                       UNITED STATES DISTRICT COURT
                       FOR THE DISTRICT OF COLUMBIA
____________________________________
                                     )
UNITED STATES OF AMERICA ex rel. )
CHRIS RIEDEL,                        )
                                     )
            Plaintiff,               )
                                    )
      v.                             )       Civil Action No. 12-1423 (RBW)
                                     )
BOSTON HEART DIAGNOSTICS             )
CORPORATION,                         )
                                     )
            Defendant.               )
____________________________________)

                                      MEMORANDUM OPINION

        The plaintiff/relator, Chris Riedel, brings this qui tam action on behalf of the United

States against the defendant, Boston Heart Diagnostics Corporation (“Boston Heart”), under the

False Claims Act, 31 U.S.C. § 3729 (2012). See Relator’s Second Amended Complaint for

Money Damages and Civil Penalties for Violations of the False Claims Act (“2d Am. Compl.”)

¶¶ 1, 108–21. Currently before the Court is Boston Heart Diagnostics Corporation’s Motion to

Dismiss Relator’s Second Amended Complaint (“Def.’s Mot.”), which seeks dismissal of the

relator’s claims pursuant to Federal Rules of Civil Procedure 9(b) and 12(b)(6). See Def.’s Mot.

at 1. Upon careful consideration of the parties’ submissions, 1 the Court concludes that it must

grant in part and deny in part Boston Heart’s motion to dismiss.




1
  In addition to the filings already identified, the Court considered the following submissions in rendering its
decision: (1) the Memorandum in Support of Boston Heart Diagnostics Corporation’s Motion to Dismiss Relator’s
Second Amended Complaint (“Def.’s Mem.”); (2) the Relator’s Opposition to Defendant’s Motion to Dismiss
Relator’s Second Amended Complaint (“Relator’s Opp’n”); and (3) Boston Heart Diagnostics Corporation’s Reply
in Support of its Motion to Dismiss Relator’s Second Amended Complaint (“Def.’s Reply”).
                                             I.    BACKGROUND

A.      Applicable Statutes

        A brief overview of the Medicare program and the statutes at issue in this case will help

elucidate the relator’s allegations in his Second Amended Complaint.

        1.       The Medicare Program

        Medicare is a federal health insurance program for the elderly and people with

disabilities. See 42 U.S.C. § 1395c (2012). Medicare Part B, which provides outpatient

coverage for, among other things, diagnostic laboratory tests, see 42 C.F.R. § 410.32 (2017),

only covers medical services that are “reasonable and necessary for the diagnosis or treatment of

illness or injury or to improve the functioning of a malformed body member,” 42 U.S.C.

§ 1395y(a)(1)(A). “[Laboratory t]ests that are performed in the absence of signs, symptoms,

complaints, personal history of disease, or injury are not covered except when there is a statutory

provision that explicitly covers tests for screening as described.” Medicare Claims Processing

Manual: Chapter 16—Laboratory Services (“Processing Manual”) § 120.1 (2018). 2 “[E]ven

though the Medicare statute requires the laboratory to certify the medical necessity of any test for

which it makes a claim for payment, the laboratory is not required to make an independent

determination of medical necessity, but rather may rely on the ordering physician’s

determination.” United States ex rel. Groat v. Boston Heart Diagnostics Corp., 296 F. Supp. 3d

155, 163 (D.D.C. 2017) (Walton, J.) (Groat II).

        “The Secretary of the Department of Health and Human Services administers the

Medicare program through the Centers for Medicare and Medicaid Services, which contracts



2
 The Court takes judicial notice of the Processing Manual because “judicial notice may be taken of public records
and government documents available from reliable sources.” Johnson v. Comm’n on Presidential Debates, 202 F.
Supp. 3d 159, 167 (D.D.C. 2016).

                                                         2
with Medicare Administrative Contractors [(‘MACs’)] to manage enrollment of health care

providers and to process payments.” Popkin v. Burwell, 172 F. Supp. 3d 161, 164 (D.D.C.

2016). This includes ensuring that claims for payment are “clean claims,” meaning “claim[s]

that ha[ve] no defect or impropriety.” 42 U.S.C. § 1395h(c)(2)(A)–(B).

       “When submitting claims for payment . . . , healthcare service providers . . . use standard

billing forms[,] . . . [which] use numeric codes to describe the medical services for which the

provider seeks payment.” Ass’n of N.J. Chiropractors v. Aetna, Inc., No. 09-3761 (JAP), 2012

WL 1638166, at *1 (D.N.J. May 8, 2012). “Federal regulations, specifically 45 C.F.R.

§ 162.1002(a)(5), (b)(1), designate the American Medical Association’s Current Procedural

Terminology (‘CPT’) and the Centers for Medicare & Medicaid Services Common Procedure

Coding System (‘HCPCS’) as the standard codes to be used for physician services and other

health care services.” Id. “HCPCS codes can define a single test or a panel (a group of tests that

are commonly performed together).” Dep’t of Health & Human Servs. Office of Inspector Gen.,

Questionable Billing for Medicare Part B Clinical Laboratory Services at 2 (2014). One

“common Medicare fraud scheme[] involving clinical lab services . . . [is] unbundling tab tests.”

Id. “Unbundling is the practice of inappropriately reporting each component of a service or

procedure instead of reporting the single comprehensive code.” Id. at 2 n.12.

       An entity seeking reimbursement for services provided to Medicare patients must submit

a CMS-1500 form to the MAC. See United States ex rel. Hobbs v. MedQuest Assocs., Inc., 711

F.3d 707, 711 (6th Cir. 2013) (“The[ CMS-1500] form[] reflect[s] the treatment or services

provided and identif[ies] the [entity that] provided them.”). The CMS-1500 form requires the

entity to certify that, among other things, “the services on this form were medically necessary.”

Health Insurance Claim Form (“CMS-1500”) at 2, available at https://www.cms.gov/Medicare/



                                                 3
CMS-Forms/CMS-Forms/Downloads/CMS1500.pdf (last visited Sept. 12, 2018).

       2.      The Anti-Kickback Statute

       The Anti-Kickback Statute prohibits payments in exchange for referrals to federal

healthcare programs, specifically prohibiting:

       knowingly and willfully offer[ing] or pay[ing] any remuneration (including any
       kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in
       kind to any person to induce such person . . . to refer an individual to a person for
       the furnishing or arranging for the furnishing of any item or service for which
       payment may be made in whole or in part under a Federal health care program.

42 U.S.C. § 1320a-7b(b)(2)(A).

       Unfortunately, the occurrence of kickbacks is reportedly common in the context of

laboratory tests billed to Medicare. In 1994, the U.S. Department of Health and Human

Services, Office of Inspector General (“OIG”), issued a Special Fraud Alert that addressed

laboratory practices that violated the Anti-Kickback Statute, including, but not limited to,

“routine waiver of Medicare Part B co-payments and deductibles.” Publication of OIG Special

Fraud Alerts, 59 Fed. Reg. 65,372, 65,373 (Dec. 19, 1994) (“1994 OIG Special Fraud Alert”).

And the OIG has made clear that “disguising remuneration for Federal referrals through offers or

payments of inflated amounts for non-Federal business or simply by offering or paying

remuneration for non-Federal referrals to ‘pull through’ the Federal business” “may violate the

[A]nti-[K]ickback [S]tatute.” Dep’t of Health & Human Servs. Office of Inspector Gen.,

Advisory Opinion No. 00-8: Spectrum Housing, d/b/a Housing Referrals of Maine at 5 (2000).

       Consequently, in 2005, the OIG issued an Advisory Opinion stating:

       Where a laboratory pays a referring physician to perform blood draws, particularly
       where the amount paid is more than the laboratory receives in Medicare
       reimbursement, an inference arises that the compensation is paid as an inducement
       to the physician to refer patients to the laboratory . . . .




                                                 4
Dep’t of Health & Human Servs. Office of Inspector Gen., Advisory Opinion No. 05-08 at 4

(2005) (“2005 OIG Advisory Opinion”). Thereafter, in 2014, the OIG issued a Special Fraud

Alert regarding other laboratory payments to referring physicians, stating that it “ha[d] become

aware of arrangements under which clinical laboratories are providing remuneration to

physicians to collect, process, and package patients’ specimens.” Dep’t of Health & Human

Servs. Office of Inspector Gen., Special Fraud Alert: Laboratory Payments to Referring

Physicians at 3 (2014) (“2014 OIG Special Fraud Alert”). The OIG noted that some of these

arrangements may implicate the Anti-Kickback Statute, particularly if, inter alia, “[p]ayment

exceeds fair market value for services actually rendered by the party receiving the payment,” id.

at 4, or the “[p]ayment is for services for which payment is also made by a third party, such as

Medicare,” id. at 5.

       3.      The Stark Law

       The Stark Law prohibits physicians from referring patients to anyone with whom he or

she has a financial relationship. Specifically, “if a physician (or an immediate family member of

such physician) has a financial relationship with an entity . . . [,] the physician may not make a

referral to the entity for the furnishing of designated health services.” 42 U.S.C.

§ 1395nn(a)(1)(A). A financial relationship is defined as “an ownership or investment interest in

the entity, or . . .a compensation arrangement . . . between the physician (or an immediate family

member of such physician) and the entity.” Id. § 1395nn(a)(2)(A)–(B).

       4.      The False Claims Act

       “The False Claims Act imposes civil liability on any person who knowingly submits false

claims to the government.” United States ex rel. Dig. Healthcare, Inc. v. Affiliated Comput.

Servs., Inc., 778 F. Supp. 2d 37, 44–45 (D.D.C. 2011) (Walton, J.) (citing 31 U.S.C. §§ 3729–



                                                 5
3733). Its purpose is “to reach all types of fraud, without qualification, that might result in

financial loss to the Government,” and “reaches beyond ‘claims’ which might be legally

enforced, to all fraudulent attempts to cause the Government to pay out sums of money.” United

States v. Neifert-White Co., 390 U.S. 228, 232–33 (1968) (noting that “the Court has

consistently refused to accept a rigid, restrictive reading [of the Act]”). “[V]iolations of [the

Anti-Kickback] and Stark [statutes] can be pursued under the False Claims Act, since they would

influence the government’s decision of whether to reimburse Medicare Claims.” United States

ex rel. Pogue v. Diabetes Treatment Ctrs. of Am., Inc., 565 F. Supp. 2d 153, 159 (D.D.C. 2008)

(Pogue II).

       Three provisions of the False Claims Act are at issue in this case. Section 3729(a)(1)(A)

creates liability for “any person who . . . knowingly presents, or causes to be presented, a false or

fraudulent claim for payment or approval.” 31 U.S.C. § 3729(a)(1)(A). Section 3729(a)(1)(B)

creates liability for “any person who . . . knowingly makes, uses, or causes to be made or used, a

false record or statement material to a false or fraudulent claim.” Id. § 3729(a)(1)(B). And

§ 3729(a)(1)(G), known as the “reverse false claims” provision, creates liability for “any person

who . . . knowingly makes, uses, or causes to be made or used, a false record or statement

material to an obligation to pay or transmit money or property to the Government, or knowingly

conceals or knowingly and improperly avoids or decreases an obligation to . . . the Government.”

Id. § 3729(a)(1)(G).

B.     Factual Background and Procedural History

       The relator is a retired individual who previously “had a long career in the commercial

reference laboratory business,” 2d Am. Compl. ¶ 20, and was a member of the Board of

Directors of Boston Heart “from 2007 until majority control of the Company was acquired by



                                                  6
Bain Capital Venture Fund in late 2010,” id. ¶ 101. “Boston Heart is a medical laboratory that

specializes in advanced lipid testing.” Id. ¶ 22.

