In a March 3, 2025 report and recommendation (R&R), a court-appointed special master in U.S. ex rel. Poehling v. UnitedHealth Group, Inc., No. cv 16-08697-FMO-PVCx, 2025 WL 682285 (C.D. Cal. Mar. 3, 2025), found that materiality is an essential element for liability under the reverse false claims provision of the False Claims Act (FCA) and, therefore, the Department of Justice (DOJ) does not have evidence to support their FCA claims. In its R&R, the special master recommended the denial of the motion for partial summary judgment submitted by the DOJ on the issue that materiality is not required for liability under the second prong of the reverse false claim provision—commonly referred to as the “avoids” prong—which imposes liability on a person who “knowingly and improperly avoids or decreases an obligation to pay…the Government.” 31 U.S.C. § 3729(a)(1)(G).
The case itself centers on allegations that Medicare Advantage plan defendants improperly retained Medicare Advantage payments that they should have repaid to the government. Those payments stemmed from diagnosis codes that the DOJ alleged the defendants should have identified as not supported by medical records during defendants’ chart review process. As explained in the R&R, Medicare Advantage plans “may obtain and review patients’ medical records to identify additional codes doctors may have failed to include in submitting claim forms”—a process commonly referred to as a “chart review.” Poehling, 2025 WL 682285, at *6. Defendants’ chart reviews were generally conducted “in a ‘blind’ manner, meaning a coder reviewing a medical record did not know what diagnosis codes the doctor had submitted.” Id. Defendants argued, among other things, that by coding blindly, coders did not know whether some of the diagnosis codes previously submitted by treating providers were unsupported by medical records—precluding the requisite reverse FCA knowledge element. Defendants also argued that they disclosed to their regulator, the Centers for Medicare & Medicaid Services (CMS), the nature of their chart review program, including the fact that it did not search for potentially unsupported diagnosis codes. This disclosure, the special master reasoned, meant that “CMS undeniably knew for years about United’s practices and was aware when it made the challenged payments that United’s coders never sought to independently confirm the validity of the diagnostic codes identified by the doctors.” Id. at *20. Defendants had argued that CMS’s continued payments demonstrated that the chart review program operation was not material to the agency’s payment decision, defeating another essential element for reverse FCA liability.