United States Ex Rel. Stephen Gugenheim v. Meridian Senior Living, LLC

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 20-1583
UNITED STATES EX REL. STEPHEN GUGENHEIM; STATE OF NORTH
CAROLINA EX REL. STEPHEN GUGENHEIM,
Plaintiffs – Appellants,
v.
MERIDIAN SENIOR LIVING, LLC; MERIDIAN SENIOR LIVING SERVICES,
LLC; CHARLES E. TREFZGER, JR.; WP−ALBEMARLE HEALTH HOLDINGS,
LLC; BURLINGTON AL HOLDINGS I, LLC; TAYLORSVILLE HOUSE, LLC;
WP−NEWLAND HEALTH HOLDINGS, LLC; WP−WINDSOR HEALTH
HOLDINGS, LLC; LELAND HOUSE, LLC; WP−YANCEYVILLE HEALTH
HOLDINGS, LLC; HICKORY HEALTH INVESTORS, LLC; WP−HAYESVILLE
HEALTH HOLDINGS, LLC; CHI HOLDINGS, LLC; DANBY HOUSE, LLC;
WP−WINSTON SALEM HEALTH HOLDINGS, LLC; COUNTRY TIME INN,
LLC; WP−GASTONIA HEALTH HOLDINGS, LLC; GATES HOUSE, LLC;
GREENSBORO AL HOLDINGS, LLC; GREENSBORO OPCO HOLDINGS,
LLC; GREENSBORO HEALTH HOLDINGS, LLC; FUQUAY−VARINA
HEALTH HOLDINGS, LLC; HAYWOOD HEALTH HOLDINGS, LLC;
AHOSKIE HOUSE, LLC; SKYLAND HOUSE, LLC; CLAYTON HEALTH
HOLDINGS, LLC; MACON HEALTH HOLDINGS, LLC; MINT HILL HEALTH
HOLDINGS, LLC; WP−CHARLOTTE HEALTH HOLDINGS, LLC;
CHARLOTTE HEALTH HOLDINGS, LLC; MITCHELL HOUSE ONE, LLC;
WEST END HOLDINGS, LLC; CASTLE HAYNE AL HOLDINGS, LLC; NEW
HANOVER HOUSE, LLC; RVHI, LLC; RV ASSISTED LIVING, LLC;
SHI−ORANGE, LLC; GRANTSBORO OPCO HOLDINGS, LLC; BURGAW
HEALTH HOLDINGS; WP−CLINTON HEALTH HOLDINGS, LLC; ROSE
TARA HOLDINGS, LLC; WP−BREVARD HEALTH HOLDINGS, LLC; CARY
HEALTH HOLDINGS, LLC; WP−WENDELL HEALTH, LLC; WP−RALEIGH
HEALTH, LLC; ZHI, LLC; WILSON HOUSE, LLC; WP−BURNSVILLE
HEALTH HOLDINGS, LLC; AFFINITY LIVING GROUP, LLC,
Defendants – Appellees.

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Appeal from the United States District Court for the Eastern District of North Carolina, at
Raleigh. Terrence W. Boyle, District Judge. (5:16-cv-00410-BO)
Argued: May 5, 2021 Decided: May 26, 2022
Before WILKINSON and RUSHING, Circuit Judges, and TRAXLER, Senior Circuit
Judge.
Affirmed by published opinion. Judge Rushing wrote the majority opinion, in which Judge
Wilkinson joined. Senior Judge Traxler wrote a dissenting opinion.
ARGUED: Mark Russell Sigmon, SIGMON LAW, PLLC, Raleigh, North Carolina, for
Appellants. Jimmie Watkins Phillips, Jr., BROOKS PIERCE, LLP, Greensboro, North
Carolina, for Appellees. ON BRIEF: Matthew E. Lee, Jeremy R. Williams, WHITFIELD
BRYSON LLP, Raleigh, North Carolina; Clifford C. Marshall, Jr., MARSHALL, ROTH
& GREGORY, PC, Asheville, North Carolina, for Appellants. Jennifer K. Van Zant,
Donald J. O’Brien, III, Kimberly M. Marston, BROOKS PIERCE, LLP, Greensboro,
North Carolina, for Appellees.

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RUSHING, Circuit Judge:
Stephen Gugenheim, a North Carolina attorney, believes he uncovered fraud
perpetrated by forty-five adult care homes upon the United States and the State of North
Carolina. According to Gugenheim, Defendants violated a North Carolina Medicaid
billing regulation, and did so knowingly, as evidenced by the clarity of the regulation and
by the fact Defendants did not ask the regulators for advice. Because we conclude no
reasonable juror could find Defendants acted with the requisite scienter on this evidence,
we affirm the district court’s decision granting Defendants summary judgment on
Gugenheim’s claims.
I.
A.
Medicaid is a “joint state-federal program in which healthcare providers serve poor
or disabled patients and submit claims for government reimbursement.” Universal Health
Servs., Inc. v. United States ex rel. Escobar, 579 U.S. 176, 183 (2016). One type of expense
eligible for reimbursement under North Carolina’s Medicaid plan is personal care services
(PCS), which assist disabled adults with the activities of daily living, whether they reside
at home or in an adult care home. See generally Pashby v. Delia, 709 F.3d 307, 313–314
(4th Cir. 2013). The North Carolina Department of Health and Human Services, Division
of Health Benefits (NC Medicaid) oversees the State’s program.
Before 2013, the provision of in-home PCS was governed by North Carolina’s
Clinical Coverage Policy 3C. No parallel policy existed for PCS provided in adult care
homes. In response to a federal mandate that eligibility requirements for PCS be

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comparable regardless of the setting in which services are delivered, North Carolina
implemented its Clinical Coverage Policy 3L on January 1, 2013. Policy 3L consolidated
PCS benefits into one program that governs both in-home providers and adult care homes.
To determine eligibility for PCS under Policy 3L, the Division of Medical
Assistance (DMA), through a contractor, conducts annual assessments of potential
beneficiaries by evaluating tasks with which they need assistance, their required assistance
level, and the number of days per week they need that assistance. It then rates potential
beneficiaries’ capacity to perform each so-called “activity of daily living”—bathing,
dressing, mobility, toileting, and eating—on a scale from “0 – Totally able” to “4 – Cannot
do at all (full dependence).” J.A. 5812–5813. Each activity encompasses subtasks that
compose the category; for example, a beneficiary who needs assistance with bathing might
need help only with certain tasks within that category, such as “[n]ail care” or
“[s]hampoo/hair care.” J.A. 5414.
After the assessment is performed and the eligibility requirements satisfied, a
beneficiary’s monthly authorized PCS hours are calculated using an algorithm based on
Policy 3L’s service level determination chart. The chart identifies the authorized PCS
hours for each activity of daily living depending on whether the beneficiary needs limited
assistance (defined as “able to self-perform more than 50 percent of activity”), requires
extensive assistance (defined as “able to self-perform less than 50 percent of activity”), or
displays full dependence (defined as “unable to perform any of the activity and . . . totally
dependent on another to perform all of the activity”). J.A. 5813, 5837. For example, the
chart provides that 35 minutes per day are authorized for a beneficiary who requires limited

