Flick v. Mercy Health NFP

Filing 34

MEMORANDUM OPINION & ORDER granting in part and denying in part 6 Motion to Strike ; granting in part and denying in part 23 Motion to Dismiss; granting 24 Motion to Amend/Correct. Signed by Senior Judge Thomas B. Russell on 2/6/2015. cc: Counsel(KJA)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
PADUCAH DIVISION
CIVIL ACTION NO. 5:14-CV-00198-TBR

CINDY FLICK

Plaintiff

v.
MERCY HEALTH PARTNERS –
LOURDES, INC.,

Defendant

MEMORANDUM OPINION AND ORDER
This matter is before the Court on several motions. Defendant Mercy Health Partners –
Lourdes, Inc. has filed a Motion to Dismiss Amended Complaint. (Docket No. 23). Plaintiff
Cindy Flick filed a Motion to Amend/Correct Amended Complaint, (Docket No. 24), which the
Court interprets both as her reply to Defendant’s Motion to Dismiss and as a Motion to Amend.
Finally, Defendant filed a Motion to Strike. (Docket No. 6). These matters are now ripe for
adjudication. For the following reasons, the Court will GRANT Plaintiff’s Motion to Amend,
GRANT IN PART and DENY IN PART Defendant’s Motion to Dismiss, and GRANT IN
PART and DENY IN PART Defendant’s Motion to Strike.
BACKGROUND
Plaintiff Cindy Flick (“Flick”), proceeding pro se, brought this litigation against her
previous employer, Mercy Health Partners – Lourdes, Inc. (“Lourdes”). (Docket No. 19). Flick
was hired in January of 2011 as a Laboratory Section Supervisor. Her duties included “oversight
of a wide variety of administrative, fiscal and technical activities and ensuring the efficient
operation and regulatory compliance of the clinical laboratory . . . .” (Docket No. 15-2). Flick
alleges that in March of 2013, she became aware that Lourdes was “purposely holding breast

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tissue biopsy specimens for 14 days after patient discharge before sending them to Agendia (an
outside reference lab).” Id. Agendia performs genetic testing which identifies the type of cancer
present in the tissue. Flick alleges that the 14 day hold on breast tissue was done in order to
“circumvent the Medicare Date of Service (“DOS”) rule which specifies that any laboratory
services performed within 14 days of an inpatient admission would be lumped into the
predetermined DRG payment . . . . Anything after 14 days post discharge is treated as a separate
encounter and can be billed separately.” Id. Flick alleges that this meant that Agendia could bill
Medicare, and not Lourdes, for the $9,325 cost of the testing, leaving Lourdes with the full
reimbursement payment.

She alleges that this procedure violated the Medicare Claims

Processing Manual and could adversely impact the health and welfare of breast cancer patients.
Flick became aware of this activity in March of 2013 and informed her direct supervisor
Mohammad Khan, the Laboratory Director.

Flick alleges that Khan denied knowledge of

arrangement and made no effort to change it. In April of 2013, Flick reported the activity to
Elizabeth Snodgrass, the Corporate Compliance Officer. Flick alleges that Snodgrass said she
would investigate it, and shortly afterwards the practice was discontinued.
Further, Flick alleges that Khan attempted to obtain discounted pricing from Agendia by
adding a clause to a proposed contract that required the lab to waive the charges if testing was
ordered on inpatient or same day surgery. Flick alleges that Agendia sales representative Renis
Baker met with Flick and said he was having trouble with Khan. Flick alleges that Baker
indicated that Lourdes had unpaid bills, and Baker also sent Flick a copy of the proposed
contract via e-mail. Flick met with Khan around July 30, 2013 and told him that she believed the
stipulation regarding free services was a potential violation of Anti-Kickback regulations. Flick
alleges that Khan responded that it was not her business. Additionally, Flick discovered that

