United States of America et al v. OSF Healthcare System et al

Filing 42

ORDER & OPINION entered by Judge Joe Billy McDade on 07/01/2014. IT IS THEREFORE ORDERED that Defendant's Motion to Dismiss 35 is GRANTED. CASE TERMINATED. See Full Written Order.(JS, ilcd)

E-FILED

Tuesday, 01 July, 2014 01:38:59 PM
Clerk, U.S. District Court, ILCD

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF ILLINOIS
PEORIA DIVISION
UNITED STATES OF AMERICA,
ex rel. GAIL MCGINNIS,
THE STATE OF ILLINOIS ex rel. GAIL
MCGINNIS,

)
)
)
)
)
Plaintiff-Relator,
)
)
v.
)
)
OSF HEALTHCARE SYSTEM and OSF )
HOME CARE SERVICES,
)
)
Defendants.
)

Case No. 11-cv-1392

ORDER & OPINION
This matter is before the Court on Defendants’ Motion to Dismiss Relator’s
First Amended Complaint (Doc. 35). The First Amended Complaint (Doc. 34)
consists of nine counts alleging violations of the federal False Claims Act, 31 U.S.C.
§ 3729 et. seq. (2009) (the “FCA”) (Counts I, II, III, and VII), the Illinois False
Claims Act 740 ILCS 175/1 et. seq. (2010) (the “IFCA”) (Counts IV, V, VI, and VIII),
and the Illinois Whistleblower Act, 740 ILCS 174/20 (2009) (Count IX). Defendants
assert that 1) Counts I, II, III, IV, V and VI of the First Amended Complaint should
be dismissed under Rule 12(b)(6) because Relator has failed to plead prima facie
elements of FCA claims; 2) Counts III and VI of the First Amended Complaint fail
to state claims for conspiracy; and 3) Relator’s retaliation claims at Counts VII and
VIII fail to state claims because Relator does not sufficiently allege that he took
lawful acts in furtherance of an FCA action. Defendants also assert that Counts I
through VI are pled without sufficient particularity as required by Rule 9(b) of the

Federal Rules of Civil Procedure. For the reasons stated below, Defendants’ motion
(Doc. 35) is granted.
LEGAL STANDARDS
Under Federal Rule of Civil Procedure1 8(a)(2), a complaint must include “a
short and plain statement of the claim showing that the pleader is entitled to
relief.” The complaint must “give the defendant fair notice of what the claim is and
the grounds upon which it rests.” Bell Atl. v. Twombly, 550 U.S. 544, 555 (2007).
“A motion under Rule 12(b)(6) challenges the sufficiency of the complaint to
state a claim upon which relief may be granted.” Hallinan v. Fraternal Order of
Police of Chicago Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). “In evaluating the
sufficiency of the complaint, [courts] view it in the light most favorable to the
plaintiff, taking as true all well-pleaded factual allegations and making all possible
inferences from the allegations in the plaintiff’s favor.” AnchorBank, FSB v. Hofer,
649 F.3d 610, 614 (7th Cir. 2011). “To survive a motion to dismiss, the complaint
must contain sufficient factual matter, accepted as true, to state a claim to relief
that is plausible on its face.” Indep. Trust Corp. v. Stewart Info. Servs. Corp., 665
F.3d 930, 934–35 (7th Cir. 2012) (citing Ashcroft v. Iqbal, 556 U.S. 662 (2009))
(internal quotation marks omitted). “The complaint must actually suggest that the
plaintiff has a right to relief, by providing allegations that raise a right to relief
above the speculative level.” Id. at 935 (citing Windy City Metal Fabricators &

These rules, and not state law, govern purely procedural matters in state cases
tried in federal court, and apply to the state law claims pled in Counts IV, V, VI,
VIII, and IX. See Windy City Metal Fabricators & Supply, Inc. v. CIT Tech. Fin.
Servs., Inc., 536 F.3d 663, 670-72 (7th Cir. 2008); Brookshire v. Pennsylvania R. Co.,
14 F.R.D. 154, 156 (N.D. Ohio 1953).
1

2

Supply, Inc. v. CIT Tech. Fin. Servs., 536 F.3d 663, 668 (7th Cir. 2008)) (internal
quotation marks omitted). “[A] plaintiff’s claim need not be probable, only
plausible.” Id. “To meet this plausibility standard, the complaint must supply
enough fact[s] to raise a reasonable expectation that discovery will reveal evidence
supporting the plaintiff’s allegations.” Id. (citing Twombly, 550 U.S. at 556)
(internal quotation marks omitted)).
Rule 9(b) imposes a higher pleading standard than that required under Rule
8. See Pirelli Armstrong Tire Corp. Retiree Med. Benefits Trust v. Walgreen Co., 631
F.3d 436, 446 (7th Cir. 2011). “The [False Claims Act] is an anti-fraud statute and
claims under it are subject to the heightened pleading requirements of Rule 9(b).”2
United States ex rel. Gross v. AIDS Research Alliance–Chicago, 415 F.3d 601, 604
(7th Cir. 2005). Rule 9(b) requires a pleading to state with particularity the
circumstances constituting the alleged fraud. See Fed. R. Civ. P. 9(b); Pirelli, 631
F.3d at 441-42. This “ordinarily requires describing the ‘who, what, when, where,
and how’ of the fraud, although the exact level of particularity that is required will
necessarily differ based on the facts of the case.” Hofer, 649 F.3d at 615 (citation
omitted).

