United States of America et al v. Symphony Diagnostic Services, Inc. et al
Filing
51
ORDER granting in part and denying in part 40 Motion to Dismiss for Failure to State a Claim. GRANTED with respect to Plaintiffs claim for unlawful retaliation under the FCA. Count II of the Amended Complaint is, accordingly, DISMISSED. Defendants Motion is DENIED with respect to Plaintiffs remaining claims for violations of the FCA and similar state law anti-fraud statutes. Signed by Judge Algenon L. Marbley on 2/27/2012. (cw)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
UNITED STATES OF AMERICA,
ex rel. KEVIN P. McDONOUGH
:
:
:
:
Plaintiff-Relator,
:
:
v.
:
:
SYMPHONY DIAGNOSTIC SERVICES, :
INC. and SYMPHONY DIAGNOSTIC
:
SERVICES NO.1, d/b/a MOBILEX, U.S.A. :
:
:
:
Defendant.
:
Case No. 2:08-CV-00114
JUDGE ALGENON L. MARBLEY
Magistrate Judge Mark Abel
OPINION AND ORDER
I. INTRODUCTION
This matter is before the Court on the Motion to Dismiss Relator’s Amended Complaint
for failure to state a claim upon which relief can be granted and failure to plead fraud with
particularity pursuant to Federal Rules of Civil Procedure 12(b)(6), 8(a), and 9(b), brought by
Defendant Symphony Diagnostic Services, Inc., and Symphony Diagnostic Services No. 1, d/b/a
Mobilex U.S.A. (collectively “Mobilex” or “Defendants”). (Dkt. 40). For the reasons set forth
herein, the Defendant’s Motion is GRANTED, in part, and DENIED, in part.
II. BACKGROUND
A. Factual Background
This is a qui tam action brought by Plaintiff-Relator Kevin McDonough (“Plaintiff” or
“Relator”) pursuant to the Federal False Claims Act (“FCA”), 31 U.S.C. §§ 3279 et seq. and
similar state law provisions. In his Amended Complaint, Plaintiff sets forth allegations of a
nationwide, and company-wide, Medicare fraud scheme being carried out by Defendant
Mobilex. The alleged scheme involves “swapping arrangements,” where Mobilex offers
substantial discounts to nursing homes for its x-ray services covered by the nursing homes’ per
diem, per-patient Medicare Part A reimbursements in exchange for patient referrals of the
nursing homes’ other Medicare and Medicaid service needs, for which Mobilex can bill publiclyfunded insurance programs directly. Plaintiff alleges that this practice constitutes the payment of
illegal kickbacks under the federal Anti-Kickback statute, see 42 U.S.C. § 1320a-7b, and the
claims for reimbursement submitted by Mobilex to federal Medicare or Medicaid programs
pursuant to such swapping arrangements constitute false claims under the FCA.
Mobilex specializes in providing portable x-ray services to in-patient facilities across the
United States.1 A large part of Mobilex’s business is contracts with skilled nursing home
facilities (“SNFs”) to provide services to patients covered by Medicare Part A, Medicare Part B
or both. Plaintiff, who has many years experience in the mobile x-ray industry and expertise in
portable x-ray services, was hired by Mobilex CEO William Glynn in October 2005 to assist the
operations of Mobilex’s Midwest Regional Office based in Worthington, Ohio. His position was
multi-faceted, and he had no specific job description other than assisting Mr. Glynn as requested.
The federal Medicare Program, established in 1965 by Title XVIII of the Social Security
Act, 42 U.S.C. § 1395 et seq., consists of two parts: Medicare Part A, which authorizes the
payment of federal funds for hospitalization and post-hospitalization care; and Medicare Part B,
which authorizes federal funding for medical and other health services. Medicare Part B also
provides funding for certain services furnished to inpatients who are either not entitled to
benefits under Part A, or who have exhausted their Part A benefits but are entitled to benefits
under Part B.
1
Mobilex, in fact, is the largest single portable x-ray provider in the country, accounting for more than fifty percent
(50%) of the portable x-rays billed under both Medicare Parts A and B.
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As provided in the Social Security Act, the Secretary of Health and Human Services
administers the Medicare Program through Centers for Medicare and Medicaid Services
(“CMS”). Medicare enters into provider agreements with health care providers and suppliers to
establish the facilities’ eligibility to participate in the Medicare Program. In order to be eligible
for payment under the Medicare program, providers and suppliers must certify in these provider
agreements that they understand payments of claims are conditioned on the claims and the
underlying transactions complying with applicable laws, regulations and program instructions,
including the Anti-Kickback statute and the Stark laws, 42 U.S.C. § 1395nn. Mobilex, as a
supplier of services under Medicare, and the SNFs must enter into such provider agreements to
receive Medicare reimbursement for their services.