       The relator filed his original Complaint under seal on August 28, 2012. See Relator’s

Complaint for Money Damages and Civil Penalties for Violations of the False Claims Act, 31

U.S.C. § 3730(b)(2) (Aug. 28, 2012), ECF No. 1. On August 19, 2016, the United States

declined to intervene in this case, see Notice of Election to Decline Intervention (Aug. 19, 2016),

ECF No. 24, and the Court therefore unsealed the case, see Order at 1 (Aug. 24, 2016), ECF No.

25. On February 18, 2016, the relator filed his First Amended Complaint. See Amended

Complaint for Money Damages and Civil Penalties for Violations of the False Claims Act (Feb.

18, 2016), ECF No. 19. On September 20, 2017, the Court denied Boston Heart’s motion to

dismiss the relator’s First Amended Complaint without prejudice and granted the relator’s

request for leave to file a Second Amended Complaint, see Order at 7 (Sept. 20, 2017), ECF No.

39, which he did on October 4, 2017, see 2d Am. Compl. at 1.

       The Second Amended Complaint contains three causes of action: (1) a violation of the

“false presentment” provision of the False Claims Act, see 2d Am. Compl. ¶¶ 108–12; see also

31 U.S.C. § 3729(a)(1)(A); (2) a violation of the “false statements” provision of the False Claims

Act, see 2d Am. Compl. ¶¶ 113–17; see also 31 U.S.C. § 3729(a)(1)(B); and (3) a violation of

the “reverse false claims” provision of the False Claims Act, see 2d Am. Compl. ¶¶ 118–21; see

also 31 U.S.C. § 3729(a)(1)(G).

       The relator asserts five theories of liability against Boston Heart that form the basis of his

three causes of action: four alleged kickback schemes and one other purported violation of

Medicare requirements. See id. ¶ 1 (“[Boston Heart] provides at least four forms of illegal

kickbacks to doctors and clinics in order to induce those doctors and clinics to refer Medicare



                                                    7
business to them, and bills Medicare for redundant and unnecessary testing.”). The four alleged

illegal kickback schemes are: (1) “waiving co-payments or patient deductible payments from

doctors’ privately-insured patients,” for physicians who “send all of their lipid-related business,

including Medicare business,” to Boston Heart, id. ¶ 2; (2) paying physicians inflated packaging

fees, in excess of the actual cost of packaging and shipping specimens to Boston Heart, to induce

physicians to refer their Medicare business to Boston Heart, see id. ¶ 4; (3) performing and

billing the government for laboratory tests ordered by physicians who are Boston Heart

shareholders in violation of the Stark Law, see id. ¶ 6; and (4) paying “outrageous consulting

fees to referring physicians,” id. ¶ 7. According to the relator:

       Each of these practices constitute[s] an illegal kickback scheme, no more legal than
       if [Boston Heart] handed doctors envelopes of cash in exchange for Medicare
       referrals. [Boston Heart] violated the False Claims Act by charging Medicare and
       other federally funded healthcare programs for lab tests that were referred to [ ]
       Boston Heart by providers because of kickbacks offered to those providers by
       [Boston Heart].

Id. ¶ 8. Boston Heart’s other purported Medicare violation is performing and billing the

government for medically unnecessary tests ordered through its own test panels. See id. ¶¶ 11–

13. Each alleged theory of liability asserted in the Second Amended Complaint is now described

in further detail below.

       1.      Waiving Co-Payments and Deductibles Theory of Liability

       The relator alleges that from 2011 through 2016, id. ¶¶ 1, 98–99, 103, Boston Heart

waived patients’ co-payments and deductibles, in violation of the Anti-Kickback Statute, “as an

incentive for physicians to refer business to Boston Heart,” id. ¶ 39. According to the relator,

private health insurance companies typically “require that a patient ordering a laboratory test

make a co-payment of approximately 20% of allowable charges to the laboratory.” Id. ¶ 40.

And, “[p]rivate insurance companies also require their patients to make a deductible payment to

                                                  8
the laboratory until the patient has met his [or] her deductible amount for the year.” Id. The

relator alleges that “Boston Heart’s most common panel of tests is the Complete One panel,

which costs $614.29.” Id. ¶ 42. Therefore, a 20% co-payment for the Complete One panel

“would be approximately $122,” if it were charged. Id. The relator alleges that Boston Heart’s

waiver of co-payments and deductibles were thus a “great benefit to the doctors, who [we]re able

to attract and retain the business of patients by promising no co-payments or patient deductible

amounts,” and that “[k]nowing this, [Boston Heart] promise[d] physicians that it w[ould] waive

the co[-]payment[s], as long as the physicians send all of their lipid-related business—including

Medicare business—to [Boston Heart].” Id. ¶ 42; see also id. ¶¶ 43–44 (alleging the same

waiver scheme and benefits for patients’ deductibles). The relator further alleges that this

scheme encouraged medically unnecessary tests because, “[b]y waiving patient deductible[s] and

co-payments, the physician [wa]s no longer subject to any restraint on whether tests [we]re

medically necessary because they [we]re free for patients,” and “by removing the patient’s

financial stake in the transaction, [Boston Heart] ha[d] neutralized one of the market’s inherent

checks on frivolous treatment—individual monetary responsibility for the cost of care.” Id. ¶ 46.

According to the relator, Boston Heart “more than ma[d]e[] up” the amount of money it lost on

the waived co-payments and deductibles “with the profits it earn[ed] on the Medicare referrals.”

Id. ¶ 45.

        To support this allegation, the relator submitted with his Second Amended Complaint a

copy of an Explanation of Benefits (“EOB”) for a patient who received Boston Heart tests. See

id., Exhibit (“Ex.”) 3 (EOB (Jan. 25, 2017)). According to the relator, the EOB shows that

$4,000 in costs were not covered by the patient’s insurance, but that “the patient was never

charged for the tests.” Id. ¶ 43; see also id. ¶ 81 (“For the 2017 EOB . . . , the insurer declined all



                                                  9
charges, which amounted to over $4,000, but the patient never received an invoice for any

amount.”).

        The relator alleges that Boston Heart continued its waiver practice until 2016, even

though in 2014, the Department of Justice pursued enforcement actions against three different

laboratories based on their “alleged failure to invoice patients for deductibles and co-payments.”

Id. ¶ 47 (alleging that the Department of Justice intervened in one false claims act action against

one laboratory and settled with two others). According to the relator, in 2016, Boston Heart,

“knowing the co-pay[ment] waivers violated the False Claims Act,” id. ¶ 48, “tweaked its fraud,”

and instead of waiving co-payments and deductibles entirely, instead began “to charge patients a

‘special fee’ named a ‘Know It Now [Fee],’” id. ¶ 3; see also id. ¶ 48 (alleging that Boston Heart

replaced its co-payment and deductible waiver scheme “with a new form of inducement for

patient invoices”); id., Ex. 2 (Know It Now Fee Schedule).

        The relator alleges that the Know It Now Fee “[wa]s the amount . . . charged to patients

in lieu of a standard calculation of their co-pay[ment] or deductible,” and that this Fee “[wa]s a

fraction of the co-payment requirement (usually in excess of $100) based on Boston Heart’s

charges to insurance companies.” Id. ¶ 3 (alleging that the Fee is $2 or less for 75% of Boston

Heart’s tests, and is $7 or less for 95% of its tests); id. ¶ 49 (similar). According to the relator,

the Know It Now Fee was “billed to patients as the total amount owed if [the patients] ha[d] not

yet met their deductible for the year,” and “where Boston Heart collect[ed] from an insurer for

the services, and the only patient responsibility [wa]s for a co-payment, Boston Heart bill[ed] the

‘Know [I]t Now’ [Fee] to the patients, rather than the 20% co-payment.” Id. ¶ 49. The relator

alleges that “Boston Heart agree[d] with physicians up front that it w[ould] send ‘two invoices’

to the patients, but states that they ‘d[id] not send patients to collections,’” id. ¶ 50, and therefore,



                                                   10
the Know It Now Fee was “effectively [a] waiver[] of patients’ co-payments and deductibles,”

id. ¶ 51. Moreover, the relator alleges that “within months of Boston Heart beginning to invoice

patients for deductibles and co-payments, even through use of its below cost, ‘Know [I]t Now’

[F]ees, Boston Heart lost 40% of its revenue.” Id. ¶ 70. The relator also names over fifty

individual physicians or medical practices who participated in the alleged waiver scheme until

2016. See id. ¶¶ 98–99.

        2.       Packaging Fees Theory of Liability

        The relator alleges that Boston Heart, from 2011 through 2016, see id. ¶¶ 1, 69, 103,

induced physicians to refer their Medicare business to Boston Heart by paying them packaging

fees that are greater than the actual cost of packaging and shipping specimens to Boston Heart

for testing, see id. ¶¶ 4, 53. The relator supports his allegation that these fees were inflated by

comparing the standard Medicare draw fee of $3 with the amount Boston Heart allegedly paid to

cover the physicians’ costs associated with both drawing and shipping the specimens to Boston

Heart. See id. ¶¶ 55, 57–58, 62. “Medicare allows the person who collects a specimen to bill

Medicare for a nominal specimen collection fee in certain circumstances, including times when

the person draws a blood sample,” 2014 OIG Special Fraud Alert at 3, and the standard amount

that the Centers for Medicare & Medicaid Services (“CMS”) allows physicians or laboratories to

charge in draw fees is $3, id. at 3 n.10; accord 2d Am. Compl. ¶ 55. CMS also reimburses

“packaging fees,” which are the costs of “processing and packaging specimens for transport to a

clinical laboratory through a bundled payment.” 2014 OIG Special Fraud Alert at 4. 3

        According to the relator, Boston Heart paid physicians between $15 and $25 to cover

their costs associated with drawing specimens and packaging them for shipping to the laboratory.


3
 The Special Fraud Alert does not provide the standard amount CMS reimburses for packaging fees. See generally
2014 OIG Special Fraud Alert.

                                                      11
2d Am. Compl. ¶¶ 62, 64. The relator alleges that this payment constituted a kickback, and

relies on the 2005 OIG Advisory Opinion prohibiting excessive draw fees in support of this

assertion. See id. ¶¶ 54–55 (citing 2005 Advisory Opinion). In that Advisory Opinion, the OIG

concluded that a laboratory paying a physician a draw fee of $6, plus blood-drawing supplies,

would implicate the Anti-Kickback Statute. See 2005 Advisory Opinion at 4. The relator

applies this conclusion to Boston Heart’s alleged $15 to $25 packaging fee payments to

physicians as support for his position that these payments also amounted to kickbacks. See 2d

Am. Compl. ¶ 55 (alleging that “[t]he ‘packaging’ fees paid by [Boston Heart] to referring

providers in this case are no different” than the scenario in the 2005 Advisory Opinion).

       And, the relator alleges that “Boston Heart encourage[d] physicians to break up their

testing needs among multiple colluding laboratories in order to receive draw fees from multiple

sources rather than have one lab perform all the tests.” Id. ¶ 59. The relator specifically

identifies Health Diagnostic Laboratories, Singulex, Liposcience, and Atherotech as other

colluding laboratories. Id. According to the relator, this scheme “facilitate[d] multiple

‘packaging’ fees per patient, rather than just one fee per patient, regardless of the number of labs

to which the tests specimens [we]re sent.” Id.; see also id. ¶ 61 (alleging that Boston Heart

“promote[d] this practice by sponsoring seminars that discuss[ed] how profitable splitting up

tests between laboratories c[ould] be for physicians.”).

       Further, the relator alleges that after the OIG issued its 2014 Special Fraud Alert warning

that certain blood-specimen collection, processing, and packaging arrangements could implicate

the Anti-Kickback Statute, see id. ¶ 63; see also 2014 OIG Special Fraud Alert at 2–5, “[i]n late

2014 and 2015,” 2d Am. Compl. ¶ 62, Boston Heart began using third parties, “including, but

not limited to LLmobileLab, Biotex, and VeniExpress,” to funnel the fees to the physicians, id.