The IFCA is modeled on the federal FCA, Scachitti v. UBS Fin. Servs., 831 N.E.2d
544, 557, 215 Ill. 2d 484, 506 (Ill. 2005), and courts use the FCA for guidance in
interpreting the IFCA. See, e.g, United States ex rel. Humphrey v. FranklinWilliamson Human Servs., Inc., 189 F. Supp. 2d 862, 867 (S.D. Ill. 2002) (explaining
that the IFCA, then known as the Whistleblower Act, “was virtually identical in all
relevant aspects to the FCA,” thereby allowing that court “to look to FCA caselaw
for guidance”).
2

3

FACTUAL BACKGROUND3
Gail

McGinnis

(the

“Relator”)

was

employed

as

the

Director

of

Reimbursement at OSF Home Care Services from March 21, 2011 until July 18,
2011. Relator has named both the OSF Healthcare System and OSF Home Care
Services as defendants. The First Amended Complaint (Doc. 34) refers to both
Defendants as a single defendant, “OSF”. OSF offers health care services through
many separate facilities operating under four separate service areas known as
Hospice, Home Health Services, Durable Medical Equipment (“DME”), and
Pharmacy Infusion. OSF agencies have their own unique provider numbers that are
used to identify where specific treatment originated in claims for reimbursement by
Medicare and Medicaid. Only some of OSF’s facilities are able to receive Medicare
and Medicaid reimbursements. In particular, OSF’s Galesburg Hospice was an
unapproved facility for the reimbursement of Medicare claims, while its Peoria
Hospice facility was approved.
OSF used a software program called CPR+ to process its billing data and to
submit DME claims for reimbursement to payers, including Medicare and Medicaid.
OSF used a different program provided by McKesson for processing Home Health
Service Medicare and Medicaid claims. Prior to and during Relator’s term of
employment with OSF, CPR+ caused several thousand DME claims from the year
2009 to be deemed as “ready” to be submitted to insurers including Medicare and
Medicaid. Relator believes these claims have a seventy to seventy-five% error rate

As noted above, all well-pled facts must be construed in the plaintiff’s favor when
ruling on a Motion to Dismiss, so these background facts are drawn from the First
Amended Complaint. (Doc. 34).
3

4

because they were billed after one year and/or contained errors and omissions of
required information with regards to statements of medical necessity, physician
orders, diagnoses, physician names, modifiers, non-billable items listed on the
claims, and insurance validation. Claims older than one year old are ineligible for
Medicare/Medicaid reimbursement. OSF knew of the problems with CPR+. A
representative from CPR+ visited OSF and recommended that OSF submit all the
claims classified as “ready” to the respective insurers, including Medicare and
Medicaid.
On May 13, 2011, Relator advised OSF’s Chief Financial Officer (“CFO”),
Belinda Muck, that he disagreed with the CPR+ representative’s recommendation
because the Relator believed the submission of such error-ridden claims would
constitute fraud. The CFO disagreed with Relator, reminded him that he was her
subordinate, warned him that he should not be talking about fraud and attempted
to intimidate him.
In or around June 2011, Relator witnessed CFO Muck instruct OSF claims
processers to submit Home Health Services claims for reimbursement to Medicare
and/or Medicaid with false information regarding the facility where the care was
administered. These claims had been previously submitted to Medicare and/or
Medicaid and rejected. The resubmitted claims were altered to show they came from
facilities that were eligible for reimbursement to Medicare and/or Medicaid.
On July 8, 2011, Lisa Peck, an OSF Home Medical Equipment Accounts
Receivable Manager, informed the Relator that CFO Muck was upset about writing

5

off two million dollars of untimely claims. On July 11, 2011, CFO Muck signed a
termination form for Relator citing resignation effective as of August 15, 2011.
On July 13, 2011, Relator explained to OSF executives and administrators
that approximately 7,000 outstanding claims needed to be reviewed to verify and
correct information relating to statements of medical necessity, physician orders,
diagnoses, physician names, modifiers, non-billable items listed on the claims,
insurance validation, and claim timeliness. Relator explained further that this
needed to be done at the billing level to ensure accuracy as opposed to simply mass
submitting the claims before such a review process.
On July 14, 2011, CFO Muck accused Relator of lying about the need to
review the outstanding claims further. CFO Muck then directed the Relator to mass
submit the outstanding claims. However, Relator reminded CFO Muck that he
believed mass submission of the claims would constitute fraud and he would be
obligated to report it since he was a licensed Nursing Home Administrator. CFO
Muck became very upset and yelled at Relator to never use the words “fraud and
abuse” again. CFO Muck told Relator that she directed certain members of the OSF
accounting staff to monitor Relator's activities and report back to her daily. Relator
then informed CFO Muck that he would neither instruct his staff to submit the
claims nor resign. CFO Muck responded that she would help Relator make the
decision to resign. Later that same day, Relator submitted a complaint to the OSF
Compliance Committee. Relator returned to work the next day and met with an
Employee Relations Manager who informed him that the CEO, AJ Querciagrossa,
wanted him to complete an updated action plan outlining his approach to the

6

situation and to prepare data regarding claims that were apparently not ready to be
submitted prior to a meeting on July 18, 2011. The Employee Relations Manager
also told Relator that OSF executives determined that no fraud and abuse was
being requested of him.
Relator began compiling billing data for a July 18, 2011 meeting requested by
the CEO. By the end of the day on July 15, 2011, the ready to bill claims that were
audited showed between a seventy and seventy-five percent error rate. On the
morning of July 18, 2011, Relator was informed that the rest of the billing data
showed there was a seventy and seventy-five percent error rate for all data that was
processed. Later that morning, on July 18, 2011, Relator met with the CEO, the
Employee Relations Manager, and the Corporate Human Resources representative.
There, he presented an action plan and the findings that the outstanding claims
showed an error rate of seventy to seventy-five percent. The Employee Relations
Manager asked him for a resignation letter but promised that he would not be
deemed “unable to be rehired” and that no bad reference would be given. On July
25, 2011, Relator received a call from an OSF Compliance Officer asking him to do
an interview with him and another OSF employee, to which Relator refused.
DISCUSSION
I.