The Balanced Budget Act of 1997 changed SNF reimbursement for patients covered
under Medicare Part A to prospective payment system (“PPS”). Under PPS, SNFs are paid a
fixed per diem amount for each Medicare Part A patient, which covers the routine, ancillary, and
capital-related costs associated with that patient’s stay. The per diem amount disbursed depends
on the severity of the patient’s condition. Under the Medicare Program, CMS makes payments
retrospectively (after the services are rendered) to hospitals for inpatient services. To receive
payment, an SNF must submit claims for its Part A patients to its fiscal intermediaries. Each
SNF’s Part A per diem includes the facility’s costs for diagnostic radiology services performed
for Part A inpatients. Thus, for mobile x-ray services furnished to Part A patients, the SNF pays
the supplier for the services, and then bills Medicare for the service at the Part A rate.
For patients covered under Medicare Part A, Mobilex bills SNFs for the services it
provides and the SNFs pay Mobilex for these services. In turn, SNFs submit claims for
payments to Medicare. For patients covered under Medicare Part A, SNFs are reimbursed by
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Medicare at a per diem rate. Services provided for patients covered under Medicare Part B are
also reimbursed at the Medicare allowable rate, however, Mobilex bills Medicare directly for
these services. CMS sets the maximum allowable amounts for covered Part B services through
the Medicare Fee Schedule (“MFS”). Portable x-ray services submitted under Part B are
reimbursed under the MFS.
At the end of each year, SNFs submit annual cost reports to CMS detailing the expenses
and revenues for its facility along with the patient activity. This annual cost report constitutes
the final accounting of the facility’s federal program reimbursement. These reports are used by
Medicare to determine whether a provider is entitled to more reimbursement than already
received through interim payments or whether the provider has been overpaid. Medicare relies
upon the cost report to determine whether the provider is entitled to more reimbursement than
already received through interim payments, or whether the provider has been overpaid and must
reimburse Medicare.
B. Allegations of Fraud
In his Amended Complaint, Plaintiff alleges that Mobilex is involved in a fraudulent
scheme in which Mobilex offers substantial discounts to SNFs for x-ray services covered by the
SNFs’ per diem, per-patient Medicare or Medicaid reimbursements in exchange for patient
referrals for which Mobilex can bill public insurance programs directly. This practice, referred
to in the health care industry as a “swapping arrangement,” constitutes the payment of kickbacks
in violation of the Anti-Kickback statute,2 and claims to Medicare or Medicaid programs
resulting from such arrangements therefore constitute false claims under the FCA.
2
The Anti-Kickback Statute provides that:
Whoever knowingly and willfully solicits or receives [or offers or pays] any remuneration
(including any kickback, bribe or rebate) directly, or indirectly, overtly, or covertly, in cash or in
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In addition to signing a Medicare provider agreement, which certifies to the government
that the signatory health care provider or supplier agrees to abide by the Anti-Kickback laws and
the Stark laws, Mobilex entered into a Corporate Integrity Agreement (“CIA”) with the
Department of Health and Human Services Inspector General, which also conditioned further
participation by Mobilex in the federal health care programs on compliance with the terms of the
CIA. The CIA required Mobilex, inter alia, to establish a Compliance Program ensuring that it
complied with all applicable statutes, regulations, policies, and the CIA.
Plaintiff claims that in this case, portable x-ray services for Part B residents were billed
by the supplier, Mobilex, to CMS. SNF providers serviced by Mobilex paid and continue to pay
Mobilex for services provided to patients with Part A coverage at a rate substantially below the
MFS allowance. In some cases, Mobilex does not require SNF’s to pay anything at all for Part A
portable x-ray services. Mobilex solicits and accepts reduced rates for its Part A portable x-ray
services as a quid pro quo for becoming the exclusive provider of portable x-ray services to all
patients of the SNF, including the Part B residents.
Plaintiff claims that, in addition to steep discounting of rates related to Part A patients,
Mobilex regularly chose simply not to collect its accounts receivable from the nursing homes,
effectively providing its services for free. Plaintiff claims that Mobilex’s accounting, recordkeeping, and collection practices related to its outstanding billed collectibles from SNFs suggests
that in many cases Mobilex did not expect to be paid for Part A portable x-ray services.
kind . . . in return for referring an individual to a person for the furnishing or arranging for the
furnishing of any item or service for which payment may be made in whole or in part under a
Federal health care program . . . shall be guilty of a felony and upon conviction thereof, shall be
fined not more than $ 25,000 or imprisoned for not more than five years, or both.
42 U.S.C. § 1320a-7b(b)(1)(A) & 2(A)
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Mobilex’s lack of accurate record-keeping occurred at least between 2004 and 2007, and Relator
believes it continues to the present.
In exchange for the reduced rates for Part A work, the nursing homes serviced by
Mobilex refer all of their non-Part A work to Mobilex. For the non-Part A work, Mobilex is able
to bill the full Medicare allowable rate directly to the federal and state healthcare programs.
The Amended Complaint states that since at least 2002, Mobilex’s contracts for the performance
of portable x-rays have not reflected a discount. Instead, the discounts offered by Mobilex are
recorded on a separate document called the Facility Data Sheet.
Plaintiff alleges that the requirements for providing discounts to providers in the AntiKickback Act were not followed here. The discounts provided by Mobilex, Plaintiff contends,
constitute illegal “remuneration” as that term is used in the Anti-Kickback statute. These
discounted rates are below fair market value and confer a benefit on the SNFs that is intended to
account for the volume or value of federally-funded business referred, in turn, to Mobilex.
