UNITED STATES OF AMERICA et al v. STEEL VALLEY AMBULANCE et al

Filing 52

MEMORANDUM AND ORDER. Defendants' Motion to Dismiss (Doc. 46 ) is GRANTED as to all of Plaintiff's claims to the extent they are based on theories of liability other than Defendants' medically unnecessary billing, and DENIED as to Pla intiff's claims to the extent they are based on Defendants' medically unnecessary billing. This dismissal will be with prejudice against Plaintiff's reassertion of her dismissed theories of liability. See contents of this filing. Signed by Judge Cathy Bissoon on 6/26/18. (rdl)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
UNITED STATES OF AMERICA,
ex. rel. Pamela Lynn Scalamogna,
Plaintiff,
v.
STEEL VALLEY AMBULENCE., et al.,
Defendants.

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Civil Action No. 14-524
Judge Cathy Bissoon

MEMORANDUM AND ORDER
Pending before the Court is a Motion to Dismiss Plaintiff’s Second Amended Complaint
filed by Defendants Steel Valley Ambulance, John T. Jumba, Sr., Patricia Jumba, John J. Jumba
and Lori Jumba (collectively, “Defendants”) (Doc. 46), pursuant to Rules 9(b) and 12(b)(6) of
the Federal Rules of Civil Procedure. For the reasons that follow, Defendants’ Motion to
Dismiss will be granted in part and denied in part. Specifically, the Court will deny Defendants’
Motion to Dismiss as to Plaintiff’s claims based on medical necessity requirements, and grant
their Motion to Dismiss to the extent Plaintiff’s theories of liability are based on other
requirements.
BACKGROUND
Defendant Steel Valley Ambulance, Inc. (“Steel Valley”) is an ambulance service based
in Homestead, Pennsylvania that provides services for patients who are insured by Medicare and
Medicaid. (2d Am. Compl. ¶¶ 10-14, Doc. 45.) Its former emergency medical technician
(“EMT”), Pamela Scalamogna (“Plaintiff”), filed claims against Steel Valley and four
individuals, John T. Jumba, Sr., Patricia Jumba, John J. Jumba and Lori Jumba, under the False
Claims Act, 31 U.S.C. § 3729, et seq. (“FCA”) (Counts 1-7). (See generally 2d Am. Compl.)

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As the United States has declined to intervene in this action (see Doc. 13), Plaintiff is pursuing
these claims individually.
According to the Second Amended Complaint, Plaintiff began working for Steel Valley
in September 2010. (2d Am. Compl. ¶ 30.) Plaintiff alleges that, during her employment with
Steel Valley, she observed Defendants violate the FCA by deviating from five Medicare and
Medicaid standards, and that she believes that false claims for payment were submitted to the
government by virtue of these deviations. (Id. at ¶¶ 58-179.) For each of the claimed deviations,
Plaintiff contends that these are the types of issues that would affect government payment
decisions, and therefore she avers on belief that they influenced the government’s payments to
Steel Valley. (Id. at ¶¶ 76-77, 129-30, 142-45, 164-65, 178-79.)
First, Plaintiff claims that Defendants deviated from vehicle and staff requirements. (Id.
at ¶¶ 58-77.) She alleges that Medicare-reimbursable ambulance service providers are required
to meet state motor vehicle standards, as well as “Star of Life” standards. (Id. at ¶¶ 58, 61.) She
contends that Steel Valley’s ambulances did not meet these standards. Specifically, she alleges
that on or about October 13, 2010, two ambulances failed to pass inspection for proper heating,
cooling and ventilation; that one ambulance failed to pass inspection for oxygen equipment; and
that one ambulance was not available for inspection. She also alleges that an ambulance’s
vehicle registration was expired on November 4, 2006. (Id. at ¶¶ 64-66.) Plaintiff alleges that
vehicles and their crews registered to provide Basic Life Support (“BLS”) services were used for
Advance Life Support (“ALS”) calls in November 2010 and February 2011, in violation of
Medicare’s requirements. (Id. at ¶¶ 68-72.)
Second, Plaintiff claims that Defendants billed for services that were medically
unnecessary, such as transporting patients by ambulance when Defendants could have used a

2

wheelchair van. (Id. at ¶¶ 78-130.) Plaintiff claims that Defendant John J. Jumba, Jr.
“repeatedly instructed Plaintiff-Relator to remove statements about a patient’s ability to walk or
ride in a wheel chair [sic] from trip documentation” and “explained to [Plaintiff] that Medicare
would not reimburse for ambulance transport that could have been performed in [a] wheelchair
van.” (Id. at ¶¶ 91-92.) She claims that Defendant John Jumba, Jr. “would either approve of the
submission of the trip to Medicare, or return the documentation to employees to have the trip
documentation amended or changed for submission to Medicare.” (Id. at ¶ 90.) Consistent with
her claim above, Plaintiff describes eleven specific patients, who, at specified times, were picked
up by Plaintiff in non-emergency situations for medically unnecessary services, such as
transportation in an ambulance. (Id. at ¶ 95.) She further states, for several of these patients, that
Defendant John Jumba, Jr. instructed her to alter trip documentation sheets (“trip sheets”) to
reflect the necessity of the services provided in order to justify Medicare reimbursement. 1
Third, Plaintiff claims that Defendants deviated from “origin and destination
requirements” by transporting patients farther than the nearest facility. (Id. at ¶¶ 137-141.) She
alleges that Steel Valley has trip sheets that contradict its submissions to Medicare concerning
the nearest facilities. (Id.)
Fourth, Plaintiff claims that Defendants violated the Anti-Kickback Statute, 42 U.S.C. §
1320a-7b(b). (Id. at ¶¶ 146-65.) She alleges that Steel Valley has “illegal provider agreements
with several providers,” including a list of anonymized entities. (Id. at ¶ 152.) She alleges that

