Segura v. Surgical Care Affiliates, LLC et al

1
In the United States District Court
for the District of Kansas
_____________
Case No. 22-cv-2425-TC-RES
_____________
UNITED STATES OF AMERICA,
EX REL. JANICE SEGURA,
Plaintiff
v.
SURGICAL CARE AFFILIATES, LLC, ET AL.,
Defendant
_____________
MEMORANDUM AND ORDER
Plaintiff Janice Segura sued Surgical Care Affiliates, LLC, (SCA)
and KU Medwest Ambulatory Surgery Center, LLC, for alleged false
claims made to the federal government. Doc. 28. SCA and KU Med-
west move jointly to dismiss for failure to state a claim. Doc. 45. For
the following reasons, that motion is granted in part and denied in part.
I
A
To survive a motion to dismiss for failure to state a claim, the com-
plaint need only contain “a short and plain statement . . . showing that
the pleader is entitled to relief” from each named defendant. Fed. R.
Civ. P. 8(a)(2); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Two
“working principles” underlie this standard. Kan. Penn Gaming, LLC v.
Collins, 656 F.3d 1210, 1214 (10th Cir. 2011); see also Ashcroft v. Iqbal,
556 U.S. 662, 678–79 (2009). First, a court ignores legal conclusions,
labels, and any formulaic recitation of the elements. Penn Gaming, 656
F.3d at 1214. Second, a court accepts as true all remaining allegations
and logical inferences and asks whether the claimant has alleged facts
that make his or her claim plausible. Id.
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A claim need not be probable to be considered plausible. Iqbal, 556
U.S. at 678. But the facts, viewed in the light most favorable to the
claimant, must move the claim from conceivable to plausible. Id. at
678–80. The “mere metaphysical possibility that some plaintiff could
prove some set of facts in support of the pleaded claims is insufficient;
the complaint must give the court reason to believe that this plaintiff
has a reasonable likelihood of mustering factual support for these
claims.” Ridge at Red Hawk, L.L.C. v. Schneider, 493 F.3d 1174, 1177
(10th Cir. 2007).
Plausibility is context specific. The requisite showing depends on
the claims alleged, and the inquiry usually starts with determining what
the plaintiff must prove at trial. See Comcast Corp. v. Nat’l Ass’n. of African
Am.-Owned Media, 589 U.S. 327, 332 (2020). In other words, the nature
and complexity of the claim(s) define what plaintiffs must plead. Cf.
Robbins v. Oklahoma, 519 F.3d 1242, 1248–49 (10th Cir. 2008) (compar-
ing the factual allegations required to show a plausible personal injury
claim versus a plausible constitutional violation).
In fraud cases, Rule 9(b) requires that plaintiffs also plead claims
with “particularity,” though mental conditions like intent and
knowledge may be alleged generally. This requirement “afford[s] de-
fendant[s] fair notice of . . . claims and the factual ground[s] upon
which [they] are based.” United States ex rel. Polukoff v. St. Mark’s Hosp.,
895 F.3d 730, 745 (10th Cir. 2018) (alteration in original) (quoting
United States ex rel. Lemmon v. Envirocare of Utah, Inc., 614 F.3d 1163, 1172
(10th Cir. 2010)).
Although Rule 9(b)’s particularity requirement is more stringent
than Rule 8(a)’s requirements, the Tenth Circuit has made clear that
“claims under the FCA need only show the specifics of a fraudulent
scheme and provide an adequate basis for a reasonable inference that
false claims were submitted as part of that scheme.” Polukoff, 895 F.3d
at 745 (quoting Lemmon, 614 F.3d at 1172). Thus, for FCA claims,
Rules 8(a) and 9(b) join to form the general pleading requirements.
Lemmon, 614 F.3d at 1171. In practice, this means that FCA claims
must “provid[e] factual allegations regarding the who, what, when,
where and how of the alleged claims.” Lemmon, 614 F.3d at 1172. For
claims that fail Rule 9(b), courts may consider whether any deficiency
resulted from the plaintiff’s inability to access information in the de-
fendant’s exclusive control. Polukoff, 895 F.3d at 745.
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B
Segura’s claims revolve around alleged false claims in the context
of medical billing to government healthcare programs. A brief primer
on these programs will help contextualize the dispute.
