Ninth Circuit Says First-to-File Rule Bars Whistleblower Action Against Kaiser Alleging Upcoding Scheme
- January 12, 2024
Several earlier-filed complaints bar a whistleblower action against Kaiser Foundation Health Plan, Inc. alleging it engaged in an upcoding scheme to unlawfully obtain additional Medicare Advantage payments, the Ninth Circuit held January 10 in an unpublished decision.
The Ninth Circuit affirmed a lower court decision that dismissed the action under the False Claims Act’s first-to-file rule. The appeals court also agreed that the lower court properly denied relators’ Marcia Stein and Rodolfo Bone leave to amend because there was no indication they could cure their first-to-file deficiency.
The action was one of six whistleblower actions against Kaiser entities that the Department of Justice joined in October 2021. The actions, which were later consolidated, alleged Kaiser defrauded Medicare Advantage by submitting inaccurate diagnosis codes to make patients appear sicker than they actually were to increase reimbursement.
The district court held that relators’ complaint was barred under the “material facts” test “because their complaint alleged lesser-included conduct that fell within the broad schemes” alleged in the earlier-filed actions.
The Ninth Circuit agreed that relators’ allegations overlapped with the fraud alleged in the earlier-filed actions. While relators focused specifically on certain allegedly false diagnoses (sepsis and malnutrition), their complaint implicated the same kind of conduct as the earlier-filed actions—i.e., that upcoding was improper because it was based on exploiting “high-value conditions,” the appeals court observed.
Additional allegations about the setting or scope of the alleged misconduct also were encompassed by the earlier complaints, the appeals court said.
Stein v. Kaiser Found. Health Plan, Inc., No. 22-15862 (9th Cir. Jan. 10, 2024).