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assistance with bathing, 50 minutes per day for a beneficiary who needs extensive
assistance with bathing, and 60 minutes per day for bathing a beneficiary who is fully
dependent. Additional time is authorized for medication assistance and exacerbating
conditions. Policy 3L originally capped authorized PCS hours at 80 hours per month. But
as of October 2013, beneficiaries who require increased supervision, such as those with a
memory impairment, can receive up to 50 additional PCS hours per month, referred to as
“safeguard hours.”
Once a beneficiary is approved for a certain number of PCS hours per month, the
provider develops a service plan designed to show a typical week of aide service. The
service plan includes each activity of daily living with which the beneficiary needs
assistance, the beneficiary’s assistance level, subtasks within each activity category, and
the required frequency of performance. Providers use the QiRePort template provided by
the State, which divides the beneficiary’s monthly authorized hours equally into hours per
week and day to display the average hours per day based on the monthly PCS authorization.
“Unlike [for] in-home providers, where visits need to be scheduled,” QiRePort assumes
that adult care homes “have the responsibility to provide aide services, 24/7,” therefore the
daily target hours will fully account for the monthly PCS authorization. J.A. 5671. The
template then displays the individual aide tasks required for the beneficiary, and the adult
care home identifies which days of the week those tasks will be performed.
Policy 3L requires PCS providers to document the performance of all PCS tasks
listed in a beneficiary’s service plan at the indicated frequency. Documentation must
include the date of service, the tasks performed, and the name of the aide providing the

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service. If a scheduled task is not performed for any reason, that deviation must also be
documented. It is undisputed, however, that a provider need not document the time spent
on each task.
Attachment A to Policy 3L addresses claims and billing. It instructs providers to
comply with the “NCTracks Provider Claims and Billing Assistance Guide, Medicaid
bulletins, fee schedules, DMA’s clinical coverage policies and any other relevant
documents for specific coverage and reimbursement for Medicaid and NCHC.” J.A. 5839.
Under the heading “Billing Units,” Attachment A advises providers to “report the
appropriate code(s) used which determines the billing unit(s).” J.A. 5840; see J.A. 5839
(explaining that a billing code “accurately and completely describes the procedure, product
or service provided”). It also carries forward two statements from Policy 3C, which had
applied only to in-home PCS providers: “1 unit of service = 15 minutes” and “PCS follows
wage and hour requirements for rounding billing units (7/8 rule).” J.A. 5840. Policy 3L
does not retain Policy 3C’s section describing “[w]hat [m]ay be [b]illed,” which authorized
in-home PCS providers to bill for time spent in the beneficiary’s home “providing the tasks
during the times specified” in the service plan, nor does it include any comparable
guidance. J.A. 729.
B.
Defendants are forty-five North Carolina adult care homes; Affinity Living Group
LLC, which manages those homes; and Charles E. Trefzger, Jr., Affinity’s CEO.
Defendants’ facilities specialize in providing around-the-clock care to high-needs elderly
individuals. Many of Defendants’ residents suffer from cognitive or memory impairments

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and so reside in special care units with greater security and supervision. The vast majority
of those residents rarely leave Affinity’s facilities other than for doctor’s visits or scheduled
appointments. Even while outside the facilities, those residents commonly need assistance
from a facility employee with tasks like walking from the vehicle to the doctor’s office,
toileting, eating, or general supervision “to ensure the resident[s] [do] not become
disoriented and harm themselves.” J.A. 6260.
Many of the residents of Defendants’ facilities receive Medicaid benefits.
Defendants’ employees document in a computerized log the PCS tasks they perform for
each resident during their shift. At every shift change, departing staff inform arriving staff
about what occurred during the previous shift and any PCS tasks that remain to be done.
Managerial staff also assist in tracking PCS tasks and ensuring each beneficiary’s service
plan is completed every day.
Affinity uses a census method to generate weekly bills for its facilities. The census
identifies the residents present in the facility at midnight each day. For every PCS
beneficiary present in the facility at midnight, Affinity bills the average daily PCS hours
calculated from the total monthly hours authorized for that beneficiary. See J.A. 2868–
2869 (using spreadsheets coded for months with 28, 29, 30, or 31 days to divide “evenly
throughout the month . . . the amount of hours that the residents are allowed”). Every
Monday, the billing department uses this method to bill for the prior week.
Upon learning of Defendants’ census-based billing practice, Gugenheim sued under
the federal False Claims Act, 31 U.S.C. § 3729 et seq., and the North Carolina False Claims
Act (NCFCA), N.C. Gen. Stat. § 1-605 et seq., to recover damages and civil penalties on

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behalf of the United States and North Carolina. He asserted that Defendants “intentionally
submitted false claims for reimbursement to N.C. Medicaid for [PCS] provided to residents
of Defendants’ Special Care Units and received reimbursements therefrom” in violation of
31 U.S.C. § 3729(a)(1)(A) and the NCFCA.1 J.A. 79. According to Gugenheim, Policy
3L obligated Defendants to track the time their employees actually spent providing PCS to
individual residents and then bill Medicaid for those hours rather than for the beneficiaries’
daily authorized PCS hours. The United States and North Carolina declined to intervene
in this qui tam action.
After discovery, Gugenheim moved for partial summary judgment and Defendants
moved for summary judgment on all claims. The district court granted Defendants’
motion, holding that Gugenheim failed to proffer evidence showing “that the bills
submitted by [D]efendants to North Carolina Medicaid for PCS reimbursement were
materially false or made with the requisite scienter.” J.A. 6840. Gugenheim timely
appealed.
II.
The district court had jurisdiction over Gugenheim’s suit, and we now have
jurisdiction to review its final decision. 28 U.S.C. §§ 1291, 1331, 1367. We review an
award of summary judgment de novo, “applying the same legal standards as the district
court, and viewing all facts and reasonable inferences therefrom in the light most favorable
1 The district court granted Defendants’ motion to dismiss Gugenheim’s conspiracy
claims and claim under 31 U.S.C. § 3729(a)(1)(B). Gugenheim does not contest that ruling
on appeal.