1

Under the heading “Medical Necessity Requirements,” Plaintiff also claims that on one
specified occasion Steel Valley took 55 minutes to respond to an emergency call, rather than
responding immediately as required by regulation, and then billed for an emergency response.
(Id. at ¶¶ 112-121.)
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these agreements violate the Anti-Kickback Statute, and the FCA, because they are used to
facilitate several kickback schemes that result in billing the government. (Id. at ¶¶ 153-162.)
Fifth, and last, Plaintiff claims that Defendants deviated from periodic billing
certification and reporting requirements. (Id. at ¶¶ 166-79.) In support of this theory, she alleges
that Steel Valley did not maintain the required records, including certificates of medical
necessity. (Id. at ¶¶ 171-74.) She also alleges that Steel Valley completed paperwork that
falsely certified two patients as bedridden. (Id. at ¶¶ 175.)
ANALYSIS 2
Defendants move to dismiss Plaintiff’s Second Amended Complaint under Federal Rule
of Civil Procedure 12(b)(6) (“Rule 12(b)(6)”) for failure to state a claim on two grounds: (1)
Plaintiff has failed to allege fraud with sufficient particularity under Federal Rule of Civil
Procedure 9(b) (“Rule 9(b)”); and (2) Plaintiff has not alleged facts that establish the materiality
of the fraud to the government’s payment decisions, as required for FCA liability. (See
generally, Defs.’ Br. Supporting MTD, Doc. 47.)
I.

Sufficiency of Plaintiff’s Claims under Rule 9(b)
A. Legal Standard
“[T]he FCA makes it unlawful to knowingly submit a fraudulent claim to the

government.” U.S. ex rel. Schumann v. Astrazeneca Pharm. L.P., 769 F.3d 837, 840 (3d Cir.

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In deciding whether to grant a motion to dismiss under Federal Rule of Civil Procedure
12(b)(6), the court must take as true all of the well-pleaded facts in the complaint, Fowler v.
UPMC Shadyside, 578 F.3d 201, 211 (3d Cir. 2009), and determine whether these facts raise a
reasonable expectation that discovery will reveal the evidence necessary to prove each element
of plaintiff’s claims, Thompson v. Real Estate Mortgage Network, 748 F.3d 142, 147 (3d Cir.
2014).
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2014). 3 As relevant here, FCA liability attaches when a claimant knowingly and falsely certifies
compliance with a material statute, regulation, or contract provision, or “makes specific
representations about the goods or services provided” but fails “to disclose noncompliance with
material statutory, regulatory, or contractual requirements.” U.S. ex rel. Whatley v. Eastwick
Coll., 657 F. App’x 89, 94 (3d Cir. 2016) (“Eastwick”) (quoting U.S. ex rel. Wilkins v. United
Health Grp., Inc., 659 F.3d 295, 305 (3d Cir. 2011) (“Wilkins”)).
“Plaintiffs must plead [FCA] claims with particularity in accordance with Rule 9(b).”
Wilkins, 659 F.3d at 301 n.9 (citing U.S. ex rel. LaCorte v. SmithKline Beecham Clinical Labs,
149 F.3d 227, 234 (3d Cir. 1998)). 4 For a plaintiff to satisfy Rule 9(b)’s heightened pleading
standard in the context of an FCA claim, she 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)
(citations omitted). “Describing a mere opportunity for fraud will not suffice.” Id. at 158. The
particular details of such a scheme must include information “as to who provided the payments,
to whom the payments were made, [and] under what criteria the payments were awarded.”
Eastwick, 657 F. App’x at 95; U.S. ex rel. Moore & Co., P.A. v. Majestic Blue Fisheries, LLC,
812 F.3d 294, 307 (3d Cir. 2016) (a plaintiff must support her “allegations ‘with all of the
essential factual background that would accompany the first paragraph of any newspaper story’”
(quoting In re Rockefeller Ctr. Props., Inc. Securities Litig., 311 F.3d 198, 217 (3d Cir. 2002)).

