Health Law Daily Wrap Up, FALSE CLAIMS ACT—5th Cir.: $29 million qui tam judgment remanded for new trial, (Apr 2, 2025)

By Justin Marcus Smith, J.D.

Vascular testing claims were the “paradigmatic case” for reimbursement for services not yet furnished, but the CPT-4 manual left ambiguity as to summary judgment about double-billing scienter.

In a False Claims Act (FCA) qui tam billing matter, CPT-4 Manual ambiguity about preparation of discrete vascular study interpretive reports meant the district court erred in granting summary judgment to the relators, held the United States Court of Appeals for the Fifth Circuit, in reversing summary judgment on “double billing” claim scienter. The district court did not err with respect to summary judgment on “testing only” claims that fit the paradigm of false claims, where billing occurred before services were rendered. The Fifth Circuit also affirmed the jury verdict with respect to materiality, where the instant matter only involved outright falsehoods on CMS-1500 forms, not misrepresentations by omission. There was no scienter requirement with respect to materiality. However, the district court erred in calculating damages about the testing only claims where it considered post-trial expert evidence without showing it to the jury. Given remand for new trial in full on the double billing claims and with respect to damages for the testing only claims, the Fifth Circuit declined to reach arguments about whether the district court’s imposition of penalties and trebled damages violated the Excessive Fines Clause of the United States Constitution. The Fifth Circuit also declined to consider whether the qui tam provisions of the False Claims Act violated Article II of the Constitution (U.S. ex rel. Montcrief v. Peripheral Vascular Associates, P.A., No. 24-50176 (5th Cir. Mar. 28, 2025)).

Background. FCA relators alleged that Peripheral Vascular Associates, P.A. (PVA) falsely billed Medicare for services it did not perform. After conducting a year-long investigation, the government intervened. PVA did not secure the services of a damages expert during discovery. The parties filed cross motions for summary judgment. The federal district court in San Antonio granted the relators’ motion with respect to falsity and scienter, but left issues of materiality and damages for the jury.

After a five-day trial, the jury concluded that PVA’s false statements were material, even though it eventually performed the services billed to Medicare and awarded nearly $3 million in damages. The relators then asked the district court to assess statutory penalties against PVA consistent with the jury’s verdict. PVA moved to set aside the jury verdict, but the district court upheld it on materiality and damages. The court rejected the provider’s argument that there was no harm at all because the government could be seriously harmed in ways difficult to quantify; however, the court agreed with the provider that damages would depend on interest. The district court also held the requested monetary sanction of more than $21 million was not grossly disproportionate to PVA’s conduct. The district court entered a total judgment of nearly $29 million against PVA that included more than $4 million in treble damages and more than $2 million in attorney fees, costs, and expenses (see Medical provider that billed “too early” fails to disrupt False Claims Act jury verdict, (Jan. 17, 2023)).

PVA appealed the district court’s pre-trial grant of partial summary judgment to the relators on falsity and knowledge of falsity. PVA also challenged district court rulings during and after trial with respect to materiality and damages. PVA contended the jury finding on materiality was not based on legally sufficient evidence and the jury should have been required to find PVA knew its allegedly false claims were material to the government. Last, PVA took issue with the district court’s reliance in calculating damages based on the relators’ post-trial expert declaration.

Summary judgment. Applying de novo review, the court concluded it was appropriate for the district court to grant summary judgment to the relators on the falsity element of the testing only claims, but it was error to grant summary judgment with respect to the double billing claims.

The Fifth Circuit deemed the testing claims a “paradigmatic case” for reimbursement for goods or services not yet furnished. The testing only claims involved patients that did not have final interpretive reports until after PVA billed Medicare. The only reasonable inference was that PVA physicians failed to complete the professional components of the corresponding vascular ultrasounds before billing Medicare using “global” CPT-4 codes that covered the technical and professional components. PVA physicians certified on each CMS-1500 claim form that they had personally furnished or overseen professional services performed. The claims were “factually false.”

