USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 1 of 41

PUBLISHED

UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

No. 23-2101

UNITED STATES EX REL. LISA WHEELER; STATE OF NORTH CAROLINA EX REL. LISA WHEELER,

Plaintiffs - Appellants,

v.

ACADIA HEALTHCARE COMPANY, INC.; CRC HEALTH, LLC; ATS OF NORTH CAROLINA, LLC, d/b/a Mountain Health Solutions Asheville, d/b/a Asheville Comprehensive Treatment Center, d/b/a Mountain Health Solutions North Wilkesboro, d/b/a North Wilkesboro Comprehensive Treatment Center,

Defendants - Appellees.

Appeal from the United States District Court for the Western District of North Carolina, at Asheville. Martin K. Reidinger, Chief District Judge. (1:21-cv-00241-MR-WCM)

Argued: September 26, 2024 Decided: February 3, 2025

Before HARRIS, HEYTENS and BERNER, Circuit Judges.

Reversed by published opinion. Judge Berner wrote the opinion, in which Judge Harris and Judge Heytens joined.

ARGUED: Tejinder Singh, SPARACINO PLLC, Washington, D.C., for Appellants. Jennifer Lyn Weaver, HOLLAND AND KNIGHT, LLP, Nashville, Tennessee, for Appellees. ON BRIEF: Gary W. Jackson, Kaitlyn E. Fudge, LAW OFFICES OF JAMES USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 2 of 41

SCOTT FARRIN, Durham, North Carolina; William N. Nettles, Frances C. Trapp, John L. Warren III, LAW OFFICE OF BILL NETTLES, Columbia, South Carolina, for Appellants. Andrew F. Solinger, HOLLAND AND KNIGHT LLP, Nashville, Tennessee, for Appellees.

2 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 3 of 41

BERNER, Circuit Judge:

Congress enacted the False Claims Act in 1863 to provide a mechanism for the

government to redress fraud in government procurement during the Civil War. Congress

substantially strengthened the Act with the passage of the False Claims Act of 1986, and

further strengthened it with the Fraud Enforcement and Recovery Act of 2009. The False

Claims Act incentivizes whistleblowers, deemed “relators,” to come forward when they

become aware of fraud against the government, and to protect them from retaliation when

they do.

The False Claims Act is a powerful tool for recovering taxpayer dollars to the public

fisc. It punishes companies that have committed fraud in government contracts and serves

an important function in deterring other companies from doing the same. In the fiscal year

ending September 30, 2023, alone, the Department of Justice reported over $2.68 billion

recovered through False Claims Act settlements and judgments. Fully two-thirds of that

amount was collected from healthcare companies. Employees in the healthcare industry,

including frontline workers who provide direct services to patients, are often in the best

position to observe these fraudulent billing practices. Lisa Wheeler, formerly the Assistant

Medical Director at Acadia Healthcare Company’s Asheville, North Carolina clinic, was

one such worker.

Acadia contracted with the government under Medicare, Medicaid, and other

government-funded healthcare programs to render methadone-assisted treatment to

patients suffering from opioid use disorder. The payment plans for these addiction

treatment programs required Acadia to provide patients therapy and counseling, in addition

3 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 4 of 41

to methadone treatment. Wheeler became aware that Acadia was not providing the requisite

therapy and counseling. Instead, Acadia was falsifying medical records—fabricating fake

therapy notes from whole cloth—and relying in part on these falsified records to submit

claims to the government for payment. Wheeler filed a complaint against Acadia alleging

a number of violations of the False Claims Act. After the government declined to intervene

in the case, Wheeler amended her complaint. Upon review of Acadia’s motion to dismiss

for failure to state a claim, the district court dismissed Wheeler’s amended complaint in its

entirety. We reverse.

I. Background

Because this is an appeal from an order granting a motion to dismiss, we accept as

true the factual allegations in Wheeler’s amended complaint. De’lonta v. Johnson,

(4th Cir. 2013). Accordingly, we recite the facts as she alleges.

A.

To combat the opioid crisis and provide treatment for those suffering from substance

use disorders, Congress permits certain healthcare providers to administer methadone and

other similar synthetic opiates1 in narrowly prescribed conditions. One such condition is

that clinics which prescribe and distribute methadone must also provide patients with

therapy and counseling services. This requirement enforces the federal scheme to combat

1 Because the distinction between these drugs is generally not relevant here, we employ the term “methadone” to include all similar synthetic opiates used in opioid use disorder treatment. 4 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 5 of 41

rampant opioid use disorder: prescribing methadone to help the patient cope with short-

term cravings and withdrawal symptoms, together with providing counseling and therapy

services to address the underlying cause of the patient’s opioid use disorder.

The Controlled Substances Act, which established this scheme, limited the

administration of methadone to Opioid Treatment Programs (OTPs) that have been

certified by the Substance Abuse and Mental Health Services Administration (SAMHSA).

; see also

(h). To obtain certification, OTPs must meet

certain specified opioid treatment standards, any relevant state standards, and possess

current, valid accreditation from a SAMHSA-approved accreditation body.

. Federal law requires OTPs to:

• “provide adequate medical, counseling, vocational, educational, and other

screening, assessment, and treatment services” and “be able to document that these

services are fully and reasonably available to patients,”

(f)(1);

• prepare a treatment plan that contains “medical and psychiatric, psychosocial,

economic, legal, housing, and other recovery support services that a patient needs

and wishes to pursue” and identifies “the recommended frequency with which

services are to be provided.”

§ 8.12(f)(4). “The plan must be reviewed and

updated to reflect responses to treatment and recovery support services,” id.;

• “provide adequate substance use disorder counseling and psychoeducation to each

patient as clinically necessary and mutually agreed-upon, including harm reduction

education and recovery-oriented counseling,” in order “to contribute to the

5 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 6 of 41

appropriate care plan for the patient and to monitor and update patient progress,” id.

§ 8.12(f)(5); and

• “establish and maintain a recordkeeping system that is adequate to document and

monitor patient care,” id. § 8.12(g).

Government healthcare programs, including Medicare and Medicaid, pay OTPs to

provide methadone-assisted treatment to persons with substance use disorders.

Under Medicare, which funds healthcare for the elderly and disabled, the OTP

submits weekly “bundled” payments, rather than billing for individual services. See

(d). To qualify for weekly payment, an OTP must furnish the patient with

at least one opioid use disorder treatment service during that week.

(b)(i)-(v). These treatment services include providing medication or counseling

services such as “individual and group therapy.”

Medicare regulations outline two types

of bundled payments—payments based on weeks where a patient received medication and

payments based on weeks where a patient did not receive medication.

§ 410.67(d)(2).

When medication is provided through a Medicare plan, the bundled rate depends on

the type of drug provided. Below is one relevant example of a billing code for a Medicare

bundled payment:

Code G2067: Medication assisted treatment, methadone; weekly bundle including dispensing and/or administration, substance use counseling, individual and group therapy, and toxicology testing, if performed (provision of the services by a Medicare-enrolled Opioid Treatment Program). Drug Cost: $37.38 Nondrug Cost: $178.29 Total Cost: $215.67

6 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 7 of 41

J.A. 45. The non-drug component—often the largest share of the weekly Medicare

payment—covers costs including counseling and therapy. See

(d)(2)(ii).

