June 09, 2014 – State of New Mexico ex rel. Gary K. King, Attorney General v. Behavioral Home Care, Inc., a New Mexico corporation, No. 31,682

IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
Opinion Number: 	__________
Filing Date: June 9, 2014
NO. 31,682
STATE OF NEW MEXICO ex rel.
GARY K. KING, ATTORNEY GENERAL,
Plaintiff-Appellant,
v.
BEHAVIORAL HOME CARE, INC.,
a New Mexico corporation,
Defendant-Appellee.
APPEAL FROM THE DISTRICT COURT OF BERNALLILO COUNTY
C. Shannon Bacon, District Judge
Gary K. King, Attorney General
Santa Fe, NM
Amy Landau, Assistant Attorney General
Albuquerque, NM
for Appellant
Davis & Gilchrist, P.C.
Bryan J. Davis
Albuquerque, NM
for Appellee

Bannerman & Johnson, P.A.
Deborah E. Mann
Albuquerque, NM
for Amicus Curiae New Mexico Association
for Home and Hospice Care

OPINION
GARCIA, Judge.
{1} 	The New Mexico Attorney General’s Medicaid Fraud Control Unit brought
action on behalf of the State against Behavioral Home Care, Inc. (BHC) alleging
violations of the New Mexico Medicaid Fraud Act (the MFA), NMSA 1978, §§ 30-
44-1 to -8 (1989, as amended through 2004), and breach of contract. The issue before
this Court involves whether the district court correctly dismissed the State’s claims
against BHC for failure to state a claim upon which relief can be granted. See Rule 1-
012(B)(6) NMRA.
{2} 	The State alleged that BHC’s billing for Personal Care Option (PCO) services
provided by certain caregivers for whom BHC had not fully complied with the
Caregivers Criminal History Screening Act (CCHSA), NMSA 1978, §§ 29-17-2 to -5
(1998, as amended through 2005), constituted false, fraudulent, or excess payments
under the MFA. The State further alleged that the same failure to comply with
CCHSA screening requirements constituted a breach of contract by BHC. The State
requested relief pursuant to Section 30-44-8 in the form of a recovery for any
overpayments, civil penalties for each overpayment, civil penalties for each false
representation, attorney fees, interest, and costs. In the two orders now being appealed
by the State, the district court dismissed all of the State’s claims.

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{3} 	While the MFA provides the vehicle for suit, federal Medicaid statutes and
regulations define the requirements for Medicaid claims. To participate in the
Medicaid program, federal law requires home healthcare providers to comply with all
applicable federal, state, and local laws and regulations. United States ex rel. Joslin
v. Cmty. Home Health of Md., Inc., 984 F. Supp. 374, 376 (D. Md. 1997); see 42
U.S.C. § 1395bbb(a)(5) (2006); 42 C.F.R. § 484.12(a) (2012). It is BHC’s compliance
with the CCHSA that forms the primary basis for the dispute in this case. As we
address in detail below, not all compliance issues translate into liability or fraud under
the MFA. We hold that failure to comply with the CCHSA regulations does not
support MFA liability in this case and affirm the district court’s dismissal of the
State’s claims.
BACKGROUND
{4} 	“Congress created the Medicaid program in 1965 to supplement the Social
Security Act.” Starko, Inc. v. Presbyterian Health Plan, Inc., 2012-NMCA-053, ¶ 4,
276 P.3d 252, cert. granted, 2012-NMCERT-003, 293 P.3d 184. “The program
provides medical assistance to persons whose income and resources are insufficient
to meet the costs of necessary care and compels participating states to share the costs
of administering the program with the federal government.” Id. (internal quotation
marks and citation omitted). “New Mexico is a participant state.” Id. The New Mexico
Human Services Department (HSD) is charged with administering Medicaid and

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maintaining a “statewide, managed care system to provide cost-efficient, preventive,
primary[,] and acute care for [M]edicaid recipients.” NMSA 1978, § 27-2-12.6(A)
(1994); see Starko, 2012-NMCA-053, ¶ 28.
{5} 	In order to function as a Medicaid service provider, BHC executed a contract
known as an HSD Medical Assistance Division (MAD) 335 Provider Participation
Agreement (PPA). The PPA is a payment related form signed by BHC and HSD that
specifically states, “BY SIGNATURE, [BHC] AGREES TO ABIDE BY AND BE
HELD TO ALL FEDERAL, STATE, AND LOCAL LAWS, RULES, AND
REGULATIONS, INCLUDING, BUT NOT LIMITED TO THOSE PERTAINING
TO MEDICAID AND THOSE STATED HEREIN.” BHC also contracted with HSD
as part of the Aging and Long Term Services Department Disabled and Elderly
Waiver Program to provide in-home PCO caregiver services for elderly and disabled
Medicaid recipients. BHC agreed in its Medicaid contracts to provide and submit
reimbursement claims for Medicaid funded services to the Medicaid eligible
population in accordance with all applicable state and federal Medicaid laws and the
regulations and standards of the New Mexico Medicaid Program, including, without
limitation, the CCHSA. See §§ 29-17-2 to -5; 7.1.9.1 to .11 NMAC (01/01/2006)
(screening requirements); 8.351.2.9 to .12 NMAC (07/01/2003, amended 01/01/2014)
(sanctions and remedies).
{6} 	The New Mexico Legislature enacted the CCHSA “to ensure to the highest

