JERSEY STRONG PEDIATRICS, LLC v. WANAQUE CONVALESCENT CENTER et al
OPINION. Signed by Judge Susan D. Wigenton on 9/18/17. (sr, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
UNITED STATES OF AMERICA, the
STATE OF NEW JERSEY, and the STATE
OF NEW YORK, ex rel. JERSEY STRONG
Civil Action No: 14-6651-SDW-SCM
September 18, 2017
WANAQUE CONVALESCENT CENTER,
WANAQUE OPERATING CO., L.P.,
SENIORS MANAGEMENT NORTH, INC.,
and H B A CORPORATION,
WIGENTON, District Judge.
Before this Court is Defendant Wanaque Convalescent Center (“WCC”), Wanaque
Operation Co., L.P., and Seniors Management North, Inc.’s (collectively “Defendants”) Motion to
Dismiss Jersey Strong Pediatric, LLC’s (“Jersey Strong”) Amended Complaint 1 pursuant to
Federal Rules of Civil Procedure 12(b)(6) and 9(b).
Jurisdiction is proper pursuant to 28 U.S.C.
§§ 1331 and 1367 and 31 U.S.C. § 3732(a). Venue is proper pursuant to 28 U.S.C. § 1391 and 31
Defendants’ previous motion to dismiss the original Complaint was granted on June 14, 2017. (Dkt. Nos. 21, 22.)
U.S.C. § 3732(a). This opinion is issued without oral argument pursuant to Federal Rule of Civil
Procedure 78. For the reasons stated herein, the Motion to Dismiss is DENIED.
BACKGROUND AND PROCEDURAL HISTORY
Because the facts of this case have been fully set out in this Court’s June 14, 2017 Opinion
Granting Defendants’ prior Motion to Dismiss the original Complaint filed in this matter, (Dkt.
Nos. 21, 22), only those facts necessary to the adjudication of this motion will be discussed here.
Jersey Strong alleges that WCC, a skilled nursing and rehabilitation facility, fraudulently billed
Medicare and Medicaid by either failing to ascertain, or ignoring the existence of, patients’ private
health insurance and, as a result, violating secondary payment laws by billing Medicare and
Medicaid as primary payer when submitting claims for payment. (Am. Compl. ¶¶ 3, 62-67.) 2 The
Amended Complaint identifies eight general examples of Defendants’ allegedly wrongful billing
practices, omitting the names of the patients involved because they were minors. (Id. ¶¶ 76-134.)
On October 2, 2014, Jersey Strong brought suit as a qui tam relator on behalf of the United
States of America, the State of New Jersey and the State of New York alleging violations of the
Federal False Claims Act (“FCA”), the New Jersey False Claims Act (“NJFCA”), and the New
York False Claims Act (“NYFCA”). (Dkt. No. 1.) The United States, New York and New Jersey
declined to intervene in November 2016. (Dkt. No. 5.) Defendants filed a motion to dismiss the
Complaint on January 26, 2017. (Dkt. No. 11.) This Court granted that motion on June 14, 2017.
In order to coordinate payments where patients have private insurance coverage and are Medicare/Medicaid
eligible, Congress enacted secondary payment laws (“MSP laws”). Fanning v. U.S., 346 F.3d 386, 388-89 (3d Cir.
2003); see also Negron v. Progressive Cas. Ins. Co., Civ. No. 15-577(NLH/KMW), 2016 WL 796888, at *1 (D.N.J.
Mar. 1, 2016) (discussing the Medicare and Medicaid Secondary Payer statutes). The MSP laws “dictate when
Medicare[/Medicaid] will pay a medical claim as the ‘primary payer,’ and when Medicare[/Medicaid] will pay as
the ‘secondary payer.’” United States ex rel. Drescher v. Highmark, Inc., 305 F. Supp. 2d 451, 454-55 (E.D. Pa.
2004) (discussing the claim submission process). “Generally, under the MSP statute and related regulations, the
private insurance carrier is the primary payer,” and “the secondary payer generally pays a smaller portion of the
claim than the amount paid by the primary payer.” Id. at 454.
(Dkt. Nos. 21, 22.) Plaintiff filed an Amended Complaint on July 14, 2017. (Dkt. No. 23.)3
Defendants filed the instant motion to dismiss on July 28, 2017. (Dkt. No. 25.) Plaintiff filed its
timely opposition on August 22, 2017 and Defendants filed their reply on August 29, 2017. (Dkt.
Nos. 27, 28.)