In contrast to the Medicare’s bundled payments, Medicaid, which provides

healthcare to poor people and people with disabilities, and other government healthcare

programs, including TRICARE and the Veterans Health Administration, pay providers for

opioid treatment services on a fee-for-service basis. This means that providers submit bills

and are paid for specific services provided.

B.

Acadia Healthcare Company is one of the largest addiction treatment and behavioral

healthcare service providers in the United States. The other defendants, CRC Health, LLC

and ATS of North Carolina, LLC, are subsidiaries of Acadia Healthcare Company. We

refer to the defendants, collectively, as “Acadia.”

Lisa Wheeler is a physician assistant who served as the Assistant Medical Director

of Acadia’s Asheville, North Carolina clinic. She treated patients suffering from addiction,

and her job required her “to handle physical assessments of patients and prescribe

appropriate doses” of medications that would help them combat substance use disorders.

J.A. 79. Wheeler worked at the Asheville clinic from January 2014 through December

2021.

Acadia’s Asheville clinic provided substance use disorder treatment to many

patients who relied on government healthcare programs. In fact, about 65 percent of

Acadia’s annual revenue came from Medicare and Medicaid. Acadia provided methadone-

assisted treatment services to government healthcare beneficiaries. As such, Acadia was

7 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 8 of 41

required to comply with the federal regulations for OTPs. Pursuant to those requirements,

Acadia prepared individual treatment plans for each patient. Therapy and counseling were

to be “integral parts of every patient’s treatment plan.” J.A. 79. New patients were

“supposed to be seen at least twice a month for counseling with a clinic-contact at least

every week,” and “established patients [were] to receive counseling at least once per

month.” J.A. 81.

Beginning in September 2020, Wheeler noticed that the Asheville clinic was

documenting that its patients were receiving group therapy, but she was unaware that such

therapy had been provided. J.A. 81. Wheeler began asking her patients about their group

therapy and her patients told her that Acadia had not provided such therapy for over two

years. Rather than providing therapy, Acadia’s therapists and counselors were signing off

on false treatment notes for “impromptu lobby group,” “continuous lobby group,”

“sidewalk group,” “telehealth group therapy sessions,” and “bibliotherapy.” J.A. 81. These

group therapy sessions never took place.

Acadia’s therapists would sign off on verbatim—or nearly verbatim—group therapy

notes for different patients and different counselors. They would also submit identical

fraudulent group therapy notes for the same patient on different dates. The notes for these

falsified therapy sessions often contained significant detail, including descriptions of

conversations between participants. For example, a medical record belonging to one

patient, who Wheeler called “Patient 1,” said that the patient had participated in an

“impromptu lobby group” on September 2, 2020. J.A. 82. The subject was “Relapse is Not

a Sign of Failure.” J.A. 82. That medical record read in full:

8 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 9 of 41

Group members were asked what they thought the analogy about the flooded house meant. The overall majority of the clients were able to find the meaning. One client wrote, “…just deciding to get clean doesn’t fix the damage to your body and brain.” Another wrote, “quitting illicit drugs doesn’t solve your problems, but it stops it from becoming worse.”

Clients were then asked if they felt like they had, at this point, completely “turned off the faucet” at this time. Answered (sic) varied in regards to their current recovery effort. Those who answered, “yes” were asked about the damages they’ve repaired. Client’s discussed their accomplishments in “people, places and things,” “family relationships,” “self-esteem,” and “overcoming the stigma attached to being an addict “,” continued illicit free urinalysis screens”, and “removing the numbers from the telephone and staying clear of old hangouts”, etc.

Assessment: All clients were given the opportunity to list some of the items they had not yet repaired. Group members discussed the need to continue to repair relationships, stop using drugs as a crutch when emotions such as anger or fear take over, repair overall health, begin to care for one’s self, working on mental health, working on one’s own attitude, repairing financial status and credit, etc.

Plan: Group members were thanked for their work and feedback in this exercise. Group facilitator encouraged client to keep transforming their life and make the necessary repairs in life.

J.A. 82–83. Although this medical record provides specific details, including direct

quotations of patient responses, it kept appearing in other patient files that Wheeler

observed. On March 3, 2021, a medical record of “sidewalk group” therapy for a different

patient contained nearly verbatim language, omitting only the words “Assessment” and

“Plan.” J.A. 83–84. An identical note was found in the files of another patient on March 4,

2021, and in the file of yet another patient on March 5, 2021. It was even reused a second

time for Patient 1. Wheeler alleges that none of those therapy sessions actually took place.

Yet another patient, who Wheeler called “Patient 6,” was enrolled in both Medicare

and Medicaid. Patient 6 received methadone-assisted treatment at Acadia’s Asheville clinic

9 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 10 of 41

beginning in April 2020. His initial treatment plan required that he participate in

counseling. For well over a year, however, Acadia failed to provide him with that option.

In July 2021, Patient 6 met with a counselor to update his treatment plan. At that time,

Patient 6 had failed two previous drug screenings, reported that he was struggling to remain

sober, and expressed interest in group therapy. His treatment plan was updated to indicate

that he would “continue to attend counseling sessions through telehealth or in person

sessions” and to note that Patient 6 “could benefit from attending group [therapy] as well.”

J.A. 99. Despite the fact that his treatment plan called for group therapy, Patient 6 never

received such therapy up to the time Wheeler left Acadia in December 2021.

Patient 6’s medical record told another story. His record contained several group

therapy notes suggesting that he participated in group therapy often. At least four notes

indicating that Patient 6 participated in group therapy were exact duplicates of notes used

previously for other patients. In one instance, Patient 6’s record stated that he was part of

a “continuous lobby group” session held on April 7, 2021. The record of that event contains

an 800-plus word account of the session and includes details as specific as “one client on

the line stated he goes for walks and leaves his phone at home just ‘to get away from the

noise.’” J.A. 96–97. That note was an exact duplicate of the note that Acadia used for

Patient 1 on January 29, 2021. It was also the same note that was used for seven other

patients on six different days. The details about this “impromptu lobby group” suggested

that the group was convened by teleconference, but the Asheville clinic lacked the technical

capability to conduct telehealth meetings.

10 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 11 of 41

Wheeler also observed that individual, non-contact therapy notes were falsified

during the COVID-19 pandemic. During this period, Acadia began making brief calls to

patients but recorded the calls as full therapy sessions. Acadia provided no meaningful

individual therapy to its patients during that time but created records suggesting that

therapy occurred. In sum, Acadia provided insufficient individual therapy and no group

therapy, but it billed government healthcare programs as if such services had been

provided.

Wheeler attempted to raise her concerns with her supervisors on many occasions.

In March, May, and July of 2021, Wheeler informed the Clinic Director of the Asheville

facility that Acadia was engaging in fraud by falsifying group therapy records. Acadia

never investigated her reports. Instead, after becoming aware of Wheeler’s complaints,

Acadia’s Regional Director for North Carolina ordered the Clinic Director of the Asheville

facility to tell Wheeler to “stay in her lane.” J.A. 93.

C.

This is not the first time Acadia has faced allegations of fraud. In April 2014, the

Department of Justice announced the settlement of FCA claims against an Acadia

affiliate’s predecessor related to allegations that it “knowingly submitted false claims by

providing substandard treatment to adult and adolescent Medicaid patients suffering from

alcohol and drug addiction.” J.A. 65. In May 2019, the Department of Justice announced

another settlement with Acadia. That claim related to Acadia’s treatment centers seeking

Medicaid reimbursement for moderate and high complexity laboratory drug testing which

Acadia’s facilities “were not certified to perform, and did not, in fact, perform.” J.A. 66.

