From Longmont United Hosp. v. St. Barnabas Corp., 2009 U.S. App. LEXIS 63 (3d Cir. Jan. 5, 2009):

This case arises out of a purported scheme to defraud the federal government through the practice of "turbocharging." At its simplest level, the Saint Barnabas Corporation ("SBC"), through a consortium of hospitals that it owned and operated throughout New Jersey, allegedly received excessive Medicare payments by reporting inflated patient treatment costs. After SBC settled a qui tam action with the United States, Longmont United Hospital ("Longmont"), a Medicare participant located in Colorado, filed a class action suit, claiming, inter alia, four violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq. On June 26, 2007, the District Court granted SBC's motion to dismiss Longmont's RICO claims under Fed. R. Civ. P. 12(b)(6) because it held that Longmont's complaint failed to show both proximate causation and SBC's participation in a RICO "enterprise." Because we agree with the District Court that SBC's conduct was not the proximate cause of Longmont's injuries, we will affirm.

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Here, we have no difficulty finding that SBC's conduct was not the proximate cause of Longmont's injuries. According to Longmont, SBC's scheme reduced Longmont's Medicare reimbursements by both increasing the cost threshold necessary to qualify for "Outlier Payments" — payments designed to compensate hospitals for treating especially costly patients — and decreasing the amount of those payments. It is clear from Longmont's complaint, however, that the Centers for Medicare & Medicaid Services ("CMS") stands between SBC's conduct and Longmont's injuries. As Longmont acknowledges, CMS is "the agency that interpreted the Medicare Act, promulgated and enforced Medicare payment regulations, and through its agents administered Medicare payment[s]." … The "Outlier [Payment] Threshold is the amount established annually by CMS." … CMS also "assign[ed] the [statewide average] to a hospital when its [cost-to-charge ratio fell] below the National Threshold . . . ." … This CMS policy "generate[d] excessive Outlier Payments" because the "higher [statewide average] is then applied" to the formula used to calculate Outlier Payments. (Id. P 53.) It also allowed SBC to continue receiving excessive Outlier Payments despite auditing. (See id.) Therefore, SBC's alleged inflation of hospital costs did not cause Longmont's injuries; instead, it was CMS's response to this behavior — reimbursing SBC for its inflated costs without ensuring that they were justified and raising the qualification threshold for Outlier Payments in subsequent years — that led to a decrease in Longmont's Outlier Payments. The three motivating principles at the heart of the proximate cause requirement support our holding in this case. First, it would be nearly impossible to ascertain the amount of Longmont's damages attributable to SBC's reporting of inflated costs, as opposed to CMS's interpretation of the Medicare Act, promulgation and enforcement of Medicare payment regulations, and administration of the Medicare payment regime. Second, it may well be that there is an appreciable risk of duplicative recoveries here, see Holmes, 503 U.S. at 269, but even if there is not, our disposition remains unchanged, see Anza, 547 U.S. at 459 (finding no proximate causation "[n]otwithstanding the lack of any appreciable risk of duplicative recoveries . . ."). Third, although Longmont disputes whether the government was a more direct victim of SBC's alleged fraud, it cannot deny that the government was a direct victim. Here, the government has already "vindicated the laws by pursuing [its] own claims," id. at 460, and entering into a $ 265 million settlement with SBC on June 15, 2006.

At best, Longmont suffered harms indirectly related to SBC's alleged "turbocharging." Any impact that SBC's conduct had on Longmont hinges entirely upon CMS's administration of the Medicare reimbursement system. Since "[t]here is no need to broaden the universe of actionable harms to permit RICO suits by parties who have been injured only indirectly," id. at 460, we will affirm the District Court's decision to grant SBC's motion to dismiss.

Note that the “Third” point in the penultimate paragraph of the quote, above, is that, in the qui tam setting, the fact that the Government pursues its own claim demonstrates that the Government is “a” direct victim and may raise a presumption that the Government, and not the RICO plaintiff, was the only directly-injured party. Plaintiffs in this circumstance should take pains to explain how they suffered distinct, direct damages.