Olson, et al. v. Fairview Health Services of Minnesota, et al.
Filing
59
MEMORANDUM OF LAW & ORDER. IT IS HEREBY ORDERED: 1. Defendant's Motion to Dismiss 27 is GRANTED; 2. Plaintiff's Second Amended Complaint 20 is DISMISSED WITH PREJUDICE; 3. Plaintiff's Motions to Amend his SAC [41[, 47 are DENIED WITH PREJUDICE. LET JUDGMENT BE ENTERED ACCORDINGLY. (Written Opinion). Signed by Chief Judge Michael J. Davis on 3/16/15. (GRR)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
PAUL ALLEN OLSON, Individually,
and as Relator for the United States
of America and State of Minnesota,
Plaintiff,
v.
MEMORANDUM OF LAW
AND ORDER
Civil File No. 13-2607 (MJD/JJK)
FAIRVIEW HEALTH SERVICES
OF MINNESOTA, and its wholly
owned subsidiary or affiliate
UNIVERSITY OF MINNESOTA
MEDICAL CENTER, FAIRVIEW,
a/k/a FAIRVIEW UNIVERSITY
MEDICAL CENTER.
Defendant.
Brian E. Wojtalewicz, Wojtalewicz Law Firm, LTD, Counsel for Plaintiff.
Douglas R. Peterson, Andrew W. Davis and Kristin Berger Parker, Stinson
Leonard Street LLP, Counsel for Defendant.
This matter is before the Court on Defendant’s Motion to Dismiss. [Docket
No. 27] The Court heard oral argument on October 24, 2014.
A.
Factual Background
1
1.
The Parties
Plaintiff Paul Allen Olson (“Olson”) is a resident of Ramsey County,
Minnesota. ([Docket No. 20] Second Amended Complaint (“SAC”) ¶ 2.) Olson
worked for the Minnesota Department of Human Services (“DHS”) for twentynine years. (Id.) Most recently, he was Manager of Payment Policy and Rates
Management. (Id.) In this capacity, Olson established payment rates for
inpatient hospitals that provide services to Medical Assistance (“MA” or
“Medicaid”) patients. (Id., Ex. D-5.)
Defendant Fairview Health Services of Minnesota owns and operates
hospitals throughout Minnesota, including Defendant University of Minnesota
Medical Center, Fairview (“UMMC”), formerly known as Fairview University
Medical Center (“FUMC”). (Id. ¶¶ 3, 4.) The University of Minnesota Children’s
Hospital is the children’s unit at UMMC, formerly known as Amplatz Children’s
Hospital (“Amplatz”). (Id.)
Non-party DHS is responsible for processing and paying MA billings. (Id.
¶¶ 11, 28.)
2.
Medical Assistance
MA is a government program that provides medical care for indigent and
disabled individuals. (Id. ¶ 11.) It is funded jointly by state and federal
2
government in approximately equal shares. (Id.) In Minnesota, MA is
administered by DHS. (Id.) The procedure for determining MA payment rates
to hospitals is described in Minnesota Statute section 256.969. (Id. ¶ 12.)
a)
MA Payment Protocol
Hospitals submit MA patient claims to DHS electronically via a “uniform
billing claim form.” (Id. ¶ 28.) Each claim includes patient data, services
provided, and the “sticker price” of medical services rendered. (Id. ¶¶ 28, 35.)
The “sticker price” is the top price: what an uninsured or non-MA patient might
pay. (Id. ¶ 35.) MA patients pay substantially less because DHS reimburses the
patient’s hospital at a predetermined rate. (Id.)
To determine the MA reimbursement rate, DHS enters each MA claim into
a payment computer system. (Id. ¶ 28.) Next, the claim is “priced.” (Id.)
Various laws, rules, and DHS price settings trigger adjustments to the total
reimbursement that a hospital receives for providing services to an MA patient.
(Id.)
b)
2011 Amendment to Minnesota Statutes Section
256.969
In July 2011, Governor Mark Dayton signed into law an amendment to
Minnesota Statute section 256.969 (“the 2011 Amendment”). (Id. ¶ 12.) The
3
purpose of the 2011 Amendment was to decrease government expenditures
during a time of fiscal austerity by reducing MA reimbursements for hospital
inpatient services by ten percent. (Id.) However, the 2011 Amendment excluded
some children’s hospitals from the reimbursement reduction:
Subd. 3c. Rateable reduction and readmissions reduction.
