UNITED STATES et al v. HEALTHNET, INC.
Filing
84
ORDER granting 77 Motion to Hold Proposed Settlement is Reasonable and Dismiss Claims brought on behalf of the State. An appropriate order will be entered. ***SEE ORDER FOR ADDITIONAL INFORMATION*** Signed by Judge James R. Sweeney II on 3/3/2022. (JDC)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
UNITED STATES ex rel. Judith Robinson,
STATE OF INDIANA ex rel. Judith
Robinson,
Plaintiffs,
v.
HEALTHNET, INC.,
Defendant.
JUDITH ROBINSON,
Relator.
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No. 1:19-cv-04258-JRS-DML
Entry and Order
On October 17, 2019, qui tam Relator Judith Robinson ("Relator" or "Robinson")
commenced this action on behalf of the United States and the State of Indiana (the
"State") against Defendant HealthNet, Inc. ("HealthNet") False Claims Act ("FCA"),
31 U.S.C. § 3729 et seq. and the Indiana False Claims and Whistleblower Protection
Act ("IFCA"), Ind. Code § 5-11-5.5-1 et seq. On March 2, 2020, Relator filed her
Amended Complaint, (Am. Compl., ECF No. 9), alleging violations of the FCA (Count
I), the IFCA (Count II), and breach of contract (Count III), which was dismissed
previously. On May 4, 2020, Indiana filed its Complaint-in-Intervention, (ECF No.
17), alleging claims under the IFCA (Count I) and the Indiana Medicaid False Claims
and Whistleblower Protection Act ("IMFCA"), Ind. Code § 5-11-5.7-1 et seq. (Count
II).
The United States declined to intervene in this action. (ECF No. 14.) As a result,
Relator maintains this action in the name of the United States.
In May 2020, the State moved to dismiss parts of Counts I and II of Relator's
Amended Complaint for failure to state a claim based on res judicata and the statute
of limitations. (ECF No. 18.) Relator consented "to dismissing the wrap-around
claims prior to October 17, 2013," (Mot. to Dismiss, ECF No. 37), the Court dismissed
with prejudice all claims alleged in Counts I and II of Relator's Amended Complaint
except for the HealthNet wrap-around claims for the period from October 18, 2013,
to 2015. (Order on Mot. to Dismiss, ECF No. 38.)
On July 12, 2021, the State and HealthNet filed a Joint Motion to Hold Proposed
Settlement is Reasonable and to Dismiss Claims Brought on Behalf of the State.
(Joint Motion, ECF No. 77.) First, they request the Court to determine that the State
Settlement Agreement between the State and HealthNet ("Proposed Settlement") is
fair, adequate, and reasonable in light of the circumstances under Indiana Code § 511-5.7-5(c). Second, they seek dismissal of the State's Complaint-in-Intervention
with prejudice subject to the terms of their settlement agreement. Third, they ask
the Court to retain jurisdiction for purposes of resolving any dispute concerning the
Relator's rights to an award under Ind. Code § 5-11-5.7-6. The Proposed Settlement
does not address Count I of Relator's Amended Complaint, which is brought on behalf
of the United States under the FCA.
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HealthNet has not received any payments for the ultrasound review claims that
are the subject of this case—the “Covered Conduct” as described in the Proposed
Settlement. (Proposed Settlement 2, ¶ F, ECF No. 77-1.) Under the terms of the
Proposed Settlement, HealthNet will release and waive all rights and claims to those
payments in exchange for the dismissal of the State’s Complaint-in-Intervention, (id.
at 3–4, ¶¶ 1–2), and the State agrees to release HealthNet from any civil or
administrative monetary cause of action that the State has for any claims submitted
or caused to be submitted to the State's Medicaid Program as a result of the Covered
Conduct, (id. at 4, ¶ 3.)
The State valued the release, waiver, and discharge to the State at $155,413.58.
(Proposed Settlement, 3, ¶ 1, ECF No. 77-1.) The State determined the value by
starting with the amount the State proposed in a draft shared with Relator on June
6, 2018, which totaled $1,454,541.91. (Br. in Support Joint Mot. 3, 11–12, ECF No.
78; see ECF No. 62-3 at 32–33.) That amount was adjusted to reflect: (1) the Order
dismissing with prejudice all claims alleged in Counts I and II, except the HealthNet
ultrasound wrap-around claims for the period from October 18, 2013, to 2015, and
taking into account the applicable Federal Medical Assistance Percentage ("FMAP")
of 66.92%. 1 The Proposed Settlement is conditioned upon the Court's approval.