An adequate complaint must be “a short and plain statement of the claim showing that the
pleader is entitled to relief.” FED. R. CIV. P. 8(a)(2). This Rule “requires more than labels and
conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual
allegations must be enough to raise a right to relief above the speculative level[.]” Bell Atlantic
Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations omitted); see also Phillips v. Cty.
of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008) (stating that Rule 8 “requires a ‘showing,’ rather
than a blanket assertion, of an entitlement to relief”).
In considering a Motion to Dismiss under Rule 12(b)(6), the Court must “accept all factual
allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine
whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief.”
Phillips, 515 F.3d at 231 (external citation omitted). However, “the tenet that a court must accept
as true all of the allegations contained in a complaint is inapplicable to legal conclusions.
Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements,
do not suffice.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); see also Fowler v. UPMC Shadyside,
578 F.3d 203 (3d Cir. 2009) (discussing the Iqbal standard). Determining whether the allegations
Defendants have asked this Court to strike certain portions of the Amended Complaint as “immaterial” under
Federal Rule of Civil Procedure 12(f). (Mot. Dismiss at 13-14.) Although this Court agrees that some of the factual
and legal allegations in the Amended Complaint are extraneous, they do not confuse the issues nor do they prejudice
any of the parties. Therefore, Defendants’ request is denied.
in a complaint are “plausible” is “a context-specific task that requires the reviewing court to draw
on its judicial experience and common sense.” Iqbal, 556 U.S. at 679. If the “well-pleaded facts
do not permit the court to infer more than the mere possibility of misconduct,” the complaint
should be dismissed for failing to “show that the pleader is entitled to relief” as required by Rule
Federal Rule of Civil Procedure 9(b) requires that “[i]n alleging fraud or mistake, a party
must state with particularity the circumstances constituting fraud or mistake. Malice, intent,
knowledge, and other conditions of a person's mind may be alleged generally.” FED. R. CIV. P.
9(b). Plaintiffs “alleging fraud must state the circumstances of the alleged fraud[ulent act] with
sufficient particularity to place the defendant on notice of the ‘precise misconduct with which [it
is] charged.’ ” Park v. M & T Bank Corp., No. 09–cv–02921, 2010 WL 1032649, at *5 (D.N.J.
Mar.16, 2010) (citing Lum v. Bank of Am., 361 F.3d 217, 223–24 (3d Cir. 2004)). To satisfy Rule
9(b)’s pleading requirements for FCA claims, plaintiffs “must provide ‘particular details of a
scheme to submit false claims paired with reliable indicia that lead to a strong inference that claims
were actually submitted.” Foglia v. Renal Ventures Mgmt., LLC, 754 F.3d 153, 157-58 (3d Cir.
2014) (internal citation omitted).
The FCA “prohibits the submission of false or fraudulent claims for payment to the United
States and authorizes qui tam actions, by which private individuals may bring a lawsuit on behalf
of the government in exchange for the right to retain a portion of any resulting damages award.”
Foglia v. Renal Ventures Mgmt., LLC, 830 F. Supp. 2d 8, 14 (D.N.J. 2011) (citing Schindler
Elevator Corp. v. U.S. ex rel. Kirk, 131 S.Ct. 1885, 1889 (2011)); see also Universal Health Serv.,
Inc. v. U.S. 136 S. Ct. 1989, 1996-97 (2016) (“Escobar”) (discussing the history and purpose of
the FCA). “The primary purpose of the FCA ‘is to indemnify the government -- through its
restitutionary penalty provisions -- against losses caused by a defendant’s fraud.’” U.S. ex rel.
Wilkins v. United Health Grp., Inc., 659 F.3d 295, 304 (3d Cir. 2011) (internal citation omitted).
The FCA provides, in relevant part:
Any person who –
(A) knowingly4 presents, or causes to be presented, a false or fraudulent
claim for payment or approval; (B) knowingly makes, uses, or causes to be
made or used, a false record or statement material to a false or fraudulent
claim; (C) conspires to commit a violation of subparagraph (A), (B) . . . is
liable to the United States of America for a civil penalty . . .
31 U.S.C. § 3729(a)(1). 5
“There are two categories of false claims under the FCA: a factually false claim and a
legally false claim.” Wilkins, 659 F.3d at 305. “A claim is factually false when the claimant
misrepresents what goods or services that it provided to the Government and a claim is legally
false when the claimant knowingly falsely certifies that it has complied with a statute or regulation
the compliance with which is a condition for Government payment.” Id. (internal citation
omitted); see also Negron, 2016 WL 796888 at *6. Legally false claims may be express or implied.