11 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 12 of 41

Medicaid unwittingly paid Acadia’s treatment centers $8,500,000 for those false tests.

J.A. 67.

As a condition of the 2019 settlement, Acadia entered into a corporate integrity

agreement (CIA) with the United States Department of Health and Human Services (HHS),

which Wheeler attached to her complaint. See E.I. du Pont de Nemours & Co. v. Kolon

Indus., Inc.,

(4th Cir. 2011) (“In deciding whether a complaint will

survive a motion to dismiss, a court evaluates the complaint in its entirety, as well as

documents attached or incorporated into the complaint.”). The CIA required Acadia to

provide training to certain “covered persons,” including staff, contractors, and agents who

provide patient care or perform a billing or coding function. J.A. 124–25, 129–30. These

covered persons were required to receive at least annual trainings on the requirements of

federal healthcare programs and the requirements of the CIA itself. J.A. 129–30.

The CIA also required Acadia to develop a “disclosure program” that would enable

individuals to internally report any potential concerns about Acadia’s policies, conduct,

practices, or procedures with respect to a federal health care program believed by the

individual to be a potential violation of criminal, civil, or administrative law. J.A. 131. The

CIA further required Acadia to publicize the existence of this disclosure program to its

employees. J.A. 131–32.

Under the CIA, Acadia was required to mandate that covered persons “report

suspected violations of any Federal health care program requirements.” J.A. 132. Upon

receipt of any such disclosure, Acadia was to gather information about the report. J.A. 132.

If, “after a reasonable opportunity to conduct an appropriate review or investigation of the

12 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 13 of 41

allegations,” Acadia determined that there had been an overpayment, or “a matter that a

reasonable person would consider a probable violation of criminal, civil, or administrative

laws applicable to any Federal health care program,” Acadia was to notify the HHS Office

of the Inspector General. J.A. 135.

Wheeler alleges that Acadia never provided her or other staff the annual trainings

required by the CIA, and Acadia never made her aware of a disclosure program. As we

noted, Wheeler reported the false group therapy records to the Asheville Clinic Director

multiple times between March and July 2021. Yet Acadia failed to investigate, take

remedial action, or report to the HHS Office of the Inspector General any information

Wheeler brought forward.

II. Procedural History

On September 10, 2021, Wheeler filed this case against Acadia under seal, as is

required by the False Claims Act, on behalf of the United States of America and the State

of North Carolina. The United States of America and the State of North Carolina declined

to intervene in June 2022, and subsequently the complaint was unsealed. In August 2022,

Wheeler filed an amended complaint, which alleges six separate False Claims Act

violations by Acadia:

• Count I: a claim of “presentment” under

(a)(1)(A);

• Count II: a claim of “false statement” under Section 3729(a)(1)(B);

• Count III: a claim of “conversion” under Section 3729(a)(1)(D);

• Count IV: a claim of “false certification” under Section 3729(a)(1)(B); 13 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 14 of 41

• Count V: a claim of “fraudulent inducement” under Section 3729(a)(1)(B); and

• Count VI: a “reverse false claim” under Section 3729(a)(1)(G).

Wheeler’s reverse false claim relates only to Acadia’s alleged violations of the CIA.

Wheeler also brought a claim under the North Carolina False Claims Act,

, et seq. The North Carolina False Claims Act “largely parallels the False

Claims Act and is interpreted consistent with it.” United States ex rel. Gugenheim v.

Meridian Senior Living, LLC,

, 179 n.2 (4th Cir. 2022) (citing

(c)). Accordingly, we “discuss only the [federal] False Claims Act, although our

analysis and conclusions apply equally” to Wheeler’s North Carolina False Claims Act

claim. See

After Wheeler filed her amended complaint, Acadia moved to dismiss. The district

court referred Acadia’s motion to a magistrate judge for review. In evaluating Acadia’s

motion to dismiss, the magistrate judge considered Wheeler’s claims in three groups: the

four claims under

(a)(1)(A) and (B) (Counts I, II, IV, and V); the

conversion claim (Count III), and the reverse false claim (Count VI). Wheeler v. Acadia

Healthcare Co., No. 1:21-cv-00241-MR-WCM,

, at *6, *10–12

(W.D.N.C. July 27, 2023). Wheeler has abandoned her conversion claim, Count III, on

appeal.

The magistrate judge first determined that Wheeler failed to allege with sufficient

specificity that the practices she became aware of in Acadia’s Asheville, North Wilkesboro,

Pinehurst, and Fayetteville facilities were occurring at any other facilities.

. The

magistrate judge found insufficient that Wheeler relied only upon a belief that Acadia had 14 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 15 of 41

a corporate policy to falsify medical records.

Thus, the magistrate judge recommended

that the district court dismiss Wheeler’s claims as they relate to any clinics other than these

four North Carolina facilities. See

After limiting the scope of Wheeler’s claims under

(a)(1)(A) and

(B), the magistrate judge next concluded that Wheeler had failed to adequately plead that

Acadia’s allegedly false claims were material or submitted to the government, two

requirements of an FCA claim. Wheeler,

, at *7–10. The magistrate

judge concluded that Wheeler failed to meet the materiality requirement because her claims

relied solely on general compliance with applicable laws and regulations, rather than

demonstrating that Acadia’s failure to provide therapy was “material to any Government

Healthcare Program’s payment decisions.”

. The magistrate judge then determined

that Wheeler had failed to demonstrate that the false claims were submitted to the

government.

at *9–10. According to the magistrate judge, Medicare did not require

Acadia to provide therapy in order to bill for weekly payments, so Acadia had not submitted

any false statements to the Medicare program.

. With respect to the healthcare

programs that bill for individual services, such as Medicaid, the magistrate judge concluded

that Wheeler’s amended complaint lacked specific allegations that Acadia submitted any

bills to those programs.

.

The magistrate judge then turned to Wheeler’s reverse false claim. Noting a split

within the federal district courts as to whether stipulated monetary penalties can constitute

an “obligation” under the False Claims Act, the magistrate judge concluded that the

15 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 16 of 41

stipulated penalties in the CIA are not an “obligation” because they rely upon the

government choosing to enforce the penalty.

at *12–13.

The magistrate judge provided a report to the district court recommending dismissal

of all of Wheeler’s claims. The district court adopted the magistrate judge’s

recommendation in full. Wheeler v. Acadia Healthcare Co., No. 1:21-cv-00241-MR-

WCM,

, at *2 (W.D.N.C. Sept. 18, 2023).

III. Standard of Review

We review de novo a district court’s grant of a motion to dismiss for failure to state

a claim, construing “factual allegations in the light most favorable” to the plaintiff. United

States v. Walgreen Co.,

(4th Cir. 2023).

Wheeler’s claims, like all claims arising under Sections 3729(a)(1)(A) and (B) of

the False Claims Act, are based on allegations of fraud and must, therefore, satisfy the

heightened pleading standard of Federal Rule of Civil Procedure 9(b). United States ex rel.

Nathan v. Takeda Pharm. N. Am., Inc.,

, 455–56 (4th Cir. 2013). “Rule 9(b)

requires a plaintiff alleging fraud or mistake, like a False Claims Act [whistleblower], to

‘state with particularity the circumstances constituting fraud or mistake,’ though

knowledge ‘may be alleged generally.’” United States ex rel. Taylor v. Boyko,

, 189 (4th Cir. 2022) (quoting Fed. R. Civ. P. 9(b)). “These circumstances are often

‘referred to as the ‘who, what, when, where, and how’ of the alleged fraud.’”

