United States of America et al v. Chattanooga Hamilton County Hospital Authority et al
Filing
177
ORDER granting in part and denying in part 104 Motion to Dismiss for Failure to State a Claim; granting in part and denying in part 107 Motion to Dismiss for Failure to State a Claim; granting 111 Motion to Dismiss for Failure to State a Claim. Signed by District Judge Travis R McDonough on 1/19/2024. (CNC)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TENNESSEE
AT CHATTANOOGA
UNITED STATES OF AMERICA and
THE STATE OF TENNESSEE, ex rel.
JULIE ADAMS, M.D., STEPHEN
ADAMS, M.D., and SCOTT
STEINMANN, M.D.,
)
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)
)
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Plaintiffs,
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v.
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CHATTANOOGA-HAMILTON
)
COUNTY HOSPITAL AUTHORITY et al. )
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Defendants.
)
Case No. 1:21-cv-84
Judge Travis R. McDonough
Magistrate Judge Susan K. Lee
MEMORANDUM OPINION
Before the Court are Defendants Anesthesiology Consultants Exchange, P.C., University
Surgical Associates, P.C., and The Plastic Surgery Group’s (collectively, “Specialist
Defendants”) motions to dismiss the claims against them (Docs. 104, 107, 111).1
For the reasons set forth below, Defendant Anesthesiology Consultants Exchange’s
motion (Doc. 104) and University Surgical Associates’ motion (Doc. 107) will be GRANTED
IN PART and DENIED IN PART. Defendant Plastic Surgery Group’s motion will be
GRANTED (Doc. 111.)
1
The Court will address Defendant Erlanger’s motion to dismiss (Doc. 117) in a separate
opinion.
I.
PLAINTIFFS’ ALLEGATIONS AND PROCEDURAL POSTURE
Defendant Chattanooga-Hamilton County Hospital System, which does business as
Erlanger Medical Center and Erlanger Health System (“Erlanger”), is a non-profit, regional
health system that operates seven hospitals in Tennessee, North Carolina, and Georgia. (Doc 51,
at 19.) This includes Erlanger Baroness Hospital, an academic teaching hospital, with
approximately 150 residents and fellows participating in graduate-level training. (Id. at 19–20.)
Erlanger is affiliated with University of Tennessee Health Sciences Center College of Medicine
(“UTCOM”) and is the primary UTCOM campus in Chattanooga. (Id. at 19.)
Defendant Plastic Surgery Group (“PSG”) is a limited liability company that contracts
with Erlanger to provide services to its patients. (Id. at 21.) Defendant University Surgical
Associates, P.C., (“USA”) is a Tennessee corporation, the physicians of which have admitting
and surgical privileges at Erlanger. (Id.) USA surgeon Dr. Phillip Burns sat on the Erlanger
Board of Trustees (“Erlanger Board”). (Id. at 22.) Defendant Anesthesiology Consultants
Exchange, P.C., (“ACE”) is a Tennessee corporation that is the sole provider of anesthesia
services at Erlanger, including for surgical procedures. (Id. at 21.) ACE anesthesiologist Dr.
Christopher Young sat on the Erlanger Board. (Id.)
Plaintiffs are physicians whom Erlanger formerly employed. (Id. at 6.) Dr. Julie Adams
was an orthopedic surgeon at Erlanger and a Professor of Orthopedic Surgery at UTCOM from
July of 2019 until March of 2021. (Id. at 16–17.) Dr. Stephen Adams became the Chief Medical
Informatics Officer at Erlanger in 2014 and later served as the Chief Information Officer at
Erlanger from December 2019 until June 2021. (Id. at 16.) He was also a professor in the
Department of Family Medicine at UTCOM. (Id. at 15). Dr. Scott Steinmann was a surgeon at
2
Erlanger and served as Chair of the UTCOM Department of Orthopedic Surgery from 2019 until
July 2021. (Id. at 18–19.)