The terms “knowing” and “knowingly” “(A) mean that a person, with respect to information -- (i) has actual
knowledge of the information; (ii) acts in deliberate ignorance of the truth or falsity of the information; or (iii) acts
in reckless disregard of the truth or falsity of the information; and (B) require no proof of specific intent to defraud.”
31 U.S.C. § 3729(b)(1).
“On May 20, 2009, Congress enacted the Fraud Enforcement and Recovery Act of 2009 (“FERA”), Pub. L. No.
111-21, 123 Stat. 1617 (2009), which amended the FCA and re-designated 31 U.S.C. § 3729(a)(1) as 31 U.S.C. §
3729(a)(1)(A) and 31 U.S.C. § 3729(a)(2) as 31 U.S.C. § 3729(a)(1)(B) [and 31 U.S.C. § 3729(a)(3) as 31 U.S.C. §
3729(a)(1)(C)].” U.S. ex rel. Gerry Phalp & Matt Peoples v. Lincare Holdings, Inc. & Lincare, Inc., d/b/a Diabetics
Experts of Am., No. 16-10532, 2017 WL 2296878, at *3 n.5 (11th Cir. May 26, 2017). The amendment changed the
designations, but not the substance of the Act for purposes of this motion. Various cases cited by the parties
reference the pre-2009 statutory designation, but for accuracy’s sake, this Court cites to the post-2009 designations.
Wilkins, 659 F.3d at 305. “Under the ‘express false certification’ theory, an entity is liable under
the FCA for falsely certifying that it is in compliance with regulations which are prerequisites to
Government payment in connection with the claim for payment of federal funds.” Id. Under the
“implied false certification” theory, an entity is liable [if it “seeks and makes a claim for payment
from the Government without disclosing that it violated regulations that affected its eligibility for
payment.” In re Plavix Mktg., Sale Practices & Prod. Liab. Litig., 123 F. Supp. 3d 584, 600
(D.N.J. 2015) (citing Wilkins, 659 F.3d at 305).
For legally false claims, plaintiffs must plead that the regulation at issue is material.
Escobar, 136 S. Ct. at 2004 n.6 (stating that plaintiffs must “plead facts to support allegations of
materiality”). Under the FCA, a regulation is material if it is “so central to the provision” of
services that the government would “not have paid the claims had it known of the violations.”
Id. at 2004 (describing the materiality standard as “rigorous” and “demanding”); see also U.S. ex
rel. Gerasimos v. Genentech, Inc., 855 F.3d 481, 492 (3d Cir. 2017) (recognizing the “heightened
materiality standard” set out in Escobar). “[A] misrepresentation is not material ‘merely because
the Government designates compliance with a particular statutory, regulatory, or contractual
requirement as a condition of payment . . . [or because] the Government would have the option to
decline to pay if it knew of the defendant’s noncompliance.’” Gerasimos, 855 F.3d at 489 (citing
Escobar, 136 S. Ct. at 2003).
The Amended Complaint raises a single FCA claim for implied false certification pursuant
to 31 U.S.C. § 3729(a)(1), specifically, that Defendants fraudulently “billed Medicare and
Medicaid as the primary payer despite the existence of alternative coverage, thereby violating
secondary payer laws . . ..” (Am. Compl. ¶ 165; see also Negron, 2016 WL 796888, at *6
(classifying a relator’s claims that defendants “caused a claim to be submitted under Medicare
which violated the Medicare Secondary Payer Act” as an implied false certification claim).) “To
establish a prima facie claim under 31 U.S.C. § 3729(a)(1), a plaintiff must show that: ‘(1) the
defendant presented or caused to be presented to an agent of the United States a claim for payment;
(2) the claim was false or fraudulent; and (3) the defendant knew the claim was false or
fraudulent.’” United States ex rel. Schmidt v. Zimmer, Inc., 386 F.3d 235, 242 (3d Cir. 2004)
(internal citations omitted); see also United States ex rel. Rahimi v. Zydus Pharm. (USA), Inc., Civ.
No. 15-6536-BRM-DEA, 2017 WL 1503986, at *11 (D.N.J. Apr. 26, 2017). As noted above,
Jersey Strong must also plead that the MSP laws are material to the government’s decision to pay
the submitted claims.