Specifically, Plaintiff alleges that Mobilex offers and pays such remuneration in exchange for
referrals for Part B portable imaging services. This scheme is referred to as “swapping,” because
Mobilex swaps cut-rate or free Part A portable imaging services for lucrative exclusivity of
providing Part B patient services. Plaintiff claims this swapping scheme violates the FCA
because Mobilex knowingly submits false claims for Part B reimbursement to Medicare when
Mobilex falsely certifies that the claims comply with the Anti-Kickback statute.
C. Alleged Retaliation by Mobilex
Plaintiff states that while employed at Mobilex’s Midwest Regional Office, on multiple
occasions in 2005 and 2006 he notified Mobilex CEO Mr. Glynn about the fraudulent scheme
alleged herein. At a meeting on March 8, 2006, according to Plaintiff, Mr. Glynn reportedly
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admitted that Mobilex was offering rates to its clients that were not compliant with Medicare
rules and regulations. Plaintiff asked Mr. Glynn to stop offering discounted Part A rates or
expose the fraud. Mr. Glynn reportedly declined to comply with either of Plaintiff’s requests,
and instructed Plaintiff not to take any such actions himself. Plaintiff claims that he alerted other
officers and managers of Mobilex to the illegal practice of the swapping scheme. They, too,
acknowledged the allegedly fraudulent practices but refused to take actions to stop them.
Plaintiff claims he was unlawfully terminated by Mobilex in September 2006 out of retaliation of
his efforts, after confronting Mobilex officers about the swapping arrangement scheme.
The Amended Complaint contains nine causes of action: Count I alleges violations of the
FCA for knowingly presenting false claims to the United States for services rendered to patients
unlawfully referred to Mobilex in exchange for kickbacks; Count II alleges unlawful retaliation
under 31 U.S.C. § 3730(h) for Mobilex’s termination of Plaintiff for his reporting fraudulent
activity; and Counts III through IX allege violations of state anti-fraud statutes for Defendant’s
actions in Illinois, Massachusetts, Virginia, New York, Texas, Michigan, and Georgia,
respectively. Neither the United States, nor any state government has intervened or filed
statements of interest regarding the case.
III. STANDARD OF REVIEW
The Plaintiff’s Amended Complaint should only be dismissed under Fed. R. Civ. P
12(b)(6) if it “fail[s] to state a claim upon which relief can be granted.” Generally, a complaint
must merely contain a “short and plain statement of the claim showing that the pleader is entitled
to relief.” Fed. R. Civ. P. 8(a)(2). The district court, in turn, “must read all well-pleaded
allegations of the complaint as true.” Weiner v. Klais and Co., Inc., 108 F.3d 86, 88 (6th Cir.
1997). This “tenet is inapplicable to legal conclusions, or legal conclusions couched as factual
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allegations.” McCormick v. Miami Univ., No. 1:10-cv-345, 2011 U.S. Dist. LEXIS 48467, at
*10 (S.D. Ohio May 5, 2011) (citing Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949-50 (2009)). The
plaintiff’s ground for relief must entail more than “a formulaic recitation of the elements” of a
cause of action. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).
A well-pleaded complaint must “give the defendant fair notice of what the claim is, and
the grounds upon which it rests.” Nader v. Blackwell, 545 F.3d 459, 470 (6th Cir. 2008). The
plaintiff must plead “enough facts to state a claim to relief that is plausible on its face.”
Twombly, 550 U.S. at 570. To “survive a motion to dismiss under Fed. R. Civ. P. 12(b)(6), the
‘complaint must contain either direct or inferential allegations respecting all the material
elements to sustain a recovery under some viable legal theory.’” Noble v. Genco I, Inc., No.
2:10-cv-648, 2010 WL 5541046, at *2 (S.D. Ohio Dec. 30, 2010) (quoting Scheid v. Fanny
Farmer Candy Shops, Inc., 859 F.2d 434, 436 (6th Cir. 1988)). Finally, the complaint must be
construed in a light most favorable to the party opposing the motion to dismiss. Davis H. Elliot
Co. v. Caribbean Utils. Co., Ltd., 513 F.2d 1176, 1182 (6th Cir. 1975).
In addition, Fed. R. Civ. P. 9(b) requires that “in any complaint averring fraud or mistake,
the circumstances constituting fraud or mistake shall be stated with particularity.” Yuhasz v.
Brush Wellman, Inc., 341 F.3d 559, 563 (6th Cir. 2003). The heightened pleading standard set
forth in Rule 9(b) applies to complaints alleging violations of the FCA. Id. The Sixth Circuit
has held that to satisfy Rule 9(b), a plaintiff must at a minimum “allege the time, place, and
content of the alleged misrepresentation” as well as “the fraudulent scheme; the fraudulent intent
of the defendants; and the injury resulting from the fraud.” Bennett v. MIS Corp., 607 F.3d 1076,
1100 (6th Cir. 2010) (internal citations omitted). A complaint’s failure to comply Rule 9(b)’s
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pleading requirements is treated as a failure to state a claim under Rule 12(b)(6). United States
ex rel. Howard v. Lockheed Martin Corp., 499 F. Supp. 2d 972, 976 (S.D. Ohio 2007).