The court did not agree with PVA arguments, for example, that the CPT-4 manual did not require a physician billing for a professional component of a vascular ultrasound to create a written report memorializing his or her interpretation of the ultrasound. The court said the CPT-4 language required some “analysis of all data” by written report of the evaluating professional. The court continued that the evidence tended to show that PVA was usually billing before physicians read and interpreted vascular studies, and PVA did not point to any evidence to the contrary. The Fifth Circuit therefore concluded the district court appropriately granted summary judgment to the relators on the falsity element of the testing only claims.

As for the double billing claims, i.e., claims for services provided to patients who received evaluation and management (E/M) visits and underwent vascular ultrasounds without written and finalized reports until after PVA billed Medicare, the court agreed with PVA that the district court “improperly mixed and matched” provisions from different sections of the CPT-4 Manual. The Fifth Circuit concluded the district court erred in concluding that separate reports were required for the vascular studies in addition to the physicians’ interpretations of them inasmuch as the CPT-4 Manual was “ambiguous” as to whether an interpretive section of the patient’s full record report could serve as a “separate distinctly identifiable signed written report.” PVA submitted expert opinion to the district court that the CPT-4 guidance did not state there should be a “stand-alone” interpretive report.

As to PVA’s knowledge of falsity, the district court did not err with respect to the testing only claims, but the relators’ evidence of PVA’s knowledge was not as strong with respect to the double billing claims. For example, a certain email showed PVA was aware that vascular studies could not be billed until actually interpreted, but that only pertained to the clear CPT-4 requirement that ultrasounds must be interpreted. That email did not show whether PVA was also aware that the software it was using to record its patients’ full records might not be storing a sufficiently “separate” and “distinctly identifiable” interpretive report to support global ultrasound bills per the ambiguous CPT-4 guidance. Accordingly, the district court erred in granting summary judgment to the relators on the scienter elements with respect to the double billing claims.

However, the Fifth Circuit declined to reverse and render judgment for PVA on the double billing claims because the relators submitted evidence to the district court suggesting that the CPT-4 Manual requires a standalone interpretive report. The Fifth Circuit held the scienter issue should go to the jury.

Jury verdict. The Fifth Circuit affirmed the jury verdict with respect to materiality. The jury made its decision based on extensive testimony by relator experts that Medicare would not have paid the relevant PVA claims if it had known that it was being billed for incomplete procedures.

Next, the court concluded the district court did not err in declining to extend the FCA scienter requirement to the materiality element in this case. PVA argued the jury should have been asked whether PVA submitted each claim to Medicare with knowledge that the falsity of the claim was material to the government. Essentially, PVA contended the FCA scienter requirement applied to both falsity and materiality. The Fifth Circuit identified this as a legal question for de novo review. The Fifth Circuit found that this case involved outright falsehoods on CMS-1500 forms, not misrepresentations by omission. The Fifth Circuit said PVA’s counsel did not explain why the court should treat the physician’s CMS-1500 certification as an omission. In any event, the Firth Circuit held FCA scienter did not extend to materiality in the instant matter.

Damages. Applying abuse of discretion review to the district court’s remittitur and recalculation of damages, the Fifth Circuit agreed with PVA that there must be a new trial to calculate damages with respect to the testing only claims. The maximum recovery rule applied to remittitur, but the district court expressly concluded, after trial, that there was not enough information to calculate damages. The district court then improperly decided to allow the relators to submit additional proof in the form of an expert declaration, and to rely on that proof, after trial, without ever showing that proof to the jury.

The Fifth Circuit acknowledged the district court thought it was deciding an issue of law, only, but that was not so to the extent it relied on the relator expert’s assurance to cure the lack of specific trial evidence supporting the expert’s calculations. The expert’s new calculations never went to the jury, and PVA submitted its own post-trial declaration challenging the relator’s damages calculations with PVA’s own calculations. The district court may have thought PVA’s post-trial declaration lacked credibility, but juries usually weigh credibility.

PVA also argued that any new trial on damages should also determine the true number of false claims resulting in damages, but the Fifth Circuit left this issue for the district court to resolve in the first instance.

The case is No. 24-50176.

Judge: Haynes, C.

Attorneys: Misty Annette Hataway-Cone (Cone, P.L.L.C.) for Tiffany Montcrief. Joshua S. Smith (Beck Redden, L.L.P.) for Peripheral Vascular Associates, P.A.

Companies: Peripheral Vascular Associates, P.A.

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