The Medicare Program is a federal health-insurance program for Americans aged 65 and
older, as well as some people with disabilities. (Id. at 24.) To participate in the Medicare
Program, hospitals must enter into “Provider Agreements” with the United States Department of
Health and Human Services (“HHS”). 42 U.S.C. § 1395cc. Under these agreements, a hospital
submits claims to HHS for reimbursement for services it provides to Medicare beneficiaries.
(Doc. 51, at 26–27.)
In teaching hospitals, resident physicians often participate in providing these services
under the supervision of teaching physicians. (Id. at 27.) However, Medicare regulations only
allow payment for teaching-physician services if the teaching physician personally provided the
services, or if a resident provided the services while the teaching physician was present. 42
C.F.R. § 415.170. “In the case of surgical, high-risk, or other complex procedures, the teaching
physician must be present during all critical portions of the procedure and immediately available
to furnish services during the entire service or procedure.” Id. § 415.172(a)(1). If the teaching
physician engages in two surgeries that overlap, she can only leave the first surgery once the
critical portions are completed. Dep’t of Health & Hum. Servs., Medicare Claims Processing
Manual Ch. 12, at § 100.1.2.A.2 (2019). Even then, the teaching physician must designate
another qualified physician to be available to assist the resident during the non-critical portions
of the procedure. Id.
Plaintiffs allege that, in the course of their employment at Erlanger, they became aware
teaching physicians were frequently permitted to conduct multiple resident-involved surgeries at
the same time while submitting claims for the surgeries to Medicare as if the teaching physicians
3
were present for the duration of each surgery. (Doc. 51, at 38.) Plaintiffs learned that it is a
“long entrenched tradition” for surgeons to operate in this way at Erlanger. (Id. (internal
quotations omitted).) Plaintiffs witnessed teaching physicians double- and triple-booking
surgical procedures in which residents were involved, making it impossible for them to be
immediately available to assist the residents if needed. (Doc. 52, at 1.) Furthermore, Plaintiffs
were told that “Erlanger [didn’t] even comply” with the Medicare rule that a backup surgeon be
designated to assist the residents when surgeries overlap. (Id. at 2.) This practice left residents
alone to conduct some or all of a surgery without supervision. (Id.) Plaintiffs identified a total
of 8,497 overlapping surgeries between 2017 and 2021 for which the Government was billed.
(Id.) Plaintiffs identified ten specific examples of overlapping-surgery claims submitted by
Erlanger to the Government. (Id. at 9–27.) These examples included the time and date of the
surgeries for which claims were submitted, the type of surgery performed, the names of the
surgeons who performed the surgeries, the amount of the claims, the date the claims were sent to
the Government, and the date Erlanger received the payments. (Id.)
Plaintiffs also became aware that there was a “culture of non-compliance” with Medicare
billing requirements at Erlanger. (Doc. 53, at 2.) Plaintiffs discovered a litany of violations of
Medicare billing rules, including medically unnecessarily long periods of patients being
anesthetized (Doc. 52, at 27), inadequate recordkeeping during surgeries (id. at 30), password
sharing by physicians (Doc. 53, at 5), patients being admitted by non-physicians (id. at 17),
patient test results not being reviewing by physicians (id. at 18), and the fabrication of patient
physical examinations pre-surgery (id. at 21). Plaintiffs also allege they discovered that Erlanger
improperly incentivized physicians to refer patients to Erlanger by offering them “excessive
4
salaries and benefits” in violation of the Stark Law and Anti-Kickback Statute, 42 U.S.C. §
1395nn; 42 U.S.C. § 1320a-7b(b). (Doc 53, at 24.)
Over the course of many months, Plaintiffs raised their concerns about these alleged
practices on multiple occasions with senior Erlanger leadership, including with Erlanger CEO
Dr. William Jackson and Erlanger’s Chief Compliance Officer, Julie Dean. (Doc. 54, at 14.)
Plaintiffs notified them about billing issues and “potential violations of federal statutes.” (Id.)