(quoting

United States ex rel. Wilson v. Kellogg Brown & Root, Inc.,

(4th Cir.

2008)).

16 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 17 of 41

IV. Analysis

We evaluate this appeal in two parts. We first consider Wheeler’s FCA claims of

presentment, false statement, false certification, and fraudulent inducement. We then turn

to Wheeler’s “reverse false claim” that Acadia’s CIA violations resulted in obligations it

has failed to pay the government.

A. Waiver

Before we can address the merits of this appeal, however, we must consider as a

threshold matter Acadia’s contention that Wheeler waived her claims of false certification

and fraudulent inducement. Acadia argues that Wheeler, in her objection to the magistrate

judge’s recommendation, failed to provide a “substantive explanation” why dismissal of

those claims would be improper. Acadia Br. at 8–12. That is not our standard for objections

to a magistrate judge’s recommendation. Wheeler objected with the specificity this court

requires.

The Federal Magistrates Act,

(b)(1), requires district courts to

“make a de novo determination of those portions of the report or specified proposed

findings or recommendations to which objection is made.” Osmon v. United States,

(4th Cir. 2023). “[A] party must object to the finding or recommendation

on that issue with sufficient specificity so as reasonably to alert the district court of the true

ground for the objection.” United States v. Midgette,

(4th Cir. 2007).

Failure to object with sufficient specificity “waives a right to appellate review.”

.

17 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 18 of 41

The specificity required for an objection is a “modest bar.” Osmon,

.

In Osmon, this court explained that “the statute requires an ‘objection’ rather than a

freestanding brief or memorandum of law, and a party need not frame its arguments anew

when it objects.”

at 146–47 (emphasis added). Wheeler easily cleared that modest bar.

The magistrate judge’s report and recommendation grouped the fraudulent

inducement, false certification, presentment, and false statement claims and considered

these claims together because they require similar elements of proof. Wheeler,

, at *6. After the magistrate judge’s recommendation issued, Wheeler objected to

the dismissal of each of these claims individually. That alone was sufficient to preserve her

claims before the district court and to meet our “modest bar” for an objection following a

magistrate judge’s findings and recommendation. Wheeler thus did not waive her false

certification and fraudulent inducement claims.

B. False Claims

We next turn to Wheeler’s FCA claims under

(a)(1)(A)

and 3729(a)(1)(B). Count I of Wheeler’s complaint sets forth a presentment claim pursuant

to

(a)(1)(A), which provides that “any person who [. . .] knowingly

presents, or causes to be presented, a false or fraudulent claim for payment or approval

[. . .] is liable to the United States Government.” Counts II, IV, and V set forth Wheeler’s

false statement, false certification, and fraudulent inducement claims, respectively. Each

of these claims is brought under

(a)(1)(B), which provides that “any

person who [. . .] knowingly makes, uses, or causes to be made or used, a false record or

18 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 19 of 41

statement material to a false or fraudulent claim [. . .] is liable to the United States

Government.”

Wheeler’s presentment claim alleges that Acadia knowingly submitted a false claim

to the government. See United States ex rel. Nicholson v. MedCom Carolinas, Inc.,

(4th Cir. 2022). Her false statement claim alleges that Acadia knowingly made a

false statement or produced a false record that was submitted to the government by

someone else. See

Wheeler asserts these causes of action with respect to claims Acadia

submitted to the Medicaid, TRICARE, and the Veterans Health Administration healthcare

programs, all of which pay for opioid treatment services on a fee-for-service basis.

Wheeler’s false certification and fraudulent inducement claims operate somewhat

differently. A false certification claim presumes that the defendant implicitly certified that

it complied with relevant statutes, regulations, or contract requirements when it knew that

it was not complying. See Universal Health Servs., Inc. v. United States ex rel. Escobar,

(2016). A fraudulent inducement claim is based on the theory that the

defendant obtained participation in the government program through fraud. United States

v. Strock,

(2d Cir. 2020). Wheeler brings these causes of action with respect

to the claims for payment Acadia submitted to Medicare, which bills using weekly bundled

payments.

For Wheeler’s presentment, false statement, false certification, and fraudulent

inducement claims to survive a motion to dismiss, she must allege four elements: 1) that

Acadia made a false statement or engaged in a fraudulent course of conduct; 2) such

19 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 20 of 41

statement or conduct was made or carried out with the requisite scienter;2 3) the statement

or conduct was material; and 4) the statement or conduct “caused the government to pay

out money or to forfeit moneys due (i.e., that involved a ‘claim’).”3 Taylor, 39 F.4th at 188

(quoting Harrison v. Westinghouse Savannah River Co.,

(4th Cir.

1999)). “Failure to adequately allege any of these elements dooms a claim.”

In

evaluating whether Wheeler’s allegations meet these elements, we will consider her claims

as a group unless noted otherwise.

i. Falsity

In drafting the False Claims Act, “Congress did not define what makes a claim

‘false’ or ‘fraudulent.’” Taylor, 39 F.4th at 200 (quoting Escobar,

). Thus,

this court has relied on the well-settled meaning of the common law terms used in the

statute.

“At common law, a false statement encompassed any ‘words or conduct’ that

‘amount[ ] to an assertion not in accordance with the truth.’”

(alteration in original)

(quoting Restatement (Second) of Torts § 525 cmt. b (1977)). This includes a

“representation stating the truth so far as it goes but which the maker knows or believes to

be materially misleading because of his failure to state additional or qualifying

[information].” Id. at 188 (quoting Restatement (Second) of Torts § 529).

2 Scienter is undisputed. Thus, we do not discuss this element. 3 This court has not determined whether submission of a false claim is an element of a false certification or fraudulent inducement claim. See Taylor, 39 F.4th at 195 n.12. Wheeler argues only that her claims meet the submission requirement, however. Therefore, we assume without deciding that she must adequately plead that element for both her false certification and fraudulent inducement claims. 20 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 21 of 41

Wheeler’s complaint readily meets this broad definition with respect to Acadia’s

North Carolina facilities. Wheeler pleads detailed allegations that Acadia created notes for

therapy sessions that did not actually occur, even going so far as to falsify specific case

notes that were reused on different dates for different patients. These allegedly false notes

would constitute misrepresentations about the services Acadia provided under government

healthcare programs. Wheeler further alleges that these notes evidenced Acadia’s

noncompliance with statutory and regulatory requirements for OTPs.

Wheeler’s allegations that Acadia falsified notes relate predominantly to her

observations at the Asheville clinic. Wheeler also alleges that the Medical Director of the

North Wilkesboro, North Carolina clinic informed her that group therapy notes were

similarly falsified at that clinic. When Wheeler complained about the misconduct she had

observed, the Clinic Director of the Asheville facility informed her that the fraudulent

group therapy notes were being created “at other North Carolina locations,” including the

clinics in Pinehurst and Fayetteville. J.A. 92–93. Just after Wheeler registered that

complaint, the manager responsible for Acadia’s North Carolina oversight told Wheeler to

“stay in her lane.” J.A. 93. These allegations are sufficient evidence that Acadia made

fraudulent representations about its compliance with statutory and regulatory requirements

across Acadia’s North Carolina opioid use disorder treatment clinics. We depart from the

district court’s conclusion that Wheeler’s allegations sufficiently allege falsity only for four

of Acadia’s North Carolina facilities, because the Clinic Director informed her that

fraudulent group therapy notes were used at Acadia’s facilities across North Carolina.

