Bellevue v. Universal Health Services of Hartgrove Inc.
Filing
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MEMORANDUM Opinion and Order: For the foregoing reasons, Hartgrove's motion to dismiss 50 is granted, and Bellevue's complaint is dismissed with prejudice. Civil case terminated. Signed by the Honorable Thomas M. Durkin on 10/5/2015:Mailed notice(srn, )
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
UNITED STATES OF AMERICA ex rel.
GEORGE BELLEVUE; STATE OF ILLINOIS ex
rel. GEORGE BELLEVUE; and GEORGE
BELLEVUE, individually,
Plaintiffs,
No. 11 C 5314
Judge Thomas M. Durkin
v.
UNIVERSAL HEALTH SERVICES OF
HARTGROVE INC., d/b/a HARTGROVE
HOSPITAL,
Defendant.
MEMORANDUM OPINION AND ORDER
George Bellevue brings this action on behalf of the United States of America
and the State of Illinois alleging that Universal Health Services of Hartgrove Inc.
(“Hartgrove”) violated the False Claims Act (“FCA”), 31 U.S.C. §§ 3729(a)(1)(A), (B),
and the Illinois False Claims Act (“IFCA”), 740 ILCS 175/3(a)(1)(A), (B), when it
submitted certain Medicaid reimbursement claims. See R. 1. The Court dismissed
Bellevue’s initial complaint without prejudice, see R. 44, and he has now filed an
amended complaint. R. 48. Hartgrove has moved to dismiss the amended complaint
pursuant to Federal Rules of Civil Procedure 12(b)(6) and 9(b) for failure to state a
claim. R. 50. For the following reasons, Hartgrove’s motion is granted, and
Bellevue’s amended complaint is dismissed with prejudice.
Legal Standard
A Rule 12(b)(6) motion challenges the sufficiency of the complaint. See, e.g.,
Hallinan v. Fraternal Order of Police of Chi. Lodge No. 7, 570 F.3d 811, 820 (7th
Cir. 2009). A complaint must provide “a short and plain statement of the claim
showing that the pleader is entitled to relief,” Fed. R. Civ. P. 8(a)(2), sufficient to
provide defendant with “fair notice” of the claim and the basis for it. Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 555 (2007). This standard “demands more than an
unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009). While “detailed factual allegations” are not required, “labels
and conclusions, and a formulaic recitation of the elements of a cause of action will
not do.” Twombly, 550 U.S. at 555. The complaint must “contain sufficient factual
matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’”
Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). “‘A claim has facial
plausibility when the plaintiff pleads factual content that allows the court to draw
the reasonable inference that the defendant is liable for the misconduct alleged.’”
Mann v. Vogel, 707 F.3d 872, 877 (7th Cir. 2013) (quoting Iqbal, 556 U.S. at 678). In
applying this standard, the Court accepts all well-pleaded facts as true and draws
all reasonable inferences in favor of the non-moving party. Mann, 707 F.3d at 877.
Additionally, it is well-established that the FCA “is an anti-fraud statute and
claims under it are subject to the heightened pleading requirements of Rule 9(b).”
Thulin v. Shopko Stores Operating Co., LLC, 771 F.3d 994, 998 (7th Cir. 2014). Rule
9(b) requires a “plaintiff to do more than the usual investigation before filing [a]
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complaint. Greater precomplaint investigation is warranted in fraud cases because
public charges of fraud can do great harm to the reputation of a business firm or
other enterprise (or individual).” Ackerman v. Nw. Mut. Life Ins. Co., 172 F.3d 467,
469 (7th Cir. 1999) (citations omitted). A complaint generally “must provide the
who, what, when, where and how” of the alleged fraud. United States ex rel. Fowler
v. Caremark RX, LLC, 496 F.3d 730, 740 (7th Cir. 2007).
Analysis
The Court assumes familiarity with the facts and analysis in its opinion and
order of April 24, 2015 (the Court’s “prior order”). See R. 44 (United States ex rel.