Counts I, II, IV and V
In Counts I and IV of the First Amended Complaint, Relator alleges OSF

“knowingly presented or caused to be presented false or fraudulent claims for
payment to” the United States and the State of Illinois (collectively the
“Governments”) in violation of 31 U.S.C. § 3729(a)(1)(A). In Counts II and V, he

7

alleges OSF “knowingly made, used or caused to be made or used, false records or
statements to get false or fraudulent claims paid or approved by” the Governments
in violation of 31 U.S.C. § 3729(a)(1)(B). The First Amended Complaint discusses
two separate schemes. In one scheme, Relator alleges OSF instructed employees to
submit claims for Home Health Services as if the claims arose from hospice
treatment provided at a Medicare and/or Medicaid eligible facility, when in fact,
they were based on hospice treatment performed at other ineligible facilities. (Doc.
34 at 2). For the second scheme, he alleges that OSF knowingly submitted timebarred DME claims and DME claims that lacked sufficient documentation
intending to have the Governments reimburse the claims. (Doc. 34 at 2)
A.

Home Health Service Claims for Reimbursement

The Court previously found that the scheme regarding Home Health Service
claims was confusing as pled and did not state legal claims upon which relief can be
granted for violations of the federal or Illinois FCA. (Doc. 30 at 14). The primary
reason for the confusion was that the original complaint conflated Home Health
Services claims with Hospice claims with no explanation of how the two categories
of claims are related and no explanation of why the location of a Hospice facility
would matter for the reimbursement of Home Health Services. (Doc. 30 at 13). Since
the claim for relief was alleged to involve Home Health Services yet the Relator only
discussed separate Hospice services, the Court concluded the original complaint
failed to apprise OSF of “fair notice of what the claim” really was and the grounds
upon which it rested. See Twombly, 550 U.S. at 555. Unfortunately, Relator has

8

pled nothing new to explain his continued use of Hospice claims to illustrate the
purported falsity or fraudulence of Home Health Services claims.
Relator alleges in the First Amended Complaint that he witnessed CFO
Muck instruct OSF claims processers to submit Home Health Services claims for
reimbursement to Medicare and/or Medicaid with false information regarding the
facility where the care was administered. (Doc. 34 at 14-15). On page sixteen of the
First Amended Complaint, Relator alleges applicable hospice regulations
disallowed providers from claiming Medicare reimbursement for hospice services
provided at an ineligible location. Relator alleges OSF knew of this requirement and
knew of prior claims being rejected because they were related to hospice services
provided at the unapproved/ineligible Galesburg Hospice facility, yet OSF
knowingly instructed its billers to resubmit the claims as if they were for the
reimbursement of hospice services rendered at an approved/eligible Peoria
Hospice facility. (Doc. 34 at 16).
In its Opposition brief to Defendants’ motion to dismiss, Relator now refers to
these claims as his “Home Health/ Hospice” claims and argues that “[i]t does not
matter if the Home Health service was hospice (or anything else).” (Doc. 39-1 at 3).
The Court disagrees that it does not matter whether Home Health Services were
hospice services because Relator clearly alleges in the First Amended Complaint
that 1) the regulations at issue only apply to hospice services (Doc. 34 at ¶56) and 2)
OSF provides Home Health Services and Hospice as separate healthcare services
(Doc. 34 at ¶17). Thus, the scheme alleged in the First Amended Complaint
concerns Home Health Service claims not Hospice claims, yet the First Amended

9

Complaint does not provide any nexus between hospice services and home health
services. For instance, Relator does not allege that OSF renders hospice services
under the umbrella of its Home Health Services or even that services provided as
Home Health Services are rendered at OSF’s Hospice facilities.
Paragraph fifty-three of the First Amended Complaint provides that “Relator
witnessed OSF’s CFO instruct Arlene Hunter and Lisa Davies, Reimbursement
Specialists for OSF, to resubmit “the claims” to Medicare and/or Medicaid in a
manner that reflected that “the claims” were related to treatment at another Home
Health facility…” (emphasis added). The First Amended Complaint does not
mention whether these particular “claims” are for hospice services or whether the
“Home Health facility” referred to is either the Galesburg or Peoria Hospice facility.
Again, nowhere in the First Amended Complaint does Relator allege that
Home Health Services were performed at the Hospice facilities. Although Relator
specifically identifies the Galesburg and Peoria Hospice facilities, he never alleges
that Home Health Services were performed at either facility. The closest Relator
comes to making such a specific allegation is in paragraph fifty-two of the First
Amended Complaint where he alleges that Home Health services were performed at
“non-eligible facilities,” the claims for these services were initially rejected by the
Government, but later resubmitted as if they were performed at “eligible facilities.”
But Relator never specifies that the “facilities” to which he refers are the Galesburg
or Peoria Hospice facilities. Nor does Relator allege that the regulations disallowing
payment for services rendered at non-eligible facilities pertain to OSF’s Home
Health Services.