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degree possible the prevention of abuse, neglect[,] or financial exploitation of care
recipients,” including Medicaid recipients, by caregivers who provided “direct care
or routine and unsupervised physical or financial access to any care recipient served
by that provider[.]” Sections 29-17-3, -4(B). It provides that a care provider may not
employ a caregiver unless the caregiver has first submitted to a request for a
nationwide criminal history screening. Section 29-17-5(C). The screening requirement
applies to caregivers who would provide services to any patient, not just Medicaid
patients, irrespective of whether the patient paid out of pocket or with private
insurance. Section 29-17-4(B), (D). Statutory compliance only requires submission
of the caregiver’s criminal history application, not receipt of screening results, prior
to billing for the PCO caregiver services. Section 29-17-5(E). Should a caregiver have
a disqualifying criminal conviction in his or her history, the CCHSA provides for a
reconsideration 	procedure. 	Section 	29-17-5(F). 	During 	the 	pendency 	of 	the
reconsideration period, the caregiver may continue to provide caregiver services on
behalf of the healthcare provider. Id.
{7} 	The New Mexico Legislature enacted the MFA and provided both a definition
for Medicaid fraud in Section 30-44-7(A) and also made the falsification of
documents a fourth degree criminal offense under Section 30-44-4. Pertinent to this
case, Medicaid fraud “consists of: . . . presenting or causing to be presented for
allowance or payment with intent that a claim be relied upon for the expenditure of

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public money any false, fraudulent, excessive, multiple[,] or incomplete claim for
furnishing treatment, services[,] or goods[.]” Section 30-44-7(A)(3). Falsification of
documents “consists of:
. . . knowingly making or causing to be made a misrepresentation of a
material fact required to be furnished under the program or knowingly
failing or causing the failure to include a material fact required to be
furnished under the [Medicaid] program in any record required to be
retained in connection with the program pursuant to the [MFA] or
regulations issued by the department for the administration of the
program, or both; or . . . knowingly submitting or causing to be
submitted false or incomplete information for the purpose of receiving
benefits or qualifying as a provider.”
Section 30-44–4(A).
{8} 	Between approximately April 2004 and July 2009, BHC electronically
submitted over 1,800 PCO billing claims for services provided by certain caregivers
whose criminal history screening applications had not been submitted as required by
the CCHSA (the Unscreened Caregivers). BHC submitted its Medicaid reimbursement
claims pursuant to an Electronic Claim Submission Agreement (the Electronic
Agreement). The Electronic Agreement required BHC to “acknowledge[] that claims
will be paid from [f]ederal and [s]tate funds” and that “anyone who misrepresents or
falsifies” any information relating to a claim may be subject to a fine and/or
imprisonment under federal and state law. By submitting a claim electronically, BHC
was also required to agree that the claim contained “true, accurate, and complete
information” and that “[t]he cashing of each check attached to each Remittance

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Advice [was] a representation and certification that [BHC] represented the claim for
services . . . and that the services were rendered . . . .” BHC was not required to
expressly certify compliance with all Medicaid contractual provisions or all applicable
state and federal regulations in order to submit the Electronic Agreement.
{9} 	The State asserts two MFA causes of action against BHC as a result of its
billing claims for the services provided by the Unscreened Caregivers. First, the State
maintains that BHC’s PCO claims for the Unscreened Caregivers’ services constituted
falsification of documents as defined in MFA Section 30-44-4(A) and/or Medicaid
fraud under Section 30-44-7(A). The State specifically alleges that each claim for
payment prior to the completion of the Unscreened Caregivers’ criminal history
screening was a false or fraudulent claim under these two statutory provisions. The
State’s second cause of action maintains that BHC’s PCO payment claims for the
Unscreened Caregivers’ services were in breach of BHC’s MAD 335 PPA contracts
with HSD. The State argues that it was entitled to recover the 1,800 PCO claims
submitted for the Unscreened Caregivers’ services as overpayments and civil penalties
under Section 30-44-8(A) of the MFA.
{10} 	The district court dismissed both of the State’s claims for failure to state a claim
upon which relief can be granted. See Rule 1-012(B)(6). Its first order granted BHC’s
Rule 1-012(B)(6) motion to dismiss the State’s first cause of action (statutory recovery
of Medicaid overpayments under the MFA). The court held that the State may not