                                                 12
¶ 64; see also id. ¶ 63 (“After an OIG ruling in 2014 . . ., rather tha[n] stop the practice of

incentivizing physician referrals through cash payments, Boston Heart simply changed its

scheme to further conceal it by using third parties to make the payments to physician staff and

families, rather than Boston Heart paying physicians directly.”). In other words, the relator

alleges that Boston Heart changed its packaging fee payment process in order to avoid detection

by the government, see id. ¶¶ 63–66, and, as an example, states that a Boston Heart sales

representative, Heidi Ann Mooney, told a California physician that “[the Department of Justice]

said we can’t pay you [the physician] directly, so we pay [a third party], they take some of the

money and they pay you. It’s all about perception,” id. ¶ 66 (alterations in original); see also id.

(alleging that a Biotex representative told the physician that “it didn’t even matter if [the payee]

was a relative as long as the last names were different” (alteration in original)). The relator

alleges that Boston Heart ceased paying packaging fees after October 31, 2016, see id. ¶ 69, and

also names over fifty individual physicians or medical practices who participated in the alleged

packaging fees scheme, see id. ¶¶ 98–99.

        3.      Self-Referrals Theory of Liability

        The relator alleges that, from 2011 through 2015, see id. ¶¶ 1, 99, two physicians who

were Boston Heart shareholders referred their patients to Boston Heart for laboratory testing in

violation of the Stark Law, id. ¶ 83, 99. To support this allegation, the relator relies on the CMS

Voluntary Self-Referral Disclosure Protocol. See id. ¶ 85; see also Ctrs. for Medicare &

Medicaid Servs., U.S. Dep’t of Health & Human Servs., CMS Voluntary Self-Referral

Disclosure Protocol (2010) (“CMS Protocol”). The CMS Protocol states that “conduct that

raises liability risks under the physician self-referral law may also raise liability risks under . . .

the federal [A]nti-[K]ickback [S]tatute,” CMS Protocol at 1; see also 2d Am. Compl. ¶ 85, and



                                                   13
therefore, the relator claims, “each laboratory test Boston Heart billed to Medicare and

performed on a patient referred by a physician with a financial stake in Boston Heart

constitute[d] a violation of the [ ] False Claims Act,” 2d Am. Compl. ¶ 85. The relator names

two individual physicians who allegedly were Boston Heart shareholders and referred business to

Boston Heart without disclosing their ownership interests to their patients. See id. ¶ 99.

        4.       Speaking and Consulting Fees Theory of Liability

        The relator alleges that Boston Heart “paid outrageous consulting fees to referring

physicians”; specifically, over $200,000 in 2012 and 2013 to a nurse practitioner and a physician

who “were among the top referral sources to [Boston Heart].” Id. ¶ 7. 4 According to the relator,

these

        fees were paid primarily for these physicians to solicit physician clients for Boston
        Heart by speaking at seminars where they explained to physicians how much
        money they could make by receiving packaging fees and splitting specimens
        between multiple labs, and how Boston Heart’s large panels would have no impact
        on their patients.

Id. (emphasis removed).

        5.       Medically Unnecessary Testing Theory of Liability

        Finally, the relator alleges that, “from at least 2009 to [2017],” id. ¶ 97, Boston Heart

performed and billed for medically unnecessary tests by “encourag[ing] doctors to order their

pre-selected panel tests,” id. ¶ 87, and compares the industry-standard four-test lipid panel to

Boston Heart’s eight-test panel, id. ¶ 91; see also id., Ex. 1 (Boston Heart Test Panel). The

relator relies on a MAC’s Future Local Coverage Determination (“Determination”) to support his

allegation that these extra tests were medically unnecessary. See id. ¶ 86. That Determination


4
 The relator does not make clear whether he is alleging that the two individuals were paid $200,000 total or whether
each was paid $200,000, nor does he provide a date or name the events associated with the payment(s). See 2d Am.
Compl. ¶ 7.


                                                        14
states that “[cardiovascular] risk assessment panels, consisting of various combinations of

biochemical, immunologic, hematologic, and molecular tests, is considered screening when

performed on an asymptomatic patient, and, as such, are not a Medicare benefit.” 2d Am.

Compl., Ex. 4 (Future Local Coverage Determination (LCD): MoIDX: Biomarkers in

Cardiovascular Risk Assessment (L36129) (Aug. 20, 2015)) at 2. The relator also relies on

purported statements made by Dr. Paul Ziajka, a cardiologist, to support his allegation that

Boston Heart’s additional tests in its lipid panel were medical unnecessary. Id. ¶ 95. 5 And the

relator alleges that Boston Heart’s practice of billing for each test on its panel separately, or

unbundling, allowed it to “charge Medicare over $100 per lipid panel, rather than the $18.97

allowed by Medicare.” Id. ¶ 92.

                                       II.    STANDARD OF REVIEW

         A complaint must contain “a short and plain statement of the claim showing that the

pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). Thus, to survive a motion to dismiss for

“failure to state a claim upon which relief can be granted,” Fed. R. Civ. P. 12(b)(6), the

complaint “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that

is plausible on its face,’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v.

Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads

factual content that allows the court to draw the reasonable inference that the defendant is liable

for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). Although the Court “must

treat the complaint’s factual allegations as true [and] must grant [the] plaintiff the benefit of all

reasonable inferences from the facts alleged,” Trudeau v. Fed. Trade Comm’n, 456 F.3d 178,


5
  The relator states Dr. Ziajka’s qualifications include that he “has been an investigator in more than [fifty] clinical
trials involving heart disease” and “has been published numerous times in peer-reviewed medical journals,” 2d Am.
Compl. ¶ 95, but does not directly quote Dr. Ziajka, cite to Dr. Ziajka’s work or any sworn statement, or provide any
further details regarding Dr. Ziajka, see id.

                                                          15
193 (D.C. Cir. 2006) (first alteration in original) (citation omitted), legal allegations devoid of

factual support are not entitled to this assumption, see, e.g., Kowal v. MCI Commc’ns Corp., 16

F.3d 1271, 1276 (D.C. Cir. 1994). Moreover, a plaintiff must provide more than “a formulaic

recitation of the elements of a cause of action.” Hinson ex rel. N.H. v. Merritt Educ. Ctr., 521 F.

Supp. 2d 22, 27 (D.D.C. 2007) (quoting Twombly, 550 U.S. at 555). “And, ‘[i]n determining

whether a complaint states a claim, the court may consider the facts alleged in the complaint,

documents attached thereto or incorporated therein, and matters of which it may take judicial

notice.’” Farah v. Esquire Magazine, 736 F.3d 528, 534 (D.C. Cir. 2013) (alterations in original)

(quoting Abhe & Svoboda, Inc. v. Chao, 508 F.3d 1052, 1059 (D.C. Cir. 2007)).

       Fraud claims are subject to the heightened pleading requirement of Rule 9(b), which

provides that “[i]n alleging fraud or mistake, a party must state with particularity the

circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b); see also United States ex rel.

Heath v. AT&T, Inc., 791 F.3d 112, 123 (D.C. Cir. 2015) (applying Rule 9(b) to claims filed

pursuant to the False Claims Act). “The rule serves to ‘discourage[] the initiation of suits

brought solely for their nuisance value, and safeguards potential defendants from frivolous

accusations of moral turpitude.’” Heath, 791 F.3d at 123 (alteration in original) (quoting United

States ex rel. Williams v. Martin-Baker Aircraft Co., 389 F.3d 1251, 1256 (D.C. Cir. 2004)).

Further, “the complaint must be particular enough to ‘guarantee all defendants sufficient

information to allow for preparation of a response.’” Id. (quoting Williams, 389 F.3d at 1256).

“Rule 9(b) is not an antithesis of Rule 8(a)’s ‘short and plain statement’ requirement, but rather a

supplement to it.” Baker v. Gurfein, 744 F. Supp. 2d 311, 315 (D.D.C. 2010) (Walton, J.) (citing

Williams, 389 F.3d at 1256). Accordingly, in order to withstand a motion to dismiss for failure

to plead a False Claims Act claim with the degree of particularity required by Rule 9(b), a



                                                  16
“complaint must . . . provide a defendant with notice of the who, what, when, where, and how

with respect to the circumstances of the fraud.” Stevens v. InPhonic, Inc., 662 F. Supp. 2d 105,

114 (D.D.C. 2009) (Walton, J.) (internal citation and quotation marks omitted).

                                               III.    ANALYSIS

A.       Count I: The False Presentment Claim Cause of Action

         The elements of a false presentment claim cause of action are “(1) the defendant

submitted or caused to be submitted a claim to the government, (2) the claim was false, and (3)

the defendant knew the claim was false.” United States ex rel. Morsell v. Symantec Corp., 130

F. Supp. 3d 106, 118 (D.D.C. 2015) (quoting United States ex rel. Tran v. Comput. Scis. Corp.,

53 F. Supp. 3d 104, 121–22 (D.D.C. 2014)); see also 31 U.S.C. § 3729(a)(1)(A). 6

                  1.       The Falsity Element of the Claim

         Under the False Claims Act, a claim may be either factually false, “in which

a . . . claimant submits information that is untrue on its face,” United States v. Kellogg Brown &

Root Servs., Inc., 800 F. Supp. 2d 143, 154 (D.D.C. 2011), or legally false, in which the claim

“rest[s] on a false representation of compliance with an applicable federal statute, federal

regulation, or contractual term,” id. (quoting United States v. Sci. Applications Int’l Corp., 626

F.3d 1257, 1266 (D.C. Cir. 2010) (SAIC)). “A legally false claim, also known as a ‘false



6
  Because Boston Heart does not specifically challenge the submission element, see generally Def.’s Mem.; Def.’s
Reply (challenging the relator’s allegations regarding Boston Heart’s participation in and knowledge of the
purported schemes), the Court need not address it. In any event, upon review of the Second Amended Complaint,
the Court finds that the relator adequately alleged that Boston Heart submitted claims to the government. See 2d
Am. Compl. ¶ 23 (alleging that “more than 30% of the tests conducted by Boston Heart are for patients covered by
Medicare”); id. ¶ 31 (alleging that “[e]ach claim for payment submitted by Boston Heart, from at least 2010 to
[2016], to Medicare that was referred to [it] by a provider who [participated in the alleged kickback schemes]
constitutes a false claim”); see also Druding v. Care Alternatives, Inc., 164 F. Supp. 3d 621, 630–31 (D.N.J. 2016)
(concluding that the relator adequately alleged the submission element because, given his allegation that the
defendant was “a certified Medicare provider,” “[i]t [wa]s no great leap for the Court to infer that a Medicare
provider would submit claims for reimbursement for any of the[] patients wh[o] had been [wrongfully] certified as
terminally ill, and that these purportedly legally false medical records could have formed the basis of such a claim
for reimbursement”).

                                                         17
certification,’ can be either ‘express’ or ‘implied.’” Id. (quoting SAIC, 626 F.3d at 1266). “An

express false certification occurs when a claimant explicitly represents that he or she has

complied with a contractual condition, but in fact has not complied.” Id. An implied false

certification, on the other hand, occurs when a claimant “makes no affirmative representation but

fails to comply with a contractual or regulatory provision ‘where certification was a prerequisite

to the government action sought.’” Id. (quoting SAIC, 626 F.3d at 1266).

       As stated above, kickbacks and violations of the Stark Law are actionable under the False

Claims Act. Under a theory of implied certification, “where the government pays funds to a

party, and would not have paid those funds had it known of a violation of a law or regulation, the

claim submitted for those funds contain[s] an implied certification of compliance with the law or

regulation and [is] fraudulent.” United States ex rel. Pogue v. Diabetes Treatment Ctrs. of Am.,

Inc., 238 F. Supp. 2d 258, 264 (D.D.C. 2002) (Pogue I); see Pogue II, 565 F. Supp. 2d at 159

(“Legion [of] other cases have held violations of [the Anti-Kickback Statute] and Stark can be

pursued under the [False Claims Act], since they would influence the Government’s decision of

whether to reimburse Medicare claims.”); see also United States ex rel. Barrett v.