IV. LAW AND ANALYSIS
A. Sufficiency of Plaintiff’s Fraud Allegations
1. Alleged Remuneration
Mobilex first moves the Court to dismiss Plaintiff’s Amended Complaint pursuant to
Rule 12(b)(6) for failure adequately to state a claim of violations of the FCA. Specifically,
Mobilex contends that Plaintiff’s Complaint fails to allege sufficient details of “remuneration”
received by Mobilex under the alleged swapping scheme, because Plaintiff provides no facts
establishing the fair market value of mobile x-ray services. Mobilex argues that Plaintiff’s
allegations, even taken as true, cannot prove the alleged violations of the Anti-Kickback statute
and the Stark laws upon which his FCA claims are predicated.
The FCA’s fraud and conspiracy provisions provide, in part, that any person who:
(A) knowingly 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; [or]
(C) conspires to commit a violation of subparagraph (A), (B). . .
. . . is liable to the United States Government for a civil penalty . . . .
See 31 U.S.C. § 3729(a).
The Government has a statutory right to intervene and take over prosecution of an FCA
case. If it chooses not to, as in this case, the FCA’s qui tam provisions award successful relators
of fraud who proceed independently a reasonable amount of the proceeds or settlement. Id.
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§ 3730(d)(2); See United States ex rel. Dick v. Long Island Lighting Co., 912 F.2d 13, 18 (2d Cir.
1990) (“‘The purpose of the qui tam provisions of the False Claims Act is to encourage private
individuals who are aware of fraud being perpetrated against the Government to bring such
information forward.’”) (quoting H.R. Rep. No. 99-660, at 22 (1986)).
As stated above, the Anti-Kickback statute prohibits Mobilex from offering “any
remuneration, (including any kickback, bribe or rebate)” in return for “in return for referring an
individual for . . . service for which payment may be made in whole or in part under a Federal
health care program.” 42 U.S.C. § 1320a-7b(b)(1)(A). This Court has interpreted the meaning
of “remuneration” broadly as “anything of value in any form whatsoever,” reasoning that “[t]he
Anti-Kickback Statute uses the term ‘any remuneration,’ which suggests an expansive reading of
the form of any kickback directly or indirectly, as opposed to a narrow reading.” U.S. ex. Rel.
Fry v. The Health Alliance of Greater Cincinnati, No. 1:03-CV-001672008, U.S. Dist. LEXIS
102411, at *20 (S.D. Ohio Dec. 18, 2008). If Mobilex falsely certifies its compliance with the
Anti-Kickback statute in its Medicare reimbursement claims and reports, as Plaintiff alleges,
Mobilex’s claims violate the FCA. See id at *12. (“A false certification of compliance with the
Anti-Kickback Statute and Stark Statute in a Medicare cost report is actionable under the
FCA.”).3
The Amended Complaint alleges that in furtherance of the Medicare fraud scheme,
Mobilex bills the SNFs for its portable x-ray services at rates below market value, and at times
even below Mobilex’s costs for the services. FAC ¶¶ 67, 71. Mobilex does this in exchange for
securing exclusive referrals of the SNFs’ Medicare Part B and Medicaid patient care services.
3
The Stark Statute makes illegal certain physician referrals to facilities with which the physician has a financial
relationship. 42 U.S.C. § 1395nn. Its provisions define a financial relationship as an ownership or investment
interest in the entity by the physician or an immediate family member of such physician, or as a compensation
arrangement between any such persons. 42 U.S.C. § 1395nn(B)(2); Fry, 2008 U.S. Dist. LEXIS, at *15.
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Id. ¶¶ 56, 68. Mobilex argues that Plaintiff’s failure to allege either what the fair market value
was for these services, the amount actually charged by Mobilex during the same time period, or
the difference between the two, is fatal to the Complaint’s success because qui tam actions must
plead facts establishing the fair market value of the goods or services in question and the actual
prices charged by the alleged wrongdoer. Mobilex claims that Plaintiff’s failure to include what
the fair market value was for any of the relevant services during the relevant time periods renders
the Amended Complaint “ripe for dismissal.” (Dkt. 40, at 7.) Mobilex, however, fails to provide
adequate support this characterization of existing precedent.
First, in Woods, the plaintiff’s failure to identify the fair market value of the goods and
services provided was but one of a laundry list of deficiencies contributing to its dismissal. See
U.S. ex rel. Woods v. North Arkansas Reg’l Med. Center, No. 03-3086, 2006 WL 2583662, at *3
(W.D. Ark. 2006). 4 And in U.S. v. Center for Diagnostic Imaging, Inc., the plaintiffs “failed to
allege that the discounted services were offered for less than fair market value” altogether. 787
F.Supp.2d 1213, 1223 (W.D. Wash. 2011) (adding that “[n]or have [plaintiffs] alleged that the
discounted prices were not commercially reasonable”). These cases are unlike the case sub
judice, in which Plaintiff repeatedly alleges that Mobilex’s x-ray services were offered not just
below fair market value, but even below cost or for no charge at all. FAC ¶¶ 67, 71.
