Schubert v. All Children's Health System, Inc. et al
Filing
44
ORDER granting 34 motion to dismiss. Signed by Judge James D. Whittemore on 4/15/2013. (KE)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
UNITED STATES OF AMERICA and
STATE OF FLORIDA ex rei.
BARBARA SCHUBERT,
Plaintiff,
Case No. 8:11-cv-1687-T-27EAJ
vs.
ALL CHILDREN'S HEALTH SYSTEM, INC.,
et al.,
Defendants.
-------------------------------·'
ORDER
BEFORE THE COURT is Defendants' Motion to Dismiss Relator's Second Amended
Complaint and Memorandum of Law (Dkt. 34), to which Relator has responded in opposition (Dkt.
35). The United States Government and Defendants were granted leave to file a statement ofinterest
(Dkt. 38) and a reply (Dkt. 42), respectively. Upon consideration, the motion (Dkt. 34) is
GRANTED.
I.
INTRODUCTION
Barbara Schubert ("Relator") brings this action under the qui tam provisions of the Federal
False Claims Act and the Florida False Claims Act. Defendants are related corporate entities that
collectively operate All Children's Hospital in St. Petersburg, Florida (Dkt. 2 ~ 9). Defendant All
Children's Health System, Inc. (ACHS) wholly owns and operates Defendants Pediatric Physicians
Services, Inc. (PPS) and All Children's Hospital, Inc. (ACH) (id.
~~
10, 11). PPS is responsible for
physician staffing at All Children's, including recruitment and acquisition of physicians and their
1
practices (id.
~
10). ACH is responsible for managing the daily operations of All Children's,
including "making claims and receiving payment for services rendered pursuant to government
healthcare coverage" (id.
~
11 ).
From 1998 to 2011, Relator was the Director of Operations for PPS (id.
~
8). In that role, she
was tasked with restructuring the compensation plan for physicians working at All Children's (id.
~
33). Her compensation plan drew on nationwide surveys of base salaries and bonus rates to
determine "an actual fair market median range" for physician compensation (id.). Under the plan,
compensation was not to exceed the 75th percentile of national average salaries in the physician's
practice area (id. ).
Despite this plan, Relator alleges that ACHS aggressively pursued, and overcompensated,
pediatric practices and physicians in an effort to guarantee loyalty to All Children's (id.
~
34). All
told, from 2007 to 2009, ACHS acquired the services of at least 75 physicians, a third of whom were
paid above the 75th percentile of national average salary, and 18 of whom were paid over the 90th
percentile (id.
~
40). Relator alleges that those 18 physicians are approved Florida Medicaid
providers and that "[f]rom their respective dates of hire to the present, ACHS has submitted and
continues to submit false claims to Medicaid for services rendered by the physicians" (id.
~
41 ).
Relator does not identify any specific claims submitted, however.
At its essence, Relator's theory is that every claim submitted by ACH since Defendants began
aggressively recruiting and overpaying physicians is false because the compensation scheme violates
the Stark Amendment and the Anti-Kickback Statute. Indeed, Relator characterizes her theory of
liability as "an underlying statutory violation that taints all resulting claims" (Dkt. 35 at 10).
Consequently, the Second Amended Qui Tam Complaint asserts three causes of action against
2
Defendants. Count I alleges the submission of false claims 1 made in violation of the Stark
Amendment, 42 U.S.C. § 1395nn(aV Count II alleges the submission of false claims made in
violation of the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b. Count III alleges violations of the
Florida False Claims Act,§ 68.082, Florida Statutes. Defendants move to dismiss all three counts
for failure to state a claim on which relief may be granted.
II.
STANDARDS
To state a claim under the False Claims Act, a relator must satisfy two pleading standards.
First, the complaint must contain "a short and plain statement of the claim showing that the pleader
is entitled to relief." Fed. R. Civ. P. 8(a)(2). This Rule does not require detailed factual allegations,
but it demands more than an unadorned, conclusory accusation of harm. Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009). The complaint must "plead all facts establishing an entitlement to relief with more
than 'labels and conclusions' or a 'formulaic recitation of the elements of a cause of action."'