The United States runs various healthcare programs: Tricare, Med-
icare, and Medicaid, among others. Doc. 28 at ¶¶ 14–20.1 To facilitate
standardized billing to those programs, the Government uses the
Healthcare Common Procedure Coding System. Id. at ¶¶ 21, 22. This
system comprises various codes, each of which identifies a medical
product or service. Id. at ¶ 23. It is divided into three levels: Level I
codes, which identify medical services and procedures furnished by
medical professionals; Level II codes, which identify non-physician
services; and Level III codes, which are used by state agencies and pri-
vate insurers. Id. at ¶¶ 23–25. Relevant here are Level II codes. Those
consist of a letter followed by four digits. Id. at ¶ 25. At issue in this
suit are two Level II codes: C-codes, which refer to specific products
and services, and L-codes, which refer to unspecified products and ser-
vices. Doc. 28 at ¶ 25. As noted in more detail below, items with L-
codes result in a higher reimbursement rate than those with a C-code.
Segura works for Surgical Care Affiliates (SCA) as a medical biller.
Doc. 28 at ¶ 31. SCA, in turn, provides medical coding and billing ser-
vices. Id. at ¶¶ 3, 31. One of SCA’s clients is KU Medwest, a company
that operates two surgical centers in Kansas: KU Medwest Indian
Creek Ambulatory Surgical Center and KU Medwest Ambulatory Sur-
gery Center. Id. at ¶ 4. Segura worked at the Indian Creek location. Id.
at ¶ 31. As part of her work Segura is responsible for submitting Level
II codes for payment to various Government programs. Id. at ¶ 32.
When Segura started at SCA she was taught how to use its billing
system. Doc. 28 at ¶ 34. Segura was trained to only bill Level II L-
codes when a patient received an implant. Id. SCA’s billing system only
permitted entry of an L-code for all implants even when a specific C-
code was available. Id. at ¶ 41. So, for example, Segura was directed to
use the L-code L8699 for various implants even though there is a spe-
cific C-code, C1713, that also applies. Id. at ¶ 42. Utilizing the L-code
when a specific C-code exists resulted in SCA and KU Medwest
1 All references to the parties’ briefs are to the page numbers assigned by
CM/ECF.
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receiving a higher reimbursement rate from the Government than they
would have received if they had billed the appropriate C-code. Id. at
¶ 40. Segura also alleges that SCA and KU Medwest are submitting the
same L8699 code to seek payment for supplies that are not separately
billable. Id. at ¶ 44. As a result, Segura alleges that SCA and KU Med-
west have submitted approximately eighty improper billing entries at
KU Medwest’s Indian Creek location.2 Doc. 28 at ¶ 43.
In June 2022, SCA and KU Medwest changed the billing system at
the KU Medwest Indian Creek location. Doc. 28 at ¶ 47. The change
prescribed the use of C-codes for implants that had previously been
billed as L-codes. Id. When the change occurred, Segura spoke to her
SCA supervisors and told them that she had been billing improper L-
codes for roughly three years, and she asked whether those overbillings
would be corrected. Id. at ¶ 48. Her supervisors replied that the change
was only prospective. Id. Segura alleges that despite this prospective
change at Indian Creek, SCA and KU Medwest are still billing im-
proper L-codes at the other surgical center in Kansas, meaning that
KU Medwest bills different codes for the same implant at different
locations. Id. at ¶ 49. In particular, Segura alleges that SCA continues
to improperly bill L-codes at roughly 220 of its centers nationwide. Id.
at ¶ 50.
Based on these events, Segura filed suit under the False Claims Act,
31 U.S.C. §§ 3729–3733. Doc. 28. She brings three claims: Count I for
knowingly presenting a false claim in violation of 31 U.S.C.
§ 3729(a)(1)(A), id. at ¶¶ 52–56; Count II for knowingly making a false
statement that is material to a false claim in violation of 31 U.S.C.
