Fowler et al v. Evercare Hospice, Inc. et al

Filing 188

ORDER. ORDERED that Relators Fowler's and Towl's Motion to Determine Relators' Share of Settlement Proceeds #175 is granted in part. ORDERED that $3.6 million, 20 percent of the settlement in this case, shall be awarded to relators pursuant to 31 U.S.C. 3730. ORDERED that this case is closed. Signed by Judge Philip A. Brimmer on 02/07/17. (jhawk, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Philip A. Brimmer

Civil Action No. 11-cv-00642-PAB-NYW
UNITED STATES OF AMERICA ex rel. TERRY LEE FOWLER and LYSSA TOWL,
Plaintiff,
v.
EVERCARE HOSPICE, INC., n/k/a Optum Palliative and Hospice Care, a Delaware
corporation,
OVATIONS, INC., a Delaware corporation,
OPTUMHEALTH HOLDINGS, LLC, a Delaware limited liability corporation, and
UNITED HEALTHCARE SERVICES, INC., a Minnesota corporation,
Defendants.

ORDER

This matter is before the Court on Relators Fowler’s and Towl’s Motion to
Determine Relators’ Share of Settlement Proceeds [Docket No. 175]. The United
States opposes relators’ motion in part. Docket No. 185. The Court has jurisdiction
pursuant to 28 U.S.C. § 1331.
I. BACKGROUND
A. Procedural History
This action arises under the False Claims Act (“FCA”), 31 U.S.C. § 3729 et seq.
Relators Fowler and Towl (the “relators”) initiated a qui tam action on March 15, 2011
alleging that defendants knowingly submitted, or caused to be submitted, claims for
Medicare hospice expenses for patients who were ineligible for such benefits. See
Docket No. 1. The complaint was filed about one month before Mr. Fowler resigned

and two months after Ms. Towl was terminated from Evercare Hospice, Inc.
(“Evercare”). Docket No. 176 at 12, ¶ 23; Docket No. 176-4 at 15, ¶ 31.
On June 5, 2013, Sharlene Rice, another f ormer Evercare employee, filed her
own qui tam action in the United States District Court for the Northern District of Illinois.
See Docket No. 154-2. That case was transferred to the United States District Court for
the District of Colorado, see United States ex rel. Rice v. Evercare Hospice, Inc., Civil
Action No. 14-cv-01647-PAB, and consolidated with this action on June 24, 2014.
Docket No. 28. The United States intervened in the consolidated action on August 25,
2014, Docket No. 34, and filed a consolidated complaint on November 10, 2014.
Docket No. 46. On September 21, 2015, the Court denied Evercare’s motion to dismiss
the government’s complaint and granted in part and denied in part Evercare’s motion to
dismiss the relators’ second amended complaint. Docket No. 120.
On July 13, 2016, Evercare agreed to pay $18 million to resolve the claims in the
consolidated action. Docket No. 183. On Septem ber 12, 2016, Mr. Fowler and Ms.
Towl filed a motion pursuant to 31 U.S.C. § 3730(d)(1) requesting that the Court order
the United States to pay 23 percent of the $18 million settlement to the relators. Docket
No. 175.1
B. Facts
The relators filed their complaint under seal on March 15, 2011. Docket No. 1.
Before filing the complaint, Mr. Fowler and Ms. Towl provided disclosures to the
1

On September 15, 2016, the Court dismissed Ms. Rice’s complaint pursuant to
31 U.S.C. § 3730(b)(5), leaving Fowler and Towl as the only remaining relators in this
proceeding. Docket No. 178 at 13. As a result of her dismissal, Ms. Rice is not eligible
to receive a share of the proceeds in this matter.
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government. Docket No. 176-4 at 6, ¶ 13; Docket No. 176 at 6, ¶ 12. Mr. Fow ler’s
pre-filing disclosure described an independent review of 129 denied Medicare claims, a
copy of documentation regarding hospice-related denials that were not appealed by
Evercare, examples of patients for whom bills were submitted despite Medicare denials,
and a description of Evercare’s policies that were designed to maintain ineligible
patients on their rolls. Docket No. 176-4 at 6-8, ¶14. Ms. T owl’s pre-filing disclosure
included descriptions of internal policies related to the underlying fraud and a roster of
146 Denver patients relating their hospice certifications to their diagnosis and whether
they had seen a physician. Docket No. 176 at 6-8, ¶ 13.
Mr. Fowler and Ms. Towl provided supplemental documentation to the
government related to Evercare’s fraud after the government intervened. See, e.g.,
Docket No. 176-4 at 8, ¶ 15 (discussing the delivery of 11 documents to the
government). They also provided the government with draft search terms, id. at 11,
¶ 19, witness lists, id. at 11, ¶ 20, and a collection of Evercare emails. Id. at 11, ¶ 21.
The complaint in this action was filed one month before Mr. Fowler resigned from
his position and two months after Ms. Towl was terminated by Evercare. Mr. Fowler
states that he was induced into leaving Evercare by his supervisors, who provided
contradictory instructions and repeatedly reprimanded him before placing him on a
corrective action plan. Id. at 14-15, ¶¶ 29-30. Mr. Fowler resigned from Evercare in
April 2011. Id. at 15, ¶ 31. Subsequently, Mr. Fowler obtained employment at a 20
percent reduced salary, which he maintained for a year and a half before being laid off.
Id. at 15, ¶ 32. After an additional period of unemployment, Mr. Fowler was employed

