Suppressed v. Suppressed

Filing 110

MEMORANDUM Opinion and Order. Signed by the Honorable John Robert Blakey on 4/23/2018. Mailed notice(ep, )

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
UNITED STATES OF AMERICA ex rel.
LUAY D.F. AILABOUNI, M.D., STATE OF
ILLINOIS ex rel. LUAY D.F. AILABOUNI, M.D.,
and LUAY D.F. AILABOUNI, M.D., individually,
Plaintiffs,

Case No. 13-cv-1826

v.
ADVOCATE CHRIST MEDICAL CENTER, et al., Judge John Robert Blakey
Defendants.
MEMORANDUM OPINION AND ORDER
Relator/Plaintiff Luay Ailabouni filed this qui tam action under the False
Claims Act (FCA), 31 U.S.C. § 3729, et seq., and the Illinois False Claims Act
(IFCA), 740 ILCS 175/1, et seq., on behalf of the United States and the State of
Illinois. Relator sues Advocate Christ Medical Center (ACMC); Advocate Medical
Group (AMG); and William Hopkins, M.D. (together, the Advocate Defendants).
Relator also sues Cardiothoracic & Vascular Surgical Associates, S.C. (CVSA); Dean
Govostis, M.D.; Wade Kang, M.D.; and Sanjeev Pradhan, M.D. (together, the CVSA
Defendants).
Relator alleges that Defendants defrauded Medicare and Medicaid in various
ways through their activities in a teaching hospital.

Relator filed his second

amended complaint in December 2017. [92]. Defendants moved to dismiss that
complaint with prejudice. [97, 99]. For the reasons explained below, this Court
partially grants and partially denies the motions.
1

This Court presumes familiarity with, and incorporates by reference, its prior
opinion dismissing Relator’s first amended complaint [87]. Abbreviations in this
opinion have the same meaning as in the prior opinion.

Because Relator’s

foundational allegations (about, among other things, Medicare’s relationship with
teaching hospitals and the residency program operating at ACMC) remain
unchanged from his first amended complaint, this opinion does not include a new
background section. Likewise, this opinion does not repeat in detail the required
elements of each statute at issue.

Instead, this Court discusses Relator’s new

allegations against each individual defendant within the analysis section.
I.

Legal Standard
To survive a motion to dismiss under Federal Rule of Civil Procedure

12(b)(6), a complaint must provide a “short and plain statement of the claim”
showing that the pleader merits relief, Fed. R. Civ. P. 8(a)(2), so the defendant has
“fair notice” of the claim “and the grounds upon which it rests,” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47
(1957)). A complaint must also contain “sufficient factual matter” to state a facially
plausible claim to relief—one that “allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). This plausibility
standard “asks for more than a sheer possibility” that a defendant acted unlawfully.
Williamson v. Curran, 714 F.3d 432, 436 (7th Cir. 2013). Thus, “threadbare recitals
of the elements of a cause of action” and mere conclusory statements “do not

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suffice.” Limestone Dev. Corp. v. Vill. of Lemont, 520 F.3d 797, 803 (7th Cir. 2008).
In evaluating a complaint under Rule 12(b)(6), this Court accepts all wellpled allegations as true and draws all reasonable inferences in the plaintiff’s favor.
Iqbal, 556 U.S. at 678. This Court does not, however, accept a complaint’s legal
conclusions as true. Brooks v. Ross, 578 F.3d 574, 581 (7th Cir. 2009).
FCA and IFCA claims must meet Rule 9(b)’s heightened pleading
requirements. See United States ex rel. Gross v. AIDS Research Alliance–Chi., 415
F.3d 601, 604 (7th Cir. 2005). Rule 9(b) demands that claimants alleging fraud
“state with particularity the circumstances constituting fraud.”

Particularity

resembles a reporter’s hook: a plaintiff “ordinarily must describe the who, what,
when, where, and how of the fraud—the first paragraph of any newspaper story.”
Pirelli Armstrong Tire Corp. Retiree Med. Benefits Trust v. Walgreen Co., 631 F.3d
436, 441–42 (7th Cir. 2011) (internal quotation marks omitted).

Ultimately, a

plaintiff must always inject “precision and some measure of substantiation” into
fraud allegations. United States ex rel. Presser v. Acacia Mental Health Clinic, LLC,
836 F.3d 770, 776 (7th Cir. 2016) (internal quotation marks omitted).
II.

