WORTHY v. EASTERN MAINE HEALTH CARE SYSTEMS et al
ORDER granting in part and denying in part 66 Motion to Dismiss; granting in part and denying in part 67 Motion to Dismiss for Failure to State a Claim; granting in part and denying in part 68 Motion to Dismiss for Failure to State a Claim. By JUDGE JOHN A. WOODCOCK, JR. (MFS)
UNITED STATES DISTRICT COURT
DISTRICT OF MAINE
UNITED STATES OF AMERICA, ex rel. )
and in her own name solely
regarding individual retaliation
EASTERN MAINE HEALTHCARE
MERCY HEALTH SYSTEM OF MAINE, )
MERCY HOSPITAL d/b/a MERCY
MEDICAL BILLING, INC.,
ACCRETIVE HEALTH, INC.,
ORDER ON MOTIONS TO DISMISS
Jennifer Worthy claims that the Defendants violated the False Claims Act by
submitting false and fraudulent claims to the Medicare program through unlawful
billing practices. She also claims that the Defendants retaliated against her in
violation of the False Claims Act and Maine Whistleblowers’ Protection Act because
of her efforts to stop the unlawful billing practices. Each of the Defendants moves to
dismiss Counts I, II, IV, and V of the complaint. The Court grants in part and denies
in part each of these motions. Specifically, the Court grants California Healthcare
Medical Billing’s motion to dismiss Count V, the retaliation count, in its entirety
because there is no factual allegation that will support the conclusion that it was ever
the Plaintiff’s employer. The Court also grants Mercy and Accretive’s motion to
dismiss Count V, but only with respect to the Maine Whistleblowers’ Protection Act
retaliation claim for monetary damages and attorney’s fees, based on the parties’
concession that the Plaintiff failed to file her constructive discharge claim in a timely
manner as required by Maine law. The Court denies the motions with respect to the
On April 29, 2014, Jennifer Worthy filed a sealed qui tam complaint under the
False Claims Act (FCA), 31 U.S.C. §§ 3729 et seq., for and on behalf of the United
States of America, and on her own behalf regarding her § 3730(h) retaliation claim,
against Mercy Hospital, Mercy Health System of Maine, Eastern Maine Healthcare
Systems (EMHS), California Healthcare Medical Billing, Inc. (CHMB), and Accretive
Health, Inc. (Accretive). Compl. (Filed Under Seal); Demand for Jury Trial; and Req.
for Injunctive Relief (ECF No. 1). She amended her complaint on August 14, 2014,
again filing it under seal. First Am. Compl. (Filed Under Seal); Demand for Jury
Trial; and Req. for Injunctive Relief (ECF No. 9). On January 12, 2015, Ms. Worthy
amended her complaint a second time and filed it under seal. Second Am. Compl.
(Filed Under Seal); Demand for Jury Trial; and Req. for Injunctive Relief (ECF No.
21). On March 9, 2015, the United States declined to intervene in the action. United
States Notice of Election to Decline Intervention (ECF No. 24). As a result, the Court
ordered that Ms. Worthy unseal the Second Amended Complaint and serve it upon
the Defendants. Order (ECF No. 27). On January 21, 2016, with consent of all the
Defendants, Ms. Worthy amended her complaint for a third time, adding a claim
under the Maine Whistleblowers’ Protection Act (MWPA), 26 M.R.S. §§ 831 et seq.
Third Am. Compl.; Demand for Jury Trial; and Req. for Injunctive Relief (ECF No.
As refined by the Third Amended Complaint, Ms. Worthy is making the
Count I: FCA against all Defendants for presentation of false
claims in alleged violation of 31 U.S.C. § 3729(a)(1)(A);
Count II: FCA against all Defendants for making or using false
record or statement to cause claim to be paid in alleged violation
of 31 U.S.C. § 3729(a)(1)(B);
Count III: FCA against all Defendants for making or using false
record or statement to conceal, avoid, and/or decrease obligation
to repay money in alleged violation of 31 U.S.C. § 3729(a)(1)(G);
Count IV: FCA against all Defendants for engaging in a
conspiracy to defraud the Government in alleged violation of 31
U.S.C. § 3729(a)(1)(C); and
Count V: Unlawful retaliation under the FCA, 31 U.S.C. §
3730(h) and under the MWPA, 26 M.R.S. §§ 831-840.
On March 21, 2016, Mercy Hospital, Mercy Health System of Maine, and
EMHS (collectively, the Mercy Defendants) moved for partial dismissal of the Third
Amended Complaint. Mot. of Defs. Mercy Hospital, Mercy Health System of Maine,
and Eastern Maine Healthcare Systems for Partial Dismissal (ECF No. 66) (Mercy’s
Mot.). On the same day, CHMB also moved to dismiss four of the five counts in the
Third Amended Complaint. California Healthcare Medical Billing, Inc.’s Mot. to
Dismiss (ECF No. 67) (CHMB’s Mot.). Accretive joined Mercy’s motion to dismiss
Counts I, II, and IV, and separately moved to dismiss Count V. Def. Accretive Health’s
Mot. to Dismiss Count V and Joinder in Supp. of Mercy Defs.’ Mot. to Dismiss Counts
I, II, and IV (ECF No. 68) (Accretive’s Mot.). Ms. Worthy objected to the Defendants’
motions on May 11, 2016. Relator’s Consolidated Obj. to Defs.’ Mots. to Dismiss Third
Am. Compl. (ECF No. 82) (Pl.’s Opp’n). On June 10, 2016, each of the Defendants
replied. CHMB’s Rely Mem. in Supp. of Mot. to Dismiss (ECF No. 88) (CHMB’s
Reply); Am. Reply of Defs.’ Mercy Hospital, Mercy Health System of Maine, and
Eastern Maine Healthcare Systems in Supp. of Their Mot. for Partial Dismissal (ECF
No. 89) (Mercy’s Reply); Def. Accretive Health’s Reply in Supp. of its Mot. to Dismiss
Count V and Joinder in Supp. of Mercy Defs.’ Mot. to Dismiss Counts I, II, and IV
(ECF No. 90) (Accretive’s Reply).
On June 10, 2016, Ms. Worthy filed a notice of supplemental authority
regarding the United States Supreme Court’s opinion in Green v. Brennan, 136 S. Ct.
1769 (2016). Pl.’s Notice of Suppl. Authority (ECF No. 86). On June 23, 2016, the
Defendants also filed a notice of supplemental authority, this one regarding the
United States Supreme Court’s decision in Universal Health Services, Inc. v. United
States ex rel. Escobar, 136 S. Ct. 1989 (2016). Defs.’ Notice of Suppl. Authority (ECF
No. 93). Ms. Worthy responded to the notice on July 5, 2016. Pl.-Relator’s Resp. to
Defs.’ Notice of Suppl. Authority (ECF No. 94).
On August 4, 2016, Ms. Worthy, with the consent of the Defendants, moved for
oral argument on the motions to dismiss. Pl.’s Consent Mot. for Oral Arg. on Mots. to
Dismiss (ECF No. 95). The Court granted the motion for oral argument on the same
day. Order (ECF No. 96). On December 14, 2016, the Defendants filed a second notice
of supplemental authority concerning the First Circuit’s decisions in United States ex
rel. Escobar v. Universal Health Services, Inc., 842 F.3d 103 (1st Cir. 2016) and
Lawton ex rel. United States v. Takeda Pharmaceutical Company, Ltd., 842 F.3d 125
(1st Cir. 2016). Defs.’ Second Notice of Suppl. Authority (ECF No. 103). Ms. Worthy
responded on December 22, 2016. Pl.-Relator’s Resp. to Defs.’ Second Notice of Suppl.
Authority (ECF No. 104). The Court held oral argument on January 5, 2017. In
response to a question by the Court at oral argument, Ms. Worthy filed a second notice
of supplemental authority on January 9, 2017 and the Defendants responded on
January 12, 2017. Pl.-Relator’s Notice of Suppl. Authority (ECF No. 106); Defs.’ Resp.
to Pl.-Relator’s Notice of Suppl. Authority (ECF No. 109).
Plaintiff/Relator Jennifer Worthy is a resident of Cumberland County in Maine
and was employed by Mercy Hospital at its Portland location from November 2, 2012
until February 21, 2014. TAC ¶ 9. Ms. Worthy began working at Mercy Hospital as
a supervisor of patient accounts and was promoted to the position of manager of
patient accounts in August 2013. Id. ¶¶ 10-11. Before working for Mercy Hospital,
Ms. Worthy had worked for several medical practices as a billing manager for a total
of about eleven years. Id. ¶ 12. She became a Certified Professional Coder in 2006
after passing a six-hour test and completing 1,600 hours of formal classroom training
and two years of on-the-job training. Id. ¶¶ 13-14.
Defendant EMHS is a Maine nonprofit, tax-exempt corporation. Id. ¶ 23.
Effective October 2, 2013, EMHS acquired Mercy Health System of Maine, a Maine
nonprofit, tax-exempt corporation, which included Mercy Hospital, a non-profit, taxexempt hospital in Portland, Maine. Id. Mercy Hospital wholly operates numerous
physician practices under the name Mercy Medical Associates and provides inpatient
and outpatient care in the greater Portland area. Id. As a result of this acquisition,
Mercy Hospital ultimately became responsible for billing for services provided by the
physician practices of Mercy Medical Associates. Id. ¶ 24.
Defendant CHMB is a California corporation with its principal place of
business in Escondido, California. Id. ¶ 19. It provides billing services to medical
providers and hospitals, including Mercy Hospital. Id.
Defendant Accretive is a Delaware corporation with its principal place of
business in Chicago, Illinois.
Id. ¶ 15.
It provides hospital and other medical
providers, including Mercy Hospital, with billing and debt collection services and
other revenue management services. Id.
The Medicare Program
Medicare is a Government program primarily benefiting the elderly created by
Congress in 1965. Id. ¶ 37. Medicare is administered by the Centers for Medicare
and Medicaid Services (CMS), a federal agency that sets standards and regulations
for participation in the program. Id. Medicare Part A primarily covers medical care
for patients admitted to the hospital and Medicare Part B primarily covers doctor
visits and medical care provided on an outpatient basis. Id. The Government,
through its Medicare program, is one of the principal payers for medical services
rendered by Mercy Hospital. Id. ¶ 36.
The Medicare program works by reimbursing health care providers for the cost
of services and ancillary items at fixed rates. Id. ¶ 38. Reimbursements are made
out of the Medicare Trust Fund, which is supposed to reimburse only for those
services that were actually performed, were medically necessary for the health of the
patient, and were ordered specifically by a physician using appropriate medical
judgment and acting in the best interest of the patient. Id. CMS requires healthcare
providers to certify that they complied with all laws and regulations. Id. ¶ 39. The
Medicare Trust Fund relies on the implied representation of suppliers of Medicare
services that the services billed are compensable under Medicare. Id. ¶ 38.
In her sixty-five page Third Amended Complaint, Ms. Worthy provides
background information about the billing and claims submission process at Mercy
Hospital. She then sets forth facts alleging several different fraudulent schemes to
support her claims in Counts I-IV that the Defendants violated the FCA by
submitting false claims and by conspiring to commit that fraud. Additionally, Ms.
Worthy alleges facts to support her claim in Count V that the Defendants unlawfully
retaliated against her. The alleged facts are copious and dense and the Court has
done its best to summarize the allegations below.
Mercy’s Billing and Claims Submission Processes
In approximately April 2012, Mercy Hospital contracted with Accretive to
provide billing, collections, and revenue management services to the Hospital. Id. ¶¶
16, 70. Because Mercy Hospital was struggling financially at the time, it contracted
with Accretive with the goals of decreasing the costs of its revenue cycle and
increasing its collections. Id. ¶¶ 17, 70. As part of its agreement with Mercy Hospital,
Accretive agreed to be compensated for its services based on the increase in the
Hospital’s collections, referred to as “lift.” Id. ¶¶ 16, 70, 121. Thus, both Accretive
and Mercy Hospital received a direct financial benefit from increases in the Hospital’s
collections. Id. ¶¶ 70, 121.
In considering a motion to dismiss, a court is required to “accept as true all the factual
allegations in the complaint and construe all reasonable inferences in favor of the plaintiff [ ].” Sanchez
v. Pereira-Castillo, 590 F.3d 31, 41 (1st Cir. 2009) (quoting Alt. Energy, Inc. v. St. Paul Fire & Marine
Ins. Co., 267 F.3d 30, 33 (1st Cir. 2001)).
Accretive employed an “infused management” structure whereby it inserted
senior Accretive employees to oversee and manage Mercy Hospital’s day-to-day
billing and collections operations, including Hospital billing personnel. Id. ¶¶ 18, 71.
Accretive also implemented several proprietary web-based tools to increase Mercy
Hospital’s collections, including its Yield Based Follow Up tool (YBFU tool). Id. ¶¶
17, 71. The YBFU tool integrates with a hospital’s billing system to track the status
and expected reimbursement of unpaid claims, and to prioritize claims for follow-up
by hospital billing staff. Id. ¶ 72. Accretive represented that the YBFU tool would
both shorten the revenue cycle–that is, the time in which Mercy Hospital was paid
for claims that it submitted to insurers–and increase Mercy Hospital’s collections. Id.
In about early 2013, Mercy Hospital also decided to contract with CHMB to
perform the billing services for the Hospital and its wholly-owned and whollyoperated physician practices. Id. ¶ 19. Under its contract with Mercy Hospital,
CHMB receives as compensation 3% of the gross collections from Mercy Medical
Associate’s physician practices. Id. ¶ 21. CHMB made frequent site visits to Mercy
Hospital and integrated its billing operations into Mercy Hospital’s patient accounts
department. Id. ¶ 22.
Claims Submission Process
Mercy Hospital used an electronic health records system (Meditech) to
document the services it provided to patients. Id. ¶ 75. In order to bill Medicare for
services, Mercy Hospital’s professional coders accessed the electronic health record in
Meditech, analyzed the medical documentation associated with the services provided
to the patient, and assigned codes that reflected those services as well as the
diagnosis. Id. Once the coder finished assigning codes based upon the medical
documentation, the codes were electronically routed to Mercy Hospital’s billing
department. Id. ¶ 76. Based upon the codes assigned by the coder, Mercy Hospital’s
billers then formulated the bill, and initiated the process by which a claim was
electronically submitted to Medicare.
Billers then electronically submitted
Medicare claims to a computer system known as the Fiscal Intermediary Standard
System (FISS), the single standard Medicare Part A claims processing system used
to process Medicare claims related to medical care provided by hospital and hospital
based providers. Id. ¶ 77.
The FISS system utilized a system of “edits” intended to promote correct coding
of claims submitted to Medicare and to prevent inappropriate payment. Id. ¶ 78.
Claim edits work by using automated edits to compare submitted Medicare claims to
a defined set of criteria, in order to identify irregularities and prevent inappropriate
payment. Id. When irregularities are identified, payment is stopped and the claim
is returned to the provider for review. Id. Coding changes, made in response to edits,
may then be made only if the clinical circumstances justify the change in coding and
not solely to bypass a Medicare edit. Id.
False Modification and Resubmission of Claims That Had Been
Stopped by Medicare
After it was integrated into Mercy Hospital’s billing system in February 2013,
the YBFU tool tracked and compiled claims submitted by Mercy for which Mercy had
not received compensation, including claims that had been stopped due to the
operation of Medicare edits, and ranked these claims based on dollar amount, payer,
and length of time the claim had gone unpaid. Id. ¶ 79. The highest priority Medicare
claims–claims in excess of $25,000 that were unpaid after 21 days–were classified as
Risk 1. Id. When ranking unpaid claims, the YBFU tool did not differentiate unpaid
claims for which the Hospital was actually entitled to compensation from those that
involved non-payable charges. Id. ¶ 80.
Instead of limiting themselves to identifying and correcting claims with
legitimate errors, at daily huddles and during SWAT team meetings, Accretive staff
members, including Jessica Martin, Brie Farmer, and Anvita Kumar, instructed
Mercy Hospital billers on how to manipulate claims that Medicare legitimately held
from payment by clearing Risk 1 claims in order to get those claims paid. Id. ¶¶ 8184.