Resnickv. AvMed, Inc., 693 F.3d 1317, 1324 (11th Cir. 2012) (quoting Bell Atl. Corp. v. Twombly,
550 U.S. 544, 555 (2007)). Although it is axiomatic that the Court must accept as true all of the
allegations contained in the complaint, this tenet is "inapplicable to legal conclusions." Iqbal, 556
U.S. at 678. "[L]egal conclusions can provide the framework of a complaint, [but] they must be
supported by factual allegations." Id at 679.
1Relevant to this case, the False Claims Act, 31 U.S.C. § 3729, imposes civil liability on any person who
"knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval," or who
"knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent
claim."§§ 3729(a)(l)(A), (a)(l)(B).
2If a
physician has a "financial relationship" with an entity, the Stark Amendment prohibits the physician
from "mak[ing] a referral to the entity for the furnishing of designated health services for which payment otherwise
may be made" under Medicare, and prohibits the entity from "present[ing] or caus[ing] to be presented a claim under
[Medicare] or bill to any individual, third party payor, or other entity for designated health services furnished
pursuant to a referral" otherwise prohibited by the Stark Amendment. 42 U.S.C. §§ 1395nn(a)(l)(A), (a)(l)(B).
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A False Claims Act complaint must also "state with particularity the circumstances
constituting fraud." Fed. R. Civ. P. 9(b); see United States ex rel. Clausen v. Lab. Corp. ofAm., 290
F.3d 1301, 1310 (11th Cir. 2002). The particularity requirement of Rule 9(b) is satisfied if the
complaint alleges "facts as to time, place, and substance ofthe defendant's alleged fraud, specifically
the details of the defendants' allegedly fraudulent acts, when they occurred, and who engaged in
them." Hopper v. Solvay Pharm., Inc., 588 F.3d 1318, 1324 (11th Cir. 2009)(citing Clausen, 290
F .3d at 131 0). Generally, in order to plead the submission of a false claim with particularity, "a
relator must identify the particular document and statement alleged to be false, who made or used
it, when the statement was made, how the statement was false, and what the defendants obtained as
a result." United States ex rel. Matheny v. Medco Health Solutions, Inc., 671 F.3d 1217, 1225 (11th
Cir. 2012).
III.
DISCUSSION
A.
Counts I and II of the Second Amended Qui Tam Complaint Do Not State with
Particularity Violations of the False Claims Act.
The "central question" in a claim brought under the False Claims Act is "whether the
defendant ever presented a 'false or fraudulent claim' to the government." Hopper v. Solvay Pharm.,
Inc., 588 F.3d 1318, 1326 (11th Cir. 2009) (quoting Clausen, 290 F.3d at 1311). "Without the
presentment of such a claim, while the practices of an entity that provides services to the
Government may be unwise or improper, there simply is not actionable damage to the public fisc as
required under the False Claims Act." Clausen, 290 F .3d at 1311. "The False Claims Act does not
create liability merely for a health care provider's disregard of Government regulations or improper
internal policies unless, as a result of such acts, the provider knowingly asks the Government to pay
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amounts it does not owe." !d. The submission of a false claim is the sine qua non of a False Claims
Act violation. !d.
The requirement of alleging the presentment of a false claim cannot be overcome by detailing
other improper activity. Specifically, Rule 9(b) does not permit a relator "merely to describe a private
scheme in detail but then to allege simply and without any stated reason for his belief that claims
requesting illegal payments must have been submitted, were likely submitted or should have been
submitted to the Government." !d. "[I]fRule 9(b) is to be adhered to, some indicia of reliability must
be given in the complaint to support the allegation of an actual false claim for payment being made
to the Government." !d.
Relator does not dispute that she fails to identify a single false claim in her complaint. Relator
submits that she need not identify specific false claims because each and every claim submitted
under Defendants' fraudulent compensation system was contrary to the Stark Amendment and the
Anti-Kickback Statute, and therefore inherently false. According to Relator, each claim submitted
to the federal government must be accompanied by a certification that the entity has complied with
all applicable laws and regulations, including the Stark Amendment and the Anti-Kickback Statute.
Relator alleges that by filing claims and falsely certifying compliance with those laws, Defendants
are liable under the False Claims Act.
This false certification, or "implied certification," theory is viable in the Eleventh Circuit.
See United States ex rel. McNutt v. Haleyville Med. Supplies, Inc., 423 F.3d 1256, 1259 (11th Cir.