§ 3729(a)(1)(B), id. at ¶¶ 57–60; and Count III for conspiracy to pre-
sent a false claim in violation of 31 U.S.C. § 3729(a)(1)(C), id. at ¶¶ 61–
69. The United States declined to intervene. Doc. 22.
2 Throughout her Complaint Segura lumps SCA and KU Medwest together
under the collective “Defendants,” alleging that they both engaged in the
conduct described. See, e.g., Doc. 28 at ¶¶ 39, 40, 42 (alleging that “Defend-
ants” improperly chose to use an L-code). SCA and KU Medwest do the
same. See, e.g., Doc. 45 at 13 (arguing that “nothing prohibited Defendants
from billing with code L8699”). Because neither SCA nor KU Medwest has
argued that it was not personally involved in the alleged upcoding scheme,
that argument is not considered and it is assumed that their liability is coex-
tensive.
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SCA and KU Medwest move jointly to dismiss. Doc. 45. They ar-
gue that dismissal of Counts I and II is required because Segura failed
to allege that they made a materially false statement with the requisite
scienter. Id. at 1–14. They also argue that Count III should be dis-
missed because Segura failed to allege a conspiracy. Id. at 14.
II
Segura adequately alleges a claim of factual falsity. But she fails to
allege a conspiracy. Accordingly, the motion is granted in part and de-
nied in part.
A
Segura claims that SCA and KU Medwest fraudulently caused the
United States to pay out sums of money in violation of the False
Claims Act. Under that statute, liability extends to anyone who “know-
ingly presents, or causes to be presented, a false or fraudulent claim for
payment or approval” to the Government, or who “knowingly makes,
uses, or causes to be made or used, a false record or statement material
to a false or fraudulent claim.” 31 U.S.C. § 3729(a)(1)(A)–(B).3 To bring
an FCA action, a plaintiff must allege facts that the defendant (i) made
a false statement or engaged in a fraudulent course of conduct, (ii) with
the requisite scienter, (iii) that is material, and (iv) that results in a claim
to the Government. United States ex rel. Janssen v. Lawrence Mem’l Hosp.,
949 F.3d 533, 539 (10th Cir. 2020). The FCA applies to Medicare and
Tricare claims. Polukoff, 895 F.3d at 735 n.1.
Under the FCA, a complaint must provide the defendant with no-
tice of the specific ways in which a submitted claim was false or
3 A federal district court in another jurisdiction has concluded that the False
Claims Act is unconstitutional because it violates the Appointments Clause.
United States ex rel. Zafirov v. Fla. Med. Assocs., LLC, 751 F. Supp. 3d 1293,
1324 (M.D. Fla. 2024). That holding is pending on appeal before the Elev-
enth Circuit, No. 24-13581. And another litigant has recently argued to the
Supreme Court that the FCA violates the separation of powers. See Petition
for Writ of Certiorari, Eli Lilly and Company v. United States ex rel. Streck, No.
25-1126 (filed Mar. 23, 2026). Neither party makes any constitutional argu-
ments against the False Claims Act here. But even if they had, that argument
is foreclosed by circuit precedent. United States ex rel. Stone v. Rockwell Int’l
Corp., 282 F.3d 787, 805 (10th Cir. 2002) (holding that the False Claims Act
does not violate the Appointments Clause).
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fraudulent. Polukoff, 895 F.3d at 745. A “false or fraudulent” claim may
be either factually false or legally false. Id. at 741. Factually false claims
involve an incorrect description of services provided (or services that
were billed but never provided). Lemmon, 614 F.3d at 1168. Legally
false claims generally involve falsely certifying compliance with a stat-
ute, regulation, or contractual provision as a condition of payment. Id.
False certifications may be either express or implied. Polukoff, 895
F.3d at 741. Express false certification occurs when a claim requestor
falsely certifies compliance—as a prerequisite to payment—with a par-
ticular statute, regulation, or contractual term. Id. (citing United States
ex rel. Conner v. Salina Reg’l Health Ctr., Inc., 543 F.3d 1211, 1217 (10th
Cir. 2008)). This does not require a formal certification statement, but
the claims must contain express falsehoods. Universal Health Servs., Inc.
v. United States ex rel. Escobar, 136 S. Ct. 1989, 1998–2001 (2016) (con-
trasting implied false certification with express false certification); see
also Lemmon, 614 F.3d at 1170–72.
