United States of America v. Health Management Associates Inc et al
Filing
163
ORDER denying 111 Motion to Dismiss for Failure to State a Claim; denying 113 Motion to Dismiss for Failure to State a Claim; denying 155 Motion to Dismiss for Failure to State a Claim; denying 156 Motion to Dismiss for Failure to State a Claim; denying 157 Amended Motion to Dismiss. Ordered by U.S. District Judge CLAY D LAND on 06/24/2014. (CGC)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF GEORGIA
ATHENS DIVISION
UNITED STATES OF AMERICA ex
*
rel. RALPH D. WILLIAMS, UNITED
STATES OF AMERICA, and STATE OF *
GEORGIA,
*
Plaintiffs,
*
vs.
*
HEALTH MANAGEMENT ASSOCIATES,
INC., et al.,
*
Defendants.
CASE NO. 3:09-cv-130 (CDL)
*
O R D E R
It is estimated that more than 340,000 babies are born each
year to undocumented alien mothers in United States hospitals.1
The American taxpayers, through the Medicaid program, pay these
hospitals at least $1 billion per year for these deliveries.2
While the wisdom of the public policy related to these issues is
for the Legislative and Executive Branches (and not for this
1
Jeffrey S. Passel & Paul Taylor, Unauthorized Immigrants and Their
U.S.-Born Children, Pew Hispanic Center (August 11, 2010), available
at
http://www.pewhispanic.org/2010/08/11/unauthorized-immigrants-andtheir-us-born-children/ (last visited June 23, 2014).
2
Medicaid Financial Management Report 2012, MAP - National Totals tab,
line 61 (Sept. 20, 2013), available at http://medicaid.gov/MedicaidCHIP-Program-Information/By-Topics/Data-and-systems/MBES/Downloads/
FMR-for-FY2012.zip (last visited June 23, 2014) (reporting that
Medicaid’s Medical Assistance Program paid roughly $2.4 billion for
emergency services for undocumented aliens in 2012); U.S. General
Accounting Office, UNDOCUMENTED ALIENS: Questions Persist about Their
Impact on Hospitals’ Uncompensated Care Costs (May 2004), available at
http://www.gao.gov/assets/250/242452.pdf (last visited June 23, 2014)
(noting that “at least half of emergency Medicaid expenditures . . .
were for labor and delivery services for pregnant women”).
Court)
to
consider,
these
numbers
the
reveal
financial
why
the
opportunities
healthcare
presented
industry
may
by
be
motivated to pursue this slice of the Medicaid pie aggressively.
In this case, Plaintiffs maintain that Defendants’ aggressive
pursuit violated the law.
Plaintiffs allege that five hospitals in Georgia and South
Carolina
paid
clinics
that
provided
prenatal
care
to
undocumented Hispanic mothers to refer those mothers to their
hospitals for the delivery of their babies in violation of the
federal Anti-Kickback Statute, 42 U.S.C. § 1320a-7b.
hospitals
submitted
Medicaid
claims
for
these
When the
deliveries,
Plaintiffs contend that they violated the federal False Claims
Act, 31 U.S.C. § 3729, and its Georgia counterpart, the Georgia
Medicaid False Claims Act, O.C.G.A. § 49-4-168.1 to 168.6.3
As
explained in the remainder of this Order, the Court finds that
the Plaintiffs have alleged sufficient facts to support these
claims, and if they are able to prove those facts, they will be
entitled to relief.
Accordingly, Defendants’ motions to dismiss
(ECF Nos. 111, 113, 155, 156 & 157) are denied.4
3
Plaintiffs also assert claims under several other state law theories,
which all depend on the alleged pay-for-referrals scheme.
4
This lawsuit was initially filed as a qui tam action by Relator Ralph
Williams (ECF No. 47).
Pursuant to the applicable law, Williams
notified the United States and the State of Georgia to give them an
opportunity to intervene and pursue this action directly.
The State
of Georgia intervened and filed its own Complaint asserting all of the
Georgia Medicaid claims asserted by Williams in his Complaint.
The
United States also intervened and filed its own Complaint. The United
2
MOTION TO DISMISS STANDARD
Defendants’ motions to dismiss are based predominately on
Federal
Rule
of
Civil
Procedure
12(b)(6),
which
authorizes
dismissal for failure to state a claim upon which relief can be
granted.
When considering a 12(b)(6) motion to dismiss, the
Court must accept as true all facts set forth in the plaintiff’s
complaint
and
limit
its
consideration
exhibits attached thereto.
to
the
pleadings
and
Bell Atl. Corp. v. Twombly, 550 U.S.
544, 556 (2007); Wilchombe v. TeeVee Toons, Inc., 555 F.3d 949,
959
(11th
Cir.
2009).
“To
survive
a
motion
to
dismiss,
a
complaint must contain sufficient factual matter, accepted as
true, to ‘state a claim to relief that is plausible on its
face.’”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting
Twombly,
550
U.S.
at
570).
The
complaint
must
include
sufficient factual allegations “to raise a right to relief above
the
speculative
level.”
Twombly,
550
U.S.
at
555.
“[A]
formulaic recitation of the elements of a cause of action will
States asserts all of the claims asserted by Williams based on federal
Medicaid payments, but it did not name Health Management Associates,
Inc., the parent company of Defendant HMA Monroe, in its Complaint.
Defendants seek to dismiss Williams’s complaint now that the United
States and Georgia have intervened.
Although the United States and
Georgia have the “primary responsibility for prosecuting the action,”
Williams “ha[s] the right to continue as a party to the action.” 31
U.S.C. § 3730(c); accord O.C.G.A. § 49-4-168.2(d)(1). Moreover, since
the United States is not presently pursuing Williams’s claims against
Health Management Associates, Inc., Williams may pursue those claims
on behalf of the United States.
Accordingly, Defendants’ motion to
dismiss Williams’s complaint solely because the United States and the
State of Georgia have intervened in this action is denied.
3
not do[.]”
Id.
Although the complaint must contain factual
allegations that “raise a reasonable expectation that discovery
will reveal evidence of” the plaintiff’s claims, id. at 556,
“Rule
12(b)(6)
does
not
permit
dismissal
of
a
well-pleaded
complaint simply because ‘it strikes a savvy judge that actual
proof of those facts is improbable,’” Watts v. Fla. Int’l Univ.,
495 F.3d 1289, 1295 (11th Cir. 2007) (quoting Twombly, 550 U.S.
at 556).
Plaintiffs’ claims allege fraudulent conduct, which must be
pled with sufficient specificity.
See United States ex rel.
Clausen v. Lab. Corp. of Am., 290 F.3d 1301, 1308-09 (11th Cir.
2002) (holding that Federal Rule of Civil Procedure 9(b) applies
to
False
Claims
Act
claims).
Generally,
fraud
claims
must
include allegations of “facts as to time, place, and substance
of the defendant’s alleged fraud, specifically the details of
the defendants’ allegedly fraudulent acts, when they occurred,
and who engaged in them.”
omitted).
Id. at 1310 (internal quotation marks
There must also be “some indicia of reliability . . .
to support the allegation of an actual false claim for payment
being made to the Government.”
Id. at 1311.5
5
Defendants’ motions to dismiss do not present the “plausibility”
dilemma that this Court has previously found confounding in other
cases. See Barker ex rel. United States v. Columbus Reg’l Healthcare
Sys., Inc., 977 F. Supp. 2d 1341, 1345-46 (M.D. Ga. 2013).
And
remarkably, Defendants’ counsel acknowledged at the hearing on these
motions that Plaintiffs’ counsel likely could allege a sufficient
claim but did not do so due to sloppy lawyering.
Counsel for the
4
FACTUAL ALLEGATIONS
Defendants Hispanic Medical Management, Inc., Clinica de la
Mama, and Clinica del Bebe (“Clinics”) provide prenatal services
to pregnant Hispanic women who are undocumented aliens.
These
women are not eligible for regular Medicaid coverage, but they
are generally eligible for Medicaid emergency medical assistance
when they deliver
their babies.
Plaintiffs allege that
the
Defendant hospitals paid illegal kickbacks to the Clinics in
return for Medicaid patient referrals.
hospital
Defendants.
Management
The
Associates,
Inc.
first
There are two groups of
group
(“HMA”)
and
consists
one
of
of
Health
its
Georgia
subsidiary hospitals, HMA Monroe, LLC (“HMA Monroe”).
The
second group consists of Tenet Healthcare Corporation (“Tenet”)
and four of its subsidiary hospitals, three of which are located
in Georgia and one in South Carolina.
hospitals
(collectively,
“Tenet
These Tenet subsidiary
Hospitals”)
are
Tenet
Health
System GB, Inc. d/b/a Atlanta Medical Center and Atlanta Medical
Center-South
Medical
Fulton”),
Campus
Center,
Tenet
(“Atlanta
Inc.
Health
d/b/a
Medical
North
System
Center”),
Fulton
Spalding,
North
Hospital
Inc.
d/b/a
Fulton
(“North
Spalding
Regional Medical Center (“Spalding Regional”), and Hilton Head
Health System, L.P. d/b/a Hilton Head Hospital (“Hilton Head”).