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Specifically, the FCA creates liability when a person “knowingly presents, or causes to be
presented, a false claim for payment or approval,” 31 U.S.C. § 3729(a)(1)(A), or when a person
“knowingly makes, uses, or causes to be made or used, a false record or statement material to a
false or fraudulent claim,” 31 U.S.C. § 3729(a)(1)(B).
4
Rule 9(b) states: “In 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).
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Under this pleading standard, a plaintiff need not identify a specific claim for payment.
Foglia, 754 F.3d at 156 (citing Wilkins, 659 F.3d at 308); see also United States ex rel. Brown v.
Pfizer, Inc., No. 05-6795, 2016 WL 807363, at *11 (E.D. Pa. Mar. 1, 2016) (“The fact that
Relators did not identify a single reimbursement is not fatal to their claims at this stage of the
proceedings.”); United States v. Medco Health Sys., Inc., No. 12-522, 2014 WL 4798637, at *11
(D.N.J. Sept. 26, 2014) (a plaintiff need not identify specific claims as “such specific proofs are
usually inaccessible to a qui tam plaintiff”). Indeed, a plaintiff may allege that claims were
submitted to the government for payment based on information and belief if she alleges that the
submissions were peculiarly within a defendant’s knowledge and control, as long as other
reliable indicia lead to a strong inference that claims were actually submitted. United States ex
rel. Chorches for Bankruptcy Estate of Fabula v. American Medical Response, Inc., 865 F.3d 71,
85-86 (2d Cir. 2017) (“Chorches”).
B. Pleading on Information and Belief
In this Court’s Order granting Defendants’ prior Motion to Dismiss (Doc. 44), the Court
noted that the facts of this case resemble those alleged in Chorches, in which the FCA relator
pleaded key elements of his complaint on information and belief. The Chorches court found that
the plaintiff, an EMT for an ambulance company, had satisfied the pleading requirements of Rule
9(b). Id. at 86.
The relator in Chorches alleged that his employer engaged in a scheme: the ambulance
company asked EMTs to alter patient reports to falsely demonstrate the medical necessity of
ambulance runs, which would then be billed to Medicare. Id. at 76-77, 85. Although the relator
did not identify particular claims that were submitted to the government based on his personal
knowledge, he “set[] forth facts establishing specific reasons why such information . . . is

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‘peculiarly within [the ambulance company’s] knowledge.”’ Id. at 82 (quoting Wexner v. First
Manhattan Co., 902 F.2d 169, 172 (2d Cir. 1990)). In addition, the relator alleged on personal
knowledge that his “supervisors specifically referenced Medicare as the provider to whose
requirements the allegedly falsified revisions were intended to conform.” Id. at 85. The
Chorches court found that this pleading was sufficient—even though the EMT’s allegation that
his employer submitted bills to the government was based on information and belief rather than
personal knowledge—because it contained “plausible allegations creating a strong inference that
specific false claims were submitted to the government.” Id. at 86.
Recognizing the similarities between Plaintiff’s allegations and the facts alleged in
Chorches, Defendants argue that Plaintiff’s Second Amended Complaint is nonetheless
distinguishable because Plaintiff has not shown that her access to Steel Valley’s billing records
was restricted to the same extent as in Chorches. (Defs.’ Br. Supporting MTD 6, 10-12.)
Plaintiff responds, to the contrary, that she “alleged that Defendants exclusively controlled the
submission of medical billing information for Steel Valley . . . and Steel Valley’s owners and
family members were responsible for the submission of the claims for payment to [M]edicare.”
(Pl.’s Br. Against MTD 7, Doc. 50.) Defendants reply that the Second Amended Complaint
contains no such allegations. (Defs.’ Reply Supporting MTD 1-2, Doc. 51.)
The first question for the Court to resolve is whether the allegations in the Second
Amended Complaint sufficiently demonstrate that medical billing was peculiarly within
Defendants’ knowledge and control, thus permitting Plaintiff to make her claim submission
allegations on information and belief. The Court finds that Plaintiff’s allegations are sufficient to
show that medical billing was peculiarly within Defendants’ knowledge and control.
Specifically, Plaintiff alleges that:

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•

“The Defendant, John T. Jumba, (a.k.a. John Jumba[,] Sr.), is the 100% owner and Chief
Executive Officer of Defendant, Steel Valley Ambulance. . . . John Jumba, Sr.,
personally makes the business decisions related to billing,” (2d Am. Compl. ¶ 17),

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“Defendant, Patricia Jumba (Wife of John Jumba, Sr.) is the Billing Manager of Steel
Valley Ambulance. Defendant, Patricia Jumba, personally performs and supervises the
billing practices,” (Id. at ¶ 20),

•

“The Defendant, John J. Jumba, (a.k.a. John Jumba, Jr.) is the Chief Operations Officer
of Defendant, Steel Valley Ambulance. . . . John Jumba, Jr. personally makes the
business decisions related to billing,” (Id. at ¶ 23),

•

“Defendant, Lori Jumba (Wife of John Jumba, Jr.) is the Office Manager of Steel Valley
Ambulance. Defendant, Lori Jumba personally performs and supervises billing practices
and office practices, in order to ensure that the office practices conform to their billing
practices,” (Id. at ¶ 26), and that

•

“The Plaintiff-Relator, is Pamela Lynn Scalamogna. . . . At all times material, she was
employed by Defendants as an EMT and driver,” (Id. at ¶ 29).