The methods Accretive instructed Mercy billers to employ included
systematically (1) unbundling claims that were required by Medicare payment rules
to be bundled together for single payment; and (2) deleting and otherwise omitting
accident and injury information in order to obtain payment of claims which Medicare
held from payment in accordance with Medicare Secondary Payer (MSP) procedures.
Id. ¶ 67. Ms. Worthy contends that as a result of these practices, Accretive and Mercy
Hospital received overpayments from Medicare, which the Defendants did not report
or return within the specified time period under the regulations. Id. ¶ 69.
Unbundling Claims to Bypass Edits and Increase Payment
“Unbundling” refers to the practice of billing separately for a group of
procedures that are covered by a single comprehensive billing code.
Id. ¶ 87.
Intentional unbundling occurs when providers manipulate billing codes in order to
maximize payment and otherwise bypass Medicare payment controls. Id. CMS has
long identified unbundling as a common type of Medicare fraud. Id. ¶¶ 63, 87.
Accretive instructed government team billers to unbundle claims in two primary
ways: (a) through the false addition of -59 modifiers and (b) through the false addition
of G0 condition codes. Id. ¶ 88.
False Addition of -59 Modifiers
Medicare requires that certain services, when performed together on the same
individual, be bundled into one comprehensive charge rather than charged and paid
separately. Id. ¶ 58. The payment for the bundled code includes payment for the
individual services included within the Current Procedural Technology (CPT) code.
Id. Under certain circumstances, a provider may need to indicate that a procedure
or service was separate or distinct from other services performed on the same day.
Id. ¶¶ 60, 90. Modifier -59 is appended to a bundled CPT code to identify procedures
or services that are normally bundled, but are correctly being billed as separate
services in that instance. Id. ¶¶ 60, 91. Modifier -59 may be appended to a lesserincluded procedure or service if the service represented a different patient encounter
or session, different procedure or surgery, different site or organ system, separate
incision/excision, separate lesion, or a separate injury not ordinarily encountered or
performed on the same day by the same physician.
Id. ¶¶ 61, 91.
documentation must support the use of the Modifier -59 and this modifier should
never be used strictly to prevent a service from being bundled or to deceive the
Medicare claims processing system. Id. ¶¶ 62, 92.
Accretive personnel, acting with the authority of Mercy management,
instructed Mercy’s billers to bypass Medicare’s edits by systematically retracting
claims and adding -59 modifiers without a lawful basis to do so and without reference
to clinical documentation. Id. ¶ 93. By instructing billers to regularly add the -59
modifier to claims without a legitimate basis to do so, Accretive caused claims to be
submitted for multiple separate services that were legally required to be paid at a
lower, bundled rate and that otherwise would have been paid at the lower rate. Id.
Ms. Worthy repeatedly witnessed and objected when Accretive Revenue Cycle
Analyst Jessica Martin ordered the use of a -59 modifier without a legitimate basis
and solely to cause Medicare to pay more than it should. Id. ¶ 94.
False Addition of G0 Condition Codes
Hospitals report condition code G0 when a patient has multiple medical visits
on the same day at the same revenue center, but the visits are for distinct, unrelated
medical conditions. Id. ¶¶ 56, 95. The G0 code bypasses Medicare’s audit system and
certifies that the billed services are unrelated, separate services eligible to be paid
separately and not as part of a packaged payment. Id. ¶¶ 57, 95.
Accretive and Mercy Hospital falsely reported the G0 condition code for related
claims to bypass Medicare edits, resulting in Medicare payment of duplicate facility
fees for related medical conditions that should have been bundled together. Id. ¶ 96.
As a result of the addition of false G0 codes, Medicare paid more for individual claims
than it was legally required to pay. Id.
Deleting Accident and Injury Information from Claims
Billed to Medicare in Violation of the MSP Provision
The MSP provisions provide that, under certain conditions, Medicare will be
the secondary rather than primary payer for its beneficiaries. Id. ¶ 64. Under the
MSP provisions, Medicare is precluded from making payment for services to the
extent that payment has been made or can reasonably be expected to be made
promptly under (1) worker’s compensation, (2) liability insurance, or (3) no-fault
insurance. Id. ¶¶ 64, 98. To participate in the Medicare program, providers must
agree to bill other primary insurers before billing Medicare. Id. ¶ 65. A provider is
only permitted to seek conditional payment from Medicare if it first billed the claim
to the worker’s compensation, liability, or no-fault insurer and it either did not receive
payment at the end of the 120-day prompt period or has evidence that payment will
not be made by the primary insurer within the 120-day prompt period. Id. ¶ 99.
Medicare regularly withholds payments on accident or injury claims in order to
determine whether there exists a primary insurer other than Medicare. Id. ¶ 100.
There exist several means by which a claim may indicate to Medicare that an
accident or injury occurred, thereby triggering Medicare’s withholding of payment
pending an inquiry and determination of primary insurance. Id. ¶ 101. One such
method is inclusion on the claim of an external cause of injury code (E code), an ICD9 diagnosis code that describes the cause of an injury, incident, or illness. Id. Other
methods include completion of specific line items–10a, 10b, and 10c–on the CMS-1500
claim form to indicate that the patient’s condition was employment or accident
To bypass the internal controls in Medicare’s MSP determination process so
that Medicare would believe itself to be the primary insurer, Accretive employees
instructed and pressured Mercy Hospital government team billers to retract and
remove accident and injury information, including E codes–information which had
previously been assigned to claims by coders based upon review of clinical
documentation–from Risk 1 claims in FISS, without regard to whether another payer
was responsible for paying the claim. Id. ¶ 104. Additionally, to accelerate payment
of Risk 1 claims billed to a worker’s compensation, liability, or no-fault insurer which
had not been paid within the expected YBFU time frame, Accretive instructed
Hospital billers to create new claims without any accident or injury information–
without E codes and with the answers to boxes 10a, 10b, and 10c of the CMS-1500
form switched from “yes” to “no”–and to bill these claims to Medicare rather than wait
and conditionally bill Medicare at the end of the 120-day prompt period. Id. ¶ 105.
For instance, in spring 2013, Ms. Worthy reviewed copies of unpaid Risk 1 claims
that Accretive staff instructed a Mercy biller (AW) to submit to Medicare without
accident or injury information in order to get the claim through the Medicare system.
Id. ¶ 107. In this way, Defendants were able to improperly receive payment from
Medicare on claims Medicare was not obligated to pay. Id. ¶ 106.
Ms. Worthy Observed and Reported Submission of False
Diagnosis & Billing Codes
During this time, members of Mercy’s billing staff began raising concerns
about Accretive’s practices. Id. ¶ 111. These billers informed Ms. Worthy of the
pressure that the billing staff–particularly, the government team billers–received
from Accretive every day to manipulate coding and clear high-value Medicare claims.
Ms. Worthy’s personal observations heightened her concerns about the
submission of false claims; specifically, she witnessed Accretive staff pressuring and
directing government team billers to resubmit Medicare claims within FISS without
accessing underlying clinical documentation or communicating with coders to ensure
that changes were clinically warranted. Id. ¶ 112. This was evidenced not only in
routine meetings between Accretive and billing staff, but also when Accretive
managers stood at the cubicles of government team billers and gave specific
instructions on how to modify the claims. Id. On more than one occasion, Ms. Worthy
overheard Jessica Martin of Accretive instruct a government team biller to add -59
modifiers to unbundled procedures to bypass Medicare edits. Id. ¶ 113.
Ms. Worthy’s concerns were corroborated by her review of specific Medicare
claims, and the patterns of changes she observed to unpaid Medicare claims in FISS,
all of which confirmed what she had personally observed and what had been relayed
to her by the billing staff. Id. ¶ 114. Specifically, in the fall of 2013, after recognizing
a drastic increase in the number of claims that had been suspended or returned by
Medicare, Ms. Worthy began receiving reports that listed FISS claims, sorted by the
reason that the claim had been returned by Medicare. Id. ¶ 115. In reviewing these
reports, Ms. Worthy, along with another Mercy biller (TH), were able to identify
patterns of changes made to high-value claims in FISS by members of Mercy
Hospital’s government team, including the deletion of E-codes and the addition of G0
codes and -59 modifiers. Id. ¶ 116. The frequency of these changes substantially
exceeded what Ms. Worthy and TH expected, based upon their experience, and these
changes were particularly concerning given that the billing staff no longer
maintained access to clinical coding information. Id.
In addition, Ms. Worthy reviewed specific Medicare claims that had been
returned for failing edits, changed in the FISS system at the direction of Accretive,
and subsequently paid by Medicare. Id. ¶ 117. This was accomplished by identifying
high-value claims that Medicare had returned or suspended based upon the fiscal
intermediary’s internal controls; examining the electronic claim in FISS to determine
what changes were made to the coding after the claim had been returned; comparing
the coding changes to the documentation in the Meditech system; and subsequently,
determining whether the changed claim had been paid by Medicare. Id. In numerous
instances, the final FISS claim was no longer consistent with the billing information
contained in Meditech. Id. For example, in approximately December 2013, Ms.
Worthy observed information provided by TH that revealed a pattern of questionable
coding changes made in the FISS system by DD, a member of the government billing
team. Id. ¶ 118. These changes included the systematic deletion of E codes from
potential MSP claims. Id. Ms. Worthy questioned DD regarding the coding changes
he made in FISS; DD responded that the changes were made at the direction of
Accretive personnel. Id.
Ms. Worthy reported her concerns to Mercy Hospital Coding Manager Shonda
Menezes and Accretive Director of Revenue Cycle Judi Kieltyka. Id. ¶ 119. She also
spoke with Brie Farmer, Anvita Kumar, and Jessica Martin from Accretive and
voiced her concerns that the coding changes made at their direction were false. Id.
Nonetheless, Accretive and Mercy Hospital continued to use the YBFU tool to identify
high-value, unpaid claims and then resubmit false codes for high-dollar Risk 1 claims.
Id. Ms. Worthy further reported the deletion of accident and injury codes in a meeting
with Mercy Hospital Chief Medical Officer Scott Rusk, Ms. Kieltyka, and Mercy
Hospital Senior Vice President and Chief Financial Officer Michael Hachey. Id. ¶
120. This meeting did not result in any changes. Id.
Accretive Instructed Staff to Falsify Patient Discharge Status
Indicators to Increase Reimbursement
Medicare pays for acute inpatient care in hospitals through the Inpatient
Prospective Payment System (IPPS). Id. ¶ 41. Hospitals receive a predetermined
rate for each discharge or each case, instead of billing Medicare for individual services
provided during the patient’s hospital stay. Id. The payment rate under the IPPS is
determined by the patient’s principal diagnosis upon discharge and any secondary
diagnoses, comorbidities, complications, procedures performed during the hospital
stay, and discharge status. Id. ¶ 42. Based on these factors, a patient is assigned to
a diagnosis-related group (DRG). Id. Each discharge is assigned only one DRG,
regardless of the number of conditions treated or services furnished during the
patient’s stay. Id. The payment for each DRG is based on the expenses associated
with the patient’s condition and treatment, and the hospital’s capital and operating
Under Medicare’s IPPS, when a patient is discharged from the hospital, the
hospital indicates the patient’s discharge status to Medicare as part of its claim for
reimbursement. Id. ¶ 123. The discharge status indicates where the patient is being
discharged to, such as a skilled nursing facility or the patient’s home. Id. If a patient
is discharged from the hospital to a skilled nursing facility, the hospital and the
skilled nursing facility share in the reimbursement. Id. By contrast, if a patient is
discharged to his or her home, the hospital gets the entire reimbursement amount.
Id. Therefore it is to the hospital’s financial advantage to have the discharge status
indicator be “discharge to home” because the hospital’s reimbursement amount from
Medicare is greater. Id.
Beginning in 2012, Ms. Martin created a spreadsheet each quarter listing
Medicare claims that had been submitted with a discharge status indicator other
than “discharge to home” and noting the difference in reimbursement for Mercy
Hospital if the listed claims had “discharge to home” status indicators rather than
their current discharge status indicator. Id. ¶ 124. Ms. Martin provided Ms. Worthy
with the discharge indicator spreadsheet every quarter from July 2013 until the end
of her employment in February 2014. Id. ¶ 125.
In July 2013, Ms. Martin provided Ms. Worthy with the discharge indicator
spreadsheet for Q1 2013 and instructed her to enter the FISS system, retract the
claims, change the discharge status indicator to “discharged to home” and resubmit
the claims so that Mercy Hospital would receive a greater DRG payment. Id. ¶ 126.
Ms. Martin later provided Ms. Worthy with the discharge status indicator
spreadsheet from Q2 2013 with the same instructions. Id. Because Accretive did not
have its own access to FISS, only a Mercy Hospital employee with access to FISS
could change the discharge status indicators on those claims. Id.
Ms. Worthy was concerned about the appropriateness of this practice and
believed these changes should be made by Mercy Hospital’s coding department based
on medical documentation.
Id. ¶ 127.
However, when Ms. Worthy sent the
spreadsheet to Ms. Menezes of the coding department and asked her why a
professional coder was not handling the discharge status indicator changes, Ms.
Menezes informed her that the coding department was not supposed to make the
changes based on Accretive’s instructions. Id. After speaking with Ms. Menezes, Ms.
Worthy investigated the electronic medical records in Meditech associated with
approximately seventy of the claims listed in the Q1 and Q2 2013 spreadsheets she
was provided, and found that there was no documentation, such as an addendum or
telephone record, which supported changing the discharge status indicator on the
claims as Accretive demanded. Id. ¶ 128. Ms. Worthy observed that the claims listed
on the spreadsheets were for high-value DRGs and that each spreadsheet indicated
that Mercy Hospital and Accretive would receive an increase of approximately
$100,000 in Medicare reimbursement by changing the discharge status indicator on
the claims. Id.
Ms. Worthy refused to falsify the discharge status indicators in accordance
with Accretive’s instructions or to allow her staff to do so. Id. ¶ 129. She also met
with Ms. Martin and Ms. Kieltyka of Accretive to express her concerns about the
practice. Id. Ms. Kieltyka and Ms. Martin dismissed Ms. Worthy’s objections, stating
that this was a “best practice” that Accretive implemented at other client hospitals
and that Mercy Hospital would be “leaving money on the table” if she did not do this.
Id. Because Ms. Worthy refused to falsify these claims in accordance with Accretive’s
instructions, upon information and belief, after Ms. Worthy’s employment with Mercy
Hospital ended, Mercy Hospital biller TH changed and resubmitted the claims listed
on the Q1 and Q2 2013 spreadsheets with false discharge status indicators based on
the instructions of Ms. Martin and Ms. Kieltyka. Id. ¶ 130. Upon information and
belief, under the direction of Ms. Martin and Ms. Kieltyka, TH also changed the
discharge status indicators of Medicare claims listed on the Q3 2013, Q4 2013, and
Q1 2014 spreadsheets. Id.
Fraudulent or Duplicative Billing for Facility Fees Within
Three-Day and Same-Day Billing Windows
The three-day payment window or “Three-Day Rule,” is designed to prevent
multiple claims for facility fees when a patient receives medical treatment at more
than one facility operated by the same hospital. Id. ¶ 47. Under the Three-Day Rule,
if a hospital or entity wholly operated by a hospital provides outpatient services to a
patient in the three days prior to an inpatient hospital stay, the technical component,
which covers the cost of equipment and supplies for a service, or facility fee for those
services, must be bundled with the claim for the inpatient stay and not separately
billed. Id. ¶ 48. Similarly, any diagnostic services within the three-day window, and
any non-diagnostic services that are clinically related to the reason for the patient’s
hospital admission, must be bundled with the claim for the hospital stay. Id.
Additionally, Medicare pays for outpatient care for beneficiaries through its
Outpatient Prospective Payment System (OPPS). Id. ¶ 51.
Under the OPPS,
Medicare pays predetermined amounts for designated services.
classifies outpatient services into ambulatory payment classifications (APCs). Id. ¶
52. APCs group procedures together that are clinically similar and use a similar
reimbursement rates. Id. APC payments include overhead and supplies, which
cannot be billed separately under OPPS. Id. ¶ 53. Items and services that must be
included as packaged cost items and not billed separately from services include, but
are not limited to: use of operating room, procedure or treatment room, recovery room,
and observation services; medical supplies including surgical supplies and
equipment, certain pharmaceuticals, surgical dressings, substitute skin products and
other products that aid wound healing; supplies and equipment related to anesthesia
or sedation; certain clinical diagnostic tests; and durable medical equipment that is
implantable. Id. ¶ 54. When multiple claims for certain outpatient services occur on
the same day, Medicare regulations require that these claims be packaged together
under the “Same-Day Rule” to avoid overpayment for the fixed costs that are
incorporated into the payment for that APC. Id. ¶ 55.