10

The First Amended Complaint makes factual allegations that OSF submitted
false hospice claims and continues to assert that claims for the reimbursement of
hospice services relating to Hospice facilities demonstrate the purported
fraudulence of Home Health Service claims. Facts supporting specific allegations
regarding Home Health Services claims would support Relator’s theory. Instead,
Relator is comparing apples to oranges with no explanation for why one should
overlook the clear distinction between the fruits.
In sum, the First Amended Complaint unambiguously complains that OSF
submitted fraudulent Home Health Services claims for reimbursement not Hospice
claims, yet only presents specific factual allegations concerning the latter category
of claims. Therefore, the Court finds that the allegations of hospice claims
resubmitted with false Hospice locations do not plausibly state legal claims upon
which relief can be granted for violations of the federal or Illinois FCA in regard to a
scheme involving Home Health Services claims. In simpler words, Relator has not
pled factual allegations that make it plausible that OSF’s Home Health Services
claims were false or fraudulent, and the claim must be dismissed pursuant to Rule
12(b)(6).
This is Relator’s second attempt at pleading false claims for reimbursement
arising out of Home Health Services and he continues to focus on Hospice
regulations and billing practices. Therefore, the Court is of the opinion that Relator

11

will never be able to plead proper FCA claims relating to Home Health Services.
Therefore, this claim is dismissed with prejudice.4
B.

DME Claims for Reimbursement

To establish a claim under section 31 U.S.C. § 3729(a)(1)(A) of the FCA, a
relator must plead three elements: (1) a false or fraudulent claim; (2) which was
presented, or caused to be presented, by the defendant to the United States for
payment or approval; (3) with the knowledge that the claim was false. See United
States ex rel. Fowler v. Caremark RX, L.L.C., 496 F.3d 730, 740-41 (7th Cir. 2007)
(dealing with pre-2009 version of the statute) overruled on other grounds by Glaser
v. Wound Care Consultants, Inc., 570 F.3d 907 (7th Cir. 2009). To establish a claim
under section 31 U.S.C. § 3729(a)(1)(B) of the FCA, a relator must also plead three
elements: “(1) the defendant made a statement in order to receive money from the
government, (2) the statement was false, and (3) the defendant knew it was false.”
United States ex rel. Crews v. NCS Healthcare of Illinois, Inc., 460 F.3d 853, 856
(7th Cir. 2006) (dealing with pre-2009 version of the statute). A defendant must
satisfy the same requirements under the Illinois False Claims Act. United States ex
rel. Upton v. Family Health Network, Inc., 900 F. Supp. 2d 821, 828 (N.D. Ill. 2012).
The First Amended Complaint does not set forth the elements of a viable claim
under 31 U.S.C. § 3729(a)(1)(A) or (B) for the DME claims.

When a claim for which relief cannot be obtained is alleged and the defending
party succeeds on a 12(b)(6) motion, the dismissal should be with prejudice.
Kamelgard v. Macura, 585 F.3d 334, 339 (7th Cir. 2009). Amendment of the claim
will only be allowed upon motion and upon a showing that such amendment would
not be futile. See Stanard v. Nygren, 658 F.3d 792, 797 (7th Cir. 2011).
4

12

1.

Untimely DME Claims Cannot Be Deemed False Simply
By Virtue Of Their Tardiness.

Relator asserts that “many of the DME claims were more than one year old at
the time of submission, making them ineligible for Medicare and/or Medicaid
reimbursement.” (Doc. 34 at ¶25). Taking the First Amended Complaint to be true
and construing all inferences in Relator’s favor, the submission of a claim that is
merely late cannot be deemed to be “false or fraudulent.” To be deemed false or
fraudulent, there must be some factual allegation that demonstrates falsity or
deceit; at least something to show that OSF was attempting to mask the claims’
untimeliness, such as an allegation that dates on the claims were falsified, doctored
or somehow erroneous. See, e.g., United States ex rel. Durcholz v. FKW Inc., 997 F.
Supp. 1159, 1167 (S.D. Ind. 1998) aff’d, 189 F.3d 542 (7th Cir. 1999) (“In short, the
false claim must be a lie.”). In this case, a claim that the CPR+ program caused the
DME claims to show incorrect dates would suffice. However, Relator has not made
such an allegation. Instead, Relator’s allegations that the untimely claims are false
claims must fail as a matter of law.
2.

Relator Has Not Pled Facts That Demonstrate OSF Was
Required To Provide A Statement Or Certification To Get
Reimbursed For DME Claims From The Governments.