Collectively, taking these allegations as true and drawing reasonable inferences, they show that
Plaintiff had no role in the billing process, which was under the control of the listed Defendants.
Although Defendants are correct that Plaintiff’s Brief overstates the contents of her Second
Amended Complaint, Plaintiff’s allegations are sufficient to show that the billing process and the
submission of claims to the government were not her job responsibilities, thus leading to the
reasonable inference that she had no access to particular billing statements. See Foglia, 754 F.3d
at 158 (where “[the defendant], and only [the defendant], has access to the documents that could
easily prove the claim one way or another—the full billing records from the time under

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consideration,” a plaintiff satisfies Rule 9(b) by presenting sufficient circumstantial details of the
alleged fraud).
The Court disagrees with Defendants’ argument that Plaintiff must allege that Defendants
intentionally or improperly prevented her from gaining access to billing records. (See Defs.’
Reply Supporting MTD 2.) Rather, it is sufficient that the employer, “advertently or
inadvertently[,] made it virtually impossible for most employees to have access to all of the
information necessary to certify on personal knowledge both that a particular invoice was
submitted for payment and that the facts stated to justify the invoice were false.” Chorches, 865
F.3d at 82. Or simply, it is sufficient for Plaintiff to show that only Defendants “ha[ve] access to
the documents that could easily prove the claim[s] one way or another.” Foglia, 754 F.3d at 158.
Given the parties’ alleged job responsibilities, it is a natural inference that Plaintiff had no access
to the billing records, which were peculiarly within Defendants’ control.
The Court may thus consider whether Plaintiff’s allegations based on information and
belief, coupled with her allegations based on personal knowledge, lead to a strong inference that
claims were actually submitted. Defendants argue that “it would be speculative (at best) to
assume that a false claim resulted from the allegations in the [S]econd [A]mended [C]omplaint.”
(Defs.’ Br. Supporting MTD 9.) To the contrary, the Court finds that Plaintiff’s allegations lead
to a nearly undeniable inference that such claims were submitted to the government, but that only
one of the alleged bases for a false claim—lack of medical necessity—survives under Rule 9(b).
C. Medical Necessity Requirements
As Defendants argue, Rule 9(b) requires the Court to examine, for each of the claimed
deviations from Medicare or Medicaid payment requirements, whether Plaintiff has alleged
sufficient details about the allegedly fraudulent conduct giving rise to claim submissions.

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Eastwick, 657 F. App’x 89, 95; U.S. ex rel. Judd v. Quest Diagnostics Inc., 638 F. App’x 162,
168-69 (3d Cir. 2015) (to satisfy Rule 9(b)’s requirement to allege “the who, what, when, where
and how of the events” giving rise to an FCA claim, a plaintiff must allege the particular details
of a scheme). Concerning medical necessity requirements, Plaintiff alleges that “Defendant,
John Jumba[,] Jr.[,] repeatedly instructed Plaintiff-Relator to remove statements about a patient’s
ability to walk or ride in a wheel chair [sic] from trip documentation” and that he “explained to
Relator-Plaintiff that Medicare would not reimburse for ambulance transport that could have
been performed in a wheelchair van.” (2d Am Compl. ¶¶ 91-92.) In addition to alleging this
general practice, Plaintiff also claims that there were numerous specific ambulance trips for
which Defendant John Jumba, Jr. instructed her to manufacture false trip documentation for
government billing purposes. For instance, to take one of eleven examples, she states:
Patient, GH, was picked-up by Plaintiff-Relator on December 24, 2010, at FN and taken
to DVEE Dialysis by an ambulance. The trip was without medical necessity for use of an
ambulance. The trip was a non-emergency trip, it was a BLS trip. Plaintiff-Relator
observed the patient walk to the stretcher. Defendant, John Jumba, Jr. instructed
Plaintiff-Relator to write that GH was moved from the bed to the stretcher with a twoman sheet lift, and if the trip sheet was not worded correctly, no payment from Medicare
would be issued.
(Id. at ¶ 95(c).) As the Chorches court found when analyzing similar allegations, “in alleging
that supervisors specifically referenced Medicare as the provider to whose requirements the
allegedly falsified revisions were intended to conform, the [operative complaint] supports a
strong inference that false claims were submitted to the government.” Chorches, 865 F.3d at 85.
Accordingly, Plaintiff’s allegations concerning medical necessity requirements are sufficient to
survive a motion to dismiss based on Plaintiff’s supposed failure to show that any claims were
submitted.

