Suppressed v. Suppressed

Filing 44

MEMORANDUM Opinion and Order Signed by the Honorable Rebecca R. Pallmeyer on 2/3/2017. Mailed notice. (etv, )

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
UNITED STATES OF AMERICA, ex rel.,
STOP ILLINOIS MARKETING FRAUD,
LLC,
Plaintiff
v.
ADDUS HOMECARE CORPORATION,
and CIGNA CORPORATION,
Defendants.

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No. 13 CV 9059

Judge Rebecca R. Pallmeyer

MEMORANDUM OPINION AND ORDER
This is a False Claims Act action, charging Defendant home health care providers with
Medicare fraud. Relator Stop Illinois Marketing Fraud, LLC, filed a complaint under the False
Claims Act (“FCA”), 31 U.S.C. § 3729, alleging that Defendants Addus HomeCare Corporation
(“Addus”) and Cigna Corporation (“Cigna”) engaged in multiple schemes to provide kickbacks in
exchange for patient referrals; falsely certified compliance with the Anti-Kickback Statute, 42
U.S.C. § 1320a-7b; and submitted reimbursement claims and records to Medicare for services
provided to unqualified patients. Both Defendants have moved to dismiss the complaint. For
the reasons given below, Defendant Cigna’s motion is granted and Defendant Addus’s motion is
granted in part and denied in part. Relator has leave to amend the complaint within 21 days.
BACKGROUND
I.

Factual History
Relator Stop Illinois Marketing Fraud, LLC is a Delaware limited liability company formed

(by whom, the complaint does not say) in 2013 1 to bring this action. (First Am. Compl. (“FAC”)
[32] ¶ 3.) Addus is a Delaware corporation with headquarters in Palatine, Illinois. (FAC ¶ 7.)

1

Delaware entity search for Stop Illinois Marketing Fraud, LLC, STATE OF
DELAWARE: DIVISION OF CORPORATIONS, https://icis.corp.delaware.gov/Ecorp/EntitySearch/
NameSearch.aspx (type “Stop Illinois Marketing Fraud, LLC” in “Entity Name” field, then click
“Search”).
1

Addus provides home health care services in nineteen states, including Illinois; Medicare
ultimately reimburses Addus for many of these services. (FAC ¶ 7.) Cigna is the owner of
Home Physicians Management, LLC, d/b/a Alegis Care (“HPG”), a Delaware corporation with
headquarters in Bloomfield, Connecticut. (FAC ¶ 8.) HPG provides home physician services to
the elderly and disabled in several states, including Illinois. (FAC ¶ 8.) Cigna acquired HPG in
September 2013; Relator alleges, without elaboration, that Cigna is HPG’s successor-ininterest. (FAC ¶ 8.)
Many of Relator’s allegations are based on the statements of Confidential Witness 1
(“CW1”), who was an Addus employee from November 2010 through April 2012, and is now
employed bv Relator. (FAC ¶¶ 3, 69.) CW1 worked for Addus as an Account Executive, the
title Addus assigned to “sales personnel who market home health in specific regions.” (FAC
¶ 3.) CW1’s specific region was in southern Illinois. (FAC ¶ 69.)
A.

Unskilled and Skilled Home Health Services

Addus provides two broad categories of services. The first are unskilled services, such
as bathing, grooming, feeding and dressing assistance, meal preparation, housekeeping, and
transportation. (FAC ¶ 26.) These services are known as unskilled because they do not require
a nurse. (See FAC ¶¶ 57–58.) Most of the unskilled services Addus provides are reimbursed
through Medicaid, which is administered by individual states. (FAC ¶¶ 27–28.) Addus also
provides what are called skilled services. (FAC ¶¶ 31, 36–40.) Skilled services are reimbursed
by Medicare, which is administered by the federal government; the claims at issue in this case
are Medicare claims for skilled services. (FAC ¶¶ 31–35.) Medicare has several requirements
for reimbursement of skilled services.

Providers must furnish basic information about the

patient and services. (FAC ¶ 37.) In addition, as relevant here: (1) health care providers must
certify that they personally rendered the services; (2) the patient must be “confined to the
home;” (3) and the services must be “reasonable and necessary.” (FAC ¶¶ 37–38.)

2

1.

Personally Rendered by the Health Care Provider

To submit a claim to Medicare for skilled services, Addus must submit a form signed by
both the physician ordering the skilled services and a nurse from a home health agency, such
as Addus, who actually provides the services. (FAC ¶¶ 39–40.) Skilled services are billed to
Medicare in 60-day increments. (FAC ¶ 38–39.) Thus, after 60 days, providers must re-certify
the patient’s need for skilled services for a longer period of time. (FAC ¶ 38–39.)
2.

“Confined to the Home”

To qualify for Medicare coverage of skilled services, the patient must meet several
requirements, including that the patient be “confined to the home” (also known as
“homebound”). (FAC ¶ 46.) The Medicare Benefit Policy Manual specifically defines what it
means to be “confined to the home.” (FAC ¶¶ 47–52.) This definition has changed over the
period of time described in the First Amended Complaint (“FAC”), but in every version, the
definition requires that the patient is generally unable to leave the home. (FAC ¶¶ 47–52.)
Providers must certify that patients are “confined to the home” to be reimbursed by Medicare.
(FAC ¶ 39.)
3.

“Reasonable and Necessary”

If a patient meets the other qualifications for Medicare skilled services, including being
homebound, the patient is entitled to coverage of health services that are “reasonable and
necessary.” (FAC ¶¶ 53–54.) Services are reasonable and necessary, and therefore qualify as
skilled, if the patient’s condition or the complexity of the services require a registered nurse.
(FAC ¶¶ 55–57.) For example, bathing would not be classified as reasonable and necessary.
(FAC ¶ 58.) In contrast, visits from a nurse might be reasonable and necessary for a patient
who had been diagnosed with diabetes to educate the patient about the condition. (FAC ¶ 58.)
B.

Addus’s Provision of Skilled Services

Relator alleges that Addus earns a gross margin (the amount of profit it makes for a
given unit of its services) for skilled services nearly double the amount it earns for unskilled
3

services. (FAC ¶ 63.) In 2007, Addus made a concerted effort to increase its skilled services
revenue.

(FAC ¶¶ 64–65.)

Staff involved with this effort included Care Coordinators, who

worked inside senior living facilities to sign residents up for skilled services, and Account
Executives like CW1, who managed several Care Coordinators. (FAC ¶¶ 70–71.) The effort
was successful; Addus substantially grew the skilled services portion of its revenue from 2007 to
2012. (FAC ¶ 66.) In February 2013, Addus entered into an asset purchase agreement to sell
most of the assets in its skilled services group in several states, including Illinois; the transaction
was completed on March 1, 2013. (FAC ¶ 67.)
C.

Anti-Kickback Statute

The Anti-Kickback Statute (“AKS”) prohibits soliciting, receiving, offering, or paying any
“remuneration” in exchange for referring a patient for services that are reimbursed by a federal
health care program. 42 U.S.C. § 1320a-7b(b). The goal of the statute is to ensure that
compensation for referrals does not affect patient care. (FAC ¶ 15.) A submitted claim that
violates the AKS also violates the False Claims Act. 42 U.S.C. § 1320a-7b(g). When a health
care provider submits a claim to Medicare, he or she must certify that the claim complies with all
Medicare regulations, including the Anti-Kickback Statute. (Health Insurance Claim Form, Form
CMS-1500, CENTERS FOR MEDICARE AND MEDICAID SERVICES (rev. Feb. 1, 2012),
https://www.cms.gov/Medicare/CMS-Forms/CMS-Forms/Downloads/CMS1500.pdf.)

Thus, to

receive or provide kickbacks to influence referrals for Medicare patients would necessarily
require a false statement in the CMS 1500 form, resulting in a violation of the False Claims Act.
D.

Alleged Fraudulent Schemes
1.