Defendants’ Scheme to Submit False Claims in Violation
of Same-Day and Three-Day Rules
On about April 17, 2013, representatives from CHMB, including its owner,
Janet Boos, and its account executive for Mercy Hospital, Michelle Pena, visited
Mercy Hospital to discuss billing procedures. Id. ¶ 134. The CHMB representatives
met with, among others, Accretive’s Judi Kieltyka, and Mercy’s Michael Hachey, Vice
President of Physician Practices Judi Hawkes, Chief Information Officer Craig
Dreher, and Ms. Worthy. Id. During the April visit, the CHMB representatives did
not spend any time reviewing claims processing or the process by which Mercy
Hospital reviewed claims and ensured their accuracy. Id.
Based upon comments by the CHMB representatives during the April 2013
visit, Ms. Worthy became concerned that CHMB was unfamiliar with the Three-Day
and Same-Day Rules and began to raise questions internally. Id. ¶ 135. The Hospital
executives assured her that CHMB had experience with provider-based billing for
Medicare and had several hospital clients. Id. Ms. Worthy raised similar concerns
at a subsequent meeting on June 19, 2013, and again in an email to representatives
from CHMB, Accretive, and Mercy. Id. ¶¶ 136, 138. She received no response. Id. ¶
Before August 1, 2013, Mercy Hospital used Meditech billing software to
process all of its hospital and physician billing, thereby ensuring that all facility
billing was bundled in a single claim in compliance with Medicare’s legal
requirements. Id. ¶ 140. When CHMB assumed responsibility for the billing of
claims for Mercy Hospital’s wholly-owned physician practices, it used a different
software, Allscripts, to process all physician-practice claims including both facility
fees and professional fees.
Allscripts was not integrated with and did not
communicate with Meditech. Id. Because Allscripts would miss all claims subject to
the Same-Day and Three-Day Rules, Defendants knew that CHMB needed to
manually check all physician practice claims for the date of service to ensure that
these claims complied with the three-day and same-day billing requirements. Id.
Defendants did not conduct this manual review after CHMB assumed responsibility
for billing for the wholly owned and operated physician practices. Id.
Before taking over responsibility for billing for the physician practices and with
knowledge that they would bill in violation of the Same-Day and Three-Day Rules,
Ms. Worthy alleges on information and belief that CHMB conducted no testing of its
billing system to ensure compliance with Medicare regulations, even after she and
others raised concerns. Id. ¶ 141. Senior leadership at Mercy Hospital, including but
not limited to Michael Hachey, Judi Hawkes, Craig Dreher, and Ms. Worthy, and
Judi Kieltyka from Accretive met biweekly as part of the Committee on Revenue
Excellence (CORE). Id. ¶ 142. At a CORE meeting on August 21, 2013, Ms. Worthy
reminded those present, including but not limited to Mr. Hachey, Ms. Hawkes, Mr.
Dreher, and Ms. Kieltyka, that CHMB still had no plan in place for complying with
Medicare billing regulations. Id.
CHMB Takes Over Billing with Knowledge of Problems
CHMB assumed responsibility for the Mercy Hospital outpatient physician
practice billing on August 1, 2013, despite knowing it was not prepared to handle
Mercy’s Medicare billings in a compliant manner. Id. ¶ 143. Based on concerns about
CHMB’s ability to submit Medicare bills in a compliant manner, Ms. Kieltyka
instructed CHMB to hold all Medicare billing until a process was in place to ensure
compliance with Medicare regulations. Id. ¶ 144. At an August 21, 2013 CORE
meeting, approximately three weeks after CHMB took over Medicare billing
responsibilities, Ms. Worthy informed the group that CHMB was now holding about
$750,000 in Medicare billings on behalf of Mercy Hospital, about 60% of which was
tainted by unlawful facility charges that were not bundled as required by the SameDay and Three-Day Rules. Id. ¶ 145.
In early September 2013, Ms. Worthy accessed the FISS system and
determined that CHMB was not holding billings as directed but actually had received
about $1 million in Medicare reimbursements on behalf of Mercy Hospital. Id. ¶ 147.
Ms. Worthy determined that contrary to Ms. Kieltyka’s directions, CHMB was billing
and receiving payment from Medicare for office visits and other medical services
subject to the Same-Day and Three-Day Rules. Id. ¶ 148. She further observed that
while claims to Medicare submitted by CHMB were increasing, Mercy Hospital’s
accounts receivable was decreasing. Id. Ms. Worthy reported the apparent Medicare
overbilling violations to Ms. Kieltyka at Accretive.
Id. ¶ 149.
She received no
response to her reports. Id. CHMB officials Janet Boos, Michelle Pena, and Paula
Kacsir (a CHMB Vice President of Client Services who was assigned to the Mercy
Hospital account in the fall of 2013) all subsequently denied that CHMB was
submitting Medicare claims on behalf of Mercy Hospital and asserted that CHMB
was holding all Medicare claims as instructed.
Id. ¶ 150. In fact, CHMB was
receiving Medicare payments and posting them to accounts at this time, but falsely
represented to Accretive and Mercy that it was holding Medicare billings. Id. ¶¶ 15051.
Creation of Dummy Accounts to Conceal Same-Day and
In December 2013, Ms. Worthy did an analysis of two weeks of the claims
submitted by CHMB using the FISS system. Id. ¶ 152. She noticed that CHMB first
billed Medicare for services in violation of the Same-Day and Three-Day Rules. Id. ¶
155. Medicare then paid CHMB for the claims. Id. After receiving payment for the
claim, CHMB was supposed to pass the payment on to Mercy Hospital. Id. ¶ 156.
Instead, once CHMB received payment, CHMB voided the correct patient account,
and created a dummy account under a different name. Id. It then posted the payment
received to Medicare to the dummy account for the same dollar amount and CPT code
as the original claim. Id. Ms. Worthy was able to determine through the FISS system
that CHMB was not billing Medicare for these dummy accounts, having already billed
Medicare under the correct patient account. Id. ¶ 159.
The voiding of patient accounts and creation of dummy accounts, which was
internal to CHMB and not reported to Medicare, allowed CHMB to falsely represent
to Accretive and Mercy Hospital that it had not violated the Same-Day or Three-Day
requirements. Id. ¶ 157. The dummy accounts also served to falsely inflate Mercy
Hospital’s accounts receivable and hampered any future attempts at audits or
repayments for violations of the Same-Day or Three-Day Rules because the payment
now appeared under another patient’s name. Id. ¶ 159.
Tyler Chase and Richard Moulton, who work for Mercy Hospital Information
Services, attempted to run an audit trail on the Allscripts computer system to
determine who entered the voids and payments. Id. ¶ 160. They determined that
CHMB had created the dummy accounts but, because an anonymous computer user
had set up the dummy accounts, they could not link the creation of the dummy
accounts to a specific Mercy Hospital, Accretive, or CHMB employee.
particular, Mr. Chase informed Ms. Worthy that there were 112 vouchers in CHMB’s
Allscripts system that had a “no charge” listing, indicating that there were no services
in the account to be billed. Id. ¶ 161. Mr. Chase discovered that approximately sixty
of these “no charge” accounts had payments posted, totaling approximately $6,000.
Id. These payments had been entered by a user called “chmb401” which had entered
more payments into Allscripts than any other user–approximately 23% of all
payments for over $120,000. Id. Mr. Chase noted that this username could be an
automated or shared login within CHMB rather than the username of a particular
individual, which would make an audit trail much harder. Id.
Ms. Worthy Reports CHMB’s Fraudulent Overbilling
After Ms. Worthy reported the apparent Medicare overbilling violations to Ms.
Kieltyka in early September 2013, representatives of CHMB abruptly and without
explanation refused to communicate with her. Id. ¶ 163. In late September 2013,
after Ms. Worthy had reported her concerns to Ms. Kieltyka and received no response
from her, she emailed Peter Angerhoffer, Accretive’s Senior Vice President for New
England, and asked to speak with him. Id. ¶ 164. She told him that the overbilling
was exposing Mercy Hospital and Accretive to liability, both from a compliance and
Medicare cash standpoint. Id. Ms. Worthy asked Mr. Angerhoffer to intervene and
Mr. Angerhoffer promised to resolve the problem. Id.
Ms. Worthy continued to monitor the FISS system throughout September and
October and saw that CHMB was continuing to submit and resubmit claims to
Medicare in violation of the Same-Day and Three-Day Rules. Id. ¶ 165. In about
October 2013 Ms. Worthy began providing Mr. Hachey and Ms. Kieltyka with daily
reports about the Medicare billing violation problems.
Id. ¶ 166.
repeatedly directed Ms. Worthy back to Ms. Kieltyka even though Mr. Hachey knew
that Ms. Kieltyka was not pursuing a resolution in compliance with the Medicare
Claims Processing Manual. Id. On October 15, 2013, Mr. Hachey convened a meeting
with Ms. Hawkes, Mr. Dreher, Ms. Kieltyka, Ms. Worthy, and CHMB President Janet
Boos (who participated by telephone). Id. ¶ 167. By that date, Ms. Worthy had
reported her concerns about violations of Medicare’s Same-Day and Three-Day Rules
at least a dozen times to Accretive executive Judi Kieltyka and Mercy Hospital
executives, including Mr. Hachey. Id. During the conversation, Ms. Boos committed
to recruiting someone familiar with provider-based billing to work as a resource for
At the CORE meeting on October 16, 2013, Ms. Worthy presented
documentation proving the Medicare billing violations and the large volume of the
improper claims. Id. ¶ 168. She further advised the attendees that although there
is a 60-day grace period to correct erroneous Medicare billing, 75 days had now gone
by, making CHMB’s illegal billing a compliance issue. Id. In response, Mr. Hachey
proposed to convene a task force composed of himself, Ms. Hawkes, Ms. Kieltyka, Mr.
Dreher, Ms. Hawkes’s assistant Marybeth Winschel, and Ms. Worthy to attempt to
resolve the illegal billing. Id. The task force met on October 17, 2013. Id. ¶ 169. At
the meeting, Ms. Kieltyka warned Ms. Worthy not to make any more statements
about improper Medicare billing by CHMB at the biweekly CORE meeting. Id. Ms.
Worthy advised the task force that representatives of CHMB were not speaking with
her and that the actual financial numbers could not be reconciled with CHMB’s claim
that it had a Medicare hold still in place. Id. At a CHMB site visit in San Diego,
California on October 30, 2013, Ms. Worthy again questioned Ms. Kieltyka for an
explanation, but Ms. Kieltyka never responded. Id. ¶ 170. In early November 2013,
Ms. Worthy met with Mr. Angerhoffer and again raised the concerns she had raised
with him previously about the illegal Medicare overbilling. Id. ¶ 171.
On November 25, 2013, CHMB Vice President Paula Kacsir stated that CHMB
had resubmitted a large claim to Medicare on behalf of Mercy Hospital’s physician
practices. Id. ¶ 172. She claimed that the need to resubmit the claims was due to an
“internal” error by Medicare.
However, because the Hospital appeared to
continue receiving reimbursement without interruption for its own billing, Ms.
Worthy told Ms. Kieltyka that something was amiss. Id. In Ms. Worthy’s experience,
if there was an error on Medicare’s part, CMS would not tell a provider to resubmit a
claim. Id. Accordingly, she concluded that Ms. Kacsir’s explanation of an “internal”
error was improbable and it was more likely that CHMB had erred. Id. This false
explanation by CHMB demonstrated to Ms. Worthy that–even four months after
assuming responsibility for billing for the Mercy Hospital physician practices–CHMB
still was filing fraudulent facility charges. Id.
Ms. Hawkes had maintained that Mercy Hospital had “special” Medicare
considerations that did not apply to hospitals on the West Coast where CHMB had
contracts to provide billing services. Id. ¶ 173. At a Medicare Billing Compliance
Boot Camp on or about December 2, 2013 Ms. Worthy confirmed with Hugh Aaron,
JD, MHC, an expert trainer at the meeting, that Ms. Hawkes’s explanation could not
be true and that the only exceptions to the Same-Day and Three-Day Rules were
three critical care hospitals in Maryland, tribal hospitals, long-term critical care
hospitals, and hospitals in Guam, the US Virgin Islands, the Marianas, and American
Samoa. Id. ¶ 174. Ms. Worthy telephoned Ms. Kieltyka that night and detailed her
conversation with the trainer. Id. ¶ 175. Ms. Kieltyka concurred and said she had
raised the same questions with CHMB and Ms. Hawkes, yet Ms. Kieltyka and
Accretive did nothing to stop CHMB’s billing of Medicare in violation of the SameDay and Three-Day Rules. Id. When Ms. Hawkes continued to falsely claim that
Mercy was “different” at the CORE meetings in December and January, Ms. Worthy
challenged her but received no response. Id.
On December 4, Ms. Worthy emailed Ms. Boos asking if CHMB had identified
someone to assist it with compliance with the Same-Day and Three-Day Rules. Id. ¶
176. Ms. Boos never responded. Id. On January 7, 9, and 10, Ms. Worthy spoke with
Ms. Kieltyka and Ms. Pena at CHMB about her findings regarding the dummy
accounts. Id. ¶ 177. Ms. Pena admitted during the conversations that the dummy
accounts were “placeholders” for the improper payments CHMB received from
When questioned further by Ms. Worthy about how refunds to
Medicare would be identified due to the creation of these dummy accounts, Ms. Pena
admitted that the practice was improper. Id.
Defendants’ Response to Ms. Worthy’s Reports
On December 12, 2013, with no progress having been made on resolving the
Medicare billing violation issues over eight months after Ms. Worthy initially raised
them, Mr. Hachey convened a work group consisting of CHMB’s Ms. Boos, Ms. Pena,
and Ms. Kacsir by phone; Mercy personnel Ms. Worthy, Ms. Hawkes, Marybeth
Winschel and Ms. Menezes; and Accretive’s Ms. Kieltyka to further address the issue.
Id. ¶ 178. During the December 12, 2013 conference call Ms. Boos admitted for the
first time that CHMB in fact had been billing claims to Medicare back to August 1,
2013, the date it took over responsibility for billing for the Mercy physician practices,
and that it had submitted mass rebills on October 28 and December 11. Id. ¶ 179.
Ms. Boos attributed the errors to CHMB’s technology, even though Ms. Worthy had
warned the Defendants about the fraudulent billing. Id.
On January 9, 2014, Ms. Worthy filed an internal complaint about the
Medicare billing violations with Jean Eichenbaum, Mercy Hospital’s compliance
officer. Id. ¶ 180. She informed Ms. Kieltyka that she had filed a complaint about
the illegal billings. Id. Ms. Eichenbaum directed Ms. Worthy to contact Maggie
Fortin, a Medicare Subject Matter Expert employed by the accounting firm Baker,
Newman & Noyes. Id. ¶ 181. Ms. Fortin conducted an investigation and met onsite
with Ms. Kieltyka, Ms. Worthy, and Ms. Menezes; she reviewed the process in place
and looked into Ms. Worthy’s allegations by an audit of 835 Medicare electronic
payment remittances and prepared a report for Mercy Hospital. Id. ¶ 182. Although
Ms. Fortin did not provide a copy of her report to Ms. Worthy, Ms. Fortin orally told
her that she agreed with her conclusions about the improper Medicare billing and
receipt of funds. Id. ¶ 183. Ms. Fortin warned Ms. Kieltyka in person and in the
presence of Ms. Worthy and Ms. Menezes that Medicare guidelines prohibited the
separate claim submission by the Hospital and its physician practices on services
rendered that fell under the Same-Day and Three-Day Rules. Id.
Defendants Deliberately Concealed Their Fraudulent
Following the January 14, 2014 meeting with Ms. Kieltyka, Ms. Worthy
continued to report to Mr. Hachey and Ms. Kieltyka about the Medicare overbilling
violations. Id. ¶ 184. She also instructed Ms. Kumar, Accretive’s senior operations
leader for patient accounts, to prepare a “dashboard” of accounts receivable metrics
for the CORE meeting scheduled for January 22nd to graphically demonstrate the
Medicare billing violations by CHMB. Id. Following this conversation with Ms.