Analysis
The FCA and IFCA each prohibit: (1) knowingly presenting, or causing to be

presented, a false or fraudulent claim to the government for payment; and (2)
knowingly making or using, or causing to be made or used, a false record or
statement material to a false or fraudulent claim to the government. See [87] at 10–
11 (citing 31 U.S.C. § 3729; 740 ILCS 175/3).

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Relator alleges violations of both prohibitions. Here, Defendants argue that
Relator’s new allegations fail to satisfy Rule 9(b)’s particularity requirements and
fail to state claims under Rule 12(b)(6).
A.

The CVSA Physicians’ Improper Exclusion of Residents

Relator alleges that:


Govostis (as the primary surgeon) and Kang (as the assistant surgeon)
performed an “Endoleak” surgery on a Medicare recipient at ACMC in
December 2010 and falsely reported that no qualified surgical resident
was available during the procedure even though Relator, then a fourthyear General Surgery resident, observed the whole procedure. Relator
alleges that he should have assisted because an Endoleak “is not a
particularly complex operation,” he previously assisted in more complex
surgeries, and within weeks of the alleged exclusion, he assisted two
different attending physicians in performing Endoleaks. [92] ¶¶ 85–91.



Pradhan (as the primary surgeon) and Govostis (as the assistant surgeon)
performed a subclavian axillary artery aneurysm repair on a Medicare
recipient at ACMC in January 2012 and falsely reported that no qualified
surgical resident was available during the procedure even though Dr.
Saied, then in his fifth and final year as a General Surgery resident,
observed the whole procedure. Relator alleges that Saied should have
assisted because the surgery was not particularly complex and Saied
previously assisted in more complex procedures, including a complicated
aneurysm repair 18 months before this procedure. Id. ¶¶ 98–105.



Pradhan (as the primary surgeon) and Govostis (as the assistant surgeon)
performed an abdominal aortic aneurysm repair on a Medicare or
Medicaid recipient at ACMC in January 2012 and falsely reported that no
qualified surgical resident was available during the procedure even
though Saied observed the whole procedure. Relator again alleges that
Saied should have assisted because the surgery was routine and Saied
“had previously and immediately thereafter assisted in surgeries of the
same and higher complexity.” Id. ¶¶ 113–20.

These amended allegations satisfy Rule 9(b). In contrast to his first amended
complaint, Relator now provides the “who, what, when, where, and how of the
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fraud.” Pirelli, 631 F.3d at 441–42 (internal quotation marks omitted). He explains
which procedures the surgeons performed, why those procedures did not fall within
the conditions specified in 42 C.F.R. § 415.190(c),1 and why the available residents
had the qualifications to assist.
The CVSA Defendants argue that Relator fails to show that they submitted
any false claims to Medicare.

[100] at 13–15.

Relator worked as a resident

physician, not a coder in CVSA’s billing department. Given Relator’s position—one
that “does not appear to include regular access to medical bills”—this Court finds no
basis to require that he “plead more facts pertaining to the billing process.” Presser,
836 F.3d at 778. In light of the record here, this Court can also reasonably infer
that Govostis, Kang, and Pradhan would not have performed surgeries without
CVSA submitting any claims for those procedures to Medicare for the patients that
Relator identified. See United States ex rel. Lusby v. Rolls-Royce Corp., 570 F.3d
849, 854 (7th Cir. 2009).
The CVSA Defendants further argue that Relator’s allegations cannot survive
because they merely demonstrate his subjective disagreement with the attending
physicians’ medical judgments about residents’ ability to assist during surgery. [10]
at 5–7. Such medical judgments, they say, form “an insufficient basis for a fraud
claim.” Id. at 6. That argument carries little weight based upon the record. Here
Relator provides enough medical context to state a facially plausible claim that the

Although Relator does not explicitly rule out each of the five possible conditions, he does not have to
do so at this point in the proceedings. This Court can reasonably infer, for example, that because the
CVSA Defendants all practiced as vascular surgeons, the procedures did not involve “a medical
condition that requires the presence of, and active care by, a physician of another specialty during
surgery.” § 415.190(c)(3) (emphasis added).
1

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attending physicians did not exclude residents based upon medical judgment, but
rather so they could make more money for CVSA. Cf. Presser, 836 F.3d at 779
(“Presser provides no medical, technical, or scientific context” to explain “why
Acacia’s alleged actions amount to unnecessary care forbidden by the statute.”).
Finally, the CVSA Defendants argue that Relator fails to plead sufficient
facts about the patients’ health to demonstrate that “using a resident assistant
would have been indisputably appropriate for the specific surgeries.” [100] at 7
(emphasis added).