Essington Place Referral Scheme

Relator claims that several members of Addus’s senior management team (Cindi Starek,
Georjean Sweis, Donna McNally, Jim Szymanski, and Julie Hearst) were the authors of an
alleged scheme to provide marketing services to senior living facilities in exchange for referrals

4

from these facilities of Medicare patients for skilled services. 2 (FAC ¶¶ 71, 72.) CW1’s role at
Addus was to provide those marketing services to particular senior living facilities working to
increase their occupancy. (FAC ¶¶ 74, 83–87.) In return for Addus’s marketing efforts, Relator
alleges, the facilities “would exclusively refer and recommend all of the facility’s patients to
Addus, and not to other home health companies.” (FAC ¶ 88.)
Essington Place, an independent living facility owned by an organization that operates
several such facilities, was one of the senior residential facilities where Addus assigned CW1.
(FAC ¶¶ 90–92.) CW1 worked directly with Essington Place managers, Debra and Steve Kroll,
to find and retain residents. (FAC ¶¶ 100–103.) Relator alleges that the Krolls “specifically
agreed to refer any and all Essington Place residents to Addus for skilled and unskilled for [sic]
home care in exchange for Addus’ assistance in increasing their facility’s occupancy.” (FAC
¶ 104.) Relator quotes e-mails in which Addus employees discussed their goal to increase
Essington Place’s occupancy. 3 (FAC ¶¶ 106–11, 126–35, 144–48.) As part of this scheme,
CW1 and Addus would try to discourage seniors from leaving Essington Place for a facility that
provided more dedicated skilled care. (FAC ¶¶ 112–25.) CW1 personally marketed Addus’s
skilled services to patients who lived at Essington Place but were considering a move to an
assisted living facility that provided skilled care services itself.

(FAC ¶¶ 112–25.)

Addus

employees, including CW1, also marketed its skilled services directly to potential residents
when they toured Essington Place. (FAC ¶¶ 137–42.)
Addus staffed a “wellness center” at Essington Place and paid rent for an apartment to
use for this purpose, paying an amount below the market rate for such apartments. (FAC

2

Starek was an Agency Administrator, Sweis was a National Director, McNally
was a Vice-President of Service Integration, Szymanski was a Regional Director of Sales, and
Hearst was an Account Executive like CW1. (FAC ¶ 72 n.2.)
3

For example, in a December 1, 2010 email with the subject “Essington Place
Joliet,” Hearst wrote, “This is not about what referrals they can give to us—that will come. This
is about our commitment to do external marketing with them. They have the lowest occupancy
[of facilities in the company that operates Essington Place].” (FAC ¶ 110.)
5

¶¶ 151–60.)

Addus scheduled free screenings and assessments for residents in order to

market its services.

(FAC ¶¶ 161–65.)

Relator further claims that Addus “encouraged” its

employees to buy meals and gifts for facility personnel (Relator does not say whether CW1
specifically received such encouragement). (FAC ¶ 172.) Finally, Relator alleges that Addus
offered skilled services to residents even if they were not “homebound.” (FAC ¶¶ 168–70.)
CW1 has identified eight patients, by their initials, whom she claims Essington Place
referred to Addus as part of this scheme. (FAC ¶ 143.) Relator also quotes e-mails that identify
additional referred patients, along with a date and the designation “SOC” or “start of care,”
indicating that Addus provided services to these patients, as well. (FAC ¶¶ 145–47.)
2.

Referral Schemes at Other Facilities

Relator alleges that CW1 was present at meetings in which Addus senior management
discussed similar referral schemes at other facilities. (FAC ¶ 149.) The e-mails quoted in the
FAC also allude to “more opportunities for all of us as we continue in other retirement
communities.” (FAC ¶ 148.) In fact, Relator alleges, Addus replicated the scheme at two other
facilities, identified as Church Creek and Tamrac, as well as at “a Holiday Retirement
Community in Palatine, Illinois, and twenty two (22) facilities within the Chicago areas owned by
Senior Lifestyle Corporation, and facilities owned by Sunrise Senior Living.” (FAC ¶ 176.) CW1
discussed Addus’s referral scheme with Addus employees who worked with Sunrise Senior
Living. (FAC ¶¶ 177–180.) Relator does not, however, identify particular patients that other
facilities referred to Addus.
3.

Referral Scheme with Dr. Dick

Relator alleges that in 2011, an Addus Account Representative, 4 Brianne Zitko, asked a
physician named Dr. Dick “what it would take to get referrals from him.” (FAC ¶ 185.) Dr. Dick
“mentioned” that his daughter was looking for a job; soon afterwards, Dr. Dick’s daughter,

4

Relator does not explain the role of an Account Representative or the
relationship between that position and the Account Executive position held by CW1.
6

Jaycee Dick, was hired by Addus. (FAC ¶ 186.) During the eight months while Jaycee Dick
worked there, Addus received “numerous patient referrals” for skilled services from Dr. Dick, but
those referrals stopped when Jaycee Dick stopped working for Addus.

(FAC ¶¶ 187–88.)

Relator asserts that “[a]ny patients referred to Addus by Dr. Dick were thus necessarily tainted
by” Jaycee Dick’s employment.

(FAC ¶ 191.)

Relator claims that she learned about this

scheme from Jaycee Dick and Brianne Zitko themselves. (FAC ¶ 189.)
4.

Scheme to Certify Ineligible Patients

Soon after CW1 began working for Addus in November 2010, someone in Addus
management—Relator does not say who—told CW1 that she should solicit all seniors for skilled
services, even if they did not meet Medicare’s requirements. (FAC ¶¶ 200–05.) Relator alleges
that Addus strongly encouraged its employees to market skilled services to patients, and quotes
one of Szymanski’s e-mails to that effect. 5 (FAC ¶¶ 208–16.) Addus specifically directed these
efforts toward Medicare patients. (FAC ¶ 220.) Relator claims that Medicare reimbursed Addus
for skilled services simply because many providers were willing to sign the Medicare
reimbursement form even if the patient was not qualified.

(FAC ¶¶ 206, 229–41.)

CW1

personally observed Addus employees prepare these forms, often exaggerating diagnoses and

5

Szymanski wrote:
I have talked to everyone in the region and I keep hearing “IT IS SLOW
OUT THERE”…………
What is SLOW ? I don’t know what the term “SLOW” means…… I can
tell you what SLOW is:
SLOW is making sure you have a diversification in your accounts. For
example, [i]f hospitals are lagging behind with discharges, then you have to have
a diversification of physicians, skilled nursing facilities, assisted living facilities,
independent living communities, all making referrals……… Don’t put all your
apples in one basket and that is what I have seen this month.
....
Slow is also a[n] opportunity to educate and identify patients to your
referral sources. You should constantly be educating your referral sources on
the types of patients that are appropriate for HH services.
Slow is making even more calls per day. Target yourself to make contact
with 14 to 16 decision makers per day. Activity breeds results. There is no such
thing as luck. OPPORTUNITY + PREPARATION = LUCK[.]
(FAC ¶ 212) (first three ellipses in original).
7

persuading physicians to sign, “hundreds of times.” (FAC ¶¶ 238–242.) She also saw nonhomebound seniors at Essington Place receive Medicare-reimbursed skilled services. (FAC
¶ 243–44, 251.)

Relator identifies seven seniors (again by initials) who allegedly received

skilled services but were unqualified for them—it does not specify whether they lived at
Essington Place. (FAC ¶¶ 253–54.)
CW1 had no direct involvement with patient care beyond soliciting patients for Addus’s
skilled services and had no access to any billing paperwork. (FAC ¶¶ 250, 252.) Yet a portion
of her earnings consisted of commissions based on the number of “starts of care” for patients
who were covered by Medicare. (FAC ¶ 197.) Care Coordinators also received bonuses for
skilled services “starts of care” or for converting patients from unskilled services to skilled
services. (FAC ¶ 217–18.)
Addus more than doubled its revenue from skilled services from 2008 to March 2013.
(FAC ¶ 210.) Essington Place’s occupancy also increased by over 20% during the course of
the scheme. (FAC ¶ 245.) Relator alleges that at the time CW1 began her involvement with
Essington Place, Addus did not provide any skilled services to its residents. (FAC ¶ 246.) By
the time CW1 left Addus, Addus had provided skilled services to thirty Essington Place
residents, all reimbursed by Medicare. (FAC ¶ 246.) Relator alleges that Addus had similar
success at the other facilities with parallel schemes. (FAC ¶ 248.)
5.