(a) The total payment for fee for service admissions occurring on or
after September 1, 2011, through June 30, 2015, made to hospitals for
inpatient services before third-party liability and spend down, is
reduced ten percent from the current statutory rates. Facilities
defined under subdivision 16, long-term hospitals as determined
under the Medicare program, children's hospitals whose inpatients
are predominantly under 18 years of age, and payments under
managed care are excluded from this paragraph.
(b) Effective for admissions occurring during calendar year 2010 and
each year after, the commissioner shall calculate a regional
readmission rate for admissions to all hospitals occurring within 30
days of a previous discharge. The commissioner may adjust the
readmission rate taking into account factors such as the medical
relationship, complicating conditions, and sequencing of treatment
between the initial admission and subsequent readmissions.
(c) Effective for payments to all hospitals on or after July 1, 2013,
through June 30, 2015, the reduction in paragraph (a) is reduced one
percentage point for every percentage point reduction in the overall
readmissions rate between the two previous calendar years to a
maximum of five percent.
Minn. Stat. § 256.969, subd. 3c. (emphasis added).
4
3.
Olson’s Interpretation of the Amendment
In his capacity as Manager of Payment Policy and Rates Management at
DHS, Olson claims he drafted the language of the 2011 Amendment. (Id. ¶ 13.)
He claims that the 2011 Amendment was designed to exempt the three wellrecognized Minnesota children’s hospitals from the MA reimbursement
reduction, since they were known to rely disproportionately on MA revenue.
(Id. ¶¶ 14, 25.) MA admission rates for the three well-known children’s hospitals
are as follows: Minneapolis Children’s Hospital, 65%; St. Paul Children’s
Hospital, 48%; and Gillette Children’s Specialty Healthcare 45%; compared to
FUMC, with 27% MA admissions. (Id. ¶ 25.)
4.
Statutory Definitions
The precise term “children’s hospital” is not defined by any Minnesota
statute. Instead, relevant Minnesota state statutes explain that “hospital” is “a
facility defined in section 144.696, subdivision 3, and licensed under sections
144.50 to 144.58 . . . .” Minn. Stat. § 256.9686, subd. 6 (2011). In turn, section
144.696 defines “hospital” as “any acute care institution licensed pursuant to
sections 144.50 to 144.5 . . . .” Minn. Stat. § 144.696 (2011). Section 144.50, subd.
2, states:
5
[h]ospital . . . shall mean any institution, place, building, or agency,
in which any accommodation is maintained, furnished, or offered
for five or more persons for: the hospitalization of the sick or
injured; the provision of care in a swing bed authorized under
section 144.562; elective outpatient surgery for preexamined,
prediagnosed low risk patients; emergency medical services offered
24 hours a day, seven days a week, in an ambulatory or outpatient
setting in a facility not a part of a licensed hospital; or the
institutional care of human beings.
(2011).
5.
The Meaning of “Children’s Hospital” in Relation to the
Amendment
As author of the 2011 Amendment, Olson claims that he chose the
particular “children’s hospital” language so as to mirror the federal definition of
children’s hospital. (SAC ¶ 14.) According to Olson, the federal definition of
“children’s hospital” is “a hospital with patients that are under 18 years of age.”
(Id.) Olson states that DHS has not questioned the legal definition of children’s
hospital, with the age restriction language, since at least 1989. (Id. ¶ 14.) During
the 1993 legislative session, Olson employed identical language to provide a nine
percent increase in MA funds exclusively to the three well-known children’s
hospitals. (Id.)
Olson further claims that in order to be considered a children’s hospital, a
hospital must be separately licensed. (Id. ¶¶ 15, 24.) He explains that Amplatz is
6
a “children’s unit” within FUMC, but it is not a separately licensed hospital. (Id.
¶ 15.) Therefore, it is not a “children’s hospital” under relevant statutes. (Id. ¶
24.)
6.
FUMC Approaches DHS
In approximately November 2011, FUMC representatives met with DHS to
discuss several legislative issues, including the 2011 Amendment. (Id., Ex. F-6.)
During that meeting, then-Assistant DHS Commissioner Scott Leitz and Director
of Purchasing & Service Delivery Mark Hudson discussed whether Amplatz
could be exempt from the rate reduction. (Id.)
7.
Hudson Approaches Olson
Sometime immediately before or after the November 2011 meeting with
FUMC, Hudson asked Olson why Amplatz was not exempt from the ten-percent
MA rate reduction. (Id. ¶ 17.) Olson recalls explaining to Hudson the relevant
law and legislative history. (Id.) He informed Hudson that excluding Amplatz
would require new legislation. (Id.)