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Having addressed medical necessity requirements, the Court will address each remaining
category of claimed deviation in turn.
D. Vehicle and Staff Requirements
Concerning the alleged deviations from vehicle and staff requirements, Defendants argue
that Plaintiff “fails to allege that Steel Valley transported Medicare or Medicaid patients while
the alleged defects were supposedly present, and while the allegedly untrained crews were on
duty.” (Defs.’ Br. Supporting MTD 14.) As a result, they argue, the Second Amended
Complaint cannot give rise to a strong inference that specific false claims were submitted to the
government based on Steel Valley’s failure to meet vehicle and staff requirements. (Id.) For
example, the patients transported in the allegedly defective ambulances may have had private
insurance, in which case no claims for payment would have been submitted to the government.
(Id.) Plaintiff does not respond directly to this argument in her brief, but does point to the
Second Amended Complaint, which alleges that “[i]t is believed and therefore averred that
Defendants knowingly and repeatedly billed for the use of vehicles, equipment, and staff which
failed to meet the standards for Medicare and Medicaid reimbursement.” (2d Am. Compl. ¶ 74.)
A careful reading of the Second Amended Complaint shows that Defendants are correct,
although this is a close case. To survive under Rule 9(b), Plaintiff’s allegations must include
information “as to who provided the payments, to whom the payments were made, [and] under
what criteria the payments were awarded,” Eastwick, 657 F. App’x at 95, and provide “reliable
indicia that lead to a strong inference that claims were actually submitted,” Foglia,754 F.3d at
156. Yet, Plaintiff’s allegations fail to indicate the details of an alleged scheme that would
strongly imply that false claims were submitted to the government based on vehicle and staff
defects.

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Plaintiff’s allegations concerning ambulance defects, which indicate specific defects that
were present at specific points in time, would be consistent with either Steel Valley’s prompt
correction of those defects upon their discovery, or with Steel Valley’s eventual billing that
falsely certifies compliance. (See Defs.’ Br. Supporting MTD 15 (“Taken to its logical extreme,
Ms. Scalamogna’s argument would force ambulance companies to remove vehicles from service
immediately, even if they have a minor defect (such as air conditioning refrigerant needing to be
recharged), or risk liability under the False Claims Act.”); Exhibit 6 to 2d Am. Compl. (noting
next to each comment on defects “Replaced SLC”).) Plaintiff’s allegations fail to show that the
prompt correction scenario is less likely than the false billing scenario. Cf. Foglia,754 F.3d at
158 (court must be able to conclude that false billing scenario is more likely).
Further, unlike in Plaintiff’s detailed allegations concerning Defendants’ failure to
comply with medical necessity requirements, Plaintiff does not provide a single example of a
patient’s billable trip that could have given rise to a false claim for payment based on either staff
or vehicle requirements. While “representative samples” are not required, see Foglia,754 F.3d at
155-57, Plaintiff’s allegations must permit the Court to strongly infer that such claims were
submitted. Taking all of Plaintiff’s allegations concerning vehicle and staff defects as true, there
is insufficient reason to conclude that Defendants submitted a false claim arising from these
defects. Cf. id. at 157-58 (acknowledging “a close case as to meeting the requirements of Rule
9(b)” where a nurse employed by a dialysis clinic alleged the details of a fraudulent scheme and
provided inventory logs showing a pattern of drug use best explained by fraudulent billing). For
this reason, Plaintiff’s claims based on vehicle and staff requirements will be dismissed. 5

5

In addition, as Defendants also argue, it is clear that Plaintiff’s claims based on vehicle and
staff requirements fail to show that the alleged deviations were material to the government’s
payment decisions. Under the “demanding” standard for materiality under the FCA, the statute
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E. Origin and Destination Requirements
Turning to origin and destination requirements, the same reasoning applies to a greater
degree. The Court finds that Plaintiff’s allegations fail to satisfy the requirements of Rule 9(b).
Defendants argue that Plaintiff “fails to identify any statements that were allegedly made by the
defendants to the government about origin and destination requirements.” (Defs.’ Br. Supporting
MTD 19.) The Second Amended Complaint alleges, entirely on Plaintiff’s belief and with no
specific examples or other information on personal knowledge, that “Defendants submit claims
made for services that fail to meet [Medicare’s] origin and destination requirements,” including
“deliver[ing] dialysis patients to facilities that are not the nearest facility that is capable of
providing the required level of service” and “deliver[ing] ‘emergency service’ patients to
facilities that are not the nearest facility that is capable of providing the required level of
service.” (2d Am. Compl. ¶ 137.) Although Plaintiff does allege that “[t]he proof of the nearest
facility is to be found in the documents retained by the service provider,” (id. at ¶ 138), which
would place the specific proof beyond her control, she provides no reliable indicia that would
suggest that claims based on improperly long ambulance trips were submitted. As a result, this
speculative claim must be dismissed. See Eastwick, 657 F. App’x at 95 (“when pleading on