2005); see also United States ex rel. Augustine v. Century Health Servs., Inc., 289 F.3d409, 413-14
(6th Cir. 2002) (recognizing the "implied certification" theory of liability under the Federal Claims
Act); United States ex rel. Freedman v. Suarez-Hoyos, 781 F. Supp. 2d 1270, 1278-79 (M.D. Fla.
5
2011) (recognizing the Eleventh Circuit's acceptance of implied certification as a theory ofliability
in McNutt); United States ex rel. Thomas v. Bailey, No. 4:06CV00465 JLH, 2008 WL 4853630, at
*7 (E.D. Ark. Nov. 6, 2008) (citing McNutt, along with other cases, as support for the "legally false
certification" theory). "When a violator of government regulations is ineligible to participate in a
government program and that violator persists in presenting claims for payment that the violator
knows the government does not owe, that violator is liable, under the [False Claims Act], for its
submission of those false claims." McNutt, 423 F.3d at 1259.
Proceeding under the false certification theory, however, does not alleviate Relator's
obligation to plead her case with particularity. Indeed, in McNutt, the complaint alleging false
certification survived dismissal because it identified specific false claims. See id. at 1260 ("[T]he
government has identified as false numerous specific claims the Burelsons made to the federal
government."). In Matheny, another false certification case, the complaint survived without
identifying specific claims only because the Relator specifically described the false certifications
submitted to the government by alleging "exactly which documents ... , exactly which sentence and
its substance ... , who was responsible ... , when the Certification was submitted ... , how the
statement misled the government ... , and what the Defendants gained as a result." 671 F .3d at 1225.
The Second Amended Qui Tam Complaint does not allege violations ofthe False Claims Act
with the specificity of McNutt and Matheny. It does not identify any false claims presented to the
government, nor has relator alleged Defendants' kickbacks, referrals, or false certifications with
particularity. While her complaint details the compensation paid to 18 of the physicians working at
All Children's, no patients, dates, referrals, procedures, or bills leading to false claims are identified,
and unlike Matheny, no specific false certifications are described. See Clausen, 290 F.3d at 1312
6
("[Relator] merely alleged that 'these practices resulted in the submission of false claims for payment
to the United States.' No amounts of charges were identified. No actual dates were alleged. No
policies about billing or even second-hand information about billing practices were described.").
Without specific allegations of fraudulent certification, billing, or referral, inferences would have
to be drawn for this complaint to state a claim, but "inferences about the submission of fraudulent
claims would 'strip[] all meaning from Rule 9(b)' s requirements of specificity."' Corsello v. Lincare,
Inc., 428 F.3d 1008, 1013 (11th Cir. 2005) (quoting Clausen, 290 F.3d at 1312 n.21V
In certain instances, relators are excused from identifying specific false claims, certifications,
or referrals if the court can infer an "indicia of reliability" from the relator's position or
circumstances. For example, the relator in Hill satisfied Rule 9(b) without identifying specific false
claims because she "worked in the very department where she alleged the fraudulent billing scheme
occurred." Hillv. Morehouse Med. Assocs., Inc., 82 Fed. Appx. 213,2003 WL22019936, at *4 (11th
Cir. Aug. 15, 2003).
Relator's allegations do not carry the same indicia of reliability as those in Hill. Relator did
not work "in the very department where she alleged the fraudulent billing scheme occurred." In fact,
she did not even work for the same company that is alleged to have presented false claims. Relator
worked for PPS, but according to Relator, ACH was responsible for "making claims and receiving
3Similar allegations of overcompensation have failed to state violations of the False Claims Act where no
claims were identified or the referral scheme was not described with particularity. See United States ex rei. Mastej v.
Health Mgmt. Assocs., Inc., 869 F. Supp. 2d 1336, 1341-42 (M.D. Fla. 2012) (dismissing qui tam complaint for
failing to identify any false claims related to the scheme to overcompensate physicians or any false claims for
reimbursement for patients who were referred by the allegedly overcompensated physicians); United States ex rei.
Osheroffv. Tenet Hea/thcare Corp., No. 09-cv-22253-CIV, 2012 WL 2871264 (S.D. Fla. July 12, 2012) (dismissing
qui tam complaint that alleged that discounted rent given to physicians "intended to induce or reward referrals"
because there were "no factual allegations suggesting any quid pro quo of below-fair-market value leases in
exchange for referrals").