Plaintiffs also raised these concerns with USA Surgeon Dr. Burns (id. at 15) and ACE
anesthesiologist Dr. Young (Doc. 52, at 2.) Additionally, Plaintiffs submitted an “e-safe” report
detailing their concerns. (Doc. 54, at 21.) An e-safe report is intended to be a confidential
means of raising concerns with Erlanger’s Medical Executive Committee. (Id. at 21–22.) The
day after Plaintiffs submitted their e-safe report, CEO Jackson spoke to the Erlanger Board and
argued that Plaintiffs represented a “threat to the enterprise.” (Id. (alteration omitted)) Shortly
after this meeting, on March 29, 2021, Erlanger terminated Dr. Julie Adams and Dr. Steinmann
without cause, which put them in danger of losing their academic positions at UTCOM since
“maintaining membership with Erlanger” was a condition of their employment. (Id. at 22, 24.)
Dr. Stephen Adams was threatened with termination and a reduced salary and ultimately
resigned in the face of these threats. (Id.) He also was banned from participating in resident
education. (Id. at 25.) Plaintiffs have searched for other positions at teaching hospitals but have
not been able to find employment due to Erlanger’s continuing campaign of retaliation aimed at
assassinating their characters. (Id. at 24.)
Plaintiffs initially filed this action on April 20, 2021. (Doc. 1.) Plaintiffs then filed an
amended complaint on January 5, 2023. (Docs. 51–54.) Plaintiffs assert ten claims for
5
violations of the Federal False Claims Act (“FCA”) and the Tennessee Medicaid False Claims
Act (“Tennessee FCA”):
1. 31 U.S.C. § 3729(a)(1)(A); (Count I: Presentment of False Claims)
2. 31 U.S.C. § 3729(a)(1)(B); (Count II: False Records)
3. 31 U.S.C. § 3729(a)(1)(C); (Count III: Conspiracy)
4. 31 U.S.C. § 3729(a)(1)(G); (Count IV: Reverse False Claims)
5. 31 U.S.C. § 3730(h); (Count V: Retaliation)
6. Tenn. Code. Ann. § 71-5-182(a)(1)(A); (Count VI: Presentment of False Claims)
7. Tenn. Code. Ann. § 71-5-182(a)(1)(B); (Count VII: False Records)
8. Tenn. Code. Ann. § 71-5-182(a)(1)(C); (Count VIII: Conspiracy)
9. Tenn. Code. Ann. § 71-5-182(a)(1)(D); (Count IX: Reverse False Claims)
10. Tenn. Code. Ann. § 71-5-183(g); (Count X: Retaliation)
(Doc. 54, 26–31.) Plaintiffs also assert four tort claims under Tennessee law:
1.
2.
3.
4.
Breach of Contract
Tortious Interference with Business Relationships
Inducement to Breach of Contract
Intentional Interference with Prospective Business Relationships
(Id. at 31–34.) Specialist Defendants filed motions to dismiss on June 8, 2023, (Docs. 104, 107,
111), and these motions are now ripe for consideration.
II.
STANDARD OF REVIEW
A.
Federal Rule of Civil Procedure 8(a)(2)
Rule 8 of the Federal Rules of Civil Procedure requires a complaint to contain “a short
and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P.
8(a)(2). Though the statement need not contain detailed factual allegations, it must contain
“factual content that allows the court to draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “[Rule 8] demands
more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Id.
A defendant may obtain dismissal of a claim that fails to satisfy Rule 8 by filing a motion
pursuant to Rule 12(b)(6). On a Rule 12(b)(6) motion, the Court considers not whether the
6
plaintiff will ultimately prevail, but whether the facts permit the court to infer “more than the
mere possibility of misconduct.” Id. at 679. For purposes of this determination, the Court
construes the complaint in the light most favorable to the plaintiff and assumes the truth of all
well-pleaded factual allegations in the complaint. Thurman v. Pfizer, Inc., 484 F.3d 855, 859
(6th Cir. 2007). This assumption of truth, however, does not extend to legal conclusions, Iqbal,
556 U.S. at 679, nor is the Court “bound to accept as true a legal conclusion couched as a factual
allegation,” Papasan v. Allain, 478 U.S. 265, 286 (1986).
After sorting the factual allegations from the legal conclusions, the Court next considers
whether the factual allegations, if true, would support a claim entitling the plaintiff to relief.
