Reported / Citable
Background
A former UT Physicians employee brought this qui tam action under the federal False Claims Act and the Texas Health Care Program Fraud Prevention Act. The operative third amended complaint alleged that UT Physicians, McKesson Corp., and Change Healthcare submitted fraudulent claims to federal and state healthcare programs.
The relator added McKesson and Change as defendants in 2024. McKesson allegedly participated in the asserted conduct only through March 2017. The complaint alleged that Change provided revenue-cycle-management services to UT Physicians, while UT Physicians contended that it was an arm of the State of Texas and therefore immune from suit.
The Court’s Holding
Magistrate Judge Peter Bray recommended dismissing the claims against McKesson with prejudice as untimely. Because the relator did not allege McKesson misconduct after March 2017 and did not assert claims against it until May 24, 2024, the claims were outside the FCA’s six-year period. They were also outside the alternative three-year period, which the magistrate judge concluded began when the government received the original qui tam complaint and supporting materials on May 7, 2021. The recommended dismissal also covered the parallel Texas claim.
The magistrate judge also recommended dismissing the claims against Change with prejudice. The contract central to the allegations was between UT Physicians and Change Healthcare Technology Enabled Services, LLC—not the named Change defendants—and the complaint did not plead a basis, such as alter ego liability, to hold the named entities responsible. As to UT Physicians, the magistrate judge recommended denying its dismissal motion without prejudice and allowing jurisdictional discovery because the existing record did not establish whether it is an arm of the state entitled to sovereign immunity.
Key Takeaways
- An FCA relator cannot rely on the statute’s ten-year outer limit without satisfying the separate three-year government-knowledge requirement.
- Adding a defendant after the limitations deadline can bar claims when the complaint alleges no timely conduct by that defendant.
- Jurisdictional discovery may be appropriate before resolving whether an affiliated healthcare entity is an arm of the state.
Why It Matters
The recommendation underscores that FCA limitations analysis is defendant-specific and that the three-year government-knowledge period can begin upon the filing of an earlier qui tam complaint containing materially similar allegations. It also illustrates the need to identify the contracting corporate entity precisely when FCA liability is premised on services provided under a contract.
This was a memorandum and recommendation; the parties were given fourteen days to object, and the district judge had not yet entered the recommended disposition.