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

Filing 147

ORDER granting in part and denying in part 93 Motion to Dismiss Relator's Second Amended Complaint for Failure to Plead Fraud with Particularity. Relator's claims with regard to seven patients whom were allegedly receiving care from Defe ndant for more than one year and six patients for whom Defendant allegedly falsified diagnoses are dismissed. Relator may proceed with his claims that relate to the fourteen other patients identified in the second amended complaint. Signed by Judge William T. Moore, Jr on 9/8/2015. (loh)

FILED

IN THE UNITED STATES DISTRICT COURT 1909t DISTRICT COURT
Sf..VAt .H DIV.
THE SOUTHERN DISTRICT OF GEORGIA
SAVANNAH DIVISION

SEP-8 1015

UNITED STATES OF AMERICA and
STATE OF GEORGIA ex rel.
CHAD WILLIS,

)

CLERK
SO.OIST.OFGA

)

)

)

Plaintiffs-Relator,
I

)

V.

)

CASE NO. CV410-124

)

SOUTHERNCARE, INC.,
)

Defendant.
ORDER

Before the Court is Defendant's Motion to Dismiss
Relator's Second Amended Complaint for Failure to Plead
Fraud with Particularity (Doc. 93), to which Plaintiff has
filed a response (Doc. 95). For the reasons stated below,
Defendant's motion is GRANTED IN PART and DENIED IN PART.
Relator's claims with regard to seven patients whom were
allegedly receiving care from Defendant for more than one
year and six patients for whom Defendant allegedly
falsified diagnoses are DISMISSED. Relator may proceed with
his claims that relate to the fourteen other patients
identified in the second amended complaint.

BACKGROUND

This case involves claims brought by the United States
under the False Claims Act ("FCA"), 31 U.S.C. § 3729.' (Doc.
90 IS 54-74.) Relator, who is a former employee of
Defendant, 2 filed a qui tam complaint under seal pursuant to
31 U.S.C. § 3730(b)(2) on May 18, 2010. (Doc. 1.) The
original complaint alleged false claims and inducement
under the FCA and Georgia Medicaid False Claims Act
("GFCA"), as well as conspiracy to commit fraud and common
lawc1aims of suppression, fraud, and deceit. (Id. I[ 2350.) After receiving six extensions of time to make its
decision, the United States notified the Court on February
4, 2013 that it was declining to intervene in this matter.
(Doc. 31.) Subsequently, the Court ordered the complaint
unsealed and served on Defendant. (Doc. 32.)
Defendant is a large provider of hospice care services
operating throughout the southeast. (Doc. 90 ¶ 3.) Relator
worked as a Community Relations Director—a type of sales
position—for Defendant beginning in 2005 and ending
September 9, 2010. (Id. II 4.) While Relator was employed by
For the purposes of Defendant's motions to dismiss,
Relator's allegations set forth in its complaint will be
taken as true. See Sinaltrainal v. Coca-Cola Co., 578 F.3d
1252, 1260 (11th Cir. 2009)
2
Relator filed this action while apparently still employed
by Defendant, but has since left the company. (Doc. 90 at
1.)

Defendant, Defendant entered into an agreement with the
United States to settle a lawsuit alleging that Defendant
had fraudulently submitted false claims during the period
of January 1, 2000 to September 1, 2008 for hospice care
patients who did not meet hospice eligibility criteria. Id.
According to Relator, Defendant has since submitted further
false claims to the Government. Id. In fact, Relator
alleges, Defendant has pressured its staff with unrealistic
sales targets and lucrative incentives to encourage the
admission of patients who were actually ineligible for
hospice care. (Id. ¶[ 26-29.) Relator further alleges that
Defendant received payment from the Government for the
false claims submitted. (Id. 1 25.)
To support his allegations, Relator identifies a
Government audit of twenty-nine patients who are or were
receiving Defendant's hospice care, and for whom claims
were submitted to and paid by the Government. Relator
further alleges facts showing thirteen of the patients
included in that audit were admitted to hospice care
despite the lack of necessary physician referrals and
certifications of terminal illness, or otherwise incomplete
and incorrect documentation .3 (Id. IN 30-43.) Relator also

