Each week for the next four weeks, we will provide a summary of a notable recent decision under the False Claims Act. The first in this series is United States v. Kernan Hospital, 2012 WL 5879133 (D.Md., Nov. 20, 2012). Read the decision here: United States v. Kernan Hospital Memorandum Opinion.pdf
This case involves a motion to set aside a civil investigative demand ("CID") issued by the United States Attorney's Office for the District of Maryland, seeking documents from Kernan Hospital. The Government had already filed a False Claims Act suit against Kernan Hospital but the District Court dismissed it without prejudice pursuant to F.R.C.P. 9(b). After dismissal, the Government issued its CID. The District Court set aside the CID, holding that the False Claims Act expressly limits the Government's use of CID's to the period "before commencing a civil proceeding."
The Government alleged that Kernan devised a scheme to increase its Medicare, Medicaid, and Tri-Care reimbursement by systematically "upcoding" secondary diagnoses concerning malnutrition. Before filing its complaint against Kernan, the Government investigated the matter for three years. Specifically, pre-complaint proceedings included the issuance of an Office of Inspector General subpoena, the production by Kernan of 100 specifically identified medical records (15,686 pages of materials), the production by Kernan of the coding summary sheets corresponding to the 100 medical records, Kernan's production of an additional 3,000 pages of documents, the issuance of a September 7, 2011 CID seeking deposition testimony from Kernan's Director of Health Information Management, followed by her testimony two weeks later. The Government filed its FCA complaint in October 2011. The District Court dismissed the complaint under Rule 9(b) and, on August 23, 2012, the Government issued yet another CID on Kernan seeking many of the same documents that it had already sought and obtained.