Bellevue v. Universal Health Servs. of Hartgrove, 2015 WL 1915493 (N.D. Ill. Apr.
24, 2015)). To the extent that Bellevue has made new allegations in his amended
complaint, the Court will describe and address them in the course of the following
analysis.
I.
Public Disclosure Bar – Original Source
Congress amended the FCA in 2010. In its prior order, the Court applied the
pre-2010 statute to hold that Bellevue is an “original source” of the allegations in
his complaint regarding Hartgrove’s conduct before the 2010 amendments took
effect, such that those allegations are not barred by the public disclosure doctrine.
See R. 44 at 17-23 (Bellevue, 2015 WL 1915493, at *7-10). Hargrove now argues that
“[s]ubsequent to the Court’s [prior order] . . . the Seventh Circuit . . . clarified that
the amended version of the public disclosure bar ‘controls’ the entirety of a case (like
this one) filed after 2010, even where the plaintiff alleges conduct both before and
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after 2010.” R. 50 at 14 (quoting United States v. Sanford-Brown, Ltd., 788 F.3d
696, 703 (7th Cir. 2015)).
The Court disagrees that the Seventh Circuit’s decision in the Sanford-Brown
case (and in United States ex rel. Heath v. Wisc. Bell, Inc., 760 F.3d 688, 690 n.1 (7th
Cir. 2014), on which Sanford-Brown relied) changed the standard such that the
post-amendment statute is applicable to pre-amendment conduct. The Supreme
Court has held that the 2010 amendments are not retroactive. See Graham Cnty.
Soil & Water Conservation Dist. v. United States ex rel. Wilson, 559 U.S. 280, 283
n.1 (2010). And the Seventh Circuit twice relied on the Supreme Court’s holding in
Wilson to hold that the “version of [the FCA] applicable to [a plaintiff’s] lawsuit is
the version that was ‘in force when the events underlying [the] suit took place.’”
Leveski v. ITT Educ. Servs., Inc., 719 F.3d 818, 828 (7th Cir. 2013) (quoting United
States ex rel. Goldberg v. Rush Univ. Med. Ctr., 680 F.3d 933, 934 (7th Cir. 2012)
(citing Wilson, 559 U.S. at 283 n.1)); see also United States ex rel. Absher v.
Momence Meadows Nursing Ctr., Inc., 764 F.3d 699, 706 (7th Cir. 2014) (“[B]ecause
the conduct underlying this action and the filing of the action itself all occurred well
before the 2010 amendments to [the FCA], we apply that section as it existed before
2010.”). Moreover, the standard expressed in Leveski, Goldberg, and Absher—that it
“is the version [of the statute] that was in force when the events underlying [the]
suit took place [that controls]”—comports with the Supreme Court’s general
principle regarding the retroactive applicability of statutory amendments: “the legal
effect of conduct should ordinarily be assessed under the law that existed when the
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conduct took place.” Landgraf v. USI Film Prods., 511 U.S. 244, 265 (1994); see also
Jeudy v. Holder, 768 F.3d 595, 599 (7th Cir. 2014) (applying Landgraf).
Furthermore, on the basis of this principle, the Sixth and Fourth Circuits, and
courts in this District, have applied the pre-amendment FCA statutory language to
pre-amendment conduct in cases filed after the amendments’ effective date. See
United States ex rel. Antoon v. Cleveland Clinic Found., 788 F.3d 605, 615 (6th Cir.
2015) (“‘the 2010 version of the public-disclosure bar cannot be applied . . .
notwithstanding the fact that the complaint was filed after the effective date of the
amendments’” (quoting United States ex rel. May v. Purdue Pharma L.P., 737 F.3d
908, 918 (4th Cir. 2013))); United States v. Bd. of Educ. of City of Chi., 2015 WL
1911102, at *7 (N.D. Ill. Apr. 27, 2015) (applying the Leveski standard); United
States ex rel. Bogina v. Medline Indust., Inc., 2015 WL 1396190, at *2 n.3 (N.D. Ill.