21 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 22 of 41

While Wheeler met her pleading requirement with respect to Acadia’s North

Carolina clinics, she failed to allege with sufficient particularity that any facilities outside

of North Carolina were falsifying group therapy notes. Wheeler’s complaint attempts to

reach Acadia’s nationwide clinics through her allegations that the practice of falsifying

group therapy notes is “corporate policy.” J.A. 104–05. A mere allegation that a corporate

policy exists, with nothing more, is insufficient. Rule 9(b) requires a False Claims Act

whistleblower to describe the fraud with sufficient particularity. Nicholson,

.

Our standard for False Claims Act pleadings requires that Wheeler have “substantial

prediscovery evidence of th[e] facts.” Harrison,

. Nothing in Wheeler’s

complaint allows us to infer that the alleged “corporate policy” in fact exists. Thus, we

conclude that Wheeler’s allegations meet the pleading requirement only with regard to

Acadia’s North Carolina clinics.

ii. Materiality

Alleging a misrepresentation will not, without more, suffice to meet the pleading

requirement under the False Claims Act. “A misrepresentation about compliance with a

statutory, regulatory, or contractual requirement must be material to the Government’s

payment decision in order to be actionable under the False Claims Act.” Escobar,

(emphasis added). For purposes of the False Claims Act, materiality means “having

a natural tendency to influence, or be capable of influencing, the payment or receipt of

money or property.”

(b)(4). In Escobar, the Supreme Court described this

“rigorous” requirement.

. We turn to Escobar to guide our analysis.

22 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 23 of 41

In Escobar, the Supreme Court looked to common law principles to explain that the

materiality inquiry should focus on “the effect on the likely or actual behavior of the

recipient of the alleged misrepresentation.”

at 193 (quoting 26 R. Lord, Williston on

Contracts § 69:12, p. 549 (4th ed. 2003)). A matter is material in tort law if “a reasonable

man would attach importance to [it] in determining his choice of action in the transaction,”

or if there was reason to know “that the recipient of the representation attaches importance

to the specific matter ‘in determining his choice of action,’ even though a reasonable person

would not.” Id. (quoting Restatement (Second) of Torts § 538, at 80). In order to meet the

materiality requirement, the fraud alleged under the False Claims Act must be “so central

to” the purpose of the government contract that the government “would not have paid the[ ]

claims had it known of the[ ] violations.” Id. at 196.

The Court explained that some express conditions of payment might be “relevant,

but not automatically dispositive” of materiality. Id. at 194. If, for example, “the

Government contracts for health services and adds a requirement that contractors buy

American-made staplers, anyone who submits a claim for those services but fails to

disclose its use of foreign staplers” would not be in violation of the False Claims Act. Id.

at 195. The failure to follow a “minor or insubstantial” requirement, such as purchasing

American-made staplers, does not suffice to show materiality. Id. at 194.

1.

This court has considered the materiality of an FCA claim in three cases post-

Escobar: United States ex rel. Badr v. Triple Canopy, Inc.,

(4th Cir. 2017);

United States ex rel. Taylor v. Boyko,

; and United States v. Walgreen

23 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 24 of 41

Company,

. These cases help establish the framework for determining whether

a claim is material.

In two of these cases, Triple Canopy and Walgreen Company, this court held the

claims were material. In Triple Canopy, the government awarded Triple Canopy, a private

military security company, a one-year contract to provide security services at Al-Asad

Airbase in Iraq.

. As part of that contract, Triple Canopy was required to

meet certain “responsibilities,” including ensuring that all employees adequately

completed “a U.S. Army qualification course.”

An FCA whistleblower alleged that

Triple Canopy employed guards who did not meet the qualification course’s marksmanship

requirement.

Rather than inform the government of this deficiency, the FCA

whistleblower alleged that Triple Canopy falsified the guard’s marksmanship scorecards.

This court found Triple Canopy’s alleged omissions material for two reasons: “common

sense and Triple Canopy’s own actions in covering up the noncompliance.”

. It

was plain that the marksmanship requirement was a “precondition for payment.”

at 178

n.4. The government certainly would not pay for “guards that cannot shoot straight” when

the contract called for proof of adequate marksmanship.

. Although Triple Canopy

did not certify contractual compliance in its invoices, the government would not have paid

Triple Canopy but for the marksmanship falsification.

at 177–79.

This court similarly found the claims material in Walgreen Company. There, an

FCA whistleblower alleged that Walgreens, to prescribe more medication and increase

profits, falsified patient compliance with Virginia’s Hepatitis C medicine eligibility

requirements. Walgreen Co., 78 F.4th at 89–90. Walgreens allegedly submitted false

24 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 25 of 41

patient records that overstated the severity of patients’ symptoms. Walgreens also allegedly

falsified records concerning patient compliance with drug abstinence requirements. Id. at

90. This court reasoned that Walgreens’s misrepresentations had “a natural tendency to

influence, or [were] capable of influencing,” the government decisionmakers. Id. at 93

(quoting

(b)(4) (brackets in original)). “In fact, they did influence the

decisionmakers” because Virginia had rejected claims when patients suffered less severe

symptoms or had failed to meet drug screens.

Taylor, by contrast, provides an example of a claim that failed to adequately allege

the requisite materiality. In Taylor, an FCA whistleblower alleged that a healthcare staffing

company submitted false claims to Medicare by failing to maintain its certificate of

corporate authorization with the state of West Virginia. 39 F.4th at 192–93. This court

upheld dismissal of that claim because the complaint failed to allege how the staffing

company’s loss of its certificate of corporate authorization—from its neglecting to file an

annual report and pay a $25 fee—would impact government decisionmaking on claims for

healthcare payments.

. The complaint in Taylor alleged that the government

rejected claims by individual healthcare providers who had lost their personal medical

licenses and analogized that to the lack of a corporate certificate.

. This court

recognized, however, that personal medical licenses are quite different than state

certificates of corporate authorization.

While an individual doctor’s license is “so

central” to the medical services provided that the “Medica[re] program would not have

paid these claims had it known of these violations,” it was not clear from Taylor’s

allegations that a state certificate of corporate authorization would be so central to

25 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 26 of 41

Medicare payment.

at 193 (quoting Escobar,

). Although the FCA

whistleblower in Taylor adequately alleged that the staffing company violated state law by

failing to maintain corporate authorization, there was no reason to infer that the federal

government would decline to pay the Medicare claims as a result.

2.

Wheeler sufficiently alleges materiality under the rule established in Escobar and

this court’s subsequent precedent. Put simply, compliance with federal methadone-assisted

treatment regulations is “so central” to Acadia’s methadone-assisted treatment that the

government would not have paid the claims had it been aware of the violations. Escobar,

. Unlike the requirements that were found to be immaterial in Escobar and

Taylor, OTPs are required to provide adequate substance use disorder counseling in order

to obtain authorization to participate in government healthcare programs and remain in

compliance.