Before a Medicare patient may receive hospice care, his or
her attending physician and the hospice care provider's
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identifies, by their initials, seven patients whom are or
were continuing to receive hospice services from Defendant
for over one year. (Id. 1 45.) Relator also provides
evidence of six patients whose recorded diagnoses were
fraudulently altered by Defendant, and one example of
Defendant allegedly drugging a patient so as to make her
decline in health and falsely appear eligible for hospice
care.' (Id. ¶I 46-49.)
On September 3, 2013, Relator filed an amended
complaint dismissing his conspiracy and common law claims,
but maintaining that Defendant violated the FCA and GMFCA.
(Doc. 50 591 46-67.) On September 29, 2014, this Court
dismissed Relator's claims to the extent that they relied
medical director are required to each certify in writing at
the beginning of the first ninety-day period "that the
individual is terminally ill . . . based on the physician's
or medical director's clinical judgment regarding the
normal course of the individual's illness." 42 U.S.C.
§ 1395f (a) (7) (A) (i). At the beginning of a subsequent
ninety or sixty-day period, the medical director or
physician must recertify "that the individual is terminally
ill based on such clinical judgment." 42 U.S.C.
§ 1395f (a) (7) (A) (ii). "Terminally ill" is defined as having
a life expectancy of less than six months. 42
C.F.R. § 418.3.
Relator also alleges facts concerning five patients who
wer allegedly legitimately eligible for Medicare or
Medicaid coverage, but for whom Defendant improperly
revked services in an effort to avoid the high costs of
their treatment. (Doc. 90 91 50-52.) However, Relator does
not reference these patients in his three counts under 31
U.S.C. § 3729 and they appear to have no impact on this
case. Accordingly, the Court need not address the facts
alleged regarding these patients.
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on conduct occurring before September 1, 2008 and further
found that Relator had failed to plead his fraud claims
with particularity. 5 (Doc. 89.) While Relator's first
amended complaint provided numerous facts concerning the
type of fraudulent services Defendant allegedly provided
patients, the Court held that Relator had failed to offer
sufficient factual allegations demonstrating that Defendant
actually submitted claims for these fraudulent services to
the Government. (Id. at 32-33.) However, the Court granted
Relator leave to amend his complaint in order to cure this
deficiency. (Id. at 34-35.)
On October 13, 3014, Relator filed his second amended
complaint, dropping one of his FCA claims as well as the
GMFCA claim, but maintaining that Defendant submitted false
claims to the Government, made false statements with regard
to such false claims, and failed to reimburse the
Government for money paid out on Defendant's false claims,
all in violation of 31 U.S.C. § 3729. (Doc. 90.) Defendant
then filed its current motion to dismiss, arguing that
Relator's second amended complaint still fails to plead
with particularity the submission of false claims to the

1: n that same order, the Court also dismissed Defendant's
counterclaim against Relator for breach of duty of loyalty.
(Doc. 89 at 35-37.)
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Government as required by Fed. R. Civ. P. 9(b). (Doe. 93.)
Relator has filed a response in opposition. (Doe. 95.)
ANALYSIS

I.

RULE 9(B) FRAUD PARTICULARITY STANDARD
The heightened pleading standard of Federal Rule of

Civil Procedure 9(b) applies to causes of actions brought
undr the FCA. Hopper v. Solvay Pharm., Inc., 588 F.3d
1318, 1324 (11th Cir. 2009). Rule 9(b) states that "in
alleging fraud or mistake, a party must state with
particularity the circumstances constituting fraud or
mistake." However,

"[m]alice, intent, knowledge, and other

conditions of a person's mind may be alleged generally."
Fed. R. Civ. P. 9(b). Despite the heightened standard,
however, the purpose of Rule 9(b) remains that a complaint
must provide the defendant with "enough information to
formulate a defense to the charges." United States ex rel.
Clausen v. Lab. Corp. of Am., Inc., 290 F.3d 1301, 1313
n.24 (11th Cir. 2002). The Eleventh Circuit has emphasized
that

"[t]he application of Rule 9(b) . . . 'must not

abrogate the concept of notice pleading.' " Tello v. Dean
Witter Reynolds, Inc., 494 F.3d 956, 972 (11th Cir. 2007)
(quoting Ziemba v. Cascade IntTl, Inc., 256 F.3d 1194, 1202
(11th Cir. 2001)). Furthermore, Rule 9(b)'s standard
"should not be conflated with that used on a summary

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judgment motion." United States ex rel. Rogers v. Azmat,
2011 WL 10935176, at

*3 (S. D. Ga. May 17, 2011)

(unpublished).
Rule 9(b) serves to ensure that a FCA claim has "some
indicia of reliability . . . to support the allegation of
an actual false claim for payment being made to the
Government." Clausen, 290 F.3d at 1311. This is because
[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." Id. As a result, a FCA complaint
must plead not only the "who, what, where, when, and how of
improper practices," but also the "who, what, where, when,
and how of fraudulent submissions to the government."
Corsello v. Lincare, Inc., 428 F.3d 1008, 1014 (11th Cir.
2005). The question of whether a complaint satisfies Rule
9(b) is decided on a case-by-case basis, but even detailed
portrayals of fraudulent schemes followed by conclusions
that false claims must have been submitted is insufficient.
See United States ex rel. Atkins v. Mclnteer, 470 F.3d
1350, 1358 (11th Cir. 2006)