In addition to alleging that many DME claims that were purportedly false
because they were untimely, Relator also alleges OSF submitted DME claims that
were rife with errors of information material to the Governments’ decisions to pay
the claims. Relator alleges these DME claims are not false in and of themselves, but
that the files that document these claims contain insufficient and error-ridden
information. In the Amended Complaint, Relator alleges:
13

OSF knowingly submitting thousands of DME claims where its patient
files either had (a) missing information, or (b) erroneous and/or
incomplete information as to statements of medical necessity,
physician orders, diagnoses, physician names, and/or other information
all of which was required to be in OSF’s file, subject to production on
request, and in some cases subject to certification as a condition to
receiving payment. The Defendant’s failure to maintain these files as
required constitutes Medicare abuse and /or fraud.
20.
In particular, certain claims were filed without documentation
that is a necessary prerequisite in order to bill Medicare for payment.
(Doc. 34 at ¶¶ 19 and 20). The upshot of Relator’s theory regarding these timely, yet
fraudulently reimbursed DME claims, is that “required information was asserted as
present in the billing records but either did not exist or was not available as
required for proper billing, and this failure is the basis of the abuse and fraud
claim.” (Doc. 34 at ¶29).
Relator has identified regulations that state 1) payment to a provider of
services is precluded unless information as may be necessary to determine the
amounts due the provider is furnished upon request; 2) all items billed to Medicare
require a prescription and an order kept in a file that documents certain
information, but that items not meeting these requirements can be assigned “an EY
modifier to the corresponding FICPCS code”; and 3) records of dispensing orders
must be maintained and contain certain information. (Doc. 34 at ¶23).
None of the regulations identified by the Relator in the First Amended
Complaint mandate certification or otherwise required OSF to make any statement
to the Governments before seeking payment for DME claims. While the regulations
above indicate Medicare expected documentation to be maintained, there is no
indication that service providers, such as OSF, had to present documentation as a

14

prerequisite to submitting claims for payment or receiving money. Indeed, the
regulations state that documentation was required to be kept available only upon
request. The regulations for prescriptions quoted by the Relator even allow the
provider to enter a special “EY Modifier” code when the provider cannot comply
with the prescription requirements.
In paragraph nineteen, Relator also makes a general statement that “in some
cases [submission of the claims was] subject to certification as a condition to
receiving payment.” This general statement is not sufficient to satisfy the pleading
requirements under Rule 8, let alone Rule 9(b). Brooks v. Ross, 578 F.3d 574, 581
(7th Cir. 2009) (“in considering the plaintiff's factual allegations, courts should not
accept as adequate abstract recitations of the elements of a cause of action or
conclusory legal statements.”). Relator does not cite an actual source for any
certification requirement.
Instead, Relator states that “the placing of an approval code on the claim
indicates to Medicare and Medicaid the required documents are in OSF’s files or
available from the patient’s medical records.” (Doc. 34 at ¶29). Relator seems to be
alleging some sort of an implicit certification theory of liability. His theory is that by
placing an approval code on a claim that lacks proper documentation, OSF was
effectively making a false statement or certification that the claim was properly
documented. The problem is that Relator has not identified any requirement that
OSF had to certify or state the DME claims were properly documented before
submitting them for payment. These sorts of false claims theories—premised upon
implicit certification without a citation to a duty to certify or affirmatively state

15

compliance with an applicable rule or regulation—have been squarely rejected by
several Courts of Appeals. See, e.g., United States ex rel. Siewick v. Jamieson
Science and Engr., Inc., 214 F.3d 1372, 1376 (D.C. Cir. 2000)(“[A] false certification
of compliance with a statute or regulation cannot serve as the basis for a qui tam
action under the FCA unless payment is conditioned on that certification.”), United
States ex rel. Hopper v. Anton, 91 F.3d 1261, 1266 (9th Cir. 1996) (“It is the false
certification of compliance which creates liability when certification is a prerequisite
to obtaining a government benefit.”). For these reasons, the First Amended
Complaint does not allege plausible violations of 31 U.S.C. §3729(a)(1)(B) with
regard to the DME claims.
Additionally, the First Amended Complaint still does not allege facts that
convey that OSF actually submitted any of the DME claims at issue for
reimbursement. Relator provides an excerpt of a training document produced on
July 13, 2011 that in his words “reflect[] 9,213 claims marked as ‘ready to bill’ for
submission to several insurers, including Medicare/Medicaid” as Exhibit A. (Doc. 34
at 9). This exhibit includes examples of “actual claims and/or accounts” that the
Relator believes have a seventy to seventy-five percent error rate because they were
either too old to be reimbursed and/or contained errors and omissions of required
information such as statements of medical necessity, physician orders, diagnoses,
physician names, modifiers, non-billable items listed on the claims, insurance
validation.
Exhibit A shows these claims are marked ready to be billed, which infers that
they were not actually billed and cannot satisfy the second prong of the §

16

3729(a)(1)(A) pleading requirement, which is that the claims were presented to the
government for payment. Caremark RX, L.L.C., 496 F.3d at 740. Exhibit A also
shows an icon on the screen shot entitled “Create Invoice (F9)” that presumably
would allow one to generate an invoice if one so chose. The “Create Invoice (F9)”
icon, along with the fact that Relator has not described or referred to any invoices,
bills or receipts of payments made by the Government in his Amended Complaint or
exhibits, only strengthens the inference that these claims were not invoiced and
actually submitted for payment to and/or paid by the Governments.
Relator continues to argue that under United States ex rel. Lusby v. RollsRoyce Corp., 570 F.3d 849 (7th Cir. 2009), invoices are unnecessary and he has pled
sufficient facts to infer either that the DME claims submissions actually occurred or
that he can prove they were submitted and reimbursed ultimately after the case has
progressed through discovery. As this Court already explained in its January 31
Order and Opinion (Doc. 30 at 10-11), in Lusby, the relator was an engineer, not an
employee with any type of connection to the defendant’s billing operations. 570 F.3d
at 850. The relator in Lusby complained that despite contractual obligations to
deliver quality parts to the government and to certify to the quality of such parts as
a condition of remuneration, the defendant had in fact knowingly submitted inferior
parts and billed and collected payment for such inferior parts. 570 F.3d at 853. The
defendant claimed the relator’s inability to produce an actual invoice doomed his
claim. Id. at 854. The relator did not possess an actual bill or invoice, but he alleged
specific parts, dates, and details of payment in his complaint. Id. In short, the