Columbia/HCA Healthcare Corp., 251 F. Supp. 2d 28, 33 (D.D.C. 2003) (“[C]ompliance with

the Anti-Kickback [Statute] and Stark laws would affect the government’s decision to pay.”);

United States ex rel. Ortega v. Columbia Healthcare, Inc., 240 F. Supp. 2d 8, 13 n.5 (D.D.C.

2003) (“Compliance with [the Anti-Kickback Statute and the Stark Law] is a condition for

reimbursement under Medicare, and [the defendants] impliedly certified compliance with these

law[s] in submitting claims to Medicare.”).

       Boston Heart argues that the relator fails to plausibly allege that its four alleged kickback

schemes constitute kickbacks under the Anti-Kickback Statute, and therefore, the relator fails to



                                                18
plausibly allege the falsity element of a false presentment claim. Def.’s Mem. at 9. Boston

Heart additionally argues that the relator fails to plausibly allege that its practice of unbundling

violates a Medicare provision or that Boston Heart charges for medically unnecessary tests, id. at

30, 33–34, and therefore, the relator does not plausibly allege the falsity element regarding

Boston Heart’s test panel billing practices, id. at 30. The Court will consider each challenge in

turn.

                       a.      Boston Heart’s Alleged Kickback by Waiving Co-Payments
                               and Deductibles

        In response to the relator’s allegation that Boston Heart’s waiver of patients’ co-payments

and deductibles constitutes a kickback, Boston Heart first argues that the relator fails to allege

that this practice provides any value to physicians, and thus cannot constitute a kickback. Def.’s

Mem. at 24–25. The Court is unpersuaded by this argument because the relator does allege that

the purported scheme benefits physicians. Specifically, the relator alleges:

        Waiving patients’ insurance co-payments and deductibles is of significant benefit
        to physicians and their patients: physicians are not forced to explain expensive
        deductible and co-payment requirements to angry patients[,] and patients receive
        free laboratory testing. Physicians market free testing to their patients to make their
        offices more appealing, thereby improving the physicians’ revenues.

2d Am. Compl. ¶ 37. In the Court’s view, this allegation sufficiently alleges how Boston Heart’s

purported waiver practice provided value to physicians; namely, by saving their time not spent

on explaining co-payment and deductible charges to patients and providing them an opportunity

to market free laboratory testing.

        Second, Boston Heart argues that the relator “fails to plausibly and with particularity

allege inducement, an essential element of a kickback violation.” Def.’s Mem. at 25; see also

Def.’s Reply at 19–20 (contending that there was no connection between the purported reduction

in costs and the inducement to physicians). Boston Heart relies heavily on Georgia ex rel.

                                                  19
Hunter Laboratories, LLC v. Quest Diagnostics Inc., No. 13-cv-01838 (SCJ), 2014 WL

12543888 (N.D. Ga. Mar. 14, 2014), for its position that “discounts do not establish an

improper/illegal referral or Medicaid claim from such referral,” Def.’s Mem. at 4. In Hunter

Laboratories, the plaintiffs “allege[d that the defendants] operated [a] kickback scheme by

improperly offering deeply discounted fees for laboratory services paid for by medical

providers.” 2014 WL 12543888, at *1. The district court granted the defendants’ motion to

dismiss, finding that the plaintiffs “fail[ed] to articulate any specific kickback at issue,”

particularly because they did not allege what the discounted rates were, and when and to whom

they were offered. Id. at *4.

        Boston Heart’s reliance on Hunter Laboratories is misplaced. The district court in Hunter

Laboratories did not state that discounts cannot constitute an unlawful referral as a matter of law;

rather, it held that the plaintiffs “fail[ed] to provide sufficient particularity to satisfy the pleading

standard of Rule 9(b).” Id. Moreover, the relator here does not allege that Boston Heart only

provided discounts on co-payment and deductible payments, but rather alleges that Boston Heart

waived these fees entirely. See 2d Am. Compl. ¶ 32 (“The first form of illegal remuneration is

the waiver of private insurance co-payments and deductibles.”). Therefore, Hunter Laboratories

does not provide a basis for dismissal due to failure to allege inducement.

        Third, Boston Heart argues that the 1994 OIG Special Fraud Alert, upon which the relator

relies to support his allegation that waiving co-payments and deductibles constitute kickbacks,

does not reference privately insured patients, and therefore is not applicable. See Def.’s Mem. at

25 (“[T]he 1994 Alert concerns Medicare beneficiaries and does not apply to waivers of amounts

owed by privately insured patients.”). The relator argues in response that “Boston Heart’s

reading of the 1994 OIG Fraud Alert is overly narrow and ignores the rationale underlying the



                                                   20
OIG’s position,” namely, that the payments at issue in that document “were improper not

because it was a managed care patient or government funded payer, but instead because

promising a physician [his or her] patients will not be charged a co-pay is a thing of value.” Pl.’s

Opp’n at 19–20 (emphasis removed).

       The Court agrees with the relator. Although Boston Heart is correct that the 1994 OIG

Special Fraud Alert references waiver of charges to managed care patients as an “example[] of

lab services arrangements that may violate the [A]nti-[K]ickback [S]tatute,” it notes that this

example fits the category of “cases where the provision of free services results in a benefit to the

provider,” and thus, “the [A]nti-[K]ickback [S]tatute is implicated.” 1994 OIG Special Fraud

Alert, 59 Fed. Reg. at 65,377. In this case, the relator alleges that Boston Heart waives

physicians’ privately insured patients’ co-payments and deductibles, “so long as the physicians

send all of their lipid-related business—especially the highly profitable Medicare business—to

[Boston Heart].” See 2d Am. Compl. ¶ 44 (emphasis removed); see also id. ¶ 42. In the Court’s

view, this allegation, if true, would also implicate the Anti-Kickback Statute because it would

constitute the provision of free services, i.e., the waiver of co-payments and deductibles, that

result in a benefit to the provider, i.e., by saving the physicians’ time not spent on explaining co-

payment and deductible charges to patients and providing them an opportunity to market free

laboratory testing. And, the relator alleges that the objective of Boston Heart’s waiver of co-

payments and deductibles scheme is to gain additional Medicare business, which in turn results

in federal funds being acquired by Boston Heart as a result of its fraudulent kickback scheme.

See id. ¶ 45. Accordingly, Boston Heart’s argument that the relator fails to plausibly allege

inducement because the 1994 OIG Special Fraud Alert does not specifically reference privately

insured patients fails. Therefore, the Court finds that the relator sufficiently alleges that Boston



                                                 21
Heart’s waiver of patients’ co-payments and deductibles constitutes a kickback, and therefore,

sufficiently alleges the falsity element of a false presentment claim under the False Claims Act.

                        b.      Boston Heart’s Alleged Kickback Through Packaging Fees

        Boston Heart argues that the relator fails to allege that the packaging fees Boston Heart

paid physicians were above fair market value, and thus cannot constitute kickbacks. Def.’s

Mem. at 13–14. According to Boston Heart, the relator incorrectly conflates draw fees and

packaging fees. See id. at 15 (“The 2014 Special Fraud Alert explicitly distinguishes between

Medicare’s $3.00 ‘nominal specimen collection fee,’ which has its own CPT code, and

Medicare’s ‘reimburse[ment] [to] physicians for processing and packaging specimens for

transport to a clinical laboratory,’ . . . .” (brackets in original)). As stated previously, a “draw

fee” is “a nominal specimen collection fee . . . [that can be assessed] when the person draws a

blood sample through venipuncture (i.e., inserting into a vein a needle with syringe or vacuum

tube to draw the specimen),” 2014 OIG Special Fraud Alert at 3, whereas a “packaging fee”

refers to the costs of “processing and packaging specimens for transport to a clinical laboratory

through a bundled payment,” id. at 4. According to Boston Heart, the $3 fee set by Medicare

that the relator references is the draw fee only, and the higher amount that Boston Heart pays

physicians is actually the packaging fee. Def.’s Mem. at 14–15. Accordingly, Boston Heart

argues that because the relator has failed to allege that Boston Heart has paid more than the fair

market value for packaging, no kickback scheme has been plausibly alleged. Def.’s Mem. at 15–

16. The Court disagrees.

        The relator plainly alleges that “[t]he second form of illegal remuneration provided by

[Boston Heart] to induce the referral of Medicare business is the payment to physicians of

inflated ‘packaging’ fees.” 2d Am. Compl. ¶ 53. Although it is true that the relator cites to the



                                                  22
2005 OIG Advisory Opinion regarding draw fees, see id. ¶ 54 (citing 2005 OIG Advisory

Opinion at 4), the relator does not “conflate[]” the draw fees referenced in the Advisory Opinion

with Boston Heart’s packaging fees, as Boston Heart contends, see Def.’s Mem. at 15, but rather

relies on the Advisory Opinion as prohibiting similar conduct, see 2d Am. Compl. ¶ 55 (alleging

that Boston Heart’s payment of packaging fees “to referring providers in this case are no

different” than the illegal draw fees paid by a laboratory in the Advisory Opinion). Specifically,

the relator alleges that “[a]s in the [draw] fees paid in the Advisory Opinion’s scenario, the

‘packaging’ fee and other ‘compensation provides an obvious financial benefit to the referring

physician, and it may be inferred that this benefit would be in exchange for referrals to the lab.’”

Id. (quoting 2005 OIG Advisory Opinion at 4); see also id. ¶ 60 (discussing the costs associated

with drawing and packaging specimens). Accordingly, the Court finds that the relator

sufficiently alleges that Boston Heart’s payment of packaging fees constitutes a kickback, and

therefore, sufficiently alleges the falsity element of a false presentment claim under the False

Claims Act to avoid dismissal under Rule 12(b)(6).

                       c.      Boston Heart’s Alleged Kickback Through Speaking and
                               Consulting Fees

       Boston Heart argues that the relator fails to allege that the $200,000 paid to the physician

and nurse practitioner for their consultation and speaking services was anything more than “a

typical arms-length contract in which compensation is paid solely in exchange” for services and

therefore, cannot constitute a kickback. Def.’s Mem. at 29 (quoting Cooper v. Pottstown Hosp.

Co., 651 Fed. App’x 114, 116 (3d Cir. 2016)). The Court disagrees.

       The relator alleges:

       The consulting fees were paid primarily for [the physician and nurse practitioner]
       to solicit physician clients for Boston Heart by speaking at seminars where they
       explained to physicians how much money they could make by receiving packaging

                                                 23
       fees and splitting specimens between multiple labs, and how Boston Heart’s large
       panels would have no impact on their patients.

2d Am. Compl. ¶ 7 (emphasis removed). The relator, therefore, alleges both that the amount

paid to the physician and nurse practitioner was not proportional to the purported service

provided, see id. (labelling them “outrageous”), and that the fees were paid to the physician and

nurse practitioner for their efforts to induce other physicians to refer patients’ laboratory tests to

Boston Heart, see id.

       Regarding the amounts paid to the physician and nurse practitioner, whether these

amounts were in fact not proportional to the services provided is a factual matter that is not

appropriate for the Court to decide at this time. See Trudeau, 456 F.3d 178 at 193. As to Boston

Heart’s argument that the relator fails to allege that Boston Heart paid such fees to obtain

referrals of Medicare patients, see Def.’s Mem. at 29, although it is true that the relator does not

specifically mention Medicare patients in this portion of his Second Amended Complaint, he

does allege that the two individuals paid by Boston Heart were explaining to other physicians the

benefits of Boston Heart’s packaging fees, see 2d Am. Compl. ¶ 7. As stated previously, the

relator alleges that the packaging fees were part of the quid pro quo between Boston Heart and

various physicians. See id. ¶¶ 4, 53, 98. Thus, taking the relator’s allegations as true, as the

Court must, the Court reasonably infers that the relator’s reference to packaging fees

incorporates his allegations elsewhere in the Second Amended Complaint regarding the alleged

kickback scheme through inflated packaging fees. See id. ¶¶ 62–66. Accordingly, the Court

finds that the relator sufficiently alleges that Boston Heart’s purported payment of inflated

speaking and consulting fees paid to a physician and nurse practitioner amounts to kickbacks,

and therefore, sufficiently alleges the falsity element of a false presentment claim under the False

Claims Act.