“is not an all-purpose antifraud statute or a vehicle for punishing garden-variety breaches of
contract or regulatory violations. . . . [m]ateriality, in addition, cannot be found where
noncompliance is minor or insubstantial.” Universal Health Servs. v. U.S. ex rel. Escobar, 136
S. Ct. 1989, 2003 (2016). Plaintiff’s only examples of cases in which noncompliance with
vehicle and staff requirements led to nonpayment or recoupment concern instances in which an
ambulance provider’s alleged misconduct was far more egregious than the conduct alleged here.
See U.S. v. Comerio Ambulance Servs., 2005 BL 18757 (D.P.R. May 31, 2005) (provider’s
vehicles were unlicensed and, in many cases, were vehicles such as SUVs and sedans rather than
ambulances—the provider pleaded guilty to criminal fraud); R.F. (Beneficiary) First Coast Serv.
Options Inc. (Contractor), 2012 WL 3582978 (Medicare Appeals Council June 18, 2012)
(Medicare refused payment where vehicle was a luxury car rather than an ambulance; the
Appeals Council upheld this denial on the ground that the vehicle was not an ambulance and the
services were medically unnecessary).
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information and belief, boilerplate and conclusory allegations will not suffice and the [FCA]
plaintiffs must make factual allegations that make their theoretically viable claim plausible”
(internal citation and quotation marks omitted)).
F. Anti-Kickback Statute
Plaintiff’s claims concerning the Anti-Kickback Statute require a separate, but related,
analysis. The Anti-Kickback Statute makes it illegal to:
[K]nowingly and willfully offer[] or pay[] any remuneration (including any kickback,
bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind to any person
to induce such person . . . to refer an individual to a person for the furnishing or arranging
of any item or 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)(2)(A). 6 Under the Anti-Kickback Statute, “a claim that includes items
and services resulting from a violation of [the Anti-Kickback Statute] constitutes a false or
fraudulent claim for purposes of [the FCA].” 42 U.S.C. § 1320a-7b(g); U.S. ex rel. Greenfield v.
Medco Health Sols., Inc., 880 F.3d 89, 95 (3d Cir. 2018) (“Greenfield”). An FCA violation
based on the above-cited provisions of the Anti-Kickback Statute requires that a patient be
exposed to an illegal referral; that a provider submits a claim for government reimbursement
pertaining to that patient; and that a party to the transaction solicits, receives or offers a kickback
to the referrer in exchange for the referral. See Greenfield, 880 F.3d at 100. Accordingly, under
Rule 9(b), Plaintiff’s factual allegations must enable the Court to discern the relationships among
the parties to the transaction and infer that compensation has been paid in exchange for a referral,
rather than for typical on-call services pursuant to an arms-length contract. Cooper v. Pottstown
Hosp. Co. LLC, 651 F. App’x 114, 116 (3d Cir. 2016). It follows that the Court must, at a

6

A parallel provision makes it illegal to “solicit[] or receive[] any remuneration” in the same
transaction. 42 U.S.C. § 1320a-7b(b)(1)(A).
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minimum, be able to discern that Defendants offered or received compensation in exchange for
an illegal referral.
Plaintiff alleges that Steel Valley has several illegal provider agreements, and she
incorporates one of the allegedly illegal agreements by reference in her Second Amended
Complaint. 7 (See 2d Am. Compl. ¶¶ 152-53; Exhibit 9 to 2d Am. Cmpl.) She also alleges, on
belief, several kickback schemes that are incomprehensible. For example, she alleges that “Steel
Valley Ambulance has an agreement that does not disclose the storage of supplies,” which
constitutes “a commercially unreasonable” deviation from the agreement itself because “supplies
are retained and distributed by the contracting parties without provision for storage, distribution,
or payment.” (2d Am. Compl. ¶¶ 153, 155.) And, she alleges that Steel Valley has agreements
that identify it as a preferred emergency care transportation provider, even though Steel Valley is
not a 911 provider, which is allegedly required for such designation. (Id. at ¶ 154.) These
asserted schemes do not come close to alleging a kickback. To name the most obvious
deficiency, they do not state or imply that any form of compensation has been exchanged among
the parties.

7

This contract designates Steel Valley as the “primary provider” for a nursing facility, which the
contract defines to mean “that, unless prohibited by law, [Steel Valley] shall be the first
ambulance provider contacted by [the nursing facility] for services for [the facility’s] residents
who require such services,” subject to certain exceptions. (Exhibit 9 to 2d Am. Cmpl. ¶ 2.) As
for payment, the contract states:
a.
When permitted by law, [Steel Valley] will bill the patient . . . or any available
insurance . . . for services provided under this agreement.
b.
Where required by law, including but not limited to trips arising under the
Medicare Prospective Payment System . . . , [Steel Valley] will bill [the facility] for
services rendered to its residents . . . according to the fee schedule set forth in Appendix
A, which . . . [is] reflective of the fair market value for the services rendered and not
substantially below the Medicare-approved charges for such services.
(Id. at ¶¶ 5.a., 5.b.) On its face, there is nothing in this contract that would indicate an illegal
kickback scheme.
15

Plaintiff asserts two additional schemes that come slightly closer, but ultimately fail.
First, she alleges that Steel Valley has provider agreements with nursing care facilities. (2d Am.
Compl. ¶ 156.) In the alleged scheme, the nursing care facilities bill Medicare (under Part A) for
Steel Valley’s ambulance services, and the nursing facilities ought to forward the Medicare
payments to Steel Valley. (Id.) However, Steel Valley does not bill the nursing facilities for
transporting their patients and the facilities do not forward Medicare’s payments to Steel Valley.
(Id.) Instead, Steel Valley bills Medicare (under Part B) such that Medicare pays twice for the
same ambulance services. (Id.) From this arrangement, Steel Valley garners customer loyalty.
(Id.) This scheme contains an alleged kickback, unlike those above, because it alleges that Steel
Valley gets contracts for services and loyalty in exchange for illicitly billed patient referrals to its
ambulance services. However, it lacks any reliable indicia—such as statements on personal
knowledge, specific examples, dates, or provider identities—that would permit the Court to
strongly infer that actual claims for payment were submitted based on the alleged scheme. As a
result, this claim fails under Rule 9(b).
Second, Plaintiff asserts a scheme in which Steel Valley had an exclusive agreement for
service with a nursing care facility. Here, she alleges that she personally “observed that
Defendant, Steel Valley Ambulance[,] had an exclusive agreement for service with MM” and
that she “was provided with copies of the contracts . . . when picking up patients.” (2d Am.
Compl. ¶¶ 159-60.) Pursuant to this scheme, she claims that Steel Valley responded to an
emergency call on May 5, 2012 instead of 911 services, due to the existence of the exclusive
agreement. (Id. at ¶ 161.) While this scheme does contain more specificity than any of the
alleged kickback schemes described above—and contains information on personal knowledge—
it does not allege a kickback. There is no basis on which the Court could conclude that Steel

