United States of America v. Cardiodx, Inc.

Background

Bryan Barnette brought claims as a relator on behalf of the United States and California. He alleged that CardioDx, Inc. fraudulently sought Medicare reimbursement for medically unnecessary, excessive, and ineffective Corus CAD cardiovascular tests. He also alleged that David Levison caused, aided, or abetted the submission of fraudulent claims for those tests to private insurers in violation of California law.

The opinion alleges that Levison was CardioDx’s founder, former Chief Executive Officer, current Chief Strategy Officer, and a member of the company’s board of directors. Barnette’s Second Amended Complaint asserted California Insurance Frauds Prevention Act claims involving patient procurement, kickbacks, and false insurance claims.

The court had previously found that the allegations against Levison were deficient and required facts connecting his specific conduct and roles to the alleged fraudulent acts. Barnette added more factual allegations about Levison’s conduct concerning the Corus CAD tests and efforts to obtain government approval.

Motion and arguments

Levison moved under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not allege enough facts to state a legally sufficient claim. He challenged only the Fifth through Ninth Causes of Action.

Barnette did not oppose dismissal of the Fifth, Sixth, and Ninth Causes of Action. The Fifth Cause of Action concerned allegedly employing people to procure patients. The Sixth concerned presenting or causing the presentation of false or fraudulent insurance claims. The Ninth concerned another alleged violation involving payment of a health benefit.

The remaining Seventh Cause of Action alleged that Levison knowingly prepared or made writings supporting false or fraudulent claims, or aided, abetted, solicited, or conspired to do so. The Eighth Cause of Action alleged that he presented or caused the presentation of false or fraudulent claims, or aided, abetted, solicited, or conspired to do so.

Levison argued that Barnette’s theory—that Levison induced Medicare to approve and cover the tests despite knowing they were ineffective for Medicare-age patients—did not plausibly show that Levison submitted or helped submit false claims to private insurers. Barnette relied partly on an inference that private insurers generally would not reimburse medically unnecessary procedures and followed Medicare’s medical-necessity guidelines. He requested permission to expressly add that allegation if the court dismissed the claims.

Ruling

The court granted Levison’s motion to dismiss. The Fifth, Sixth, and Ninth Causes of Action were dismissed with prejudice. The Seventh and Eighth Causes of Action were dismissed with leave to amend. The court stated that Barnette could add the missing allegations, including identifying the person or persons with whom Levison allegedly aided, abetted, or conspired.

Barnette was ordered to file a Third Amended Complaint within 20 days of the order. The opinion addresses whether the complaint adequately pleaded the claims; it does not decide whether the alleged insurance fraud occurred.