8.
Hudson Inquires a Second and Third Time
Olson alleges that Hudson confronted him about the Amplatz exemption
again in January 2012, and once more on August 8, 2012. (Id. ¶¶ 17, 18.) Olson
7
recalls that Hudson stressed that he was making the inquiry on behalf of Leitz
and James Golden, DHS Deputy Assistant Commissioner. (Id. ¶ 18.)
Olson replied to Hudson’s August 8 inquiry by e-mail, explaining that
Amplatz is a “hospital within a hospital.” (Id., Ex. A.) Because Amplatz does
not have a separate hospital license, Olson explained that it cannot be exempted
from the MA rate reduction. (Id.) He then forwarded the correspondence to
Ann Berg, Deputy Medicaid Director and primary federal compliance attorney,
to alert her to Hudson’s inquiries. (Id., Ex. B.) Berg verbally warned Olson that
“he should be careful,” and that “[Hudson, Leitz, and Golden are] not a
management group that you said no to.” (Id. ¶ 19.)
9.
DHS Excludes FUMC from Reduction, Reimburses FUMC
On October 12, 2012, DHS employee Steve Masson informed Olson that
Leitz and Golden had met with FUMC lobbyists. (Id. ¶ 20.) Masson disclosed an
arrangement to exclude all FUMC patients under age 18 from the rate reduction.
(Id.) Masson revealed that Golden and Hudson gave orders to Rachel Cell, a
DHS payment processing director, instructing her to implement Amplatz’s MA
rate reduction exemption. (Id.) In turn, Masson was to execute changes in MA
8
computer programming to reflect the exemption, 1 retroactive to September 1,
2011. (Id.) Because the exemption was applied retroactively, Masson delivered a
$500,000 reimbursement to FUMC. (Id. ¶ 21.) Olson witnessed verification of
the $500,000 reimbursement check on October 23, 2012. (Id.)
Olson insists that Leitz, Golden, and Hudson did not have official
delegated authority to set MA rates for hospitals. (Id. ¶ 29.)
10.
Olson’s Concerns Precipitate an Audit
In July 2013, Olson informed DHS Commissioner Lucinda Jesson
(“Jesson”) of his concerns over the Amplatz exemption. (Id. ¶ 31.) He also met
with DHS Internal Audit Director Gary J. Johnson and DHS Office of the
Inspector General Chief Legal Counsel Bridgid Dowdal (“Dowdal”). (Id.)
Johnson and Dowdal conducted an audit in order to investigate Olson’s
allegations. (Id., Ex. F.) Johnson issued a completed audit report (“Audit
Report”) to Jesson on October 1, 2013. (Id. at F-1.)
a)
The Audit Report’s Findings
Initially, the Audit Report found “a lack of clarity in the statutory
definition of what constitutes a children’s hospital.” (Id. at F-6.) Nevertheless,
To adjust MA reimbursement rates, DHS applies a series of computer codes.
(SAC ¶ 35.) “LQ” is the DHS code that triggered a ten percent MA
reimbursement reduction. (Id.)
9
1
the Audit Report concluded that “it [did] not appear that DHS’ decision to give
Amplatz retroactive exemption from the 10% rate reduction under [Minn. Stat.]
256.969 was consistent with the law or how other similarly situated children’s
facilities are treated,” (id. at F-6) and further, that the decision to exempt
Amplatz “appear[ed] to be contrary to prior internal policy determinations of
what constitutes a children’s hospital.” (Id. at F-7.)
During an investigatory interview, both Golden and Leitz acknowledged
that “a driving factor in Amplatz getting the exemption was based upon the fact
that [FUMC] approached DHS to discuss the issue.” (Id. at F-6.) The Audit
Report suggested that the decision to exclude Amplatz was almost exclusively
handled by Leitz. (Id.)
b)
Audit Report Recommendation
The Audit Report recommended that DHS obtain a formal legal opinion
on the question of whether Amplatz should be exempted by the 2011
Amendment. (Id. at F-7.) If the opinion concluded that it was improper to
exempt Amplatz, it recommended that DHS “immediately revoke the exemption
and take back any excess amounts” paid to FUMC. (Id.)
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11.