Kieltyka, plans to create the dashboard were cancelled. Id. Upon learning of Ms.
Worthy’s plan to present the graphic information about Medicare billing violations at
the upcoming CORE meeting, Ms. Kieltyka directed her by phone not to do so. Id. ¶
185. Ms. Worthy questioned why she could not do so and complained that eight
months had passed and the Medicare billing violations still had not been corrected.
Ms. Kieltyka responded in a demeaning fashion that Ms. Worthy was
inexperienced and there was “no appropriate audience” at CORE. Id. The January
22nd meeting was later cancelled. Id.
A few days after Ms. Worthy gave her notice of resignation, Mr. Hachey
requested and Ms. Worthy provided a detailed description of the Medicare billing
violations. Id. ¶ 186. On about February 21, 2014 Ms. Worthy reported to Mr. Hachey
by email that CHMB continued to receive erroneous payments following the last
confirmed claim run of February 6, 2014 and that Ms. Kieltyka had signed the Fourth
Quarter 2013 Medicare Credit Balance report knowingly omitting the overpayments.
Id. ¶ 187. In addition to the cancellation of the scheduled January 22nd CORE
meeting, Ms. Kieltyka and Mr. Hachey also cancelled future CORE meetings until
after Ms. Worthy had stopped working at the Hospital, thereby precluding her from
presenting her concerns about the illegal billing to Ms. Kieltyka, Mr. Hachey, Ms.
Hawkes, Mr. Dreher, and others as a group. Id. ¶ 188.
CHMB Submitted False Claims to Medicare in Violation of SameDay and Three-Day Rules
By virtue of her position as patient account manager, Ms. Worthy had direct,
first-hand knowledge that CHMB, on behalf of the Hospital, billed and received
payment from Medicare for duplicative, unbundled claims in violation of Medicare’s
Three-Day and Same-Day Rules. Id. ¶ 189. For instance, CHMB billed Medicare
$73.91 for a December 17, 2013 outpatient clinic office visit (CPT 99213) which
Medicare paid on January 10, 2014. Id. ¶ 190. This claim should have been bundled
with Mercy Hospital’s claim (#AH0003256198) for an x-ray (CPT 71020) and an office
visit (CPT 99214) for the same patient on the same date of service. Id. CHMB also
billed Medicare for the following other claims in violation of the Same-Day Rule:
Id. ¶ 191.
CHMB claim #14103860 which should have been bundled with
the Mercy Hospital claim #AH0003184841 for the same patient
on the same date of service (08/13/2013);
CHMB claim #14493120 which should have been bundled with
the Mercy Hospital claim #AH0003200549 for the same patient
on the same date of service (09/10/2013);
CHMB claim #15715700 which should have been bundled with
the Mercy Hospital claim #AH0003248527 for the same patient
on the same date of service (12/03/2013); and
CHMB claim #16132440 which should have been bundled with
the Mercy Hospital claim #AH0003263843 for the same patient
on the same date of service (01/05/2014).
By separately billing unbundled, duplicative claims which it was
specifically instructed to not bill pursuant to the Same-Day Rule, CHMB submitted
false claims to Medicare in violation of the FCA. Id. ¶ 192.
Similarly, through her access to FISS, Ms. Worthy identified a number of
physician practice claims billed by CHMB and paid by Medicare which CHMB was
instructed to void for bundling pursuant to Three-Day Rule. Id. ¶ 193. These claims
CHMB claim #15558520 for which CHMB billed $2,886.38 and
which Medicare paid $843.35;
CHMB claim #15112400 for which CHMB billed Medicare
$506.21 and which Medicare paid $178.31;
CHMB claim #14127300 for which CHMB billed Medicare
$299.08 and which Medicare paid $168.67;
CHMB claim #14210380 for which CHMB billed Medicare
$448.70 and which Medicare paid $163.22; and
CHMB claim #13924980 for which CHMB billed $329.34 and
which Medicare paid $160.23.
Id. ¶ 194. All of these claims were ineligible for payment since they should have been
bundled with Mercy Hospital’s inpatient DRG claims pursuant to the Three-Day
Rule. Id. ¶ 195. By billing these claims, despite receiving specific instructions to void
the claims for bundling pursuant to the Three-Day Rule, CHMB submitted false
claims to Medicare in violation of the FCA. Id.
Accretive and Mercy Hospital Made False Statements to Avoid
an Obligation to Return Overpayments Received from Medicare
Providers are required to report any overpayments to Medicare within 60 days
of the identification of the overpayment or the date that any corresponding cost report
is due, whichever is later. Id. ¶ 197. Pursuant to Medicare billing requirements,
Mercy Hospital was required to file a quarterly Credit Balance Report (CMS-838)
with Medicare which identified any “credit balances” or overpayments the Hospital
received from Medicare as a result of billing or claims processing errors, duplicate
payments for the same service, or payment for non-covered services. Id.
overpayment retained by a provider after the deadline of reporting and returning the
overpayment is an “obligation” for purposes of the reverse false claims provision of
the FCA. Id. ¶ 198. In addition, Medicare may suspend payment to providers who
fail to file the CMS-838 report. Id. In the CMS-838 report, an officer or administrator
of the provider must certify that the information provided is “a true, correct, and
complete statement prepared from the books and records of the provider in
accordance with applicable Federal laws, regulations and instructions.” Id. ¶ 199. In
addition, the CMS-838 report states that “anyone who misrepresents, falsifies,
conceals, or omits any essential information may be subject to fine, imprisonment, or
civil money penalties under applicable Federal laws.” Id.
Instead of identifying the payments the Hospital received as a result of
CHMB’s fraudulent billing, Mercy Hospital and Accretive improperly omitted these
overpayments to avoid the obligation of repaying these amounts to Medicare and
unlawfully certified that the information in the reports was true and accurate. Id. ¶
200. Ms. Worthy was personally instructed by Ms. Kieltyka to prepare and submit
CMS-838 reports for Q3 2013 and Q4 2013 which omitted the Medicare payments
received by Mercy for the unbundled and duplicative facility fee claims submitted by
CHMB. Id. ¶ 201. Although Ms. Worthy prepared the reports, she refused to sign
the certification that the information was true and accurate because she knew that
the reports omitted these improperly obtained payments. Id. Because Ms. Worthy
refused to sign and submit these CMS-838 reports, Ms. Kieltyka personally signed
them, falsely certified that they were true and accurate, and faxed them to National
Government Services, the fiscal intermediary responsible for processing Mercy
Hospital’s claims. Id. Ms. Worthy informed Mr. Hachey of the submission of the false
CMS-838 reports on her last day of work at Mercy in February 2014. Id. Ms. Worthy
alleges on information and belief that Mercy Hospital did not inform Medicare about
these improper CMS-838 reports or repay the improperly obtained funds to Medicare
within 60 days as required by law. Id.
CHMB’s Mass Rebilling of Paid Claims
Medical billers typically follow up on unpaid claims every 30 days to correct
and resubmit claims that have not yet been paid. Id. ¶ 202. Instead of reviewing
individual Medicare claims and following up only on unpaid claims that had not been
paid or needed to be corrected and resubmitted, CHMB engaged in the improper mass
rebilling of claims. Id. On October 8, 2013, October 28, 2013, and December 11, 2013,
CHMB submitted claims to Medicare in mass rebills. Id. ¶ 203. Instead of verifying
that the claims had not already been paid, Ms. Boos of CHMB instructed Claims
Manager Grace Rusk to resubmit all claims, paid or unpaid, in a certain date range.
This mass resubmission of claims means that Defendants submitted, and
Medicare paid, claims that had previously been submitted and paid. Id.
Ms. Worthy saw in the FISS system that some of these resubmitted claims had
been paid. Id. For instance, on January 7, 2014, Ms. Worthy emailed CHMB’s billers
Yvette Ortiz and Melissa Thomas regarding a number of outpatient facility fee
charges subject to the Same-Day Rule which she instructed them to void in Allscripts,
but which they instead billed to Medicare, in some cases multiple times. Id. ¶ 204.
In the email, Ms. Worthy noted that she had traced the history of a particular
outpatient physician practice facility fee claim in FISS which CHMB billed to
Medicare twice December 11, 2013 and which Medicare reimbursed twice on
December 26th, even though Mercy notified CHMB to void the claim on November
15th. Id. ¶ 205. As a result, rather than paying Mercy once for both the physicianpractice and hospital facility charges subject to the Same-Day Rule in a single,
bundled claim, Medicare overpaid Mercy Hospital for three separate, duplicative
Through her review of FISS, Ms. Worthy discovered that this claim was not
merely an outlier; rather, it was among the numerous other claims which CHMB
rebilled to Medicare even though CHMB or Mercy Hospital had already billed and
received payment from Medicare for the associated charges. Id. ¶ 206. As of the date
of Ms. Worthy’s resignation, neither CHMB nor Mercy Hospital had taken any action
to refund claims that were paid twice or to investigate which claims should have been
refunded. Id. ¶ 207. Moreover, the Defendants conducted no investigation into
claims that were subjected to mass rebilling and did not inquire to see if Medicare
had paid duplicate payments for any of them. Id. ¶ 208.
CHMB and Mercy Falsely Billed for Unbundled Wound Care
Medicare pays facility fees to hospitals that include all overhead and supply
costs. Id. ¶ 209. Because the facility fee bundles all of these costs together, hospitals
should not submit individual claims for supplies or other charges included in the
bundled facility fee. Id. CHMB re-categorized dressings and skin substitutes for
wound care in order to bill separately for these items. Id. ¶ 210. CHMB changed the
codes in the computer system after Mercy Hospital coders had correctly entered the
codes into the computer system. Id. In particular, CHMB submitted claims for CPT
code 99070, which is for “[s]upplies and materials (except spectacles), provided by the
physician over and above those usually included with the office visit or other services
rendered.” Id. ¶ 211. These claims were false because the wound care supplies should
be included with the wound care services rendered and should have been included in
the bundled facility charge. Id.
Through her access to the FISS system, Ms. Worthy saw that false claims for
99070 for wound care supplies were being submitted to Medicare by CHMB. Id. ¶
212. For instance, in her January 14, 2014 weekly FISS update email, Ms. Worthy
noted that CHMB had submitted 302 claims to Medicare involving wound dressings
in which the revenue code for sterile supplies (272) was tied to CPT code 99070,
including specific claims with dates of service of 11/21/2013, 11/22/2013, and
11/26/2013. Id. On January 14, 2014, Lora Morse, a Revenue Integrity auditor
employed by Mercy Hospital, responded to Ms. Worthy’s email, and expressed
concern that CHMB had failed to contact her regarding denied claims for dressings
and that CHMB had modified the billing code without her approval after these claims
had been rejected by Medicare. Id. ¶ 213. Ms. Morse was concerned that by doing
so, CHMB had exposed the Hospital to compliance issues. Id. Upon information and
belief, CHMB never returned the wrongful reimbursements it obtained from
improperly unbundling claims in this manner to Medicare. Id.
Circumvented Medicare Screening Software
Physician office visits are assigned a level of service from 1 to 5, with Level 1
visits being the simplest and Level 5 the most complex. Id. ¶ 214. Medicare pays a
reimbursement to physicians based on the level of service. Id. Higher level visits are
reimbursed at a higher rate than lower level visits. Id. For physician practices that
are wholly owned or operated by a hospital, and subject to separate facility fee billing,
the facility fee also increases as the level of service increases. Id.
Accretive and CHMB devised a scheme to falsely inflate or “upcode” facility
fees by one level by requiring coders to base the level of the office visit on an Accretive
tool rather than on the clinical documentation. Id. ¶ 215. Upcoding the visit meant
that Medicare paid more than the correct amount for the office visit and also
prevented Medicare from detecting that the claim was subject to the Same-Day Rule.
Id. Ms. Kieltyka of Accretive and Ms. Hawkes of Mercy Hospital created the “matrix”
introduced in an October 2013 meeting to train coders how to code and bill the facility
fee component. Id. ¶ 216. By following the matrix as Accretive instructed, coders
falsely increased the level of service for the facility fee. Id. Ms. Menezes opposed the
use of this matrix and refused to attend the October 2013 meeting. Id.
The facility matrix scheme also had the effect of circumventing Medicare’s
screening software’s attempts to identify claims submitted in violation of the SameDay Rule. Id. ¶ 217. Medicare uses screening software to detect duplicate claims or
certain claims that violate Medicare billing requirements. Id. ¶ 218. Medicare’s
Common Working File screens incoming electronic claims submitted to Medicare to
search for inaccuracies. Id. The upcoding gave the impression that the two charges
were not connected and therefore not subject to the Same-Day Rule and did not need
to be bundled or screened out. Id. ¶ 220. Thus, the upcoding of the facility fee charge
resulted in both falsely inflated facility fee charges and eliminated the ability of
Medicare to detect claims that should have been bundled under the Same-Day Rule.
Id. ¶ 221.
Defendants Fraudulently Upcoded to Increase Facility Fee at
In July 2013, Ms. Worthy was asked to fill in as a coder at New England Foot
and Ankle, a podiatry and orthopedic practice wholly owned and operated by Mercy
Hospital. Id. ¶ 222. While at New England Foot and Ankle, Ms. Worthy noticed that
nurses would check a box on the patients’ “superbill” or office visit charge slip
indicating that the patient was scheduled for surgery, even if this was false. Id. ¶
223. Falsely indicating that a patient was scheduled for surgery increased the level
of service for the facility fee component by two levels. Id. ¶ 224. During the period
she was working at New England Foot and Ankle, Ms. Worthy reported this
fraudulent upcoding of facility fees to her supervisor, Ms. Kieltyka. Id. ¶ 225. After
approximately three days at the facility, she was instructed to leave New England
Foot and Ankle and return to her usual job. Id. Ms. Worthy alleges on information
and belief that the practice of falsely indicating a patient is scheduled for surgery to
upcode facility fees continues. Id. ¶ 226.
False Listing of Primary Diagnosis Code
Medicare does not cover certain services such as preventive physical exams
and office visits solely for the purpose of establishing care with a new provider. Id. ¶
227. These non-payable services are associated with a particular diagnosis code, such
as V70.0 for “routine general medical exam.” Id. Most Medicare patients have at
least one secondary diagnosis, such as hypertension or anxiety, even if the primary
purpose of the visit being billed is a non-payable service. Id. ¶ 228. To obtain
payment for services with the primary diagnosis code V70.0, which Medicare would
otherwise deny as non-payable, CHMB falsely listed a secondary diagnosis code as
the primary diagnosis code in their claim submissions to Medicare. Id. ¶ 229. As a
result of this fraudulent change in the primary diagnosis for the service being billed,
Medicare paid for services that were legally required not to be paid and that it
otherwise would not have paid. Id.
Ms. Worthy alleges that Mercy, CHMB, and Accretive unlawfully retaliated
against her. Id. ¶ 241.
Ms. Worthy says that she reported to her supervisors,
including Ms. Kieltyka, at numerous times, all of the alleged violations. Id. ¶¶ 242,
243. On November 11, 2013, Ms. Worthy emailed Ms. Kieltyka and stated that it was
becoming impossible to perform her job duties because CHMB representatives
refused to speak with her about major Medicare billing violations. Id. ¶ 244. Ms.
Kieltyka told Ms. Worthy that she was responsible for working with CHMB and also
informed Ms. Worthy that she had told Mr. Hachey she was struggling at her job and
had recommended she step down and take a new position as administrative assistant.
Id. ¶¶ 245-46. At one point, Ms. Kieltyka told Ms. Worthy she let her team down by
“throwing them under the bus.” Id. ¶ 247.
A few days after Ms. Worthy submitted her complaint to Mercy’s compliance
officer, Defendants assigned Brie Farmer and Anvita Kumar, two contract employees
from Accretive, to work in Ms. Worthy’s office. Id. ¶ 248. Ms. Farmer and Ms. Kumar
questioned Ms. Worthy about her daily workload and projects, accused her of poor
decision-making, forbade her from sending emails without their initial review, and
rummaged through her desk. Id. ¶¶ 249-50.