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recover the claimed MFA overpayments in addition to a claim for the recovery of civil
penalties under Section 30-44-8(A)(2). The district court determined that Section
30-44-7(A)(3) was the only applicable liability provision that required BHC to comply
with the CCHSA and its regulations prior to billing Medicaid for in-home caregiver
services. It explained, however, that BHC’s non-compliance with the CCHSA and its
regulations was not actionable under the MFA because submission of criminal history
screening applications for Medicaid caregivers was a “condition[] of participation in
Medicaid” rather than a “condition[] of [Medicaid] payment.” The district court’s
second order granted BHC’s Rule 1-012(B)(6) motion to dismiss the State’s amended
cause of action (breach of contract for Medicaid overpayments). Because the Medicaid
regulations were not applicable to the State’s claims, the district court reviewed
BHC’s breach of contract claim under the common law. The court determined that the
State failed to state a claim for relief under Rule 1-012(B)(6) because of its failure to
allege facts that would support any recoverable damages for breach of contract.
STANDARD OF REVIEW
{11} 	A Rule 1-012(B)(6) motion tests the legal sufficiency of a party’s allegations,
so we review de novo a district court’s granting of such a motion. Padwa v. Hadley,
1999-NMCA-067, ¶ 8, 127 N.M. 416, 981 P.2d 1234; see Padilla v. Wall Colmonoy
Corp., 2006-NMCA-137, ¶ 7, 140 N.M. 630, 145 P.3d 110 (recognizing that “a
Rule1-012 B)(6) motion tests the legal sufficiency of the complaint, not the facts that

8
support it” (internal quotation marks and citation omitted)). If a plaintiff is not entitled
to recover under any theory of the facts alleged in the complaint, it is appropriate to
grant a motion for dismissal under Rule 1-012(B)(6). Padilla, 2006-NMCA-137, ¶ 7.
On appeal we accept as true all well-pleaded factual allegations and resolve all doubts
in favor of the sufficiency of the complaint. Padwa, 1999-NMCA-067, ¶ 8.
{12} 	Our analysis requires us to review the district court’s interpretation of the MFA.
Questions of statutory interpretation are reviewed de novo on appeal. N.M. Indus.
Energy Consumers v. N.M. Pub. Regulation Comm’n, 2007-NMSC-053, ¶ 19, 142
N.M. 533, 168 P.3d 105. In discerning the Legislature’s intent, “we are aided by
classic canons of statutory construction” and “look first to the plain language of the
statute, giving the words their ordinary meaning, unless the Legislature indicates a
different one was intended.” Id. ¶ 20. “When statutory language is clear and
unambiguous, we must give effect to that language and refrain from further statutory
interpretation.” Anadarko Petroleum Corp. v. Baca, 1994-NMSC-019, ¶ 9, 117 N.M.
167, 870 P.2d 129 (internal quotation marks and citation omitted). Only if an
ambiguity exists will we proceed further in our statutory construction analysis. See
State v. Maestas, 2007-NMSC-001, ¶ 14, 140 N.M. 836, 149 P.3d 933 (“Unless
ambiguity exists, [the appellate courts] must adhere to the plain meaning of the
[statutory] language.”).
DISCUSSION

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I. 	MFA Overpayment and Penalty Claims
{13} 	We first address the district court’s rulings that the State’s statutory claims for
civil penalties and overpayments were not legally sufficient under the MFA. The State
argues that BHC violated the MFA because of an implied certification that should be
recognized under New Mexico law and an alleged violation of the terms of BHC’s
Medicaid contracts when it submitted the Electronic Agreement for the payment of
the services provided by the Unscreened Caregivers. The State asserts that BHC knew
the Unscreened Caregivers’ services did not comply with New Mexico CCHSA
requirements and that it was in breach of the MAD 335 PPA contracts. The legal issue
raised by this allegation is whether BHC’s failure as a Medicaid provider to comply
with certain CCHSA screening application requirements constitutes billing and
payment fraud under the MFA and exposes BHC to liability under the MFA. This
legal issue arises as a matter of first impression in New Mexico.
1. 	Applicable Liability Provisions Under the MFA
{14} 	As a preliminary matter, we first address the applicability of the State’s attempt
to impose MFA liability under Section 30-44-4(A) for falsification of documents and
under Section 30-44-7(A) for Medicaid fraud. In the proceedings below, the district
court determined that Section 30-44-7(A)(3) was the only liability provision in the
MFA that was “potentially applicable” to the State’s argument. Although the State
summarily argues on appeal that BHC’s conduct also violated Section 30-44-4(A) of

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the MFA, it failed to then develop a substantive or legally articulate challenge to the
district court’s determination that Section 30-44-4 was inapplicable to its claims. We
decline to address this inarticulate argument addressing Section 30-44-4(A). See Elane
Photography, LLC v. Willock, 2013-NMSC-040, ¶ 70, 309 P.3d 53 (“It is of no benefit
either to the parties or to future litigants for [the appellate courts] to promulgate case
law based on our own speculation rather than the parties’ carefully considered
arguments.”). We will therefore consider the State’s argument only as it pertains to
Medicaid fraud under Section 30-44-7(A)(3) of the MFA.
2. 	Liability for Medicaid Fraud Based on a Regulatory Violation Alone
{15} 	The State alleges that BHC committed Medicaid fraud because it received
payments for services that it knew were not provided in compliance with state
licensing laws and regulations. To avoid dismissal of this allegation, the State must
establish that BHC (1) presented false or fraudulent claims for payment to HSD, and
(2) that BHC intended for HSD to rely on the false or fraudulent claims for purposes
of reimbursement. See § 30-44-7(A)(3) (defining Medicaid fraud as “presenting or
causing to be presented for allowance or payment with intent that a claim be relied
upon for the expenditure of public money any false, fraudulent, excessive, multiple[,]
or incomplete claim for furnishing treatment, services[,] or goods”). It is not necessary
to address the intent element of the statute on appeal. The question we address is
whether regulatory compliance with the CCHSA was a material condition of HSD

