, of course, that a
federal appellate court does not consider an issue not passed upon below.” Singleton v.
Wulff, 428 U.S. 106, 120 (1976). “[W]here the ground presented here has not been raised
below we exercise this authority [to consider the newly raised argument] ‘only in
exceptional cases.’” Heckler v. Campbell, 461 U.S. 458, 468 n.12 (1983) (quoting
McGoldrick v. Compagnie Generale Transatlantique, 309 U.S. 430, 434 (1940)). “[T]he
decision regarding what issues are appropriate to entertain on appeal in instances of lack
of preservation is discretionary.” Abernathy v. Wandes, 713 F.3d 538, 552 (10th Cir.
2013). We decline to address Intermountain’s separation of powers argument.
“We review the district court’s dismissal under Rule 12(b)(6) de novo.” Lemmon,
614 F.3d at 1167. “Although we generally review for abuse of discretion a district
court’s denial of leave to amend a complaint, when this ‘denial is based on a
determination that amendment would be futile, our review for abuse of discretion
includes de novo review of the legal basis for the finding of futility.’” Cohen v.
Longshore, 621 F.3d 1311, 1314 (10th Cir. 2010) (quoting Miller ex. Rel. S.M. v. Bd. of
Educ. of Albuquerque Pub. Schs., 565 F.3d 1232, 1250 (10th Cir. 2009)).
“Enacted in 1863, the False Claims Act ‘was originally aimed principally at
stopping the massive frauds perpetrated by large contractors during the Civil War.’”
Universal Health Servs., Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989, 1996
(2016) (quoting United States v. Bornstein, 423 U.S. 303, 309 (1976)). “‘[A] series of
sensational congressional investigations’ prompted hearings where witnesses ‘painted a
sordid picture of how the United States had been billed for nonexistent or worthless
goods, charged exorbitant prices for goods delivered, and generally robbed in purchasing
the necessities of war.’” Id. (quoting United States v. McNinch, 356 U.S. 595, 599
Today, the FCA generally prohibits private parties from “knowingly” submitting
“a false or fraudulent claim” for reimbursement. 31 U.S.C. § 3729(a)(1)(A).
Unfortunately, “Congress did not define what makes a claim ‘false’ or ‘fraudulent.’”
Escobar, 136 S. Ct. at 1999. Without a definition from Congress, the Supreme Court has
turned to common law. And “common-law fraud has long encompassed . . . more than
just claims containing express falsehoods.” Id. Consequently, the Court favors a more
expansive view of “false or fraudulent.”
As we have held, “false or fraudulent” includes both factually false and legally
false requests for payment. See Lemmon, 614 F.3d at 1168. “Factually false claims
generally require a showing that the payee has submitted an incorrect description of
goods or services provided or a request for reimbursement for goods or services never
provided.” United States ex rel. Thomas v. Black & Veatch Special Projects Corp., 820
F.3d 1162, 1168 (10th Cir. 2016) (quotation omitted). “Claims arising from legally false
requests, on the other hand, generally require knowingly false certification of compliance
with a regulation or contractual provision as a condition of payment.” Id. In this case,
Dr. Polukoff does not allege Dr. Sorensen submitted factually false requests because his
claims do not focus on an inaccuracy of the PFO closures performed. Instead, he claims
the PFO closures do not comply with Medicare’s “reasonable and necessary”
requirement, meaning Dr. Sorensen submitted legally false requests for payment.
“Such claims of legal falsity can rest on one of two theories—express false
certification, and implied false certification.” Id. at 1169 (quotation and brackets
omitted). “An express false certification theory applies when a government payee falsely
certifies compliance with a particular statute, regulation or contractual term, where
compliance is a prerequisite to payment.” Conner, 543 F.3d at 1217 (quotation omitted).
“By contrast, the pertinent inquiry for implied-false-certification claims is not whether a
payee made an affirmative or express false statement, but whether, through the act of
submitting a claim, a payee knowingly and falsely implied that it was entitled to
payment.” Thomas, 820 F.3d at 1169 (quotation and brackets omitted).
As relevant here, Dr. Polukoff brings express-false-certification claims against Dr.
Sorensen. The amended complaint alleges Dr. Sorensen submitted express false
certifications when he signed and submitted CMS Form 1500, which states: “I certify
that the services shown on this form were medically indicated and necessary for the
health of the patient. . . .” App’x at 518.