Ms. Worthy complained again to Ms. Kieltyka who told Ms. Worthy that she
was “inexperienced” and that “it wasn’t [her] time at Mercy Hospital.” Id. ¶¶ 251-52.
She also said that she had reached out to a replacement for Ms. Worthy. Id. Ms.
Kieltyka continued to criticize Ms. Worthy for her performance, advising her that she
was responsible for the revenue recovered by CHMB. Id. ¶¶ 253-54. On January 28,
2014, Ms. Worthy gave her 30-day resignation notice, which made clear that she felt
as though she was being forced out of Mercy. Id. ¶ 255. The harassment continued
until the day Ms. Worthy left, with Ms. Kieltyka demanding a copy of the compliance
packet Ms. Worthy provided to the compliance officer and Mercy’s attorney. Id. ¶¶
THE PARTIES’ POSITIONS
The Defendants’ Motions to Dismiss
The Mercy Defendants
The Mercy Defendants move to partially dismiss the claims in Ms. Worthy’s
Third Amended Complaint pursuant to Federal Rules of Civil Procedure 9(b) and
12(b)(6). Mercy’s Mot. at 1. Specifically, the Mercy Defendants move to dismiss all
claims, except the reverse FCA claims in Count III and the FCA retaliation claim in
Count V. Id. at 1, 6.
To begin, the Mercy Defendants lay out the pleading requirements that the
relator must satisfy in order to survive a motion to dismiss under Rule 12(b)(6). Id.
at 7. First, the complaint must “state a claim to relief that is plausible on its face.”
Id. (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) and Bell Atl. Corp. v. Twombly,
550 U.S. 544, 556 (2007)). In addition, they state that relators asserting FCA claims
must also satisfy Rule 9(b).
Id. (citing United States ex rel. Heineman-Guta v.
Guidant Corp., 718 F.3d 28, 36 (1st Cir. 2013)). This requires that relators plead
“with particularity the circumstances constituting fraud.” Id. The Mercy Defendants
explain that the purpose behind the rule is to “protect defendants whose reputation
may be harmed by meritless claims of fraud, [ ] discourage ‘strike suits,’ and [ ]
prevent the filing of suits that simply hope to uncover relevant information during
discovery.” Id. (quoting Doyle v. Hasbro, Inc., 103 F.3d 186, 194 (1st Cir. 1996)).
Citing First Circuit caselaw, the Mercy Defendants explain that to satisfy Rule 9(b),
an FCA complaint “must (1) specify the statements that the plaintiff contends were
fraudulent, (2) identify the speaker, (3) state where and when the statements were
made, and (4) explain why the statements were fraudulent.” Id. at 8.
The Mercy Defendants first argue that the Court should dismiss Counts I & II
of the Third Amended Complaint because certain of the theories that Ms. Worthy
advances are not pleaded with particularity. Id. They allege that Ms. Worthy “has
failed to plead with particularity the facts surrounding the submission of any false
claim for payment linked to those theories” and that she “fails to provide the requisite
‘who, what, where, and when’ of these alleged fraudulent schemes.” Id. (emphasis by
The Mercy Defendants claim that to establish FCA liability, “merely alleging
facts related to a defendant’s alleged misconduct is not enough” and that a complaint
must “connect allegations of fraud to particular false claims for payment, rather than
a fraudulent scheme in the abstract.” Id. at 9. They recognize that the First Circuit
employs a flexible approach in assessing FCA complaints but state that a complaint
must be dismissed when its omits “among other fraud specifics, details concerning
the dates of the claims, the contents of the forms or bills submitted, their
identification numbers, [and] the amount of money charged to the government.” Id.
The Mercy Defendants argue that Ms. Worthy “provides no details regarding
even one allegedly false claim for payment submitted to the government.” Id. at 9-10
(emphasis by Mercy). They compare these claims to some of Ms. Worthy’s theories
against the other Defendants, where, they concede, “she does attempt to detail
specific exemplar claims.” Id. at 10. The Mercy Defendants then compare Ms.
Worthy’s complaint to a complaint that a judge in this District recently dismissed
because the relator had not “provided transactional detail for any claim.” Id. (citing
United States ex rel. Webb v. Miller Family Enter., No. 1:13-cv-00169, 2014 U.S. Dist.
LEXIS 163698, at *30-31 (D. Me. July 2, 2014)).
In addition, the Mercy Defendants argue that these allegations are “doomed
by Worthy’s failure to specify the time, place, and content of a particular false
representation.” Id. at 11 (internal quotations omitted). For example, they state that
Ms. Worthy contends that Mercy engaged in the improper use of billing codes and
modifiers, but that “she does not allege who in particular did so, when specifically the
person did so, what the particular circumstances of the service were that rendered
the code inappropriate, and whether the coding was ever communicated to the
The Mercy Defendants claim that Ms. Worthy’s “generalized
allegations are a far cry from the detailed assertions necessary to satisfy Rule 9(b) in
an FCA suit.” Id. They contend that Ms. Worthy’s Complaint with respect to these
factual allegations “presents a classic example of a prohibited strike suit; designed to
remedy its deficiencies through discovery.” Id. at 12.
The Mercy Defendants also move to dismiss the allegations in Counts I & II
regarding the Same-Day and Three-Day Rules for failure to plead an element of the
claim. Id. at 6. The Mercy Defendants state that in order to sustain an FCA claim,
the relator must establish that the defendant “knowingly misrepresented compliance
with a material precondition of payment.” Id. at 12 (emphasis added by Mercy). They
allege that the Three-Day and Same-Day Rules are not preconditions of payment. Id.
at 13, 15.
The Mercy Defendants state that certain subparts of the relevant
regulations, such as subpart C and N, include “unambiguous language designating
certain requirements within those subparts as conditions of payment.” Id. at 13-14.
However, the Mercy Defendants argue that the Three-Day Rule is found in subpart
A, which “lacks any similar language indicating that payment is contingent on
compliance.” Id. at 14. As a result, the Mercy Defendants submit that “under
traditional canons of statutory interpretation, the regulations’ plain text establishes
that the Three-Day Rule is not a precondition of payment that can support FCA
liability.” Id. The Mercy Defendants make a similar argument with respect to the
Same-Day Rule, claiming that none of the sources of the Rule establishes that it is a
condition of payment. Id. at 15-16.
In addition, the Mercy Defendants argue that Ms. Worthy’s allegations in
Counts I and II regarding mass rebilling and unbundled wound care supplies should
be dismissed because the allegations establish that Mercy did not act knowingly, an
essential element in the statute. Id. at 16-17. With respect to the mass rebilling, the
Mercy Defendants cite the factual allegations in the Third Amended Complaint,
which, in their view, show that “Mercy was unaware of the mass rebills until after
they had been submitted” and that “Mercy was victimized by CHMB’s affirmative
representations.” Id. at 17-18. With respect to the unbundled wound care supplies,
the Mercy Defendants cite the factual allegations in the Third Amended Complaint,
which, it submits, show that “CHMB undertook the allegedly improper recategorization of wound care supplies only after the claims had been properly coded
by Mercy, and CHMB did so without notifying or obtaining approval from Mercy.” Id.
The Mercy Defendants also move to dismiss Count IV of the Complaint, Ms.
Worthy’s FCA conspiracy claim. Id. at 19. They state that to establish liability under
the FCA for conspiracy, Ms. Worthy must “plead with particularity” the “existence of
an agreement between the Defendants to violate the FCA.” Id. They argue that Ms.
Worthy has failed to do so. Id. at 19. Further, the Mercy Defendants allege that Ms.
Worthy’s “conspiracy claim rises and falls with the individual claims” and since her
underlying claims fail, her conspiracy claim also fails. Id. at 19-20.
Lastly, the Mercy Defendants move to dismiss Ms. Worthy’s retaliation claim
in Count V under the MWPA because they claim it is untimely. Id. at 20. They state
that under 5 M.R.S. § 4611, a charge of discrimination must be filed within 300 days
of the alleged act of unlawful discrimination.
They note that Ms. Worthy
submitted her resignation stating that she was being forced out of Mercy on January
28, 2014, and filed her Maine Human Rights Commission (MHRC) claim on December
18, 2014, over 300 days later. Id. at 20-21.
Accretive joins the Mercy Defendants’ motion to dismiss with respect to Counts
I, II, and IV and incorporates their arguments into its own motion. Accretive’s Mot.
Accretive separately moves for dismissal of Ms. Worthy’s federal and state
retaliation claims in Count V. Id. at 5. As a threshold matter, Accretive agrees with
Mercy that Ms. Worthy’s retaliation claim under the MWPA is time-barred and
should be dismissed outright because she filed her complaint with the MHRC 324
days after she resigned and the statute requires such complaints to be filed within
300 days. Id. at 6 (citing 5 M.R.S. § 4611). Accretive then argues that Ms. Worthy
fails to state a sufficient retaliation claim against it under the MWPA or FCA. Id. It
states that liability under these statutes requires an employment-like relationship
and that Ms. Worthy has not alleged that Accretive had sufficient control over her in
order to act as an employer. Id. at 6-8. Additionally, Accretive claims that Ms.
Worthy has not alleged enough facts to support her claim of constructive discharge.
Id. at 8-10.
CHMB also moves to dismiss Counts I, II, IV, and V of the Third Amended
Complaint. CHMB’s Mot. at 1. CHMB moves to dismiss Counts I and II because, it
argues, the factual allegations set out against CHMB “fail to plead with particularity
the existence of a fraudulent scheme and they fail to plead with particularity the
submission of any false claim for payment.” Id. at 7. Just as the Mercy Defendants
argued, CHMB alleges that Ms. Worthy’s complaint fails to meet the pleading
standards laid out by Rule 9(b) and the First Circuit because it does not specify the
who, what, where and when of the alleged fraudulent schemes, nor does it connect
the allegations to particular false claims for payment. Id. at 7-8. CHMB recognizes
that Ms. Worthy “at least attempts to identify specific claims” in some sections of the
complaint but claims that these allegations do not provide sufficient transactional
detail to satisfy the particularity requirements of Rule 9(b). Id. at 8-9.
CHMB also argues that the theories in Counts I and II concerning the ThreeDay and Same-Day Rules should be dismissed because the Rules are not
preconditions of payment as required to impose FCA liability. Id. at 9-10. CHMB
says that it “has nothing to add, subtract or alter with respect to” Mercy’s discussion
of this issue and therefore it adopts and incorporates Mercy’s discussion by reference.
Id. at 10.
CHMB further argues that the conspiracy claim in Count IV should be
dismissed because it fails to meet the particularity requirements and because it is
based on alleged false claims that were not pled with particularity.
Id. at 10.
Specifically, CHMB claims that Ms. Worthy did not plead with particularity the
existence of any agreement because “[t]here were no allegations anywhere in the
complaint alleging the who, what, where or when of any such agreement.”
Additionally, CHMB states that a “conspiracy claim rises and falls with the
individual claims” and that Ms. Worthy’s individual claims are insufficient to survive
a motion to dismiss and therefore the conspiracy claim fails as well. Id. at 11.
Finally, CHMB argues that Count V should be dismissed because Ms. Worthy
failed to plead CHMB’s employer status and actions or conduct sufficient to support
a claim of constructive discharge.
CHMB states that the MWPA provides
protection against retaliation by an employer and that a joint employer relationship
exists “where two or more employers exert significant control over the same
employees and share or co-determine those matters governing essential terms and
conditions of employment.” Id. at 12-13. It lays out several factors courts consider to
determine joint employer status, and then argues that “[i]n the 267 paragraphs of
[Ms. Worthy’s] complaint there is not a single factual allegation which, if proved,
would establish any fact that would suggest or support an inference that CHMB was
her joint employer.” Id. at 13.
As for the claim of constructive discharge, CHMB states that Ms. Worthy must
show that the harassment to which she was subjected was “objectively so severe and
oppressive that staying on the job would have been intolerable.” Id. at 14. CHMB
asserts that the only specific, factual allegations against CHMB is that its
“representatives were refusing to speak with [Ms. Worthy] about major Medicare
billing violation issues.” Id. It argues that this single allegation is insufficient to
constitute constructive discharge. Id.
Consolidated Objection to Motions to Dismiss
Ms. Worthy agrees with the Defendants that an FCA complaint must be
pleaded with particularity in accordance with Rule 9(b) by setting forth the who,
what, when, where, and how of the alleged fraud. Pl.’s Opp’n at 11-12. However, Ms.
Worthy contends that under First Circuit law, there exists no “checklist of mandatory
requirements that must be satisfied by each allegation included in a complaint.” Id.
at 12. She submits that district courts in the First Circuit have recognized a flexible
approach and denied motions to dismiss where the complaint, although lacking any
specific details about particular false claims, adequately alleged that the defendant
actually presented false claims to the government. Id. at 12 (collecting cases).
Under this framework, Ms. Worthy argues that she has sufficiently alleged the
resubmission of false claims with particularity. Id. at 13. Citing specific paragraphs
of her Third Amended Complaint, she outlines the details she provided about who
resubmitted the false claims, what unlawful billing practices were at issue, when the
Defendants implemented the fraudulent billing practices, where the practices took
place, and how the Defendants effectuated the alleged fraud. Id. at 13-15. She claims
that these facts, taken together, “substantially and particularly describe the
underlying fraudulent scheme that led to the submission of false claims.” Id. at 15.
She claims that she went further and points to places in the complaint where she
“linked these practices with the presentment of false claims to Medicare.” Id. Ms.
Worthy objects to CHMB’s motion to dismiss her claims regarding the Three-Day and
Same-Day rules on the same grounds. Id. at 18-20.
Ms. Worthy distinguishes her case from the cases cited by Defendants. Id. at
16. She states that unlike in those cases where the relator was merely speculating
about the false claims that could have been submitted, Ms. Worthy directly observed
and personally identified and reviewed actual false claims in the Medicare claims
processing computer system. Id. She argues that she has satisfied Rule 9(b) by
pleading details about the billing practices and personal knowledge of the
Defendants’ submission of false claims. Id. at 17-18.
Next, Ms. Worthy contends that her FCA conspiracy claim in Count IV is
sufficiently pleaded. Id. at 21. Ms. Worthy says that to plead an FCA conspiracy
claim with particularity the relator must allege (1) who the co-conspirators are, (2)
when or where they entered into an agreement, and (3) what overt acts they took in
furtherance of the conspiracy.
She agrees with Defendants that because a
conspiracy claim is predicated on an underlying FCA violation, the underlying
violations must also be sufficiently pleaded. Id.
Ms. Worthy argues that the complaint alleges that Accretive and Mercy
entered into two unlawful agreements to violate the FCA: (1) an agreement to falsify
billing information to obtain payment on claims that Medicare had legitimately
suspended from payment; and (2) an agreement to falsify patient discharge status
indicators on inpatient claims to obtain increased payment from Medicare. Id. She
points out the places in the complaint where she describes when the agreements
occurred, who was involved, and what acts were taken to further the conspiracy. Id.
at 21-22. She also argues that the complaint alleges an unlawful agreement between
all the Defendants to submit duplicative claims for overlapping facility fees and to
conceal the overpayments as a result of these billings. Id. at 22. Again, she identifies
the specific paragraphs of her complaint in which she provides details about the who,
when, where, and what of these claims. Id. at 22-23.
Ms. Worthy then takes on the Defendants’ argument that she has failed to
state a claim with respect to the allegations of a violation of the Three-Day and SameDay Rules because these are not conditions of payment. Id. at 23. She states that
“Defendants’ arguments upend elemental principles of False Claims Act liability: that
contractors may not bill the government separately for claims that are required by
law to be billed together at a lower, bundled rate.” Id. Additionally, she states that
Defendants’ arguments “contradict the controlling precedent in this Circuit, which
makes clear that a regulation need not contain the formulaic text – “condition of
payment” – to establish the falsity of a claim.” Id. at 24. Ms. Worthy contends that
these rules are not “aspirational billing guidelines for which providers are afforded
the discretion of complying” but “Congressionally-enacted, binding payment rules.”
Id. at 25.
Ms. Worthy also opposes Mercy and Accretive’s argument that they are not
liable for the mass rebilling and unbundling of wound care supplies because they did
not act knowingly. Id. at 26. She argues that Mercy and Accretive are vicariously
liable for CHMB’s actions under principles of agency law. Id. at 27.