4
In Woods, the amended complaint failed to identify any of the following:
(1) the particular individuals who are alleged to have made the decision to provide office space,
staff, etc., to [the doctor] for less than fair market value; (2) what the fair market value of these
goods and services actually was and what [the doctor] was charged; (3) the names of any of the
patients [the doctor] allegedly referred to [the medical center] in exchange for the provision of
office space, staff, etc., at less than fair market value; (4) who was involved in submitting the
fraudulent claims and cost reports; (5) what the content was of the fraudulent claims and cost
reports; (6) what monies were fraudulently obtained as a result of the alleged illegal arrangement;
or (7) how plaintiff learned of the alleged fraudulent claims and their submission for payment.
Id.
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Contrary to Mobilex’s contentions, Plaintiff does support his allegations of Mobilex
undercharging SNFs for x-ray services at below-market rates with specific facts. The Complaint
provides, for example, that “in 2001, Mobilex’s actual cost to perform a portable x-ray averaged
approximately $96.62. For Medicare Part A patients, Mobilex’s per diem rate ranged from $0.45
to $1.00 per patient day and the flat fee ranged from $50.00 to $75.00 per exam.” FAC ¶ 69.
While some additional explanation might have been helpful, these factual allegations on their
face suggest portable x-ray services being charged to Mobilex’s Medicare Part A clients at a rate
significantly below Mobilex’s “actual costs” for those services.
The Amended Complaint also provides that the 2006 Medicare Fee Schedule in Ohio,
“allowed $145.25 for a single-view chest x-ray,” and by 2009 it “allowed $162.40 for a single
view chest x-ray.” FAC ¶ 70. While Mobilex takes issue with the appropriateness of comparing
2006 and 2009 Medicare Fee Schedules with Mobilex’s cost and pricing data from 2001 instead
of 2006 and 2009, such scruples do not warrant dismissal of the complaint in the same way a
wholesale failure to allege below-market provision of services might. See, e.g., Ctr. for
Diagnostic Imaging, 787 F. Supp. 2d at 1223. At the pleading stage, prior to discovery, the
plaintiff cannot be expected to provide complete details of the necessary sensitive corporate
statistics to support his allegations on issues of costs and pricing. It is sufficient that the
Plaintiff’s Amended Complaint alleges that Mobilex provided its x-ray services to SNFs at
below-market and below-cost rates, and provides some factual details which, at least on their
face, support those allegations. See Twombly, 550 U.S. at 570 (“[W]e do not require heightened
fact pleading of specifics, but only enough facts to state a claim to relief that is plausible on its
face.”).
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Mobilex claims that Plaintiff fails to allege the times when Mobilex allegedly charged for
services below market value, or which facilities in particular Mobilex provided services below
market value. This is simply not accurate. For instance, the Amended Complaint states that
Mobilex has offered significant discounts to SNFs that are part of large chain organizations if all
the chain’s facilities contract with Mobilex, “upon information and belief, from 2004 to present.”
FAC ¶ 89. The Amended Complaint further specifies the timeframe for specific below-cost
discounts offered to specific SNFs, such as “[i]n 2006, Mobilex began providing services to the
Sava Senior chain of SNFs” for a “per bed rate of between ten cents and one dollar per diem, a
below-cost rate.” FAC ¶ 87. Besides Sava Senior, Plaintiff names a number of other specific
SNFs, including specific facilities, which have been offered, and received, such discounts in
exchange for contracting exclusively with Mobilex for their Medicare Part B patients’ services.
FAC ¶¶ 89, 102, 106-07.
Mobilex insists that Plaintiff fails to firmly establish that Mobilex was charging less than
the fair market rate, or even less than the allowable rates under the Medicare Fee Schedule for
any given time period. The Amended Complaint, however, also includes detailed allegations of
Mobilex deciding not to pursue collection of its billables from its clients at all for its Part A
services. FAC ¶¶ 71, 94. For example, the Amended Complaint alleges that from 2005-2007,
Mobilex’s did not provide sufficient information to allow its subcontractors to bill for their
services (such as Apex Radiology, which performed readings for Mobilex from 2002 to 2007).
FAC ¶¶ 101-07. Whatever the precise market rate might have been for specific x-ray services at
any specific time, the Court is comfortable in assuming it was higher than zero. Providing the xray services for free would necessarily be providing them at below market rates and below cost.
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This Court has determined that indirect remuneration schemes such as the one described
by Plaintiff, which involve offers of discounted services in exchange for patient referrals, may
violate the Anti-Kickback statute. In U.S. ex. rel. Fry, on the issue of whether “remuneration”
was received under the Anti-Kickback statute, the Court ruled that “compensation arrangements
that take into account the volume or value of referrals or business otherwise generated between
the parties” fall “within the scope of the statute.” 2008 U.S. Dist. LEXIS, at *22-23 (stating that
“the Anti-Kickback statute was amended to add the term ‘remuneration’ when investigations
showed kickbacks were taking the form of sham rentals for office space, rebates equal to the
percentage of referral business, outright gifts of cars, TV’s, and prepaid vacations”).