The district court concluded that Dr. Polukoff’s express-false-certification claims
were not legally cognizable under the FCA. First, it held that “medical judgments and
‘conclusions about which reasonable minds may differ cannot be false’ for the purposes
of an FCA claim.” App’x at 2526 (quoting Morton, 139 F. App’x at 983). Second, the
district court determined that a physician’s certification that a PFO closure was
“reasonable and necessary” could not be false under the FCA—given that it would
constitute a medical judgment—absent “a regulation that clarifies the conditions under
which [the government] will or will not pay for a PFO closure.” Id. at 2528.
Morton is narrower than the district court suggests. First, Morton involved the
application of the FCA to ERISA, not Medicare. Second, we explicitly cabined Morton
to the facts in that case:
We agree that liability under the FCA must be predicated on an
objectively verifiable fact. Nonetheless, we are not prepared to
conclude that in all instances, merely because the verification of a
fact relies upon clinical medical judgments, or involves a decision of
coverage under an ERISA plan, the fact cannot form the basis of an
FCA claim. In this case, the nature of neither the scientific nor
contract determinations inherent in the formation and evaluation of
the allegedly “false” statement is susceptible to proof of truth or
139 F. App’x at 983. We did not create a bright-line rule that a medical judgment can
never serve as the basis for an FCA claim.
It is possible for a medical judgment to be “false or fraudulent” as proscribed by
the FCA for at least three reasons. First, we read the FCA broadly. See United States v.
Neifert-White Co., 390 U.S. 228, 232 (1968) (observing that the FCA “was intended to
reach all types of fraud, without qualification, that might result in financial loss to the
Government,” and “refus[ing] to accept a rigid, restrictive reading”). Second, “the fact
that an allegedly false statement constitutes the speaker’s opinion does not disqualify it
from forming the basis of FCA liability.” United States ex rel. Loughren v. Unum Grp.,
613 F.3d 300, 310 (1st Cir. 2010) (holding, in the Social Security benefits context, that
“an applicant’s opinion regarding the date on which he became unable to work” can give
rise to FCA liability); cf. Omnicare, Inc. v. Laborers Dist. Council Constr. Indus. Pension
Fund, 135 S. Ct. 1318, 1326 (2015) (suggesting, in the securities context, that a “falsestatement
provision . . . appl[ies] to expressions of opinion”). Third, “claims for
medically unnecessary treatment are actionable under the FCA.” United States ex rel.
Riley v. St. Luke’s Episcopal Hosp., 355 F.3d 370, 376 (5th Cir. 2004) (holding relator’s
complaint “sufficiently allege[d] that statements were known to be false, rather than just
erroneous, because she assert[ed] that Defendants ordered the services knowing they
were unnecessary”); cf. Frazier ex rel. United States v. Iasis Healthcare Corp., 392 F.
App’x 535, 537 (9th Cir. 2010) (affirming FCA claim was inadequately pled, but
suggesting an FCA claim could survive if the relator “provide[s] ‘reliable indicia’ that
[the defendant] submitted claims for medically unnecessary procedures”).
As the government states in its amicus brief, “A Medicare claim is false if it is not
reimbursable, and a Medicare claim is not reimbursable if the services provided were not
medically necessary.” Amicus Br. at 14. For a claim to be reimbursable, it must meet
the government’s definition of “reasonable and necessary,” as found in the Medicare
Program Integrity Manual. The manual instructs contractors to “consider a service to be
reasonable and necessary” if the procedure is:
Safe and effective;
Not experimental or investigational . . .; and
Appropriate, including the duration and frequency that is considered appropriate
for the item or service, in terms of whether it is:
o Furnished in accordance with accepted standards of medical practice for the
diagnosis or treatment of the patient’s condition or to improve the function
of a malformed body member;
o Furnished in a setting appropriate to the patient’s medical needs and
o Ordered and furnished by qualified personnel;
o One that meets, but does not exceed, the patient’s medical need; and
o At least as beneficial as an existing and available medically appropriate
CMS, Medicare Program Integrity Manual § 13.5.1; see also id. § 13.3 (incorporating
§ 13.5.1’s definition of reasonable and necessary for individual claim determinations).
We thus hold that a doctor’s certification to the government that a procedure is
“reasonable and necessary” is “false” under the FCA if the procedure was not reasonable
and necessary under the government’s definition of the phrase. We understand the
concerns that a broad definition of “false or fraudulent” might expose doctors to more
liability under the FCA, but the Supreme Court has already addressed those concerns:
“Instead of adopting a circumscribed view of what it means for a claim to be false or
fraudulent, concerns about fair notice and open-ended liability can be effectively
addressed through strict enforcement of the [FCA]’s materiality and scienter
requirements. Those requirements are rigorous.” Escobar, 136 S. Ct. at 2002 (quotation
marks and some brackets omitted).