Mar. 24, 2015) (same); United States ex rel. Cause of Action v. Chi. Trans. Auth., 71
F. Supp. 3d 776, 779 n.2 (N.D. Ill. 2014) (same).
Leveski, Goldberg, and Absher, however, all concerned conduct that occurred,
and complaints that were filed, before the 2010 amendments to the FCA. By
contrast, Hartgrove argues that complaints filed after the 2010 amendments are
governed by the post-amendment statutory language, even if the complaint makes
allegations about conduct that occurred before the amendments. In support of this
argument, Hartgrove cites the following passage from the Seventh Circuit’s decision
in Sanford-Brown:
[The plaintiff] filed this action in 2012, but it potentially
covers claims that have accrued since 2006—and two
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different versions of the § 3730(e)(4) have operated as law
throughout the time period covered by [the plaintiff’s]
suit. No matter. The 2010 version of § 3730(e)(4) is not
retroactive and it controls here.
788 F.3d at 703 (citing Heath, 764 F.3d at 690 n.1). And in Heath, the court stated
that “the version of the statute in place at the time [the plaintiff] filed this suit
applies.” 760 F.3d at 690 n.1. In Heath, however, both the conduct at issue occurred,
and the complaint was filed, before the amendments took effect. Thus, Heath’s
application of the version of the statute in place at the time the suit was filed does
not conflict with Leveski’s rule that the version of the statute in force when the
events underlying the suit took place controls.
Unlike Heath, Sanford-Brown concerned a complaint filed after the FCA
amendments, and conduct that occurred both before and after the amendments.
Nevertheless, in that case the court found that the plaintiff conceded that his
allegations were “publicly disclosed,” and that he lacked “independent knowledge” of
fraudulent conduct. See Sanford-Brown, 788 F.3d at 703-04. Although the court
noted that the 2010 version of the statute “controls here,” that statement was
inconsequential to the court’s analysis because the FCA both pre- and postamendment prohibits claims based on publicly disclosed information and requires
plaintiffs to have independent knowledge of the fraud. Id. Since the plaintiff in
Sanford-Brown conceded both these points, the court did not need to determine
whether the amendments applied to pre-amendment conduct.
The Seventh Circuit’s holdings in Sanford-Brown and Heath that the version
of the statute in place at the time the plaintiff filed the suit controls must be read in
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the context of those two cases. And as discussed, when read in context, the holdings
do not contradict the standard as expressed in Leveski. Furthermore, Leveski’s
standard comports with general principles of statutory retroactivity, and a number
of courts have applied the FCA amendments in accordance with Leveski’s standard.
For these reasons, the Court does not agree with Hartgrove’s argument that
Sanford-Brown constitutes a change in the law. Accordingly, the Court will not
revisit the rulings it made in its prior order and will not dismiss any of Bellevue’s
claims based on the public disclosure bar, including whether Bellevue was an
original source.
II.
Failure to State a Claim
A.
Failure to Provide Inpatient Psychiatric Services Claim
Bellevue’s amended complaint includes allegations supporting a theory of
liability that he did not include in his initial complaint. Bellevue alleges that
Hartgrove is an “inpatient psychiatric hospital” for purposes of Medicaid claims, see
R. 48 ¶ 38, and that Hartgrove’s failure to provide rooms to certain patients means
that its claims for reimbursement for “impatient psychiatric services” are
fraudulent. Id. ¶ 43. Bellevue supports this argument with reference to the Code of
Federal Regulations governing Medicaid payments and unrelated provisions of the
Illinois Administrative Code. Bellevue cites the definition of “inpatient” in the
Illinois Hospital Report Card Code to allege that “inpatient” means “a person
admitted for at least one overnight stay to health facilities, usually hospitals, that
provide board and room, for the purpose of observation, care, diagnosis or
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treatment.” Id. ¶ 39 (citing 77 ILAC 255.100). Bellevue also cites the Illinois
administrative code governing “Construction Requirements for Existing Hospitals”
to allege that a “patient room” must have “a toilet, a sink, and closet for storing
personal items.” R. 48 ¶ 40 (citing 77 ILAC 250.2630(d)(1)). Bellevue then notes that
42 C.F.R. § 441.150 “specifies the requirements of inpatient psychiatric services for
individuals under age 21,” and alleges that “[p]atients not provided a room do not
meet the definition of ‘inpatient.’” R. 48 ¶ 42. “Therefore,” Bellevue claims,
“inpatient claims . . . submitted by [Hartgrove] for patients not assigned a patient
room are false claims submitted in violation of the [FCA].” Id. ¶ 43.
