United States Of America et al v. SouthernCare, Inc.

Filing 101

ORDER denying 97 Motion to Stay discovery. Signed by Magistrate Judge G. R. Smith on 12/5/14. (wwp)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF GEORGIA
SAVANNAH DIVISION
UNITED STATES OF AMERICA and
)
STATE OF GEORGIA ex rel. )
CHAD WILLIS,
Plaintiffs,
v.

Case No. CV410-124

SOUTHERNCARE, INC.,
Defendant.

)

ORDER
Defendant SouthernCare, Inc. (“SouthernCare”) moves to stay
discovery pending the resolution of its motion to dismiss plaintiffs’
second amended complaint in this qui tam action under the False
Claims Act (“FCA”). 1 (Doc. 97.) Plaintiffs oppose the motion. (Doc. 99.)
For the following reasons, defendant’s motion is denied.
The Court granted SouthernCare’s earlier motion to dismiss
plaintiffs’ complaint for failure to plead fraud with particularity under
Fed. R. Civ. P. 9(b), but it permitted plaintiffs to submit a second
amended complaint to cure the deficiency. (Doc. 89 (order); doc. 56 (first
motion to dismiss).) Specifically, the Court stated:
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The motion to dismiss (doc. 93) is not referred to the undersigned.

Although the amended complaint alleges that Defendant engaged
in fraudulent alterations and improper conduct to prepare claims
for submission for government payment, Relator stops short of ever
alleging specific facts tying the alleged improper conduct with such
a submission. The closest Relator comes to such an allegation is
describing the general process Defendant takes in submitting
claims for reimbursement to the Government. (Doc. 50 ¶ 14-16.)
However, such a general statement is insufficient to demonstrate
that Defendant submitted any false claim to the government. See
[ United States ex rel. Clauson v. Laboratory Corp., Inc. ], 290 F.3d
[1301, 1306 (11th Cir. 2002)] (demonstrating how claim would be
submitted did not prove false claim actually was submitted).
Accordingly, Relator’s amended complaint is deficient for lack of
specificity with regard to this second step of alleging a claim under
the FCA. See Hopper [ v. Solvay Pharm., Inc. ], 588 F.3d [1318, 1326
(11th Cir. 2009)] (filing of false claim with government cannot be
shown by inference).
(Doc. 89 at 32-33 (footnote omitted).) In SouthernCare’s present motion
to dismiss, it insists that plaintiffs’ second amended complaint fails to
cure this deficiency. (Doc. 93.) It thus contends that a stay of discovery
should be granted because a favorable ruling on its motion to dismiss
will substantially limit the claims against it and would spare the
parties needless expense. (Doc. 97 at 3-5.)
Plaintiffs respond that they have fixed the complaint, so a stay of
discovery is inappropriate. (Doc. 99 at 2.) Furthermore, this case has
been pending for over 54 months, largely due to the United States’
delay in determining whether it would intervene (it has declined (doc.

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31)), and another stay would further prejudice plaintiffs’ ability to
gather discovery relevant to the applicable time period. ( Id. at 3-4.)
A brief review of defendant’s motion to dismiss (doc. 93) suggests
that while it is not insubstantial, it is unlikely to be case dispositive.

Arriaga-Zacarias v. Lewis Taylor Farms, Inc., 2008 WL 4544470 at *2
(M.D. Ga. Oct. 10, 2008) (“it may be helpful for the court to take a
‘preliminary peek’ at the merits of the dispositive motion to assess the
likelihood that such motion will be granted”). Rather than merely
describing the claims submission process, plaintiffs have added
substantial factual averments stating that SouthernCare