17

relator provided specific factual allegations concerning how the defendant
submitted false claims to the government. Id. at 853-54.
In stark contrast to the relator in Lusby, 570 F.3d at 850, Relator here was
deeply involved in OSF’s billing. Relator alleges he was the Director of
Reimbursement and was responsible for planning, directing, executing and
evaluating the billing and reimbursement functions for OSF. (Doc. 1 at 5). Despite
his familiarity and access to OSF’s billing and reimbursement procedures, Relator
does not allege any dates, amounts, or other details of actual payments in the First
Amended Complaint that would allow the Court to infer DME claims were actually
submitted and/or reimbursed by the Governments.
The complaint in Lusby did not leave the court to speculate on whether
claims were ever submitted. The relator in Lusby knew of and pled specific details
about the underlying contract and requisite facts that supported his allegations, but
was unable to present information evidencing actual payment by the government.
570 F.3d at 853-54. Here, Relator does not allege any facts from which a court can
fairly conclude the DME claims at issue were even submitted for payment and
reimbursed. To the contrary, the First Amended Complaint still presents factual
allegations that lead the Court to the conclusion that these DME claims were not
submitted for reimbursement.
For example, throughout the First Amended Complaint, Relator uses
language which casts doubt on whether the claims at issue were submitted to the
Governments. For instance, Relator states he “believes that these claims were filed,

18

as CFO Muck informed Relator to do so” (Doc. 34 at ¶30), and “[t]hese claims were
released or prepared for release over the Relator’s objection” (emphasis added).
The First Amended Complaint also alleges that CFO Muck was not only
prepared to write these claims off but she actually approved the write off. (Doc. 34
at ¶36). Such action conveys no other impression other than the CFO was willing to
not seek reimbursement for the alleged DME claims. Lastly, Relator’s own Exhibit
E is an email in which the OSF accounts Receivable Manager explains to CFO
Muck that the billing errors are resulting in OSF not getting paid. (Doc. 34-1 at 12
(emphasis added)).
The only evidence that Relator offers to show that claims were actually
submitted and reimbursed is Exhibit G, which 1) only applies to late claims and 2)
does not actually demonstrate claims were submitted and reimbursed. Exhibit G is
an OSF Accounts Receivable Summary for May and July of 2011 that shows that
OSF expected amounts from services rendered more than 365 days prior from
payers such as Medicare and Medicaid. It also shows that these expected amounts
decreased significantly from May to July. Relator contends this is evidence that
OSF submitted late claims to Medicare and Medicaid and was reimbursed, thereby
causing the decrease in amounts. However, this exhibit does not demonstrate that
OSF received any payments; it only shows that OSF’s expectations changed. The
exhibit offers no insight into the cause of the change in expectation. The change in
expectation could be attributable to CFO Muck’s decision to write off claims given
the Relator’s allegations she approved a write-off.

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After reading the First Amended Complaint in the light most favorable to the
Relator, there are no plausible allegations that the untimely DME claims were false
or fraudulent, that OSF was obligated to make any certifications or statements of
compliance before submitting DME claims for reimbursement, or that OSF actually
submitted the DME claims in question to the Governments for reimbursement.
Relator has only pled allegations that support the conclusion that the CPR+
software allowed untimely claims to exist in the OSF system as “ready to be billed”
with errors or missing documentation in the corresponding OSF’s files. This is not a
plausible allegation that OSF obtained government payments through the
submission of knowingly false or fraudulent claims. Therefore, the Court concludes
that the DME scheme as pled does not state a claim upon which relief can be
granted as violations of the federal or Illinois FCA.
As this is the second time Relator has attempted to plead sufficient FCA
violations in regard to the DME claims and the Court is of the opinion that he will
never be able to do so. Consequently, Counts I, II, IV and V are dismissed with
prejudice.
II.

Conspiracy Counts III and VI.
Relator alleges two counts of conspiracy. Count III alleges “Defendant

knowingly conspired to defraud the United States by getting false or fraudulent
claims allowed or paid by the United States” in contravention of 31 U.S.C. §
3729(a)(1)(C). Count VI alleges “Defendant knowingly conspired to defraud the
State of Illinois by getting false or fraudulent claims allowed or paid by the State of
Illinois” in contravention of 740 ILCS 175/3(a)(1)(C). Defendants contend that