Thurman, 484 F.3d at 859. The factual allegations must “state a claim to relief that is plausible
on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Plausibility “is not akin to a
‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted
unlawfully.” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 556). “[W]here the wellpleaded facts do not permit the court to infer more than the mere possibility of misconduct, the
complaint has alleged—but it has not ‘show[n]’—‘that the pleader is entitled to relief.’” Id. at
679 (quoting Fed. R. Civ. P. 8(a)(2)).
B.
Federal Rule of Civil Procedure 9(b)
Rule 9(b) applies in cases in which a plaintiff alleges fraud and requires that “a party []
state with particularity the circumstances constituting fraud.” Fed. R. Civ. P. 9(b); Sanderson v.
HCA-The Healthcare Co., 447 F.3d 873, 877 (6th Cir. 2006). “To plead fraud with particularity,
the plaintiff must allege (1) the time, place, and content of the alleged misrepresentation, (2) the
fraudulent scheme, (3) the defendant's fraudulent intent, and (4) the resulting injury.”
Chesbrough v. VPA, P.C., 655 F.3d 461, 467 (6th Cir. 2011) (internal quotations and citation
7
omitted).
While this is a high bar, “so long as a [plaintiff] pleads sufficient detail—in terms of time,
place and content, the nature of a defendant’s fraudulent scheme, and the injury resulting from
the fraud—to allow the defendant to prepare a responsive pleading, the requirements of Rule
9(b) will generally be met.” U.S. ex rel. SNAPP, Inc. v. Ford Motor Co., 532 F.3d 496, 504 (6th
Cir. 2008). Furthermore, “[a]lthough conjecture and speculation are insufficient under Rule 9(b),
[a court] must construe the complaint in the light most favorable to the plaintiff [and] accept all
factual allegations as true.” United States ex rel. Prather v. Brookdale Senior Living Cmtys.,
Inc., 838 F.3d 750, 771 (6th Cir. 2016) (internal quotations and citations omitted); see SNAPP,
532 F.3d at 503 (“[Rule 9(b)] should not be read to defeat the general policy of simplicity and
flexibility in pleadings contemplated by the Federal Rules.”)
III.
ANALYSIS
Plaintiffs’ claims can be divided into four categories: (1) the FCA Payment Claims; (2)
the FCA Conspiracy Claim; (3) the FCA Retaliation Claim; and (4) the Tort Claims. 2
A.
FCA Payment Claims
Under 31 U.S.C. § 3729(a)(1)(A), a person is liable if he “knowingly presents, or causes
to be presented, a false or fraudulent claim for payment” to the Government. A person is also
liable under 31 U.S.C. § 3729(a)(1)(B) if he “knowingly makes, uses, or causes to be made or
2
The Court’s analysis of Plaintiffs’ Federal FCA claims applies equally to their claims under the
Tennessee FCA because the provisions of the Tennessee FCA are coextensive with the Federal
FCA. See United States v. UT Med. Grp., Inc., No. 2:12-cv-02139, 2014 WL 12611244, at *4
n.2 (W.D. Tenn. May 21, 2014) (“The elements of [the Federal FCA and Tennessee FCA] are
virtually identical. . . . Accordingly, the analysis of the sufficiency of the pleading is equally
applicable to both statutory claims.”); see also United States v. Walgreen Co., 591 F. Supp. 3d
297, 304 (E.D. Tenn. 2022) (“Both parties agree that the False Claims Act is co-extensive with
the Tennessee Medicaid False Claims Act, so the Court will begin and end its analysis with the
United States’ claims under the False Claims Act.”).
8
used, a false record or statement material to a false or fraudulent claim.” Claims brought under
Sections 3729 (a)(1)(A) and (a)(1)(B) are often called “direct false claims” because these claims
“cause the United States to remit money directly to claimants.” United States v. Walgreen Co.,
591 F. Supp. 3d 297, 303 (E.D. Tenn. 2022) (citations omitted). Furthermore, “[the FCA]
imposes liability on one who accepts overpayment from the government and fails to refund that
overpayment—a so-called ‘reverse false claim.’” United States ex rel. Ibanez v. Bristol-Myers
Squibb Co., 874 F.3d 905, 916 (6th Cir. 2017); see 31 U.S.C. § 3729(a)(1)(G).