United States, Georgia, and Williams strongly contest this accusation
and do not seek leave to perfect their Complaints.
5
I.
Health Management Associates and HMA Monroe Allegations
A.
HMA Monroe’s Services Agreement with the Clinics
Relator Ralph Williams is a former chief financial officer
of HMA Monroe.
When Williams began his employment at HMA Monroe
in April 2009, he discovered a copy of an agreement between HMA
Monroe and the Clinics, which was allegedly approved by HMA.
Under the agreement, the Clinics purportedly provided Spanish
translation
and
eligibility
Hispanic patients.
services
to
HMA
Monroe
for
its
U.S. Compl. in Intervention ¶¶ 134, 171, ECF
No. 153 [hereinafter U.S. Compl.]; Ga. Compl. in Intervention
¶ 78, ECF No. 55 [hereinafter Ga. Compl.].
On its face, the
services agreement between HMA Monroe and the Clinics states
that the Clinics would provide HMA Monroe with 24/7 translation
services, Medicaid eligibility determination services, and other
support services.
U.S. Compl. Ex. 23, Services Agreement A-1,
ECF No. 153-26 at 12.
Plaintiffs allege that HMA Monroe paid
the Clinics between $15,000 and $20,000
services agreement.
per month
under the
Ga. Compl. ¶ 94; accord U.S. Compl. ¶ 176.
Plaintiffs allege that the interpreter services were not the
primary reason for the agreement, but the agreement was a sham
“designed to conceal the underlying financial motive, which was
the purchasing of Clinic[] referrals by . . . HMA Monroe.” Ga.
Compl. ¶ 83; accord U.S. Compl. ¶¶ 171, 175.
6
Plaintiffs allege that HMA Monroe and HMA knew when they
entered the services agreement with the Clinics that its real
purpose was to generate Medicaid referrals.
01; U.S. Compl. ¶¶ 171, 175.
Ga. Compl. ¶¶ 100-
Plaintiffs assert that HMA Monroe
CEO Gary Lang, who came to HMA Monroe from a Tenet Hospital,
told Williams that the services agreement had been cloned from
an agreement Tenet had with the Clinics and that the Clinics’
“referrals generated large volumes of Medicaid deliveries for
Tenet.”
Ga. Compl. ¶ 100; U.S. Compl. ¶ 186.
Plaintiffs point
to a financial feasibility analysis created by HMA Monroe CEO
Gary Lang and then-CFO Jeff Grimsley in support of their request
for their parent HMA’s approval of the contract.
U.S. Compl.
¶ 175; Ga. Compl. ¶¶ 96-97; U.S. Compl. Ex. 24, Fin. Feasibility
Analysis, ECF No. 153-25.
projects
a
56.2%
return
The financial feasibility analysis
on
investment
and
focuses
on
the
expected revenue from the services agreement between HMA Monroe
and the Clinics, particularly the number of expected deliveries
and
the
reimbursement
Analysis at 1-2.
rate
per
delivery.
Fin.
Feasibility
The financial feasibility analysis contains an
expense item for “Outside Services,” which includes “Clinica de
la
Mama”
and
“Neo-natology.”
Id.
at
2.
The
financial
feasibility analysis does not provide any detail on the “Outside
Services” expense item.
Id. at 1-2.
Plaintiffs also point to a
memorandum from HMA Monroe personnel to HMA personnel seeking
7
approval for the services agreement.
U.S. Compl. Ex. 21, Mem.
from G. Lang & J. Grimsley to B. Jones & B. Stiekes (Apr. 2,
2008), ECF No. 153-24.
would
provide
The memorandum states that the Clinics
“translation,
eligibility
services,
pre-
registration and management of OB patients seen at” HMA Monroe.
Id.
The memorandum recommends that HMA approve the services
agreement “to add new service and grow OB service line volume.”
Id.
In support of their assertion that the Clinic agreement was
a sham, Plaintiffs allege that HMA Monroe tried to hide the
agreement by keeping it out of HMA Monroe’s contract monitoring
system.
U.S. Compl. ¶ 183.
Plaintiffs also allege that the
Clinic did not actually provide all of the services for which it
billed.
Id. ¶ 184; Ga. Compl. ¶ 90.
agreement
to
determine
providing
interpreter
whether
services
¶¶ 184-85; Ga. Compl. ¶ 90.
to
Williams investigated the
the
HMA
clinics
Monroe.
were
actually
U.S.
Compl.
HMA Monroe’s director of nursing
services told Williams that HMA Monroe used AT&T Interpreter
Services, not interpreters from the Clinics.
U.S. Compl. ¶ 185;
Ga. Compl. ¶ 91; Ga. Compl. Ex. J, Email from S. Queen to B.
Williams (Aug. 20, 2009), ECF No. 55-10 (stating that HMA Monroe
uses AT&T Interpreter Services).
personnel also told
HMA Monroe human resources
Williams that they “had no knowledge of
8
Clinic[] personnel rendering interpreter services to patients at
Defendant HMA Monroe.”
Ga. Compl. ¶ 93.
HMA Monroe and HMA point out that the services agreement
between HMA Monroe and the Clinics was terminated in July 2009.
U.S. Compl. Ex. 25, Letter from T. Cota to G. Lang (Aug. 6,
2009), ECF No. 153-28.
HMA Monroe and HMA also point out that
the emails cited by Plaintiffs regarding interpreter services
are dated after the services agreement termination date.
from S. Queen to B. Williams (Aug. 20, 2009).
Email
HMA Monroe and
HMA argue that these emails establish as a matter of law that
the Clinics actually did provide interpreter services to HMA
Monroe before the services agreement was terminated.
of
the
emails
does
suggest
that
the
Clinics
Though one
provided
some
interpreter services prior to July 16, 2009, the emails do not
establish the extent or value of the interpreter services.
Id.
(stating that HMA Monroe had not had any interpreters since July
16
and
that
schedules).
the
Clinics
These
did
emails
not
do
not
provide
directly
HMA
Monroe
contradict
with
the
allegations in the Complaints that key HMA Monroe personnel did
not
use
or
were
not
aware
of
interpreters
provided
by
the
Clinics, so the Court may not discount those allegations at this
stage of the proceedings.
9
B.
Medicaid Claims Submitted by HMA Monroe
Plaintiffs
allege
that
after
HMA
Monroe
executives,
including CEO Gary Lang, developed the alleged pay-for-referrals
scheme with the Clinics, HMA Monroe submitted claims to Georgia
Medicaid for Clinic patients who delivered their babies at HMA
Monroe.
Ga.
Compl.
¶
110;
U.S.
Compl.
¶
193.
Plaintiffs
provided specific examples of these claims, including patient
service dates, Medicaid claim dates, claim amounts, and amounts
paid by Medicaid.
Ga. Compl. ¶ 110.
Plaintiffs also contend
that HMA Monroe submitted false cost reports to Medicare and
Georgia Medicaid and sought additional reimbursement from the
Medicare Disproportionate Share program based on figures that
included Clinic patients who had been referred to HMA Monroe
under the allegedly illegal kickback scheme.
U.S. Compl. ¶¶
194-95; Ga. Compl. ¶¶ 39-46.
C.
Claims Against HMA Monroe and HMA
The United States asserts claims against HMA Monroe under
the following theories: (1) False Claims Act; (2) False Claims
Act civil conspiracy; (3) unjust enrichment; and (4) payment
under mistake of fact.
In addition to these claims, Williams
asserts a False Claims Act civil conspiracy claim against HMA on
behalf of the United States.
Georgia asserts claims against HMA
Monroe and HMA under the following theories: (1) Georgia False
Medicaid Claims Act (HMA Monroe); (2) Georgia Medical Assistance
10
Act
(HMA
Monroe);
conspiracy
(both);
(3)
(4)
Georgia
fraud
False
(HMA
Medicaid
Monroe);
Act
(5)
civil
breach
of
contract (HMA Monroe); (6) payment by mistake (HMA Monroe); and
(7) fraudulent concealment (HMA Monroe).
All of these claims
are rooted in the allegation that HMA Monroe had an illegal payfor-referrals
deal
with
the
Clinics
and
submitted
claims
to
Georgia Medicaid for services rendered to Clinic patients who
were referred to HMA Monroe because of that deal.
Plaintiffs
also allege that HMA Monroe falsely certified compliance with
the Anti-Kickback Statute when it submitted cost reports under
the Medicare Disproportionate Share Program.
II.
Tenet Defendant Allegations
A.
Tenet’s Services Agreements with the Clinics
Plaintiffs allege that each of the Tenet Hospitals also
entered sham agreements with the Clinics that were designed to
conceal
the
referrals.
true
motive,
which
was
payment
for
U.S. Compl. ¶ 61; Ga. Compl. ¶¶ 10, 118.
Medicaid
Plaintiffs
allege that the Tenet Hospitals paid illegal kickbacks to the
Clinics for patient referrals and then submitted false claims to
Medicaid for medical services provided to Clinic patients.
U.S.
Compl. ¶¶94-95, 127-28, 140-41, 156-57; Ga. Compl. ¶¶ 9-10, 118.