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Agendia had written off approximately $14,000 worth of services on two patients, one of whom
Lourdes had already billed Medicare for.
In August of 2013, Flick met with Jeff Jones, Vice President of Operations; Flick
reported that Khan had solicited and accepted free services and supplied Jones with
documentation. Flick alleges that she heard back from Jones via e-mail on September 6, 2013,
and that Jones said he did not have time to deal with these issues and that Jones supported
Khan’s decisions.
On October 3, 2013, Flick was suspended pending termination. The reason given for her
termination was insubordination. Prior to her termination, Flick’s four previous evaluations from
Khan ranked her as an “above average” employee. Flick alleges that she was discharged in
retaliation for reporting the activities described above.
In her first amended complaint, Flick alleges that the defendant violated KRS 216B.165
for unlawfully terminating her, KRS 205.8461 for soliciting kickbacks, 205.8463, 205.8465, and
18 USC 1031. In her second amended complaint, Flick voluntarily dismissed her claims under
31 USC 3729-3733 and 42 USC 1320(a)-7(b)(b). (Docket No. 24-1). Thus, Defendant’s Motion
to Dismiss is GRANTED as to those two claims.
STANDARD
The Federal Rules of Civil Procedure require that pleadings, including complaints,
contain a “short plain statement of the claim showing that the pleader is entitled to relief.” Fed.
R. Civ. P. 8(a)(2). A defendant may move to dismiss a claim or case because the complaint fails
to “state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b). When considering a
Rule 12(b)(6) motion to dismiss, the court must presume all of the factual allegations in the
complaint are true and draw all reasonable inferences in favor of the nonmoving party. Total

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Benefits Planning Agency, Inc., 552 F.3d 430, 434 (6th Cir. 2008) (citing Great Lakes Steel v.
Deggendorf, 716 F.2d 1101, 1105 (6th Cir. 1983)). “The court need not, however, accept
unwarranted factual inferences.” Id. (citing Morgan v. Church's Fried Chicken, 829 F.2d 10, 12
(6th Cir. 1987)).
Even though a “complaint attacked by a Rule 12(b)(6) motion to dismiss does not need
detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to
relief requires more than labels and conclusions, and a formulaic recitation of the elements of a
cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations
omitted). Instead, the plaintiff's “[f]actual allegations must be enough to raise a right to relief
above the speculative level on the assumption that all the allegations in the complaint are true
(even if doubtful in fact).” Id. (citations omitted). A complaint should contain enough facts “to
state a claim to relief that is plausible on its face.” Id. at 570. A claim becomes plausible “when
the plaintiff pleads factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009)
(citing Twombly, 550 U.S. at 556). If, from the well-pleaded facts, the court cannot “infer more
than the mere possibility of misconduct, the complaint has alleged—but has not ‘show[n]’—‘that
the pleader is entitled to relief.’” Id. at 1950 (citing Fed. R. Civ. P. 8(a)(2)). “Only a complaint
that states a plausible claim for relief survives a motion to dismiss.” Id.
In addition, federal courts hold pro se pleadings to a less stringent standard than formal
pleadings drafted by lawyers. Haines v. Kerner, 404 U.S. 519, 520–21 (1972); Jourdan v. Jabe,
951 F.2d 108, 110 (6th Cir. 1991). However, “[o]ur duty to be ‘less stringent’ with pro se
complaints does not require us to conjure up unpled allegations.” McDonald v. Hall, 610 F.2d
16, 19 (1st Cir. 1979) (citation omitted). Accordingly, this Court is not required “to explore

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exhaustively all potential claims of a pro se plaintiff,” as this would “transform the district court
from its legitimate advisory role to the improper role of an advocate seeking out the strongest
arguments and most successful strategies for a party.” Beaudett v. City of Hampton, 775 F.2d
1274, 1278 (4th Cir. 1985). Only well-pled factual allegations contained in the complaint and
amended complaint are considered on motions to dismiss pursuant to Fed. R. Civ. P. 12(b)(6).
See Weiner v. Klais & Co., Inc., 108 F.3d 86, 89 (6th Cir. 1997).
DISCUSSION
1.