                                                  24
                          d.       Boston Heart’s Alleged Kickback in Violation of the Stark Law
                                   Through Stakeholder Physicians’ Referrals

        Boston Heart argues that the relator’s allegations that it engaged in a kickback scheme

through physician self-referrals “are no more than bald assertions.” Def.’s Mem. at 34. The

Court disagrees. The relator alleges that Boston Heart received referrals from physicians who

were Boston Heart shareholders, 2d Am. Compl. ¶ 84, and provides the names of two specific

physicians, id. ¶ 99. Taking the relator’s allegations as true, this practice would violate the Stark

Law because that statute prohibits a physician from referring patients to an entity in which the

physician has an ownership interest, see 42 U.S.C. § 1395nn(a)(1)(A)–(B), and accordingly, can

constitute a False Claims Act violation, see Pogue II, 565 F. Supp. 2d at 159 (holding that a

violation of the Stark Law is actionable under the False Claims Act). Accordingly, the Court

finds that the relator has properly alleged a violation of the Stark Law, and therefore, sufficiently

alleges the falsity element of a false presentment claim under the False Claims Act. 7

                          e.       Boston Heart’s Alleged Medically Unnecessary Testing

        Boston Heart argues that the relator fails to plausibly allege that unbundling constitutes a

false claim because unbundling is expressly allowed by Medicare. Def.’s Mem. at 30. Although

Boston Heart is correct that CMS permits laboratories to unbundle lipid panel tests, see

Processing Manual § 90.2 (Note) (“If a laboratory chooses, it can bill each of the component

tests of . . . panels individually, but payment will be based upon [the Medicare] rules.”), the

Court is not persuaded that unbundling, on its own, forms the basis of the relator’s theory of

liability. Rather, as explained above, the relator alleges that Boston Heart “encourage[d] doctors


7
  As support for Boston Heart’s argument that the relator’s allegations do not amount to a violation of the Stark
Law, Boston Heart states that it repaid the government for prior Stark Law violations. Def.’s Mem. at 34. This fact,
even if true, is immaterial, because it does not mean that Boston Heart is not liable for any additional Stark Law
violations, such as the ones that the relator alleges here.


                                                        25
to order [its] pre-selected panel tests,” 2d Am. Compl. ¶ 87, which purportedly contain four

additional tests that are medically unnecessary, id. ¶¶ 91, 95, and by billing for each test on its

panel separately, Boston Heart “charge[s] Medicare over $100 per lipid panel, rather than the

$18.97 allowed by Medicare,” id. ¶ 92. And, although the relator specifically acknowledges that

CMS allows parties to unbundle lipid panels, he alleges that Boston Heart

       is not protected by the fact that CMS allows parties to bill component parts of panels
       individually so long as they accept the lower panel reimbursement amount because
       Boston Heart’s bloated lipid panel has no unique CPT code or lowered
       reimbursement amount. Thus, b[y] adding redundant tests, Boston Heart is able to
       bill for substantially more than it would receive if it properly tested and billed.

Id. ¶ 94. Therefore, the basis of the claim is not unbundling in isolation, but rather allegedly

including medically unnecessary tests in its test panels and billing Medicare for those additional

tests. See id. ¶¶ 91–94. Accordingly, Boston Heart’s argument fails.

       Boston Heart additionally argues that the relator fails to adequately allege that it billed for

medically unnecessary tests because he “[failed] to identify any Medicare or other requirement

mandating the composition of tests on a lipid panel,” and “there is not a single factual allegation

supporting the conclusory assertion that Boston Heart cannot also include the ‘four additional

tests’ on its own lipid panel, as long as it bills for them correctly.” Def.’s Mem. at 33. The

Court again disagrees.

       The relator’s primary allegation is not that Boston Heart violated a specific lipid panel

standard, but rather that Boston Heart encouraged and billed Medicare for medically unnecessary

tests. And, “improper inducements such as providing kickbacks or promoting medically

unnecessary testing” is a violation of the False Claims Act. United States ex. rel Lutz v.

Berkeley Heartlab, Inc., 225 F. Supp. 3d 487, 501, 497 (D.S.C. 2016) (declining to dismiss the

government’s False Claims Act allegations against a laboratory for “encourag[ing] physicians to



                                                 26
order tests that were medically unnecessary”); see also Groat II, 296 F. Supp. 3d at 166 (holding

that “laboratories have a legal duty to ensure that they do not submit claims for medically

unnecessary tests” and that promoting medically unnecessary tests is a violation of the False

Claims Act). Therefore, because the relator alleges that Boston Heart’s additional tests on their

lipid panels are medically unnecessary because they contain Apo B and LDL-P tests, 2d Am.

Compl. ¶¶ 86, 95, and it is not the Court’s role to make medical necessity determinations at this

stage of the litigation, see United States ex rel. Groat v. Boston Heart Diagnostics Corp., 255 F.

Supp. 3d 13, 27–29 (D.D.C. 2017) (Walton, J.) (Groat I) (declining to make medically necessity

determinations at the motion to dismiss stage), the relator does allege a violation of a Medicare

requirement, i.e., that the tests Boston Heart billed were not medically necessary. Therefore, the

Court finds that the relator plausibly alleges falsity under this theory of liability.

        In summary, the Court finds that the relator adequately alleges the falsity element of his

presentment claim with respect to each of his five theories of liability because in each instance,

he alleges that Boston Heart submitted legally false claims. See Groat I, 255 F. Supp. 3d at 23

(holding that the relator sufficiently pleaded the falsity element by “alleg[ing] that Boston Heart

failed to comply with the Medicare rules restricting covered services to those that are medically

necessary”); Ortega, 240 F. Supp. 2d at 13 n.5 (“Compliance with [the Anti-Kickback Statute

and the Stark Law] is a condition for reimbursement under Medicare, and [the defendants]

impliedly certified compliance with these law[s] in submitting claims to Medicare.”).

                2.      The Knowledge Element of the Claim

        The knowledge element of a false presentment cause of action requires a defendant to

have “actual knowledge of the information” related to the false claim or to “act[] in deliberate

ignorance . . . [or] reckless disregard of the truth or falsity of the information” related to the false



                                                   27
claim. 31 U.S.C. § 3729(b)(1)(A). However, the statutory definition of “knowledge” does not

require “proof of specific intent to defraud.” Id. § 3729(b)(1)(B). Moreover, “[b]ecause Rule

9(b) permits knowledge to be pled generally, there is no basis for dismissal for failure to plead

knowledge with particularity.” United States v. Honeywell Int’l, Inc., 798 F. Supp. 2d 12, 22

(D.D.C. 2011).

       With respect to the five foregoing theories of liability, the relator relies on his experience

as a former member of Boston Heart’s Board of Directors to allege that Boston Heart’s false

claims were made knowingly and willfully. According to the relator, he was a member of

Boston Heart’s Board of Directors “from 2007 until majority control of [Boston Heart] was

acquired by Bain Capital Venture Fund in late 2010,” and he “resigned from the [B]oard around

the fourth quarter of 2010,” 2d Am. Compl. ¶ 101, although “he remained a shareholder,” id.

¶ 104. He alleges that during his time on the Board of Directors, “competitors’ policies of

paying packaging and handling . . . fees to physicians and never billing patients was discussed at

several board meetings. During those meetings, [the relator] and others voiced concerns about

the propriety and legality of the conduct, and it was ultimately decided that Boston Heart would

not employ [those policies].” Id. ¶ 102; see also id. ¶ 101 (“Prior to his resignation, [the relator]

advised Boston Heart against engaging in the practices described in the [Second Amended

Complaint] on several occasions.”). However, according to the relator, after Bain Capital

Venture Fund acquired Boston Heart, “Boston Heart instituted the payment of packaging fees to

physicians and of never billing patients for co[-payments] or deductibles.” Id. ¶ 103. The relator

alleges that he sent three letters to Boston Heart’s Board of Directors from September to

November of 2011, warning it of the potential liability issues related to its practices regarding




                                                 28
self-referrals, packaging fees, and waiving of co-payments and deductibles, but received no

response. Id. ¶¶ 105–06.

         Boston Heart argues that the letters that the relator alleges to have sent it “were merely

[the relator’s] recitation of what violations he believes Boston Heart was committing,” and “do

not in any way reflect that Boston Heart actually engaged in such conduct or that it did so with

the requisite intent.” Def.’s Mem. at 3. The relator argues in response that Boston Heart must

have known “that [its] conduct was unlawful, knew [it] was acting with a bad purpose, or knew

[it] was acting with evil intent without justifiable excuse.” Relator’s Opp’n at 14–15 (quoting

United States ex rel. Lutz v. Berkeley Heartlab, Inc., No. 9:14-230 (RMG), 2017 WL 4803911,

at *3 (D.S.C. Oct. 23, 2017), appeal docketed, No. 18-1813 (4th Cir. July 18, 2018)).

         The Court agrees with Boston Heart’s argument that the letters the relator alleges he sent

to it demonstrate that the relator thought that Boston Heart was engaged in illegal conduct (and

perhaps that Boston Heart was aware of the relator’s opinion), but not that Boston Heart knew or

should have known that it was indeed engaging in such conduct. In the Court’s view, this is not

sufficient to show that Boston Heart itself thought that its conduct was illegal. Accordingly, the

Court does not find that the relator’s letters to Boston Heart are sufficient to satisfy the

knowledge element. 8 Compare with Honeywell Int’l, 798 F. Supp. 2d at 23–24 (concluding that

the government adequately alleged the defendant’s knowledge by pleading that it “intentionally

obscured its . . . data” and its “bad faith in selectively disclosing those findings”).




8
  Boston Heart also argues that the relator “fails to plausibly allege that Boston Heart acted knowingly” because he
fails to make allegations “regarding Boston Heart’s receipt of and internal response to his letter.” Def.’s Mem. at
21. Although it is true that the relator does not allege receipt of his letters, given the Court’s conclusion that the
content of the letters, even if received, does not satisfy the knowledge requirement on the part of Boston Heart, the
Court need not decide the issue of whether alleging that letters were sent, without alleging their receipt, sufficiently
alleges Boston Heart’s knowledge.

                                                           29
       The relator, however, makes other factual allegations regarding Boston Heart’s

knowledge with respect to the specific theories of liability, which the Court will consider in turn.

                       a.      Boston Heart’s Knowledge that Its Waivers of Co-payments
                               and Deductibles Were Unlawful

       Regarding the co-payment and deductible waivers, the relator relies on Boston Heart’s

conduct following the Department of Justice’s action taken against Berkeley Heart Laboratories

for waiving co-payments and deductibles to demonstrate Boston Heart’s knowledge. See 2d

Am. Compl. ¶¶ 47–48. First, the relator alleges:

       In 2014, the Department of Justice intervened in a false claims act complaint against
       Berkeley Heart Laboratories, alleging the failure to invoice patients for deductibles
       and co-payments to be illegal inducements under the Anti-Kickback laws—strong
       evidence the government considered the practice to be illegal. The same year, the
       Department of Justice settled with two other Boston Heart competitors for $49
       million based on their alleged failure to invoice patients for deductibles and co-
       payments. Despite this, Boston Heart continued.

Id. ¶ 47. The relator further alleges:

       Eventually, knowing the co-pay waivers violated the False Claims Act, in 2016
       Boston Heart ceased the 100% waivers of co-pays and deductibles and replaced
       them with a new form of inducement for patient invoices. As described to a
       southern California physician by Boston Heart sales person Mooney, “insurance
       companies in some states require that we must bill patients, so we came up with a
       fee schedule. It is not a co-pay or a deductible, but rather a special fee.”