DHS Receives Legal Opinion, Requests Recovery of
Overpayment from FUMC
On November 5, 2013, Leitz sent a letter to FUMC. (SAC, Ex. G.) The
letter indicated that DHS had conducted an audit, and pursuant to the Audit
Report, it received a legal opinion regarding whether Amplatz should be
excluded from the MA rate reduction. (Id.) Because the opinion found that it
was likely that Amplatz should not have been excluded, Leitz notified FUMC
that it was ending the exemption. (Id.) By letter dated November 5, 2013, Leitz
explained to FUMC that despite all parties acting in good faith with regard to
interpretation of the statute, DHS would be calculating overpayment and issuing
a notice of recovery. (Id.)
12.
Olson Alleges Retaliation
Olson alleges that he was retaliated against for reporting the Amplatz
arrangement. (SAC ¶ 33.) On February 12, 2013, Hudson, Golden, and two other
DHS employees met with Olson. (Id.) They told him that he was being moved
to a new position at DHS. (Id.) Olson was relocated from an office to a cubicle.
(Id.) On February 28, 2013, he was given the lowest performance rating at DHS,
in contrast to the “outstanding” and “above expectations” rating he received on
the previous six evaluations. (Id. ¶ 33.)
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On October 28, 2013, Olson received an anonymous death threat by
telephone call at his home. (Id. ¶ 34.) He commenced an action for retaliation
against DHS in Ramsey County District Court on March 19, 2014, captioned
Olson v. Minn. Dept. Human Servs., Case No. 62-cv-14-1624.
13.
Minnesota State Legislature Amends Section 256.969
In May 2014, the Minnesota State Legislature amended Minnesota Statute
section 256.969 (“the 2014 Amendment”) to create a retroactive MA rate for
exemption exclusively for FUMC. The 2014 Amendment reads:
Subd. 3c. Rateable reduction and readmissions reduction. (a) The
total payment for fee for service admissions occurring on or after
September 1, 2011, through June 30, 2015 to October 31, 2014, made
to hospitals for inpatient services before third-party liability and
spenddown, is reduced ten percent from the current statutory rates.
Facilities defined under subdivision 16, long-term hospitals as
determined under the Medicare program, children's hospitals whose
inpatients are predominantly under 18 years of age, and payments
under managed care are excluded from this paragraph.
...
(c) Effective for payments to all hospitals on or after July 1, 2013,
through June 30, 2015 October 31, 2014, the reduction in paragraph
(a) is reduced one percentage point for every percentage point
reduction in the overall readmissions rate between the two previous
calendar years to a maximum of five percent.
(d) The exclusion from the rate reduction in paragraph (a) shall apply to a
hospital located in Hennepin County with a licensed capacity of 1,700 beds
as of September 1, 2011, for admissions of children under 18 years of age
12
occurring on or after September 1, 2011, through August 31, 2013, but
shall not apply to payments for admissions occurring on or after September
1, 2013, through October 31, 2014.
(e) Effective for discharges on or after November 1, 2014, from
hospitals paid under subdivision 2b, paragraph (a), clauses (1) and
(4), the rate adjustments in this subdivision must be incorporated
into the rebased rates established under subdivision 2b, paragraph
(c), and must not be applied to each claim.
EFFECTIVE DATE. Paragraph (d) is effective retroactively from
September 1, 2011, and applies to admissions on or after that date.
Minn. Stat. § 256.969, subd. 3c.(d) (2014) (emphasis in italics).
A.
Procedural History
Olson filed an initial qui tam complaint against FUMC under seal on
September 23, 2013. [Docket No. 1] The Complaint alleged violations of the
Federal False Claims Act, 31 U.S.C. §§ 3729(a)(1)(A), (B), (C) and (G), as well as
violations of the Minnesota False Claims Act, Minn. Stat. §§ 15C.02(a)(1), (2), (3)
and (7).