Claims under KRS 205.8461 and KRS 205.8463
Flick argues that Lourdes violated both KRS 205.8461 and KRS 205.8463.

KRS

205.8461 states that:
. . .[N]o provider shall knowingly solicit, receive, or offer any remuneration
(including any kickback, bribe, or rebate) for furnishing medical assistance
benefits or in return for purchasing, leasing, ordering, or arranging for or
recommending purchasing, leasing, or ordering any goods, facility, service, or
item for which payment may be made pursuant to Title XIX of the Social Security
Act.
KRS 205.8461(1). It provides for criminal penalties for any person who violates the section.
KRS 205.8461(3). Next, KRS 205.8463 states that:
No person shall knowingly or wantonly devise a scheme or plan a scheme or
artifice, or enter into an agreement, combination, or conspiracy to obtain or aid
another in obtaining payments from any medical assistance program under this
chapter by means of any fictitious, false, or fraudulent application, claim, report,
or document submitted to the Cabinet for Health and Family Services, or
intentionally engage in conduct which advances the scheme or artifice.
KRS 205.8463(1). It also provides for criminal penalties. KRS 205.8463(5).

Lourdes argues that neither statute contains a private cause of action. (Docket No. 23).
In response, Flick added KRS 446.070 to her Second Amended Complaint. (Docket No. 24).
KRS 446.070 states that:

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A person injured by the violation of any statute may recover from the offender
such damages as he sustained by reason of the violation, although a penalty or
forfeiture is imposed for such violation.

Flick alleges that she was discharged after reporting violations of KRS 205.8461 and KRS
205.8463 to her supervisors. However, she does not allege any injury she suffered as a result of
Lourdes’s alleged violations of these two statutes. Thus, her claims under KRS 205.8461 and
KRS 205.8463 are dismissed.
2. Claim under KRS 205.8465
Flick alleges that she was retaliated against by Lourdes after reporting Lourdes’s
violations to her supervisors. KRS 205.8465 states:
Any person who knows or has reasonable cause to believe that a violation of this
chapter has been or is being committed by any person, corporation, or entity,
shall report or cause to be reported to the state Medicaid Fraud Control Unit, or
the Medicaid Fraud and Abuse hotline, the following information . . .
No employer shall, without just cause, discharge or in any manner discriminate or
retaliate against any person who in good faith makes a report required or
permitted by KRS 205.8451 to 205.8483, testifies, or is about to testify, in any
proceeding with regard to any report or investigation. Any individual injured by
any act in violation of the provisions of this subsection shall have a civil cause of
action in Circuit Court to enjoin further violations, and to recover the actual
damages sustained, together with the costs of the lawsuit, including a reasonable
fee for the individual's attorney of record.
KRS 205.8465(1); 205.8465(3). Lourdes argues that this statute does not apply to employees
who report violations to their supervisors. (Docket No. 27). Rather, Lourdes notes that it
prohibits retaliation against an employee who reports or causes activity to be reported to the state
Medicaid Fraud Control Unit or the Medicaid Fraud and Abuse hotline. Id. In response, Flick
argues that she met the requirements of the statute by informing her immediate supervisor, Khan,
that the solicitation of free services was illegal, and by elevating her reporting by notifying Vice
President Jeff Jones. She alleges that her actions fit into the statutory language “cause to be