Plaintiffs
also
contend
additional
reimbursement
that
from
the
the
Tenet
Medicare
Hospitals
sought
Disproportionate
Share Program based on figures that included Clinic patients who
11
had
been
referred
kickback scheme.
to
the
Tenet
Hospitals
under
the
illegal
U.S. Compl. ¶¶ 96, 129, 142, 158; Ga. Compl.
¶¶ 10, 118.
1.
Atlanta Medical Center’s Clinic Agreements
Beginning in 1999, Atlanta Medical Center began negotiating
with
Clinic
representatives
for
a
deal
that
would
Atlanta Medical Center’s obstetric patient volume.
¶¶ 50-51.
U.S. Compl.
Atlanta Medical Center initially proposed having the
Clinics establish and operate a residency clinic.
Atlanta
increase
Medical
Center
would
provide
physician
Id. ¶ 53.
services
to
Clinic patients, and the Clinics would collect cash payments
from
the
patients
for
those
services
and
would
retain
the
payments with no obligation to pay Atlanta Medical Center for
the services its physicians provided.
Id.
When Tenet’s legal
counsel warned that such a deal would violate the Anti-Kickback
Statute, Atlanta Medical Center and the Clinics restructured the
deal, and instead of the Clinics retaining the fees from the
Clinic patients, Atlanta Medical Center would pay the Clinics
roughly the same amount and call it a “management fee.”
55-56.
During
negotiations,
Clinic
personnel
told
Id. ¶¶
Atlanta
Medical Center personnel that if they reached an agreement, the
Clinics would refer patients from their other locations (not
just
the
residency
clinic)
delivery of their babies.”
to
Atlanta
Id. ¶ 61.
12
Medical
Center
“for
In 2000, Atlanta Medical Center CEO Bruce Buchanan told a
Tenet corporate executive that if Atlanta Medical Center did not
reach an agreement with the Clinics, the Clinics “would pursue a
relationship with another hospital.”
Id. ¶ 65.
Shortly after
that, the parties reached a deal for Atlanta Medical Center to
pay the Clinics a minimum monthly management fee of $42,350 “for
the operation and management” of the residency clinic.
U.S.
Compl. Ex. 5, Affiliation Agreement ¶ 6, ECF No. 153-5; U.S.
Compl. ¶ 66.
Atlanta Medical Center and the Clinics opened the
new residency clinic, which was staffed by faculty and residents
of Atlanta Medical Center’s obstetrical residency program and
Atlanta
Medical
Center
physicians.
Affiliation
Agreement
¶ 3(f).
When the new residency clinic opened, the Clinics began
referring patients from their other locations to Atlanta Medical
Center
for
delivery
of
their
babies.
U.S.
Compl.
¶
69.
Although Clinic personnel were not doctors, they were “able to
direct
referrals
to
particular
hospitals,”
such
as
Atlanta
Medical Center based on the Clinics’ “control of the patients
who sought services and [their] leverage over the physicians who
saw those patients.”
Id. ¶ 70.
Specifically, the Clinics told
patients that they would not receive Medicaid benefits unless
they went to their assigned hospital.
Id. ¶¶ 72-73.
And the
Clinics, which controlled which physicians were given time slots
13
at
their facilities,
only gave time slots to physicians who
agreed to send patients to Atlanta Medical Center for delivery.
Id. ¶¶ 71, 74.
The majority of Clinic referrals to Atlanta Medical Center
were not from the residency clinic; they were from other Clinic
locations.
Id. ¶ 77.
The residency clinic had a “low volume”
of patients, and the physician faculty members expressed concern
about the low numbers.
Id. ¶ 81.
Plaintiffs allege that the
monthly management fee paid by Atlanta Medical Center to the
Clinics “was excessive in light of the low volume of patients
seen at the residency clinic.”
Id. ¶ 79.
Tenet’s own legal
counsel found in June 2000 that “there was no fair market value
justification for the compensation rate set by the contract” and
that Atlanta Medical Center did not provide any documentation of
its expenses to justify the management fee.
Id. ¶ 80.
In 2001, Bill Moore replaced Buchanan as CEO of Atlanta
Medical
Center.
Moore
received
reports
from
Clinic
representatives “regarding patient volume and admissions from
all
of
clinic.”
[the
Clinics’]
Id. ¶ 83.
facilities,
not
just
the
residency
The residency program “continued to see few
patients,” but Atlanta Medical Center kept paying the management
fee to the Clinics, and the Clinics kept referring patients from
their other facilities to Atlanta Medical Center for delivery of
their babies.
Id. ¶ 84.
When the initial affiliation agreement
14
expired, Atlanta Medical Center continued to make payments to
the Clinics without a written contract in place.
Id. ¶ 85.
By 2004, the residency clinic only generated $20,000 per
month in revenue, though Atlanta Medical Center continued to pay
the Clinics more than $40,000 per month.
Id. ¶ 86.
In 2005,
Atlanta Medical Center entered a new agreement with the Clinics
under which the Clinics would make “the same amount as under the
previous contract, even if the management fee was changed.”
¶¶ 88-89.
Id.
Under that agreement, Atlanta Medical Center agreed
to pay $23.50 per hour for translation services ($7 more per
hour
than
North
Fulton
paid
for
translation
services)
and
increased the hourly fee paid for Medicaid eligibility services
“to ensure that [the Clinics] would continue to make roughly the
same amount of money.”
Id.
¶ 89.
And the Clinics “began
retaining the patient fees at the residency clinic” for services
provided by Atlanta Medical Center physicians, residents, and
nurses.
The
Id. ¶ 90.
residency
relationship
continued,
program
between
with
was
Atlanta
Atlanta
terminated
Medical
Medical
Center
Center
translation and eligibility services.
in
2008,
and
ostensibly
Id. ¶¶ 92-93.
the
but
the
Clinics
paying
for
Plaintiffs
allege that the Clinics were “not even required to submit an
invoice to receive [the] monthly payment.”
Atlanta
Medical
Center
“paid
15
Id. ¶ 93.
automatically
based
Rather,
on
the
contract.”
Id.
And the Clinics continued to refer patients to
Atlanta Medical Center.
Tenet
corporate
Id. ¶ 94.
executives
monitored
the
number
of
deliveries at Tenet hospitals and asked hospital management to
report
on
Clinic
volumes.
U.S.
Compl.
Ex.
11,
Email
Chain
between J. Austin, B. Moore & J. Holland (Sept. 25-26, 2008),
ECF No. 153-13.
When the number of deliveries fell in 2008,
Moore investigated whether Clinic patients were being directed
to other Tenet hospitals.
U.S. Compl. ¶ 116.
He noted that if
North Fulton had “not seen an increase,” presumably making up
for
the
Atlanta
problem.”
Medical
Center
decline,
then
there
was
“a
Email Chain between J. Austin, B. Moore & J. Holland
(Sept. 25-26, 2008).
2.
In
2000,
North Fulton’s Clinic Agreements
Atlanta
Medical
Center’s
CEO
introduced
North
Fulton CEO John Holland to Clinic representatives.
U.S. Compl.
¶
the
98.
Holland
expressed
an
interest
in
having
Clinics
establish a new location in Roswell, Georgia that would send
patients to North Fulton.
Id. ¶ 99.
At the time, North Fulton
did not have a large Hispanic patient population and would not
need translators unless the Clinic referred Hispanic patients to
North Fulton; Holland offered to pay the Clinics for translators
and “community outreach.”
Id. ¶¶ 99-100.
16
When North Fulton began its negotiations with the Clinics,
many
of
Northside
the
Clinics’
Hospital
in
patients
North
delivered
Atlanta,
and
their
the
babies
Clinics
at
helped
those patients “with Medicaid eligibility paperwork at no charge
to
Northside.”
representatives
provided
Id.
discussed
services
admissions
Northside
from
to
to
of
102-05.
how
to
Clinic
Northside
learned
presentation
¶¶
this
Northside
Holland
ensure
that
patients
to
North
plan,
proposing
would
the
that
Clinic
physicians
“shift
Fulton.”
and
and
Id.
Clinics
Northside
who
their
¶
103.
made
pay
a
the
Clinics for services, including Medicaid eligibility services
that it was already providing for free to Clinic patients who
delivered their babies at Northside.
declined to pay.
Id. ¶ 105.
Northside
Id.
As negotiations continued and Holland met regularly with
Clinic
representatives,
Holland
told
Clinic
representatives
“that he wanted at least 50 deliveries per month from Clinic[]
facilities.”
Id. ¶ 109.
And a business plan prepared by North
Fulton employees states that “upon completion of the contract,”
the Clinics “will begin directing admissions” to North Fulton
and “will shift 100% of their volume from Northside” to North
Fulton, and “[a]ll deliveries will be Medicaid.”
Id. ¶ 110;
U.S. Compl. Ex. 9, Business Plan Proforma Worksheet, ECF No.
153-11.
North
Fulton
expected
17
that
the
revenue
from
the
Medicaid
referrals
would
far
Clinics.
exceed
the
fees
paid
to
the
U.S. Compl. ¶ 111.