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to the nonmoving party.” Carter v. Fleming, 879 F.3d 132, 139 (4th Cir. 2018) (internal
quotation marks omitted). Summary judgment is appropriate “if the movant shows that
there is no genuine dispute as to any material fact and the movant is entitled to judgment
as a matter of law.” Fed. R. Civ. P. 56(a). “[A] scintilla of evidence” in support of the
nonmoving party’s position is insufficient to defeat summary judgment. Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 252 (1986). Rather, “[w]here the record taken as a
whole could not lead a rational trier of fact to find for the non-moving party, there is no
genuine issue for trial.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,
587 (1986) (internal quotation marks omitted).
When the nonmoving party “has failed to make a sufficient showing on an essential
element of [his] claim with respect to which [he] has the burden of proof,” summary
judgment is warranted. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). This includes
a state-of-mind element like scienter. See Skibo ex rel. U.S. v. Greer Labs., Inc., 841 Fed.
App. 527, 532 (4th Cir. 2021) (rejecting the argument that “summary judgment is never
appropriate on the element of knowledge”).
III.
The False Claims Act “is a fraud prevention statute.” United States ex rel. Owens
v. First Kuwaiti Gen. Trading & Contracting Co., 612 F.3d 724, 728 (4th Cir. 2010)
(internal quotation marks omitted).2 As relevant here, it imposes civil liability on “any
2 The NCFCA largely parallels the False Claims Act and is interpreted consistent
with it. N.C. Gen. Stat. § 1-616(c). We follow the parties’ lead and discuss only the False
Claims Act, although our analysis and conclusions apply equally to Gugenheim’s NCFCA
claim.

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person who . . . knowingly presents, or causes to be presented” to the federal Government
“a false or fraudulent claim for payment or approval.” 31 U.S.C. § 3729(a)(1)(A).
“[D]irect requests to the Government for payment as well as reimbursement requests made
to the recipients of federal funds under federal benefits programs,” such as Medicaid, may
give rise to a claim under the Act. Universal Health, 579 U.S. at 182. “[C]ertain
misleading omissions” about a defendant’s “violations of statutory, regulatory, or
contractual requirements . . . can [also] be a basis for liability if they render the defendant’s
representations misleading with respect to the goods or services provided.” Id. at 187.
The Act’s scienter requirement defines “knowingly” to mean that a person “has
actual knowledge of the information,” “acts in deliberate ignorance of the truth or falsity
of the information,” or “acts in reckless disregard of the truth or falsity of the information.”
31 U.S.C. § 3729(b)(1)(A). It does not require “specific intent to defraud,” id.
§ 3729(b)(1)(B), but neither does it punish “honest mistakes or incorrect claims submitted
through mere negligence,” Owens, 612 F.3d at 728 (internal quotation marks omitted). As
we have previously observed, “[b]ad math is no fraud, [and] proof of mistakes is not
evidence that one is a cheat.” Id. at 734 (internal quotation marks omitted).
Gugenheim argues that Defendants acted with reckless disregard or deliberate
ignorance of the alleged falsity of their bills when they billed Medicaid for PCS based on
a census method rather than based on the hours their employees actually spent providing
PCS to each beneficiary. Gugenheim bears the burden to prove scienter at trial. Therefore,
summary judgment is warranted if Gugenheim has failed to marshal evidence from which
a reasonable jury could find that Defendants acted with the requisite state of mind. As

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evidence of scienter, Gugenheim relies almost exclusively on the supposed clarity of Policy
3L, which he asserts unambiguously put Defendants on notice that they were required to
bill by time. In particular, he highlights the “7/8 rule” in Policy 3L—that seven minutes
of service or less rounds down to zero and eight minutes of service or more rounds up to
fifteen—as a clear indication that PCS providers were required to track and bill by time.
According to Gugenheim, this regulation is so clear that if Defendants violated it, we can
infer they did so knowingly.
But Policy 3L’s billing requirement for adult care homes is not as clear as
Gugenheim claims. Policy 3L advises providers to “comply with . . . any other relevant
documents for . . . reimbursement for Medicaid,” and other agency guidance undermines
Gugenheim’s interpretation that Policy 3L requires all providers to track and bill by time.
J.A. 5839. For starters, in a QiRePort Frequently Asked Questions document, NC
Medicaid advised that providers do not need to record the time spent on each PCS task.
This is significant for adult care homes, which, unlike in-home providers, do not limit their
care to a time window marked by arrival and departure. In the same document, NC
Medicaid explained that the State organizes its reporting software on the assumption that
adult care homes, unlike in-home providers, “have the responsibility to provide aide
services, 24/7.” J.A. 5671. Based on this expectation, the State’s reporting software pre-
populates the weekly PCS schedule for beneficiaries in adult care homes by “display[ing]
the average daily PCS hours/units based on the monthly PCS authorization.” J.A. 5671.
Elsewhere in the same document, NC Medicaid responded to a provider’s question
about whether it must “deduct the time from what I bill for PCS” if “one of the required

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aide tasks in a group . . . could not be completed for a given day(s).” J.A. 5684. The
agency answered: “If the aide attempted the required task but it could not be completed,
this instance should be documented as a deviation. In the same grouping of tasks, if at least
one of the remaining tasks could be completed for the same day, there is no requirement
that time should be deducted from the billing of PCS hours.” J.A. 5684, 490 (explaining
that NC Medicaid approved the answers appearing in the frequently-asked-questions
document). In other words, so long as the aide completed one of the required tasks within
the category, the provider may bill for the full associated PCS hours. This guidance
arguably suggests that Policy 3L authorizes providers to bill based on completion of tasks
rather than time.3
Defendants interpret this and other guidance from NC Medicaid as permitting their
census billing method, which functions as a form of task-based billing for their full-time
care homes. Given the special needs of their residents and Defendants’ obligation to
3 Gugenheim asserts that task-based billing is impossible because there are no time
allotments corresponding to tasks or activities of daily living. But NC Medicaid
representatives repeatedly testified that the units of time associated with an activity of daily
living in a beneficiary’s service plan also correspond to billing. J.A. 428–429; see, e.g.,
J.A. 428 (“[W]hen the provider can document that the task or the [activity of daily living]
was performed, they are permitted to bill for that unit.”); J.A. 5314–5315 (explaining that
“completing the [activity of daily living] service is a proxy for time,” and “if you document
the completion of the task, the [activity of daily living] service, . . . you’re able to bill for
the entire time”); J.A. 6461 (testifying that, for adult care homes, “if they completed the
task, then they would be allowed to bill,” because “they don’t have an in and out time
similar to the in-home care providers”). We need not address whether the testimony from
these deponents could qualify as an authoritative agency interpretation. See Kisor v.
Wilkie, 139 S. Ct. 2400, 2416–2417 (2019). It is sufficient for scienter purposes to observe
that, on this point, the agency witnesses interpret Policy 3L as Defendants do and not in
the manner Gugenheim claims it unambiguously requires.