Implied false certifications, however, do not require courts to ex-
amine the defendant’s actual statements to the Government. Lemmon,
614 F.3d at 1168. Instead, courts look at the underlying contracts, stat-
utes, or regulations to determine whether compliance is a prerequisite
to the government’s payment. Id. For example, if a service provider
submits a claim that includes specific representations about the ser-
vices rendered—and fails to disclose noncompliance with material
statutory, regulatory, or contractual requirements—the claim is legally
false under a theory of implied false certification. Escobar, 136 S. Ct. at
2001.
A plaintiff must also establish that the defendant acted “know-
ingly.” 31 U.S.C. § 3729(a)(1)(A)–(B). The FCA defines knowingly to
“mean that a person, with respect to information[ ] (i) has actual
knowledge of the information; (ii) acts in deliberate ignorance of the
truth or falsity of the information; or (iii) acts in reckless disregard of
the truth or falsity of the information.” Id. at § 3729(b)(1)(A). This
knowledge, unlike other aspects of alleged fraudulent behavior, “may
be alleged generally.” Fed. R. Civ. P. 9(b). “Alleged generally” is less
demanding than the particularity otherwise required by Rule 9(b), but
these general allegations must still comply with Federal Rule of Civil
Procedure 8(a). Iqbal, 556 U.S. at 686–87. And Rule 8(a) requires more
than “plead[ing] the bare elements” of a claim. Id. at 687.
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Finally, a plaintiff must show that a falsehood was “material” to
the government’s payment. A knowingly false claim is considered ma-
terial when it has “a natural tendency to influence, or [is] capable of
influencing, the payment . . . of money.” 31 U.S.C. § 3729(b)(4). This
inquiry is often holistic, looking to the effect on the behavior of the
government entity receiving the misrepresentation. Escobar, 136 S. Ct.
at 2002. Where FCA liability is based on noncompliance with regula-
tory or contractual provisions, relevant factors include (i) whether the
government consistently refuses to pay similar claims based on the
noncompliance, or whether the government continues to pay claims
despite knowledge of the noncompliance; (ii) whether the noncompli-
ance goes to the “very essence of the bargain” or is only “minor or
insubstantial”; and (iii) “whether the government has expressly identi-
fied a provision as a condition of payment.” Janssen, 949 F.3d at 541
(citing Escobar, 136 S. Ct. at 2003 & n.5).
B
1. SCA and KU Medwest generally assert that dismissal of Counts
I and II are required because Segura’s Complaint does not allege falsity.
Doc. 45 at 8. Not so.
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The facts pleaded by Segura, taken as true, make out a plausible
allegation that SCA and KU Medwest submitted a factually false claim.4
Contra Doc. 45 at 10. In particular, she alleges that SCA and KU Med-
west submitted an incorrect description of the goods they provided:
They submitted L-codes for unidentified products even though the
products were identified by a C-code. Doc. 28 at ¶ 42; see Lemmon, 614
F.3d at 1168 (“Claims arising from factually false requests generally
require a showing that the payee has submitted an incorrect description
of goods or services provided . . . .”) (quotation marks omitted). This
was material because it affected the Government’s payment decision
insofar as SCA and KU Medwest received reimbursements higher than
those to which they were entitled. Doc. 28 at ¶ 43 (alleging roughly
$267,000 in overpayments); cf. Janssen, 949 F.3d at 543 (finding that a
false claim was not material because it was unlikely to “affect the Gov-
ernment’s payment decision”). Segura informed her supervisors about
this issue, but they took no corrective action at other KU Medwest
locations. Doc. 28 at ¶¶ 48, 49; see Lemmon, 614 F.3d at 1169 (reversing
the district court’s dismissal where the plaintiffs alleged, inter alia, that
the defendant knew about the false claims because the plaintiffs in-
formed them of that fact). These allegations provide an adequate basis
for a plausible inference that SCA and KU Medwest submitted a false
claim. See Lemmon, 614 F.3d at 1173 (reversing the district court’s dis-
missal because the plaintiffs met their burden of pleading sufficient
4 Segura does not explain whether she is pursuing a claim of legal falsity or
factual falsity. See United States ex rel. Sorenson v. Wadsworth Bros. Constr. Co., Inc.,
48 F.4th 1146, 1151 (10th Cir. 2022) (“A false claim within the meaning of
§ 3729(a)(1) can be either factually false or legally false.”). Based on a review
of Segura’s Complaint and her response to the motion to dismiss, Docs. 28
and 46, it does not appear that she is pursuing a claim of legal falsity because
she failed to allege that SCA and KU Medwest certified compliance with a
statute or regulation as a condition of payment. See Sorenson, 48 F.4th at 1158
(affirming the district court’s finding that a complaint did not satisfy the
FCA’s materiality standard where it asserted nothing more than a naked vio-
lation of federal law); cf. Lemmon, 614 F.3d at 1169 (finding that a complaint
contained sufficient allegations to support legally-false claims where the
plaintiffs “documented a series of instances in which they personally ob-
served [the defendant] violate its contractual and statutory obligations”) (emphasis
added). Moreover, she did not suggest or argue that her claim of legal falsity
is for either an express or implied false certification. See United States v. The
Boeing Co., 825 F.3d 1138, 1148 (10th Cir. 2016) (explaining that “there are
two forms of legally false certification—express and implied”). As a result,
her claim is construed as only asserting a claim for factual falsity.