More specifically, the State started with the $1,454,541.91 identified in the Relator's
Amended Complaint, and subtracted:
(1) the total claims for 2011, as identified in Relator’s Amended Complaint,
$343,662.63, (Relator's Am. Compl. ¶ 35, ECF No. 9), that were dismissed
without prejudice due to being barred by the statute of limitations, (see Order,
ECF No. 38);
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On July 26, 2021, Robinson filed an Objection to State's Proposed Settlement and
Dismissal of Count II. (Relator's Obj., ECF No. 79.)
On February 24, 2022, the Court held a hearing on the Joint Motion and Objection.
Having heard argument and considered the briefing and record before it, the Court
finds that the Joint Motion should be granted.
Discussion
Under the IMFCA, with court approval, "the attorney general . . . may dismiss the
action" after giving the person who initially filed the complaint notice and an
opportunity to be heard. Ind. Code § 5–11–5.7–5(b). The court may consider the
request to dismiss the action, but is not bound by it. Id. The attorney general "may
settle the action if [the] court determines, after a hearing, that the proposed
settlement is fair, adequate, and reasonable in light of the circumstances." Id. § 5–
11–5.7–5(c). "The court may consider an objection to the settlement brought by the
person who initially filed the complaint, but is not bound by this objection." Id.
(2) the total claims for 2012, as identified in Relator’s Amended Complaint,
$368,565.19, (Relator's Am. Compl. ¶ 35, ECF No. 9), that were dismissed
without prejudice due to being barred by the statute of limitations, (see Order,
ECF No. 38);
(3) the portion of the total claims for 2013, as identified in Relator’s Amended
Complaint, $348,994.91, (Relator's Am. Compl. ¶ 35, ECF No. 9), that were
dismissed without prejudice due to being barred by the statute of limitations,
those made on or before October 17, 2013, (see Order, ECF No. 38), which
represents 285/365 of the annual amount or $272,502.87, leaving a remainder
of $469,811.32.
Then the State took the remainder of $469,811.32 and subtracted the applicable
FMAP of 66.92%, (Complaint-in-Intervention ¶ 24, ECF No. 17), or $314,397.74, to
arrive at the $155,413.58 value. (Br. in Support Joint Mot. 12, ECF No. 78.)
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In reviewing the proposed settlement and motion to dismiss, the Court looks to
the FCA for guidance on reviewing the proposed settlement and motion to dismiss.
United States v. Indianapolis Neurosurgeon Grp., Inc., No. 1:16-cv-1778-JMS-DML,
2013 WL 652538, at *7 n.9 (S.D. Ind. Feb. 21, 2013) (stating "the Indiana FCA mirrors
the Federal FCA in all respects") (citation omitted).
Under the FCA, "'[i]f the
Government proceeds with the action,' it assumes 'primary responsibility' for
prosecuting it." United States ex rel. CIMZNHCA, LLC v. UCB, Inc., 970 F.3d 835,
841 (7th Cir. 2020) (quoting 31 U.S.C. § 3730(c)(1)); see also Ind. Code § 5-11-5.7-5(a)
(analogous provision). 2 However, the Relator "may continue as a party to the action,"
subject to certain limitations.
CIMZNHCA, 970 F.3d at 841 (quoting U.S.C. §
3730(c)(1)).
The first limitation is the government's right to dismiss the action. The FCA
allows the United States to dismiss the action over the relator's objection if the relator
has been given notice and an opportunity for a hearing. Id. (quoting 31 U.S.C.
§3730(c)(2)(A)); see also Ind. Code § 5-11-5.7-5(b) (like provision additionally
requiring court approval). Another limitation is the government's right to settle the
action over the relator's objection "if the court determines, after a hearing, that the
proposed settlement is fair, adequate, and reasonable under all the circumstances."
CIMZNHCA, 970 F.3d at 841 (quoting 31 U.S.C. § 3730(c)(2)(B)); see also Ind. Code §
5-11-5.7-5(c).
If the Government declines to proceed with the action, the relator "shall have the
right to conduct the action." CIMZNHCA, 970 F.3d at 841 (quoting U.S.C. §
3730(c)(3)); see also Ind. Code § 5-11-5.7-5(e) (analogous provision).