(f)(1). Falsifying patient records to government healthcare

programs is not akin to failing to purchase American staplers, see Escobar, 579 U.S. at

194–95, or failing to maintain a certificate of corporate authorization with the state, Taylor,

39 F.4th at 192–93.

Clinics that fail to provide counseling services are precluded from providing

methadone or seeking SAMHSA certification. See

(a), (f)(5)(i). Whether

Acadia provides adequate therapy determines if it can provide methadone-assisted

treatment at all. It is thus “common sense” that the government would not pay Acadia to

provide methadone-assisted treatment unless it was in compliance with core methadone-

assisted treatment regulations. See Triple Canopy, Inc.,

.

26 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 27 of 41

Acadia also contends that the requirement to comply with federal opioid treatment

standards meant nothing more than general “compliance with applicable laws and

regulations.” Acadia Br. at 28–29 (quoting Wheeler,

, at *8). Acadia

argues such generalized compliance with federal law was immaterial to receiving

government healthcare payments because Acadia had previously been certified to provide

methadone-assisted treatment.

That argument fails to reconcile the compliance

requirements for OTPs and the commonsense connection between Acadia’s claims for

methadone assisted treatment and violations of the very laws that allow it to provide such

treatment. Acadia was under an ongoing obligation to comply with the federal opioid

treatment standards.

(a) (stating that “OTPs must provide treatment in

accordance with the standards in this section”). Moreover, omissions that “fall squarely

within the rule that half-truths—representations that state the truth only so far as it goes,

while omitting critical qualifying information—can be actionable misrepresentations.”

Escobar,

(emphasis added). Acadia did not simply omit qualifying

information, it falsified it.

As this court recognized in Walgreen Company and Triple Canopy, “the very act of

falsifying records to feign compliance with requirements suggests that [the company] itself

thought that those requirements were material.” Walgreen Co.,

; see also

United States ex rel. Badr v. Triple Canopy, Inc.,

(4th Cir. 2015).

Wheeler alleges that Acadia actively falsified therapy records to fraudulently indicate

compliance with federal regulatory requirements in order to receive payments under

government healthcare programs. Acadia would not have orchestrated a scheme to falsify

27 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 28 of 41

medical records had it truly believed that group therapy was immaterial to the

government’s decision to pay.

Wheeler sufficiently pleads facts that, if true, would establish that the government

would not have paid Acadia’s claims had it known Acadia was not providing group therapy

or adequate individual therapy. Wheeler therefore adequately pled materiality.

iii. Submission of a False Claim

The final element for Wheeler’s claims requires that the fraudulent statement or

conduct “caused the government to pay out money or to forfeit moneys due.” Taylor, 39

F.4th at 188. Fraud is actionable under the False Claims Act only if it constitutes a “false

or fraudulent claim.” Nathan,

(quotation omitted) (emphasis in original).

A plaintiff can establish submission of a false claim in one of two ways. A plaintiff

can “allege with particularity that specific false claims actually were presented to the

government for payment.”

. This standard requires the plaintiff to, “at a minimum,

describe ‘the time, place, and contents of the false representations, as well as the identity

of the person making the misrepresentation and what he obtained thereby.’”

at 455–56

(quoting Wilson,

). Alternatively, a plaintiff can allege that the defendant’s

fraudulent conduct necessarily led to the plausible inference that false claims were

submitted to the government.

.

This court has considered the submission of false claims in two cases since Congress

amended the False Claims Act in 2009: United States ex rel. Nathan v. Takeda

Pharmaceuticals North America, Inc.,

, and United States ex rel. Grant v.

28 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 29 of 41

United Airlines Inc.,

(4th Cir. 2018). In each case, this court found that the

FCA whistleblower alleged fraud but failed to connect the fraud to a government payment.

In Grant, an FCA whistleblower alleged that United Airlines did not

possess an “FPI radiometer,” a necessary tool for certain repairs required for federal

maintenance of aircraft.

. United Airlines nevertheless continued to sign off

on documentation indicating that it had completed repairs and inspections that should have

required the use of a radiometer.

This court found that the complaint failed to allege

facts that connected the payments to the fraudulent activity: “[T]he complaint lacks any

allegation—for instance, that upon information and belief, bills are routinely sent to the

government upon completion of repairs and are routinely paid as presented—that fills that

gap.”

. The complaint left open the possibility that the government was never

billed for the allegedly fraudulent repairs, and failed to demonstrate that the repairs did not

in fact occur.

This court also emphasized that United Airlines was three levels removed

from the government in the subcontracting relationship and distinguished Grant from those

cases in which “the defendant contracted directly with the government, and the complaint

provided at least some explanation of the billing structure.”

. Thus, this court

affirmed the dismissal of Grant’s complaint because he failed to sufficiently allege that a

false claim was submitted to the government.

Similarly, in Nathan, this court affirmed a motion to dismiss an FCA claim because

the complaint likewise failed to demonstrate submission of a false claim. Nathan, an FCA

whistleblower, alleged that his former employer, Takeda Pharmaceuticals, provided drug

prescriptions for “off-label” uses not approved by the Food and Drug Administration.

29 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 30 of 41

Nathan,

. Nathan alleged that federal health insurance programs did not

reimburse for these off-label uses.

He claimed that, because the cost of prescriptions for

off-label uses is not subject to reimbursement by the federal government, the submission

of these types of claims for payment violated the False Claims Act.

This court was not “persuaded by [Nathan’s] contention that allegations of a

fraudulent scheme, in the absence of an assertion that a specific false claim was presented

to the government for payment, is a sufficient basis on which to plead a claim under the

[FCA] in compliance with Rule 9(b).”

. Instead, “the critical question is whether

the defendant caused a false claim to be presented to the government, because liability

under the [FCA] attaches only to a claim actually presented to the government for payment,

not to the underlying fraudulent scheme.”

In Nathan, this court contrasted these

allegations to those in United States ex rel. Grubbs v. Kanneganti,

(5th Cir.

2009), where the Fifth Circuit held that the FCA whistleblower adequately alleged

submission of a false claim. Nathan,

. The reasoning in Grubbs proves

applicable here.

In Grubbs, the whistleblower alleged a conspiracy by doctors to seek reimbursement

from government healthcare programs for services that had not been performed.

. The Fifth Circuit reasoned that, because the complaint included allegations of

specific services recorded but never provided, such allegations constituted “more than

probable, nigh likely, circumstantial evidence that the doctors’ fraudulent records caused

the hospital’s billing system in due course to present fraudulent claims to the

Government.”

. The Fifth Circuit thus concluded that it would “stretch the

30 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 31 of 41

imagination” for the doctors to continually record services that were not provided, but “to

deviate from the regular billing track at the last moment so that the recorded, but

unprovided, services never get billed.” Id.; see also United States ex rel. Duxbury v. Ortho

Biotech Prods., L.P.,

, 30–32 (1st Cir. 2009) (holding that, in a scheme alleging

kickbacks to health care providers, allegations of “the dates and amounts of the false claims

filed by these providers with the Medicare program” met the standard imposed by Rule

9(b)).

Like the allegations in Grubbs, Wheeler’s allegations meet Rule 9(b)’s standard for

submission of false claims. Acadia argues that Wheeler failed to allege that the fraudulent

therapy notes were submitted in actual claims for payment. Yet an FCA whistleblower

need not “produce documentation or invoices at the outset of the suit,” nor are they required

to have “specific knowledge of a company’s financial and billing structure.” Grant,

. If an FCA whistleblower “cannot allege the details of an actually submitted

false claim, [the complaint] may nevertheless survive by alleging particular details of a

scheme to submit false claims paired with reliable indicia that lead to a strong inference

that claims were actually submitted.” Grubbs,

. This court requires only

“that plaintiffs connect the dots, even if unsupported by precise documentation, between

the alleged false claims and government payment.” Grant,

. Wheeler

adequately connects the dots.