Id. ¶ 48. In other words, the relator alleges that once Boston Heart realized that the Department

of Justice might discover its waiver scheme, it adopted its “Know It Now Fee.” Id. ¶¶ 48–50.

The relator contends that this fee is so low that it is “effectively [a waiver] of patients’ co-

payments and deductibles,” id. ¶ 51, and accordingly, Boston Heart “continue[d] to offer

inducements to physicians despite knowing that waiving co-pay[ment]s or deductibles is illegal,”

id. ¶ 50 (emphasis added). Thus, the relator alleges that Boston Heart evidenced its knowledge

that its practice of waiving co-payments and deductibles was illegal when it “came up with a fee



                                                  30
schedule” to replace its waiver practice. Id. ¶ 48. Taking the relator’s allegations as true, the

Court finds that the relator sufficiently alleges the knowledge element with respect to his waiver

theory by alleging that Boston Heart implemented its “Know It Now Fee” in order to avoid

detection of its waiver practice by the Department of Justice. See Honeywell Int’l, 798 F. Supp.

2d at 23 (concluding that the relators adequately alleged knowledge by noting that the relator

“intentionally obscured” its data to avoid the negative consequences of its disclosure); see also

United States v. Newman, No. 16-1169 (CKK), 2017 WL 3575848, at *8 (D.D.C. Aug. 17,

2017) (“The Court will not dismiss this case at the outset merely because the allegations in the

complaint are rebutted by assertions about [the d]efendant’s state of mind in her briefing on her

motion to dismiss.”).

                        b.     Boston Heart’s Knowledge that Its Payment of Packaging Fees
                               Was Unlawful

       Regarding the relator’s allegation that Boston Heart had knowledge that its inflated

packaging fees paid to physicians would induce the physicians to increase their referral of

Medicare business to Boston Heart, the relator relies on Boston Heart’s actions following the

OIG’s 2014 Special Fraud Alert that laboratories’ payment of packaging fees, among other

services, to referring physicians “could constitute illegal remuneration under the [A]nti-

[K]ickback [S]tatute.” 2014 OIG Special Fraud Alert at 1. According to the relator, after the

Special Fraud Alert was issued, “rather than stop the practice of incentivizing physician referrals

through cash payments, Boston Heart simply changed its scheme to further conceal it by using

third parties to make the payments to physician staff and families, rather than Boston Heart

paying physicians directly.” 2d Am. Compl. ¶ 63. Furthermore, the relator alleges that a Boston

Heart representative told a physician: “[the Department of Justice] said we can’t pay you [the

physician] directly, so we pay [a third party], they take some of the money and they pay you. It’s

                                                 31
all about perception.” Id. ¶ 66 (emphasis and brackets in original). Finally, the relator alleges

that Boston Heart’s CEO and two members of its Board of Directors “were involved in the

decision to institute the payment of packaging fees to physicians.” Id. ¶ 103.

        Boston Heart argues that “it is not sufficient to allege that a low-level employee or

agent’s knowledge can be imputed to the company as a whole,” Def.’s Mem. at 7 (citing SAIC,

626 F.3d at 1275), and that the relator “failed to describe the source of [his knowledge of its

employees’ alleged statements],” id. at 10 n.7. Boston Heart further argues that the relator must

allege that Boston Heart “had knowledge that it was submitting false claims and that it took

specific actions to do so.” Id. at 7 (emphasis added). However, the relator does allege that

Boston Heart took specific actions to submit false claims, alleging that Boston Heart began

funneling excess packaging fees through specific third parties in order to avoid discovery

because it knew that what it was doing was illegal. See 2d. Am. Compl. ¶ 63; see also id. ¶ 66

(alleging that Boston Heart funneled this money through Biotex, LLmobileLab, and

VeniExpress). Putting aside the statements allegedly made by the Boston Heart representative,

taking the relator’s allegations as true, as it must, the Court finds that the relator sufficiently

alleges Boston Heart’s knowledge of this purported scheme by alleging that Boston Heart’s CEO

and two members of its Board of Directors “were involved in the decision to institute the

payment of packaging fees to physicians,” id. ¶ 103, that Boston Heart “promote[d] this practice

by sponsoring seminars that discuss[ed] how profitable splitting up tests between laboratories

can be for physicians,” id. ¶ 61, and that Boston Heart changed its practice of directly paying

referring physicians for their packaging fees following the 2014 OIG Special Fraud Alert to

instead paying those payments through third parties to avoid government detection, see id.

¶¶ 63–66. Like the alleged waiver scheme, the Court concludes that the relator sufficiently



                                                   32
alleges Boston Heart’s knowledge, given that the relator contends that Boston Heart altered its

practice to hide its scheme in response to government action. See Lutz, 225 F. Supp. 3d at 500

(concluding that the relator sufficiently alleged the defendants’ knowledge by alleging that they

“knew of the illegality of the [processing and handling] fees and tried to disguise them”). The

Court therefore finds that the relator has sufficiently pleaded Boston Heart’s alleged knowledge

of this scheme.

                       c.      Boston Heart’s Knowledge of Physicians’ Self-Referrals

       The relator does not discuss Boston Heart’s knowledge regarding self-referrals by

physicians who were Boston Heart shareholders, and he never specifically alleges that Boston

Heart knew that it received referrals from such physicians apart from the letters that the relator

sent Boston Heart following his resignation. See 2d. Am. Compl. ¶¶ 83–85, 99, 105. Therefore,

the Court does not find that the relator sufficiently alleges Boston Heart’s knowledge of this

purported scheme as required under 31 U.S.C. § 3729(b)(1)(A). Accordingly, the relator cannot

proceed on this theory of liability.

                       d.      Boston Heart’s Knowledge that Its Payment of Speaking and
                               Consulting Fees Was Unlawful

       Boston Heart argues that the relator’s complaint is “devoid of any indicia of [Boston

Heart’s] intent to operate a kickback scheme” through the payment of speaking and consulting

fees to a physician and nurse practitioner. Def.’s Mem. at 29 (quoting Cooper, 651 Fed. at 116).

However, as discussed before, the relator alleges that Boston Heart paid “outrageous” speaking

and consulting fees to the physician and nurse practitioner with the specific purpose of

expanding its packaging fee kickback scheme. See 2d. Am. Compl. ¶ 7 (“The consulting fees

were paid primarily for [the physician and nurse practitioner] to solicit physician clients for

Boston Heart by speaking at seminars where they explained to physicians how much money they

                                                 33
could make by receiving packaging fees and splitting specimens between multiple labs . . . .”)

(emphasis omitted)). Taking the relator’s allegations as true, and because the Court has already

found that the relator sufficiently alleges Boston Heart’s knowledge of the packaging fee

scheme, the Court finds that the relator sufficiently alleges Boston Heart’s knowledge of this

alleged scheme by pleading that the fees it paid to the physician and nurse practitioner were

above market value with the specific purpose of perpetuating its scheme to defraud the

government.

                       e.     Boston Heart’s Knowledge that It Was Performing Medically
                              Unnecessary Testing

       The relator alleges that Boston Heart included medically unnecessary tests in its panels.

2d. Am. Compl. ¶ 95. In Groat II, this Court held “that even though the Medicare statute

requires the laboratory to certify the medical necessity of any test for which it makes a claim for

payment, the laboratory is not required to make an independent determination of medical

necessity, but rather may rely on the ordering physician’s determination,” 296 F. Supp. 3d at

163, the relator in that case sufficiently “allege[d] that Boston Heart engaged in a scheme to

encourage non-cardiology physicians to order medically unnecessary tests through a false

marketing campaign and pre-printed test requisition forms,” id. at 165. In this case, the relator

alleges that Boston Heart employees encouraged physicians to use its test panels, which included

more tests than the industry standard, and that the additional tests were not medically necessary.

See 2d. Am. Compl. ¶¶ 11–13. However, the relator never specifically alleges that Boston Heart

knew that these additional tests were medically unnecessary tests, nor can the Court reasonably

infer Boston Heart’s knowledge on the basis of any alleged scheme, like the one in Groat, where

the relator specifically alleged that “‘General Practitioners and other non-cardiology physicians

[we]re Boston Heart’s primary target’ for its allegedly false marketing statements regarding the

                                                34
medical necessity of its tests.” Groat I, 255 F. Supp. 3d at 19. Rather, the relator in this case

merely alleges, with respect to this theory, that “[Boston Heart] knew that Federal law prohibited

code stacking and the manipulation of Medicare reimbursement.” 2d. Am. Compl. ¶ 96. 9

Therefore, the Court finds that the relator has not sufficiently alleged that Boston Heart knew

that the additional tests on its test panels were medically unnecessary, and therefore, the relator

cannot proceed on this theory of liability.

        For the foregoing reasons, the Court is satisfied that the relator properly alleges Boston

Heart’s knowledge for his false presentment theories of liability regarding (1) the waiver of co-

payments and deductibles, (2) the payment of packaging fees, and (3) the payment of speaking

and consulting fees. The Court dismisses the self-referral and medically unnecessary testing

theories of liability because the relator has not adequately alleged Boston Heart’s knowledge

with respect to these theories as required under 31 U.S.C. § 3729(b)(1)(A). 10

                 3.       Whether the Relator’s Allegations Satisfy Rule 9(b)

        Federal Rule of Civil Procedure 9(b) requires that a plaintiff allege the “who,” “what,”

“when,” and “where” with respect to the circumstances of an alleged fraud. See Heath, 791 F.3d

at 124; Stevens, 662 F. Supp. 2d at 114. Boston Heart argues that the relator’s Second Amended

Complaint does not satisfy this heightened pleading requirement because for all three theories of

liability that have otherwise survived the motion to dismiss, he does not allege “who at Boston


9
  The Court recognizes that the relator also alleges, in discussing the packaging fees scheme, that “Boston Heart
actively encourage[d] physicians to order additional tests—whether medically necessary or not—in order to increase
the number of ‘packaging’ fees physicians receive[d].” 2d Am. Compl. ¶ 61. In the Court’s view, this allegation
does not constitute an allegation that Boston Heart knew that its additional tests on its lipid panel were medically
unnecessary; rather, it constitutes an allegation that Boston Heart knew that ordering additional tests would mean
increased packaging fees for the physician, and that in the relator’s view, such tests were often not medically
necessary.
10
   These two theories of liability are dismissed with respect to both the relator’s false presentment and false
statements causes of action because the knowledge element is a required component of both claims. See 31 U.S.C.
§ 3729(a)(1)(A)–(B), (b)(1).

                                                        35
Heart made the [kickback] agreements with physicians (or sent the agreements that physicians

‘received’); when [ ] such [kickback] agreements occur[red]; where and how [ ] such [kickback]

agreements come to be; and . . . the terms of the agreement[s].” Def.’s Mem. at 26.

         The Court finds that the relator does sufficiently allege the “who” requirement of Rule

9(b), i.e., which Boston Heart employees were part of the scheme, having identified the

following individuals as knowing participants of all three purported schemes: (1) Boston Heart’s

President and CEO, Susan Hertzberg; (2) the Chairman of Boston Heart’s Board of Directors,

Peter Parker (3) Boston Heart’s Chief Business Officer, Alice Limkaking; (4) Boston’s Heart’s

General Counsel, Frank Yunes; and (5) Boston Heart’s Director, Jeff Crison. 2d. Am. Compl.

¶ 107. Because these specific, high-level employees have been identified as having allegedly

participated in the schemes, the Court finds that the “who” element is satisfied. 11 See United

States ex rel. Scott v. Pac. Architects & Eng’rs (PAE), Inc. d/b/a PAE Gov’t Servs., Inc., 270 F.