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Relator has ignored the Court’s previous explanation of how the “intracorporate
conspiracy doctrine” bars conspiracy claims under 31 U.S.C. § 3729(a)(1) where all
the alleged conspirators are actors within the same corporate entity and also failed
to sufficiently allege an agreement amongst co-conspirators. (Doc. 30 at 15-16, n. 8).
The Seventh Circuit has held that “general civil conspiracy principles apply”
to FCA conspiracy claims. United States ex rel. Durcholz v. FKW Inc., 189 F.3d 542,
545 n. 3 (7th Cir. 1999) (citing United States v. Murphy, 937 F.2d 1032, 1039 (6th
Cir. 1991)). The “intracorporate conspiracy doctrine” bars conspiracy claims under
31 U.S.C. § 3729(a)(1) where all the alleged conspirators are actors within the same
corporate entity. United States ex rel. Chilcott v. KBR, Inc., No. 09-CV-4018, 2013
WL 5781660, at *10-12 (C.D. Ill. Oct. 25, 2013); see also U.S. ex rel. Brooks v.
Lockheed Martin Corp., 423 F. Supp. 2d 522, 528 (D. Md. 2006) aff'd in part,
dismissed in part, 237 F. App’x 802 (4th Cir. 2007). In its second attempt to plead
valid conspiracy claims, Relator has established that his claims are barred by the
intracorporate conspiracy doctrine.
In the original Complaint, Relator’s allegations of conspiracy were so vague
that the Court could not identify who the alleged co-conspirators were. The Court
was left to speculate whether Relator was alleging that OSF Healthcare System and
OSF Home Care Services conspired together or whether OSF and the claims
processing program vendors, CPR+ and McKesson, were the purported coconspirators. (Doc. 30 at 15-16). Now Relator has cured the ambiguity and names
OSF’s CFO, Belinda Muck (Doc. 34 at ¶37), and several other OSF officers and

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employees (Doc. 34 at ¶33), as OSF’s co-conspirators.5 These claims fail as a matter
of law.
Both federal and Illinois law bar the respective conspiracy claims brought by
the Relator in this action. The First Amended Complaint alleges facts that clearly
show CFO Muck and other OSF employees were acting in the course of their duties
in furtherance of their employer’s interests at all times relevant. For example, at
paragraph fifty-nine, Relator states “the Defendant engaged in conduct among its
employees to conspire to defraud the Government by getting false or fraudulent
claims allowed or paid.” In paragraph forty, he alleges he “was being pressured to
process the outstanding claims as fast as possible in order to maximize the revenue
that could be presented at the August 2011 OSF Board meeting and also partly to
avoid more claims being declined as untimely.” Thus, Relator is contending that the
supposed co-conspirators were acting as OSF employees to maximize OSF revenue.
As the Court has already explained, the “intracorporate conspiracy doctrine”
bars federal conspiracy claims under 31 U.S.C. § 3729(a)(1) where all the alleged
conspirators are actors within the same corporate entity. United States ex rel.
Chilcott v. KBR, Inc., No. 09-CV-4018, 2013 WL 5781660, at *10-12 (C.D. Ill. Oct.
25, 2013). “A corporation is, therefore, incapable of conspiring with its employees,

In paragraph 33 of the First Amended Complaint, Relator alleges “[t]he listed
attendees to the meeting conspired to ignore the correct procedures, and allow the
claims to continue to be filed.” Exhibit C confirms the listed attendees were Cindy
Bauling, Gail McGinnis, Chris Gibson, JJ Guedet, Cindi Hoggard, Donna Medina,
Belinda Muck, AJ Querciagrossa, Ginger Reynolds, Amy Trau, Felicia Schafer,
Rachel Hays, Patti Atteberry, Jon McKee, Deb Vielbak, Paul Harbaugh and Brian
Schofield. (Doc. 34-1 at 7). Despite that Relator was himself an attendee to the
meeting, the Court will assume Relator does not mean to implicate himself as a
potential co-conspirator.
5

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and its employees, when acting in the scope of their employment, cannot conspire
among themselves.” United States ex rel. Woods v. SouthernCare, Inc., 3:09-CV00313-CWR, 2013 WL 1339375, at *6 (S.D. Miss. 2013) (quotation marks and
citation omitted). Similarly, under Illinois law, “a civil conspiracy cannot exist
between a corporation’s own officers or employees.” Van Winkle v. Owens-Corning
Fiberglas Corp., 683 N.E.2d 985, 991 (Ill. App. 4th Dist. 1997). This is so because
the acts of an employee are deemed to be the acts of the corporate employer, and an
entity cannot conspire with itself. See Buckner v. A. Plant Maint., Inc., 694 N.E.2d
565, 571 (Ill. 1998) (explaining that because “the acts of an agent are considered in
law to be the acts of the principal, there can be no conspiracy between a principal
and an agent” while upholding the dismissal of a civil conspiracy claim). Thus,
under both federal and Illinois law, a corporation cannot be deemed to conspire with
its own employees and officers to accomplish corporate acts and objectives.
After two attempts to plead facts that establish conspiracies to violate the
federal False Claims Act, 31 U.S.C. § 3729 et. seq. and its Illinois counterpart,
Relator has been unable to plead viable conspiracy claims. Originally, the Relator
failed to identify a co-conspirator, now Relator has accused persons who cannot be
deemed as co-conspirators under the law. There is no reason to conclude that
Relator will ever be able to plead viable claims of conspiracy amongst OSF and its
employees to submit the false claims at issue in the First Amended Complaint.
Consequently, Counts III and VI are dismissed with prejudice.

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III.