Relator does not need to prove anything “indisputably” to

survive a motion to dismiss; he only needs to state a facially plausible claim that
allows this Court to draw a reasonable inference of misconduct. See Iqbal, 556 U.S.
at 678. He does so. Further factual development at summary judgment might
reveal that Govostis, Kang, and Pradhan properly excluded residents from the
procedures because, for example, the patients had unusual risk factors that made
the surgeries more complex. At this stage, however, the alleged claims survive
because the new details inject “precision and some measure of substantiation” into
Relator’s fraud allegations. Presser, 836 F.3d at 776.
The CVSA Defendants make no standalone argument for dismissing CVSA
itself. See generally [100]. Thus, CVSA remains in the case because, as an Illinois
professional corporation, it faces liability for misconduct that its officers,
shareholders, or employees committed while “engaged on behalf of the corporation
in the rendering of professional services.” 805 ILCS 10/8.
Lastly, this Court dismisses the allegations about a surgery that Pradhan

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and Govostis performed on a patient with private insurance, [92] ¶¶ 106–12,
because FCA liability cannot arise from submitting claims to a private payer, 31
U.S.C. § 3729.
B.

Improper Use of Modifier 62

For the first time, Relator alleges that, in July and December 2010, Govostis,
Kang, and Pradhan improperly performed surgeries together and then billed
Medicare for co-surgeon services using modifier 62 when they should have used
residents as assistant surgeons instead.

[92] ¶¶ 92–97, 121–126.

The CVSA

Defendants argue, among other things, that these new claims are time-barred. This
Court agrees.
The FCA and IFCA have six-year statutes of limitations, 31 U.S.C. §
3731(b)(1); 740 ILCS 175/5(b)(1), which expired for these claims in 2016. Relator
makes no attempt in his response brief to argue that these claims relate back to his
earlier complaints under Rule 15(c) (indeed, he does not defend the claims at all).
See generally [105]. Accordingly, he waives any relation-back argument. United
States v. Cisneros, 846 F.3d 972, 979 (7th Cir. 2017). Because Relator’s previous
complaints all focused upon billing requirements for assistant surgeons, not cosurgeons, this Court dismisses Relator’s claims alleging the improper use of
modifier 62 as time-barred.
C.

Hopkins’ Improper Use of a PA

Relator claims that Hopkins improperly used a PA instead of a resident
during four surgeries in October 2011. [92] ¶¶ 127–47. The Advocate Defendants

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argue that these allegations fail to state a claim because Medicare’s conditions of
payment for assistant surgeons do not apply to PAs. [98] at 11. This Court agrees.2
The Social Security Act provides that Medicare will not pay for the services of
an assistant at surgery in a teaching hospital, except under certain conditions,
including “exceptional medical circumstances” and “such other circumstances as the
Secretary determines by regulation.” 42 U.S.C. § 1395u(b)(7)(D)(i). The Act defines
“assistant at surgery” as “a physician who actively assists the physician in charge of
a case in performing a surgical procedure.” Id. § 1395u(b)(7)(D)(ii). Likewise, the
implementing regulation identifies five conditions under which Medicare will pay
for such assistants at surgery, and defines “assistant at surgery” as “a physician
who actively assists the physician in charge of a case in performing a surgical
procedure.” § 415.190.
In contrast, the CMS Manual repeats the above definition of “assistant at
surgery,” but also explains that PAs can serve as assistants at surgery when
“authorized to provide such services under State law.”

Ctrs. for Medicare &

Medicaid Servs., Pub. 100-04, Medicare Claims Processing Manual Ch. 12, §
100.1.7A (2017). And the CMS Manual explicitly states:
Procedures billed with the assistant-at-surgery physician modifiers
-80, -81, -82, or the AS modifier for physician assistants, nurse
practitioners and clinical nurse specialists, are subject to the
assistant-at-surgery policy. Accordingly, pay claims for procedures
with these modifiers only if the services of an assistant-at-surgery
are authorized.
Id. § 20.4.3. Relator points out that Illinois law allows PAs to act as assistant

The Advocate Defendants also raised this argument during briefing on their earlier motion to
dismiss, [60] at 24, but this Court granted the motion for a different reason, [87] at 15–16.
2

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surgeons, [105] at 16 (citing 225 ILCS 95/7.7), and argues that the CMS Manual
does not conflict with federal law, but rather explains the applicable statute and
regulation, id. at 16–18.
Under certain circumstance, courts can defer to an agency’s interpretation of
its own ambiguous regulations. Christopher v. SmithKline Beecham Corp., 567 U.S.
142, 155 (2012); Chase Bank USA, N.A. v. McCoy, 562 U.S. 195, 207 (2011) (When
“an agency’s regulations construing a statute are ambiguous, we next turn” to the
agency’s

“subsequent

interpretation

of

those

regulations.”).