The Clinics and North Fulton entered a services agreement
in October 2001; under that agreement, North Fulton ostensibly
paid the Clinics to provide translation and other services for a
monthly fee of between $42,680 and $53,480.
the
contract
was
executed,
patients to North Fulton.
the
Clinics
Id. ¶ 113.
Id. ¶ 112.
began
sending
After
their
When two doctors refused
because North Fulton was farther from some patients’ homes than
Northside, the Clinics barred those doctors from seeing Clinic
patients at Clinic facilities.
Id. ¶¶ 106, 113.
Other doctors
understood that to keep their positions with the Clinics, they
must deliver the patients’ babies at North Fulton or another
Tenet hospital.
Id. ¶ 115.
North Fulton renewed the contract with the Clinics several
times.
Fulton
During the course of the relationship between North
and
the
Clinics,
North
Fulton’s
executives
emphasized
“that North Fulton had a quota for admissions that [the Clinics
were] expected to meet.” Id. ¶ 121.
In 2005, North Fulton’s
chief nursing officer questioned the value of the contract and
stated that she had “many questions and concerns about what”
North Fulton was getting in return for the fees it paid to the
Clinics.
U.S. Compl. Ex. 14, Email from J. Reeves to P. Allen &
L. Sneed (Aug. 22, 2005), ECF No. 153-17.
18
North Fulton renewed
the contract even after it learned “that it was being billed for
marketing work that was never performed by Clinic[] personnel.”
U.S. Compl. ¶ 126.
In 2006, Holland was promoted to a senior vice president
position at Tenet, and David Anderson was appointed as interim
CEO of North Fulton.
Id. ¶ 122.
Anderson questioned the Clinic
contract, but Clinic representatives “met with Anderson and made
clear how many patients [the Clinics were] sending to North
Fulton,
and
threatened
to
cease
patient
Fulton did not renew the contract.”
referrals
Id. ¶ 123.
if
North
North Fulton
renewed the contract, and the Clinics continued to send Medicaid
patients to North Fulton. Id. ¶ 124.
At
some
point,
Joe
Austin
became
CEO
of
North
Fulton.
Email Chain between J. Austin, B. Moore & J. Holland (Sept. 2526, 2008).
Region,
As senior vice president of Tenet’s Southern States
Holland
hospitals
and
volumes.
Id.
monitored
asked
the
hospital
number
of
management
deliveries
to
report
at
on
Tenet
Clinic
When the number of deliveries fell at Atlanta
Medical Center in 2008 and Tenet executives determined that the
Clinics were not directing the patients to North Fulton or other
Tenet
hospitals,
believed
program.”
the
Austin
Clinics
Id.
told
were
the
other
“diverting
executives
[patients]
to
that
he
another
Austin noted that the contract between North
Fulton and the Clinics was up for renegotiation, and he pledged
19
to contact Clinic representatives about the issue.
“volumes were up to previous levels.”
Id.
Soon,
U.S. Compl. Ex. 12, North
Fulton EBITDA 1, ECF No. 153-14.
3.
Spalding Regional’s Clinic Agreements
In 2003, Spalding Regional CEO John Quinn contacted Clinic
personnel to discuss a deal between the Clinics and Spalding
Regional.
U.S. Compl. ¶ 131.
relationship
Clinics
to
with
open
Atlanta
a
Quinn was aware of the Clinics’
Medical
clinic
near
Center,
Spalding
and
he
wanted
Regional
Hispanic Medicaid patients to Spalding Regional.
and
Id.
the
refer
At the
time, Spalding Regional did not have a large volume of Hispanic
labor and delivery patients and did not have an existing need
for translation services.
Id. ¶¶ 132, 134.
Clinic personnel
explained their “model” to Quinn and gave him a copy of the
North Fulton agreement, “which provided for payments ostensibly
for
translation
and
marketing
services.”
Id.
Clinic
representatives told Quinn that the Clinics “could send 30-40
deliveries a month to Spalding” Regional if Spalding Regional
implemented the Clinic model.
Id. ¶ 133.
One of Quinn’s personal performance goals was to increase
Spalding Regional’s market share and grow the market area.
Compl. Ex. 15, Tenet Performance Review 1, ECF No. 153-18.
U.S.
To
reach this goal, Quinn proposed implementing the Clinic model.
Id.
Spalding Regional entered an agreement with the Clinics
20
under which the Clinics opened a new location near Spalding
Regional.
U.S. Compl. ¶¶ 136-37.
Quinn “was very clear that he
expected the contract with [the Clinics] to generate patient
referrals to Spalding” Regional.
Id. ¶ 138.
But the deal “did
not generate the expected amount of referrals,” and after a few
months Quinn canceled “the contract due to insufficient delivery
volume from” the Clinics.
4.
Id. ¶ 139.
Hilton Head’s Clinic Agreements
In 2005, Hilton Head CEO Elizabeth Lamkin contacted Clinic
representatives and told them that her area had a large Hispanic
population but “was losing patients to a competing hospital.”
Id. ¶¶ 144, 146.
Lamkin was familiar with the Clinics because
she had served as COO of North Fulton.
At North Fulton, Lamkin
emphasized to the Clinics “that North Fulton had a quota for
admissions
that
¶¶ 121, 144.
arrangement
[the
Clinics
were]
expected
to
meet.”
Id.
Lamkin asked the Clinics for “the same contractual
as
at
North
Fulton,
translation,
which
for
Id. ¶ 147.
“Lamkin made clear that she wanted 30 deliveries per
Id. ¶ 148.
and
other
payments
ostensibly
month from” the Clinics.
marketing
involved
services.”
Hilton Head entered an
agreement with the Clinics under which the Clinics established a
new location in Hilton Head, South Carolina and began referring
patients to Hilton Head.
expected
significant
Id. ¶ 150.
referrals
from
21
the
Hilton Head personnel
Clinic
agreement
and
“attributed
a
dramatic
increase
agreement.
Id. ¶¶ 152-53.
in
OB
cases”
to
the
Clinic
Hilton Head renewed the contract
several times, even though it was unable to track the hours
worked by Clinic employees on certain tasks.
5.
Id. ¶¶ 154-55.
Involvement of Tenet Corporate Personnel
As early as 2003, Tenet executives, including Bill Henning,
met with Clinic representatives to discuss opening more Clinic
facilities
in
connection
with
Tenet
hospitals
so
they
could
“replicate the profitable program in place at North Fulton.”
U.S. Compl. ¶ 159-60.
When Henning met with the hospital CEOs
in 2004, he asked them how the Clinic program “was impacting
admissions at” Atlanta Medical Center “and North Fulton, and how
[the Clinics] could increase future business there and at other
Tenet Hospitals.” Id. ¶ 161.
In response to Henning’s requests,
“Moore and Holland explained that they were pleased with the
Clinic[]
relationship”
and
hospitals’ delivery numbers.
provided
Henning
with
their
Id. ¶ 162.
Tenet employees emphasized that a “large part of Georgia
[Medicaid] inventory” came from the services agreements with the
Clinics.
K.
Id. ¶ 164; Ga. Compl. Ex. A, Email from H. Lanzner to
Waters
(Feb.
¶ 10;.
At
program
resulted
deliveries.”
23,
least
2007),
ECF
No.
one
Tenet
Hospital
“in
an
excellent
55-1;
noted
accord
Ga.
Compl.
that
the
Clinic
referral
source
for
Ga. Compl. Ex. R, Q2 Summary, ECF No. 55-18 at 2.
22
Again,
Tenet
corporate
Clinic referrals.
executives
tracked
the
revenue
from
Email Chain between J. Austin, B. Moore & J.
Holland (Sept. 25-26, 2008).
And Tenet corporate executives,
including Holland, were aware that when the number of Clinic
referrals
dipped,
representatives
Tenet
to
make
representatives
sure
“diverting to another program.”
Compl. ¶ 117.
ways
to
that
the
met
with
Clinics
Clinic
were
not
Id.; Ga. Compl. ¶¶ 122-23; U.S.
Finally, Tenet corporate executives discussed
keep
the
Clinic
referrals
translation services agreements.
without
continuing
the
U.S. Compl. ¶ 166; U.S. Compl.
Ex. 20, Email from D. Keel to K. Waters (Nov. 18, 2009), ECF No.
153-23.
B.
Medicaid Claims Submitted by Tenet Hospitals
Plaintiffs
claim
that
after
Tenet
Hospital
executives,
including Bruce Buchanan (Atlanta Medical Center), Bill Moore
(Atlanta
Austin
Medical
(North
Center),
Fulton),
John
John
Holland
Quinn
(North
(Spalding
Fulton),
Joe
Regional),
and
Elizabeth Lamkin (Hilton Head) developed the alleged pay-forreferrals schemes with the Clinics, Tenet Hospitals submitted
claims
to
Clinic
patients
Hospitals.
Georgia
Medicaid
who
and
delivered
South
Carolina
their
babies
Medicaid
at
the
for
Tenet
U.S. Compl. ¶¶ 83, 94, 98, 127, 131, 140, 144, 156;
Ga. Compl. ¶ 123, 130.
Plaintiffs provided specific examples of
claims submitted by Atlanta Medical Center, North Fulton, and
23
Spalding Regional.