Referral Scheme with HPG

In some cases, a patient’s regular physician declined to sign off on the Medicare
certification forms that Addus provided. (FAC ¶¶ 259–62.) Addus would then arrange for an
HPG physician to visit the patient’s home and sign the certification form; Relator alleges that
HPG physicians did so even when a patient was unqualified for Medicare-reimbursed skilled
services. (FAC ¶¶ 258–64, 269.) In exchange, Addus would refer all patients who needed
physician care to HPG; this enabled HPG to bill Medicare for its own visits with the patients.
(FAC ¶¶ 265–66.) HPG allegedly certified every single patient referred by Addus for Medicare
8

skilled care. (FAC ¶ 270.) CW1 cannot identify specific claims because she does not have
access to HPG records, but Relator alleges, on information and belief, that HPG submitted
claims to Medicare for services provided to Addus-referred patients. (FAC ¶¶ 267–68.) Addus
eventually created a call center to centrally process all the referrals. (FAC ¶¶ 271–73.)
According to Relator, HPG participated in this scheme because the then-CEO of HPG,
Craig Reiff, “had close personal and business ties to senior management at Addus, including
Mark Heaney, Addus’ president and CEO” (FAC ¶ 275), and because Addus was a large source
of business for HPG. (FAC ¶¶ 276–80.) Relator alleges that this referral scheme was exclusive
and when on one occasion, CW1 attempted to get a non-HPG physician to assess a patient,
she was criticized for doing so.

(FAC ¶ 282.)

Finally, Relator alleges that all the claims

submitted by either HPG or Addus as a result of this arrangement violated the AKS, and the
FCA by extension. (FAC ¶ 286.)
6.

Resulting Medicare Starts of Care

Relator alleges that she arranged approximately 114 starts of care during 2011, and that
approximately 35% of these patients lived at Essington Place. (FAC ¶ 289.) Relator does not
explicitly say whether these patients were Medicare recipients, but does allege that more than
75% of these patients did not qualify for Medicare-reimbursed services. (FAC ¶ 289.) Relator
breaks these 2011 starts of care into two groups. The first consists of approximately 67 starts of
care from January to July 2011. (FAC ¶ 290.) Relator does not identify any particular patient by
name or location, but notes that patients in Essington Place are “readily identifiable” through
Addus’s records system. (FAC ¶ 290.) The second group consists of 54 starts of care from
August to November 2011, 6 where Relator identifies patients by initials and by the month in
which their care started; as with the first group, Relator explains that Essington Place residents
can be identified in Addus’s records system. (FAC ¶¶ 291–96.)

6

Though Relator identifies approximately 114 starts of care for all of 2011, it
makes no mention of the starts of care for December of that year.
9

II.

Procedural History
Relator filed its original complaint, pleading violations of the False Claims Act, under seal

on December 19, 2013. (Compl. [1].) In the original complaint, Relator did not mention specific
facilities by name, nor that Addus engaged with facilities for referrals. Instead, it alleged that
Addus sought to establish wellness centers in senior living facilities, and used these wellness
centers to solicit Medicare-covered seniors to accept Addus services. (Compl. ¶ 38–55.) The
original complaint did allege that Addus sought to provide Medicare-reimbursed skilled services
to unqualified patients, and encouraged its employees to provide gifts and meals to facility
personnel. (Compl. ¶ 55–58.) The original complaint also described the scheme to certify
unqualified patients (Compl. ¶ 59–67), and the agreement with HPG to certify patients in
exchange for Addus’s business. (Compl. ¶ 68–78.)
On December 18, 2015, the United States provided notice that it would not intervene in
the case. (Notice of the United States [12].) On April 4, 2016, Relator filed the FAC, alleging,
against all Defendants, violations of the False Claims Act through the submission of false claims
(Count I) and false records and/or statements (Count II), and conspiracy to violate the False
Claims Act (Count III). 7 (FAC ¶¶ 298–320.) Each Defendant moved to dismiss the FAC on
June 6, 2016. (Def. Cigna’s Mot. to Dismiss [33]; Def. Addus’s Mot. to Dismiss [36].)
DISCUSSION
Both Cigna and Addus have moved to dismiss. The court addresses their motions in
turn.

7

Relator alleges that Defendants have also violated the Illinois False Claims Act,
but address this potential cause of action only briefly: “Defendants also violated Illinois law,
which contains an analogous anti-kickback provision. See 305 ILCS 5/8A-3. Therefore,
Defendants have also violated the Illinois False Claims Act. See Illinois False Claims Act, 740
ILCS 175/1 et seq.” (FAC ¶ 25.) This barebones allegation is a legal conclusion and makes no
reference to the elements of such a cause of action. Defendants understandably do not
address this conclusory allegation, and any such cause of action is dismissed without prejudice.
10

I.

Claims Against Cigna
Relator’s sole allegation against Cigna is that Cigna is liable for the conduct of its

subsidiary, HPG. These allegations are insufficient to state a claim against it, Cigna contends.
Relator’s response to this argument is not satisfying. Relator first claims that “the FAC does not
allege that the fraud ever ended.” (Pl.’s Opp. to Def. Cigna’s Mot. to Dismiss (“Opp. to Cigna”)
[39] 5). Second, Relator argues that the FAC sufficiently pleads that Cigna is HPG’s successorin-interest.
Notably, Relator’s first argument, that the fraud may be ongoing, has no basis in the
FAC with respect to Cigna or HPG. The contention that the fraud may be ongoing is based
solely on the allegation that “from at least 2008 through 2013, Defendants illegally billed the
Government for, collected, and profited tens of millions of dollars.” (FAC ¶ 2.) This date range
refers to all of the alleged fraudulent schemes—as described above, there are several. But
HPG’s role is limited to one scheme: to falsely certify patients as qualified for skilled services in
exchange for referrals from Addus. (FAC ¶¶ 255–87.) The FAC alleges that Addus “virtual[ly]”
ceased providing skilled services in March 2013, when it sold its skilled services group. (FAC
¶ 67.) Thus, any scheme in which HPG provided certification for skilled services also ceased in
March 2013. 8 The allegation that Addus’s skilled services “virtually” ceased, as opposed to
completely ceased, is not sufficient to allege that the fraud is ongoing. Because Cigna acquired
HPG in September 2013, HPG’s involvement in the fraud ended before Cigna acquired it.
Furthermore, even if the FAC did allege that HPG’s role in the fraud continued, Relator
would still need some basis to hold Cigna liable. “[P]arent corporations are not liable for the
wrongs of their subsidiaries unless they cause the wrongful conduct (and so are directly liable)
or the conditions of investors' liability (‘piercing the corporate veil’) have been satisfied.” Bright
8

In contrast, unskilled services, rather than being reimbursed by Medicare, are
reimbursed by the state-administered Medicaid program. (FAC ¶¶ 26–27.) In fact, the FAC
alleges that Medicare will not reimburse unskilled services—it reimburses only reasonable and
necessary skilled services. (FAC ¶¶ 31–61.) The complaint contains no allegations about any
certification that may be required for Medicaid reimbursement for unskilled services.
11

v. Hill's Pet Nutrition, Inc., 510 F.3d 766, 771 (7th Cir. 2007); see also United States v.
Bestfoods, 524 U.S. 51, 61 (1998) (“It is a general principle of corporate law deeply ingrained in
our economic and legal systems that a parent corporation (so-called because of control through
ownership of another corporation's stock) is not liable for the acts of its subsidiaries.”) (internal
citations and quotation marks omitted). The FAC must, therefore, contain some allegation that
would make Cigna liable for HPG’s alleged fraud.
Relator’s only gesture in this direction is the assertion that Cigna is HPG’s successor-ininterest. (FAC ¶ 8.) A successor-in-interest theory “allows lawsuits against even a genuinely
distinct purchaser of a business if (1) the successor had notice of the claim before the
acquisition; and (2) there was ‘substantial continuity in the operation of the business before and
after the sale.’” Chicago Truck Drivers, Helpers & Warehouse Workers Union (Indep.) Pension
Fund v. Tasemkin, Inc., 59 F.3d 48, 49 (7th Cir. 1995) (quoting E.E.O.C. v. G-K-G, Inc., 39 F.3d
740, 748 (7th Cir. 1994)). But Relator pleads no facts that show that either element is satisfied.
In its opposition to Cigna’s motion, Relator argues that Cigna had notice of possible
claims because Cigna and HPG had a four-year partnership prior to the acquisition. There is no
reference to this partnership in the FAC, however; Relator’s brief instead cites news stories that
reference the partnership. (Opp. to Cigna 6 & n.3.) Materials outside the pleadings are ordinary
not considered on a motion to dismiss. See Greenpoint Mortg. Funding, Inc. v. Family First
Mortg., Inc., No. 05 C 4498, 2007 WL 2608554, at *6 (N.D. Ill. Sept. 4, 2007); FED. R. CIV. P. 12.
In any event, these articles do not describe any details of the partnership that indicate how it
would have put Cigna on notice of HPG’s alleged fraud. They describe “a partnership that
proved fruitful for both,” a “relationship” between HPG and an entity acquired by Cigna in 2012,
and a “successful relationship and results [Cigna] shared with [HPG] since 2009.” 9 The court