On November 1, 2013, the State of Minnesota filed a notice of declination
of intervention. [Docket No. 4] The United States declined intervention on
March 31, 2014. [Docket No. 18]
Olson has twice amended his Complaint. He filed a First Amended
Complaint (“FAC”) [Docket No. 14] on December 12, 2013, followed by the SAC
13
[Docket No. 20] on April 18, 2014. The FAC added allegations related to the
Audit Report. The SAC provided more detail about allegedly fraudulent billings
submitted by FUMC. On April 30, 2014, the Court ordered Olson to unseal and
serve the SAC on UMMC. [Docket No. 21] Olson served the Second Amended
Complaint on UMMC on June 19, 2014. [Docket No. 24]
The SAC renews Olson’s claims under the state and federal false claims
acts. Count I alleges violations of:
31 U.S.C. § 3729(a)(1)(A), for knowingly presenting, or causing to be
presented, false or fraudulent claims for payment or approval of
Medicaid monies, knowing that FUMC did not legally qualify for
the exemption from the ten percent reduction in Medicaid payments
under Minnesota Statute 256.969, Subd. 3c.;
31 U.S.C. § 3729(a)(l)(B), for knowingly making, using, or causing to
be made or used, false records or statements material to a false or
fraudulent claim when FUMC submitted billings to DHS for MA
monies in excess of those they were legally entitled to receive;
31 U.S.C. § 3729(a)(l)(C), for illegally conspiring with DHS
employees, including at least Mark Hudson, Scott Leitz and James
Golden, to obtain illegal amounts of MA monies, in violation of 31
U.S.C. § 3729(a)(1) subparagraphs (A), (B) and (G); and,
31 U.S.C. § 3729(a)(l)(G), for knowingly concealing an obligation to
pay back MA monies to the federal and state government that
FUMC knew it illegally received.
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Count II reiterates all claims enumerated in Count I under the Minnesota FCA,
Minn. Stat. sections 15C.02(a)(1), (2), (3) and (7).
Under the Minnesota FCA, Olson requests an award up to three times the
amount alleged to have been wrongfully taken by UMMC, in addition to per
claim penalties of $6,000 to $11,000, not including attorney’s fees, costs and
interest. Under the federal FCA, he requests his full share of any recovered sum
as governed by 31 U.S.C. § 3730(d), plus fees, costs and interest.
If the Court grant’s FUMC’s Motion to Dismiss, Olson requests leave to
amend the Complaint a third time, pursuant to Local Rule 15(a) and Rule 15 of
the Federal Rules of Civil Procedure.
II.
DISCUSSION
A.
Standard of Review
1.
Motion to Dismiss
Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a party may
move the Court to dismiss a claim if, based on the pleadings, a party has failed to
state a claim upon which relief may be granted. In reviewing a motion to
dismiss, the Court takes all facts alleged in the complaint to be true. Zutz v.
Nelson, 601 F.3d 842, 848 (8th Cir. 2010). The Court need not accept a plaintiff’s
legal conclusions. Brown v. Medtronic, Inc., 628 F.3d 451, 459 (8th Cir. 2010)
15
(citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007)). A complaint
must allege “enough facts to state a claim to relief that is plausible on its face.”
Twombly, 550 U.S. 544, 547 (2007).
In deciding a motion to dismiss, a court can consider “the complaint,
matters of public record, orders, materials embraced by the complaint, and
exhibits attached to the complaint.” PureChoice, Inc. v. Macke, Civ. No. 07-1290,
2007 WL 2023568, at *5 (D. Minn. July 10, 2007) (citing Porous Media Corp. v. Pall
Corp., 186 F.3d 1077, 1079 (8th Cir. 1999)).
B.
Pleading Fraud Under the FCA
FCA claims, when grounded in fraud, must satisfy heightened pleading
requirements of Federal Rule of Civil Procedure 9(b). See United States ex rel.
Roop v. Hypoguard USA, Inc., 559 F.3d 818, 822 (8th Cir. 2009); United States ex
rel. Costner v. URS Consultants, Inc., 317 F.3d 883, 888 (8th Cir. 2003). “In
alleging fraud or mistake, a party must state with particularity the circumstances
constituting fraud or mistake,” but “[m]alice, intent, knowledge, and other
conditions of a person’s mind may be alleged generally.” Fed. R. Civ. P. 9(b).
The Eighth Circuit requires that a complaint “plead such facts as the time,
place, and content of the defendant’s false representations, as well as the details
of the defendant’s fraudulent acts, including when the acts occurred, who
16
engaged in them, and what was obtained as a result.” United States ex rel. Joshi
v. St. Luke's Hosp., Inc., 441 F.3d 552, 556 (8th Cir. 2006). In other words, the
plaintiff must identify the “who, what, where, when, and how” of the fraud
being alleged. Costner, 317 F.3d at 888 (citing Parnes v. Gateway 2000, Inc., 122
F.3d 539, 550 (8th Cir. 1997)).
C.