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Valley offered anything of value to the referrer in exchange for a referral. 8 Thus, for one reason
or another, none of Plaintiff’s allegations concerning Anti-Kickback Statute schemes suffices
under Rule 9(b).
G. Billing Certification and Reporting Requirements
Plaintiff’s final category of alleged deviations from Medicare payment requirements
concern periodic certifications of compliance. Specifically, Plaintiff alleges that, to maintain
Medicare billing privileges, ambulance suppliers must certify on a 5-year cycle that they comply
with relevant laws and regulations, pursuant to 42 C.F.R. §§ 424.516(a)(2) and 424.515. (2d
Am. Compl. ¶¶ 166-67.) Plaintiff’s overall theory is that Steel Valley has failed to comply with
various Medicare requirements, such as keeping trip records and retaining certificates of medical
necessity, and thus that Steel Valley’s certifications of compliance have been false. (Id. at ¶¶
172-75.) In support of this theory, Plaintiff also asserts two exemplary scenarios:
[(1)] A wheelchair patient refused to get on a stretcher and the paramedic, R.V., called
Defendant, Steel Valley[,] to report the uncooperative patient. It is believed and therefore
averred that Defendant certified the patient as bedridden. Certifying the patient as
bedridden is a knowingly false certification.
[(2)] A patient is taken to a dialysis clinic and placed in a dialysis chair. He is not
bedridden because he can sit in the dialysis chair. It is believed and therefore averred that
Defendant certified the patient as bedridden. Certifying the patient as bedridden is a
knowingly false certification.
(2d Am. Compl. ¶¶ 175(c)-(d).)
Defendants’ primary argument for dismissing claims based on its allegedly false
certifications is that none of the requirements cited by Plaintiff apply to Defendants. (Defs.’ Br.
Supporting MTD 21.) Defendants argue that Steel Valley is a “supplier” rather than a “provider”

8

Notably, despite alleging that she was provided with a copy of this exclusive contract, she does
not aver any of its specific contents.
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under the relevant regulations. (Id.) Defendants also argue for dismissal based on lack of
materiality and lack of specificity. (Id. at 22.)
The plain language of the regulations contradicts Defendants’ primary argument that the
regulations do not apply to suppliers. First, 42 C.F.R. § 424.516(a)(2) states that “CMS enrolls
and maintains an active enrollment status for a provider or supplier when that provider or
supplier certifies that it meets . . . all of the following requirements: . . . [including] [c]ompliance
with Federal and State licensure, certification, and regulatory requirements, as required, based on
the type of services or supplies the provider or supplier type will furnish and bill Medicare.” 42
C.F.R. § 424.516(a)(2) (emphases added). And 42 C.F.R. § 424.515 similarly applies to “a
provider or supplier” throughout. Thus, Defendants’ primary argument is inapposite.
Defendants’ remaining argument, however, has merit. 9 None of Plaintiff’s allegations
concerning certification and reporting requirements go beyond conclusory assertions. For
example, Plaintiff’s most specific assertions are the two exemplary scenarios quoted above,
which merely allege a belief that Defendant at some point in time falsely certified a patient as
bedridden. Without any supporting information or indicia of reliability, this claim cannot
survive under Rule 9(b).
Plaintiff’s only allegations that survive under Rule 9(b) concern Steel Valley’s false
claims based on medically unnecessary billing. To survive Defendants’ Motion to Dismiss,

9

While Defendants describe their argument as concerning “materiality,” the content of the
argument concerns whether Plaintiff has properly alleged sufficient details to give rise to an
inference that a false claim was submitted. Thus, the Court takes this argument to be addressing
the pleading standard under Rule 9(b). (See Defs.’ Br. Supporting MTD 22 (“[Plaintiff] does not
identify whether any of these patients were insured, let alone covered by Medicare or
Medicaid.”).)
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Plaintiff’s allegations must also show that the defects are material to government payment
decisions. Accordingly, the Court will now analyze materiality.
II.