This theory of liability borders on frivolous. Bellevue claims that 42 C.F.R. §
441.150 provides that “patients not provided a room do not meet the definition of
‘inpatient,’” but there is no such provision in that section of the regulations.
Bellevue argues that the definitions of “impatient” and “patient room” in the Illinois
administrative code should be imported into the federal regulations, but he offers no
authority for this theory. The definitions come from sections in the Illinois
Administrative Code governing hospital construction and procedures for reporting
data to the state. They are entirely unrelated to Medicaid payment conditions.
Thus, Bellevue cannot succeed on this theory of liability.
B.
Worthless Services Claim
As in his initial complaint, Bellevue again claims that Hartgrove’s
“submission of claims for patients assigned to dayrooms and not a patient room is a
false claim.” R. 48 at 12 (¶¶ 44-45). The Court dismissed this theory of liability in its
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prior order, explaining that it was a form of the “diminished value of services
theory” that the Seventh Circuit has rejected. See R. 44 at 25 (Bellevue, 2015 WL
1915493, at *10-11 (citing Absher, 764 F.3d at 710)). The Court rejected this theory
of liability here because “Bellevue’s only argument in support of this theory . . .
[was] that an individual room is ‘essential’ to the treatment Hartgrove provides to
its patients. . . . Yet Bellevue only makes this argument in summary fashion . . . .
and does not explain . . . why a room is so essential to treatment.” R. 44 at 25
(Bellevue, 2015 WL 1915493, at *11). In his amended complaint, Bellevue again
summarily alleges the “essential” nature of an individual room, alleging that a
“patient room, as opposed to a rollaway bed in a dayroom, is an essential
requirement for inpatients being treated for acute mental illness.” R. 48 ¶ 44.
Despite the Court’s analysis in its prior order that specifically noted this deficiency,
Bellevue has again failed to explain or describe how a patient’s treatment is
adversely affected by temporarily sleeping in a dayroom, let alone how such
circumstances equate to delivery of “worthless services” by Hartgrove, as the
Seventh Circuit requires. For these reasons, the Court again dismisses Bellevue’s
claims based on this theory of liability.
C.
False Certification Claim
Bellevue realleges his claims based on a theory of false certification. See R. 48
¶¶ 46-55. He, however, fails to add anything to his allegations in this regard. Thus,
the Court dismisses Bellevue’s claims based on this theory of liability for the same
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reasons stated in the Court’s prior order. See R. 44 at 26-29 (Bellevue, 2015 WL
1915493, at *11).
D.
Fraudulent Inducement Claim
In its prior order, the Court noted that although Hartgrove certified that it
would comply with all applicable regulations, including those limiting the number
of patients it could service, such “prospective certification can only establish an FCA
claim under a theory of fraudulent inducement where the plaintiff alleges that the
defendant never intended to comply with the conditions of participation.” R. 44 at
28 (Bellevue, 2015 WL 1915493, at *11). Bellevue alleges that Hartgrove
“fraudulently induced HFS to permit [Hartgrove] to participate in the Illinois
Medical Assistance Program.” R. 48 at 14. But this is an unadorned allegation
devoid of any factual content that was not already alleged in Bellevue’s initial
complaint. Thus, Bellevue has failed to state a claim based on a theory of fraudulent
inducement.
Conclusion
For the foregoing reasons, Hartgrove’s motion, R. 50, is granted, and
Bellevue’s complaint is dismissed with prejudice.
ENTERED:
______________________________
Honorable Thomas M. Durkin
United States District Judge
Dated: October 5, 2015
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