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Further, dismissal of an action under the FCA is subject to the Federal Rules of
Civil Procedure. CIMZNHCA, 970 F.3d at 849–51. Under Rule 41(a), "subject to . . .
any applicable federal statute, the plaintiff may dismiss an action without a court
order by filing a notice of dismissal before the opposing party serves either an answer
or a motion for summary judgment." Fed. R. Civ. P. 41(a)(1)(A)(i). "This right is
'absolute.'" CIMZNHCA, 970 F.3d at 849 (citation omitted). But Rule 41(a) "does not
authorize an intervenor-plaintiff to effect voluntary dismissal of the original
plaintiff's claims." Id. at 850. This is where the FCA picks up: "'The Government
may dismiss the action' without the relator's consent if the relator receives notice and
opportunity to be heard." Id. (quoting 31 U.S.C. § 3730(c)(2)(A)). However, the
government's dismissal may not violate the relator's substantive due process or equal
protection rights. Id. at 851–2 (citations omitted). And the dismissal may not be an
attempt to perpetrate a fraud on the court. Id. at 852. These are "generous limits"
on the government's power to dismiss, which will "be breached rarely, if ever." Id.
Two questions are presented for the Court's consideration: (1) whether the State
is entitled to dismissal, and (2) whether the proposed settlement is fair, adequate,
and reasonable in light of the circumstances.
A. Dismissal: Notice and Opportunity to Be Heard
The State's right to dismiss the action without Relator's consent is conditioned on
Relator having been given notice and an opportunity to be heard. Ind. Code § 5-115.7-5(b); see CIMZNHCA, 970 F.3d at 850 (quoting 31 U.S.C. § 3730(c)(2)(A)). In this
case, Relator received notice of the Joint Motion seeking dismissal, she was given an
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opportunity to be heard at the February 24, 2022, hearing, and she took advantage
of that opportunity. Thus, unless the State's dismissal violates Relator's substantive
due process or equal protection rights, or is an attempt to perpetuate a fraud on the
Court, the State has a right to dismiss, see CIMZNHCA, 970 F.3d at 851–2, with court
approval, see Ind. Code § 5-11-5.7-5(b).
No substantive due process or equal
protection violations have been identified by Relator. Nor has any argument that the
State's dismissal is an attempt to perpetuate a fraud on the Court. Therefore, the
Court finds that the State is entitled to dismissal.
However, the State and HealthNet request that dismissal be subject to the terms
of the Proposed Settlement and that the Court retain jurisdiction for purposes of
resolving any dispute as to Relator's rights to a share. That brings the Court to the
second question: whether the Proposed Settlement is fair, adequate, and reasonable
under all the circumstances.
B. Proposed Settlement: Fair, Adequate, and Reasonable Under the Circumstances
The State argues there are several reasons for concluding that the Proposed
Settlement is in the State's best interests. First, it never paid HealthNet any funds
due to the Covered Conduct, and since the State has not sustained any damages, it is
not entitled to a damages award. (Br. in Support Joint Mot. 6, ECF No. 78 (citing
Ind. Code § 5-11-5.5-2(b) and § 5-11-5.7-2(a)).) Second, public policy weighs against
assessing a monetary penalty against HealthNet who is one of the largest providers
of medical services to the Medicaid recipients in the State, providing healthcare to
more than 56,000 patients with a total of 300,000 patient visits per year, with many
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patients at or below the federal poverty level and who provides full service healthcare,
including pediatric, prenatal, OB delivery, behavioral health, dental, nutrition
counseling, and immunizations. Any penalty would reduce the funds available to
serve the underprivileged population and would not further Indiana Medicaid's
mission. (Br. in Support Joint Mot., 6–7, ECF No. 78.) Third, the State considers
HealthNet's release of its right to payment on the unpaid wrap-around claims to be
proportionate to the gravity of the alleged misconduct. (Id. at 7.) The State explains
that HealthNet ceased the practices described in the complaint in United States ex
rel. Robinson v. Indiana University Health, Inc., No. 1:13-cv-02009-TWP-MJD
("Robinson I") shortly after the wrap-around allegations were added to that action;
HealthNet since then has not taken another $4.7 million of wrap-around payments
for services other than physician-ultrasound reviews from 2011 through 2014,
awaiting the State's approval in order to avoid further potential improprieties;
HealthNet already paid $9 million to the United States and the State to resolve
claims in Robinson I; and HealthNet has worked cooperatively to enter into
settlements even though HealthNet disputes liability. (Br. in Support Joint Mot. at
7–8.) Finally, the State asserts that the Proposed Settlement is reasonable from an
opportunity-cost perspective, citing its limited resources in the Medicaid Fraud
Control Unit ("MFCU"), the MFCU's substantial number of open cases, and the time,
talent, and litigation costs of trying the disputed claims in this case. (Id. at 8.)