There appearing to be no dispute that claims were submitted for payment, this Court must
first determine whether the claims submitted were false or fraudulent. Jersey Strong alleges that
Defendants fraudulently billed Medicare and Medicaid instead of patients’ private health insurance
policies. (Am. Compl. ¶¶ 3, 162-167.) To support its allegations, Jersey Strong provides eight
examples of claims that allegedly violated the MSP laws. (Am. Compl. ¶¶ 76-134.) Although
these examples do not contain patient names, dates of treatment, or primary insurance policy
numbers, they do put Defendants on notice of the allegations against them and create “a strong
inference that [false] claims were actually submitted.” Foglia, 830 F. Supp. 2d at 157-58; see also
Drescher, 305 F. Supp. 2d at 457-58, 461. This is enough to survive Defendants’ motion to
Jersey Strong also sufficiently pleads that the MSP laws are material to the government’s
decision to pay Medicaid/Medicare claims in this context. (Am. Compl. ¶¶ 169-70.) Specifically,
Additional information such as patient dates of admission or the specifics of private insurance plans could be
obtained in discovery. At that time, once the dates of treatment and claims have been ascertained, Defendants may
raise any applicable statutes of limitation arguments.
Plantiff pleads that under the MSP and related regulations, “providers are required to gather
accurate information to determine whether Medicare/Medicaid is the primary payer for each
inpatient admission or outpatient encounter . . .” and may be penalized for failing to do so. (Id.)
Further, claims may be and are “consistently/continually/automatically” denied if alternative,
primary benefits are available. (Id.) The Amended Complaint also alleges that the federal
government contracts “with private auditors to strictly enforce secondary payment laws to prevent
improper payments” indicating that adherence to secondary payer laws is material to any
“decision to pay for Defendants’ services.” (Id.) At this stage, Plaintiff has met its burden to plead
that the MSP laws are material. See United States ex rel. Schimelpfenig v. Dr. Reddy’s Lab. Ltd.,
Civ. No. 11-4607, 2017 WL 1133956, at *7 (E.D. Pa. Mar. 27, 2017) (noting that “[u]ltimately,
the relevant inquiry is whether the Government’s payment decision was influenced by claimant’s
purported compliance with a particular requirement”).
Finally, Jersey Strong’s allegations, that it made Defendants aware of patients’ private
insurance and that Defendants intentionally ignored the existence of such primary payers, is
sufficient to plead that Defendants acted knowingly. Therefore, Defendants’ Motion to Dismiss
will be denied as to the federal FCA claim in Count One.
Plaintiff’s remaining claims arise under the New Jersey False Claims Act, N.J.S.A. §
2A:32c-5-8 (Count Two), and the New York False Claims Act, N.Y. State. Fin. Law § 190(2)
(Count Three). These state statutes mirror the FCA and require the same showings. See, e.g.,
United States v. Loving Care Agency, Inc., 226 F. Supp. 3d 357, 363-64 (D.N.J. 2016) (noting
that “[t]he language in the NJFCA is nearly identical to the federal statute and thus requires the
same showings”); New Jersey v. Haig’s Serv. Corp., No. 12-cv-4797, 2016 WL 4472952, at *6-7
(D.N.J. Aug. 24, 2016) (stating that “the similarity of language between the federal FCA and the
NJFCA allows for the conclusion that the NJFCA also proscribes ‘misrepresentations by
omission’”) (internal citations omitted); United States v. N. Adult Daily Health Care Ctr., 205 F.
Supp. 3d 276, 286 (E.D.N.Y. 2016) (concluding that the NYFCA “‘is closely modeled on the
federal FCA’” and “imposes liability for ‘knowingly mak[ing] a false statement or knowingly
fil]ing] a false record’”) (citing U.S. ex rel. Bilotta v. Novartis Pharm. Corp., 50 F. Supp. 3d 497,
509 (S.D.N.Y. 2014) and People ex rel. v. Schneiderman v. Sprint Nextel Corp., 42. N.E. 655,
661 (N.Y. 2015)); Kane ex rel. U.S. v. Healthfirst, Inc., 120 F. Supp. 3d 370, 381 (S.D.N.Y.
2015) (noting that [w]hen interpreting the NYFCA, New York courts rely on federal FCA
precedent”). 7 Therefore, having found that Plaintiff has sufficiently pled an FCA claim, this
Court will also deny Defendants’ motion to dismiss Counts Two and Three.
For the reasons set forth above, Defendants’ Motion to Dismiss is DENIED.
appropriate order follows.
___/s/ Susan D. Wigenton_____
SUSAN D. WIGENTON, U.S.D.J.
Steven C. Mannion, U.S.M.J.
This Court again notes that the NJFCA was enacted in 2008, and is not retroactive. See Loving Care, 226 F. Supp.
3d at 363-64. Therefore, any claims under that statute for actions the occurred prior to March 13, 2008 are barred.
There is no such limitation on claims under the NYFCA. See U.S. ex rel. Bilotta, 50 F. Supp. 3d 497 at 540-41
(noting that the NYFCA was enacted on April 1, 2007 and does apply retroactively).
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