in fact

submitted fraudulent claims to the government, as is required by Fed.
R. Civ. P. 9(b) in FCA cases. See Clausen , 290 F.3d at 1311 (“The [FCA]
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
amounts it does not owe.”). Plaintiffs first explain, in detail, the process
under which the allegedly false claims were filed:
21. From at least January 1, 2008, SouthernCare knowingly
submitted or caused the submission of false claims to Medicare and
created false records and statements to receive reimbursement
from Medicare, through Palmetto, for hospice care.
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22. During this time, SouthernCare falsely certified on claim forms
submitted to Medicare that hospice care provided to Medicare
recipients was “medically indicated and necessary for the health of
the patient.” SouthernCare created and submitted documentation
falsely representing that certain Medicare recipients were
terminally ill to Medicare, via Palmetto. However, many of these
Medicare recipients were not eligible for hospice care paid for by
Medicare because they did not have a prognosis of six months or
less to live.
23. During the majority of the period at issue, SouthernCare’s
billing of Medicare claims -- through Palmetto using CMS Claim
Form 1450 as described in Paragraphs 15-18 -- was performed at
the SouthernCare corporate office in Birmingham, Alabama.
Barbara Donahoo served as SouthernCare Billing Supervisor in
Birmingham from 2009 to 2011. SouthernCare locations such as
Vidalia, Georgia, forwarded patient claim information to Ms.
Donahoo’s office, where it was formulated by billing personnel and
submitted monthly as described in Paragraph 18. Palmetto paid
these claims based on SouthernCare’s certification that the services
in question were reasonable and medically necessary.
(Doc. 90 at 15-16.) Then, in a patient-by-patient factual narrative,
plaintiffs explain that certain charts that SouthernCare provided to the
United States show that SouthernCare submitted fraudulent Medicare
claims as to at least 29 patients. (Doc. 90 . ) In one section, they explain
in detail why 13 of those patients were not hospice-qualified, as
Medicare requires, and then affirmatively state that SouthernCare
submitted claims for those patients to Medicare. ( Id. at 21-37.) “Each
of these patients is a Medicare patient who was identified by Palmetto

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as a patient whose hospice claims had been billed by SouthernCare and
paid by the United States.” ( Id. at 21.) As to a fourteenth patient,
plaintiffs state that they have Medicare Explanation of Benefits forms
confirming that the United States had paid SouthernCare for
unnecessary care that led to that patient’s death. ( Id. at 39-41.)
Finally, under the FCA statement of claim sections, plaintiffs again
reiterate that SouthernCare fraudulently billed the United States for
the specific patients it described in the fact section of its complaint.
(Doc. 90 at 47-48 (“SouthernCare billed the United States $350,000
[from March 1, 2009 through December 31, 2011] for the 29 patients
whose charts were subjected to the medical review described in detail
above.”); id. at 51 (“As described in Paragraphs 30 to 43, including the
14 specific patient examples, in perpetrating and concealing its fraud
SouthernCare was forced to create and use false certifications of
terminal illness; false admission paperwork indicating fraudulent
diagnoses; false patient care plans not calculated to cope with patients’
actual needs and conditions; and other false records intended to support
their fraudulent billing to the United States, all in violation of 42 U.S.C.
§1395y and the Medicare regulations cited supra.”).)
Plaintiffs’ second amended complaint appears on preliminary

review to meet its Fed. R. Civ. P. 9(b) burden. See Clausen , 290 F.3d at
1313 n.24 (despite Rule 9(b)’s heightened pleading standard for fraud
claims, the purpose of the rule remains that a plaintiff must provide
defendant with “enough information to formulate a defense to the
charges.”). Accordingly, the Court doubts SouthernCare’s assertion that
its dismissal motion will be dispositive of plaintiffs’ claims. The Court
thus DENIES defendant’s motion to stay discovery (doc. 97). See

Chudasama v. Mazda Motor Corp. , 123 F.3d 1353, 1367 (11th Cir. 1997)
(where no discovery is required and a motion to dismiss raises purely
legal questions a stay may be warranted).

SO ORDERED this 5th day of December, 2014.

-

UNITED STATES MAGISTRATE ILJDGE
SOUThER}'T DISTRICT OF GEORGIA

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