Lastly, Ms. Worthy disputes the Defendants’ motions to dismiss her retaliation
claims in Count V of the Complaint. Id. at 28. First, Ms. Worthy contends that her
claim of constructive discharge was timely filed under the MWPA. Id. She states
that the date of her resignation occurred on February 21, 2014 when she actually
resigned, not on January 28, 2014 when she gave her letter of resignation. Id. She
suggests that the intervening time between the notice and resignation allowed an
opportunity for the Defendants to take steps to end the retaliation and that under
applicable law, the statute of limitations runs from the date one actually leaves
employment because until that point, constructive discharge is not certain. Id. at 2829.
Ms. Worthy also argues that the retaliatory hostile work environment claim is
based on a series of retaliatory acts and that she has plausibly stated at least three
separate bases for constructive discharge. Id. at 30-32. She says that the Third
Amended Complaint specifically alleges that CHMB’s refusal to speak with her and
the other Defendants’ failure to correct CHMB’s retaliation made it impossible for
her to do her job; that she was informed by her supervisor that she was being
replaced; and that she had no choice but to resign or be complicit in the illegal acts.
Id. at 32. Under these circumstances, Ms. Worthy argues, “it is certainly at least
plausible that a reasonable person would have felt compelled to resign to avoid
participating in unlawful activities.” Id.
Finally, Ms. Worthy claims that Accretive is a joint employer and thus liable
for constructive discharge and retaliatory harassment under the FCA and MWPA.
Id. at 32-35. Additionally, she contends that even if Accretive and CHMB are not
joint employers, the Maine Human Rights Act (MHRA), 5 M.R.S. §§ 4551 et seq.,
prohibits any person from interfering with an individual’s rights under the Act and
that the MWPA is among the rights protected by this statute. Id. at 34.
The Defendants’ Replies
The Mercy Defendants
In their reply, the Mercy Defendants maintain that Ms. Worthy’s factual
allegations “are fatally defective because she has not pled them with the requisite
particularity under Rule 9(b).” Mercy’s Reply at 3. They agree that relators need not
satisfy a “checklist of mandatory requirements,” but they state that relators must
provide sufficient details to enable defendants to “identify particular false claims for
payment that were submitted to the government.” Id. Citing Sixth Circuit caselaw,
the Mercy Defendants state that a relator must “pl[e]ad with specificity . . .
characteristic examples that are illustrative of the class of all claims covered
by the fraudulent scheme.” Id. (emphasis added by Mercy).
The Mercy Defendants insist that all of the arguments made by Ms. Worthy in
her opposition fail. Id. First, they allege that the specific details Ms. Worthy invoked
in support of her claims against Mercy are linked to her other theories, such as the
Same-Day and Three-Day Rules. Id. They claim that “Worthy cannot plead one
theory with particularity and use that as a ticket to subject Mercy to burdensome
discovery on any other FCA theory she can imagine.” Id. They state that “[e]xemplar
claims are necessary for each distinct theory.” Id. at 4.
Second, the Mercy Defendants dispute Ms. Worthy’s argument that an FCA
claim can survive Rule 9(b) “so long as it provides sufficient details to support that
false claims were actually presented and puts the defendant on notice.” Id. They
state that the First Circuit has rejected this proposition and they distinguish this
case from the cases cited by Ms. Worthy, explaining that the complaints in the other
cases alleged that every claim for payment was false, but here, Ms. Worthy only
claims that some of the claims were false. Id.
Third, the Mercy Defendants object to Ms. Worthy’s argument that pleading
personal knowledge together with indicia of reliability is sufficient to satisfy Rule
9(b). Id. at 5. They claim that her argument is supported only by out-of-circuit cases
and that the First Circuit has established that relators must plead specific claims of
Further, the Mercy Defendants state that Ms. Worthy has not
explained why, if she has personal knowledge, she failed to provide specific details.
The Mercy Defendants also contend that Ms. Worthy is mistaken in her
assertion that because 31 U.S.C. § 3729(a)(1)(B) does not contain a presentment
claim, she need not provide particular claims for payment. Id. at 6. The Defendants
state that under First Circuit law, Rule 9(b) applies with full force to this subsection
and that the more flexible standard that Ms. Worthy seeks only applies to qui tam
actions in which the defendant induced third parties to file false claims. Id.
Next, the Mercy Defendants reject Ms. Worthy’s argument that the Three-Day
and Same-Day Rules are preconditions of payment. Id. They respond to Ms. Worthy’s
argument that if the Rules are not preconditions, they are in effect unenforceable by
pointing out that the Rules are still enforceable, just not by a private citizen. Id. at
The Mercy Defendants also oppose Ms. Worthy’s argument that Mercy should
be vicariously liable for CHMB’s actions. Id. at 8. They explain that “vicarious
liability in FCA cases should only be imposed when it would be ‘entirely consistent
with the underlying purpose of the FCA.’” Id. (quoting United States v. Dynamics
Research Corp., No. 03-cv-11965, 2008 WL 886035, at *15 (D. Mass. 2008)). According
to the Mercy Defendants, this case does not meet that standard because the Mercy
Defendants were actively misled by their principal and therefore are innocent. Id.
As for the conspiracy claim, the Mercy Defendants maintain that Ms. Worthy
failed to allege any unlawful agreement among the Defendants to violate the FCA.
Id. at 9. They state that she only alleged facts related to either the lawful business
agreements among the Defendants or the alleged conduct that she contends violates
the FCA. Id.
Finally, the Mercy Defendants maintain that Ms. Worthy’s MWPA claim is
untimely because, they claim, the limitations period begins to run on the date an
employee gives notice of resignation, not the effective date of that resignation. Id. at
Like the Mercy Defendants, CHMB maintains that Ms. Worthy’s claims in
Counts I & II should be dismissed because, it argues, she is required to plead with
particularity representative examples of the false claims covered by each of the
alleged schemes. CHMB’s Reply at 1. It distinguishes the cases cited by Ms. Worthy,
explaining that those cases acknowledged that relators must plead representative
examples but concluded that because the relator alleged every invoice submitted was
false, there was no need to identify particular invoices by date or number. Id. at 2.
Here, CHMB states, “[t]he falsity of the claims depend largely on the particularized
details contained within the claim forms submitted” and therefore, Ms. Worthy must
plead characteristic examples. Id. at 3.
representative examples of false claims for each of the fraudulent schemes she alleges
and not blur the distinctions between the alleged schemes . . . by borrowing specific
examples from some schemes to mask the lack of representative examples from other
schemes.” Id. They also maintain that Ms. Worthy has failed to provide the “who,
what, where, when and how” tying CHMB to any particular scheme. Id. at 4-5.
As for Count IV, CHMB urges that Ms. Worthy fails to plead with particularity
any agreement among the Defendants to defraud the government, or any agreement
to do anything, and state that although corporations can be held liable, they act
through individuals, but the complaint fails to contain any allegations that any of
CHMB’s employees entered into an agreement. Id. at 5-7.
Finally, CHMB contends that in the absence of an employer-employee
relationship, CHMB may not be held liable for retaliation against Ms. Worthy. Id. at
7. It states that Ms. Worthy does not oppose the argument that CHMB is not a joint
employer but instead asserts that CHMB can be held liable even if it was not her
Id. at 8.
According to CHMB, however, although MHRA generally
authorizes actions against any persons, the relevant provisions are limited in their
application to employers only. Id.
In its reply, Accretive maintains that Ms. Worthy must plead specific details
with respect to her claims in Counts I, II, and IV. Accretive’s Reply at 2. It argues
that Ms. Worthy’s suggestion that she cannot provide any details because Defendants
are in control of the records is belied by the fact that she does provide specific details
for other theories. Id. at 2-3. It agrees with the Mercy Defendants that the more
flexible approach for which Ms. Worthy argues only applies in cases involving the
indirect submission of claims, which is not the case here. Id. at 3. Accretive says that
Ms. Worthy disproves her own point that she need not plead any specific claims by
relying on cases in which the complaints did plead specifics. Id. at 3-4. It also states
that Ms. Worthy cannot rely on the discovery process to uncover relevant information.
Id. at 4.
Accretive also objects to Ms. Worthy’s contention that Accretive is liable
vicariously through CHMB for mass rebilling and unbundling claims. Id. Accretive
states that it still must have acted “knowingly” and Ms. Worthy has not pleaded facts
supporting knowing participation by Accretive, and it states that she has pleaded no
facts to support a theory that CHMB was an agent of Accretive. Id. at 4-5.
Lastly, Accretive argues that Ms. Worthy has failed to plead either a Maine or
FCA retaliation claim against Accretive. Id. at 5. First, it states that under Maine
law the relevant date is the date of the notice, not the actual date of resignation. Id.
Second, it argues that the alleged facts do not meet the standard for constructive
discharge because they only demonstrate that the workplace conditions were difficult
and unpleasant, not so intolerable to render a voluntary resignation a termination.
Id. at 6. Third, Accretive claims that Ms. Worthy is unable to overcome the fact that
Accretive was not Ms. Worthy’s employer. Id. at 6-7.
Federal Rule of Civil Procedure 12(b)(6) provides that a court may dismiss a
complaint for “failure to state a claim upon which relief can be granted.” FED. R. CIV.
P. 12(b)(6). Under the general pleading standards, a complaint need only contain “a
short and plain statement of the claim showing that the pleader is entitled to relief.”
FED. R. CIV. P. 8(a)(2).
However, claims brought under the FCA must satisfy Rule 9(b)’s heightened
pleading requirements. United States ex rel. Karvelas v. Melrose-Wakefield Hosp.,
360 F.3d 220, 228 (1st Cir. 2004). Rule 9(b) requires that any party alleging fraud or
mistake “state with particularity the circumstances constituting fraud or mistake.”
FED. R. CIV. P. 9(b). This standard “means that a complaint must specify ‘the time,
place, and content of an alleged false representation.’” United States ex rel. Gagne v.
City of Worcester, 565 F.3d 40, 45 (1st Cir. 2009) (quoting United States ex rel. Rost v.
Pfizer, Inc., 507 F.3d 720, 731 (1st Cir. 2007)).
Conclusory allegations are not
sufficient. Gagne, 565 F.3d at 45. The First Circuit recognizes that there is some
flexibility to this standard where “the complaint as a whole is sufficiently particular
to pass muster under the FCA.”
Rost, 507 F.3d at 732.
The purpose of this
requirement is to “give notice to defendants of plaintiff’s claim, to protect defendants
whose reputation may be harmed by meritless claims of fraud, to discourage ‘strike
suits,’ and to prevent the filing of suits that simply hope to uncover relevant
information during discovery.” Doyle, 103 F.3d at 194.
The FCA imposes liability on any person who (1) knowingly presents, or causes
to be presented, a false or fraudulent claim for payment or approval, 31 U.S.C. §
3729(a)(1)(A); (2) knowingly makes, uses, or causes to be made or used, a false record
or statement material to a false or fraudulent claim, 31 U.S.C. § 3729(a)(1)(B); or (3)
conspires to commit such violations. 31 U.S.C. § 3729(a)(1)(C). The FCA also forbids
making or using a false record or statement to conceal, avoid, and/or decrease
repayment obligations, called a “reverse false claim.” 31 U.S.C. § 3729(a)(1)(G). In
addition, it forbids retaliatory discharge based upon an employee’s efforts to stop
violations of the FCA. 31 U.S.C. § 3730(h).
Violations of the FCA may be enforced through civil actions initiated by either
the Attorney General or private persons. Id. § 3730(a), (b). In the latter category of
qui tam actions, the government has an opportunity to evaluate the complaint and
decide whether to intervene. Id. § 3730(b)(2), (b)(4), (c)(1). A relator is entitled to
recover a share of the proceeds regardless of whether the government intervenes. Id.
Ms. Worthy filed a qui tam complaint on behalf of the Government alleging
four counts against the Defendants for violations of the FCA. She also brings one
count in her own name claiming retaliation in violation of both the FCA and MWPA.
The Defendants contest all of the Counts in the Third Amended Complaint except for
Count III, the “reverse false claim.”
Counts I & II
In her factual allegations, Ms. Worthy sets forth several theories forming the
basis for the claims in Counts I and II that the Defendants knowingly presented false
claims or knowingly made or used false statements material to false claims. All of
the Defendants move to dismiss these Counts arguing that certain of the allegations
do not state an element of the claim and others do not satisfy the particularity
The First Circuit has “long held that the FCA is subject to a judicially imposed
requirement that the allegedly false claim or statement be material.” United States
ex rel. Jones v. Brigham and Women’s Hosp., 678 F.3d 72, 82 (1st Cir. 2012) (quoting
United States ex rel. Loughren v. Unum Grp., 613 F.3d 300, 307 (1st Cir. 2010)). Thus,
in order to sustain an FCA claim, a plaintiff must establish that the defendant
“misrepresented compliance with a material precondition of . . . payment.” New York
v. Amgen Inc., 652 F.3d 103, 110 (1st Cir. 2011). All of the Defendants contend that
the Same-Day and Three-Day Rules are not material preconditions of payment and
therefore Ms. Worthy has failed to state an element of her claim with respect to these
The thrust of the Defendants’ argument is that the Three-Day and Same-Day
Rules cannot be preconditions of payment because they are not expressly labeled as
such in the regulations. See, e.g., Mercy’s Mot. at 13-16. However, as the Defendants
pointed out in their first notice of supplemental authority, the United States Supreme
Court recently addressed this exact issue in Universal Health Services, Inc. v. United
States ex rel. Escobar, 136 S. Ct. 1989 (2016) (Escobar II), an appeal of a First Circuit
decision.2 In Escobar II, the Supreme Court held that FCA liability for individuals
who fail to disclose violations of legal requirements “does not turn upon whether those
requirements were expressly designated as conditions of payment.” Escobar II, 136
S. Ct. at 1996. The Supreme Court explained:
Defendants can be liable for violating requirements even if they were
not expressly designated as conditions of payment. Conversely, even
when a requirement is expressly designated a condition of payment, not
every violation of such a requirement gives rise to liability. What
matters is not the label the Government attaches to a requirement, but
whether the defendant knowingly violated a requirement that the
defendant knows is material to the Government's payment decision.
Id. Therefore, the fact that the provisions containing the rules may not be labeled
“condition of payment” is relevant but not automatically dispositive of the materiality
inquiry. See id. at 2001.
“[T]he term ‘material’ means having a natural tendency to influence, or be
capable of influencing, the payment or receipt of money or property.” Id. at 2002; 31
United States ex rel. Escobar v. Universal Health Servs., 780 F.3d 504 (1st Cir. 2015).
U.S.C. § 3729(b)(4). Materiality “look[s] to the effect on the likely or actual behavior
of the recipient of the alleged misrepresentation.” Escobar II, 136 S. Ct. at 2002. The
Supreme Court provided some direction as to the type of evidence the Court may
consider in determining materiality:
[P]roof of materiality can include, but is not necessarily limited to,
evidence that the defendant knows that the Government consistently
refuses to pay claims in the mine run of cases based on noncompliance
with the particular statutory, regulatory, or contractual requirement.
Conversely, if the Government pays a particular claim in full despite its
actual knowledge that certain requirements were violated, that is very
strong evidence that those requirements are not material. Or, if the
Government regularly pays a particular type of claim in full despite
actual knowledge that certain requirements were violated, and has
signaled no change in position, that is strong evidence that the
requirements are not material.
Id. at 2003-04. Ultimately, the Escobar Court remanded the materiality issue to the
First Circuit for further proceedings. Id. at 2004.
On remand, the First Circuit applied a “holistic approach” to the materiality
standard based on the Supreme Court’s guidance. United States ex rel. Escobar v.
Universal Health Care Servs., Inc., 842 F.3d 103, 106, 109 (1st Cir. 2016) (Escobar
III). The First Circuit focused on three factors: 1) whether regulatory compliance was
a condition of payment; 2) the centrality of the requirement in the regulatory
program; and 3) whether the Government pays claims despite actual knowledge that
certain requirements were violated. Id. at 110. Applying Escobar III, the Court turns
to whether the Three-Day and Same-Day Rules are material.
First, the Court addresses the parties’ arguments as to whether the Rules are
in fact designated as conditions of payment. The Defendants are correct that neither
regulation is expressly labeled as a “condition of payment.”