But

agency

interpretations (such as the CMS Manual) fail to warrant judicial deference when
they interpret unambiguous regulations. From a more foundational standpoint, if a
statute clearly expresses Congress’ intent, “the court, as well as the agency, must
give effect to the unambiguously expressed intent of Congress.” Chevron, U.S.A.,
Inc. v. Natural Res. Def. Council, 467 U.S. 837, 843–44 (1984).
Here, § 1395u(b)(7)(D)(ii) and section 415.190(b) plainly and unambiguously
confine the scope of Medicare’s assistant-at-surgery payment restrictions to
physicians. Thus, this Court cannot defer to the more expansive view that the CMS
Manual advances. See Chevron, 467 U.S. at 843–44; Chase Bank, 562 U.S. at 207.
Because the payment restrictions that Relator accuses Hopkins of violating do not
apply to assistant-at-surgery services provided by PAs, this Court grants the motion
to dismiss Hopkins with prejudice. Accordingly, this Court also grants the motion
to dismiss AMG with prejudice, because it cannot face liability for submitting false
claims if Hopkins did not engage in any underlying misconduct that rises to the

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level of an FCA violation.
D.

GME Fraud Through Fraudulent MCRS

Relator alleges that ACMC defrauded Medicare out of GME payments by
submitting MCRs that reflected fraudulent billing practices. [92] ¶¶ 162–76. As
this Court explained in its previous opinion, Relator adequately pleads that ACMC
submitted MCRs to CMS that certified compliance with Medicare statutes and
regulations. [87] at 23 (citing Leveski v. ITT Educ. Servs., Inc., 719 F.3d 818, 838–
39 (7th Cir. 2013) (at the outset of litigation, a plausible inference of a false
submission can satisfy Rule 9(b) and a relator does not need to produce the false
document)).
Previously, Relator failed to plead that ACMC submitted fraudulent MCRs
because he failed to allege any underlying physician misconduct with the requisite
particularity. Id. Both sides say that Relator’s allegations regarding false MCRs
rise or fall with his allegations regarding the submission of false claims for
assistant-at-surgery services. See [105] at 23; [106] at 15. Accordingly, Relator
sufficiently pleads that ACMC knowingly submitted false cost reports in violation of
the FCA, because here he: (1) adequately pleads FCA violations by the CVSA
physicians; (2) alleges that MCRs reported on ACMC’s total costs for “providing
services to all patients” (including those that the CVSA physicians treated at
ACMC), [92] ¶ 167; and (3) alleges—with specific examples—that higher-ups at
ACMC knew of the CVSA misconduct, id. ¶¶ 148–61.
Neither side mentions materiality. For Relator’s implied-certification theory

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to proceed, he must also allege that the misrepresentations were material, meaning
that—if known—they likely would have influenced the government’s decisions to
make GME payments to ACMC. See Universal Health Servs., Inc. v. United States
ex rel. Escobar, 136 S. Ct. 1989, 2003–04 (2016) (identifying possible methods of
demonstrating materiality), remanded to United States ex rel. Escobar v. Universal
Health Servs., 842 F.3d 103 (1st Cir. 2016) (Escobar II). Here, Relator adequately
pleads materiality because he alleges (and section 415.190 explicitly says) that
Medicare will not pay for assistant-at-surgery services that do not meet section
415.190(c)’s conditions. [92] ¶ 38. He also alleges that ACMC’s fraud “undermined”
the essence of the relationship between Medicare and teaching hospitals, id. ¶ 176,
and that Medicare would not have made the GME payments if it knew about the
fraud, id. ¶ 181. At this stage, that suffices for materiality. See United States ex
rel. O’Donnell v. Am. at Home Healthcare & Nursing Servs., Ltd., No. 14-cv-1098,
2017 WL 2653070, at *8 (N.D. Ill. June 20, 2017) (citing Escobar II, 842 F.3d at
110).

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III.

Conclusion
This Court partially grants and partially denies Defendants’ motions to

dismiss [97, 99]. This Court grants the motions with prejudice as to allegations
involving the improper use of modifier 62 and as to Hopkins and AMG. This Court
denies the motions as to ACMC and the CVSA Defendants. The status hearing set
for April 25, 2018, at 9:45 a.m. in Courtroom 1203 stands. The parties shall come
prepared to set case management dates.
Dated: April 23, 2018
Entered:

____________________________
John Robert Blakey
United States District Judge

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