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payment for services rendered pursuant to government healthcare coverage" (Dkt. 2 ~ 11 ). Removed
from the billing process of ACH and the referral practices of the accused physicians, Relator lacks
the indicia of reliability that might otherwise excuse her failure to identify specific false claims or
certifications. See United States ex rel. Sanchez v. Lymphatx, Inc., 596 F.3d 1300, 1303 (11th Cir.
201 0) ("Despite her assertion that she had direct knowledge of the defendants' billing and patient
records, however, Sanchez failed to provide any specific details regarding either the dates on or the
frequency with which the defendants submitted false claims, the amounts of those claims, or the
patients whose treatment served as the basis for the claims. Without these or similar details,
Sanchez's complaint lacks the 'indicia of reliability' necessary under Rule 9(b) ...."); Mastej, 869
F. Supp. 2d at 1344 (finding allegations by a relator working in an executive position in the
defendant corporation at a level similar to that held by Relator Schubert to lack indicia of reliability
because the relator made "no allegations that he had any familiarity, through his various roles with
the defendants and subsequent to his tenure with the defendants, with the billing practices of the
defendants"). 4
B.
Count III Must Also Be Dismissed.
Count III alleges that the same actions underlying Counts I and II violated the Florida False
Claims Act. Because the Florida False Claims Act mirrors the federal False Claims Act and is
4Relator's
failure to plead claims, schemes, and false certifications with specificity is fatal to the entirety of
Counts I and II. If it were determined, however, that the failure to alleged specific false claims was fatal only to
claims asserted under 31 U.S.C. § 3729(a)(l)(A), the Second Amended Qui Tam Complaint would fail to allege a
cause of action for a violation of subsection 3729(a)(l )(B), as well. Subsection (a)(l )(B) requires Relator to "allege
with particularity, pursuant to Rule 9(b), that the false statements ultimately led the government to pay amounts it did
not owe." Mastej, 869 F. Supp. 2d at 1345 (citing Hopper, 588 F.3d at 1329). Relator has failed to allege with
specificity any amounts the government paid that it did not owe and therefore fails to state a claim under subsection
(a)(l)(B).
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subject to the same pleading standard, Count III must be dismissed. See United States v. Adventist
Health Sys./Sunbelt, Inc., No. 6:10-cv-1062-0rl-28GJK, 2012 WL 3105586, at *2 n.4 (M.D. Fla.
July 30, 2012); United States ex rel. Watine v. Cypress Health Sys. Fla., Inc., No. 1:09cv137-SPMGRJ, 2012 WL 467894, at *1 (N.D. Fla. Feb. 14, 2012). 5
Accordingly,
1) Defendants' Motion to Dismiss Relator's Second Amended Complaint (Dkt. 34) is
GRANTED.
2) Relator is GRANTED leave to file a Third Amended Qui Tam Complaint within fourteen
(14) days of the date of this order, but cautioned that failure to plead a cause of action in the next
iteration may result in dismissal with prejudice. 6
DONE AND ORDERED this
/S :y of April, 2013.
nited States District Judge
Copies to: Counsel of Record
5Defendants also argue that Counts I and III should be dismissed for failing to state a claim because the
Stark Amendment applies only to Medicare and not to Medicaid. Because Relator does not state her claims with
particularity, that issue need not be reached.
6Counsel
are reminded that Relator's complaint must comply with Federal Rule of Civil Procedure 8(a)(2).
Relator's amended complaint should contain only a "short and plain statement of the claim showing that the pleader
is entitled to relief." Fed. R. Civ. P. 8(a)(2). Digressions into legislative and regulatory history and detailed
recitations of applicable statutes do fall into the category of facts necessary to make a "short and plain statement of
the claim." (See~~ 12- 16; 17; 18- 19; 20- 26; 27- 29). Failure to adhere to this rule may result in dismissal. See
Anderson v. Dist. Bd ofTrs. ofCent. Fla. Cmty. Coli., 77 F.3d 364,367 (lith Cir. 1996) ("Experience teaches that,
unless cases are pled clearly and precisely, issues are not joined, discovery is not controlled, the trial court's docket
becomes unmanageable, the litigants suffer, and society loses confidence in the court's ability to administer
justice.").
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