The Federal/State False Claims Acts
Because the Minnesota FCA parallels the federal FCA, the Court will
analyze Olson’s state and federal claims under a unified FCA framework. See,
e.g., Nhut Le v. Wells Fargo Bank, NA, Civ. No. 13–1920, 2014 WL 1672260, at *9
(D. Minn. Mar. 17, 2014) (recommending dismissal of relator’s Minnesota FCA
claims for “substantially the same reasons [as] claims under parallel federal”
FCA).
The FCA “protect[s] the federal fisc by imposing severe penalties on those
whose false or fraudulent claims cause the government to pay money.” United
States ex rel. Vigil v. Nelnet, Inc., 639 F.3d 791, 796 (8th Cir. 2011). It “attaches
liability, not to the underlying fraudulent activity, but to the ‘claim for
payment.’” Costner, 153 F.3d at 677 (quoting United States ex rel. Hopper v.
Anton, 91 F.3d 1261, 1266 (9th Cir. 1996)). The FCA’s “core provisions” impose
liability on any person who “(1) knowingly presents, or causes to be presented, a
17
false or fraudulent claim for payment or approval,” or “(2) knowingly makes,
uses, or causes to be made or used, a false record or statement to get a false or
fraudulent claim paid or approved by the Government.” Vigil, 639 F.3d at 796;
31 U.S.C. § 3729(a)(1)-(2).
D.
Theories of Liability Under the FCA
Courts generally recognize three theories of liability under the FCA. See
United States ex rel. Colucci v. Beth Israel Med. Ctr., 785 F. Supp. 2d 303, 311
(S.D.N.Y. 2011). FCA claims fall under a “factually false” category or two
distinct “legally false” categories. Colucci, 785 F. Supp. 2d at 311.
Factually false claims allege that a government payee has submitted “an
incorrect description of goods or services provided or a request for
reimbursement for goods or services never provided.” Mikes v. Straus, 274 F.3d
687, 697 (2d Cir. 2001); United States ex rel. Kirk v. Schindler Elevator Corp., 601
F.3d 94, 114 (2d Cir. 2010) (explaining that a factually false claim as one where
the payee “bills for something it did not provide”).
Alternatively, a claim for government funds is legally false “where a party
certifies compliance with a statute or regulation as a condition to governmental
payment.” Mikes, 274 F.3d at 697. False certification occurs either expressly or
impliedly. Id. at 697-700. An expressly false claim is one “that falsely certifies
18
compliance with a particular statute, regulation or contractual term, where
compliance is a prerequisite to payment.” Id. at 698. In contrast, the implied
false certification theory is “based on the notion that the act of submitting a claim
for reimbursement itself implies compliance with governing federal rules that are
a precondition to payment.” Id. at 699 (citation omitted).
E.
Olson’s Claims Under the FCA
Olson’s Complaint alleges that FUMC knowingly engaged in certain
misconduct aimed at inducing DHS officials to ignore the clear command of state
statutes. As a result, FUMC collected a substantial sum of MA funds that,
according to Olson, it was not entitled to receive. For the reasons that follow, the
Court concludes that Olson has not stated a claim for relief under the FCA.
1.
Olson’s “Presentation” Cause of Action Under 31 U.S.C.
§ 3729(a)(1)(A)
Olson has alleged a violation of 31 U.S.C. § 3729(a)(1)(A), which imposes
liability on a person who “knowingly presents, or causes to be presented, a false
or fraudulent claim for payment or approval.” A prima facie case under section
3729(a)(1)(A) requires that “(1) the defendant made a claim against the United
States; (2) the claim was false or fraudulent; and (3) the defendant knew the claim
19
was false or fraudulent.” United States v. Basin Elec. Power Co-op., 248 F.3d 781,
803 (8th Cir. 2001).
Olson argues that FUMC presented false claims to the government in two
ways. First, FUMC made “improper oral requests and demands” from DHS
while lobbying for an exemption to the ten-percent MA rate reduction. Olson
borrows the “requests and demands” language from the statutory definition of
“claim” under the FCA, wherein a claim means “any request or demand,
whether under a contract or otherwise, for money or property . . . (i) [that is]
presented to an officer, employee, or agent of the United States.” 31 U.S.C. §
3729(b)(2). Second, Olson argues that having been granted an exemption, FUMC
violated the FCA every time it submitted a subsequent claim for MA.
a)
Improper Oral Requests and Demands
To support his claim that FUMC’s requests for an exemption are
prohibited by the FCA, Olson argues that courts have broadly interpreted the
term “claim” to include both obviously false information as well as a person’s
failure to disclose misconduct that “taints” a claim. He cites to United States v.