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at a further salary reduction through August 2015, when he retired. Id. at 15, ¶ 33.
Evercare terminated Ms. Towl in January 2011. Docket No. 176 at 12, ¶ 23. She
started her own business, which she now considers to be a success. Id. at 12-13, ¶ 25.
The complaint in this action was filed under seal and was not provided to defendants
until June 2012. See Docket No. 11 and subsequent order.
II. LEGAL STANDARD
The False Claims Act allows a private citizen, “the relator,” to file a qui tam
lawsuit on behalf of the United States to recover the government’s damages. 31 U.S.C.
§ 3730. If the government elects to intervene in a qui tam suit, as the government did
here, a relator is entitled to 15 percent to 25 percent of the “proceeds of the action or
settlement of the claim.”2 31 U.S.C. § 3730(d)(1). The amount of compensation is
determined by the “extent to which the person substantially contributed to the
prosecution of the action.” Id. “[D]etermination of the relator’s share is left largely to
the Court’s informed discretion.” United States ex rel. Alderson v. Quorum Health Grp.,
Inc., 171 F. Supp. 2d 1323, 1331 (M.D. Fla. 2001). W hile the statute is silent about the
factors that determine whether a contribution is substantial, courts may consider
legislative history, internal Department of Justice (“DOJ”) guidelines in FCA matters,
and case law in determining the correct percentage to award to relators. Alderson, 171
F. Supp. 2d at 1331.

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There is a statutory exception where a relator might receive less if (1) the
relator “planned and initiated” the violation of the FCA; (2) the relator “is convicted of
criminal conduct arising from his or her role in the violation”; or (3) the relator’s claim is
based on disclosures “other than information provided by the person bringing the
action.” 31 U.S.C. § 3730(d). None of these exceptions applies here.
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The legislative history of the FCA provides three factors that courts often
consider in determining the amount relators should recover: the significance of the
information provided by the relator, the relator's contribution to the final outcome, and
whether the government was previously aware of the fraud. Alderson, 171 F. Supp. 2d
at 1332 (citing S. Rep. No. 99-345, at 28 (1986), reprinted in 1986 U.S.C.C.A.N. 5266,
5293).
Some courts have also considered the DOJ guidelines for determining the
relators’ share. The DOJ guidelines identify the following factors to consider in
increasing the relator’s percentage of the settlement:
1. The relator reported the fraud promptly.
2. When he learned of the fraud, the relator tried to stop the fraud
or reported it to a supervisor or the Government.
3. The qui tam filing, or the ensuing investigation, caused the
offender to halt the fraudulent practices.
4. The complaint warned the Government of a significant safety
issue.
5.The complaint exposed a nationwide practice.
6. The relator provided extensive, first-hand details of the fraud to
the Government.
7. The Government had no knowledge of the fraud.
8. The relator provided substantial assistance during the
investigation and/or pretrial phase of the case.
9. At his deposition and/or trial, the relator was an excellent,
credible witness.
10. The relator’s counsel provided substantial assistance to the
Government.
11. The relator and his counsel supported and cooperated w ith the
Government during the entire proceeding.
12. The case went to trial.
13. The FCA recovery was relatively small.
14. The filing of the complaint had a substantial adverse impact on
the relator.