Medicaid
claim
The examples include patient service dates,
dates,
claim
Medicaid.
Ga. Compl. ¶ 130.
Hospitals
submitted
Medicaid,
and
false
South
amounts,
and
amounts
paid
by
Plaintiffs also contend that Tenet
cost
Carolina
reports
Medicaid
to
Medicare,
and
sought
Georgia
additional
reimbursement from the Medicare Disproportionate Share program
based on figures that included Clinic patients who had been
referred
to
scheme.
the
U.S.
Tenet
Compl.
Hospitals
¶¶
95-96,
under
the
128-29,
illegal
141-42,
kickback
157-58;
Ga.
Compl. ¶¶ 39-46.
C.
Claims Against Tenet and Tenet Hospitals
The
United
States
asserts
claims
against
Tenet
and
the
Tenet Hospitals under the following theories: (1) False Claims
Act;
(2)
False
Claims
Act
civil
conspiracy;
(3)
enrichment; and (4) payment under mistake of fact.
unjust
Georgia
asserts claims against Tenet and the Tenet Hospitals under the
following theories: (1) Georgia False Medicaid Claims Act (Tenet
Hospitals);
Hospitals);
(both);
(4)
(2)
(3)
Georgia
Georgia
fraud
(Tenet
Medical
False
Assistance
Medicaid
Hospitals);
Act
(5)
Act
civil
breach
(Tenet
conspiracy
of
contract
(Tenet Hospitals); (6) payment by mistake (Tenet Hospitals); and
(7) fraudulent concealment (Tenet Hospitals).
These claims are
all rooted in the allegation that Tenet Hospitals had an illegal
pay-for-referrals deal with the Clinics and submitted claims to
24
Georgia
Medicaid
and
South
Carolina
Medicaid
for
services
rendered to Clinic patients who were referred to Tenet Hospitals
because
of
that
deal,
as
well
as
cost
reports
that
falsely
certified compliance with the Anti-Kickback Statute.
DISCUSSION
The Hospitals contend that Plaintiffs’ Complaints fail to
state a claim upon which relief can be granted for two main
reasons.
First, the Hospitals assert that the Complaints fail
to plead a violation of the Anti-Kickback Statute.
Second, the
Hospitals argue that the Complaints fail to plead a violation of
the False Claims Act.
The Court addresses each issue in turn,
as well as Defendants’ other arguments for dismissal.
I.
Do the Complaints Allege that the Hospitals Violated the
Anti-Kickback Statute?
Plaintiffs’ False Claims Act claims are based on an alleged
violation of the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b).
Plaintiffs contend that when Defendants submitted their claims
for
Medicaid
complied
with
payment,
the
they
falsely
Anti-Kickback
certified
Statute.
The
that
they
had
Anti-Kickback
Statute makes it a felony to offer or pay “remuneration” to “any
person to induce such person” to refer patients for services
that will be paid “in whole or in part under a Federal health
care program.”
violation
of
42 U.S.C. § 1320a-7b(b)(2)(A).
the
Anti-Kickback
25
Statute,
To establish a
Plaintiffs
must
show
that the Hospitals “(1) knowingly and willfully, (2) paid money,
directly or indirectly, to [the Clinics], (3) to induce [the
Clinics]
to
refer
individuals
to
[the
Hospitals]
for
the
furnishing of [medical services], (4) paid for by Medicaid.”
See United States v. Vernon, 723 F.3d 1234, 1252 (11th Cir.
2013)
(setting
forth
elements
of
Anti-Kickback
Statute
violation).
The Hospitals do not dispute that they paid money to the
Clinics or that the services the Hospitals rendered to Clinic
patients were paid for by Medicaid, which is a federal health
program.
The Hospitals also do not seriously dispute that the
Clinics “referred” patients to the Hospitals within the meaning
of
the
Anti-Kickback
Complaints
do
not
Statute.6
allege
a
Statute for two main reasons.
But
violation
they
of
contend
the
that
the
Anti-Kickback
First, the Hospitals contend that
6
In their briefs, the Tenet Hospitals argued that the Clinics
did not “refer” patients to the Hospitals because the Clinic owners
are not physicians.
At the hearing on the motions to dismiss,
Defendants abandoned that argument, perhaps because the Eleventh
Circuit has rejected it.
The plain language of the Anti-Kickback
Statute “speaks broadly to whoever knowingly and willfully . . . pays
any remuneration to any person to induce such person . . . to refer an
individual . . . for an item or service paid by Medicaid.”
Vernon,
723 F.3d at 1254 (first two alterations in original) (internal
quotation marks omitted).
In Vernon, the Eleventh Circuit concluded
that a non-physician patient advocate “had the capacity to, and did,
refer”
her
clients
to
a
specialty
pharmacy
to
fill
their
prescriptions; the fact that the patient advocate “could not actually
prescribe the . . . medication [was] irrelevant.”
Id.
Here,
Plaintiffs allege that the Clinics had existing relationships with
pregnant, undocumented Hispanic immigrant women and directed them to
deliver their babies at the Hospitals. Those allegations sufficiently
allege that the Clinics “referred” patients to the Hospitals.
26
the Complaints do not adequately allege that the Hospitals paid
“remuneration” to the Clinics to induce them to refer Medicaid
patients to the Hospitals.
the
Complaints
and
Rather, the Hospitals assert that
their
exhibits
simply
allege
that
the
Hospitals contracted with the Clinics to provide interpreters
and other services for Hispanic patients and that the Hospitals
merely
hoped
Hospitals.
that
the
Clinics
might
refer
patients
to
the
Second, the Hospitals argue that the Complaints do
not adequately allege that the Hospitals acted knowingly and
willfully.
A.
Do the Complaints Allege that the Hospitals Paid the
Clinics Remuneration to Induce Medicaid Referrals?
The Anti-Kickback Statute forbids the offer or payment of
“any
remuneration
(including
any
kickback,
bribe,
or
rebate)
directly or indirectly, overtly or covertly, in cash or in kind
to any person to induce such person” to refer Medicaid patients
for
services.
42
U.S.C. § 1320a-7b(b)(2).
hospital may not offer or pay
any
Simply
compensation for
put,
a
Medicaid
referrals.
The
business
Hospitals
argue
relationships
that
with
the
they
entered
Clinics
and
into
only
legitimate
hoped
that
those legitimate relationships would generate more referrals.
Although the mere hope or expectation of future referrals may
not make an otherwise legitimate business relationship illegal
27
under the Anti-Kickback Statute, United States v. McClatchey,
217
F.3d
823,
834
Plaintiffs
allege
supporting
their
agreements
with
(10th
Cir.
here.
conclusion
the
Medicaid referrals.
2000),
Plaintiffs
that
Clinics
the
for
See, e.g.,
the
that
is
clearly
Hospitals
purpose
not
what
allege
facts
entered
of
the
sham
generating
U.S. Compl. ¶¶ 50-51, 61-66
(alleging that Atlanta Medical Center entered the Clinic deal to
increase obstetric patient volume); id. ¶¶ 109-11 (alleging that
North Fulton executives sought at least 50 deliveries per month
in return for the Clinic management fee); id. ¶ 138 (alleging
that Spalding Regional’s CEO made it clear that he expected
Medicaid referrals in exchange for the services agreement); id.
¶ 148 (alleging that Hilton Head’s CEO demanded 30 deliveries
per
month
from
the
Clinics);
id.
¶
171
(alleging
that
HMA
Monroe’s Lang “offered to pay thousands of dollars per month in
return for 30 deliveries per month”).
The Hospitals do not dispute that a straightforward quid
pro quo kickback is unlawful: it is illegal for a hospital to
pay a doctor for referrals and conceal the payments by giving
the doctor a fake title and having him submit fake timesheets.
E.g., United States v. Borrasi, 639 F.3d 774, 777, 781-82 (7th
Cir. 2011); McClatchey, 217 F.3d at 827, 834-35.
The Hospitals
also do not dispute that an overpayment-for-services arrangement
may be an illegal kickback: if a hospital pays a doctor for
28
legitimate services but pays more than fair market value
to
induce referrals, the difference between the amount paid and the
actual value of the legitimate service is the illegal kickback.
Cf., e.g., United States v. Bay State Ambulance & Hosp. Rental
Serv.,
Inc.,
874
F.2d
20,
30
(1st
Cir.
1989)
(noting
that
Medicare fraud statute’s “any remuneration” provision “includes
not only sums for which no actual service was performed but also
those amounts for which some professional time was expended”);
United States v. Lipkis, 770 F.2d 1447, 1449 (9th Cir. 1985)
(describing a kickback arrangement where a laboratory paid more
than fair market value for services provided by a medical group,
so the court inferred that the laboratory was also paying for
lab work referrals).
The Hospitals argue that Plaintiffs did
not adequately allege either type of illegal kickback.
Instead,
they insist that they paid fair market value, nothing more, for
the
services
provided
by
the
Clinics.
This
hyper-technical
reading of Plaintiffs’ Complaints is disingenuous.