Neifert-White Co., a 1968 United States Supreme Court case involving fraudulent
loan applications to The Commodity Credit Corporation, a federal agency. 390
U.S. at 228. In ruling for the United States, the Court held that the term “claim”
20
encompasses not just payments “due and owing from the Government,” but “all
fraudulent attempts to cause the Government to pay out sums of money.” Id. at
230, 233.
Olson’s reliance on Neifert-White is unavailing. Minnesota statutes do not
define “children’s hospital.” As DHS noted in its Audit Report, the precise
definition of the term is unclear. Given the lack of clarity in relevant statutes,
and absent particular evidence of fraud or false statements, FUMC’s reasonable
lobbying efforts to exempt Amplatz from the ten-percent MA rate reduction
cannot properly be characterized as a false claim under the FCA. See United
States ex rel. Hixson v. Health Mgmt. Sys., Inc., 613 F.3d 1186, 1190 (8th Cir. 2010)
(“[A] reasonable interpretation of a statute cannot support a claim under the FCA
if there is no authoritative contrary interpretation of that statute.”); Lamers v.
City of Green Bay, 168 F.3d 1013, 1018 (7th Cir. 1999) (stating that “imprecise
statements or differences in interpretation growing out of a disputed legal
question are . . . not false under the FCA”) (citation omitted); Colucci, 785 F.
Supp. at 314 (holding that it is not fraud to “[take] advantage of the uncertainty”
in MA regulations to maximize MA payments).
21
Taking the facts alleged to be true, Olson’s SAC merely illustrates that
FUMC petitioned government for a favorable interpretation of unclear statutes.
This is not fraudulent conduct under the FCA. Therefore, the Court rejects
Olson’s “improper oral requests and demands” argument.
b)
Knowingly Making Claims for MA that Would
Ultimately be Exempt from the Ten Percent MA
Reimbursement Reduction
Olson further alleges that FUMC submitted “false or fraudulent claims” in
violation of section 3729(a)(1)(A) by continuing to knowingly submit thousands
of claims for MA funds that would ultimately be exempt from the ten percent
reimbursement reduction.
To advance this theory of liability, Olson argues that a claim can be
rendered false or fraudulent by attendant facts not apparent on the face of the
claim; no factual lies are necessary. Olson calls this Court’s attention to Marcus
v. Hess, a 1942 Supreme Court case where a collusive bid-rigging scheme was
found to have violated the FCA. 317 U.S. 537. In holding that the rigged bids
caused the government to enter into a contract, the Court reasoned that the fraud
“did not spend itself with the execution of the contract,” but rather “entered into
every swollen estimate which was the basic cause for payment of every dollar
paid by the [government].” Id. at 543. Like the “swollen estimates” causing
22
government to pay funds in Marcus, Olson alleges that FUMC’s
misrepresentations to DHS render each of its subsequent claims for MA funds
unlawful under the FCA.
The Court is not persuaded. It is well-settled that to satisfy the falsity
element of section 3729(a)(1)(A), the statement or conduct at issue must be a
falsehood. See, e.g., United States ex rel. Dunn v. N. Mem’l Health Care, Civ. No.
10–4673, 2012 WL 6552791, at *5 (D. Minn. Dec. 14, 2012) (“Without sufficient
allegations of materially false claims, [a False Claims Act] complaint fails to state
a claim on which relief can be granted.”) (quoting 639 F.3d at 796). Unlike the
inflated bids at issue in Hess, Olson has not alleged any misrepresentations
within FUMC’s individual claims for MA. Moreover, absent particular evidence
that FUMC knowingly made false or fraudulent statements to DHS while
lobbying for Amplatz’s status as a children’s hospital under unclear statutes,
FUMC’s claims for MA payment cannot give rise to liability under section
3729(a)(1)(A).
In sum, neither of the “false claims” alleged by Olson can, as a matter of
law, support liability under the FCA. The Court dismisses Olson’s cause of
action under section 3729(a)(1)(A).
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2.
Olson’s Remaining Causes of Action Under 31 U.S.C. §§
3729(a)(l)(B), (G) and (C)
Because the SAC does not sufficiently allege that FUMC submitted false or
fraudulent claims to the government, and because the statutes at issue are
unclear, Olson’s remaining causes of action under sections 3729(a)(l)(B), (C),(G)
and their Minnesota FCA equivalents must be dismissed.
a)
31 U.S.C. § 3729(a)(l)(B)
Olson has alleged a violation of section 3729(a)(1)(B), which imposes
liability on a person who “knowingly makes, uses, or causes to be made or used,
a false record or statement material to a false or fraudulent claim.” Specifically,
Olson alleges that FUMC made or used false records or statements material to a
false or fraudulent claim when it submitted billings to DHS for MA monies in
excess of those they were legally entitled to receive.
