Appeals court revives whistleblower lawsuit against Kinetic Concepts

This article has been updated to include information from Acelity.

A federal appeals court has revived a whistleblower lawsuit alleging that Acelity subsidiary Kinetic Concepts fraudulently billed Medicare for its negative-pressure wound therapy devices without doctors’ orders.

A unanimous Ninth Circuit Court of Appeals panel decided that a district court erred in dismissing the lawsuit even though whistleblower and former KCI employee Geraldine Godecke did not cite specific bills. Godecke had adequately shown a pattern of fraudulent billing that led to “a strong inference that the claims were actually submitted,” Judge A. Wallace Tashima wrote for the court. Godecke’s claims are supported by information by a former co-worker who personally reviewed the Medicare claims, Tashima added.

When Godecke raised concerns in 2007 about whether KCI was following proper rules for billing Medicare, KCI quickly fired not only Godecke, but also her supervisor, and the senior vice president to whom they both reported, according to the ruling. Godecke’s supervisor told her that KCI management was afraid she was gathering information on false claims and was going to be a whistleblower, Tashima added.

Liability under the False Claims Act is established only when the defendant “knowingly” presents a false or fraudulent claim for payment, Tashima wrote. “Instead of pleading specific intent to defraud, it is sufficient to plead that the defendant knowingly filed false claims, or that the defendant submitted false claims with reckless disregard or deliberate ignorance as to the truth or falsity of its representations…

“The deliberate ignorance standard can cover ‘the ostrich type situation where an individual has buried his head in the sand and failed to make simple inquiries which would alert him that false claims are being submitted,'” Tashima added, referring to a 2016 9th Circuit decision in United States v. United Healthcare Insurance Company. “Congress adopted the concept that individuals and contractors receiving public funds have some duty to make a limited inquiry so as to be reasonably certain they are entitled to the money they seek.”

“While we respect the court’s ruling, we believe in the merits of our defense, and look forward to presenting the facts of our case,” Acelity said in an email to MassDevice.

Steven Hartpence and Geraldine Godecke filed the lawsuit in 2008 in the U.S. District Court for Central California. Judge George King dismissed the case in 2012, ruling that Hartpence and Godecke failed to show that they had a part in bringing the allegations to light.

The district court granted KCI’s motion for summary judgment in Hartpence’s qui tam action against KCI in June 2019, dismissing all of his claims.