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payment for the Medicaid services, and therefore, whether alleging that BHC
submitted false certifications of regulatory compliance for the purpose of receiving
HSD payments states a claim for relief under Section 30-44-7(A)(3).
{16} 	Although this issue is novel, we are not without guidance. With respect to the
statutory language at issue in this litigation, pursuing Medicaid fraud under the MFA
is substantively similar to claims pursued under the federal False Claims Act (FCA).
See 31 U.S.C. § 3729(a)(1)(A) (2006) (creating civil liability for any person who
“knowingly presents, or causes to be presented” to the government “a false or
fraudulent claim for payment or approval”); see also Pamela Bucy et al., States,
Statutes, & Fraud: A Study of Emerging State Efforts to Combat White Collar Crime,
31 Cardozo L. Rev. 1523, 1535 (2010) (noting that many states’ false claims statutes
were passed in recent years, spurred by Congress’ “financial incentive for states to
pass FCAs that mirror the federal FCA”). Given this analogous language, both parties
have relied on federal case law interpreting the meaning of a false or fraudulent claim
under the federal FCA.
{17} 	To address whether the State has identified Medicaid fraud as defined by
Section 30-44-7(A)(3), we shall also reference case law interpreting the meaning of
a false or fraudulent claim under the FCA. New Mexico does not necessarily follow
federal 	precedent 	in 	every 	instance. 	See 	Ocana 	v. 	Am. 	Furniture 	Co.,
2004-NMSC-018, ¶ 23, 135 N.M. 539, 91 P.3d 58 (“Our reliance on the methodology

12
developed in the federal courts, however, should not be interpreted as an indication
that we have adopted federal law as our own.” (internal quotation marks and citation
omitted)); Charles v. Regents of N.M. State Univ., 2011-NMCA-057, ¶ 15, 150 N.M.
17, 256 P.3d 29 (noting that our appellate courts look to federal decisions for guidance
but emphasizing that we have not adopted, wholesale, federal decisions that may be
helpful in deciding a particular case). The federal cases referenced by the parties in
this case have provided helpful guidance.
{18} 	“The FCA recognizes two types of actionable claims—factually false claims
and legally false claims.” United States ex rel. Conner v. Salina Reg’l Health Ctr.,
Inc., 543 F.3d 1211, 1217 (10th Cir. 2008). A factually false claims case is relatively
straightforward, arising where the government payee has submitted reimbursement
claims for unnecessary services or those that were never provided. Id. By contrast, a
claim based on an alleged legal falsehood arises where the government payee “has
certified compliance with a statute or regulation as a condition to government
payment, yet knowingly failed to comply with such statute or regulation.” Id.
(emphasis, alteration, internal quotation marks, and citation omitted). In this case, the
State does 	not assert that BHC billed for services that were not rendered or
necessary—a factually false claim. Instead, the State raises a claim based on a legal
falsehood. The State claims that BHC impliedly submitted a legally false claim
because it attempted to collect payment from the government for services provided by

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the Unscreened Caregivers who it knew were not in compliance with the CCHSA
screening application requirements. See United States ex rel. Wilkins v. United Health
Grp., Inc., 659 F.3d 295, 305 (3d Cir. 2011) (explaining that an implied false
certification claim under the FCA “is premised on the notion that the act of submitting
a claim for reimbursement itself implies compliance with governing federal rules that
are a precondition to payment” (internal quotation marks and citation omitted)).
{19} 	The State essentially argues that because BHC once certified that it complied
with all state regulations to originally qualify as a Medicaid home healthcare provider
and facility, BHC is continually liable under the MFA for each failure to later adhere
to all the original certification requirements and regulations. BHC concedes that it
“must comply with a host of regulations contained in 8.315 [NMAC], including the
performance of criminal history screening on prospective caregivers” in order to
participate as a provider of PCO services. However, BHC contends that violations of
state qualification and licensing regulations are not actionable under the MFA, even
where a healthcare provider certifies compliance with all state laws, because Medicaid
reimbursement is not conditioned on compliance with all such regulations. We agree.
{20} 	The success of a legally false certification claim under the FCA depends on
whether it is based on “conditions of participation” in the Medicare program (which
do not support an FCA claim) or on “conditions of payment” from Medicare funds
(which do support FCA claims). Wilkins, 659 F.3d at 309; Conner, 543 F.3d at 1220;