Plaintiffs
Hospitals
paid
allege
that
remuneration
under
to
the
the
Clinic
Clinics
model,
for
the
Medicaid
referrals under one or both theories: payment for services that
the Clinics did not provide and overpayment for services.
factual
allegations
and
exhibits
viewed
in
the
light
The
most
favorable to Plaintiffs support the conclusion that North Fulton
and
HMA
Monroe
paid
for
services
29
that
the
Clinics
did
not
actually provide.
billed
North
U.S. Compl. ¶ 126 (alleging that the Clinics
Fulton
for
marketing
services
that
were
not
provided); id. ¶¶ 184-85, Ga. Compl. ¶¶ 90-93 (alleging that key
personnel
at
HMA
Monroe
did
not
actually
use
Clinic
interpreters, which supports Plaintiffs’ claim that the services
agreement was a sham to conceal payments made to the Clinics for
Medicaid
Medical
referrals).
Center
Plaintiffs
allowed
the
further
Clinics
to
allege
retain
that
fees
Atlanta
paid
by
patients for services that were actually provided by Atlanta
Medical Center personnel.
Plaintiffs
also
U.S. Compl. ¶ 90.
allege
Clinics for services.
that
each
Hospital
overpaid
the
Plaintiffs allege that Atlanta Medical
Center paid the Clinics an excessive management fee for running
the
residency
automatically
clinic
paid
the
and
that
monthly
Atlanta
management
Medical
fee
Center
without
even
receiving an invoice detailing the services allegedly provided.
U.S. Compl. ¶¶ 79-81, 93.
did
not
need
Plaintiffs allege that North Fulton
interpreter
services
or
Medicaid
eligibility
services absent Clinic referrals and that North Fulton paid an
excessive fee for Clinic services.
Id. ¶¶ 100, 125.
Plaintiffs
allege that although Spalding Regional did not need interpreter
services or Medicaid eligibility services, it entered the same
Clinic
model
that
had
been
implemented
at
North
Fulton
and
Atlanta Medical Center; under that model, the Hospitals paid
30
excessive fees to the Clinics in return for Medicaid referrals.
Id. ¶¶ 132, 134.
And Plaintiffs allege that Hilton Head’s CEO
entered the same Clinic model she had used at North Fulton,
where the Hospital paid for some services it did not receive and
overpaid for other services.
clearly
allege
Clinics
for
that
the
Medicaid
Id. ¶¶ 144, 155.
Hospitals
referrals,
paid
in
The Complaints
remuneration
violation
of
to
the
the
Anti-
Hospitals
Acted
Kickback Statute.7
B.
Do the Complaints Allege
Knowingly and Willfully?
that
the
The Hospitals contend that even if Plaintiffs alleged that
Medicaid
referrals
were
the
purpose
behind
the
Hospitals’
decisions to enter the Clinic agreements, Plaintiffs did not
sufficiently
willfully.
allege
that
the
Hospitals
acted
knowingly
and
To be a violation of the Anti-Kickback Statute, the
offer or payment of remuneration for referrals must be done
“knowingly and willfully.”
42 U.S.C. § 1320a-7b(b)(2).
The
Hospitals acknowledge that Plaintiffs allege that the Hospitals
acted knowingly—that is, voluntarily and intentionally and not
because of a mistake or by accident.
7
The Hospitals contend,
Plaintiffs also allege that the Clinics were compensated for their
referrals by being given the opportunity to obtain and retain the
Tenet Hospitals’ interpreter business.
No Court of Appeals has
addressed this type of alleged “business opportunity” remuneration.
Because the Complaints adequately allege remuneration under two widely
accepted theories, the Court need not decide today whether providing a
business opportunity in exchange for referrals is remuneration within
the meaning of the Anti-Kickback Statute.
31
however, that Plaintiffs failed to allege that the Hospitals
acted willfully, at least in part because they failed to use the
word “willfully” in their Complaints.
Generally,
the
term
“willfully”
means
that
an
“act
was
committed voluntarily and purposely, with the specific intent to
do something the law forbids, that is with a bad purpose, either
to disobey or disregard the law.”
F.3d
833,
omitted).
838
(11th
Cir.
United States v. Starks, 157
1998)
(internal
quotation
marks
It is not necessary to prove that a defendant acted
with specific intent to violate the Anti-Kickback Statute.
at 838-39 & n.8.
Id.
Rather, it is simply necessary to prove that
the defendant acted with the intent to do something the law
forbids—even if he is not aware of the specific law his conduct
may violate.
Id.
The Complaints and exhibits sufficiently allege that the
Hospitals acted knowingly and willfully.
The Hospitals do not
dispute that concealed payments may indicate an awareness of
illegality.
most
The allegations and exhibits viewed in the light
favorable
to
Plaintiffs
support
the
conclusion
that
Hospital executives entered the services agreements that paid
the Clinics for Medicaid referrals under the guise of paying for
services that were not actually provided or were not worth the
amount paid.
Based on these allegations, the Court finds that
Plaintiffs sufficiently alleged that executives at each Hospital
32
knew
they
Medicaid
were
offering
referrals
and
illegal
meant
to
kickbacks
do
so.
in
The
exchange
for
Complaints
and
exhibits also sufficiently allege that Tenet and HMA corporate
executives
knew
about
the
kickback
scheme,
approved
it,
and
fostered an environment where kickbacks to achieve quotas was
the norm.
Plaintiffs have adequately alleged facts to support
the conclusion that Defendants acted knowingly and willfully.8
II.
Do the Complaints Allege that the Hospitals Violated the
False Claims Act?
Having determined that the Complaints allege a violation of
the
Anti-Kickback
Statute,
the
Court
turns
to
the
question
whether the Complaints allege a violation of the False Claims
Act, 31 U.S.C. § 3729(a).
The False Claims Act “creates civil
liability
false
for
government.”
Supplies,
making
a
claim
for
payment
by
the
McNutt ex rel. United States v. Haleyville Med.
Inc.,
423
F.3d
1256,
1259
(11th
Cir.
2005).
To
prevail on a False Claims Act claim, the government or a relator
must establish that the defendant presented a false claim to the
United States for approval knowing that the claim was false.
United States ex rel. Walker v. R&F Props. of Lake Cnty., Inc.,
8
HMA Monroe argues that it cannot be held liable for Lang’s actions
because Lang did not have authority to enter the Clinic agreement. To
describe this argument as unpersuasive is charitable. It would not be
hyperbole to describe it as frivolous.
The focus here is on
Plaintiffs’ allegations in their Complaints, not on what Defendants
believe Plaintiffs may be unable to ultimately prove.
Plaintiffs
allege that Lang was HMA Monroe’s CEO who negotiated the deal for HMA
Monroe and worked with HMA executives to get it approved.
33
433
F.3d
1349,
§ 3729(a).
1355
(11th
Cir.
2005);
accord
31
U.S.C.
A violation of the Anti-Kickback Statute can form
the basis of a False Claims Act action if compliance with the
Anti-Kickback
claim
and
the
Statute
is
claimant
“necessary
submits
for
the
reimbursement”
claim
for
of
a
reimbursement
knowing that the claimant was ineligible for the payment due to
a violation of the Anti-Kickback Statute.
McNutt, 423 F.3d at
1259-60; accord 42 U.S.C. § 1320a–7b(g).
A.
Is Compliance with the Anti-Kickback Statute a
Condition of Payment for Georgia and South Carolina
Medicaid Claims?
The Hospitals do not appear to dispute that compliance with
the Anti-Kickback Statute is a requirement for payment of a
Georgia or South Carolina Medicaid claim submitted after passage
of the Patient Protection and Affordable Care Act on March 23,
2010.
See Patient Protection and Affordable Care Act, Pub. L.
No. 111-148, § 6402(f)(1), 124 Stat. 119, 759 (2010) (adding 42
U.S.C. § 1320a-7b(g): “In addition to the penalties provided for
in this section . . . a claim that includes items or services
resulting from a violation of this section constitutes a false
or fraudulent claim for purposes of [the False Claims Act]”).
But the Hospitals argue that for claims submitted before March
23, 2010, compliance with the Anti-Kickback Statute was simply a
condition of participation in the Georgia and South Carolina
Medicaid programs, not a condition of
34
payment,
so any false
certification of compliance with the Anti-Kickback Statute in
connection with those claims does not violate the False Claims
Act.
The Court disagrees.
1.
Conditions of Georgia Medicaid Claims
Plaintiffs
allege
that
the
provider
agreements
between
Georgia and the Hospitals prohibit the Hospitals from paying
remuneration
prohibit
for
the
referrals
Hospitals
of
Medicaid
from
billing
services rendered to those patients.
patients
Georgia
and
further
Medicaid
for
Ga. Compl. ¶¶ 47-55.
By
entering the provider agreements, the Hospitals agree to “comply
with
all
of
[Georgia
Medicaid’s]
requirements”
including
Georgia’s Policies & Procedures for Medicaid/PeachCare for Kids
Manual.
Ga. Compl. Ex. B, Statement of Participation, ECF No.
55-2
2.
at
The
Manual
states:
“Any
offer
or
payment
of
remuneration, whether direct, indirect, overt, covert, in cash
or
in
kind,
in
return
for
the
referral
of
a
PeachCare for Kids member is . . . prohibited.”