Wheeler provides multiple examples of false therapy notes that were repeatedly

used to falsify patient records, identifying Acadia staff who created and signed the notes,

and specifying the dates and descriptions of the fictitious therapy sessions. She further

31 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 32 of 41

describes the use of fraudulent “bibliotherapy” worksheets to create the impression that

therapy had been provided. There can be little doubt that, if Acadia created these false

notes, it billed for those services. It would “stretch the imagination” for Acadia’s

practitioners continually to record services that were not provided, but “to deviate from the

regular billing track at the last moment so that the recorded, but unprovided, services never

get billed.” See Nathan,

(quoting Grubbs,

). Unlike the

FCA whistleblower in Grant, Wheeler alleges that Acadia contracted directly with the

government and sought reimbursement directly from government healthcare programs,

which Wheeler explained in depth. Wheeler’s allegations suffice to connect Acadia’s

allegedly submitted false claims for payment from Medicaid, TRICARE, and the Veterans

Health Administration, which each pay for opioid treatment services on a fee-for-service

basis. Wheeler therefore adequately pled submission of false claims for her presentment

and false statement claims.

Wheeler’s claims concerning payments under Medicare differ because Medicare’s

billing procedure differs. To establish submission of false claims to Medicare, Wheeler

alleges implied false certification and fraudulent inducement. Rather than alleging that

individual claims were fraudulent, Wheeler alleges that Acadia fraudulently certified that

it had complied with federal regulations and thereby fraudulently induced the government

to allow Acadia to participate in government healthcare programs.

Acadia argues that Wheeler’s false certification and fraudulent inducement claims

fail because Medicare’s bundled billing procedure does not require an OTP to provide

therapy in any given week. According to Acadia, Wheeler cannot demonstrate that any

32 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 33 of 41

specific claim Acadia presented to Medicare violated the federal opioid treatment

standards.

While it is true that Medicare only requires an OTP to provide one type of

service each week, and that such service may include methadone distribution, the claims

Acadia submitted to Medicare were implicitly false because they falsely certified

compliance with federal opioid treatment standards and fraudulently induced the

government to continue Acadia’s SAMHSA accreditation.

When Medicare receives a claim under a bundled billing code, a core assumption

behind allowing payment is that the entity has provided the full suite of federally mandated

services. “The bundled payment for episodes of care in which a medication is provided

consists of payment for a drug component, reflecting payment for the applicable FDA-

approved opioid [. . .] medication in the patient’s treatment plan, and a non-drug

component, reflecting payment for all other opioid use disorder treatment services reflected

in the patient’s treatment plan.”

(d)(2) (emphasis added). All bundled

codes for Medicare contain a non-drug component, which is based on the sum of:

(1) Psychotherapy, 30 minutes with patient (2) Group psychotherapy (3) Alcohol and/or substance (other than tobacco) abuse structured assessment and brief intervention at the non-physician practitioner rate. (4) For administration of an injectable medication, if applicable, drug administration (Therapeutic, prophylactic). (5) For the insertion, removal, or insertion and removal of the implantable medication, if applicable, the applicable rate.

§ 410.67(d)(2)(ii) (emphasis added). The non-drug component is often more costly than

the drug component in Medicare’s billing schemes.

33 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 34 of 41

Wheeler alleges that Acadia submitted implicitly false claims to Medicare by

certifying that it had provided the appropriate weekly non-drug services to its patients in

accordance with each patient’s treatment plan. See

(f) (listing counseling

services as a “[r]equired service[ ]” and requiring OTPs to “provide adequate substance

use disorder counseling and psychoeducation to each patient as clinically necessary”).

Acadia was not required to provide every service each week, or even provide counseling

in any given week. Bundled billing codes allow for flexibility in when services are

provided. Even with this flexibility, however, the codes assume all critical services will be

provided and will be made available to the patient. If the only service that Acadia provided

its patients was methadone distribution, as Wheeler alleges, then Acadia was in fact

ineligible to receive payment through Medicare’s bundled billing scheme. Upon review of

Acadia’s invoices, the government “would probably—but wrongly—conclude that

[Acadia] had complied with core requirements” of the federal opioid treatment standards.

See Triple Canopy, Inc.,

. Thus, we conclude that Wheeler plausibly alleges

Acadia submitted claims that falsely certified compliance with federal regulations.

We similarly find sufficient Wheeler’s allegations that Acadia fraudulently induced

the government to provide Acadia the benefits of OTP accreditation, including by giving

it renewed SAMHSA certification. To adequately plead a claim of fraudulent inducement,

Wheeler need only allege facts that, if true, would demonstrate that Acadia misrepresented

its compliance with a condition of payment to induce the government to enter or renew the

contract. See United States v. Molina Healthcare of Illinois, Inc.,

(7th

Cir. 2021).

34 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 35 of 41

By allegedly creating false therapy notes and submitting claims to Medicare,

Wheeler alleges Acadia represented that it complied with federal opioid standards even

though it had not. She further alleges that Acadia created the false notes to demonstrate

compliance with the federal opioid treatment standards that expressly require each patient

be provided counseling services.

(f)(1). In doing so, Wheeler alleges,

Acadia fraudulently induced the government to allow it to provide services under

government healthcare programs in which it would not otherwise have been permitted to

participate. See

(b)(6), (e)(7) (requiring OTPs to agree to “operate in

accordance with Federal opioid treatment standards and approved accreditation elements”).

Although Acadia would have been aware that it failed to meet a SAMHSA requirement,

Wheeler alleges Acadia nonetheless requested continued SAMHSA accreditation based on

its fraudulent records and continued to submit claims to the government for payment

through Medicare. Wheeler alleges that SAMHSA re-accreditation is required every three

years. Because she also alleges that the falsification of group therapy notes began in

September 2020 and remains ongoing, the complaint adequately alleges that Acadia

facilities necessarily sought and obtained SAMHSA re-accreditation during the period in

which group therapy notes were allegedly being forged. These allegations, if true, would

support a claim of fraudulent inducement.

Wheeler’s allegations suffice to demonstrate the required elements for her claims of

presentment, false statement, false certification, and fraudulent inducement—Counts I, II,

IV, and V of her amended complaint.

35 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 36 of 41

C. Reverse False Claim

We last turn to Wheeler’s reverse false claim. A reverse false claim flips the typical

claim under the False Claims Act: “Direct false claims cause the United States to remit

money directly to claimants, whereas reverse false claims facilitate the improper

withholding of money or property to which the United States is legally entitled.” United

States ex rel. Landis v. Tailwind Sports Corp.,

(D.D.C. 2016).

This court has not considered a reverse false claim since Congress amended the False

Claims Act in 2009.

A company may be held liable for a reverse false claim if it: (1) “knowingly makes,

uses, or causes to be made or used, a false record or statement material to an obligation to

pay or transmit money or property to the Government;” or (2) “knowingly conceals or

knowingly and improperly avoids or decreases an obligation to pay or transmit money or

property to the Government.”

