Seventh Circuit Says “Medical Necessity” FCA Claims Require Specifics


Last week, the Seventh Circuit Court of Appeals handed down its decision in  US ex rel. Presser v. Acacia Mental Health Clinic, LLC. [1] The FCA case was brought by a nurse practitioner whistleblower who alleged that services being provided were not medically necessary. The court affirmed dismissal under Rule 9(b) for failure to plead fraud with particularity, stating that it took more than the mere statement that services were not medically necessary to adequately plead a False Claims Act (“FCA”) case.

The whistleblower, who worked as an independent contractor nurse practitioner, alleged different fraudulent schemes. First, she alleged that, while she was directed not to perform a full psychological assessment and did not perform one, the clinic billed using the code for one. Second, she alleged that several different services provided to patients were not medically necessary, including multiple assessments for the same patients, repeated urine tests and complete reassessments for patients not seen for 30 days.

The court found that the first allegation was pleaded with sufficient particularity to meet Rule 9(b)’s standard. It identified a code used that did not describe the services provided, and the general pleading that the vast majority of patients were Medicaid recipients, along with the allegation that every single patient was improperly billed using that code, was sufficient to state a claim for a whistleblower without access to billing records.

The allegations related to medical necessity suffered a different fate. The whistleblower identified the different schemes, and she specifically related them to 42 U.S.C. § 1395y(a)(1)(A), which states that the Medicare program will not provide reimbursement for services that “are not reasonable and necessary for the diagnosis or treatment of illness or injury.” However, she did not state a basis for her conclusion that the services were not medically necessary. As the court stated, she “provides no medical, technical, or scientific context which would enable a reader of the complaint to understand why Acacia’s alleged actions amount to unnecessary care forbidden by the statute.” [2] She also failed “to demonstrate how Acacia’s policies compare to other clinics or could otherwise be understood as ‘unusual.'”[3]

 The court, considering the whistleblower’s statement that the services were not medically necessary, concluded:

“Many potential relators could claim that ‘in my experience, this is not the way things are done.’ However, relators may not be in a position to see the entire picture or may simply have a subjective disagreement with the other party on the most prudent course of action. Further, their perspective may be colored by considerable bias or self‐interest, such as in the case of a disgruntled employee. The heightened possibility of mistake or bias supports the need for a higher standard of specificity for fraud compared to other civil litigation.”[4]

The hesitation of the court to accept, even at the early pleading stages, a whistleblower’s allegations related to medical necessity are a small but welcome shift away from presuming that anything written by a whistleblower should be taken at face value at the pleading stages of a suit and puts whistleblowers on notice that FCA cases require particularity supporting the underlying theories of their cases.

Practical Takeaway

The FCA is the government’s primary tool in policing health care fraud. Whistleblowers are an integral part of the process. The Seventh Circuit, in requiring more particularity in “medical necessity” cases, is holding whistleblowers to a minimum standard to make public accusations of fraud before allowing them to use discovery to search for a lawsuit.

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