In this case, Dr. Polukoff adequately alleges that Dr. Sorensen performed
unnecessary PFO closures on patients and then knowingly submitted false certifications
to the federal government that the procedures were necessary, all in an effort to obtain
federal reimbursement. Specifically, Dr. Polukoff alleges: (1) Dr. Sorensen performed
an unusually large number of PFO closures, App’x at 542 (“The Cleveland Clinic
reported that it had performed 37 PFO closures in 2010; during that same time period
[Dr.] Sorensen’s billing records indicate that he had performed 861.”); (2) these
procedures violated both industry guidelines and hospital guidelines, id. at 524–26, 535;
(3) other physicians objected to Dr. Sorensen’s practice, id. at 535; (4) Intermountain
eventually audited Dr. Sorensen’s practice, and concluded that its “guidelines had been
violated in many of the 47 cases reviewed,” id.; and (5) “Dr. Sorensen knew that
Medicare and Medicaid would not pay for PFO closures to treat migraines, so he chose to
represent that the procedures had been performed based upon indications set forth in the
AH[A]/ASA stroke guidelines—the existence of confirmed recurrent cryptogenic
stroke,” id. at 542. Under these specific factual allegations, Dr. Polukoff has pleaded
enough to state a claim as a matter of law and survive Rule 12(b)(6) dismissal against Dr.
We further hold the amended complaint adequately states express-falsecertification
claims against St. Mark’s and Intermountain, both of which allegedly “billed
for the hospital charges associated with” PFO closures. Id. at 542–43. More specifically,
the amended complaint alleges St. Mark’s and Intermountain both requested
reimbursements for these procedures by submitting annual Hospital Cost Reports. The
reports require hospitals to certify: “I further certify that I am familiar with the laws and
regulations regarding the provision of health care services, and that the services identified
in this cost report were provided in compliance with such laws and regulations.” Id. at
516. By submitting a Hospital Cost Report, then, St. Mark’s and Intermountain expressly
certified that every procedure for which they sought reimbursement complied with
Medicare’s requirements. Because the complaint adequately alleges that Dr. Sorensen’s
surgeries and any procedure associated therewith was not, in fact, “reasonable and
necessary,” the complaint adequately alleges that St. Mark’s and Intermountain submitted
false claims for reimbursement to the government through their Hospital Cost Reports.
Moreover, Dr. Polukoff adequately alleges St. Mark’s and Intermountain
submitted these false certifications “knowingly.” As to St. Mark’s, Dr. Polukoff alleges
that he personally told the CEO about the circumstances surrounding Dr. Sorensen’s
suspension from Intermountain for performing unnecessary PFO closures. Nonetheless,
according to Dr. Polukoff, St. Mark’s continued to recruit Dr. Sorensen’s business:
Contemporaneously with his suspension from Intermountain, St.
Mark’s executive management knew that [Dr.] Sorensen had been
suspended for performing medically unnecessary PFO closures. Dr.
Polukoff personally discussed the suspension with the CEO of St.
Mark’s Hospital, Steve Bateman, and his physician liaison, Nikki
Gledhill. Despite the fact that St. Mark’s knew that [Dr.] Sorensen
was performing medically unnecessary PFO closures, and knew that
[Dr.] Sorensen had been suspended from Intermountain for
performing medically unnecessary PFO closures, St. Mark’s
Hospital continued to court [Dr.] Sorensen’s septal closure business
and provide a platform and assistance to [Dr.] Sorensen.
Id. at 540–41.
As to Intermountain, Dr. Polukoff alleges that, “at all times relevant to this case,
Intermountain knew that septal closures were rarely indicated.” Id. at 535. This is
because, “[f]or years Intermountain ignored the loud objections from its own medical
staff and leadership, including the Director of the Catheterization Laboratory, Dr.
Revenaugh, and the Medical Director for Cardiovascular Services at Intermountain
Healthcare, Dr. Lappe, as well as written warnings and complaints from Professor
Andrew Michaels of the University of Utah.” Id. Because Dr. Sorensen performed an
excessively large number of profitable PFO closures for Intermountain, Dr. “Sorensen
was given his own catheterization lab room at Intermountain and provided with a
handpicked staff of Intermountain employees.” Id. at 610. “No other cardiologist
received this type of special treatment from Intermountain.” Id.