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United States ex rel. Mikes v. Straus, 274 F.3d 687, 701-02 (2d Cir. 2001). The claim
will fail unless compliance with the allegedly violated state law or regulation is a
condition of the government’s payment of the claim. See, e.g., Mikes, 274 F.3d at 697;
United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899,
902 (5th Cir. 1997); United States ex rel. Hopper v. Anton, 91 F.3d 1261, 1266-67
(9th Cir. 1996); United States ex rel. Wall v. Vista Hospice Care, Inc., 778 F. Supp.
2d 709, 720 (N.D. Tex. 2011); United States ex rel. Conner v. Salina Reg’l Health
Ctr., Inc., 459 F. Supp. 2d 1081, 1086 (D. Kan. March 4, 2006). “A violation concerns
a condition of payment if such violation might cause the government to actually refuse
payment.” United States ex rel. Spay v. CVS Caremark Corp., 913 F. Supp. 2d 125,
147 (E.D. Pa. 2012) (alteration, internal quotation marks, and citation omitted); see
Chesbrough v. VPA, P.C., 655 F.3d 461, 468 (6th Cir. 2011) (“[I]t is not the violation
of a regulation itself that creates a cause of action under the FCA. Rather,
noncompliance constitutes actionable fraud only when compliance is a prerequisite
to obtaining payment.”); see also United States ex rel. Landers v. Baptist Mem’l
Health Care Corp., 525 F. Supp. 2d 972, 978 (W.D. Tenn. 2007) (“Conditions of
[p]articipation are quality of care standards directed toward[] an entity’s continued
ability to participate in the Medicare program rather than a prerequisite to a particular
payment.”).
{21} 	Though we have yet to address the viability of an implied false certification

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claim under the MFA, we consider the federal precedent instructive. Like the FCA,
Section 30-44-7(A)(3) imposes a materiality element which requires that the false or
fraudulent certification be integral to the government’s payment decision. On appeal,
we recognize that the State does not dispute this materiality requirement. Rather, it
argues that the federal distinction between conditions of payment and conditions of
participation is irrelevant in this case because BHC’s certification of CCHSA
compliance was both a material prerequisite for participation in the Medicaid program
and a condition of Medicaid reimbursement and payment. See Conner, 543 F.3d at
1222 (“[S]ome regulations or statutes may be so integral to the government’s payment
decision as to make any divide between conditions of participation and conditions of
payment a distinction without a difference.” (internal quotation marks and citation
omitted)).
{22} 	The State cites New York v. Amgen Inc., 652 F.3d 103, 115 (1st Cir. 2011), to
support its assertion that CCHSA compliance should be considered a condition of
Medicare payment because such compliance is a mandatory prerequisite to ever
receiving payment. Amgen is readily distinguishable from the instant case. The Amgen
case involved false and fraudulent claims to state Medicaid agencies that arose from
alleged kickbacks to healthcare providers. Id. at 105. Kickbacks are specifically
recognized as a form of fraud in the provider participation agreements signed by
healthcare providers. Id. at 114 (citing NMSA 1978, § 27-11-3(B)(6), (C)(3)). In

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Amgen it was unnecessary for the federal court to distinguish between conditions of
payment and conditions of participation because the contract 	provisions at issue
explicitly identified the fraudulent kickback conduct as a condition of Medicaid
payment. 652 F.3d at 115 (“[T]he New Mexico agreement requires providers to
acknowledge that non-compliance with anti-kickback laws vitiates a provider’s ability
to get its claims paid.”).
{23} 	More significantly, the Amgen holding must also be reconciled with the
well-established principle that the FCA is not a vehicle for regulatory compliance.
See, e.g., Hopper, 91 F.3d at1267; see also United States ex rel. Lamers v. City of
Green Bay, 168 F.3d 1013, 1020 (7th Cir. 1999) (“[T]he FCA is not an appropriate
vehicle for policing technical compliance with administrative regulations.”). Thus, the
overwhelming majority of courts have held that a violation of the underlying statute
or regulation by itself does not create a false certification cause of action under the
FCA. See United States v. McNinch, 356 U.S. 595, 599 (1958) (addressing an
application for credit insurance and recognizing that the FCA “was not designed to
reach every kind of fraud practiced upon the [g]overnment”); United States ex rel.
Graves v. ITT Educ. Servs., Inc., 284 F. Supp. 2d 487, 501 (S.D. Tex. 2003) (“A
general statement of adherence to all regulations or statutes governing participation
in a program through which federal funds are received is insufficient as a basis of
[FCA] liability.”); see also Wall, 778 F. Supp. 2d. at 720 (“A sustainable FCA

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allegation premised on a false certification of compliance with statutory or regulatory
requirements must be based upon a ‘condition of payment,’ not a ‘condition of
participation.’ ”). This reluctance to expand the intended scope of the FCA is
particularly evident where a government payee has failed to comply with state
regulations like the CCHSA screening requirement at issue here. See United States ex
rel. Swan v. Covenant Care, Inc., 279 F. Supp. 2d 1212, 1221 (E.D. Cal. 2002) (“The
prevailing law is that regulatory violations do not give rise to a viable FCA action
unless government payment is expressly conditioned on a false certification of
regulatory compliance.” (internal quotation marks and citation omitted)). The federal
courts have repeatedly held that regulatory deficiencies that are not material to
government payment do not support a false claim action. Id. (explaining that only two
district courts “have held that submitting Medicare or Medicaid claims for services
that fail to meet the relevant statutory standard of care can constitute actionable fraud
under the FCA” and that “these questionable holdings have not been adopted by the
Ninth Circuit or any other appellate court”); see United States ex rel. Siewick v.
Jamieson Sci. & Eng’g, Inc., 214 F.3d 1372, 1376 (D.C. Cir. 2000) (noting that “all
courts of appeals to have addressed the matter, [hold] that a false certification of
compliance with a statute or regulation cannot serve as the basis for a qui tam action
under the FCA unless payment is conditioned on that certification” (emphasis
omitted)); see, e.g., United States ex rel. Willard v. Humana Health Plan of Texas