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Johnson, 889 F. Supp. 2d at 796 n.6 (listing factors). The DOJ guidelines are
not binding on courts, Johnson, 889 F. Supp. 2d at 794, but both sides cite them
here as a means of determining an award.
The minimum percentage awarded to a relator, 15 percent, “is viewed as
a finder’s fee to which a relator is entitled even when he or she does not
substantially contribute to the prosecution of the action.” Roberts v. Accenture,
LLP, 707 F.3d 1011, 1016 (8th Cir. 2013) (citing S. Rep. 99-345, 1986
U.S.C.C.A.N. 5266, 5293). In contrast, the award “of the full 25 percent fee
should be reserved for only those individuals whose conduct in disclosing the
fraud is virtually flawless.” United States v. Gen. Elec., 808 F. Supp. 580, 584
(S.D. Ohio 1992).
III. ANALYSIS
The government acknowledges that Mr. Fowler and Ms. Towl commenced
this action soon after they were disciplined or terminated by Evercare, that the
relators responded to government requests, and that the relators’ actions may
deter misuse of the Medicare hospice benefit, “a significant issue impacting the
health and well-being of a particularly vulnerable patient population.” Docket No.
185 at 7. The government, however, states that the relators “did not develop all
the facts and supporting documentation necessary to make the case” and that
relators did not suffer sufficient personal hardship to justify an increased award.
Id. The government argues that an award of $3,240,000, 18 percent of the
proceeds of this action, is sufficient to compensate the relators. Id. at 15.

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The Court will first consider the Senate factors noted above, namely, the
significance of the information provided by the relators, relators’ contribution to
the final outcome, and whether the government was previously aware of the
fraud.
The relators provided detailed pre-filing information to the government
regarding the method and manner of the fraudulent scheme. Such information
included a description of the internal policies used to motivate physicians,
nurses, and other staff to place ineligible patients in hospice. Docket No. 175 at
7-8. In addition, the relators provided a roster of 146 patients, documentation
from a review of 129 denied Medicare claims, and documentation on denials for
ineligible patients at four Evercare locations. Id. at 10. This information provided
a roadmap to Evercare’s large-scale fraud.
Although relators provided detailed information to the United States, the
government is correct that the complaint filed by the government demonstrates
significant additional fact-gathering. See Docket No. 46. In particular, the
government points to the falsity and scienter allegations in its complaint as
evidencing its extensive additional effort. Docket No. 185 at 9-11.
As to the falsity allegations, the government’s complaint provided specific
clinical information from patients’ records demonstrating the falsity of Evercare’s
hospice submissions. Docket No. 46 at 36, 38, 50, ¶¶ 176, 186, 237. T he
specificity of these claims was made possible by a medical record review
conducted by an expert retained by the government. Docket No. 185 at 10. The
information provided to the government by relators also identified patient
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information. Although relators provided sufficient patient information to
demonstrate the scheme they alleged, Docket No. 120 at 29-30 (noting that, of
21 representative patients for whom defendants allegedly submitted false
reimbursement claims, relators provided sufficient details for 14 patients showing
claims denied on the basis of ineligibility),3 and, although additional fact
development by the government is not unusual, the substantial investigation by
the United States undermines relators’ request for a high-range reward.4
As to the scienter allegations, the government states that the relators’
complaint did not contain allegations “rebutting Evercare’s principal defense that
it could not have knowingly submitted false claims because it reasonably relied
on the clinical judgment of certifying physicians.” Docket No. 185 at 11. The
relators’ complaint identifies many of the tactics implemented by Evercare to
encourage physicians to improperly certify hospice patients. Docket No. 1 at 1328, ¶¶ 53-129. However, the government supplemented these allegations with
detailed information related to Evercare’s knowledge of the fraud. See Docket
No. 120 at 20-22 (noting that the government’s complaint contains “extensive
allegations that suggests that the information on which the physicians relied . . .

3

While the Court’s decision was based on the second amended
complaint, filed after the government’s complaint, the relevant portion of relator’s
underlying complaint was unchanged. Compare Docket No. 1 at 28-36,
¶¶ 130-53, with Docket No. 86 at 37-44, ¶¶ 190-213.
4