Supp. 3d 146, 154 (D.D.C. 2017) (concluding that the who element was satisfied because the

complaint named “some of the employees involved”).

         The Court similarly finds that the relator satisfies the “when” requirement of Rule 9(b).

Although the relator alleges the timeframe of Boston Heart’s scheme generally, stating that the


11
   Boston Heart concedes that even if the relator had not identified specific individuals, under Heath, “individual
employees at a corporation need not always be named, especially where fraud is alleged to be a specific corporate
policy.” Def.’s Mem. at 26 n.17 (citing Heath, 791 F.3d at 125). Boston Heart seeks to distinguish Heath from the
circumstances here by arguing that the relator “alleges something different than a Boston Heart policy; [rather, the
relator] alleges that Boston Heart and certain physicians came to an understanding regarding waiver of co-payments
and deductibles and medical referrals.” Id. However, the Court does not see a difference between the facts in Heath
and the facts here. In Heath, the relator “allege[d] that [the defendant] orchestrated and implemented through its
subsidiaries a corporate-wide scheme to have false claims submitted to [a government] Fund by depriving schools
and libraries in the [Fund’s Internet and telephone] program of the lowest corresponding price for services.” Heath,
791 F.3d at 117. The Court finds that in this case, like in Heath, the relator has alleged that there was “a corporate-
wide scheme to have false claims submitted to [the government],” id., because the relator alleges that the scheme
was perpetrated by some of Boston Heart’s highest-level officers and employees, see 2d Am. Compl. ¶ 107. Calling
what happened in Heath a “policy,” while arguing that what the relator alleges here is not a policy, makes the two
actions distinguishable in name only. That is so because in both cases, the relators allege “a corporate-wide scheme
to have false claims submitted to [the government].” Heath, 791 F.3d at 117; see also 2d Am. Compl. ¶ 107.


                                                          36
fraud has been occurring “since 2011,” 2d. Am. Compl. ¶ 1, and that the scheme was tweaked in

2016, id. ¶ 3, that is sufficient under Heath, where the relator identified only the years when the

scheme was perpetrated, see 791 F.3d at 124 (“In short, Rule 9(b)’s requirements of particularity

as to . . . when (1997 to 2009) [has] been satisfied.”); see also United States ex rel. Head v. Kane

Co., 798 F. Supp. 2d 186, 203 (D.D.C. 2011) (“Where a ‘scheme spans several years,’ ‘Rule 9(b)

does not require plaintiffs to allege every fact pertaining to every instance of fraud . . . .’”

(alteration in original) (quoting Williams, 389 F.3d at 1259)). Therefore, the timeline that the

relator alleges is sufficient to satisfy Rule 9(b).

        The Court also finds that the relator has satisfied the “where” requirements of Rule 9(b).

In Heath, the Circuit found that Rule 9(b) was satisfied by the relator alleging that the scheme

took place “through nineteen subsidiaries and their interactions with [program] schools and

libraries across the Country.” Heath, 791 F.3d at 124. The relator here alleges that the scheme

was perpetrated with the participation of over fifty physicians through their interactions with

their patients, their fellow physicians, and Boston Heart. See 2d. Am. Compl. ¶ 98 (naming over

fifty physicians involved in the alleged scheme and providing their practices’ addresses).

Therefore, the relator alleges the conduits and locations through which the scheme allegedly

occurred, see 2d. Am. Compl. ¶ 98, which sufficiently pleads the “where” requirement of Rule

9(b), see Heath, 791 F.3d at 124; see also Scott, 270 F. Supp. 3d at 154 (noting that the “what

and where” elements were satisfied by alleging “the contracts and location effected”).

        The “what” requirement varies for each surviving theory of liability. In Heath, the

“what” requirement of Rule 9(b) was satisfied by the relator providing a “detailed identification

of a centralized and institutionalized failure to comply with the lowest-corresponding-price




                                                      37
requirement, which resulted in massive overbilling of a governmental program.” 791 F.3d at

124. Specifically, the relator in Heath alleged that

        AT&T orchestrated and implemented through its subsidiaries a corporate-wide
        scheme to have false claims submitted to the [government] Fund by depriving
        schools and libraries in the [Internet and telephone] program of the lowest
        corresponding price for services. Schools and libraries, unaware of those
        overcharges, then passed those inflated costs on to the federal government for
        reimbursement through the [government] Fund.

                                                 ***

         . . . AT&T chose not to train its employees in the lowest-corresponding-price
        requirement . . . [and] as a result of AT&T’s knowing or reckless decision not to
        train its employees, AT&T’s sales representatives nationwide overbilled
        [participating] schools and libraries—that, in turn, passed those inflated costs onto
        the [government] Fund—for more than a decade.

Id. at 117–18. For all three surviving theories of liability, the relator here contends that Boston

Heart “has perpetrated a multi-million dollar fraud on U.S. taxpayers through a Medicare

kickback scheme.” 2d. Am. Compl. ¶ 1. This, along with the relator’s identification of five of

the highest-level Boston Heart officials allegedly involved in the scheme, id. ¶ 107, and of over

fifty named physicians who allegedly participated in the scheme, id. ¶ 98, conveys that this

scheme was both “centralized” and “institutionalized,” see Heath, 791 F.3d at 124, thus

satisfying part of the Heath requirement, see id. (holding that the “what” requirement was

satisfied by the relator’s “detailed identification of a central and institutionalized failure to

comply with the [government price] requirement”).

        The Court must now additionally consider whether the relator provides a “detailed

identification” of the scheme, see id., underlying each surviving theory of liability in order to

determine whether the “what” requirement of Rule 9(b) is satisfied.




                                                   38
                       a.      Whether the Relator Satisfies the “What” Requirement of Rule
                               9(b) Regarding the Waiver of Co-payments and Deductibles
                               Theory of Liability

       Boston Heart argues that the relator fails to “plausibly allege a nexus or link between

Boston Heart’s alleged waiver of co-payments and deductibles and physician referrals of

Medicare-covered testing to Boston Heart.” Def.’s Mem. at 27. Boston Heart also argues that

the relator’s allegations regarding waiver of co-payments and deductibles are “vague[] and

conclusory” because he fails to allege the “terms of the agreement[].” Id. at 26. The Court

disagrees.

       The relator alleges that Boston Heart “promise[d] physicians that it w[ould] waive

deductibles, so long as the physicians sen[t] all of their lipid-related business—especially the

highly profitable Medicare business—to [Boston Heart]’s laboratory.” 2d Am. Compl. ¶ 44. In

the Court’s view, this sufficiently provides both the link between Boston Heart and the

physicians’ referral of Medicare business, as well as the terms of the agreement, because the

relator specifically alleges that Boston Heart agreed to waive co-payments and deductibles in

exchange for physicians referring Medicare patients to Boston Heart—the link is a quid pro quo

with the terms of agreement being that Boston Heart would only waive co-payment and

deductibles if it received referrals of Medicare patients.

       The relator also provides a “detailed identification” of the purported waiver of co-

payments and deductibles scheme. See Heath, 791 F.3d at 124. The relator alleges that Boston

Heart waives co-payments and deductibles for physicians’ privately insured patients in return for

their referral of their Medicare business, 2d Am. Compl. ¶ 45, with Boston Heart profiting from

the Medicare referrals, id., and the physicians benefitting from the increased private patient flow

resulting from their advertising the waiver of co-payments and deductibles, id. ¶ 37.



                                                 39
Furthermore, the relator alleges that when Boston Heart learned that its waiver scheme might be

detected, it switched to a Know It Now Fee system instead of waiving co-payments and

deductibles, id. ¶¶ 47–49, attaching a copy of the Know It Now Fee schedule, id., Ex. 2, showing

that the new fees, mostly ranging between $1 and $5, were significantly lower than what Boston

Heart could have charged through co-payments and deductibles, and thus, Boston Heart

continued to induce physicians to send it their Medicare business, id. ¶ 51.

       In Heath, the Circuit found that when the relator provided “factual specificity concerning

the type of fraud [and] how it was implemented,” as well as a document allowing the court to

“corroborate[] by . . . concrete example” the alleged fraud, this was enough to satisfy Rule 9(b),

791 F.3d at 126. The same is true here: the relator provides a detailed account of the alleged

scheme, including how it was implemented, as well as the attached Know It Now Fee schedule,

which shows the fees that Boston Heart charged instead of co-payments and deductibles.

Therefore, the relator has provided corroboration of the specific details of the scheme through

the submission of the Know It Now Fee schedule. Accordingly, the Court finds that the relator

has satisfied Rule 9(b) regarding the waiver of co-payments and deductibles. See Kellogg

Brown & Root Servs., 800 F. Supp. 2d at 153–54 (“While the [plaintiff] conceivably could have

provided additional details—such as individual claim numbers or the specific submissions that

are allegedly false—the same could be said of virtually every complaint, particularly those based

on multiple claims . . . . What matters here is that the complaint fulfills Rule 9(b)’s underlying

purpose of providing [the defendant] with ‘sufficient notice of the claims against [it] to prepare a

defense.’” (third alteration in original) (quoting Ortega, 240 F. Supp. 2d at 18)).




                                                 40
                       b.     Whether the Relator Satisfies the “What” Requirement of Rule
                              9(b) Regarding Boston Heart’s Payment of Packaging Fees

       Boston Heart makes several arguments regarding why the relator has not satisfied Rule

9(b)’s “what” requirement for the packaging fees scheme theory of liability. Boston Heart

argues that the relator “does not identify the amount of [packaging] fees Boston Heart paid with

respect to any claim submitted to the government.” Def.’s Mem. at 16. The relator argues in

response that he did provide the amount of the packaging fees, see Relator’s Opp’n at 16,

because he alleged that Boston Heart paid LlmobileLab, Biotex, and VeniExpress $15, 2d Am.

Compl. ¶ 64, and sometimes up to $25, per blood draw, id. ¶ 62. The Court therefore agrees with

the relator that he provided the amount of the packaging fees that Boston Heart allegedly paid to

physicians.

       Boston Heart next argues that the relator “does not identify the fair market value for the

[packaging] services associated with such fees.” Def.’s Mem. at 16. The relator alleges that the

standard draw fee allowed by Medicare is $3, 2d. Am. Compl. ¶ 55, and cites to an OIG

Advisory Opinion stating that a $6 draw fee is illegal, see id. ¶ 54 (citing 2005 OIG Advisory

Opinion). Although the relator does not cite or provide what constitutes a standard packaging

fee, see id. ¶¶ 54–55, this is presumably because CMS has not established one, see generally

2014 OIG Special Fraud Alert, but the Special Fraud Alert, in its discussion of packaging fees,

states that “arrangements providing free or below-market goods or services to actual or potential

referral sources are suspect and may violate the [A]nti-[K]ickback [S]tatute, depending on the

circumstances,” id. at 2; see also id. at 4 (providing various factors to consider “[w]hen

determining the fair market value of a physician’s services”). And, OIG noted:

       Whether an actual violation of the [Anti-Kickback S]tatute occurs depends on the
       intent of the parties—the [A]nti-[K]ickback [S]tatute prohibits the knowing and
       willful payment of such amounts if even one purpose of the payment is to induce

                                                 41
         or reward referrals of Federal health care program business. This is true regardless
         of whether the payment is fair market value for services rendered.

Id. at 4 (emphasis added). Here, the relator has alleged that Boston Heart’s intent in covering

physicians’ packaging fees was to “induce[] physicians to order tests from [Boston Heart],” 2d

Am. Compl. ¶ 62. Because the OIG has made clear that the Anti-Kickback Statute may be

violated even if the payment in question is of an amount equivalent to fair market value, so long

as the parties intend to induce referrals of federal health care business, the Court does not find

that the relator’s failure to provide a fair market value for packaging fees is grounds for dismissal

under Rule 9(b).