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provide around-the-clock care, Defendants use the midnight census to determine the
residents who received care on a given day. Defendants’ employees track the
accomplishment of PCS tasks for their beneficiaries to ensure each beneficiary’s service
plan is completed on any day he or she receives care. And based on completion of the
tasks in a beneficiary’s daily service plan, Defendants bill Medicaid for the beneficiary’s
daily allotment of PCS hours any day he or she was present in the facility.4
We need not determine whether Defendants’ interpretation of Policy 3L is correct.
The policy and related guidance from NC Medicaid are sufficiently ambiguous to foreclose
the possibility of proving scienter based solely on the clarity of the regulation. We cannot
infer scienter from an alleged regulatory violation itself, and we “especially” will not do
so “where there is regulatory ambiguity as to whether” Defendants’ conduct even violated
the policy. United States ex rel. Complin v. N.C. Baptist Hosp., 818 Fed. App. 179, 184
(4th Cir. 2020). “‘[E]stablishing even the loosest standard of knowledge, i.e., acting in
reckless disregard of the truth or falsity of the information, is difficult when’”—as here—
“‘falsity turns on a disputed interpretive question.’” Id. (quoting U.S. ex rel. Purcell v.
MWI Corp., 807 F.3d 281, 288 (D.C. Cir. 2015)). Gugenheim does not identify any
4 The dissent is built on a hypothetical case of billing for a beneficiary’s full daily
allotment when no services were provided. Gugenheim has not identified any such
evidence. The closest he comes is showing thirteen instances when certain tasks were not
performed for a beneficiary within one eight-hour shift, without evidence about the
remaining sixteen hours of the day. See Reply Br. 12 n.6. Gugenheim’s speculation cannot
fill the evidentiary void. See Sandlands C&D LLC v. County of Horry, 737 F.3d 45, 54
(4th Cir. 2013) (“[T]he nonmoving party must rely on more than conclusory allegations,
mere speculation, the building of one inference upon another, or the mere existence of a
scintilla of evidence.” (internal quotation marks omitted)).

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evidence to suggest that Defendants knew, or had any reason to believe, their interpretation
of the regulation was incorrect or that Defendants ignored any relevant agency guidance in
reaching their conclusion. Because Policy 3L’s billing requirement for adult care homes
is ambiguous and Defendants’ interpretation of the policy and agency guidance is
reasonable, Gugenheim cannot prove, based on the policy alone, that Defendants
knowingly submitted false claims. Cf. United States ex rel. Sheldon v. Allergan Sales,
LLC, 24 F.4th 340, 348 (4th Cir.), vacated and reh’g en banc granted, 2022 WL 1467710
(4th Cir. May 10, 2022).
In the alternative, Gugenheim contends that, even if Policy 3L were ambiguous,
Defendants “stuck their head[s] in the sand” when they should have sought more guidance
from NC Medicaid. Opening Br. 53. For example, Tom Stahlschmidt, Defendants’
employee in charge of implementing Policy 3L, testified that, although he “[was] sure it
came up in a stakeholders meeting” attended by state agency representatives, he did not
recall ever asking anyone at NC Medicaid whether the 7/8 rule applied to adult care homes.
J.A. 2074–2075; see also J.A. 2042–2043 (explaining stakeholder meetings).
To prove that Defendants knowingly submitted false or fraudulent claims for
payment, however, it is not enough to show that Defendants could have sought more
guidance about an ambiguous regulation. At a minimum, Gugenheim must show that
Defendants acted in “reckless disregard of the truth or falsity” of their bills, as opposed to
merely committing an “honest mistake[]” in their interpretation of the policy. Owens, 612
F.3d at 728 (internal quotation marks omitted); see, e.g., United States v. Krizek, 111 F.3d
934, 942 (D.C. Cir. 1997) (holding that psychiatrist acted with reckless disregard by failing

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to review bills submitted on his behalf, and his wife acted with reckless disregard by
completing claims with “little or no factual basis”).
The evidence does not meet this standard. Importantly, Gugenheim does not
identify any evidence that Defendants knew, or even suspected, that their interpretation of
Policy 3L and the related guidance from NC Medicaid was incorrect (indeed, it may be
right). Nor does Gugenheim identify any evidence that Defendants attempted to avoid
discovering how the regulation applied to adult care homes or plowed ahead with a dubious
interpretation despite serious doubts about its accuracy.
In fact, the evidence suggests to the contrary. Stahlschmidt testified that he asked
another stakeholder—from a company that provides billing-related services to other adult
care homes in North Carolina—about how Policy 3L’s statement on billing units and the
7/8 rule would apply to adult care homes like Defendants’ facilities. The stakeholder
responded that the rule does not apply because adult care homes are not required to
document time spent providing PCS but instead must document the completion of PCS
tasks. Cf., e.g., Skibo, 841 Fed. App. at 534 (affirming summary judgment on lack of
scienter when the record demonstrated that the defendant’s interpretation of the regulation
accorded with the “common understanding . . . in the industry”). What is more, state and
federal regulators audited Defendants’ facilities numerous times without incident during
the relevant period. During a 2016 audit, a federal contractor requested that Defendants
produce, among other things, timesheets and documents showing the total time spent for
the units billed to Medicaid. Confused by this request, Stahlschmidt contacted two NC
Medicaid officials and explained his understanding that Policy 3L did not require adult

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care homes to make or keep time records. See J.A. 5925 (stating that “Policy 3L dictates
this is not applicable to PCS recipients residing in license[d] residential facilities”). The
NC Medicaid officials responded that the auditors would consult North Carolina policies,
would “review to see if what was billed . . . met NC policy and billing requirements,” and
would contact him if any documentation was missing. J.A. 5923. No one ever contacted
Stahlschmidt to request further documents or information regarding that audit, nor did the
NC Medicaid officials raise any question about the appropriateness of Defendants’ billing
practices in response to Stahlschmidt’s explanation.
These actions do not betoken a deliberate effort to avoid learning the truth. Nor do
the facts suggest that Defendants’ interpretation of Policy 3L was so off-base as to
demonstrate reckless disregard for the truth or falsity of their bills. Viewing the record in
the light most favorable to Gugenheim, even if Defendants’ interpretation of Policy 3L
were incorrect—a question we do not decide—their actions amount, at most, to an error in
judgment or mistake. Gugenheim has not identified evidence from which a reasonable jury
could conclude that Defendants billed Medicaid for PCS in reckless disregard of the truth
or falsity of those bills, much less with deliberate ignorance or actual knowledge of falsity.
Given the lack of genuine dispute about whether Defendants acted with the requisite
scienter, we need not evaluate the remaining elements of Gugenheim’s federal and state
claims.
IV.
Gugenheim spotted a disparity between the amount Defendants billed and the time
Defendants’ employees worked. But that alone cannot support a claim of fraud under