See 42 C.F.R. §§
412.2(c)(5), 419.44. However, subpart C of the regulations states:
If CMS determines, on the basis of information supplied by a [Quality
Improvement Organization] that a hospital has misrepresented
admissions, discharges, or billing information, or has taken an action
that results in the unnecessary admission of an individual to benefits
under Part A, unnecessary multiple admissions of an individual, or
other inappropriate medical or other practices with respect to
beneficiaries or billing for services furnished to beneficiaries, CMS may
as appropriate . . . Deny payment (in whole or in part) under Part A . . .
42 C.F.R. § 412.48. The Three-Day Rule is a billing rule under Part A dealing with
the bundling of preadmission services otherwise payable that are provided during the
three calendar days immediately preceding a beneficiary’s admission. 42 C.F.R. §
412.2(c)(5). Therefore, subpart C suggests that, under certain circumstances, CMS
has the discretion to deny payment for a misrepresentation of the Three-Day Rule.
Still, it is not “sufficient for a finding of materiality that the Government would have
the option to decline to pay if it knew of the defendant’s noncompliance.” Escobar II,
136 S. Ct. at 2003.
By contrast, nowhere do the regulations or the MCPM suggest that
noncompliance with the Same-Day Rule, which deals with outpatient services, could
result in a denial of payment. See 42 C.F.R. § 419.44; MCPM, CMS Pub. No. 100-04,
ch. 4, §§ 10.4, 170.
However, “[d]efendants can still be liable for violating
requirements even if they were not expressly designated as conditions of payment.”
Escobar II, 136 S. Ct. at 1996. Therefore, the Court must turn to the centrality of the
requirements and the Government’s actual behavior with respect to these
requirements. See Escobar III, 842 F.3d at 110.
Ms. Worthy explains that the Three-Day and Same-Day rules are billing rules
requiring that certain services be bundled instead of separately billed. TAC ¶¶ 4650, 55-57. She alleges that Medicare would not have otherwise paid the claims had
it known of the Defendants’ violations of the Three-Day and Same-Day Rules. TAC
¶ 131. In addition, she alleges that the Defendants specifically made changes and
created dummy accounts in order to get claims paid in violation of the billing rules
and to conceal those payments. TAC ¶¶ 152-62. These allegations at least make it
plausible that CMS would not have paid the Defendants had it known that
Defendants misrepresented their compliance with the Rules, and that the Defendants
were aware of this fact; in the Court’s view, these allegations are sufficient to survive
a motion to dismiss on this issue.
This conclusion is supported by the fact that the Government has previously
taken action to prevent the type of double-billing and unbundling alleged here and
has warned that duplicate billing “may generate an investigation for fraud.” CMS,
MLN Matters No. SE0415, Reminder to Stop Duplicate Billings at 1-2 (May 9, 2013);
see also U.S. Dep’t of Justice, Deputy Att’y Gen., Health Care Fraud Report Fiscal
Year 1997 (“A major national project undertaken that yielded significant results was
the 72 Hour Window Project, which detected and sought recoveries for double billings
that occurred when hospitals billed Medicare for outpatient services rendered within
72 hours prior to hospital admission . . . Over $46 million was returned to the
government”). Given that the Government has found violations of these rules to be
“sufficiently important” to wage an investigation in the past, the Court concludes that
Ms. Worthy has stated a plausible claim under the FCA for the alleged violations of
the Same-Day and Three-Day Rules.
See Escobar III, 842 F.3d at 110 (“[T]he
fundamental inquiry is ‘whether a piece of information is sufficiently important to
influence the behavior of the recipient’”) (quoting United States ex rel. Winkelman v.
CVS Caremark Corp., 827 F.3d 201, 211 (1st Cir. 2016)).
The text of the FCA and caselaw make clear that liability cannot arise under
the FCA unless a defendant acted knowingly. See 31 U.S.C. § 3729(a); Jones, 678
F.3d at 95; United States ex rel. Hutcheson v. Blackstone Med., Inc., 647 F.3d 377, 388
(1st Cir. 2011). For purposes of the FCA, knowingly means that a person 1) has actual
knowledge of the information; 2) acts in deliberate ignorance of the truth or falsity of
the information; or 3) acts in reckless disregard of the truth or falsity of the
information. 31 U.S.C. § 3729(b)(1)(A). No proof of specific intent to defraud is
Mercy and Accretive object to the claims premised on the factual allegations
concerning mass rebilling and the unbundling of wound care, arguing that they did
not act knowingly as required to establish liability under the FCA. They argue that
it was CHMB that submitted the mass rebills, but that CHMB denied doing so and
falsely misrepresented to Accretive and Mercy that it was holding the billings for
these claims, and that it was CHMB that re-categorized dressings and skin
substitutes for wound care supplies, but only after Mercy correctly entered the codes.
Mercy’s Mot. at 17-18 (citing TAC ¶¶ 150-51, 179, 203, 205, 210).
It is true that based on these allegations, Mercy and Accretive may not have
had actual knowledge of the mass rebills or re-categorization. However, the FCA also
holds defendants liable if they acted in deliberate ignorance of or with reckless
disregard for the truth or falsity of the information. 31 U.S.C. § 3729(b)(1)(A). Ms.
Worthy alleges that she repeatedly told staff members from Mercy and Accretive
about the violations. TAC ¶¶ 242, 243.
Yet, they did nothing in response. Id. ¶¶
208, 213. Taken as true for the purposes of the motion, the Court concludes that
these allegations are sufficient to show that Defendants acted with reckless disregard
for the truth or falsity of the potential violations. Therefore, the Court determines
that Ms. Worthy has stated a plausible claim that Mercy and Accretive acted
“knowingly” under the FCA.3
The Defendants object to Counts I and II of the Third Amended Complaint first
on the grounds that Ms. Worthy failed to plead with particularity any fraudulent
scheme. The Court disagrees. Rule 9(b) requires that the “[u]nderlying schemes and
other wrongful activities that result in the submission of fraudulent claims . . .be pled
with particularity.” Karvelas, 360 F.3d at 232. Relators must specify “the who, what,
when, where, and how of the alleged fraud.” United States ex rel. Ge v. Takeda
Pharm. Co., 737 F.3d 116, 123 (1st Cir. 2013).
Ms. Worthy sets out ten separate
Ms. Worthy also argues that even if Mercy and Accretive did not act knowingly, they can be
held liable under principles of vicariously liability. Pl.’s Opp’n at 26-27 (citing United States v.
O’Connell, 890 F.2d 563, 568-69 (1st Cir. 1989) and Dynamics Research Corp., 2008 WL 886035, at
*15). Because the Court concludes that Mercy and Accretive could themselves be liable under the
FCA, it does not reach that issue.
“schemes” that form the basis for her claims. Within each of these schemes, Ms.
Worthy provides significant detail concerning who engaged in the fraud, when and
where the fraud took place, what the individuals did, and how their actions were
For example, in Ms. Worthy’s first theory, she alleges that the Defendants
falsely modified and resubmitted claims that had been stopped by Medicare. TAC ¶¶
66-121. She says that this scheme began in or around February 2013 and lasted at
least until around December 2013. Id. ¶¶ 66, 79, 118. She names specific staff
members, such as Jessica Martin, Brie Farmer, and Anvita Kumar, and says that
these individuals instructed Mercy Hospital billers how to manipulate the claims in
the system. Id. ¶¶ 81, 114. She discusses where these instructions took place, namely
at “daily huddles” and “SWAT team” meetings. Id. ¶¶ 82, 84. She also explains
exactly how the Defendants committed the fraud, by unbundling claims that were
supposed to be bundled together through the false addition of -59 modifiers and G0
condition codes, and by deleting or otherwise omitting accident and injury
information in order to obtain payment which Medicare held under the Secondary
Payer procedures. Id. ¶¶ 67, 89-108. Further, she provides extensive background
information of the regulatory framework for Medicare to show why the Defendants’
actions were fraudulent. Id. ¶¶ 36-65.
Similarly, in her second theory, Ms. Worthy alleges that Accretive instructed
staff to falsify patient discharge status indicators to increase reimbursement. Id. ¶
122. She says that this scheme started in 2012 and has continued to the present,
specifically noting that the indicators were changed for the claims listed on Q1-Q4
2013 spreadsheets, as well as the Q1 2014 spreadsheet. Id. ¶¶ 122, 130. She names
specific individuals who were involved in the scheme, including Jessica Martin, who
created the spreadsheet of claims that originally did not have “discharge to home
status,” Judi Kieltyka who told Ms. Worthy this was a best practice, and one Mercy
Hospital biller “TH” who changed the status indicators when Ms. Worthy refused to
do so. Id. ¶¶ 124-126, 129, 130. She also explains how the fraud took place, by
identifying claims that had been submitted with discharge statuses other than
“discharge to home” and then changing and resubmitting those indicators, and why
the acts were fraudulent, because they result in greater Medicare reimbursement.
Id. ¶¶ 122-124, 130. Ms. Worthy continues this pattern of details for each alleged
scheme. The Court concludes that Ms. Worthy has sufficiently pleaded details of the
However, the Defendants are correct in stating that details concerning the
fraudulent scheme alone are not enough to satisfy Rule 9(b) for FCA claims. See Ge,
737 F.3d at 124 (“Because FCA liability attaches only to false claims . . . merely
alleging facts related to a defendant’s alleged misconduct is not enough”) (internal
citations omitted) (emphasis in original); Karvelas, 360 F.3d at 234 (“[A]lleged
violations of federal regulations are insufficient to support a claim under the FCA”).
Relators must also connect the fraud to the actual submission of a false claim for
payment. Ge, 737 F.3d at 124; Gagne, 565 F.3d at 47; Karvelas, 360 F.3d at 232
(“[S]uch pleadings invariably are inadequate unless they are linked to allegations,
stated with particularity, of the actual false claims submitted to the government that
constitute the essential element of an FCA qui tam action”). The First Circuit has
listed certain transactional details that may help a relator identify particular false
claims, such as:
[D]etails concerning the dates of the claims, the content of the forms or
bills submitted, their identification numbers, the amount of money
charged to the government, the particular goods or services for which
the government was billed, the individuals involved in the billing, and
the length of time between the alleged fraudulent practices and the
submission of claims based on those practices.
Karvelas, 360 F.3d at 233 (internal citation omitted). At the same time, the First
Circuit has made clear that “[t]hese details do not constitute a checklist of mandatory
requirements that must be satisfied by each allegation included in a complaint.” Id.
Yet, “some of this information for at least some of the claims must be pleaded in order
to satisfy Rule 9(b).” Id.4
The Defendants argue that Ms. Worthy fails to plead with particularity the
actual false claims submitted to the government for payment. Again, the Court
disagrees. As Ms. Worthy points out in her reply, she identifies specific transactional
details for several of her claims. Ms. Worthy is the most specific in her allegations in
paragraphs 190, 191, and 194, where she provides actual claim numbers, amounts,
and dates for the alleged violations of the Same-Day and Three-Day Rules. She also
Ms. Worthy relies on cases such as United States ex rel. Duxbury v. Ortho Biotech Prods., L.P.,
579 F.3d 13 (1st Cir. 2009), and United States ex rel. Leysock v. Forest Labs., Inc., 55 F. Supp. 3d 210
(D. Mass. 2014), for the proposition that she does not need to plead particular details of false claim
submissions. Pl.’s Opp’n at 17-18. However, as the Defendants correctly point out, these cases concern
defendants who induced third parties to submit claims. By contrast, the prevailing standard when
defendants themselves submit the false claims is that the relator must specify at least some actual
submissions of false claims. See e.g., Karvelas, 360 F.3d at 222; see also Webb, 2014 U.S. Dist. LEXIS
163698, at *7-8.
provides identification codes and the specific dates on which CHMB submitted mass
rebills in paragraphs 203, 205, and 212. In addition, Ms. Worthy provides some
transactional details for her other allegations. For example, in paragraphs 115-118,
which deal with the false addition of -59 modifiers and G0 condition codes, Ms.
Worthy explains that she reviewed reports beginning in fall 2013 and identified
changes to high value claims in FISS made by one biller DD, including the deletion
of E codes on potential MSP claims and the addition of G0 condition codes and -59
modifiers, and states that these claims had subsequently been paid by Medicare.
Additionally, in paragraphs 126-130, which deal with the falsification of patient
discharge status indicators, Ms. Worthy states that, upon information and belief, one
biller TH changed and resubmitted the discharge status indicators on the Q1-Q4 2013
spreadsheets, as well as the Q1 2014 spreadsheets.
Although some of these statements are made “on information and belief” they
are still sufficient as long as “the complaint set[ ] forth the facts on which the belief
is founded.” See Karvelas, 360 F.3d at 226 (quoting New England Data Servs., Inc. v.
Becher, 829 F.2d 286, 288 (1st Cir 1987)). Here, Ms. Worthy explains that Accretive
staff asked her to make the changes and resubmit the claims, claiming that it was a
“best practice” but that she refused to do so believing it was illegal. Yet, she alleges
that she personally observed that these claims had subsequently been paid by
Medicare. Taking her allegations as true for the purposes of the motion to dismiss,
they provide sufficient factual support for her belief that someone else must have
submitted the claims.
The Court acknowledges that Ms. Worthy does not identify specific
transactional details for each and every claim in her complaint. However, she does
not have to. See Karvelas, 360 F.3d at 233 (“[S]ome of this information for at least
some of the claims must be pleaded in order to satisfy Rule 9(b)”). Ms. Worthy has
provided transactional details for at least some of her claims. This stands in contrast
to the complaints in Gagne, Ge, and Karvelas which did not allege any specific facts
about any claims submitted to the government. See Ge, 737 F.3d at 124; Gagne, 565
F.3d at 47; Karvelas, 360 F.3d at 233. Ms. Worthy’s Third Amended Complaint “as a
whole is sufficiently particular to pass muster under the FCA.” See Rost, 507 F.3d at
732 (citing Karvelas, 360 F.3d at 233 n.17).
This conclusion is further supported by the fact that one of the main purposes
of the particularity requirement is to avoid lawsuits by “‘parasitic’ relators who bring
FCA damages claims based on information within the public domain or that the
relator did not otherwise discover.” Ge, 737 F.3d at 123 (quoting Rost, 507 F.3d at
727). In this case, Ms. Worthy garnered the information alleged in the complaint
from her own direct, personal observations during her employment at Mercy
Hospital, not from the public domain. Nor in the Court’s view does Ms. Worthy’s
claim have the earmarks of a “strike suit,” where the courts act to “prevent the filing
of suits that simply hope to uncover relevant information during discovery.” Doyle,
103 F.3d at 194.
Moreover, based on the allegations in the Third Amended
Complaint, the Defendants are, in the Court’s view, able “to prepare an appropriate
Guidant, 718 F.3d at 36. The Court acknowledges the problems of
reputational damage and costly and labor-intensive discovery. Id. But these are
problems for defendants even in meritorious FCA cases. The Court is at least capable
of reining in discovery through the imposition of sensible, often agreed-upon
In sum, the Court concludes that the allegations forming the basis for Counts
I and II in the Third Amended Complaint are sufficiently pled under Rule 9(b).
To survive a motion to dismiss on a conspiracy claim under the FCA, a plaintiff
must show that Defendants entered into an unlawful agreement to defraud the
government and took one or more acts in furtherance of the agreement. United States
ex rel. Estate of Cunningham v. Millennium Labs. of California, No. 09-12209-RWZ,
2014 WL 309374, at *2 (D. Mass. Jan. 27, 2014). A relator must plead the conspiracy
with particularity in accordance with Rule 9(b) by alleging facts as to (1) who the coconspirators are, (2) when or where they entered into an agreement to defraud the
government, or (3) what overt acts they took in furtherance of the conspiracy.
Leysock, 55 F. Supp. 3d at 221; see Gagne, 565 F.3d at 45.
Defendants argue that Ms. Worthy has not pleaded any agreement between
the Defendants to defraud the Government. Mercy’s Mot. at 19. The Court agrees
with the Defendants insofar as Ms. Worthy has not pleaded any facts demonstrating
an express agreement between the Defendants.
However, a relator may plead
conspiracy with particularity “by alleging conduct from which the court can naturally
infer an agreement among multiple parties.” United States v. Coloplast Corp., No.