9

Steven Dashiell, Cigna-Alegis Acquisition Portrays the Growing Importance of
Embedded Case Management, DORLAND HEALTH, http://www.dorlandhealth.com/dorlandhealth-articles/CIP_1013_11_ManagedCarexml (last visited Jan. 31, 2017); Rachel Landen,
12

has no information about the nature or extent of this partnership, and Relator cites no authority
holding that the mere existence of some business relationship establishes notice.
Relator also argues that Cigna was on notice of the fraud because of its “sheer scope
and pervasiveness.” (Opp. to Cigna 7.) Relator cites to no authority regarding how much
“pervasiveness” constitutes notice. Complaints that sufficiently alleged notice generally explain
why a successor should suspect fraud. For example, in United States ex rel. Geschrey v.
Generations Healthcare, LLC, 922 F. Supp. 2d 695, 709 (N.D. Ill. 2012), a relator, an employee
of the acquiring entity, allegedly told another employee that the relator thought the subsidiary
was “dirty,” and the other employee later told the relator that the parent knew there were
“problems” with the subsidiary. The court noted that the relator “does not allege that she told
[the employee] that there was any pending litigation or that [the subsidiary] was engaged in a
specific fraudulent scheme.”

Id.

The court acknowledged “[t]hese communications in

themselves might not suffice to establish notice,” but found the allegations sufficient when
combined with the fact that the parent employed the entire subsidiary staff.

Id.; see also

Chicago Truck Drivers, 59 F.3d at 49 (finding notice when the former registered agent for the
original entity became the president and secretary of the new entity). Here, the FAC alleges
nothing like such suspicious conversations, nor whether any HPG employees remained after
March 2013 or after Cigna acquired HPG.
Instead, Relator points to numerous allegations about HPG’s and Addus’s relationship
that it claims should have alerted Cigna to HPG’s alleged fraud:
(i) HPG certified “100% of the patients sent [to it] by Addus” and . . . this was
well-known within Addus and regularly discussed at meetings (¶¶269-270); (ii)
Craig Reiff, HPG’s CEO[,] e[-]mailed his senior employees and stressed the
importance of Addus to HPG, describing it as “Illinois’ ‘largest’ home health care
company, one of HPG’s ‘top ten’ referral sources, and a ‘Priority Account’ for
HPG” (¶276); (iii) Mr. Reiff had a “strong personal relationship” with senior
managers at Addus and attended Addus internal meetings (¶¶270-280); and (iv)

Cigna Acquires Home Healthcare Company Alegis, MODERN HEALTHCARE, http://
www.modernhealthcare.com/article/20130903/NEWS/309039962 (last visited Jan. 31, 2017).
13

HPG was Addus’ exclusive provider of physicians to certify patients that other
physicians had refused to certify (¶¶282-285).
(Opp. to Cigna 7.)

Relator does not allege why any of these circumstances should have

triggered red flags for Cigna—getting referrals from Addus is not improper unless it was part of
an illegal exchange. It is unclear how Cigna would have known that other physicians had
refused to certify Addus’s patients. HPG’s certification of “100%” of Addus’s referrals may be
suspect, but there is no basis to infer that a high certification rate would have signaled fraud;
Addus, after all, was an experienced provider of skilled services.
Relator also has not alleged sufficient continuity of operations before and after the
purchase. Relator does point out that HPG continued doing business under the same name
after the acquisition. “[A]ssumption of . . . corporate identity makes a strong case for substantial
continuity.” Chicago Truck Drivers, 59 F.3d at 49. In Chicago Truck Drivers, however, the
original entity had been liquidated. See id. Here, by contrast, HPG continues to operate as a
distinct entity under Cigna’s ownership; Cigna did not assume HPG’s corporate identity. (See
FAC ¶ 8.)

The fact that Cigna has not “asserted that there was any change in HPG’s

employees, offices, or services following the acquisition” (Opp. to Cigna 6), misstates the
burden—it is up to Relator to support a successor-in-interest theory. 10
Relator has not alleged facts sufficient to hold Cigna liable as a successor-in-interest to
HPG. Several of Cigna’s other arguments may have merit, as well, 11 but the court need not
address them. Cigna’s motion to dismiss is granted.

10

Other cases that Relator uses to support this argument, similarly, involved
purchased entities that, unlike HPG, did not continue operating independently after the
purchase. See Upholsterers' Int'l Union Pension Fund v. Artistic Furniture of Pontiac, 920 F.2d
1323, 1329 (7th Cir. 1990); see also Steinbach v. Hubbard, 51 F.3d 843, 845–46 (9th Cir. 1995)
(finding continuity when the original company ceased operating, and the successor began
operating the next day, hired all the other company’s employees, leased the other company’s
equipment, but eventually stopped doing so and ceased its attempts to purchase the other
company).
11

In particular, as explained below, Relator does not identify any particular claims
that HPG itself submitted, or any patients that HPG treated or certified. (See FAC ¶¶ 267–68.)
14

II.

Claims Against Addus
Addus moves to dismiss all counts. In the alternative, Addus moves to dismiss all claims

based on alleged FCA violations that occurred before April 4, 2010 as time-barred.
A.

Counts I and II: Submission of False Claims and Records

Counts I and II allege violations of the False Claims Act.

Count I alleges that

Defendants submitted false claims, while Count II alleges that Defendants submitted false
records and statements. (FAC ¶¶ 299, 313). These two counts arise from the same courses of
conduct: (1) paying kickbacks and falsely certifying compliance with the AKS, and (2) falsely
certifying patients as eligible for home health care services, thus violating Medicare conditions
of payment. 12 (FAC ¶¶ 302, 304, 311.) The court addresses Counts I and II together, because
a false claim would necessarily involve submission of a false record under the alleged conduct,
and if any records in a submitted claim were false, the claim would have been false as well.
1.

Anti-Kickback Statute

The FAC alleges that Addus both paid kickbacks and falsely certified compliance with
the AKS. In doing so, the FAC describes four kickback schemes: (1) Addus allegedly provided
marketing services to Essington Place in exchange for referrals; (2) Addus provided marketing
services to other facilities for referrals; (3) Addus employed Dr. Dick’s daughter, in exchange for
referrals; and (4) Addus accepted false Medicare certifications from HPG in exchange for
referrals to HPG. 13

Cigna makes two threshold arguments regarding the alleged kickback

12

Relator casts falsely certifying patients and violating Medicare conditions of
payment as separate courses of conduct, but they are essentially the same behavior: certifying
patients as eligible for skilled services without following Medicare’s certification requirements.
13

This last kickback scheme involves Addus receiving kickbacks. The FAC alleges
that Addus violated the FCA by paying kickbacks in violation of the AKS, but does not
specifically state that Addus violated the FCA by receiving kickbacks. (See FAC ¶¶ 302, 304.)
The AKS, however, also prohibits receiving remuneration in exchange for referrals. 42 U.S.C. §
1320a-7b(b)(1)(A) and (2)(A). Violations of the AKS are also violations of the False Claims Act,
42 U.S.C. § 1320a-7b(g), so this deficiency does not doom this final alleged kickback scheme,
because the court can infer that Addus certified that it complied with the AKS to receive
reimbursement from Medicare. (Cf. FAC ¶¶ 19, 21.) Thus, if Addus received kickbacks for
15

schemes, and although Cigna has already been dismissed, Addus incorporates these
arguments by reference (Mem. in Supp. of Def. Addus’s Mot. to Dismiss (“Addus Mem.”) [37] 1
n.1), so the court addresses them.
a.

Certifying Compliance

First, Defendants argue that the FAC does not allege that certifying compliance with the
AKS is a condition of payment under Medicare.