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reported,” as Lourdes encouraged its employees to report to their supervisor or the Corporate
Compliance officer. Flick also notes that she went to Snodgrass, the Corporate Compliance
officer, in making her first report.
Flick cites to Follett v. Gateway Regional Health Syst., Inc., 229 S.W.3d 925 (Ky. App.
2007). In Follett, the plaintiff “testified that she advised members of her staff to report either
directly to Medicaid, or to the hospital's corporate compliance officer, their suspicions of billing
irregularities in the hospital's emergency room.” Id. at 929. The court found that “genuine
issues of material fact exist as to whether [the plaintiff] was engaged in a statutorily-protected
activity when she advised her staff members to report the matter.” Id. at 930.
On the other hand, Defendants cite to Miracle v. Bell County Emergency Medical
Services, 237 S.W.3d 555 (Ky. App. 2007). In Miracle, the plaintiff “admitted in his deposition
that his reports of wrongdoing were limited to oral complaints to Broughton, and ‘probably . . .
to some ER staff maybe possibly.’” Id. at 559. The court found that because the plaintiff
“admittedly made no timely report of the alleged fraud or abuse to a statutorily-designated
authority, he does not fall within the whistleblower exception to the terminable at-will doctrine.”
Id.
Flick alleges that she caused the activity to be reported, by bringing it to the attention of
various supervisors, according to instructions provided in her employment manual and training.
Under the standard required for a Motion to Dismiss, the Court finds that Flick has alleged
sufficient facts to support her claim under KRS 205.8465. Thus, the Motion to Dismiss is denied
on this claim.
3. 18 U.S.C. § 1031

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Flick brings a claim under 18 U.S.C. § 1031, which creates liability for “[w]hoever
knowingly executes, or attempts to execute, any scheme or artifice with the intent-- (1) to
defraud the United States; or (2) to obtain money or property by means of false or fraudulent
pretenses, representations, or promises . . . .” 18 U.S.C. § 1031(a). It provides a remedy for
parties injured:
Any individual who-(1) is discharged, demoted, suspended, threatened, harassed, or in any other
manner discriminated against in the terms and conditions of employment by an
employer because of lawful acts done by the employee on behalf of the employee
or others in furtherance of a prosecution under this section (including
investigation for, initiation of, testimony for, or assistance in such prosecution),
and
(2) was not a participant in the unlawful activity that is the subject of said
prosecution, may, in a civil action, obtain all relief necessary to make such
individual whole. Such relief shall include reinstatement with the same seniority
status such individual would have had but for the discrimination, 2 times the
amount of back pay, interest on the back pay, and compensation for any special
damages sustained as a result of the discrimination, including litigation costs and
reasonable attorney's fees.
18 U.S.C. § 1031(h). Lourdes argues that Flick’s actions were not “in furtherance of a
prosecution” as required by the statute. In response, Flick argues that “her reports to the hospital
compliance officer could be construed as furtherance of a possible prosecution, as the retaliation
clause includes retaliation for "investigation of . . . a potential prosecution.” (Docket No. 24).
In Mattes v. Johns Hopkins University, 139 F.3d 891 (4th Cir. 1998), the plaintiff
conceded “that he never contacted anyone, except his supervisor concerning his allegations.
Section 1031(h) requires the protected conduct be in furtherance of a prosecution. Mattes never
reported any of the alleged misconduct to any federal agency and never provided any assistance
in furtherance of a prosecution.”