Post-intervention, the government engaged in substantial written
discovery and retained a medical expert to conduct a medical review of a
statistically significant random sample of Evercare patients. Docket No. 185 at
11.
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was not reliable and therefore precluded those physicians’ legitimate exercise of
clinical judgment”).
After the government intervened, relators continued to contribute to the
litigation by meeting with the government, formulating search terms, and
preparing a list of witnesses and outlines of deposition testimony. Docket No.
175 at 12-14. The government does not dispute that relators continued to assist
the government, but states that the type of assistance provided is “commonly
provided by relators.” Docket No. 185 at 13. The government is correct that,
while relators in this action made themselves available to the government, their
contribution was not as extensive as the contributions of relators in cases
involving top-end awards. See, e.g., United States ex rel. Shea v. Verizon
Communications, Inc., 844 F. Supp. 2d 78, 83 (D.C. Cir. 2012) (awarding 20
percent of the settlement where relator “participated fully in all aspects of the
Government's investigation and settlement discussions,” spending “hundreds of
hours each year on the case”); Alderson, 171 F. Supp. 2d at 1340 (awarding 24
percent of the proceeds where relator and his counsel “participated fully in
virtually every aspect of the case from beginning to conclusion”).
The Senate factors also ask whether the government was aware of the
fraud at the time the qui tam action was brought. The government does not
dispute that, but for the relators’ filing of this action, the government would have
been unaware of the fraud perpetrated by Evercare. See Docket No. 175 at 1415; Docket No. 185.

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In addition to the Senate factors, one other factor commonly taken into
consideration by courts is the hardship suffered by the relators.5 United States
ex rel. Burr v. Blue Cross & Blue Shield of Florida, Inc., 882 F. Supp. 166, 169
(M.D. Fla. 1995) (a relator “may be entitled to the statutory maximum percentage
in situations where the relator has suffered personal or professional hardship”).
In this case, both Ms. Towl and Mr. Fowler were forced out or terminated by
Evercare. Ms. Towl was terminated on January 5, 2011 and went on to form her
own business, which consults with hospitals, medical practices, and physicians.
Docket No. 176 at 12-13, ¶¶ 23, 25. She avers that, as a result of her
termination, she “lost confidence” in herself and in potential employers. Id. at 12,
¶ 24. Mr. Fowler states that his supervisors at Evercare induced him to quit.
Docket No. 176-4 at 14-15, ¶¶ 29-30. Mr. Fowler resigned in April 2011. Docket
No. 176-4 at 15, ¶ 31. Mr. Fowler states that it took him several months to find a
job, that his new job was at a 20 percent reduced salary, and that he was laid off
after one and a half years at his new position. Id. at 15, ¶ 32. Several months
after being laid off, he found another job, at a further reduced salary, from which
he retired in 2015. Id. at 15, ¶ 33. Plaintiffs’ hardship, while not insubstantial, is
not as great as relators in several other cases. For instance, in United States ex
5

One factor mentioned in the DOJ guidelines is whether “[t]he filing of the
complaint had a substantial adverse impact on the relator.” Johnson, 889 F.
Supp. 2d at 796 n.6. Relator hardship arising from the filing of the qui tam action
and hardship arising from the underlying fraud may be distinct, as is evident in
this case. As noted above, the complaint was filed under seal and was only
served on Evercare after both Mr. Fowler and Ms. Towl had resigned and been
terminated, respectively. The filing of the complaint in this action does not seem
to have adversely affected relators.
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rel. Johnson-Pochardt v. Rapid City Reg’l Hosp., 252 F. Supp. 2d 892 (D.S.D.
2003), the filing of the qui tam action “wreaked havoc” on the relator’s life. Id. at
902; see also Alderson, 171 F. Supp. 2d at 1338 (noting the propriety of an
increased award because “[e]ven a cursory review of applicable history
demonstrates the formidable personal and legal difficulties encountered by [the
relator]”). While Mr. Fowler and Ms. Towl both suffered hardship as a result of
their actions, neither of them has demonstrated hardship justifying an award
substantially above the government’s proposal.
Weighing all of the above factors, the Court finds that an award of $3.6
million, 20 percent of the settlement in this case, is appropriate. W hile the
relators provided the necessary information to commence the underlying lawsuit
and brought the fraud to the attention of the government, the government
nevertheless had to invest considerable resources to settle the case. An award
in this amount takes into consideration the extent of the relators’ contribution to
the litigation and sufficiently compensates them for their hardship.
IV. CONCLUSION
For the foregoing reasons, it is
ORDERED that Relators Fowler’s and Towl’s Motion to Determine
Relators’ Share of Settlement Proceeds [Docket No. 175] is granted in part. It is
further
ORDERED that $3.6 million, 20 percent of the settlement in this case,
shall be awarded to relators pursuant to 31 U.S.C. § 3730. It is f urther

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ORDERED that this case is closed.
DATED February 7, 2017.
BY THE COURT:

s/Philip A. Brimmer
PHILIP A. BRIMMER
United States District Judge

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