18
Inc., 336 F.3d 375, 379, 382 (5th Cir. 2003); Lamers, 168 F.3d at 1016-17, 1020.
{24} 	Public policy recognizes that the failure to strictly comply with a regulatory
scheme as complicated as the MFA or the FCA does not always provide grounds for
a fraudulent payment suit, especially without taking into account the nature of the
noncompliance or the material aspects of the regulation. See Conner, 543 F.3d at 1221
(“[A]lthough the government considers substantial compliance a condition of ongoing
Medicare participation, it does not require perfect compliance as an absolute
condition to receiving Medicare payments for services rendered.”); Hopper, 91 F.3d
at 1267. Adoption of the State’s theory of implied compliance could have a broad
impact on all providers of Medicaid services. For this reason, courts addressing
compliance issues under the FCA have not supported such an expansive interpretation
of liability. As a result, we will not automatically conclude that every request for
payment accompanied by a statement of compliance with all applicable regulations
is material to the government’s subsequent payment to the provider and thereby
actionable as Medicaid fraud under the MFA.
{25} 	An alleged violation of a state Medicaid licensing regulation does not
automatically render a Medicaid provider ineligible to receive Medicaid payments.
The MFA does not support such expansive liability in the absence of an underlying
statute or regulation that conditions payment on compliance with the certification.
Absent this requirement, the MFA could turn “into a blunt instrument to enforce

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compliance with all . . . regulations [rather than] only those regulations that are a
precondition to payment.” Wilkins, 659 F.3d at 307 (omission in original) (internal
quotation marks and citation omitted). The mere fact that BHC violated the statutory
hiring requirements outlined by the CCHSA does not automatically create a violation
of a condition of Medicaid payment that supports a Medicaid fraud cause of action
under the MFA. Instead, the appropriate framework for resolving Medicaid fraud false
certification issues is to examine whether the defendant’s compliance with the statutes
and regulations in question was a condition to receiving payment from the
government. Hopper, 91 F.3d at 1266-68; see also Thompson, 125 F.3d at 902-03
(holding that the FCA is implicated where the government conditions payment upon
the certification of compliance with regulations); United States ex rel. Lamers v. City
of Green Bay, 998 F. Supp. 971, 985 (E.D. Wis. 1998) (The “key inquiry is whether
the claim in question has the practical purpose and effect, and poses the attendant risk,
of inducing wrongful payment.” (internal quotation marks and citation omitted)).
Accordingly, the success of the State’s appeal depends on whether compliance with
the CCHSA was a condition of HSD payment for services rendered by BHC.
3. 	Failure to Comply with CCHSA Screening Requirements
{26} 	In the instant case, the State asserts that HSD payment was conditioned on BHC
billing for services conducted by “qualified” caregivers—those who had been hired
in compliance with CCHSA screening requirements. It asserts that HSD would not

20
have paid BHC for services provided by the Unscreened Caregivers had it known that
they were not “qualified” under the terms of the CCHSA. But, a disqualifying criminal
history under the CCHSA does not automatically affect the caregiver’s qualifications
to provide caregiver services. Section 29-17-5(F) (allowing for continued employment
of a disqualified caregiver and reconsideration of a disqualifying conviction during
the subsequent reconsideration proceedings). The State has neither alleged any facts
to support an argument that the Unscreened Caregivers provided a level of care that
violated reasonable healthcare standards or requirements, nor that care from the
Unscreened Caregivers resulted in the “abuse, neglect[,] or financial exploitation of
care recipients.” Section 29-17-3. While the State asserts that BHC had a policy of
employing “unqualified” caregivers, the State could not allege that HSD would have
been entitled to withhold payment solely because the Unscreened Caregivers had
disqualifying criminal convictions in their histories.
{27} 	Even when a care provider has expressly certified compliance with all state
regulations, the New Mexico Medicaid regulations make clear that not every
regulatory deficiency constitutes actionable false or fraudulent conduct under the
MFA. See 8.351.2.11 NMAC. For example, the statutes and regulations allow, but do
not require, HSD to sanction a provider for non-fraudulent misconduct, including a
violation of the CCHSA. Section 29-17-5(L); 8.351.2.11 NMAC. If HSD determines
that termination from the Medicaid program is the appropriate sanction for a