But the FAC does specifically assert

“[c]ompliance with the Anti-Kickback Statute is a condition of payment under federal health care
programs” (FAC ¶ 19); Medicare is such a program. Defendants appear to believe that Relator
must allege that certifying compliance with the AKS, not just compliance, is a condition of
payment.

This is unnecessary; as one of the cases that Cigna itself cites recognizes,

“[p]articipation in federal Medicare and Medicaid programs requires healthcare providers to
submit . . . certifications attesting to their compliance with anti-kickback laws.”

Mason v.

Medline Indus., Inc., No. CIV.A. 07 C 5615, 2009 WL 1438096, at *1 (N.D. Ill. May 22, 2009);
(see also Health Insurance Claim Form, Form CMS-1500, CENTERS FOR MEDICARE AND
MEDICAID SERVICES (rev. Feb. 1, 2012), https://www.cms.gov/Medicare/CMS-Forms/CMSForms/Downloads/CMS1500.pdf.) That a party claiming reimbursement from a government
program must certify that it has complied with all conditions of that program is not an inferential
stretch.
b.

What Constitutes Remuneration

Second, Defendants argue that the referral arrangement between HPG and Addus does
not violate the AKS because certifying compliance with Medicare requirements is not
remuneration. (Def. Cigna’s Mem. in Supp. of Mot. to Dismiss (“Cigna Mem.”) [34] 12–13.) An
illegal referral arrangement under the AKS requires giving or receiving “remuneration” in
exchange for federally-reimbursed health care referrals. 42 U.S.C. § 1320a-7b(b). Relator

giving referrals, but certified that it complied with the AKS, then Addus would have submitted a
false claim.
16

asserts that the false certifications provided by HPG were themselves remuneration, in that the
certifications enabled Addus to obtain the cash payments. If the patients were truly unqualified,
then without HPG’s false certification, Addus would have no chance of obtaining the higher
revenue associated with skilled services.
Defendants challenge this interpretation. They argue that remuneration means payment
or compensation. United States v. Goldman, 607 F. App'x 171, 174 (3d Cir. 2015) (citing
Remuneration, Black's Law Dictionary (9th ed.2009)). Defendants reason that HPG did not pay
a kickback because the cash payments came from Medicare, not HPG. Defendants do not cite
any authority for the contention that remuneration must be in the form of cash or something
similar, however, and the court is not inclined to read the statute so narrowly. The kickbacks in
the other alleged referral schemes—marketing services and a job for a relative—can fairly be
characterized as remuneration, as they are things of value to the alleged recipients. See United
States ex rel. Nehls v. Omnicare, Inc., No. 07 C 05777, 2013 WL 3819671, at *15 (N.D. Ill. July
23, 2013) (“[R]emuneration, for purposes of the AKS, is defined broadly, meaning ‘anything of
value.’”) (quoting Klaczak v. Consol. Med. Transp., 485 F.Supp.2d 622, 678 (N.D. Ill. 2006).
Defendants emphasize that “certification is an essential part of what a provider legitimately does
under the Medicare program.” (Cigna Mem. 13.) But that is the point: certifications are not
legitimate if exchanged for referrals. Cash payments and hiring a doctor’s relative are also not
inherently illegal, but they become illegal when they are traded for Medicare referrals. Relator
alleges that HPG certified patients for skilled services not because the patients qualified, but
because Addus referred them.
Defendants attempt to distinguish the facts here from what they call “classic kickback”
scenarios, where the entity that bills the federal health program then pays money to the referral
source. For example, in United States v. Hancock, 604 F.2d 999, 1001 (7th Cir. 1979), a
laboratory paid “handling fees” to two chiropractors, who used the laboratory to analyze tissue
samples.

The court concluded that these handling fees were kickbacks.
17

Id. at 1001–02.

Similarly, in United States v. Greber, 760 F.2d 68, 70 (3d Cir. 1985), a company provided
diagnostic services, billed Medicare for them, and then gave a portion of that fee to the referring
physician. Defendants also distinguish these facts from cases where the remuneration was the
opportunity to bill for services not performed, thus obtaining wholly unearned revenue, see, e.g.,
U.S. ex rel. Daugherty v. Bostwick Labs., No. 1:08-CV-00354, 2012 WL 6593804, at *11–12
(S.D. Ohio Dec. 18, 2012). As Hancock and Greber demonstrate, however, HPG’s certification
can constitute a kickback even though Addus actually rendered the services that it billed to
Medicare. 604 F.2d at 1001–02; 760 F.2d at 72. Billing for services actually provided does not
sanitize a kickback.
Defendants also argue that the certifications are not remuneration because they bring
Addus only the mere expectation (or possibility) of payment. Those certifications have obvious
value, however. The FAC alleges that HPG certified patients who were not in fact qualified for
Medicare skilled services. HPG’s certifications enabled Addus to seek reimbursement for the
services. United States ex rel. Fry v. The Health Alliance of Greater Cincinnati, No. 1:03-CV00167, 2008 WL 5282139, at *1 (S.D. Ohio Dec. 18, 2008), is most factually similar to this case.
There, the relator alleged that a hospital “assigned time to cardiologists in the hospital's heart
station in proportion to the volume of referral of cardiac procedures made by cardiologists to [the
hospital].” Id. Relators claimed that time at the heart station was remuneration because it
“would have given [doctors] additional patients, [and] opportunities to bill for those additional
patients[.]” Id. The court found that this time at the heart station was remuneration because it
gave the doctors the opportunity to earn more money. Id. at *7–8. Under the allegations here,
Addus would never have earned the same amount of money without the referral scheme. 14
HPG’s patient certifications can be remuneration under the AKS.

14

For this reason, United States v. Pikus, No. 13 CR. 25 BMC, 2015 WL 3794456,
at *1 (E.D.N.Y. June 17, 2015) and U.S. ex rel. Kosenske v. Carlisle HMA, Inc., No. CIV.A. 1:05CV-2184, 2007 WL 3490537, at *1 (M.D. Pa. Nov. 14, 2007), rev'd and remanded, 554 F.3d 88
(3d Cir. 2009) do not support Defendants’ argument. Pikus simply involves a classic kickback
18

c.

AKS Schemes and Rule 9(b)

Defendants argue that Relator’s allegations do not satisfy Rule 9(b). Actions under the
False Claims Act must be pleaded with particularity, “which ‘means the who, what, when, where,
and how: the first paragraph of any newspaper story.’” U.S. ex rel. Lusby v. Rolls-Royce Corp.,
570 F.3d 849, 853 (7th Cir. 2009) (quoting DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir.
1990)).

“[M]uch knowledge is inferential[,]” however.

Id. at 854.

In Lusby, the complaint

pleaded “specific parts shipped on specific dates, and it relates details of payment[;]” the court
found this was sufficient and did not require the relator “to produce the invoices (and
accompanying representations) at the outset of the suit.” Id. “[A] plaintiff does not need to
present, or even include allegations about, a specific document or bill that the defendants
submitted to the Government.” U.S. ex rel. Presser v. Acacia Mental Health Clinic, LLC, 836
F.3d 770, 777 (7th Cir. 2016). But as Addus contends, under Lusby a relator must do more
than simply alleging generally that claims were submitted. (Addus Mem. 7.) Indeed, Relator
must plead some details about submitted claims, sufficient to support an inference of false
claims. See Lusby, 570 F.3d at 853–54.
Courts have generally agreed that when a relator pleads lengthy fraudulent schemes,
the relator need only allege representative examples of the fraud with particularity. See, e.g.,
U.S. ex rel. Dolan v. Long Grove Manor, Inc., No. 10 C 368, 2014 WL 3583980, at *3 (N.D. Ill.
July 18, 2014); U.S. ex rel. Obert-Hong v. Advocate Health Care, No. 99 C 5806, 2001 WL
303692, at *3 (N.D. Ill. Mar. 28, 2001). The parties agree that is the standard here. (Addus
Mem. 7–8; Opp. to Addus 3.)

scenario and contains no analysis of the remuneration issue. Pikus at *1. In Kosenske, the
court, in a footnote without analysis, “express[ed] its doubts” that the expectation of payment
could be remuneration, but did not rely on these doubts because it found other forms of
remuneration. Kosenske at *7 & n.9. Further, neither of these cases alleged facts where at
least some of the expectation of payment was for services that were not medically necessary
and could not otherwise have been paid.
19

United States ex rel. Grenadyor v. Ukrainian Village Pharmacy, Inc., 772 F.3d 1102 (7th
Cir. 2014), provides an illustrative example. In that case, the relator alleged that “the pharmacy
defrauded the government by making gifts to customers (such as tins of caviar), or forgiving
their copays (even if they were not entitled under the law to such forgiveness), in order to induce
them to have their prescriptions filled by it rather than by competing pharmacies.” Id. at 1104.
The district court dismissed the complaint on other grounds, but the Court of Appeals affirmed
on the basis that the complaint did not satisfy Rule 9(b). Id. at 1105–06. The Court of Appeals
explained that the relator should have identified a specific patient who was the subject of a
kickback, and stated that a claim was submitted to Medicare (or Medicaid) for that patient. Id. at
1107. Strictly construed, then, Rule 9(b) requires that for each scheme, Relator must identify a
specific patient referred in exchange for a kickback, and allege that a claim was submitted to
Medicare for that patient.
i.