(a)(1)(G) (emphasis added). The False

Claims Act defines “obligation” as “an established duty, whether or not fixed, arising from

an express or implied contractual, grantor-grantee, or licensor-licensee relationship, from

a fee-based or similar relationship, from statute or regulation, or from the retention of any

overpayment.”

(b)(3).

We begin this inquiry by examining the terms of the CIA between Acadia and the

government and determining whether Wheeler’s allegations, if true, would constitute a

violation of that agreement. Wheeler alleges two potential violations: First, she alleges that

Acadia failed to provide the requisite training or inform her of the CIA’s disclosure

program. These allegations could constitute violations of the CIA. Wheeler was a “covered

36 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 37 of 41

person” under the terms of the CIA, because she worked for Acadia providing patient care.

J.A. 124–25. Acadia was, therefore, required to provide her with trainings at least annually

on the requirements of the federal healthcare program and the CIA. J.A. 129–30. The CIA

also required Acadia to publicize the existence of the disclosure program to Wheeler and

all other covered persons. J.A. 131–32.

Second, Wheeler alleges that she reported the false group therapy records to her

superiors, including the Asheville Clinic Director, multiple times between March and July

2021. Wheeler alleges that Acadia failed to investigate, take remedial action, or report any

of Wheeler’s information to the HHS Office of the Inspector General. This failure to

investigate, if true, would also constitute a violation of the CIA. Upon receipt of any

disclosure believed by the individual to be “a potential violation of criminal, civil, or

administrative law,” that would “permit[ ] a determination of the appropriateness of the

alleged improper practice,” and “provide[ ] an opportunity for taking corrective action,”

the terms of the CIA required Acadia to conduct an internal review. J.A. 131–32. If upon

review Acadia determined that there had been an overpayment, or “a matter that a

reasonable person would consider a probable violation of criminal, civil, or administrative

laws applicable to any Federal health care program,” it was required, under the terms of

the CIA, to notify the HHS Office of the Inspector General of the violation. J.A. 135.

Wheeler sufficiently alleges such violations went unreported.

Next, we consider whether these alleged violations would create an “obligation”

owed by Acadia to the government.

(a)(1)(G). This inquiry similarly

requires us to look to the terms of the CIA. The CIA contained a provision, in addition to

37 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 38 of 41

any remedies independently available under federal or state law, for stipulated monetary

penalties in the event of breach. J.A. 145–47. The CIA required Acadia to pay $2,500 for

each day it failed to establish, implement, or comply with requirements for “training and

education of Covered Persons,” the “Disclosure Program,” or “reporting of Reportable

Events.” J.A. 145. The CIA further defined a “Reportable Event” as “(a) a substantial

overpayment; [or] (b) a matter that a reasonable person would consider a probable violation

of criminal, civil, or administrative laws applicable to any Federal health care program.”

J.A. 135.

Acadia argues that these stipulated penalties are not an “obligation,” because they

were contingent and may not ultimately materialize. We disagree. Taking Wheeler’s

allegations as true, the stipulated penalties have accrued.

The CIA imposed a stipulated monetary penalty for each day Acadia failed to

implement or comply with requirements for “training and education of Covered Persons,”

the “Disclosure Program,” or “reporting of Reportable Events.” J.A. 145–46. The penalty

was to automatically “accrue on the day after the date the obligation became due.”

J.A. 145–46 (emphasis added). If, as Wheeler alleges, Acadia violated these provisions of

the CIA, then the penalty for those violations accrued the day following each violation,

thereby creating an obligation to pay a stipulated monetary penalty.

The only remaining step is for the government to collect on that penalty. This is the

“contingency” that Acadia claims defeats its obligation. Yet there is nothing contingent

about the obligations imposed by the CIA. Even though the CIA leaves to the discretion of

the government whether to enforce the stipulated penalty provision, this is no different

38 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 39 of 41

from the decision by any contracting party to seek enforcement of a breach of contract. See

Restatement (Second) of Contracts § 346 cmt. a (1981) (“Every breach of contract gives

the injured party a right to damages against the party in breach.” (emphasis added)). A

contracting party’s discretion to enforce an obligation does not eliminate the existence of

that obligation.

Although our court has not previously confronted this issue, our conclusion is

supported by decisions from several other circuits. See United States ex rel. Bahrani v.

Conagra, Inc.,

(10th Cir. 2006) (“[G]overnment officials may have

discretion as to whether to insist on a party’s performance under a contract or whether to

file a breach of contract action if a party does not perform. However, a contractual

obligation falls within the scope” of a reverse false claim.); Am. Textile Mfrs. Inst., Inc. v.

The Ltd., Inc.,

(6th Cir. 1999) (concluding that the “definition of

‘obligation’ certainly includes those arising from [. . .] breaches of government contracts”);

United States v. Pemco Aeroplex, Inc.,

(11th Cir. 1999). That the

government may exercise discretion regarding whether to charge the authorized fee does

not render an obligation “contingent” in the context of a reverse false claim. See Bahrani,

.

Finally, to maintain a reverse FCA claim, Wheeler must allege facts sufficient to

establish that Acadia knowingly concealed or knowingly and improperly avoided the

stipulated penalty obligation. See

(a)(1)(G). As we explained, the CIA

required Acadia to report to the HHS Office of the Inspector General any substantial

overpayment or “matter that a reasonable person would consider a probable violation of

39 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 40 of 41

criminal, civil, or administrative laws applicable to any Federal health care program.”

J.A. 135. The report was to detail, “at a minimum, the types of claims, transactions or other

conduct giving rise to the Reportable Event; the period during which the conduct

occurred;” any federal laws or regulations probably violated; and any federal programs

affected. J.A. 135–36. Wheeler alleges no such reports were made.

The purpose of penalizing “knowingly and improperly avoided” obligations is made

plain in cases like this one. Though a government contract may provide for stipulated

penalties, the government is unable to enforce that provision without notice of a breach. If

the contracting party knows of a breach and fails to provide notice, the government might

only learn of the breach and be able to recover damages if an FCA whistleblower—like

Wheeler—comes forward to report it. That is particularly true where, as here, it is the

reporting requirement of the government contract that has been violated. It is often said

that whistleblowers are the eyes and the ears of the public. Without information from such

whistleblowers, “fraudulent schemes might never be brought into the light of day, contrary

to the intent of Congress in enacting the FCA.” Grant,

(Keenan, J.,

concurring in part and dissenting in part).

We conclude by emphasizing that our holding with respect to Wheeler’s reverse

false claim is a narrow one. We hold only that the stipulated penalties in this contract,

which have allegedly already accrued, constitute an obligation under the False Claims Act.

We do not express any opinion as to whether a different liquidated damages remedy would

constitute an obligation. That said, we conclude that Wheeler adequately pled her reverse

false claim because the stipulated penalties in this particular CIA—if accrued—would

40 USCA4 Appeal: 23-2101 Doc: 49 Filed: 02/03/2025 Pg: 41 of 41

constitute an “obligation” under the FCA. Wheeler sufficiently alleges that the penalties

accrued and were knowingly and improperly avoided.

V. Conclusion

Wheeler adequately pled her claims of presentment, false statement, false

certification, and fraudulent inducement, as well as her reverse false claim. Accordingly,

we reverse the district court’s dismissal of Counts I, II, IV, V, and VI of the amended

complaint. We limit these claims, however, to actions allegedly taken by Acadia at its

facilities in the State of North Carolina. We remand for further proceedings consistent with

this opinion.

REVERSED

41