“The FCA . . . is an anti-fraud statute that prohibits the knowing submission of false or
fraudulent claims to the federal government.” U.S. ex rel. Bledsoe v. Cmty. Health Sys., Inc., 501
F.3d 493, 502–03 (6th Cir. 2007) (“Bledsoe II”). Since the FCA is a statute addressing fraud on
the Government, allegations that a defendant submitted false claims are subject to Rule 9(b)’s
heightened pleading requirements. Sanderson, 447 F.3d at 877; see U.S. ex rel. Marlar v. BWXT
Y-12, L.L.C., 525 F.3d 439, 445 (6th Cir. 2008) (“The elements of an FCA action must be
pleaded with the particularity required by Rule 9(b).”). “Pleading an actual false claim with
particularity is an indispensable element of a complaint that alleges an FCA violation in
compliance with Rule 9(b).” Bledsoe II, 501 F.3d at 504; see also U.S. ex rel. Eberhard v.
Physicians Choice Lab’y Servs., LLC, 642 F. App’x 547, 550 (6th Cir. 2016) (“[The Sixth
Circuit] imposes a strict requirement that relators identify actual false claims.”) (citations
omitted). To plead an FCA violation with sufficient specificity, a plaintiff must allege: “(1)
precisely what statements were made in what documents . . . (2) the time and place of each such
statement and the person responsible for making [the statement], (3) the content of [the]
statements and the manner in which they misled the government, and (4) what the defendants
obtained as a consequence of the fraud.” Sanderson, 447 F.3d at 877 (citations omitted).
9
Furthermore, when a plaintiff brings an action under the FCA against multiple
defendants, she must specifically identify a false claim submitted by each of them. See U.S. ex
rel. Bledsoe v. Cmty. Health Sys., Inc., 342 F.3d 634, 643 (6th Cir. 2003) (“[E]ach defendant
named in the complaint is entitled to be apprised of the circumstances surrounding the fraudulent
conduct with which he individually stands charged.”) (citations omitted); see also Sugarlips
Bakery, LLC v. A&G Franchising, LLC, No. 3:20-CV-00830, 2022 WL 210135, at *10 (M.D.
Tenn. Jan. 24, 2022) (“In a fraud case with multiple defendants, Rule 9(b) requires that the
plaintiff plead specific allegations as to each defendant’s alleged involvement.”) (quotations and
citations omitted).
Here, Plaintiffs fall short of Rule 9(b)’s requirement that they plead a specific example of
a false claim submitted by each Specialist Defendant.3 While Plaintiffs identify ten claims
submitted to the Government by Erlanger for payment for non-compliant overlapping surgeries
(Doc. 52, at 9–26), they do not allege Specialist Defendants submitted claims for these
procedures.4 (See id. at 11) (“Erlanger submitted Part A and Part B claims to Medicare for
Patient 7’s surgery”). Plaintiffs allege that there were “8,497 overlapping surgical cases
performed at Erlanger” from 2017 to 2021, which resulted in claims being submitted to the
3
Despite their amended complaint frequently referring to “Defendants,” the substance of the
complaint can only support a finding that their allegations almost exclusively refer to Erlanger
alone. (See generally Docs. 51–54.) In fact, Specialist Defendants are barely ever mentioned
individually. (Id.)
4
Physicians associated with Defendant PSG participated in several surgeries that Plaintiffs
specifically identify. (Doc. 52, at 9–26.) Plaintiffs also note that Defendant ACE was the sole
provider of anesthesiology services at Erlanger when these surgeries occurred. (Doc 51, at 21.)
However, merely identifying a procedure in which a defendant is involved does not satisfy Rule
9(b), because Plaintiffs fail to identify a claim submitted by either PSG or ACE. As the Sixth
Circuit has explained, “liability [attaches], not to the underlying fraudulent activity . . . but to the
claim for payment.” United States ex rel. Owsley v. Fazzi Assocs., Inc., 16 F.4th 192, 196 (6th
Cir. 2021), cert. denied sub nom. United States v. Fazzi Assocs., Inc., 143 (2022).
