The $11 million false claims award against the diagnostic imaging company MedQuest Associates Inc was overturned on Monday by the 6^th U.S. Circuit Court of Appeals. The federal appeals court found that the district court in Tennessee that had issued the judgment finding MedQuest guilty of flouting certain Medicare requirements had erred. The appeals court found that the violations regarding using unapproved physicians for monitoring patient tests or using an outdated billing code did not amount to Medicare fraud.

Writing for an unanimous three-judge panel, Judge John Rogers observed, “Because these regulations are not conditions of payment, they do not mandate the extraordinary remedies of the FCA and are instead addressable by the administrative sanctions available, including suspension and expulsion from the Medicare program.”

The original plaint had been part of a whistle-blower lawsuit, brought in 2006 by Karen Hobbs, a former MedQuest employee. The Justice Department later intervened in the lawsuit brought under the False Claims Act.

  

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In the case, the Justice Department and Hobbs accused certain company facilities in Tennessee of using physicians who had not been designated for the procedures, and of using the billing code of an individual doctor whose practice was purchased by MediQuest.

Calculating in total 343 violations for test supervision fined at $11,000 each, and 945 instances of the company using the doctor’s billing number, which was again fined at $5,500 per violation – the U.S. District Court for the Middle District of Tennessee granted summary judgment amounting to $11 million to the government.

However, the 6^th Circuit reversed the order on Monday.

In reversing the ruling of the lower court, the 6^th Circuit further observed, “The bluntness of the FCA’s hefty fines and penalties makes them an inappropriate tool for ensuring compliance with technical and local program requirements like the special supervision requirements at issue in this case.”