21
provider’s non-compliance with a condition of participation, it must allow the
provider notice and an opportunity to correct the identified misconduct before
termination. See 8.351.2.9 NMAC; 8.31.2.10(B)(1), (3) NMAC; see also 42 C.F.R.
§ 488.28 (2013) (granting a care provider a reasonable time to achieve compliance
with conditions of participation); Mikes, 274 F.3d at 702 (“The fact that [the statute]
permits sanctions for a failure to maintain an appropriate standard of care only where
a dereliction occurred in ‘a substantial number of cases’ or a violation was especially
gross and flagrant makes it evident that the section is directed at the provider’s
continued eligibility in the Medicare program, rather than any individual incident of
noncompliance.” (alterations, internal quotation marks, citation omitted)); Hopper, 91
F.3d at 1267 (holding that the FCA may not be used as a substitute for administrative
remedies where regulatory compliance is “not a sine qua non [for the] receipt of state
funding”). The regulations require HSD to impose the ultimate sanction of termination
when a “provider has a previous suspension from [Medicaid] with failure to correct
identified deficiencies[,]” or immediately when a provider is convicted of Medicare
fraud. 8.351.2.11(E)(1)(a), (b) NMAC. The fact that HSD may choose to institute a
plan of correction or other alternative sanctions before addressing the provider’s
participation in the program makes it evident that the MFA does not require perfect
compliance at all times with regulatory standards such as those instituted by the
CCHSA. See Conner, 543 F.3d at 1220-21 (recognizing that provider noncompliance

22
with the FCA does not immediately suspend Medicare payments unless such
noncompliance is a recognized condition of payment); see also United States ex rel.
N.M. v. Deming Hosp. Corp., ___ F. Supp. 2d. ___, 2013 WL 7046410, at *7, 9
(D.N.M. Nov. 2013) (“[A]lthough the government considers substantial compliance
[with applicable regulations] a condition of ongoing Medicare participation, it does
not require perfect compliance as an absolute condition of receiving Medicare
payments for services rendered.” (internal quotation marks and citation omitted)).
{28} 	The State’s position that compliance with the CCHSA requirements is an
implied condition of payment is only possible by weaving together isolated phrases
from several sections in a complex system of Medicaid regulation. This creative
approach to implied compliance is not supported by the structure of the statutory or
regulatory scheme. To the contrary, CCHSA permits providers to employ a caregiver
with a disqualifying criminal history during the pendency of an administrative
reconsideration and, even after reconsideration, if “the conviction does not directly
bear upon the applicant’s, caregiver’s[,] or hospital caregiver’s fitness for the
employment.” Section 29-17-5(F). Strict compliance cannot be reconciled with these
exceptions allowed under CCHSA.
{29} 	The State has correctly identified certain caregiver qualification deficiencies
that are recognized as preconditions for Medicaid payment. These deficiencies include
the lack of necessary caregiver certifications and inadequate training. However,

23
nothing in the State’s complaint alleges that there were any deficiencies with the
certifications or training of the Unscreened Caregivers. The State merely argues
that—by virtue of BHC’s failure to submit criminal history screenings prior to
billing—the Unscreened Caregivers were not fully qualified to perform Medicaid
services.
{30} 	Unlike failures to meet minimum certification and training requirements to
adequately perform caregiving services, the State has presented no authority that the
criminal background screenings required by CCHSA constitute an equivalent
performance-based deficiency that must be recognized as a condition of payment. See
Mikes, 274 F.3d at 697 (“Since the [FCA] is restitutionary and aimed at retrieving
ill-begotten funds, it would be anomalous to find liability when the alleged
noncompliance would not have influenced the government’s decision to pay.”); see
also State v. Guerra, 2012-NMSC-014, ¶ 21, 278 P.3d 1031 (emphasizing that where
a party “cites no authority from any jurisdiction supporting [its] argument, [then the
appellate courts] may conclude that no such authority exists”). BHC’s compliance
with CCHSA thus raises only one serious question—whether BHC fell below the
requirements for Medicaid participation as a qualified provider. Because BHC was
recognized as a qualified provider at the time it was paid for the services provided by
the Unscreened Caregivers, its qualified provider status is not at issue in these
proceedings. The State was not pursuing a termination of BHC’s participation as a

24
qualified provider. Accordingly, there is no evidence that Medicaid provider payments
were conditioned upon compliance with CCHSA regulations. We conclude that
BHC’s practice of failing to comply with CCHSA was not in violation of the MFA as
a condition for payment of Medicaid services. Accordingly, we affirm the district
court’s ruling on this issue.
4. 	Section 30-44-8(A) Overpayments
{31} 	We now address the State’s contention that the district court erred when it held
that the State could not seek the remedy of reimbursement of Medicaid overpayments
under Section 30-44-8(A). The State asserts that “[t]he plain language of Section 30-
44-8(A) requires consideration regarding whether BHC received program payments
in violation of the MFA.” We have already concluded that BHC’s failure to comply
with CCHSA regulations was not actionable under the MFA. As such, Section 30-44-
8(A) is equally inapplicable to the State’s claims and does not provide a separate
statutory basis for recovery of alleged overpayments. See § 30-44-8(A) (creating
liability for payments obtained “by reason of a violation of the [MFA]”). For this
reason, we need not address at this time whether the MFA provides for civil recovery
of Medicaid overpayments in addition to other penalties provided by law.
II. 	Breach of Contract Claims
{32} 	The State also appeals the district court’s Rule 1-012(B)(6) dismissal of its
breach of contract claims against BHC. The State alleged that BHC breached its MAD