Accordingly, Plaintiff’s allegations are more than “merely consistent with” Mobilex
having violated the Anti-Kickback statute. See Iqbal, 129 S. Ct. at 1949 (quoting Twombley, 550
U.S. at 557). If accepted as true, Mobilex’s alleged agreements with SNFs to provide free or
heavily discounted, below market x-ray services under Medicare Part A in exchange for
exclusive referrals for the SNFs’ Medicare Part B services states a claim for relief from
violations of the Anti-Kickback statute and the FCA “that is plausible on its face.” Id. The
Court accordingly rejects Mobilex’s argument for dismissal under Rule 12(b)(6).
2. Allegations of Specific Fraudulent Claims
Mobilex also argues for dismissal of Plaintiff’s Amended Complaint under Rule 9(b),
which provides additional pleading requirements in fraud cases such as this. See Yuhasz, 341
F.3d at 563. Mobilex’s chief complaint is that the Amended Complaint fails to allege facts of
any specific fraudulent claims presented for payment to the government in violation of the FCA,
as required by Rule 9(b). Mobilex also argues generally that Plaintiff fails to provide enough
particulars of the alleged fraud to place Mobilex on adequate notice of the claims brought against
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it. Rule 9(b) requires that “[i]n alleging fraud or mistake, a party must state with particularity the
circumstances constituting the fraud or mistake. Malice, intent, knowledge, and other conditions
of a person’s mind may be alleged generally.” The Rule is in place to “alert defendants ‘as to the
particulars of their alleged misconduct’ so that they may respond,’” prevent unwarranted “fishing
expeditions,” “to protect defendants’ reputations from allegations of fraud,” and “and to narrow
potentially wide-ranging discovery to relevant matters.” Chesbrough, 655 F.3d at 466 (internal
citations omitted).
Pleading fraud with particularity requires that the plaintiff allege: (1) “the time, place,
and content of the alleged misrepresentation”; (2) “the fraudulent scheme”; (3) the defendant’s
fraudulent intent; and (4) “the injury resulting from the fraud.” United States ex rel. Bledsoe v.
Cmty. Health Sys., Inc. (“Bledsoe II”), 501 F.3d 493, 503 (6th Cir. 2007). The Sixth Circuit, in
Bledsoe II, “held that, where a relator alleges a ‘complex and far-reaching fraudulent scheme,’ in
violation of § 3729(a)(1), it is insufficient to simply plead the scheme; he must also identify a
representative false claim that was actually submitted to the government.” Chesbrough, 655
F.3d at 470 (citing Id. at 510-11) (internal citations omitted).
Relying on Bledsoe II, Mobilex argues that because Plaintiff’s allegations fail to identify
any specific false claim submitted, the Amended Complaint must be dismissed. Mobilex alleges
that Plaintiff does not identify a year or range of years when a specific claim was made to the
Government. Plaintiff challenges Mobilex’s interpretation of the pleading standard under 9(b),
arguing that despite Bledsoe II’s holding, supra, recent cases have discredited Mobilex’s position
that all FCA complaints must attach a specific claim that was submitted falsely. Plaintiff also
argues that despite the Amended Complaint not providing a specific submitted false claim, the
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allegations strongly support the inference that claims for Part B service were submitted by
Mobilex pursuant to swapping agreements, which were therefore false claims.
Plaintiff is correct in arguing that the requirement that “particularized allegations of an
actual false claim . . . must be specifically pled if a complaint is to survive Rule 9(b) scrutiny”
has been somewhat lessened since Bledsoe II. Bledsoe II, 501 F.3d at 505. The Sixth Circuit’s
most recent pronouncement on the issue in Chesbrough tempered the strict holding from Bledsoe
II with the following:
[T]he requirement that a relator identify an actual false claim may be relaxed
when, even though the relator is unable to produce an actual billing or invoice, he
or she has pled facts which support a strong inference that a claim was submitted.
Such an inference may arise when the relator has “personal knowledge that the
claims were submitted by Defendants . . . for payment.”
Chesbrough, 655 F.3d at 471 (quoting United States ex rel. Lane v. Murfreesboro Dermatology
Clinic, PLC, No. 4:07-cv-4, 2010 U.S. Dist. LEXIS 46847, at *5 (E.D. Tenn. May 12, 2010)).
This Court is of the opinion that, unlike the plaintiffs in Chesbrough itself, the Plaintiff’s
Amended Complaint here warrants just such a “relaxing” of the specific claim requirement. The
Amended Complaint contains well-pleaded particularities drawn from Plaintiffs’ personal
experience that, collectively, support a strong inference that Mobilex submitted claims pursuant
to the swapping scheme that Plaintiff alleges, and thus, would have been fraudulent. See id. at
467 (“When a claim expressly states that it complies with a particular statute, regulation, or
contractual term that is a prerequisite for payment, failure to actually comply would render the
claim fraudulent.”). While no specific claim is identified, specific representative examples of the
swapping scheme at issue are identified, and in this case that is enough to satisfy the particularity
requirements of Rule 9(b).
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Plaintiff alleges specific conversations with Mobilex’s CEO in which Mr. Glynn
acknowledged that Mobilex performed Medicare Part A work, FAC ¶ 76, and on January 19,
2006, and March 8, 2006, Glynn referenced “per diem payments” received from Part A patients.