         Boston Heart next argues that the relator “does not identify any specific payment to any

specific physician.” Def.’s Mem. at 16. The relator responds that he “identified dozens of

physicians who received packaging fees and zero balance billing and who made referrals to

Boston Heart.” Relator’s Opp’n at 16; see 2d Am. Compl. ¶ 98 (providing a list of several

specific physicians who purportedly received packaging fees or waivers of co-payments and

deductibles). Because the relator provides the names and locations of over fifty physicians who

allegedly referred Medicare business to Boston Heart after allegedly receiving inflated packaging

fees, 2d Am. Compl. ¶ 98, the Court is not persuaded by Boston Heart’s argument. 12

         Finally, Boston Heart argues that the relator fails to satisfy Rule 9(b) in regards to the

alleged packaging fees scheme because in Heath, the Circuit relied on “the concrete example of



12
    Boston Heart also argues that the relator “does not provide any evidence establishing a nexus between the alleged
[packaging] fee agreement with physicians and the referral of Medicare business to Boston Heart.” Def.’s Mem. at
17. As an initial matter, the relator need not provide evidence to satisfy Rule 9(b); rather, he must state allegations
with sufficient particularity. See Fed. R. Civ. P. 9(b). And the Court finds that the relator sufficiently alleges a
nexus between Boston Heart’s allegedly inflated packaging fees and Medicare referrals. Specifically, the relator
alleges that Boston Heart pays physicians packaging fees that “far exceed fair market value . . . designed to induce
the referral of Medicare business to [Boston Heart].” 2d. Am. Compl. ¶ 4; see also id. ¶ 53 (“The second form of
illegal remuneration provided by [Boston Heart] to induce the referral of Medicare business is the payment to
physicians of inflated ‘packaging’ fees.”).

                                                          42
[an] audit documenting the [scheme]” provided by the relator as the basis for finding that Rule

9(b) had been satisfied. See Def.’s Mem. at 17 (quoting Heath, 791 F.3d at 126). The Court is

unpersuaded by this argument. Although a concrete example can be helpful in analyzing the

pleading of claims under Rule 9(b), other members of this Court have found that “plaintiffs are

not required to ‘affix actual claims for payment to the complaint.’” Head, 798 F. Supp. 2d at 203

(quoting Pogue I, 238 F. Supp. 2d at 269); see also Kellogg Brown & Root Servs., 800 F. Supp.

2d at 153–54. This Court agrees with its colleagues that requiring a concrete example of the

alleged fraud would “require claimants to essential provide detailed proof of their allegations,”

which is not required “on a 9(b) motion to dismiss.” Head, 798 F. Supp. 2d at 202–03 (footnote

omitted). Therefore, this argument fails as well.

                       c.      Whether the Relator Satisfies the “What” Requirement of Rule
                               9(b) Regarding Boston Heart’s Payment of Speaking and
                               Consulting Fees

       Boston Heart argues that the relator’s characterization of Boston Heart’s speaking and

consulting fees paid to a nurse practitioner and a physician as “outrageous,” 2d. Am. Compl. ¶ 7,

is “conclusory,” Def.’s Mem. at 29. The Court agrees. The relator alleges that the speaking and

consulting fees paid by Boston Heart were $200,000, and that the payment of this amount was

“outrageous.” 2d. Am. Compl. ¶ 7. Although the Court must treat this allegation as true under

Rule 12(b)(6), and finds that the relator plausibly alleges that a kickback occurred, see supra at

23–24, Rule 9(b) requires “a party [to] state with particularity the circumstances constituting

fraud or mistake,” Fed. R. Civ. P. 9(b). Without providing any further detail regarding why

payment of the $200,000 qualifies as an “outrageous” speaking and consulting fee for a

physician or nurse practitioner, the Court cannot find that the relator alleges a fraud with

sufficient particularity. Although the relator does allege in the introduction of his Second



                                                 43
Amended Complaint that Boston Heart paid such speaking and consulting fees to the physician

and nurse practitioner to “explain[] to [other] physicians how much money they could make by

receiving packaging fees,” 2d. Am. Compl. ¶ 7, and also alleges that packaging fees are part of

Boston Heart’s kickback scheme, id. ¶ 4, he never specifically alleges that the physician and

nurse practitioner were promoting inflated packaging fees, nor does he provide any further detail

regarding the scheme or even mention the scheme again, see generally id. With nothing more

than an attenuated connection between Boston Heart’s payment of speaking and consulting fees

and the alleged inflation of packaging fees, the Court concludes that the relator fails to allege a

speaking and consulting fee fraud with sufficient particularity under Rule 9(b). Accordingly, the

Court holds that the “what” requirement of Rule 9(b) has not been satisfied, and therefore

dismisses the theory of liability based on the payment of speaking and consulting fees to the

physician and nurse practitioner.

       In conclusion, as to the relator’s false presentment cause of action, the Court finds that

two theories of liability survive Boston Heart’s motion to dismiss: (1) the waiver of patient

co-payments and deductibles theory, and (2) the payment of inflated packaging fees to

physicians theory. The Court dismisses the three following theories of liability: (1) the physician

self-referral theory, (2) the medically unnecessary testing theory, and (3) the payment of

excessive speaking and consulting fees theory.

B.     Count II: The False Statements Claim Cause of Action

       Section 3729(a)(1)(B) of the False Claims Act creates liability for “any person

who . . . knowingly makes, uses, or causes to be made or used, a false record or statement

material to a false or fraudulent claim.” 31 U.S.C. § 3729(a)(1)(B). The purpose of the false

statements provision is to “prevent those who make false records or statements . . . from escaping



                                                 44
liability solely on the ground that they did not themselves present a claim for payment or

approval.” Morsell, 130 F. Supp. 3d at 122 (quoting Totten v. Bombardier Corp., 380 F.3d 488,

501 (D.C. Cir. 2004)). “[T]he elements for a count brought under [§] 3729(a)(1)(B) are

practically identical to the requirements for a count brought under [§] 3729(a)(1)(A).” Penchang

Si v. Laogai Research Found., 71 F. Supp. 3d 73, 87 (D.D.C. 2014). Thus, to establish a “false

statements” violation, a relator must show that “(1) the defendant made or used [or caused to be

made or used] a ‘record or statement;’ (2) the record or statement was false; (3) the defendant

knew it to be false; and (4) the record or statement was ‘material’ to a false or fraudulent claim.”

Morsell, 130 F. Supp. 3d at 122 (alterations in original) (quoting United States ex rel. Hood v.

Satory Global, Inc., 946 F. Supp. 2d 69, 85 (D.D.C. 2013)).

       The relator “incorporate[s] by reference and reallege[s] all of the allegations contained in

[the False Presentment section] of [his Second Amended] Complaint,” 2d Am. Compl. ¶ 113, to

allege that “[Boston Heart] knowingly . . . made, used, or caused to be made or used false

records or statements material to false or fraudulent claims,” id. ¶ 114. Boston Heart argues that

the relator’s false statements claim must be dismissed because the relator “fails to make a single

allegation concerning a false statement or record,” and “appears to have tacked on a [§]

3729(a)(1)(B) claim based on the same set of facts as [the r]elator’s [§] 3729(a)(1)(A) false

presentment claim.” Def.’s Mem. at 35. The Court disagrees.

       The Court is unpersuaded by Boston Heart’s argument that the relator’s false statements

claim must be dismissed because the relator has not alleged an “independent reason” for liability

under the false statements cause of action. See Def.’s Mem. at 35. Other members of this Court

have allowed a relator to proceed with both a false presentment cause of action and a false

statements cause of action based on the same factual allegations. See, e.g., Scott, 270 F. Supp.



                                                 45
3d at 154 (concluding that the relators presented viable presentment and false statements causes

of action under the same set of facts). It is immaterial that the relator alleges a false statements

claim based on the same set of facts as his false presentment claim because “the elements for a

count brought under [§] 3729(a)(1)(B) are practically identical to the requirements for a count

brought under [§] 3729(a)(1)(A).” Penchang, 71 F. Supp. 3d at 87. Furthermore, parties are

entitled to plead claims in the alternative. See Fed. R. Civ. P. 8(d)(2); see also 5 Charles Alan

Wright & Arthur R. Miller, Federal Practice and Procedure § 1282 (3d ed. 2005) (“Federal Rule

8(d)(2) affords a party considerable flexibility in framing a pleading by expressly permitting

claims for relief or defenses to be set forth in an alternative or hypothetical manner.” (footnote

omitted). Because the Court has already found that the relator has sufficiently alleged that

Boston Heart made statements that were legally false in its claims for Medicare payments, see

supra at 27, the Court finds that the relator also plausibly alleges a false statements cause of

action for Boston Heart’s (1) waiver of patient co-payments and deductibles, and (2) the payment

of inflated packaging fees to physicians.

C.     Count III: The Reverse False Claims Cause of Action

       Section 3729(a)(1)(G) of the False Claims Act, known as the “reverse false claims”

provision, creates liability for “any person who . . . knowingly makes, uses, or causes to be made

or used, a false record or statement material to an obligation to pay or transmit money or

property to the Government, or knowingly conceals or knowingly and improperly avoids or

decreases an obligation to . . . the Government.” 31 U.S.C. § 3729(a)(1)(G).

       Whereas a traditional false claim action involves a false or fraudulent statement
       made to the government to support a claim for money from the government, a
       typical reverse false claim action involves a defendant knowingly making a false
       statement in order to avoid having to pay the government when payment is
       otherwise due.



                                                 46
Pencheng Si, 71 F. Supp. 3d at 88 (citing United States v. Caremark, Inc., 634 F.3d 808, 814–15

(5th Cir. 2011)).

       Boston Heart argues that the relator’s reverse false claims act claim must be dismissed

because the relator’s allegation simply realleges the relator’s false statements and false

presentment causes of action. Def.’s Mem. at 35. The Court agrees.

       This Court, as well as three other members of this Court, have determined that

       [a] reverse false claim may not rest, however, on the argument “that an obligation
       arose out of [the d]efendants’ concealment of their allegedly fraudulent activity,”
       because “by this logic, just about any traditional false statement or presentment
       action would give rise to a reverse false claim action; after all, presumably any false
       statement actionable under sections 3729(a)(1)(A) or 3729(a)(1)(B) could
       theoretically trigger an obligation to repay the fraudulently obtained money.”

Groat I, 255 F. Supp. 3d at 32 (citing United States ex rel. Scollick v. Narula, 215 F. Supp. 3d

26, 41 (D.D.C. 2016)) (quoting Pencheng Si, 71 F. Supp. 3d at 97); see also Scollick, 215 F.

Supp. 3d at 41 (“Like the Court in Pencheng Si, this Court finds that the fraudulent actions

alleged here do not trigger an obligation to repay the fraudulently obtained money.”); see also

Scott, 270 F. Supp. 3d at 155 (same). Because the relator “does not plead any monetary

obligation owed by Boston Heart to the government independent of its concealing of [its]

allegedly fraudulent activity,” Groat I, 255 F. Supp. 3d at 32 (quoting Scollick, 215 F. Supp. 3d

at 40), the Court must dismiss the relator’s reverse false claims cause of action.

                                      IV.    CONCLUSION

   For the foregoing reasons, the Court grants in part and denies in part Boston Heart’s motion

to dismiss the Second Amended Complaint. Specifically, the Court grants the motion and

dismisses the following theories of liability under both the false presentment and false statements

causes of action (Counts I and II): (1) the payment of speaking and consulting fees theory, (2) the

physician self-referral theory, and (3) the medically unnecessary testing theory. The theories of

                                                 47
liability regarding (1) the waiver of patient co-payments and deductibles and (2) the payment of

inflated packaging fees to physicians survive under both Counts I and II. Finally, the Court

grants Boston Heart’s motion to dismiss the reverse false claims cause of action (Count III).

       SO ORDERED this 12th day of September, 2018. 13



                                                                              REGGIE B. WALTON
                                                                              United States District Judge




13
     The Court will contemporaneously issue an Order consistent with this Memorandum Opinion.

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