25
335 PPA by filing Medicaid claims and retaining the Medicaid payments for services
rendered to patients by the Unscreened Caregivers. While it is true that BHC’s failure
to submit the required criminal screening requests for the Unscreened Caregivers
constituted a breach of its MAD 335 PPA contract, the real issue on appeal is whether
the State sought any remedy for this breach that is allowed by the law. The State
challenges the district court’s application of UJI 13-843 NMRA to its breach of
contract claim.
{33} 	We have already concluded that the district court correctly found that the State
failed to allege facts that would support any recoverable damages under federal and
state Medicaid regulatory schemes. Thus, the only remedy available for the State’s
breach of contract claim is provided under the common law. See UJI 13-822 NMRA.
But the purpose of allowing damages for a common law breach of contract is to
restore to the injured party what was lost by the breach and what he or she reasonably
could have expected to gain had there been no breach. UJI 13-843. Accordingly, BHC
sought dismissal by the district court, arguing that “the State has suffered no damages
as a result of BHC’s billing . . . for services rendered” by the Unscreened Caregivers.
BHC’s motion for dismissal questioned the State’s ability to recover in damages
“money that it paid for services it actually received.” In response, the State argued that
it did not waive any rights to recover damages for breach of contract under the MFA.
However, it did not address BHC’s argument that the State could not “support any

26
actual damages in contract based upon BHC’s conduct of billing for [the U]nscreened
[C]aregivers’ services.”
{34} 	The State in this case pursued only a reimbursement remedy under the MFA
that is inapplicable under the facts of the case. Even though BHC breached its MAD
335 	PPA 	contract, 	its 	allegedly 	false 	certifications 	were, 	under 	the 	MFA
circumstances of this case, not legally material to HSD’s ongoing decision to pay
BHC for services provided by the Unscreened Caregivers. If the State wished to
contest the accuracy of BHC’s statement in its motion to dismiss, that the State
suffered no recoverable damages as a result of BHC’s breach of contract, then the
State was required to so by identifying a basis that entitled it to relief. See Hovet v.
Lujan, 2003-NMCA-061, ¶ 8, 133 N.M. 611, 66 P.3d 980. Although the record
indicates that the State filed a brief in opposition to BHC’s motion to dismiss, it did
not contest BHC’s statement that the State could not recover damages for services that
it actually received or otherwise establish that the pleadings told “a story from which
the essential elements [that are a] prerequisite to the granting of the relief sought can
be found or reasonably inferred.” Derringer v. State, 2003-NMCA-073, ¶ 5, 133 N.M.
721, 68 P.3d 961 (omissions, internal quotation marks, citation omitted). Other
jurisdictions recognize that in the absence of pleading allegations sufficient to
establish recoverable damages or relief that might be granted, the plaintiff may not
defeat a motion to dismiss. See Aimis Art Corp. v. N. Trust Secs., Inc., 641 F. Supp.

27
2d 314, 319 (S.D.N.Y. 2009); see also Dloogatch v. Brincat, 920 N.E.2d 1161, 1166
(Ill. App. Ct. 2009); Greenwald v. Burns & Levinson, LLP, 1 N.E.3d 294 (Mass. App.
Ct. 2014) (non-precedential). Because the sole remedy sought by the State for BHC’s
breach of contract was based on inapplicable reimbursement provisions of the MFA,
the district court did not err when it ruled in favor of BHC on the State’s breach of
contract claim that alleged no other damages that were recoverable.
{35} 	The MFA is essential to policing the integrity of the State’s dealings with those
to whom it pays money. At the same time, the federal penalties afforded by the FCA
are not interchangeable with remedies for ordinary breaches of contract claims. See
United States v. Southland Mgmt. Corp., 326 F.3d 669, 684 (5th Cir. 2003)
(addressing factual issues for summary judgment but noting and distinguishing the
nature of FCA claims and remedies from ordinary breach of contract claims). While
we 	do 	not 	condone 	a 	care 	provider’s 	alleged 	failure 	to 	adhere 	to 	CCHSA
requirements, the State has failed to allege common law contract remedies or damages
where it incurred no identified harm to PCO patients and enjoyed the benefit of the
BHC’s services that were provided. Liability cannot be imposed absent an alleged
injury and a remedy. Neither the district court nor this Court have been alerted to any
other non-MFA remedy sought by the State under its breach of contract claim. It was
therefore not necessary for the district court to determine whether BHC could be liable
to the State for a different remedy that the State is not pursuing under its breach of

28
contract theory in this case. As a result, we affirm the district court’s ruling to dismiss
the State’s breach of contract claim under Rule 1-012(B)(6).
CONCLUSION
{36} 	For the foregoing reasons, we affirm the district court’s Rule 1-012(B)(6)
dismissals of the State’s complaint against BHC.
{37} 	IT IS SO ORDERED.
______________________________
TIMOTHY L. GARCIA, Judge
WE CONCUR:
____________________________
JONATHAN B. SUTIN, Judge
____________________________
MICHAEL E. VIGIL, Judge