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detail to support “a plausible inference that false claims were submit-
ted”) (citations omitted).
SCA and KU Medwest make three counterarguments, but none
are persuasive. First, they allege that Segura is wrong in suggesting that
the L-codes they submitted were improper. Doc. 45 at 11, 13–14. That
position may ultimately be vindicated by proof that their submissions
were not incorrect. But it is improper at this procedural stage to con-
sider a factual universe inconsistent with what is alleged in the Com-
plaint; district courts must accept all well-pleaded allegations as true.
Penn Gaming, 656 F.3d at 1214.
Second, they argue that Segura’s allegations fail to plead fraud with
the particularity that Rule 9(b) requires. Doc. 45 at 12. Generally speak-
ing, “Rule 9(b) requires that a plaintiff set forth the ‘who, what, when,
where and how’ of the alleged fraud.” United States ex rel. Sikkenga v.
Regence Bluecross Blueshield of Utah, 472 F.3d 702, 727 (10th Cir. 2006),
abrogated on other grounds by Cochise Consultancy, Inc. v. United States ex rel.
Hunt, 587 U.S. 262 (2019). Segura’s Complaint adequately satisfies this
standard. She alleges that SCA and KU Medwest (who), Doc. 28 at
¶¶ 49, 50, submitted false claims for payment by improperly using L-
codes (what), id. at ¶ 42, beginning as early as 2021 and continuing to
this day (when), id. at ¶¶ 42, 50, at KU Medwest’s Kansas locations and
SCA’s locations nationwide (where), id. at ¶¶ 49, 50, by training medi-
cal billers like herself to use L-codes instead of the appropriate C-codes
and preventing them from entering C-codes (how), id. at ¶¶ 34, 39, 41.
See Lemmon, 614 F.3d at 1172 (reversing the lower court’s dismissal af-
ter walking through how the plaintiffs satisfied their Rule 9(b) burden).
Again, these allegations may ultimately find no support once discovery
concludes, but they must be accepted at the Rule 12 stage.
Third, SCA and KU Medwest argue that Segura failed to properly
allege scienter. Contra Doc. 45 at 12. They argue that “code L8699 is
an accurate description to use when billing implantable devices,” and
therefore the fact that they changed their billing practices “does not
support an improper intent because nothing prohibited Defendants
from billing with code L8699.” Id. at 13. But Segura has alleged that
SCA changed its billing practices at KU Medwest’s Indian Creek loca-
tion, that she informed her supervisors that she had been billing im-
properly for years, that SCA continues to bill improperly at KU Med-
west’s Ambulatory Surgery Center, and that SCA continues to bill im-
properly at its facilities nationwide despite her statements and their
changed practice at the Indian Creek location. Doc. 28 at ¶¶ 47–50.
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These allegations establish that KU Medwest is acting with reckless
disregard, if not with actual knowledge, of the falsity of the claims it
submits because it has different billing practices at two of its surgery
centers in Kansas. The allegations similarly establish SCA’s reckless-
ness or actual knowledge given that it has different billing practices
nationwide. See 31 U.S.C. § 3729(b)(1)(A) (requiring “actual
knowledge” or “reckless disregard”); cf. United States v. Boeing Co., 825
F.3d 1138, 1149 (10th Cir. 2016) (affirming summary judgment for the
defendant where the plaintiff offered no evidence that the defendant
knew about the false claim).