FAC ¶¶ 86-87. Mr. Glynn and others at Mobilex allegedly admitted to charging SNFs nonMedicare compliant rates. Plaintiff also provides, in an attachment to the Amended Complaint,
an alleged list of a sample of the SNFs for which Mobilex was providing both Medicare Part A
and Part B services, pursuant to fraudulent swapping arrangements. FAC ¶¶ 106-107. The
nature of the fraud alleged does not lend itself to identifying specific claims, as Plaintiff is
arguing that the remuneration here involves agreements to send Mobilex referrals which Mobilex
then bills at a compliant rate. Thus, no particular claim for reimbursement would itself be
indicative of the fraud, but rather the agreement pursuant to which the services within the claim
were rendered.
As a “representative example[] of [the defendants’] alleged fraudulent conduct” see
Bledsoe II, 501 F.3d at 510, the Amended Complaint provides, inter alia, the alleged agreement
between the SNF chain Sava Senior and Mobilex. Plaintiff alleges that Mobilex began providing
services for Sava Senior in 2006; that Mobilex’s rates offered to some Sava Senior facilities was
below-cost; and that Mobilex’s national vice president, Robin Reichert, stated that the rate would
need to stay there or else Mobilex would risk losing Sava Senior’s business—presumably
referring to the referrals Mobilex received in exchange for the low rates. FAC ¶ 88. Accepting
these allegations as true, as the Court must, see Weiner, 108 F.3d at 88, raises a high probability
that Mobilex submitted claims for reimbursement to the government for Medicare services
provided pursuant to the swapping scheme described in Plaintiff’s Amended Complaint.
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Plaintiff’s Amended Complaint is distinguishable from the Chesbrough’s because of the
Mobilex and the SNFs with which it contracts expressly certify that the submitted claims for
reimbursement are not fraudulent. The major failure of the Chesbrough’s complaint of fraud was
its inability to identify when or where the allegedly deficient providers had certified that their
services would comply with a higher standard. See Chesbrough, 655 F.3d at 468 (“Although the
Chesbroughs allege that VPA failed to meet ‘objective standards’ for testing, they do not allege
that VPA was expressly required to comply with those standards as a prerequisite to payment of
claims.”) On the contrary, here Plaintiff asserts that Mobilex certified, to the government, its
compliance not just with the Anti-Kickback statute and Stark laws, but also the Corporate
Integrity Agreement. FAC ¶¶ 28, 59-61. Plaintiff alleges that under these certifications,
compliance with the Anti-Kickback statute and other applicable laws and regulations “was
required to obtain payment” from the government. Thus, any bills or claims submitted to the
government thereafter, such as those referenced in Exhibit 1 to the Amended Complaint, would
be fraudulent if Mobilex offered SNFs discounted Part A services in exchange for Part B
referrals, as alleged.
Finally, Mobilex broadly argues that Plaintiff’s Amended Complaint fails adequately to
identify the “who, what, when, where, and how” requirements of a successful complaint for
violations of the FCA. See, e.g., DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir. 1990)
(holding, as many courts have, that “particularity” under Rule 9(b) “means the who, what, when,
where, and how: the first paragraph of any newspaper story”). Looking back at the Sava Senior
example, however, Plaintiff easily meets his pleading burden with respect to those common
factors of particularity. Plaintiff provides representative examples of which SNFs were
involved; the nature of the swapping scheme, including even the degree of the discounted
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Mobilex provided; and the range of years, “2004 to the present,” during which Mobilex and large
SNFs like Sava Senior have engaged in the swapping scheme. The alleged swapping scheme is
set forth in detail, and the Amended Complaint names multiple Mobilex officers, including the
CEO, who explicitly acknowledged, and then refrained from addressing, the fraud. For these
reasons, Plaintiff’s Amended Complaint complies with Rule 9(b)’s requirements for pleading
fraud under the FCA.
B. Plaintiff’s Retaliation Claim
Plaintiff alleges that Mobilex retaliated against him by terminating him because of his
actions taken in furtherance of bringing these claims of fraud against it, in violation of Section
3730(h) of the FCA. 5 Mobilex attacks Plaintiff’s unlawful retaliation claim on three grounds.
First, Mobilex argues that because the Amended Complaint fails to identify a plausible FCA
violation, Plaintiff’s claim for unlawful termination must fail as well because Plaintiff cannot
show involvement in a protected activity. Secondly, Mobilex argues that Plaintiff fails to allege
sufficient facts to prove that Plaintiff placed Mobilex on notice that he was pursuing an FCA
action, which is a necessary element for his unlawful retaliation claim. Third, Mobilex claims
that the unlawful retaliation claim should be dismissed because the concerns Plaintiff brought to
Mobilex CEO Mr. Glynn’s attention were part of his duties in his position at Mobilex, and
complaints for retaliation must be dismissed if raising concerns was part of the relator’s job
description.