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federal and state law. After discovery, there is no issue of material fact as to whether
Defendants acted with scienter, which is a “rigorous” requirement we must “strict[ly]
enforce[].” Universal Health, 579 U.S. at 192 (internal quotation marks omitted). We
accordingly hold that the district court appropriately granted Defendants summary
judgment on Gugenheim’s claims.
AFFIRMED

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TRAXLER, Senior Circuit Judge, dissenting:
With respect, I dissent. Plaintiff alleges that Defendants violated the False Claims
Act (FCA) by knowingly presenting false or fraudulent Medicaid claims for payment in
violation of 31 U.S.C § 3729(a)(1)(A). Plaintiff has presented evidence that Defendants
intentionally billed the government for the maximum amount of compensable time for
personal care services (PCS) for every Medicaid beneficiary in every one of their adult care
homes, without any inquiry whatsoever into what services the beneficiaries actually
received. Plaintiff has also presented documentary and expert evidence that for every 8
hours their adult care home aides worked, Defendants billed Medicaid for almost 12 hours
of personal care services, resulting in over 1,900,000 false claims being submitted to the
Medicaid program for payment. Over a five-year period, the losses to the Medicaid
program from this overbilling could exceed $40,000,000.
Plaintiff has also presented evidence that Defendants did next to nothing to educate
themselves about how NC Medicaid’s new Clinical Coverage Policy 3L affected their
billing practices. Policy 3L governs the provision of PCS for Medicaid beneficiaries and
the proper billing for such services, both in the home and in adult care facilities. On its
face, Policy 3L includes a “Billing Units” provision that requires Medicaid providers to
bill for their services in 15-minute units, utilizing the “7/8 rule” for rounding. If a provider
provides 0 to 7 minutes of service, it must round down and bill no unit, but if it provides 8
to 15 minutes of service, it may round up and bill a 15-minute unit.
Defendant’s representative responsible for implementing Policy 3L testified that he
did not understand why the billing units provision was included in Policy 3L or how it

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applied in the adult care home setting. But he did not consult NC Medicaid for guidance.
Instead, he concluded that it could not apply and that it was appropriate to just charge the
government for the maximum number of authorized PCS hours per day without regard to
the actual time the beneficiary was in the facility or the time the aides spent providing PCS
to the beneficiary.
Defendants argue, and the majority agrees, that it was okay for them to do this
because NC Medicaid provided subsequent “guidance” that approved the use of “task-
based” billing as opposed to the “time-based” billing required by the language of Policy
3L. Task-based billing, Defendants argue, authorizes them to bill for all of the authorized
hours associated with a particular PCS if any part of the task was attempted. I do not think
this is a reasonable interpretation of the Policy or the guidance document upon which
Defendants rely. But even if I were to agree that the guidance authorized “task-based”
billing, Defendants did not use “task-based” billing.
Defendants’ employees responsible for submitting claims to NC Medicaid did not
check the computerized task logs to determine whether any PCS tasks had been performed
or attempted for the individual beneficiaries. Instead, Defendants used a “census-based”
billing method to generate weekly bills. If the patient was in the facility at 12:00 midnight
on a particular day, Defendants billed Medicaid for every authorized hour for that day of
the week. In sum, Defendants’ billing had zero to do with time, tasks, or the actual
provision of PCS. Medicaid was billed the maximum number of authorized hours even if
the beneficiary was absent from the facility for a portion of the day or received no
assistance at all with his or her activities of daily living.

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Despite this evidence, the majority affirms the grant of summary judgment to
Defendants because, in its view, Plaintiff failed to produce sufficient evidence from which
a reasonable juror could find that Defendants submitted these false claims “knowingly,” as
that term is defined in the FCA. In my view, the majority’s interpretation of the scienter
element of an FCA claim is far too narrow and its affirmance of summary judgment is
based upon a review of the evidence in the light most favorable to Defendants, not to
Plaintiff.
I.
The FCA imposes liability on one who “knowingly presents, or causes to be
presented, a false or fraudulent claim for payment or approval.” 31 U.S.C. § 3729(a)(1)(A).
Under the FCA, a person acts “knowingly” when he “has actual knowledge of the
information.” 31 U.S.C. § 3729(b). Nonetheless, neither actual knowledge nor specific
intent to defraud are required, as the FCA also provides that a person acts knowingly if he
or she “acts in deliberate ignorance of the truth or falsity of the information” or “acts in
reckless disregard of the truth or falsity of the information.” 31 U.S.C. § 3729(b).
The definition of “knowingly” was added in 1986, after the FCA’s initial enactment,
in order to expand the FCA’s reach to “the ostrich type situation where an individual . . .
fail[s] to make simple inquiries which would alert him that false claims are being
submitted.” S. Rep. No. 99-345, at 21 (1986), 1986 U.S.C.C.A.N. 5266, 5286.
Accordingly, since the 1986 amendment, courts have recognized that FCA defendants have
a “limited duty to inquire” to insure the validity of their claims. U.S. ex rel. Williams v.
Renal Care Grp., Inc., 696 F.3d 518, 530 (6th Cir. 2012) (cleaned up). As the Sixth Circuit

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has explained, the point of the FCA’s expansive definition of knowledge was “to target
that defendant who has buried his head in the sand and failed to make some inquiry into
the claim’s validity. The inquiry, however, need only be reasonable and prudent under the
circumstances, which clearly recognizes a limited duty to inquire as opposed to a
burdensome obligation.” Id. (cleaned up).
The FCA is not intended to “punish honest mistakes or incorrect claims submitted
through mere negligence.” United States ex rel. Owens v. First Kuwaiti Gen. Trading &
Contracting Co., 612 F.3d 724, 728 (4th Cir. 2010) (cleaned up). Nevertheless, failing to
familiarize oneself with the legal requirements of Medicaid can constitute reckless
disregard or deliberate indifference of those requirements. See, e.g., United States v.
Mackby, 261 F.3d 821, 828 (9th Cir. 2001) (“[The FCA defendant’s] claim that he did not
know of the Medicare requirements does not shield him from liability. By failing to inform
himself of those requirements, particularly when twenty percent of [the defendant’s]
patients were Medicare beneficiaries, he acted in reckless disregard or in deliberate
ignorance of those requirements, either of which was sufficient to charge him with
knowledge of the falsity of the claims in question.”).
In this case, we consider the FCA claim through the lens of summary judgment. A
motion for summary judgment may not be granted unless there are no genuine issues of
material fact for trial and the movant is entitled to judgment as a matter of law. Fed. R. Civ.
P. 56(a). “A dispute is genuine if a reasonable jury could return a verdict for the nonmoving
party,” and a “fact is material if it might affect the outcome of the suit under the governing
law.” Libertarian Party of Va. v. Judd, 718 F.3d 308, 313 (4th Cir. 2013) (cleaned up).