Sufficiency under Materiality Standard
A. Legal Standard
To state a valid FCA claim, a plaintiff must allege a “misrepresentation about compliance

with a statutory, regulatory, or contractual requirement [that is] material to the Government’s
payment decision.” United States ex rel. Petratos v. Genentech Inc., 855 F.3d 481, 489 (3d Cir.
2017) (quoting Universal Health Servs., Inc. v. United States ex rel. Escobar, 136 S.Ct. 1989,
1996 (2016) (“Escobar”)). As the United States Supreme Court has held, “[t]he materiality
standard is demanding.” Escobar, 136 S. Ct. at 2003. “A misrepresentation cannot be deemed
material merely because the Government designates compliance with a particular statutory,
regulatory, or contractual requirement as a condition of payment.” Id. Rather, materiality may
be found where “the Government consistently refuses to pay claims in the mine run of cases
based on noncompliance with the particular statutory, regulatory, or contractual requirement.”
Id. Applying Escobar’s holistic approach to materiality, the relevant factors to consider are:
“whether compliance with a statute is a condition of payment; whether the violation goes to ‘the
essence of the bargain’ or is ‘minor or insubstantial’; and whether the government consistently
pays or refuses to pay claims when it has knowledge of similar violations.” U.S. ex rel.
Emanuele v. Medicor Assocs., 242 F. Supp. 3d 409, 431 (W.D. Pa. 2017) (quoting Escobar, 136
S. Ct. at 2003-04).
B. Materiality of Medical Necessity Requirements
Defendants argue that their alleged failure to comply with medical necessity
requirements, if true, would not be material to the government’s payment decisions. (Defs.’ Br.

19

Supporting MTD 13 n.5, 18-19.) They focus their analysis on Plaintiff’s inability to show
“whether the government consistently refuses to pay claims where a trip sheet misstates that a
patient is able to walk or ride in wheelchair van.” (See id. at 19.) They also discount the cases
that Plaintiff cites by arguing that these cases merely show the government’s desire to claw back
spent funds as opposed to the government’s refusal to pay claims in the first place. (Id. at 13
n.5.).
Defendants’ arguments are unpersuasive. Defendants concede that medical necessity is a
condition of payment under 42 C.F.R. 410.40, (see Defs.’ Br. Supporting MTD 18), but contend
that their patients’ health conditions were such that ambulance transportation was medically
necessary as defined by 42 C.F.R. 410.40(d), (see id.). Such arguments are inappropriate at this
stage, as the Court must take Plaintiff’s factual allegations as true. Further, billing for
unnecessary services goes to the heart of the bargain between Medicare and ambulance service
providers—other than billing for services that were not provided at all, it is difficult to conceive
of a more fundamental breach of the bargain than deliberately inflating billing to charge for
unnecessary services. Concerning the government’s general behavior in the mine run of cases,
Plaintiff’s Second Amended Complaint cites eight instances in which the government has
initiated actions for noncompliance with medical necessity requirements against ambulance
service providers. (2d Am. Compl. ¶ 129.) For example, Plaintiff cites U.S. v. Advantage Med.
Transp. Inc., 698 F. App’x 680 (3d Cir. 2017), a criminal case that arose from the investigation
of ambulance transportation claims based on trip sheets that were fraudulently altered to show
that patients could not walk. Id. at 682-83. The Court of Appeals noted in that case that
“ambulance transport claims have long been a vector for fraud and abuse of the Medicare
system” and that “[a]n investigation by the Department of Health and Human Services Inspector

20

General revealed, for example, that Medicare paid more than $50 million to ambulance
companies for improper rides for beneficiaries in the first six months of 2012 alone.” Id. at 682
(internal citations omitted). That the government frequently takes action to recoup money paid
on fraudulent claims in this area bolsters Plaintiff’s argument that these claims are important to
the government. See, e.g., U.S. v. Louthian, 756 F.3d 295, 297-98 (4th Cir. 2014) (“Because of
the large volume of such claims for Medicare payments, little or no inquiry is made into the
validity of claims as they are received. If a paid claim is ultimately suspected of having been
fraudulently submitted, the authorities will investigate and pursue an appropriate reimbursement
. . . .”). As a result, the Court finds that Plaintiff’s claims based on billing for medically
unnecessary ambulance services are sufficiently material to the government’s payment decisions
to survive a Motion to Dismiss.
*

*

*

Accordingly, in consideration of the discussion above, Defendants’ Motion to Dismiss
(Doc. 46) is GRANTED as to all of Plaintiff’s claims to the extent they are based on theories of
liability other than Defendants’ medically unnecessary billing, and DENIED as to Plaintiff’s
claims to the extent they are based on Defendants’ medically unnecessary billing.
It is further ordered that, as the Court previously provided Plaintiff with an opportunity to
correct the pleading deficiencies discussed above (see Doc. 44) and as she has failed to do so,
additional amendment opportunities would be futile and this dismissal will operate with
prejudice against Plaintiff’s reassertion of her dismissed theories of liability. 10 See Cal. Pub.
Emps.’ Ret. Sys. v. Chubb Corp., 394 F.3d 126, 165-66 (3d Cir. 2004).

10

As the Court noted in its prior order, the government may elect to intervene and reassert claims
that have been dismissed. (Doc. 44.)
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IT IS SO ORDERED.

June 26, 2018

s/Cathy Bissoon
Cathy Bissoon
United States District Judge

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All Counsel of Record

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