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II. RELATOR'S COMPLAINT
In its motion, Defendant argues that Relator's second
amended complaint fails to plead fraud with particularity
because it does not sufficiently allege the submission of
false claims to the Government (Doc. 91, Attach. 1 at 5.)
In particular, Defendant contends that the facts alleged
concerning Defendant's billing practices merely offer
inferences that false claims were submitted. (Id., Attach.
1 at 9.) Furthermore, Defendant states that Relator has
failed to identify with specificity any false claims that
were submitted to the Government and has "offered no
documents to support any of his (allegations)." (Id.,
Attach. 1 at 11.)
While not wholly without merit, however, the Court
finds Defendants arguments persuasive only with respect to
some of the patients for whom Relator alleges services were
fraudulently billed to the Government. Although neither
Defendant nor Relator discusses Relator's claims with
regard to individual patients identified in the second
amended complaint, the Court finds it necessary to do so.
In the second amended complaint, Relator identifies seven
patients whom allegedly received care from Defendant for
over one year and states that such care was "being billed
to Medicare and Medicaid." (Doc. 90 T 45.) In addition,
[1

Relator lists six patients for whom Defendants allegedly
altered their diagnoses and "whose care has been falsely
billed by [Defendant] to the United States." (Id. 91 46.)
However, Relator fails to offer any additional facts to
substantiate these conclusory allegations. As a result, the
Court finds Relator has failed to plead his FCA claims with
sufficient particularly as they pertain to these patients.
See United States ex. rel. Keeler v. Eisai, Inc., 568 F.
App' 783, 797-98 (11th Cir. 2014) (conclusory statement
that false claim was submitted insufficient to maintain FCA
claim). Accordingly, Relator's claims stemming from these
patients should be dismissed.
Despite Relator's pleading failures with regard to the
patints described above, the Court finds Relator has
nevertheless alleged sufficient facts to indicate the
submission of false claims for other patients. First,
Relator alleges that an audit conducted by the Government
identified twenty-nine patients for whom Defendant
submitted claims to the Government and was paid
$350,000.00. (Doc. 90 1 30.) With regard to these twentynine patients for whom the Government paid claims, Relator
alleges in detail why Defendant's services for thirteen of
them were ineligible for Medicare coverage. (Id. ¶II 31-43.)
Relator also includes the specific dates for which

Defendant provided services to these patients. Id. With
regard to a fourteenth patient, Relator provides the dates
for which the patient was enrolled in Defendant's hospice
carel, and alleges in detail how the services Defendant
provided were ineligible for Medicare coverage and actually
harmful to the patient. (Id. ¶! 47-49.) With respect to
this patient, Relator also alleges that the patient's
caretaker received a Medicare Explanation of Benefits form
confirming that the United States paid Defendant for the
allegedly unnecessary and harmful care. (Id. ¶ 49.)
The Court finds that Relator has met his pleading
burden with regard to these fourteen patients. While it is
true that Relator does not provide details of individual
allegedly false claims by billing code or date, "there is
no per se rule that a[] FCA complaint must provide exact
billing data or attach a representative sample claim."
United States ex. rel. Mastej v. Health Mgmt. Assocs.,
Inc., 591 F. App'x 693, 704 (11th Cir. 2014). Taken
together, the facts alleged in the second amended complaint
sufficiently indicate specific fraudulent services provided
by defendant, when the services were provided, and further
allege with particularity that Defendant submitted claims
for such care that were then paid by the Government. As a
result, the Court finds these factual averments provide all

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the necessary indicia of reliability to satisfy the
pleading requirements of Fed. R. Civ. P. 9(b) and sustain
Relator's FCA claims. Accordingly, Defendant's motion to
dismiss must be denied with regard to Relator's claims
based on these fourteen patients.
CONCLUSION

For the foregoing reasons, Defendant's motion is
GRANTED IN PART and DENIED IN PART. Relator's claims with
regard to seven patients whom were allegedly receiving care
from Defendant for more than one year and six patients for
whom Defendant allegedly falsified diagnoses are DISMISSED.
Relator may proceed with his claims that relate to the
fourteen other patients identified in the second amended
complaint.
SO ORDERED this

day of September 2015.

WILLIAM T. MOO
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF GEORGIA

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