Id. Similarly, Flick’s conduct was not undertaken “in

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furtherance of a prosecution.” Thus, the motion to dismiss is granted as to her claim under 18
U.S.C. § 1031.
4. KRS 216B.165
Flick brings a claim under KRS 216B.165, which states that:
Any agent or employee of a health care facility or service licensed under this
chapter who knows or has reasonable cause to believe that the quality of care of a
patient, patient safety, or the health care facility's or service's safety is in jeopardy
shall make an oral or written report of the problem to the health care facility or
service, and may make it to any appropriate private, public, state, or federal
agency.
...
No health care facility or service licensed under this chapter shall by policy,
contract, procedure, or other formal or informal means subject to reprisal, or
directly or indirectly use, or threaten to use, any authority or influence, in any
manner whatsoever, which tends to discourage, restrain, suppress, dissuade, deter,
prevent, interfere with, coerce, or discriminate against any agent or employee who
in good faith reports, discloses, divulges, or otherwise brings to the attention of
the health care facility or service the circumstances or facts to form the basis of a
report under subsections (1) or (2) of this section. No health care facility or
service shall require any agent or employee to give notice prior to making a
report, disclosure, or divulgence under subsections (1) or (2) of this section.
KRS 216B.165. This statute does not set out a civil remedy that would allow Flick to recover
from Lourdes. Rather, Flick’s ability to bring suit “comes pursuant to KRS 446.070, which
states that ‘[a] person injured by the violation of any statute may recover from the offender such
damages as he sustained by reason of the violation, although a penalty or forfeiture is imposed
for such violation.’” Foster v. Jennie Stuart Medical Center, Inc., 435 S.W.3d 629, 634 (Ky.
App. 2013).
Lourdes argues that “Plaintiff did not plead facts sufficient to show any such attempt at
dissuasion by Lourdes. Furthermore, Plaintiff’s Amended Complaint alleges that she reported
her suspicions internally at Lourdes numerous times, making it apparent that she was in no way
dissuaded from reporting.” (Docket No. 23). Flick responds that Lourdes “sought to discourage

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her by ignoring her complaints, and to suppress, deter and interfere with her ability to make
problems for them by suspending and then terminating her employment.” (Docket No. 24).
At this stage, Flick sufficiently alleged that she reported on practices affecting patient
safety. In addition to other allegations, Flick stated that Khan told her that a particular topic was
not her business, and that Jones told her he did not have time to deal with her feedback. Thus,
Flick provided significant allegations of being “discourage[d], restrain[ed], suppress[ed],
dissuade[d], deter[red], prevent[ed], interfere[d] with, coerce[d], or discriminate[d].”

The

Motion to Dismiss is denied for this claim.
5. Wrongful discharge claim
Finally, Flick alleges a common law wrongful discharge claim. According to Grzyb v.
Evans, 700 S.W.2d 399, 402 (Ky. 1985), “an employer cannot discharge an employee for a
reason contrary to a fundamental and well-defined public policy as evidenced by existing law.”
Id. Defendants state that “the only relevant statutes concerning Plaintiff’s alleged wrongful
discharge claim are the previously discussed KRS 205.8456(1) and 18 U.S.C. § 1031” both of
which have been dismissed. (Docket No. 27). However, one can bring a claim of wrongful
discharge based on a violation of KRS 216B.165. See Foster v. Jennie Stuart Medical Center,
Inc., 435 S.W.3d 629, 635 (Ky. App. 2013). Thus, the court will deny the Motion to Dismiss on
this claim.
In summary, the Court will GRANT the Motion to Dismiss for the following claims: 31
USC 3729-3733; 42 USC 1320(a)-7(b)(b); KRS 205.8461; KRS 205.8463; and 18 U.S.C. §
1031. The Court will DENY the Motion to Dismiss for the following claims: KRS 205.8465;
KRS 216B.165; and common law wrongful discharge.
6.

Motion to Strike

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Lourdes filed a Motion to Strike, (Docket No. 6) paragraphs 4, 5, 18, 19, 20, and 21 from
Flick’s First Complaint (Docket No. 1-1), arguing that they are “immaterial” and “redundant.
The Court will GRANT the Motion to Strike as to paragraphs 18, 19, and 21, and will DENY the
Motion as to paragraphs 4, 5, and 20.
CONCLUSION
For these reasons, and consistent with the Court’s conclusions above,
IT IS HEREBY ORDERED that:
1)

Plaintiff’s Motion to Amend, (Docket No. 24), is GRANTED;

2)

Defendant’s Motion to Dismiss, (Docket No. 23) is GRANTED IN PART and

DENIED IN PART;
3)

Defendant’s Motion to Strike, (Docket No. 6), is GRANTED IN PART and

DENIED IN PART.
February 6, 2015

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