Referral Scheme with Essington Place

In the context of the first alleged kickback scheme, Relator must allege that Addus
provided skilled services to a specific Essington Place patient as part of the marketing-servicesfor-referrals scheme, and that Addus claimed reimbursement from Medicare for that patient.
The FAC describes the detailed scheme with Essington Place 15 (FAC ¶¶ 81, 85–88, 91–93, 98–
104, 115–25), and identifies specific patients referred as part of this exchange. (FAC ¶ 143.)
The FAC also names patients who were referred and to whom Addus provided services—these
patients are identified in e-mail excerpts. (FAC ¶¶ 145, 147.)
Addus argues that these allegations are insufficient under Rule 9(b) because Relator
does not identify specific claims submitted to Medicare. Ordinarily, this would be problematic.
But “when details of the fraud itself ‘are within the defendant's exclusive knowledge,’ specificity
15

Addus complains that Relator does not define “Medicare referral” and “Medicare
start of care” when describing the scheme. (Addus Mem. 9.) This is far from a fatal flaw. The
context of the FAC makes it clear that “Medicare referral” means the referral of a patient who
receives health insurance through Medicare, and “Medicare start of care” means the initiation of
skilled services for a patient who is covered by Medicare.
20

requirements are less stringent.” Goldberg v. Rush Univ. Med. Ctr., 929 F. Supp. 2d 807, 815
(N.D. Ill. 2013) (quoting Jepson, Inc. v. Makita Corp., 34 F.3d 1321, 1328 (7th Cir. 1994)). Here,
Relator explained that CW1 was responsible only for soliciting patients who were on Medicare,
and had no responsibility for billing. (FAC ¶¶ 250–52.) Addus effectively suggests that CW1
should have retained more records, but this places an unreasonable burden on relators,
especially in a situation like this one, where CW1 was involved in soliciting more than a hundred
patients while at Addus. (See FAC ¶ 289.)
Moreover, the court is satisfied that Relator’s allegations both describe the scheme with
particularity and support a strong inference that Addus submitted claims to Medicare for patients
referred by Essington Place. First, Relator alleges that a significant amount of Addus’s revenue
came from skilled services reimbursements from Medicare: the FAC alleges that “Addus went
from zero to dozens of Medicare referrals” in the first three months of the Essington Place
scheme and significantly increased its Medicare revenue for the duration of the alleged scheme.
(FAC ¶ 146; see FAC ¶¶ 210, 245–46.) Second, Relator infers that Addus submitted many
claims to Medicare because Addus paid CW1 bonuses for each Medicare patient to whom
Addus provided skilled services. (FAC ¶¶ 197, 199, 252, 300.) Third, Relator identifies 54
specific Medicare starts of care in a mere four-month period from August to November 2011;
though the FAC does not specify that these were all at Essington Place, it allows the inference
that many of Addus’s patients were covered by Medicare. (FAC ¶¶ 291–295.) Finally, Relator
alleged that Addus’s billing system can identify specific patients whose claims were submitted to
Medicare. (FAC ¶ 290.) Addus alone has access to its billing system from which these patients
are most easily identified; CW1 does not, and apparently never had, access to this system.
These allegations amply support an inference that at least one of the twelve specific
patients that Essington Place referred (FAC ¶¶ 143–47) had claims submitted to Medicare.
Although Relator has not explicitly alleged that Addus submitted a Medicare claim for these
twelve patients, Relator has provided enough information to the court about specific patients
21

who received care and the quantity of claims submitted to Medicare generally to meet the
requirements of Rule 9(b).
United States ex rel. Presser v. Acacia Mental Health Clinic, LLC, 836 F.3d 770 (7th Cir.
2016) is instructive. In that case, the relator alleged that “[a defendant] had told her ‘that almost
all of Acacia's patients . . .’ dealt with Medicare[,]” and that “the questionable practices and
procedures were applied to all patients at the clinic.” Id. at 778. The district court dismissed the
complaint on the grounds that the relator “had not alleged that the defendants actually sent any
of the alleged claims or made any of the alleged statements” to the government. Id. at 777.
The Court of Appeals reversed, holding that the relator’s allegations were sufficient to infer that
the defendants had billed Medicare. Id. at 778. Of particular import for this case, the court
noted that the relator did not have access to billing information, and the court “d[id] not see how
she would have been able to plead more facts pertaining to the billing process.” Id. Here,
similarly, Relator has alleged that enough claims were submitted to Medicare, and lacked
access to further information, to pass Rule 9(b).
Addus cites several cases that passed 9(b)’s hurdle with more detail, but these cases do
not set a 9(b) threshold. In United States ex rel. Litwiller v. Omnicare, Inc., No. 11-CV-8980,
2014 WL 1458443, at *10 (N.D. Ill. Apr. 14, 2014), “Relator set[] forth the claims and payments
in sufficient detail in more than 16 paragraphs.” The detail provided, however, was for the
schemes themselves, not the submitted claims; in all but one of the six schemes alleged, the
relator did not identify any specific customers as having been affected. Id. at *2–3. In fact, the
Litwiller court rejected the defendant’s argument for dismissal on the basis that “Relator did not
give specific examples of actual false claims submitted, the date of the claim, who submitted it,
the amount of the claim, where the claim was submitted from, and to whom.” 16 Id. at *10. In

16

United States ex rel. Kalec v. Nuwave Monitoring, LLC, 84 F. Supp. 3d 793, 801
(N.D. Ill. 2015), is another case that passed the 9(b) hurdle with more detail than here. In one
cause of action for an FCA violation, the relator alleged a bill for services on a specific date, id.,
but the fact that such detail can pass 9(b) does not mean that 9(b) requires such detail. In
22

Geschrey, 922 F. Supp. 2d 695, similarly, the relator provided details of a scheme, but did not
identify specific examples of claims with particularity. Geschrey, 922 F. Supp. 2d at 700, 704.
But the court held:
Despite Relators' lack of specific knowledge about billings submitted to the
government, the fact that most of Generations's patients were receiving
government benefits and Generations billed Medicare and Medicaid . . . for each
covered patient creates a strong inference that bills for the care of patients as to
whom fraud has been alleged were submitted to the government.
Id. at 705. In that case, as in this one, the relators “had no access to billing documents and no
way to know which government program was being billed for each patient[.]” Id. at 706. The
relators also provided allegations, as Relator here has, regarding how to access the alleged
claims in the defendants’ internal systems, which “[made] the alleged fraud in the billing process
sufficiently clear to allow Defendants to respond to the allegations.” Id.
In contrast, other complaints dismissed at the pleading stage included significantly less
detail than the FAC. See U.S. ex rel. Kalec v. Nuwave Monitoring, LLC, No. 12 C 69, 2016 WL
750155, at *5 (N.D. Ill. Jan. 26, 2016) (finding no link between the representative examples of
the fraudulent practices and submitting a claim because the relator did not allege that the
patients had Medicare coverage or that claims were submitted for reimbursement); U.S. ex rel.
Schramm v. Fox Valley Physical Servs., S.C., No. 12 C 8262, 2015 WL 3862954, at *4 (N.D. Ill.
June 22, 2015) (dismissing a claim due to “the lack of detail regarding matters that [the relator]
would know from first-hand observation” and the relator’s failure to explain how she knew that
certain services were not performed). Here, Relator has explained the basis for concluding that
Addus submitted a Medicare claim for at least one of the several referred patients.
Addus also cites United States ex rel. Fowler v. Caremark RX, L.L.C., 496 F.3d 730, 742
(7th Cir. 2007) overruled on other grounds by Glaser v. Wound Care Consultants, Inc., 570 F.3d
907 (7th Cir. 2009), where the relators claimed that the defendant did not give a credit for a