11-12131-RWZ, 2016 WL 4483868, at *2 (D. Mass. July 29, 2016) (citing United States
ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 194 (5th Cir. 2009)); see also United States
v. Newell, 658 F.3d 1, 13-14 (1st Cir. 2011) (holding that in the context of 18 U.S.C. §
669, a conspiratorial “agreement may be shown by a concert of action, all the parties
working together understandingly, with a single design for the accomplishment of a
In the Third Amended Complaint, Ms. Worthy alleges that the Defendants had
an infused management and billing structure in which all of the Defendants worked
in an integrated manner.
TAC ¶¶ 18, 22.
She also alleges that on numerous
occasions, she informed staff members of each of the Defendants about the potential
violations but no changes were made. Id. ¶¶ 119, 120, 127, 138, 175, 188. Although
certain staff members stated at times that they would look into the issues, their plans
never resulted in any action or were later cancelled. Id. ¶¶ 164, 169, 171, 188. In
addition, Ms. Worthy alleges details of the steps that the Defendants took to continue
and conceal the violations. Id. ¶¶ 85, 93. Taken as true, one could infer from these
facts that the Defendants had a tacit or implied agreement to defraud the
Government. Thus, the Court concludes that Ms. Worthy has pleaded sufficient facts
to survive a motion to dismiss on this issue.5
Defendants also argue that her conspiracy claim must rise and fall with her other claims and
because her other claims are not pleaded with particularity her conspiracy claim too must fail.
However, as already discussed, the Court concludes that Ms. Worthy has pleaded her individual claims
Ms. Worthy claims that the Defendants retaliated against her unlawfully in
violation of the FCA and the MWPA, resulting in her constructive discharge and a
hostile and abusive work environment. TAC ¶¶ 241-67. As a threshold matter, all of
the Defendants move to dismiss the MWPA claim alleging that it is time-barred.
Accretive and CHMB additionally move to dismiss the MWPA and the FCA
retaliation claims arguing that they are not employers and there is no constructive
Untimely Filing of MWPA Claim
Although Ms. Worthy initially objected to the dismissal of her MWPA
retaliation claim, Pl.’s Opp’n at 28-29, she later conceded that she did not timely file
her constructive discharge claim in light of the United States Supreme Court’s
decision in Green v. Brennan.6 Pl.’s Notice of Suppl. Authority (ECF No. 86). The
The MWPA prohibits discrimination by employers against employees who
report the employer for violations of law. 26 M.R.S. § 833. MWPA claims are brought
pursuant to the MHRA. 26 M.R.S. § 834-A. In order to pursue a claim for damages
in federal court under the MHRA, a plaintiff must first file a complaint with the
MHRC. 5 M.R.S. § 4622(1); Flood v. Bank of Am., No. 1:12-cv-00105-GZS, 2012 WL
6111451, at *2 (D. Me. Dec. 10, 2012). This complaint must be filed within 300 days
of the alleged act of unlawful discrimination. 5 M.R.S. § 4611.
Green v. Brennan, 136 S. Ct. 1769 (2016).
The statute of limitations period begins to run “when an employee receives
unambiguous and authoritative notice of an employer’s adverse discriminatory
decision.” Kezer v. Cent. Me. Med. Ctr., 2012 ME 54, ¶ 17, 40 A.3d 955; LePage v.
Bath Iron Works Corp., 2006 ME 130, ¶ 15, 909 A.2d 629. “[A] constructive discharge
claim accrues–and the limitations period begins to run–when the employee gives
notice of his resignation, not the effective date of that resignation.” Green, 136 S. Ct.
at 1782. In this case, Ms. Worthy gave her notice of resignation on January 28, 2014
and did not file her claim with the MHRC until December 18, 2014, over 300 days
However, Ms. Worthy correctly points out that the lack of timely filing with
the MHRC is not fatal to her claim under the MHRA but only limits her to equitable
relief. See 5 M.R.S. § 4622. She also contends that the lack of timely filing has no
application to her retaliatory harassment claims under the MHRA because the Green
decision is limited to constructive discharge claims. Pl.’s Notice of Suppl. Authority
at 2. At oral argument, the Defendants agreed that the untimely filing only affects
Ms. Worthy’s request for monetary damages and attorney’s fees on her constructive
The Court accepts the Plaintiff’s and Defendants’ mutual
concession and by agreement it dismisses only the portion of Ms. Worthy’s MWPA
constructive discharge claim seeking monetary damages and attorney’s fees.
Accretive and CHMB claim that they are not joint employers and thus cannot
be liable for retaliation under either the FCA or MWPA.
“A joint employer
relationship exists where two or more employers exert significant control over the
same employees and share or co-determine those matters governing essential terms
and conditions of employment.” Rivera-Vega v. ConAgra, Inc., 70 F.3d 153, 163 (1st
Cir. 1995). The First Circuit has discussed several factors that may be used in
determining the existence of joint employer status, including: supervision of the
employees' day-to-day activities; authority to hire, fire, or discipline employees;
authority to promulgate work rules, conditions of employment, and work
assignments; participation in the collective bargaining process; ultimate power over
changes in employer compensation, benefits and overtime; and authority over the
number of employees. Id. (citing Rivas v. Federacion de Associaciones Pecuarias de
Puerto Rico, 929 F.2d 814, 820-21 (1st Cir. 1991) and Holyoke Visiting Nurses Ass’n
v. NLRB, 11 F.3d 302 (1st Cir. 1993)). Significantly, for purposes of the pending
motions, whether joint employer status exists “is essentially a factual question.” Id.;
Holyoke Visiting Nurses, 11 F.3d at 306; Rivas, 929 F.2d at 820.
Accretive and CHMB argue that the only allegation supplied by Ms. Worthy to
support her claim that they are joint employers is found in paragraph 242, which is
conclusory. Accretive’s Mot. at 7; CHMB’s Mot. at 13. The Court agrees that the
relevant part of paragraph 242 of the Third Amended Complaint, which states
“Accretive and CHMB operated with Mercy Hospital as her joint employers
controlling and directing her work conditions,” is a legal conclusion in the guise of a
factual assertion. Therefore, the Court need not accept it as true for the purposes of
However, Ms. Worthy has alleged additional facts that are sufficient to support
her claim that Accretive was her joint employer with Mercy. For example, Ms.
Worthy claims that Accretive and Mercy had an “infused management” structure in
which Accretive staff members were integrated into the Hospital’s billing operations
and Mercy employees were managed by Accretive. TAC ¶ 18. Her direct supervisor
was an Accretive employee and Accretive employees supervised her on a daily basis.
Id. ¶¶ 242, 248-49.
Additionally, her Accretive supervisor recommended her
discharge and looked for her replacement. Id. ¶ 246, 252. Because the determination
of joint employer status is a fact-intensive inquiry and because Ms. Worthy has
alleged enough facts indicating Accretive’s control over the conditions of her
employment, her retaliation claims cannot be dismissed as to Accretive. See Cannell
v. Corizon, LLC, No. 14-CR-64, 2015 U.S. Dist. LEXIS 166153, at *14 (D. Me. Dec.
By contrast, Ms. Worthy has not supplied similar facts concerning CHMB. All
the Court has been able to find with respect to CHMB’s status as a joint employer is
the conclusory statement contained in paragraph 242. This conclusory statement is
not sufficient to survive a motion to dismiss. Potentially recognizing the lack of facts
to support CHMB’s status as a joint employer, Ms. Worthy argues that CHMB can be
held liable under both the MWPA and FCA even if it is not her joint employer. Pl.’s
Opp’n at 34-35.
Ms. Worthy argues that the MHRA does not limit its scope to employers and
instead prohibits any “person” from “interfer[ing] with any individual in the exercise
of enjoyment of the rights . . . protected by this act.” Id. at 34 (citing 5 M.R.S. §
4633(2)). Because the retaliation provisions of the MWPA are among the rights
protected under the MHRA and because “person” under the MHRA includes “one or
more individuals, partnerships, associations, [and] organizations,” see 5 M.R.S. §
4553(7), she argues that CHMB can be liable for interfering with her right to whistleblow. Pl.’s Opp’n at 34. Yet, as CHMB correctly points out, the Maine Law Court has
explicitly said that although the discrimination provision of the MHRA applies to any
person, the rights protected by the relevant employment discrimination provision of
the MHRA and retaliation provisions of the MWPA are limited in their application to
employers only. See Fuhrmann v. Staples Office Superstore East, Inc., 2012 ME 135,
¶ 24 n.7, 58 A.3d 1083; see also 26 M.R.S. § 833(1)(A) (“No employer may discharge .
. . “). Therefore, the Maine Law Court concluded that only an employer can be liable
for employment discrimination under the MHRA. Fuhrmann, 2012 ME 135, ¶ 24 n.7
(“Although the MHRA generally authorizes actions for discrimination against the
‘person or persons’ who commit discrimination, 5 M.R.S. § 4621 (2011), the relevant
portion of the employment discrimination section of the MHRA applies only to
‘employer[s],’ 5 M.R.S. § 4572(1)(A)(2011)”). Although the Fuhrmann case dealt with
individual supervisor liability, the basic premise applies with equal force to this case.
Only an employer can be liable under the MHRA for retaliation for whistle-blowing
activity. To hold otherwise would mean that even though an individual supervisor
cannot be held liable, a non-employer third party could be.
Ms. Worthy also claims that CHMB is liable under the MWPA because it
“participated in unlawful discrimination against her by aiding and abetting other
Defendants’ unlawful discrimination in violation of 5 M.R.S. § 4553(10)(D).” Pl.’s
Opp’n at 34 n.32. Ms. Worthy has cited no decision by any court in the state of Maine
that has held or even addressed whether a non-employer can be liable for aiding and
abetting in the context of a MWPA retaliation claim. In the absence of any state
authority for her self-proclaimed position, it is noteworthy that the First Circuit has
cautioned litigants who choose to come to federal rather than state court that they
“cannot expect that new trails will be blazed.” Hearts With Haiti, Inc. v. Kendrick,
No. 2:13-cv-00039-JAW, 2015 WL 3649592, at * 3 (D. Me. June 9, 2015) (quoting Ryan
v. Royal Ins. Co. of Am., 916 F.2d 731, 744 (1st Cir. 1990)). In the face of such novel
questions of state law, “litigants must provide a federal court with a ‘well-plotted
roadmap showing an avenue of relief that the state’s highest court would likely
follow.’” Id. (quoting Ryan, 916 F.2d at 744). No such roadmap has been provided
here. Indeed, if the MWPA retaliation provisions were interpreted as Ms. Worthy
urges, the exception to Maine Supreme Judicial Court’s holding in Fuhrmann would
become the rule since an aiding and abetting allegation would necessarily survive a
motion to dismiss and might even survive a motion for summary judgment, causing
non-employers to fall within the MWPA in a manner contrary to Fuhrmann.
Court declines to create an exception to the Fuhrmann rule based on the aiding and
abetting provision of the MWPA.
Similar to the MWPA, a defendant in an FCA retaliation case must have an
employment-type relationship with the plaintiff.
See 31 U.S.C. § 3730(h) (“Any
employee, contractor, or agent shall be entitled to all relief . . .”); see also Vander
Boegh v. Energy Sols., Inc., 772 F.3d 1056, 1062-64 (6th Cir. 2014) (interpreting the
terms “contractor” and “agent” to be limited to employment-like relationships). At
oral argument, Ms. Worthy argued that she was an agent of CHMB. Agency is a
“fiduciary relationship that arises when one person (a ‘principal’) manifests assent to
another person (an ‘agent’) that the agent shall act on the principal’s behalf and
subject to the principal’s control, and the agent manifests assent or otherwise
consents so to act.” Restatement (Third) of Agency § 1.01 (Am. Law Inst. 2006). The
factual allegations in the Third Amended Complaint are not sufficient to generate a
reasonable inference that a principal-agent relationship existed between CHMB and
Ms. Worthy. Therefore, the Court concludes that the retaliation charges under both
the FCA and MWPA should be dismissed as to CHMB only.
Accretive and CHMB argue that Ms. Worthy has not pleaded sufficient facts
to show constructive discharge. Because the Court concludes that CHMB is not a
joint employer and cannot be held liable for retaliation, it will only address the
constructive discharge argument with respect to Accretive.
To establish constructive discharge, an employee must show that “conditions
were so intolerable that they rendered a seemingly voluntary resignation a
termination.” Torrech–Hernandez v. Gen. Elec. Co., 519 F.3d 41, 50 (1st Cir. 2008).
“[I]n order for a resignation to constitute a constructive discharge, it effectively must
be void of choice or free will.” Id. In other words, an employee “must show that, at
the time of his resignation, his employer did not allow him the opportunity to make
a free choice regarding his employment relationship.” Id. Furthermore, the standard
“is an objective one; it cannot be triggered solely by an employee's subjective beliefs,
no matter how sincerely held.” Roman v. Potter, 604 F.3d 34, 42 (1st Cir. 2010)
“To prove constructive discharge, a plaintiff must usually ‘show that her
working conditions were so difficult or unpleasant that a reasonable person in [her]
shoes would have felt compelled to resign.’” Torrech-Hernandez, 519 F.3d at 50; see
also Gerald v. Univ. of P.R., 707 F.3d 7, 25 (1st Cir. 2013); EEOC v. Kohl’s Dep’t
Stores, Inc., 774 F.3d 127, 134 (1st Cir. 2014). Constructive discharge may occur
when a reasonable employee would have believed that her termination was
imminent, Torrech-Hernandez, 519 F.3d at 51, or when an employer effectively
prevents an employee from performing her job. Sanchez v. P.R. Oil Co., 37 F.3d 712,
719 (1st Cir. 1994) (citing Aviles–Martinez v. Monroig, 963 F.2d 2, 6 (1st Cir. 1992)
(finding constructive discharge when an employer, inter alia, “removed all of
[plaintiff's] files and then chastised him for not doing his work”) and Parrett v. City
of Connersville, 737 F.2d 690, 694 (7th Cir. 1984) (finding constructive discharge
where supervisor removed all work and responsibilities from employee), cert. denied,
469 U.S. 1145 (1985)).
Accretive claims that, as alleged in the Third Amended Complaint, its actions
do not rise to the level of constructive discharge, only to mere frustration and
unpleasantness. Accretive’s Mot. at 9-10. The Court disagrees. Ms. Worthy alleges
that she told Accretive staff members numerous time about the potential violations
of law and that she told her supervisor at Accretive she could not perform her job
duties because CHMB representatives refused to speak with her; yet, Accretive did
nothing. TAC ¶¶ 243-45. Instead, Ms. Worthy’s supervisor told Mr. Hachey that Ms.
Worthy was struggling and should step down and become an administrative
assistant. Id. ¶ 246. Accretive employees questioned Ms. Worthy daily, rummaged
through her desk, and searched her work projects. Id. ¶¶ 249-50. Her supervisor not
only told her she was being replaced, but also informed her that she had “reached out
to someone at Dartmouth Hitchcock Medical Center in New Hampshire to replace
[her].” Id. ¶ 252. She was also criticized and berated with derogatory statements.
Id. ¶¶ 253-54. These allegations make it plausible that a reasonable person would
have felt compelled to resign or believed that termination was imminent. Given that
constructive discharge is a fact-intensive inquiry and Ms. Worthy has pleaded
sufficient facts to support her claim, the motion to dismiss with respect to Accretive
The Court hereby GRANTS in part and DENIES in part Mercy’s Motion for
Partial Dismissal (ECF No. 66). The Court DENIES the motion with respect to
Counts I, II, and IV. The Court accepts the parties’ agreement and GRANTS the
motion with respect to Count V for the MWPA constructive discharge claim insofar
as it seeks attorney’s fees and damages.
The Court also GRANTS in part and DENIES in part Accretive’s Motion to
Dismiss (ECF No. 68). The Court DENIES the motion with respect to Counts I, II,
and IV. The Court accepts the parties’ agreement and GRANTS the motion with
respect to Count V for the MWPA constructive discharge claim insofar as it seeks
attorney’s fees and damages.
Finally, the Court GRANTS in part and DENIES in part CHMB’s Motion to
Dismiss (ECF No. 67). The Court DENIES the motion with respect to Counts I, II,
and IV and GRANTS the motion with respect to Count V in its entirety.
/s/ John A. Woodcock, Jr.
JOHN A. WOODCOCK, JR.
UNITED STATES DISTRICT JUDGE
Dated this 18th day of January, 2017
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