Olson has not alleged with sufficient particularity that FUMC made, used,
or caused to be made or used, any false record or false statement. As explained
above, his SAC illustrates that FUMC approached DHS with a reasonable
interpretation of unclear Minnesota statutes. This conduct cannot sustain a
violation of section 3729(a)(1)(B). Therefore, the Court dismisses this claim.
b)
31 U.S.C. § 3729(a)(1)(G)
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Having illegally acquired MA money, Olson alleges that FUMC knowingly
concealed an obligation to pay it back to the federal and state government. The
FCA’s “reverse liability” provision imposes liability on an individual who, in
relevant part, “knowingly conceals or knowingly and improperly avoids or
decreases an obligation to pay or transmit money or property to the
Government.” 31 U.S.C. § 3729(a)(1)(G).
Olson’s “reverse liability” argument fails because Olson’s SAC does not
allege with requisite particularity that FUMC knowingly concealed any
obligation to pay back funds it received under the 2011 or 2014 amendments,
including the $500,000 retroactive payment paid to FUMC in October, 2012.
Accordingly, the Court dismisses Olson’s section 3729(a)(1)(G) claim.
c)
31 U.S.C. § 3729(a)(l)(C)
Finally, Olson’s SAC alleges FUMC violated section 3729(a)(1)(C) by
conspiring to violate sections 3729(a)(1)(A), (B) and (G). Because the Court
determines that FUMC did not violate sections 3729(a)(1)(A), (B) and (G), Olson’s
conspiracy FCA claim also fails as a matter of law.
E.
Olson’s Request for Leave to File a Third Amended Complaint
Under Federal Rule of Civil Procedure 15(a), the Court should grant leave
to amend a complaint “when justice so requires.” However, plaintiffs do not
25
have an absolute or automatic right to amend their complaints. Meehan v.
United Consumers Club Franchising Corp., 312 F.3d 909, 913 (8th Cir. 2002)
(citation omitted). “[P]arties should not be allowed to amend their complaint
without showing how the complaint could be amended to save the meritless
claim.” Wisdom v. First Midwest Bank, 167 F.3d 402, 409 (8th Cir. 1999).
In his July 28, 2014 Memorandum in Opposition to Defendant’s Motion to
Dismiss [Docket No. 41] Olson requested leave to amend his Complaint a third
time in the event that this Court granted FUMC’s motion. In addition to that
request, Olson filed a Motion to Alter/Amend/Supplement Pleadings [Docket
No. 47] on January 7, 2015, that was argued before Judge Keyes on January 30,
2015. In order to avoid potentially conflicting rulings on Olson’s multiple
requests to amend, Magistrate Judge Keyes denied Olson’s January 7, 2015
motion without prejudice. [Docket No. 58]
Olson seeks to amend his SAC in two ways. First, he requests an
opportunity to clarify evidence of false statements made to DHS by FUMC
representatives, including the specific false statement that Amplatz was a “true”
children’s hospital. Second, the amendment will introduce Minnesota
Department of Human Services form DHS-4138 (Provider Agreement)
26
purportedly demonstrating that FUMC agreed to abide by federal and state
statutes before receiving any MA funds from the government.
The Court has reviewed Olson’s motion to amend, supporting documents,
and relevant law. Because the Court determines that Minnesota statutes relating
to the definition of “children’s hospital” are sufficiently unclear, the Provider
Agreement is of no use to Olson. Furthermore, Olson’s clarification of FUMC’s
false statements amounts to a reiteration of facts already alleged in his SAC.
Olson’s request for leave to amend his SAC will be denied.
Accordingly, based upon the files, records, and proceedings herein, IT IS
HEREBY ORDERED:
1.
Defendant’s Motion to Dismiss [Docket No. 27] is GRANTED;
2.
Plaintiff’s Second Amended Complaint [Docket No. 20] is
DISMISSED WITH PREJUDICE;
3.
Plaintiff’s Motions to Amend his SAC [Docket Nos. 41, 47] are
DENIED WITH PREJUDICE.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated: March 16, 2015
s/ Michael J. Davis
Chief Judge Michael J. Davis
United States District Court
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