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As we explained more than 50 years ago,
summary judgment should not be granted unless the entire record shows a
right to judgment with such clarity as to leave no room for controversy and
establishes affirmatively that the adverse party cannot prevail under any
circumstances. Neither should summary judgment be granted if the evidence
is such that conflicting inferences may be drawn therefrom, or if reasonable
men might reach different conclusions. [The] [b]urden is upon [the] party
moving for summary judgment to demonstrate clearly that there is no
genuine issue of fact, and any doubt as to the existence of such an issue is
resolved against him.
Phoenix Sav. & Loan, Inc. v. Aetna Cas. & Sur., 381 F.2d 245, 249 (4th Cir. 1967) (cleaned
up). When considering a summary-judgment motion, this court, like the district court, must
view the facts and inferences in the light most favorable to the party opposing the motion.
See Anderson v. Liberty Lobby, 477 U.S. 242, 249 (1986); Lone Star Steakhouse & Saloon,
Inc. v. Alpha of Va., Inc., 43 F.3d 922, 928 (4th Cir. 1995). “[A]t the summary judgment
stage the judge’s function is not himself to weigh the evidence and determine the truth of
the matter but to determine whether there is a genuine issue for trial.” Anderson, 477 U.S.
at 249.
Credibility determinations, the weighing of evidence, and the drawing of
legitimate inferences from the facts are jury functions, not those of a judge,
whether he is ruling on a motion for summary judgment or for a directed
verdict. The evidence of the nonmovant is to be believed, and all justifiable
inferences are to be drawn in his favor.
Id. at 255.
States of mind, like scienter, are “preeminently factual issues for the trier of fact.”
Miller v. Premier Corp., 608 F.2d 973, 982 (4th Cir. 1979). Accordingly, “the issue of
fraudulent intention is generally not amenable to resolution on summary judgment. . . .
[W]hen evidence of intention is ambiguous, summary judgment simply cannot be

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awarded.” United States ex rel. Bunk v. Government Logistics N.V., 842 F.3d 261, 276-77
(4th Cir. 2016); see also Skibo ex rel. U.S. v. Greer Labs., Inc., 841 F. App’x 527, 532 (4th
Cir. 2021) (“[I]n order for summary judgment to be appropriate, it must be clear that there
is no issue of material fact as to whether [the defendant] acted with the requisite mental
state—here, scienter.”)
II.
A.
On January 1, 2013, NC Medicaid implemented Policy 3L because of a federal
requirement that the policies for providing PCS in adult care homes be comparable to the
policies for providing PCS in the in-home setting. See 42 U.S.C. § 1396a(a)(10)(B); Pashby
v. Delia,709 F.3d 307, 314-15 (4th Cir. 2013). Under Policy 3L, NC Medicaid authorizes
a maximum number of hours that a provider can bill Medicaid per month for the provision
of PCS for each specific patient, based on the needs of the individual beneficiaries, whether
those services are performed in a private home or in an adult care home.
Consistent with the comparability requirements of federal law, many of the
requirements from former Policy 3C, which applied only in the in-home setting, were
carried forward into Policy 3L, including the 15-minute billing units provision and the 7/8
rule. Attachment A to Policy 3L, titled “Claims-Related Information,” requires all
providers to “comply with the[] NCTracks Provider Claims and Billing Assistance Guide,
Medicaid bulletins, fee schedules, DMA’s clinical coverage policies and any other relevant
documents for specific coverage and reimbursement for Medicaid and NCHC.” J.A. 5727.
Subsection E of Attachment A, titled “Billing Units,” requires providers to report the

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appropriate codes to determine the billing units and states that “1 unit of service = 15
minutes.” J.A. 5728. Subsection E also provides that “PCS follows wage and hour
requirements for rounding billing units (7/8 rule).” Id. Section 4.2.2 of Policy 3L explicitly
states that PCS will not be covered by Medicaid when “the PCS is not documented as
completed in accordance with this clinical coverage policy” or when “the PCS is not
completed on the date the service is billed.” J.A. 5935.
When Policy 3L was being developed, NC Medicaid recognized that the new policy
would change how adult care homes would have to bill for PCS. Under Policy 3L, in-home
providers record the time they arrive at the beneficiary’s home and the time they leave, and
NC Medicaid presumes that the time in between was all spent providing reimbursable PCS.
So, if the providers are preauthorized to provide PCS for 3 hours in a day but finish in 2
hours, they are only allowed to bill for 2 hours, not 3 hours. Adult care home providers
cannot use this in/out method for billing PCS services because the authorized PCS are
provided at different times throughout the day and week, in accordance with a Service Plan.
Policy 3L requires PCS providers to document the performance of all PCS tasks included
in the beneficiary’s Service Plan with the date of service, the tasks performed, and the name
of the aide providing the service. Policy 3L also requires the provider to document
deviations from the Service Plan, i.e., the failure or inability to complete a task under the
Service Plan.
The dispute in this case centers on whether Policy 3L’s billing units provision
applies in the adult care home setting. Plaintiff argues that the language of Policy 3L and
the billing units provision clearly require time-based billing for the provision of PCS—