The FCA requires a defendant submit a false claim “knowingly,” which includes
the submission of claims by an entity who “acts in deliberate ignorance of the truth or
falsity of the information” or “acts in reckless disregard of the truth or falsity of the
information.” 31 U.S.C. § 3729(b)(1)(A). At a minimum, the amended complaint
adequately alleges that St. Mark’s and Intermountain acted with reckless disregard as to
whether the PFO closures Dr. Sorensen was performing were medically necessary.
B. Rule 9(b)
All Defendants also challenged the amended complaint under Rule 9(b), arguing
that Dr. Polukoff had failed to plead his claims with sufficient particularity. The district
court denied the motions as to Dr. Sorensen and St. Mark’s, but granted the motion as to
Intermountain. Dr. Polukoff appeals, arguing his amended complaint pleaded allegations
against Intermountain with sufficient particularity to survive a motion to dismiss under
Rule 9(b). We agree with Dr. Polukoff.
Rule 9(b) states: “In alleging fraud or mistake, a party must state with
particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge,
and other conditions of a person’s mind may be alleged generally.” Fed. R. Civ. P. 9(b).
“Concerning the failure to plead fraud with particularity under Rule 9(b), we . . . review a
dismissal de novo.” Lemmon, 614 F.3d at 1167.
The purpose of Rule 9(b) is “to afford defendant[s] fair notice of plaintiff’s claims
and the factual ground upon which [they] are based.” Id. at 1172 (quotations omitted).
“Thus, claims under the FCA need only show the specifics of a fraudulent scheme and
provide an adequate basis for a reasonable inference that false claims were submitted as
part of that scheme.” Id. Practically speaking, FCA claims comply with Rule 9(b) when
they “provid[e] factual allegations regarding the who, what, when, where and how of the
alleged claims.” Id. But, “in determining whether a plaintiff has satisfied Rule 9(b),
courts may consider whether any pleading deficiencies resulted from the plaintiff’s
inability to obtain information in the defendant’s exclusive control.” George v. Urban
Settlement Servs., 833 F.3d 1242, 1255 (10th Cir. 2016). This reflects the principle that
“Rule 9(b) does not require omniscience; rather the Rule requires that the circumstances
of the fraud be pled with enough specificity to put defendants on notice as to the nature of
the claim.” Williams v. Duke Energy Int’l, Inc., 681 F.3d 788, 803 (6th Cir. 2012)
The district court dismissed Dr. Polukoff’s allegations against Intermountain under
Rule 9(b) because “vital information regarding who knew what and when they knew it
[was] missing.” App’x at 2521–22. But, for many of the same reasons the amended
complaint survived Rule 12(b)(6) against all Defendants, it survives Rule 9(b) as well.
Rule 9(b) itself states: “Malice, intent, knowledge, and other conditions of a person’s
mind may be alleged generally.” Fed. R. Civ. P. 9(b) (emphases added). Moreover, we
excuse deficiencies that result from the plaintiff’s inability to obtain information within
the defendant’s exclusive control. See George, 833 F.3d at 1255. Intermountain,8 no
doubt, knows which employees handle federal billing for procedures reimbursable under
Medicare, and in particular, who reviewed reimbursement claims for Dr. Sorensen during
his decade there.9
8 This applies with equal force to St. Mark’s. But, because the district court
determined that Dr. Polukoff satisfied Rule 9(b)’s particularity requirements as to St.
Mark’s, we limit our discussion of Rule 9(b) to Intermountain.
9 In discussing the legal background of Rule 9(b), the district court stated:
“Because both [Intermountain] and St. Mark’s are corporations, this knowledge must be
held by a managing agent of either of these corporate entities.” App’x at 2521. The
district court then failed to cite any authority for its “managing agent” theory. To the
extent the district court relied upon the “managing agent” theory, we disagree. “It is well
established that a corporation is chargeable with the knowledge of its agents and
employees acting within the scope of their authority.” W. Diversified Servs., Inc. v.
Hyundai Motor Am., Inc., 427 F.3d 1269, 1276 (10th Cir. 2005); see also United States
Outcome: Because Dr. Polukoff’s amended complaint satisfies the pleading requirements of
Rules 12(b)(6) and 9(b), we REVERSE and REMAND this case for further proceedings.
ex rel. Jones v. Brigham & Women’s Hosp., 678 F.3d 72, 82 n.18 (1st Cir. 2012) (“We
have long held that corporate defendants may be subject to FCA liability when the
alleged misrepresentations are made while the employee is acting within the scope of his
or her employment.”). Thus, under Rule 9(b), it suffices that any employee, acting within
the scope of his or her employment, had knowledge.