contrast, the court dismissed the alleged AKS violation in the complaint because the relators
“fail[ed] to identify a single patient that was referred[.]” Id. at 807. That is not the case here.
23

returned prescription that had been reimbursed, thus defrauding the government. The Court of
Appeals upheld the dismissal because the relators “do not have any evidence to demonstrate
that Caremark failed to reconcile this excess payment on a future invoice or through an
otherwise proper accounting technique.” Id. In contrast to this case, however, the relators in
Fowler had materials from the United States’ investigation into whether it would intervene,
during which the defendant “disclosed in excess of 113,000 pages of documents.” Id. at 734.
Relator here has nothing close to this kind of access; not only does CW1 no longer work at
Addus, but Relator alleges that she never had access to billing information.
Addus points out that the government would also have this information from the
Medicare claims. (Reply in Supp. of Def. Addus’s Mot. to Dismiss (“Addus Reply”) [42] 6); see
United States ex rel. Grant v. Thorek Hosp. & Med. Ctr., No. 04 C 8034, 2007 WL 2484333, at
*2 (N.D. Ill. Aug. 29, 2007) (“[A] relaxed pleading standard for a qui tam relator cannot be
reconciled with the fact that a relator is a plaintiff who steps into the shoes of the
government.”). 17 Yet Lusby, decided two years after Grant, held that a relator need not plead
the specifics of particular bills submitted to the government. If relators were imputed with all the
knowledge that the government possessed, Lusby would not have reached this conclusion. 18
Other cases cited by the parties confirm the court’s conclusion that the FAC’s allegations
are sufficient. In Dolan, 2014 WL 3583980, at *2, 5, the relator presented examples of the
17

Like this case, the complaint in Grant also did not identify specific patients for
whom false claims were submitted. Grant, 2007 WL 2484333, at *3.
18

Addus also cites United States ex rel. Walner v. NorthShore University
HealthSystem, 660 F. Supp. 2d 891, 897 n.5 (N.D. Ill. 2009) for this proposition, but the court
there did not decide that the complaint did not satisfy 9(b) solely on that basis. In Walner,
Medicare sent the reimbursements directly to the relator, and the court pointed out that the
relator “is in no position to claim that specific facts regarding his own patient care and Medicare
payment are inaccessible to him.” Id. at 897 & n.5. Similarly, in United States ex rel. Marquis v.
Northrop Grumman Corp., No. 09 C 7704, 2013 WL 951095 (N.D. Ill. Mar. 12, 2013), “[the
relator] himself alleges that he was privy to detailed and intimate information” about the fraud.
Id. at *3 (internal citation and quotation marks omitted). Relator in this case has pleaded
specific information about the fraudulent practices—the only thing missing is details about the
submitted claims, to which Relator lacks access.
24

alleged fraudulent conduct, but “fail[ed] not only to identify any specific claim presented in
conjunction with these practices, but also to provide sufficient details—even in paragraphs
describing ‘exemplary’ cases—to satisfy Rule 9(b).” The court explained that
the relator cannot merely describe a private scheme in detail but then . . . allege
simply and without any stated reason for his belief that claims requesting illegal
payments must have been submitted, were likely submitted or should have been
submitted to the Government. Rather, he must link specific allegations of deceit
to specific claims for payment.
Id. at *3 (omission in original) (internal citations and quotation marks omitted). 19 U.S. ex rel.
Kennedy v. Aventis Pharm., Inc., 512 F. Supp. 2d 1158, 1167 (N.D. Ill. 2007), however,
concluded that arguably similar allegations were sufficient: the relators there alleged that the
defendants “promot[ed] and market[ed] off-label uses of [a drug], which they allege[d] caused
healthcare providers to present false claims to the United States government . . . .” Id. at 1163.
The court concluded:
Relators have alleged with particularity facts regarding defendants' alleged offlabel marketing. Specific facts, however, regarding particular claims were and
19

Other cases Addus has cited are readily distinguishable. See U.S. ex rel. Garst
v. Lockheed-Martin Corp., 328 F.3d 374, 378 (7th Cir. 2003) (the relator “filed documents so
long, so disorganized, so laden with cross-references and baffling acronyms[.]”); U.S. ex rel.
Swift v. DeliverCareRx, Inc., No. 14 C 7976, 2015 WL 10521636, at *4 (N.D. Ill. Oct. 26, 2015)
(“Relator pled that Defendant purchased lists of potential customers and solicited those
customers from an undisclosed ‘offshore call center,’ but all other detail is lacking.”) (internal
citations omitted); U.S. ex rel. McGinnis v. OSF Healthcare Sys., No. 11-CV-1392, 2014 WL
2960344, at *8 (C.D. Ill. July 1, 2014) (“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.”) (emphasis
added); U.S. ex rel. Bragg v. SCR Med. Transp., Inc., No. 07-CV-2328, 2011 WL 1357490, at *4
(N.D. Ill. Apr. 8, 2011) (“The Court refuses to relax the requirements of Rule 9(b) here because
specific information was available to Bragg to properly plead his fraud claims under the FCA.”);
Obert-Hong, 2001 WL 303692, at *3 (“This complaint is so conclusory it is questionable whether
it would satisfy even liberal notice pleading standards.”); U.S. ex rel. Walsh v. Eastman Kodak
Co., 98 F. Supp. 2d 141, 148 (D. Mass. 2000) (“As Chief Financial Officer of Carney, the Relator
is certainly in a position to uncover a false cost report that resulted from false invoices, if one
exists within Carney.”). In its own attack on the complaint, Cigna (again, whose arguments
Addus has incorporated) cites another similarly distinguishable case. See Bantsolas ex rel.
U.S. v. Superior Air & Ground Ambulance Transp., Inc., No. 01 C 6168, 2004 WL 609793, at *3
(N.D. Ill. Mar. 22, 2004) (“[The relator] described defendants' alleged scheme in only very
general, vague terms” and identified patients who received services, but did not allege that the
services were not medically necessary; if they were, then the claims were not illegal.).
25

are not likely within relators' reach. Given the significant proportion of medical
care in this country that is financed by Medicare and Medicaid, relators have
drawn a reasonable inference that claims for reimbursement regarding off-label
uses of Lovenox were submitted to the federal government . . . for payment.
Id. at 1167. As in Kennedy, here Relator has described the scheme in detail and identified
specific patients whose care followed the scheme, but omitted specific facts outside of its and
CW1’s reach. Relator has provided enough information, however, for the court to infer that
claims were submitted to the government. As in Lusby, “much knowledge is inferential . . . and
the inference” that Relator “proposes is a plausible one.” Lusby, 570 F.3d at 854. Relator has
alleged that Medicare reimbursements were pervasive enough that the court can infer that
Addus submitted a Medicare claim for one of the patients that Relator has identified.
ii.

Other Alleged Referral Schemes

Relator’s allegations of other referral schemes fare less well. Unlike the Essington Place
allegations, Relator does not allege examples of any specific patients who were part of the
referral schemes at other facilities. Similarly, Relator provides no particulars about any patients
referred by Dr. Dick, allegedly in exchange for Addus providing his daughter with a job. 20
Finally, Relator alleges that Addus participated in a referral scheme with HPG to certify
unqualified patients. Relator identifies patients allegedly unqualified for skilled services. (FAC
¶ 254.) The court could infer that, as in the Essington Place scheme, either Addus or HPG
submitted claims to Medicare for these patients, because it makes no sense to describe patients
as “unqualified” except in the context of qualifying for Medicare reimbursement. But Relator
20

Relator also mentions Addus’s wellness center at Essington Place, and that CW1
“found it unusual” that Addus would pay rent to Essington Place for the wellness center. (FAC
¶ 157.) Relator condemns this practice as “additional compensation to Essington Place in
exchange for Essington Place’s referrals of residents to Addus” (FAC ¶ 160), but also notes that
the rent was significantly below the market rent for similar space in Essington Place. (FAC
¶ 158.) The court is uncertain what Relator is alleging; either the rent should have been higher,
or it should not have been paid at all, but it cannot be both. Regardless, Relator gives no basis
for concluding that the rent really was “additional compensation” for referrals instead of precisely
what it purported to be: rent for Essington Place’s space. Essington Place could legitimately
benefit from Addus’s operating a wellness center at the facility; that Addus may have charged
more if it rented this unit as a residence does not necessarily make the rent discounts a
kickback.
26

provides fewer details about these example patients. In the Essington Place examples, Relator
offered e-mail excerpts discussing specific referrals, with some dates of starts of care, and
referring to the overall scheme. No other details are necessary to explain that Essington Place
referred these patients.