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whether those services are provided in the home or in an adult care home. Defendants do
not really dispute this, as there is no language in Policy 3L that indicates that adult care
homes are exempt from compliance with the time-based billing units provision for the
submission of claims to Medicaid. Instead, they argue that NC Medicaid, by way of a third-
party question-and-answer document, provided subsequent “guidance” that approved of
the use of “task-based” billing instead of “time-based” billing. Under Defendants’
interpretation of this Q&A document, they are allowed to bill all of the hours allocated for
a day so long as the aide attempted to perform an approved PCS task or sub-task associated
with an activity of daily living on that day. Defendants argue, and the majority agrees, that
this was a reasonable interpretation of Policy 3L and, therefore, that no reasonable jury
could find the requisite scienter. For the reasons set forth below, I disagree.
When we view the evidence in the light most favorable to Plaintiff, as we must,
there is sufficient evidence from which a reasonable jury could conclude that, in the face
of Policy 3L’s clear billing units provision, Defendants’ interpretation of the Q&A
document was not reasonable and that they “act[ed] in deliberate ignorance of the truth or
falsity of the information” or “in reckless disregard of the truth or falsity of the
information” presented to Medicaid in support of their requests for reimbursement. 31
U.S.C. § 3729(b).
B.
First, the language in Policy 3L is clear. As discussed above, Attachment A to Policy
3L requires providers to report the appropriate codes to determine the billing units, and
states “1 unit of service = 15 minutes” and that “PCS follows wage and hour requirements

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for rounding billing units (7/8 rule).” J.A. 5728. Providers are also explicitly notified that
PCS will not be covered by Medicaid when the PCS “is not documented as completed in
accordance with th[e] clinical coverage policy” or “not completed on the date the service
was billed.” J.A. 5935.
Second, even if I were to assume that the language in Policy 3L is ambiguous,
Defendants sought no guidance from NC Medicaid, much less engaged in a reasonable and
prudent inquiry under the circumstances.
Tom Stahlschmidt, the person within Defendants’ organization responsible for
answering questions about Policy 3L, testified that he did not understand why the 15-
minute billing units and 7/8 rule were included in Policy 3L. But he made no inquiry to,
nor did he seek clarification from, NC Medicaid officials. Instead, Stahlschmidt testified
that he had a single conversation with a colleague from another adult care home, and they
decided between themselves that the new billing units provision simply could not apply to
them because, in their opinion, Policy 3L only required in-home providers to document the
performance of the PCS tasks in the Service Plan, and not the time spent on performing
them. In other words, they chose not to seek clarification or guidance from NC Medicaid,
and they chose not to implement the changes. Contrary to the majority’s view,
Stahlschmidt’s testimony about a single conversation with a colleague does not, in my
opinion, rise to the level of a “common industry understanding” that would preclude a jury
from finding the requisite scienter in this case. Cf. Skibo, 841 F. App’x at 533 (finding
support for summary judgment for the defendant based upon the actions of “nearly the

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entire industry” of similarly situated companies, as well as the views of several trade groups
on the issue).
Pam Coffey, who is in charge of Defendants’ billing department, likewise failed to
educate herself about how Policy 3L applied in the adult care home setting or how the
billing units provision applied in the adult care home setting. Coffey testified that all she
knew about Policy 3L was “the name of it, and that’s pretty much it, as far as knowing that
it affected the hours in some way or another.” J.A. 2921. She never reviewed any Medicaid
bulletins about Policy 3L or any provider “questions and answers” about billing issues
under Policy 3L, despite being designated as the person responsible for training accounts
receivable specialists on how reimbursement claims for PCS should be submitted.
According to Coffey, the billing departments used a pre-populated spreadsheet that
assigned a maximum number of daily billing units based upon the maximum number of
hours authorized by Medicaid for the beneficiary per month. The daily maximum was
determined by dividing the monthly allowance by the number of days (28, 29, 30, or 31)
in the particular month. Using this spreadsheet, Coffey billed Medicare the maximum
number of hours authorized per day for every beneficiary present at the facility at midnight,
regardless of whether the beneficiary received that amount of care, or any care, that day.
For example, if Medicaid authorized 90 hours of PCS per month for a particular patient,
and the billing month had 30 days, Defendants automatically billed Medicaid for 3 hours
of services per day for that patient, regardless of how much time was actually spent
providing PCS to the patient. If the beneficiary was in the adult care home at midnight,
Coffey simply assumed that the person received all the authorized PCS for that day and

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billed Medicaid for every pre-authorized hour. That’s it. Under what Defendants describe
as a “census-based” billing policy, Defendants continued to bill the maximum permitted
hours per diem per beneficiary, without consulting the task logs and without regard to
whether and to what extent the PCS were provided. Plaintiff proffered evidence that such
bills were sent even where Defendants’ task logs showed that the beneficiary had been
absent from the facility for most of the day.
Cassandra McFadden is a NC Medicaid employee working in the PCS division.
When she was made aware of Coffey’s billing method, she stated that she “would not agree
that that was the correct thing to do.” J.A. 6474. McFadden quite reasonably explained that
PCS services must be completed for providers to bill for them. See J.A. 6472 (“I would say
that providers bill for the services that . . . they provided. . . . Meaning if they didn’t provide
them, they would not bill.”); see also J.A. 5935 (“Medicaid shall not cover PCS when . . .
the PCS is not documented as completed in accordance with this clinical coverage policy”
or “not completed on the date the service was billed.”) (emphasis added).
The majority essentially ignores this evidence and concludes that no reasonable jury
could find the requisite scienter because Defendants received “guidance” from NC
Medicaid that they reasonably interpreted as approving “task-based” billing. I disagree.
This so-called “guidance” from NC Medicaid is contained in a Q&A document from
QiRePort, a third-party entity. One question asked whether time must be deducted from
PCS billing if one of the PCS tasks could not be completed on a given day. NC Medicaid
responded that the inability to complete a PCS task “should be documented as a deviation,”
but “if at least one of the remaining tasks could be completed for the same day, there is no

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requirement that time should be deducted from the billing of PCS hours.” J.A. 5684
(emphasis added). The majority concludes that this guidance “arguably suggests that Policy
3L authorizes providers to bill based on completion of tasks rather than time,” and that “so
long as the aide completed one of the required tasks within the category, the provider may
bill for the full associated PCS hours.” Majority Op. at 12.1 In my view, the Q&A document
was not sufficient to completely relieve Defendants of their duty to comply with Policy 3L
or engage in a reasonable and prudent inquiry into whether their census-based billing
method was proper.
First, there is nothing in NC Medicaid’s response that indicates it intended to
abandon Policy 3L’s time-based billing requirements, much less that NC Medicaid
intended to authorize adult care homes to bill the maximum authorized hours for PCS every
day if any sub-task in any category was attempted that day. If Medicaid intended to
authorize adult care homes to bill for the maximum number of preauthorized hours
regardless of whether any assistance was attempted or provided, there was no reason to
discuss when time can or cannot be deducted from the maximum, or whether a task within
a category had been attempted or completed. NC Medicaid could have just said that time
and the completion of tasks was wholly irrelevant as long as the beneficiary was present in
the facility for any part of the day. It did not.
1 The district court relied heavily upon the deposition testimony of NC Medicaid
representatives as validating Defendants purported “task-based” billing. Although the
majority finds it unnecessary to address the question of whether this testimony also
qualifies as authoritative agency interpretation of Policy 3L, I would note that the
deposition testimony did not exist at the time of Defendants’ billings and therefore could
not have served as guidance or a clarification of Policy 3L.