Based on all these considerations, the State has determined that HealthNet's
waiver of all rights and claims to the payments described in the Covered Conduct in
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exchange for the dismissal of all claims on behalf of the State is in the State's best
interest. (Id. at 8–9.) Relator has not challenged the reasons articulated by the State.
Instead, she asserts that these same reasons existed back when she entered into a
settlement with HealthNet in 2016. The Court finds that all of these considerations
identified by the State support the conclusion that the Proposed Settlement is in the
best interests of the State and the Hoosiers served by HealthNet.
However, as noted, Relator objects to the settlement on the grounds that it
unfairly reduces her qui tam recovery by depriving her of a recovery she made earlier
for the State on the same ultrasound wrap-around claims. Relator maintains that
she entered into an agreement with HealthNet in connection with Robinson I in
which HealthNet agreed to waive/release its claims for reimbursement of the wraparound claims in consideration for a release of liability, and that the State approved
the agreement. If Relator had such an agreement with HealthNet, she could file a
lawsuit to enforce that agreement. She tried to do so in this case, but her claim to
enforce an oral agreement (Count III of her Amended Complaint) was dismissed for
lack of subject-matter jurisdiction. (Order on Motions to Dismiss & Mot. to Enforce
Settlement Agreement, 7–15, ECF No. 80.)3
As the State contends, Relator, not the Proposed Settlement, reduced her potential
recovery. First, Relator did not obtain a tolling agreement with HealthNet for the
wrap-around claims she voluntarily dismissed without prejudice in Robinson I, which
Any action to enforce an agreement would require its own independent basis for subjectmatter jurisdiction. Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 378 (1994). Relator's
Amended Complaint does not plead diversity jurisdiction. (See Am. Compl. ECF No. 9.)
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would have preserved the wrap-around claims from January 1, 2011, through October
17, 2013. (See Br. in Support Joint Mot. 9–10, ECF No. 78.) Instead, the statute of
limitations ran on some of the claims before Relator filed this action, and she
consented to the dismissal of the ultrasound wrap-around claims prior to October 17,
2013, which claims have been dismissed with prejudice. According to the State, the
wrap-around claims barred by the statute of limitations and dismissed with prejudice
total $984,730.69, (see Am. Compl. ¶ 35, ECF No. 9), leaving a remainder of
$469,811.32 prior to application of the applicable FMAP of 66.92%, (Br. in Support
Joint Mot. 10, ECF No. 78). 4
Second, Relator pleaded her state-law claims under the IFCA and only the IFCA;
she pleaded no claims under the IMFCA. (Am. Compl., ECF No. 9; Br. in Support
Joint Mot. 9–11, ECF No. 78.) The IFCA does not apply to a claim, request, demand,
statement, record, act, or omission made or submitted after June 30, 2014, in relation
to the Medicaid program described in Indiana Code § 12–15. See Ind. Code § 5–11–
5.5–2 (a)(2). According to the State, the claims covered only by the IMFCA have a
value of $224,753.88 ($168,565.41 + $56,188.47), prior to the application of the FMAP
of 66.92%. 5 (Br. in Support Joint Mot. 11, ECF No. 78.) By omitting claims under
the IMFCA, Relator reduced the basis for a relator’s share under Indiana Code § 5–
11–5.7–6 from $1,454,541.91 to $245,057.44 ($1,454,541.91 - $984,730.69 $224,753.88 = $245,057.44). 6 Upon application of the FMAP of 66.92%, the basis for
The FMAP reflects the approximately one-third funding of Medicaid claims by the federal
government.
5 $168,565.41 is for the second half of 2014; $56,188.47 is for the first two months of 2015.
6 By the Court's math, this comes to $245,057.34 rather than $245,057.44.
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the relator’s share under Indiana Code § 5–11–5.7–6 would be $81,065. 7
(Id.)
