Fourth Circuit Upholds Dismissal of False Claims Act Lawsuit Alleging Nursing Home Medicaid Fraud: United States ex. rel. Black v. Health & Hospital Corp. of Marion County

The Fourth Circuit Court of Appeals affirmed the dismissal of a qui tam lawsuit brought under the False Claims Act (FCA) against a nursing home for alleged Medicaid fraud. The relator in United States ex. rel. Black v. Health & Hospital Corp. of Marion County alleged that an Indiana nursing home fraudulently submitted bills to the Medicaid system for services it had not rendered. The United States declined to intervene in the lawsuit. The relator alleged that bills submitted for federal matching funds from the Medicaid system exceeded amounts spent on actual care to Medicaid patients, and argued that this constituted fraud. The trial court dismissed the suit for lack of subject matter jurisdiction. The case demonstrates the complex nature of the Medicare and Medicaid systems and the difficulty of understanding, let alone enforcing, laws prohibiting fraud.

The relator, Paul R. Black, resides in Indiana. After unsuccessfully filing a qui tam suit in an Indiana federal court, he filed the present case in the U.S. District Court for the District of Maryland against Health & Hospital Corporation of Marion County (HHC), an Indiana nursing home. The district court described the three state-level Medicaid funding mechanisms at issue in Black’s suit:
– The Upper Payment Limit (UPL) system sets an upper limit for the amount a state may reimburse medical providers equal to the amount it could receive from Medicare.
– Intergovernmental transfers (IGTs) allow states to transfer money from local government entities to the state government in order to fund the state’s portion of Medicaid expenses.

– Certified public expenditures (CPEs) are expenditures made by Medicaid providers that qualify for matching funds directly from the federal Medicaid system. They must receive certification from the federal Centers for Medicare and Medicaid Services (CMS).

Black’s lawsuit, as well as the Indiana suit filed before it, alleged that HHC was over-reporting expenditures to the Medicaid system using fraudulent IGTs or CPEs, thereby making an unlawful “profit” on Medicaid-funded services. Black asserted four causes of action for violations of the FCA, including factually false claims to CMS, legally false claims to CMS, submission of false records and statements, and conspiracy to defraud the United States. HHC moved to dismiss the suit, and the trial court agreed.

In dismissing the suit for lack of subject matter jurisdiction, the trial court found that the relator failed to prove that he had obtained the information forming the basis of his case independently of disclosures made to the public. An exception in the FCA, the “Public Disclosure Bar,” bars qui tam suits based on information available to the general public, as opposed to information discovered independently by the relator. The purpose of this exception is to discourage relators from taking advantage of previously-disclosed information to bring suit.

CMS had publicly raised concerns about the potential for fraud through these Medicaid funding mechanisms at various times since 2001, and had proposed a rule to modify UPLs and IGTs in 2007. The trial court concluded, in large part based on the timing of his lawsuits, that Black was not the “original source” of the alleged facts supporting his lawsuit, but rather that he had most likely gathered them from public disclosures of fraud concerns. The Fourth Circuit agreed with this conclusion, and found that Black had failed to produce evidence to establish “original source” status.

At Lebowitz & Mzhen, our nursing home lawyers help residents and their families in Maryland obtain compensation for injuries caused by abuse or neglect. To schedule a free and confidential consultation, contact us today online or at (800) 654-1949.

More Blog Posts:

Nursing Home Administrator Receives 20-Year Prison Sentence for Health Care Fraud, Maryland Nursing Home Lawyer Blog, August 22, 2012
Contractor Kickbacks Result in Prison Sentence for Former Nursing Home Executive, Maryland Nursing Home Lawyer Blog, July 27, 2012
Maryland Podiatrist Sentenced to Four Years in Prison for Scheme Involving Nursing Home Patients, Maryland Nursing Home Lawyer Blog,

Contact Information