C,
Ga.
Dep’t
of
Cmty.
Health
Div.
of
Medicaid
or
Ga. Compl. Ex.
Medicaid,
Policies
&
Procedures for Medicaid/PeachCare for Kids § 106(E), ECF No. 553.
Also, enrolled providers must not “bill the Division [of
Medicaid]
for
any
services
not
performed
accordance with all applicable policies.”
The
Hospitals
emphasize
that
§
or
delivered
in
Id. § 106(J).
106
is
titled
“General
Conditions of Participation,” and they argue that this heading
35
means that compliance with the anti-kickback policy is merely a
condition of participation in Georgia Medicaid, not a condition
of payment for Georgia Medicaid claims.
Therefore, according to
the Hospitals, even if they made illegal kickbacks for Medicaid
referrals, they cannot be held liable under the False Claims
Act.
The proper sanction for those violations, according to
Defendants,
is
restricted
to
penalties
affecting
their
participation in the Georgia Medicaid program, which presumably
could include denial of continued participation.
not interpret § 106(E) this narrowly.
The Court does
That section clearly
prohibits the kickbacks alleged in Plaintiffs’ Complaints.
And
§ 106(J) prohibits the Hospitals from billing for services that
violates the Georgia Medicaid policies, including the kickback
prohibition.
If a bill, which is prohibited because it is for
services tainted by illegal kickbacks, is nevertheless submitted
and paid, then the payment is obviously conditioned on the false
representation that the bill complied with the Georgia Medicaid
policies.
The Hospitals also rely on New York v. Amgen, Inc., 652
F.3d
103
(1st
Cir.
2011).
In
Amgen,
the
First
Circuit
interpreted § 106(E) of the Georgia Medicaid agreement and found
that it was not relevant to the alleged kickbacks in that case,
where the defendants were accused of a kickback scheme to induce
doctors to prescribe an anemia drug.
36
Id. at 116.
The Court is
not persuaded that Amgen, which is not binding precedent on this
Court, counsels in favor of concluding that § 106(E) is merely a
condition of participation (not a condition of payment) for the
type of kickback alleged in this case.
addresses
the
type
of
kickback
Section 106(E) directly
alleged
here:
payment
of
remuneration in return for the referral of a Medicaid patient.
And as previously explained, § 106(J) prohibits providers from
billing Georgia Medicaid for any services that are not delivered
in
accordance
with
all
applicable
policies.
Since
it
is
a
violation of the applicable policies to pay a kickback for the
referral of a patient, an enrolled provider may not bill Georgia
Medicaid for services rendered to patients who were obtained via
illegal kickbacks.
The Amgen court even noted that § 106(E)
“may
preconditions
identify
some
of
payment
under
Georgia’s
Medicaid program” and suggested that its conclusion would have
been different if the alleged kickbacks in that case involved
“payments in exchange for referrals of patients.”
Id.
For all
of these reasons, the Court finds the rationale expressed in
Amgen to be reconcilable with this Court’s conclusion today and
finds the Amgen holding distinguishable based on the difference
in the facts presented.
The Court also notes that the Eleventh Circuit in McNutt
emphasized that “[w]hen a violator of government regulations is
ineligible
to
participate
in
a
37
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.
The Eleventh
Circuit further noted that “[t]he violation of the regulations
and the corresponding submission of claims for which payment is
known by the claimant not to be owed make the claims false”
under the False Claims Act.
For
all
of
these
Id.
reasons,
the
Court
concludes
that
Plaintiffs have sufficiently alleged that compliance with antikickback rules was a condition of payment for Georgia Medicaid
claims, even for claims that predated the Affordable Care Act.
2.
The
Conditions of South Carolina Medicaid Claims
United
States
alleges
that
the
provider
agreement
between South Carolina and Hilton Head prohibits Hilton Head
from paying remuneration for referrals of Medicaid patients and
further
prohibits
Hilton
Head
from
billing
South
Medicaid for services rendered to those patients.
¶¶ 34-36.
Carolina
U.S. Compl.
The Hilton Head provider agreement states that Hilton
Head “agrees to comply with all applicable federal and state
laws and regulations in effect and as may be promulgated during
the
term
of
this
Contract
in
the
provision
of
services
performance of it[s] obligations under this Contract.”
and
U.S.
Compl. Ex. 3, Hilton Head Provider Agreement art. IX ¶ N, ECF
38
No. 153-3.
The provider agreement further states that Hilton
Head “shall not submit for payment any claims, statements, or
reports which he knows, or has reason to know, are not properly
prepared
or
payable
pursuant
to
federal
and
state
law,
applicable regulations, this Contract, and SCDHHS policy.”
art. VI ¶ A.
Id.
It is a violation of federal law to pay a kickback
for the referral of a Medicaid patient, so, under its provider
agreement, Hilton Head may not bill South Carolina Medicaid for
services
rendered
kickbacks.
to
patients
who
were
obtained
via
illegal
The Court thus concludes that the United States
sufficiently alleged that compliance with anti-kickback rules
was a condition of payment for South Carolina Medicaid claims.
B.
Do the Complaints Allege a False Claims Act Violation?
Plaintiffs allege that the Hospitals submitted claims to
Georgia and South Carolina Medicaid in connection with Clinic
patients and that Georgia and South Carolina Medicaid paid those
claims
and
government.
Complaints,
amount
sought
partial
reimbursement
from
the
federal
Plaintiffs listed examples of those claims in the
including
claimed,
the
and
patient’s
amount
initials,
paid.
As
service
discussed
date,
above,
Plaintiffs allege that Hospital executives, including Gary Lang
(HMA
Monroe),
Bruce
Buchanan
(Atlanta
Medical
Center),
Bill
Moore (Atlanta Medical Center), John Holland (North Fulton and
Tenet
Corporate),
Joe
Austin
39
(North
Fulton),
John
Quinn
(Spalding Regional), and Elizabeth Lamkin (Hilton Head), entered
the services agreements knowing that the primary purpose of the
agreement
was
to
Plaintiffs
further
generate
allege
illegal
that
Medicaid
compliance
with
referrals.
anti-kickback
rules is necessary for payment of a Georgia or South Carolina
Medicaid claim.
And Plaintiffs allege that the Hospitals paid
the Clinics to refer Medicaid patients to the Hospitals and that
the Hospitals submitted claims for reimbursement to Georgia and
South Carolina Medicaid in connection with those patients.
These
factual
allegations
support
Plaintiffs’
conclusion
that when the Hospitals submitted Medicaid claims for Clinic
patients who were referred while the services agreements were in
effect,
the
Hospitals
Anti-Kickback
Statute.
falsely
See
certified
Walker,
compliance
Inc.,
433
F.3d
with
the
at
1360
(affirming denial of 12(b)(6) motion as to False Claims Act
claim by former employee who observed improper billing practices
that
led
to
alleged
false
claims).
Plaintiffs’
allegations
address who submitted the false claims: the Hospitals submitted
the claims pursuant to a kickback scheme engineered by Hospital
executives,
including
Gary
Lang,
Bruce
Buchanan,
Bill
Moore,
John Holland, Joe Austin, John Quinn, and Elizabeth Lamkin.
The
allegations address when the Hospitals submitted the claims to
Georgia or South Carolina Medicaid.
The allegations address how
the claims were false: the claims for reimbursement were made
40
even though the Hospitals paid the Clinics to refer the Medicaid
patients.
And Plaintiffs’ Complaints allege that the primary
purpose of the alleged kickback scheme was to generate Medicaid
referrals, so Hospital executives who engineered the scheme knew
that
false
claims
would
be
submitted
to
Georgia
or
South
Carolina Medicaid for services that arose from Clinic referrals
bought with illegal kickbacks.
Plaintiffs
also
allege
that
the
Hospitals
violated
the
False Claims Act when they submitted their hospital cost reports
to the Centers for Medicare and Medicaid Services.
¶¶ 21-22, 95-96, 128-29, 141-42, 157-58, 194-95.
Plaintiffs
sought
allege
that
additional
in
their
cost
reimbursement
reports,
from
U.S. Compl.
Specifically,
the
Hospitals
the
Medicare
Disproportionate Share Program “based on figures that included
Clinic[]
patients
referred
pursuant
to
the
kickback
scheme.”
Id. ¶¶ 96, 129, 142, 158, 195.
Hospitals
that
serve
a
“significantly
disproportionate
number of low-income patients” may receive supplemental payments
from
Medicare.
supplemental
42 U.S.C. § 1395ww(d)(5)(F)(i)(I).
payments
are
based
on
the
The
hospital’s
“disproportionate patient percentage.” Id. § 1395ww(d)(5)(F)(v).
And the “disproportionate patient percentage” is the sum of two
fractions:
the
Medicare
fraction
42 U.S.C. § 1395ww(d)(5)(F)(vi);
41
42
and
the
C.F.R. §
Medicaid
fraction.
412.106(b).