2. SCA and KU Medwest also argue that Count III should be dis-
missed because Segura has failed to allege a conspiracy. Doc. 45 at 14.
They are correct.
The False Claims Act imposes liability on anyone who conspires
to submit a false claim. 31 U.S.C. § 3729(a)(1)(C); United States ex rel.
Sorenson v. Wadsworth Bros. Constr. Co., 48 F.4th 1146, 1151(10th Cir.
2022). The elements of such a claim are an agreement to make a false
claim and an overt act taken toward that purpose. United States ex rel.
Schroeder v. Hutchinson Reg’l Med. Ctr., 777 F. Supp. 3d 1256, 1283 (D.
Kan. 2025); accord United States ex rel. Angelo v. Allstate Ins. Co., 106 F.4th
441, 452 (6th Cir. 2024) (noting that for conspiracy claims under the
False Claims Act, “as with any conspiracy, there must be plausible facts
alleging an agreement”). It is not enough that the conspirators had an
agreement that had the effect of defrauding the Government. Allison
Engine Co. v. United States. ex rel. Sanders, 553 U.S. 662, 672 (2008). Ra-
ther, “it must be shown that the conspirators intended to defraud the
Government.” Id. (quotation marks omitted).
Segura’s Complaint falls short of that standard. Contra Doc. 46 at
14. Nowhere does she allege that SCA and KU Medwest entered into
an agreement in order to defraud the Government. See Angelo, 106
F.4th at 452 (“[I]t is not enough for relators to show there was an
agreement that made it likely there would be a violation of the FCA;
they must show an agreement was made in order to violate the FCA.”)
(emphasis in original). Her only allusion to an agreement is to note that
SCA and KU Medwest “entered into an agreement and plan to con-
spire to violate the FCA . . . .” Doc. 28 at ¶ 64; see Doc. 46 at 15 (argu-
ing that “[b]y acting together to utilize a system and process of illegal
upcoding . . . the Defendants are put on notice of a plausible agree-
ment existing”). That is not an allegation of fact; it is “a formulaic rec-
itation of the elements of a cause of action” that, as the Supreme Court
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noted, “will not do.” Iqbal, 556 U.S. at 678. “Relators must allege who
was party to the agreement, how the agreement was reached, when the
agreement was reached, and what were its terms.” Angelo, 106 F.4th at
452. Segura has not done so.
Segura’s argument to the contrary is unavailing. Contra Doc. 46 at
15. She notes that her allegations of SCA and KU Medwest’s “joint
knowledge and wrongdoing” satisfy her burden to plead a conspiracy
because “[b]y acting together . . . the Defendants are put on notice of
a plausible agreement existing . . . .” Id. This argument is a non sequitur.
If the existence of an agreement could be inferred solely from joint
conduct, then the requirement to plead an agreement would be tooth-
less. See Schroeder, 777 F. Supp. 3d at 1283 (“The elements of an FCA
conspiracy claim are [1] an agreement to get false claims paid . . . .”)
(alterations in original); United States ex rel. Ibanez v. Bristol-Myers Squibb
Co., 874 F.3d 905, 917 (6th Cir. 2017) (affirming the lower court’s dis-
missal of a conspiracy claim because there were “insufficient allega-
tions to show there was a plan to get false claims paid”). But even if an
agreement could be inferred merely from joint conduct, her claim still
fails because she has not alleged that any agreement was made to de-
fraud the Government. See Allison, 553 U.S. at 672 (“[I]t is not enough
for a plaintiff to show that the alleged conspirators agreed upon a fraud
scheme that had the effect of causing a private entity to make payments
using money obtained from the Government. Instead, it must be
shown that the conspirators intended to defraud the Government.”).
III
For the foregoing reasons, SCA and KU Medwest’s Motion to Dis-
miss, Doc. 45, is GRANTED in part and DENIED in part.
It is so ordered.
Date: March 30, 2026 s/ Toby Crouse
Toby Crouse
United States District Judge
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