10
Government (id. at 2) and that “all of these cases represent false claims because none complied
with the backup surgeon requirement.” (Id.) Plaintiffs claim that “Defendant PSG was involved
in 660 of these cases” and that “Defendant USA was involved in 391 of them.” (Id.) However,
out of these hundreds of cases, Plaintiffs do not identify any specific claim that Specialist
Defendants submitted. (Id.) But Rule 9(b) requires just that. Plaintiffs must identify with
specificity at least one fraudulent claim submitted by each Specialist Defendant. See Sanderson,
447 F.3d at 877 (citations omitted) (requiring a plaintiff to identify who made a claim, when it
was made, its contents, and the amount of the claim).5
Because Plaintiffs have not identified any false claims that any Specialist Defendant
submitted, Plaintiffs have failed to satisfy the heightened pleading requirement of Rule 9(b).6
They have therefore, failed to state a claim upon which relief can be granted.
5
Plaintiffs also allege Erlanger presented false claims due to its violations of the Stark Law and
Anti-Kickback Statutes. (Doc 53, at 24.) Because Plaintiffs do not allege in their complaint (or
argue in their briefings) that Specialist Defendants violated the FCA in this manner, Plaintiffs
fail to state a claim against Specialist Defendants on this basis. (See generally Docs. 51–54,
135.)
6
Plaintiffs state in a footnote in their briefings, “[Plaintiffs] can amend to clarify their allegations
as well as add additional allegations regarding PSG, USA, and ACE if necessary.” (Doc. 135, at
45 n.32, 47 n.34.) This action has been pending for over two years, and Plaintiffs have already
amended their complaint once. The Sixth Circuit has held that an informal request for leave to
amend, which is raised only in response to a motion to dismiss and which does not explain how
amendment would cure the complaint, is improper and should be denied. See Forrester v. Am.
Sec. & Prot. Serv. LLC, No. 21-5870, 2022 WL 1514905, at *4 (6th Cir. May 13, 2022) (“[W]e
have held that a district court may deny leave to amend when the plaintiff neither moved
formally to amend nor proffered a proposed amended complaint.”); see also Louisiana Sch.
Emps.’ Ret. Sys. v. Ernst & Young, LLP, 622 F.3d 471, 486 (6th Cir. 2010) (“[A] bare request in
an opposition to a motion to dismiss—without any indication of the particular grounds on which
amendment is sought . . . does not constitute a motion within the contemplation of Rule 15(a).”).
11
B.
FCA Conspiracy Claim
“[The FCA] imposes liability on anyone who ‘conspires to commit a violation’ of the
FCA’s other prohibitions.” Ibanez, 874 F.3d at 916 (quoting 31 U.S.C. § 3729(a)(1)(C)). To
establish an FCA conspiracy, a plaintiff must show two things: (1) an unlawful agreement made
with the purpose of getting a false claim paid; and (2) a false claim that was submitted to the
government in furtherance of the conspiracy. U.S., ex rel., Prather v. Brookdale Senior Living
Cmtys., Inc., No. 3:12-CV-00764, 2015 WL 1509211, at *17 (M.D. Tenn. Mar. 31, 2015);
United States ex rel. Crockett v. Complete Fitness Rehab., Inc., 721 F. App’x 451, 459 (6th Cir.
2018).
i.
Agreement
To plead an FCA conspiracy, a plaintiff must allege facts that plausibly suggest the
defendants made an agreement with the purpose of defrauding the government.7 Ibanez, 874
F.3d at 917. While pleading a statement showing there is such an agreement is one way to do
this, “general civil conspiracy principles apply [to FCA conspiracy claims].” U.S. ex rel.