Retaliation Claims
In Counts VII and VIII, Relator alleges that OSF “threatened, harassed, and

discriminated against Relator in the terms and conditions of his employment
because of the lawful acts done by Relator in furtherance of an action under this
section.” (Doc. 34 at ¶¶62, 84-86, 18-19). Count IX was not dismissed by the Court.
That count provides that OSF retaliated against him “for refusing to participate in
activities that would result in a violation of State or Federal laws, rules or
regulations.” (Doc. 1 at 20; Doc. 34 at 24-25).
In order to survive a motion to dismiss, a complaint alleging FCA retaliation
claims brought pursuant to 31 U.S.C. §3730(h)(1) and 740 ILCS 175/4(g)(1) must
contain factual allegations that if proven would establish that 1) the Relator was
acting in furtherance of an FCA enforcement action or other efforts to stop
violations of the FCA, 2) the employer knew Relator was engaged in protected
conduct, and 3) the employer was motivated to take an adverse employment action
against the Relator because of the protected conduct. 31 U.S.C. § 3730(h) (2012);
Brandon v. Anesthesia & Pain Mgmt. Assocs., Ltd., 277 F.3d 936, 944 (7th Cir.
2002); see, e.g., United States ex rel. Wildhirt v. AARS Forever, Inc., No. 09 C 1215,
2011 WL 1303390, at *6 (N.D. Ill. Apr. 6, 2011). Courts analyze the conduct the
Relator engaged in and his purpose for doing so to help determine whether these
elements have been sufficiently pled. Luckey v. Baxter Healthcare Corp., 2
F.Supp.2d 1034, (N.D. Ill. 1998), aff'd by 183 F.3d 730 (7th Cir. 1999).
This Court has found 1) that Relator has not successfully pled false or
fraudulent DME claims or Home Health Service claims, 2) that his allegations do

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not support that OSF made false or fraudulent statements to obtain payments for
DME claims, and 3) that the allegations make it plausible that the DME claims at
issue were not submitted to the Governments.6 Without finding that the Relator has
sufficiently pled underlying violations of the FCA, the Court cannot conclude that
the allegations support a finding that Relator was acting in furtherance of an FCA
enforcement action or other efforts to stop violations of the FCA. Thus, Counts VII
and VIII are dismissed.
Additionally, Relator’s retaliation allegations must fail for the separate
reason that his allegations do not support that he was engaged in furtherance of an
FCA action. In general, section 3730(h) allows an employee to be compensated if
that employee is discriminated against in the terms and conditions of her
employment because of lawful acts done by such employee in furtherance of an FCA
action under this section or other efforts to stop violations of the FCA. Thus there
are two distinct ways to prove liability for retaliation under §3730(h); one must
either prove she put her employer on notice that she was contemplating an FCA
action or prove she was otherwise engaged in other efforts to stop FCA violations.
This Court clearly admonished Relator that his retaliation allegations did not
suffice to show he was engaged “in furtherance of an FCA action,” but rather that
he was more plausibly engaged “in other efforts” to stop what Relator thought were
violations of the FCA. Despite that admonition, Relator has deliberately chosen to
re-plead these counts by again only contending that his actions were in furtherance

Relator has not made any allegations that he took any action in regard to the
Home Health Service claims to precipitate OSF retaliation.
6

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of an FCA action, not that he was otherwise engaged in other efforts to stop
violations of the FCA.
The allegations do not suffice to show that Relator was engaged “in the
furtherance of an FCA enforcement action.” Relator alleges he informed his OSF
superiors that submitting the DME claims would be fraud. (Doc. 34 at 10). He also
lodged internal complaints with the OSF Compliance Committee. (Doc. 34 at 13).
He told his CFO that if OSF submitted the DME claims he would have to report it
because he is a licensed Nursing Home Administrator. (Doc. 34 at 12). Relator does
not say to whom he would report the submission though nor does he provide any
nexus between the profession of Nursing Home Administrator and the False Claims
Act or its Illinois equivalent. Despite the foregoing, the Relator’s conduct was
squarely aimed at preventing OSF from submitting the DME claims. So to the
extent he believed OSF’s actions to be violations of the FCA, Relator’s actions could
plausibly be read to constitute “efforts to stop violations of the FCA.”
But the case law is clear that simply informing one’s employer that certain
actions are “illegal,” “improper,” or “fraudulent,” without any explicit mention of the
possibility that the employee may sue, will not suffice to show the Relator was
acting in furtherance of an FCA enforcement action. Brandon, 277 F.3d at 944-45
(court held merely trying to convince superiors to comply with Medicare billing
regulations did not constitute protected activity). This is especially true for an
employee like the Relator, whose duties included planning, directing, executing and
evaluating the billing and reimbursement functions for OSF. Id. at 945; Fanslow v.
Chicago Mfg. Ctr., Inc., 384 F.3d 469, 484 (7th Cir. 2004).

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The Court is of the opinion that Relator will be unable to ever plead facts that
will establish he was acting in furtherance of an FCA action. Moreover, since
Relator has clearly chosen to disregard the Court’s guidance regarding pleading
that his actions amounted to “other efforts” under the federal and Illinois FCAs,
these retaliation claims are dismissed with prejudice.
CONCLUSION
For the reasons stated above, Counts I, II, III, IV, V, VI, VII and VIII are
dismissed with prejudice under Federal Rules of Civil Procedure 12(b)(6). Due to the
nature of the deficiencies described in this Order and Opinion, as well as Relator’s
failure to heed the Court’s clear guidance in some instances, the Court finds it
appropriate to disallow Relator any further leave to amend his complaint. Count IX,
an Illinois state law claim, is dismissed without prejudice as the Court has decided
not to retain supplemental jurisdiction over this action. See 28 U.S.C. § 1367(c)(3).
IT IS THEREFORE ORDERED that Defendant’s Motion to Dismiss (Doc. 35)
is GRANTED. CASE TERMINATED.

Entered this 1st day of July, 2014.

s/ Joe B. McDade
JOE BILLY McDADE
United States Senior District Judge

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