5
Section 3730 provides, in relevant part, that:
“[a]ny employee [who] . . . is discharged, demoted, suspended, threatened, harassed, or in any
other manner discriminated against in the terms and conditions of employment because of lawful
acts done by the employee . . . in furtherance of an action under this section or other efforts to stop
1 or more violations of this subchapter [shall] be entitled to all relief necessary to make that
employee . . . whole.”
31 U.S.C. § 3730(h)(1).
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Section 3730(h) protects qui tam “whistleblowers” who pursue or investigate fraudulent
activity of their employers from retaliation. See McKenzie v. BellSouth Telecomms., Inc., 219
F.3d 508, 513 (6th Cir. 2000). For a plaintiff to establish that he was retaliated against in
violation of Section 3730(h), he must prove: (1) he was engaged in a protected activity; (2) the
employer knew about the protected activity; and (3) the employer must have discharged or
otherwise discriminated against the alleged whistleblower as a result of the protected activity.6
Georgandellis v. Holzer Clinic, Inc., No. 08-cv-626, 2009 WL 1585772, at *7 (S.D. Ohio June 5,
2009) (citing McKenzie, 219 F.3d at 514).
Mobilex’s first argument for dismissal of the Plaintiff’s retaliation claim fails. As
determined above, Plaintiff has alleged sufficient facts to support a claim for violations of the
FCA on the part of Mobilex, and even if he had not successfully pled an FCA violation under
Section 3729, it would not necessarily invalidate his claim for retaliation under Section 3730.
See Georgandellis, 2009 WL 1585772, at *9; United States ex rel. Ramseyer v. Century
Healthcare Corp., 90 F.3d 1514, 1522 (10th Cir. 1996) (“The case law is clear that a retaliation
claim can be maintained even if no FCA action is ultimately successful or even filed.”).
Mobilex challenges the sufficiency of the Amended Complaint’s allegations regarding
the second, “notice” element for establishing retaliation under Section 3730(h), arguing that
Plaintiff fails to show that he had adequately placed Mobilex on notice of his FCA investigation.
The Sixth Circuit has stated that “[w]hen seeking legal redress for retaliatory discharge under the
FCA, plaintiff has the burden of pleading facts which would demonstrate that defendants had
been put on notice that plaintiff was either taking action in furtherance of a private qui tam action
6
“‘Protected activity’ means ‘lawful acts done by the employee on behalf of the employee or others in furtherance
of an [FCA] action, including investigation for, initiation of, testimony for, or assistance in an [FCA] action filed or
to be filed . . . .’” United States ex rel. Marlar v. BWXT Y-12, L.L.C., 525 F.3d 439, 449 (6th Cir. 2007) (citing 31
U.S.C. § 3730(h)).
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or assisting in an FCA action brought by the government.” Yuhasz, 341 F.3d at 568 (quoting
Ramseyer, 90 F.3d at 1522).
In his Amended Complaint, Plaintiff states that he personally notified Mr. Glynn and
others at Mobilex on numerous occasions of the fraud scheme. FAC ¶¶ 86-87. Crucially,
however, nowhere does Plaintiff allege that he notified Mr. Glynn, or anyone else at Mobilex, of
his intent to investigate the fraud himself, much less that he was contemplating a qui tam action
or assisting in furthering an action under the FCA against Mobilex. Rather, the Complaint
merely states that after questioning Mr. Glynn and the others about Mobilex’s fraudulent
practices, and asking Mr. Glynn to expose the fraud, he was let go. Id.
Alleged whistleblowers bringing complaints of fraud to their employer “‘must make clear
their intentions of bringing or assisting in an FCA action in order to overcome the presumption
that they are merely acting in accordance with their employment obligations.’” Yuhasz, 341 F.3d
at 568 (quoting Ramseyer, 90 F.3d at 1523 n. 7). Plaintiff himself acknowledges in his briefing
that to successfully state a retaliation claim under Section 3730(h) he must “allege that his
activities have given defendants reason to believe he was contemplating filing a qui tam
complaint.” (Dkt. 44, at 33.) Simply insisting to Mobilex that it should cease certain activities
which Plaintiff believed to be fraudulent does not, even when interpreting the standard broadly,
constitute reasonable notice to his employer that he intended to pursue legal action to end the
fraud. See Marlar, 525 F.3d at 449 (stating that plaintiff “repeatedly ‘object[ing] to her
superiors’ about the inaccurate medical records” without more “likely do not suffice to show that
BWXT was on notice of Ms. Marlar’s protected activity”).
Based on the Plaintiff’s own pleadings, he never indicated any intentions to pursue
investigation of the fraud, report the fraud, or otherwise take action or assist the government in
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prosecuting the fraud under the FCA. Therefore, as a matter of law, his claim for unlawful
retaliation under the FCA must fail.
V. CONCLUSION
Defendant’s Motion to Dismiss Relator’s Amended Complaint is GRANTED with
respect to Plaintiff’s claim for unlawful retaliation under the FCA. Count II of the Amended
Complaint is, accordingly, DISMISSED. Defendant’s Motion is DENIED with respect to
Plaintiff’s remaining claims for violations of the FCA and similar state law anti-fraud statutes.
IT IS SO ORDERED.
s/Algenon L. Marbley
Algenon L. Marbley
DATED: February 27, 2011
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