The
Medicaid fraction is calculated by dividing the number “patient
days”
for
hospital’s
42
Medicaid
patient
C.F.R. §
patients
days.
by
the
total
number
of
the
42 U.S.C. § 1395ww(d)(5)(F)(vi)(II);
412.106(b)(4).
The
disproportionate
share
adjustment is reported on a hospital’s annual cost report.
Compl. ¶ 22.
U.S.
In general, more Medicaid patients means a higher
disproportionate share adjustment.
Id.
And Plaintiffs allege
that the Hospitals inflated their Medicaid fraction by including
Clinic
patients
kickbacks.
whose
referrals
were
bought
with
illegal
Id. ¶¶ 96, 129, 142, 158, 195.
To be reimbursed by Medicare, a hospital’s representative
“must execute an express certification in the cost report.”
¶
22.
That
cost
report
contains
a
certification
statement
followed by a certification:
MISREPRESENTATION OR FALSIFICATION OF ANY INFORMATION
CONTAINED IN THIS COST REPORT MAY BE PUNISHABLE BY
CRIMINAL, CIVIL AND ADMINISTRATIVE ACTION, FINE AND/OR
IMPRISONMENT
UNDER
FEDERAL
LAW.
FURTHERMORE,
IF
SERVICES IDENTIFIED IN THIS REPORT WERE PROVIDED OR
PROCURED THROUGH THE PAYMENT DIRECTLY OR INDIRECTLY OF
A KICKBACK OR WERE OTHERWISE ILLEGAL, CRIMINAL, CIVIL
AND ADMINISTRATIVE ACTION, FINES AND/OR IMPRISONMENT
MAY RESULT.
I HEREBY CERTIFY that I have read the above statement
and
that
I
have
examined
the
accompanying
electronically filed or manually submitted cost report
and the Balance Sheet and Statement of Revenue and
Expenses prepared by [name of facility, ID number of
facility] for the cost reporting period beginning
[date] and ending [date] and that to the best of my
knowledge and belief, it is a true, correct and
complete statement prepared from the books and records
42
Id.
of
the
provider
in
accordance
with
applicable
instructions, except as noted. I further certify that
I am familiar with the laws and regulations regarding
the provision of the health care services, and that
the services identified in this cost report were
provided in compliance with such laws and regulations.
Id.
The
Hospitals
contend
that
even
if
the
disproportionate
share adjustments they claimed in their cost reports were false
because
they
inflated
their
Medicaid
fraction
by
including
Clinic patients, that false representation cannot form the basis
of
a
False
Claims
Act
claim
because
the
Hospitals
violate the cost report’s express certification.
did
not
The Hospitals
argue that the anti-kickback portion of the certification only
references
“services”
disproportionate
share
identified
in
adjustment
the
simply
report,
counts
and
how
the
many
patients were eligible for Medicaid and does not identify any
services provided to those patients.
Plaintiffs
allege
that
submission
The Court is unpersuaded.
of
a
cost
report
is
a
condition of the disproportionate share supplemental payments.
Plaintiffs
because
the
further
allege
that
disproportionate
the
share
cost
reports
adjustment
were
false
inappropriately
included Medicaid patients whose referral was bought with an
illegal kickback.
It follows that when the hospitals certified
that the report was “a true, correct and complete statement,”
that was an express false certification.
43
Whether Plaintiffs
will produce sufficient evidence on this claim to prevail at
trial or to survive summary judgment is not before the Court
today.
Plaintiffs have sufficiently alleged the claim.
Finally,
Defendants
contend
that
Plaintiffs
did
not
sufficiently allege a basis for holding the parent corporations,
Tenet and HMA, liable under the False Claims Act.
allege
that
Tenet
and
HMA
executives
were
Plaintiffs
involved
in
the
decisions to enter the pay-for-referral Clinic agreements and
were responsible for approving the deals.
At this stage of the
litigation, the Court is satisfied that the Complaints state
claims against Tenet and HMA.
As explained in the foregoing discussion, Plaintiffs have
adequately alleged claims under the False Claims Act against
Defendants.
Therefore,
claims must be denied.
Defendants’
motions
to
dismiss
those
9
9
Before the United States intervened in this action, HMA sought
dismissal of Williams’s False Claims Act claims under the Act’s
“first-to-file” rule, contending that Williams’s Complaint alleges the
same essential facts as United States ex rel. Dennis v. Health
Management Associates, Inc., an earlier-filed Tennessee action. Under
the first-to-file rule, when a person brings a False Claims Act case,
“no person other than the Government may intervene or bring a related
action based on the facts underlying the pending action.” 31 U.S.C. §
3730(b)(5). HMA seems to acknowledge that now that the United States
has intervened in this action, the first-to-file rule does not apply.
However, even if HMA has not abandoned its first-to-file lack of
subject matter jurisdiction defense and pretermitting whether the
Government’s intervention moots that defense, the Court finds that the
essential facts of Dennis do not sufficiently overlap with the
essential facts here to divest this Court of jurisdiction. In Dennis,
the plaintiff alleged that HMA offered free or below-market office
space leases and equipment rentals, as well as free personnel, to
doctors at the University Medical Center in Lebanon Tennessee to
44
III. Are the Remaining Counts Sufficiently Stated?
A.
Plaintiffs’ Conspiracy Claims
In addition to their False Claims Act claims, Plaintiffs
allege that the Hospitals and the Clinics conspired to defraud
the
government.
Defendants
seek
arguing that the Clinics and
dismissal
of
the Hospitals
these
claims,
had a legitimate
business agreement, so Plaintiffs cannot prove a conspiracy to
defraud
the
government.
As
thoroughly
discussed
above,
Plaintiffs have adequately alleged that the services agreements
were a sham designed to conceal the underlying purpose of the
agreement:
a
pay-for-referrals
scheme.
Accepting
these
allegations as true, as this Court must at this stage of the
litigation,
the
Court
denies
Defendants’
motion
to
dismiss
Plaintiffs’ conspiracy to defraud claims.
B.
Georgia’s Medical Assistance Act Claim
In addition to its other claims, Georgia asserts a claim
under
the
Georgia
Medical
Assistance
Act,
which
makes
it
unlawful for “any person or provider to obtain . . . payments
. . .
under
a
managed
care
program
operated,
funded,
or
reimbursed by the Georgia Medicaid program, to which the person
induce referrals of Medicare, Medicaid, and Tri-Care patients. Dennis
Compl. ¶ 16, ECF No. 1 in M.D. Tenn. Case No. 3:09-cv-00484. Here,
Plaintiffs allege that HMA’s Monroe, Georgia facility paid the Clinics
to refer Medicaid patients to that facility under a sham services
agreement for Spanish interpreter services.
Accordingly, the firstto-file rule does not deprive this Court of subject matter
jurisdiction.
45
or provider is not entitled.”
O.C.G.A. § 49-4-146.1(b)(1).
statute provides for criminal and civil penalties.
146.1(c)-(d).
The
Id. ¶ 49-4-
HMA Monroe contends that Georgia may not bring a
civil action under the Medical Assistance Act because the Act
sets forth two avenues for relief: (1) criminal prosecution or
(2)
a
civil
Department
penalty,
of
which
Community
may
Health
be
recovered
pursuant
to
an
by
the
Georgia
administrative
procedure.
In support of this argument, HMA Monroe cites cases that
stand for the general proposition that “the violation of a penal
statute does not automatically give rise to a civil cause of
action on the part of” a private citizen who was injured by the
violation.
See Murphy v. Bajjani, 282 Ga. 197, 201, 647 S.E.2d
54, 58 (2007) (finding that statute requiring report of criminal
activity by students did not create private right of action for
individual injured by students); see also United States ex rel.
Dennis v. Health Mgmt. Assocs., Inc., No. 3:09-cv-00484, 2013 WL
146048, at *10 (M.D. Tenn. Jan. 14, 2013) (noting that AntiKickback Statute does not provide a private right of action).
HMA Monroe did not cite any cases standing for the proposition
that
these
private
right
of
action
cases
apply
to
a
state
government seeking a civil penalty authorized by law, and the
46
Court declines to extend those holdings to this case at this
time.10
C.
Remaining State Law Claims
Defendants seek dismissal of Plaintiffs’ remaining state
law claims, contending that they do not adequately allege that
Defendants’ arrangements with the Clinics were anything other
than legitimate business ventures.
contrary
today
puts
this
argument
The Court’s ruling to the
to
rest.
Accordingly,
Defendants’ motions to dismiss the remaining claims are denied.
CONCLUSION
For the reasons described in this Order, the Motions to
Dismiss (ECF Nos. 111, 113, 155, 156 & 157) are denied.11
IT IS SO ORDERED, this 24th day of June, 2014.
S/Clay D. Land
CLAY D. LAND
UNITED STATES DISTRICT JUDGE
10
Georgia points out that state law gives the Georgia Attorney General
authority “to file and prosecute civil recovery actions in the name of
the state against any person, firm, or corporation which violates any
statute while dealing with the state.” O.C.G.A. § 45-15-12.
11
The parties shall now proceed with discovery expeditiously and
provide the Court with a jointly proposed scheduling order as
contemplated by the Court’s previously issued order on this subject.
See February 7, 2014 Order, ECF No. 142.
47
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