According to the State, if the Proposed Settlement were approved, the basis for the
Relator’s share would be nearly twice that amount—$155,413.58. (Br. in Support
Joint Mot. 11, ECF No. 78.)
Relator argues that the Proposed Settlement violates the public policy for paying
qui tam share awards—incentivizing insiders to report fraud on the government. She
also argues that the settlement sends a message to future qui tam relators that the
State does not honor its statutory obligations to relators, which could disincentivize
future whistleblowers from coming forward. The Proposed Settlement does neither
of these. Relator's own actions and omissions have reduced the basis for a relator's
share. And at oral argument, the State suggested that it could have settled the claims
without a relator's share but has decided that would not be fair to Relator. Instead,
the State has decided to give Relator a share, indeed based on an increased basis, of
what the State believes the value of the claims would have been to the State had the
State paid them.
The State argues that the FMAP of 66.92% should be applied in determining the
basis for a relator's share under the IFMCA. The Court agrees. This action addresses
false claims presented to Indiana Medicaid. 8 Relator brought claims under both the
Multiply the basis of $245,057.44 by 0.6692 and subtract that number ($163,992.44) from
the basis to get the $81,065 share. The same result would obtain if $245,057.34 was used
as the starting basis.
8 Medicaid is jointly funded by the federal government and the participating states;
participating states receive federal money to provide assistance with the medical expenses of
low-income patients. 42 U.S.C. §§ 1396–1 et seq. The federal government reimburses states
for a portion of their Medicaid expenditures based on a formula tied to each state’s per capita
income, the FMAP). 42 U.S.C. § 1396b(a)(1).
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FCA and the IFCA. Because the United States has declined to intervene, she retains
the right to conduct the action on behalf of the United States. 31 U.S.C. § 3730(c)(3).
The State says that in a typical case, where claims have been pleaded under both the
FCA and the state analog, the Medicaid recovery is split between the federal
government and the state based on the FMAP, and the relator’s share is paid based
on the amount received by each governmental entity at a rate negotiated with each
governmental entity.
Based on Relator's position that "the value of released claims is part of the
settlement in determining the relator's share," (Relator's Objection to State's
Proposed Settlement with HealthNet & Dismissal of Count II, 12 n.2 (citing United
States v. Thornton, 207 F.3d 769, 771–72 (5th Cir. 2000)), ECF No. 79)), the State
argues that the value of the released claims should also be allocated using the FMAP,
(Br. in Support Joint Mot. 13, ECF No. 78). Since 2011, the State has not submitted
a claim to the Centers for Medicare and Medicaid Services for HealthNet services,
including the wrap-around claims at issue. As a result, the United States has not
suffered a monetary loss or damages related to the wrap-around claims at issue in
this action.
(See United States's Resp. in Opp'n to Mot. to Enforce Settlement
Agreement 3, ECF No. 65.) Further, under the Proposed Settlement, HealthNet
releases the State from any and all claims for payments relating to the wrap-around
claims, (Proposed Settlement, 3, ¶ 1, ECF No. 77-1); thus, the State cannot make a
claim to the United States for reimbursement, (see United States's Resp. in Opp'n at
3–4 (asserting that because the claims at issue were determined to be fraudulent, the
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State cannot and will not make a claim to the United States for reimbursement), ECF
No. 65).
As a result of the Proposed Settlement, the United States has no claim to release
and will have no claim in the future. Additionally, at the hearing on the Joint Motion,
Relator indicated that she had advised the United States that she would dismiss
Count I of her Amended Complaint brought on behalf of the United States, and the
United States said it would consent to dismissal of all remaining counts. Therefore,
the Court finds that the Relator's share should be based on the value to the State of
the released claims and further finds that the FMAP of 66.92% should be applied to
determine the basis for a relator's share.
The Court has taken Relator's objection to the Proposed Settlement into
consideration. Still, the Court holds that the Proposed Settlement is fair, adequate,
and reasonable in light of the circumstances. Therefore, the Proposed Settlement is
approved. Moreover, the Court determines that the State is entitled to dismissal of
its Complaint-in-Intervention and approves of dismissal.
Conclusion
For the foregoing reasons, the Joint Motion to Hold Proposed Settlement is
Reasonable and to Dismiss Claims Brought on Behalf of the State, (ECF No. 77), is
granted. An appropriate order will be entered.
SO ORDERED.
Date: 3/3/2022
Distribution by CM/ECF to registered counsel of record
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