The allegations about the HPG referral scheme, in contrast, are

premised on the patients being unqualified for skilled services. Relator provides no details
describing how these example patients were unqualified. But CW1 was in a position to have
that information because she personally solicited such patients and should be able to identify at
least some of them as examples. (FAC ¶¶ 251, 253.) The motion to dismiss is granted with
respect to these schemes.
2.

Falsely Certifying Patients as Eligible for Skilled Services

Relator alleges other violations of the False Claims Act as part of Counts I and II: that
Defendants actually submitted claims (and supporting records) to the government for
reimbursement falsely certifying that patients were eligible for skilled services; and that the
claims complied with Medicare conditions for payment. These allegations suffer from the same
problem as the alleged kickback scheme between Addus and HPG—Relator has not provided
sufficient detail about the purported examples describing how these patients were allegedly
unqualified. 21

And although Relator alleges that Defendants did not comply with Medicare

conditions for payment, namely the face-to-face evaluation and certification/recertification
requirement (FAC ¶ 297), Relator relies on the same insufficient examples of unqualified
patients; there is no information about whether these patients had face-to-face evaluations or
improper certifications. Accordingly, the motion to dismiss is granted with respect to these
allegations.

21

Even if Relator had named HPG, not Cigna, as a defendant, Relator’s allegations
that HPG actually submitted claims suffers from the same deficiency. (See FAC ¶¶ 266–68.)
27

B.

Count III: Conspiracy

Count III alleges that HPG and Addus conspired to violate the False Claims Act. Relator
must plead a conspiracy claim premised on fraudulent conduct with particularity. Goldberg, 929
F. Supp. 2d at 825 (citing DiLeo, 901 F.2d at 627). Moreover, Relator must not only allege that
Addus and HPG had an agreement, but it also must plead the underlying fraud with particularity.
See U.S. ex rel. McGee v. IBM Corp., 81 F. Supp. 3d 643, 666 (N.D. Ill. 2015) (“Accordingly, to
adequately plead an FCA conspiracy claim, a plaintiff must allege 1) that “the [d]efendants had
an agreement . . . to defraud the government by getting a false or fraudulent claim allowed or
paid; and 2) that the [d]efendants did so for the purpose of obtaining or aiding to obtain payment
from the government or approval of a claim against the government[.]”) (omission and first and
second alterations in original) (internal citation and quotation marks omitted). As explained
above, Relator does not plead that Addus or HPG submitted claims as part of the alleged
fraudulent certification scheme with particularity.
Relator correctly notes that it need only allege an overt act to further the conspiracy, not
necessarily that the government was actually defrauded, see U.S. ex rel. Kroening v. Forest
Pharm., Inc., 155 F. Supp. 3d 882, 894–95 (E.D. Wis. 2016) (“A civil conspiracy is a
combination of two or more persons acting in concert to commit an unlawful act, or to commit a
lawful act by unlawful means, the principal element of which is an agreement between the
parties to inflict a wrong against or injury upon another, and an overt act that results in
damage.”) (internal citation and quotation marks omitted). In the FAC, however, Relator has not
alleged any overt acts with particularity. Though Relator describes meetings at which Addus
employees discussed HPG’s certifications, a call center to process referrals, and reliance on

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verbal orders to start patients on skilled services under Medicare (FAC ¶¶ 270–73), none of the
allegations describe particular unqualified patients. 22 Count III is dismissed.
C.

Time Bar

Of the claims that remain, Addus moves to dismiss any alleged AKS violations that
occurred before April 4, 2010. A qui tam action under the FCA may not be brought more than
six years after the date of the alleged false claim or more than three years after the relator
becomes aware of the underlying facts, whichever comes later. 31 U.S.C. § 3731(b). CW1
witnessed the alleged violations through April 2012, so the six-year option would be the longer
time period. Relator filed the FAC on April 4, 2016, and six years prior to that date would be
April 4, 2010. Relator alleges that these schemes may stretch back to 2008, but Addus argues
that any alleged violations before April 2010 would fall outside the statute of limitations. Relator
responds that these pre-April 2010 allegations do not fall outside the statute of limitations
because they relate back to the original complaint, filed in December 2013.
The FAC relates back to the original complaint if it “asserts a claim or defense that arose
out of the conduct, transaction, or occurrence set out—or attempted to be set out—in the
original pleading.” FED. R. CIV. P. 15(c)(1)(B). “In general, relation back is permitted . . . where
an amended complaint asserts a new claim on the basis of the same core of facts, but involving
a different substantive legal theory than that advanced in the original pleading.”

Bularz v.

Prudential Ins. Co. of Am., 93 F.3d 372, 379 (7th Cir. 1996). Relator argues that the pre-April
2010 allegations relate back to the original complaint because the complaints assert the same
cause of action—violation of the FCA—and the only difference is that the FAC includes “an
additional legal basis” for how the same conduct violates the FCA. (Opp. to Addus 14–15.)

22

While Relator does identify some unqualified patients, Relator identifies these
patients as part of Addus’s singular scheme to inflate diagnoses for skilled services, and does
not allege that HPG was involved with these patients. (FAC ¶ 254.) Moreover, as described
above, the FAC gives no detail as to why these patients were unqualified.
29

The court agrees. Although the original complaint does not mention the Anti-Kickback
Statute, it describes numerous activities that constitute the alleged remuneration that Relator
explicitly mentions in the FAC. For example, the original complaint describes Addus’s efforts to
market directly to potential senior living facility residents, encouraging perks for senior living
facility managers, and soliciting hospitalized senior living facility residents. (Compl. ¶¶ 39–47,
53–58.) In fact, the original complaint refers to “a senior housing marketing scheme.” (Compl.
¶ 38.) Even if the original complaint does not describe these activities as remuneration, the
allegations in the FAC about the Essington Place referral scheme arise from the same core set
of facts as those described in the original complaint.
In its opening brief, Addus argues that the allegations in the FAC do not arise out of the
same conduct, transaction or occurrence as the original complaint. (Addus Mem. 15 n. 3.) In its
reply memorandum, Addus argues that the fact that both complaints invoke the FCA is not
enough, and that the original complaint did not mention Essington Place or other specific
facilities and did not discuss any kickbacks.

(Addus Reply 14–15.)

As explained above,

however, the allegations in the two complaints do not simply invoke the same statute; Relator
describes the same conduct, albeit in more general terms, that it later labels as involving
kickbacks. Second, even though the original allegations were more general, the core facts are
the same. See Feltman v. Blatt, Hasenmiller, Leibsker & Moore, LLC, No. 06 C 2379, 2009 WL
3151878, at *3 (N.D. Ill. Sept. 25, 2009) (finding that although the amended complaint described
debt collection practices separate from those alleged in the original complaint, “the new claims
are based on the Defendants' debt collection practices, were mentioned in the original
complaint, and arise out of the same conduct, transaction or occurrence as those alleged in the
original complaint.”) (internal citation and quotation marks omitted); see also PNC Equip. Fin.,
LLC v. Zilberbrand, No. 12-CV-03074, 2014 WL 448384, at *6–7 (N.D. Ill. Feb. 4, 2014) (finding
that allegations of fraudulent transfer based on a specific agreement related back to the original

30

complaint, which did not mention the specific agreement but alleged similar fraudulent
transactions). These allegations are not time-barred.
CONCLUSION
For the reasons stated above, Defendant Cigna’s motion to dismiss [33] is granted, and
Defendant Addus’s motion to dismiss [36] is granted in part and denied in part. Relator has
leave to amend the complaint within 21 days.

ENTER:

Dated: February 3, 2017

_________________________________________
REBECCA R. PALLMEYER
United States District Judge

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