False Claims Act Complaint Against “Sophisticated” Medicaid Plan Allowed To Proceed

MM Curator summary


Molina dropped a vendor whose service was included in its cap rate, and the lawsuit has been allowed to proceed.


The article below has been highlighted and summarized by our research team. It is provided here for member convenience as part of our Curator service.


20 October 2021

by Shannon Britton Hartsfield



Molina Healthcare of Illinois (Molina) was a Managed Care Organization (MCO) that received a per-patient capitated payment from the Illinois Medicaid program to provide certain services. These services included, among other things, certain professional services delivered within a skilled nursing facility to Molina’s Medicaid beneficiaries receiving nursing facility services. The services were supposed by be rendered by “SNFists,” who are medical professionals focused on providing and coordinating medical care for individuals residing in a nursing facility. Molina provided SNFist services through a subcontract with GenMed. GenMed eventually terminated its contract with Molina due to a payment dispute, yet Molina continued to receive capitation payments from the state without providing SNFist services, either directly or through another subcontractor.

As an MCO, Molina had a risk-based contract in which it agreed to receive a per-enrollee fee, and in exchange, Molina assumed the risk that its cost of providing services could exceed those fees. For a two-year period after the termination of the GenMed agreement, Molina did not deliver SNFist services, yet it continued to receive the full capitation amount for those SNFist services from the Illinois Medicaid program.

GenMed’s founder, Thomas Prose, was aware of this situation and filed a qui tam complaint under the False Claims Act (FCA) and its state law corollary. The lower court dismissed the case for failure to state a claim because it found that the relator’s complaint failed to sufficiently allege that Molina knew that the failure to provide SNFist services was material. On Aug. 19, 2021, the U.S. Court of Appeals for the Seventh Circuit, in United States ex rel. Prose v. Molina Healthcare of Ill., Inc., 10 F. 4th 765 (7th Cir. 2021), reversed and remanded for further proceedings based on the finding that “as a sophisticated player in the medical-services industry, Molina was aware that these kinds of services play a material role in the delivery of Medicaid benefits.”

The court noted that a complaint in a suit brought under the FCA must include particular information regarding the fraud in order to survive. The court found that Prose’s detailed allegations were adequate to state a claim under the FCA and sufficiently alerted Molina regarding the details of a false claim. The fact that Prose did not have details that would be available only in Molina’s files did not defeat the complaint. The lower court found that Prose’s allegations were inadequate to allege that Molina knew that the SNFist services were material to the government’s payment. The appellate court determined that, as a “highly sophisticated member of the medical-services industry,” Molina knew that capitation rates were designed to reimburse providers for services rendered and that the SNFist services were the reason why the capitation rate was as high as it was. Because the complaint contained sufficient allegations that Molina was aware that its higher capitation rate hinged, in large part, on the provision of SNFist services, the court held that the relator could proceed with the complaint.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.Clipped from: https://www.mondaq.com/unitedstates/healthcare/1123040/false-claims-act-complaint-against-sophisticated-medicaid-plan-allowed-to-proceed