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Second, even if I were to agree that the Q&A document authorized “task-based”
billing, Defendants did not employ task-based billing. Defendants used a “census-based”
billing which had absolutely nothing to do with the completion of any ADL task or sub-
task, or whether any such task was attempted but could not be completed that day. When
billing, Defendants did not even consult the task logs. Although Defendants argue that they
reasonably interpreted the Q&A document as authorizing “task-based” billing, what they
really argue is that it approved their use of “census-based” billing. I fail to see how
Defendants could have reasonably interpreted the Q&A document as authorizing a
“census-based” billing. Nor can I agree with the majority’s view that Defendants
reasonably decided that their “census billing method . . . functions as a form of task-based
billing.” Majority Op. at 12. To state the obvious, task-based billing is based on the aide’s
performance of tasks; census-based billing is based on the beneficiary’s presence in the
facility at midnight. But, as the record makes clear, Medicaid does not cover PCS when the
PCS “is not documented as completed in accordance with th[e] clinical coverage policy”
or “not completed on the date the service was billed.” J.A. 5935.
And, last—but certainly not least—we should not summarily dismiss Plaintiff’s
significant expert evidence that Defendants’ “census-based” billing method resulted in NC
Medicaid being billed for more hours than Defendants’ employees could have possibly
worked. Plaintiff’s expert examined Defendants’ billing records and compared them to
Defendants’ staffing records. As a result of Defendants continued use of what essentially
remained a per-diem billing method that encompasses every authorized hour, and their
practice of always employing the minimal staffing levels required by law, Defendants

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billed Medicaid for more PCS hours than their staff members worked. According to the
expert, for every 8 hours a nursing home employee worked, Defendants billed Medicaid
for almost 12 hours of PCS, resulting in over 1,900,000 false claims being submitted to the
Medicaid program for payment, to the tune of over 40 million dollars. And this assumed,
quite conservatively, that the employees provided PCS for the entire 8 hours, without a
single break. See United States v. Krizek, 111 F.3d 934, 942 (D.C. Cir. 1997) (finding that
physician and his wife, who was in charge of maintaining billing records, displayed
reckless disregard under the FCA for “fail[ing] utterly” to review bills submitted on the
doctor’s behalf, where “even the shoddiest recordkeeping would have revealed” that the
claims sought reimbursement for an excessive number of hours, in some cases for more
than 24 hours in a day.”).
The majority does not engage with this evidence at all, summarily concluding
instead that this “disparity” between the amount of time Defendants billed and the amount
of time their employees worked cannot alone support a claim of fraud under federal or state
law. Although the majority never explains why the disparity alone is not evidence of fraud,
this disparity is not the sole basis for the claim of fraud. As explained above, Plaintiff has
also submitted evidence that, in several instances, Medicaid was billed for the maximum
number of authorized hours in situations where the beneficiary was absent from the facility
for a significant portion of the day.2
2 Defendants and the majority also rely upon a 2016 audit, but it too is insufficient
to support summary judgment for Defendants in the face of Plaintiff’s evidence. NC
Medicaid did not request additional information from Stahlschmidt after he questioned

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These are material matters for the jury’s determination. Plaintiff has produced
sufficient evidence from which a reasonable jury could find that Defendants failed to make
a reasonable and prudent inquiry into how Policy 3L affected their billing method and,
instead, buried their heads in the sand to maximize their billings. A reasonable jury could
find that Defendants “census-billing” practice was not a reasonable interpretation of the
Policy or guidance document, and not an “honest mistake” or mere negligence on their
part. A reasonable jury could find that Defendants ignored the changes that Policy 3L
mandated and engaged in a deliberate method to maximize profits at the expense of the
government or, at the very least, deliberate indifference to the time-based billing units
provision of Policy 3L to reach the same result. Given the language of Policy 3L,
Stahlschmidt’s lack of effort to understand Policy 3L, Coffey’s wholesale lack of
knowledge about Policy 3L’s requirements, and the fact that the actual billing method
employed did not consider whether any PCS tasks were completed, a reasonable jury could
conclude that Defendants displayed a reckless disregard or deliberate indifference to the
falsity of their reimbursement claims.
whether time sheets and time spent needed to be provided. But they do not explain the
reason for the audit or why the time records were not necessary to determine whether the
computerized task logs were properly maintained. While I do not dispute the existence of
this evidence, this evidence simply does not answer the question of whether Defendants
reasonably interpreted Policy 3L as allowing them to continue to bill the maximum amount
of authorized time for PCS services regardless of whether any PCS services were provided
or, if such services were provided at all, how much time their employees spent providing
them. At most, it is a matter for the jury’s consideration, not a determination that
Defendants are entitled to summary judgment.

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III.
Although the majority addresses only the question of scienter, the district court also
concluded that summary judgment was proper because any false statements made by
Defendants were not material. I disagree.
A statement is material under the FCA if it has “a natural tendency to influence, or
be capable of influencing, the payment or receipt of money or property.” 31 U.S.C. §
3729(b)(4); see Universal Health Services v. U.S. ex rel. Escobar, 136 S. Ct. 1989, 2002–
03 (2016) (“Under any understanding of the concept, materiality looks to the effect on the
likely or actual behavior of the recipient of the alleged misrepresentation.”) (cleaned up).
If Policy 3L requires time-based billing, as I believe it does, then Defendants’ bills seeking
payment for the maximum authorized daily hours for each patient, regardless of time
actually spent with the patient, were materially false. But even if Defendants are right that
Policy 3L allows task-based billing, the materiality standard is still met. Policy 3L requires
documentation of PCS tasks performed; any failure to perform a scheduled PCS task must
be documented as a deviation. While Defendants maintain records of the PCS tasks actually
performed, the billing department never sees them. Instead, as discussed above, Defendants
bill the maximum daily hours for every patient present at the facility on midnight, without
regard to whether the patient actually received all or any part of the authorized PCS.
Defendants’ maximum-hour billing amounts to an assertion that all authorized PCS tasks
were completed, and that assertion is clearly material under a task-based reimbursement
system.

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IV.
For the foregoing reasons, I would hold that Plaintiff has proffered sufficient
evidence to establish a genuine dispute of a material fact regarding the scienter and the
materiality elements of his FCA claim and reverse the district court’s grant of summary
judgment to Defendants. Accordingly, I dissent.

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