Sixth Circuit: Violations of Conditions of Participation Insufficient Basis for FCA Claims


By David B. Honig and Andrew B. Howk

In U.S. v. MedQuest, the Sixth Circuit held that violations by a provider of conditions of participation in Medicare were insufficient as a matter of law to “trigger the hefty fines and penalties created by the FCA.” This case was a reaffirmation by the Sixth Circuit that “[t]he False Claims Act is not a vehicle to police technical compliance with complex federal regulations.”

MedQuest was accused of violating enrollment requirements for facilities providing contrast imaging to patients and purchasing a physician’s practice and continuing to use the former owner’s Medicare billing number to submit claims. The District Court of the Middle District of Tennessee granted summary judgment for the Government. The Sixth Circuit reversed on appeal, finding that the violations by MedQuest were violations of conditions of participation rather than conditions of payment.

1. Express and Implied Certification Allegations

First, the Government alleged that MedQuest’s failure to satisfy Medicare and a local Medicare carrier’s requirements regarding the level of physician supervision for contrast imaging resulted in false claims. For contrast MRI or CT scans, Medicare requires direct supervision by a supervising physician of an independent diagnostic testing facility (“IDTF”). Additionally, the local Medicare carrier required that the supervising physician must be a radiologist. MedQuest did not contest its failure to satisfy these conditions. The District Court found that MedQuest expressly certified that these requirements would be met when it filled out its IDTF application, and that by certifying CPT submissions to Medicare, MedQuest presented claims for payment that it knew to be false.

The Sixth Circuit rejected the Government’s express certification allegations. The Court noted “the falsity of a claim is determined at the time of submission.” The only express certification at the time of submission of any CPT codes was on the CMS-1500 claim form itself: that the billed for services were “medically indicated and necessary for the health of the patient.” Neither party contested the medical necessity of the claims. Therefore, the Government’s express certification theory was unsupported by the evidence.

Next, the Court rejected the Government’s implied certification allegations. Here, the Government alleged that each submission implicitly certified compliance with all regulations, including the regulations regarding the qualifications of supervising physicians. A highly skeptical Court noted that to conclude such requirements were conditions of payment rather than conditions of participation was “only possible by weaving together isolated phrases from several sections in the complex scheme of Medicare regulations.” The Court rejected what it termed this “cut-and-paste” approach, finding it unreasonable to require providers to attempt compliance with such an interpretation. Interpreting the regulations, the Court held that the supervision requirements relied upon by the Government were “characteristics and requirements” for IDTFs and therefore conditions of participation rather than conditions of payment. The only condition of payment created by these regulations was that the payee be an IDTF, and it was undisputed that MedQuest was an IDTF.

2. Purchased Practice’s Use of Former Owner’s Billing Number

In rejecting the District Court’s grant summary judgment regarding the Medicare billing number for the facility, the Court noted that the lower court again relied on conditions of participation, not conditions of payment. MedQuest bought a physician’s private practice and continued to operate the facility using the former physician’s billing number. The Government argued that the facility’s former enrollment and approval in Medicare was as a physician’s practice and not an IDTF. Because Medquest was using the billing number for a physician’s practice, the Government argued it was violating its conditions of payment. The Court found the Government had failed to provide any “statutes, regulations, or interpretive rules” that provided a basis for such argument. Absent a relevant regulatory provision providing a condition of payment, there could be no FCA violation. While such noncompliance with conditions for participation was insufficient for claims under the FCA, the Court did note that the Government could legally enforce such conditions through administrative actions such as suspension or even disqualification from the Medicare program.

Conditions of payment alone provide a sufficient legal basis for FCA claims. Violations of conditions of participation do not, as they do not “natural[ly] tend[] to influence CMS’s decision to pay on the claims.” The Sixth Circuit characterized the Government’s allegations as an attempt to “impose liability for providers’ failure to anticipate needs of the program that have not been promulgated in regulations conditioning payment on compliance.” Rejecting this attempt, the Court refused to add to the “providers’ obligations to navigate the already-complicated scheme of regulations.”

Should you have any questions, please contact David B. Honig at or 317-977-1447.