Durcholz v. FKW Inc., 189 F.3d 542, 545 n.3 (7th Cir. 1999); see United States v. Murphy, 937
F.2d 1032, 1039 (6th Cir. 1991) (applying civil conspiracy principals to an FCA conspiracy
claim). Therefore, it is possible to infer the existence of a tactic or express agreement to defraud
the government from the conduct of defendants. See United States ex rel. Travis v. Gilead Scis.,
Inc., 596 F. Supp. 3d 522, 541 (E.D. Pa. 2022) (“The Court can ‘infer the existence of an
7
The Sixth Circuit has held that allegations regarding a defendant’s purpose or knowledge can
be pled generally, even when the underlying claim is subject to Rule 9(b). See SNAPP, 532 F.3d
at 505 (“[T]he question of whether [Defendant] acted with a particular purpose inquires into
[Defendant’s] state of mind, and an inquiry regarding [Defendant’s] state of mind may only be
pled generally.”); see also Chesbrough, 655 F.3d at 466 (“Malice, intent, knowledge, and other
conditions of a person’s mind may be alleged generally.”).
12
agreement’ between [defendants] to violate the False Claims Act”). Indeed, as courts have
acknowledged, “conspiracies are rarely evidenced by explicit agreements and nearly always must
be proven through inferences that may fairly be drawn from the behavior of the alleged
conspirators.” Gelboim v. Bank of Am. Corp., 823 F.3d 759, 781 (2d Cir. 2016) (quotations and
citations omitted); see Jacobs v. Alam, 915 F.3d 1028, 1043 (6th Cir. 2019) (“[I]t is enough to
produce circumstantial evidence sufficient to reasonably infer the existence of a conspiracy.”).
Three facts plausibly suggest that Defendants Erlanger, ACE, and USA had a tacit or
express agreement to perform non-compliant overlapping surgeries for the purpose of submitting
false claims: (1) the extensive business relationship between Defendants; (2) Defendants’ shared
motive in performing non-compliant surgeries; and (3) Defendants’ actions after being put on
notice that their practices violated the FCA. See Bevill v. Fletcher, 26 F.4th 270, 283–84 (5th
Cir. 2022) (holding that a plaintiff had adequately pled a conspiracy when he alleged facts
indicating a close working relationship between the defendants, a common motive, and a
meeting between defendants in which a defendant urged the plaintiff’s firing).
First, Plaintiffs allege that Defendants worked together on hundreds of non-compliant
overlapping surgeries over the course of at least four years. (Doc. 52, at 2.) Plaintiffs allege that
there were “8,497 overlapping surgical-cases performed at Erlanger” from 2017 to 2021 which
resulted in false claims being submitted to the Government. (Id.) Plaintiffs claim that
“Defendant USA was involved in 391 of [these cases].” (Id.) Plaintiffs allege that ACE was the
sole provider of anesthesiology services for surgeries performed at Erlanger, so it is reasonable
to infer that ACE participated in the vast majority of these procedures.8 (Doc. 51, at 21–22.)
8
By alleging these facts, Plaintiffs have adequately demonstrated “when, where or how the
alleged conspiracy occurred.” U.S. ex rel. Dennis v. Health Mgmt. Assocs., Inc., No. 3:09-CV00484, 2013 WL 146048, at *17 (M.D. Tenn. Jan. 14, 2013) (citations omitted).
13
Plaintiffs also allege that “Defendant PSG was involved in 660 [non-compliant overlapping
surgeries]” (Doc. 52, at 2.) This long history of business dealings suggests a relatively high level
of knowledge, communication, and coordination between Defendants. See Halberstam v. Welch,
705 F.2d 472, 487 (D.C. Cir. 1983) (“The long-running nature of the scheme is also crucial to the
inference of agreement”). Defendants ostensibly had some ability to influence a policy of noncompliant overlapping surgeries because ACE physician Dr. Christopher Young and USA
surgeon Dr. Phillip Burns sat on the Erlanger Board.9 (Doc. 51, at 22–23); see Gelboim, 823
F.3d at 781 (noting that courts may weigh “a high level of interfirm communication” in
considering whether an agreement was made). PSG did not have an employee sitting on the
Erlanger Board. (See generally Docs. 51–54.)
Second, Defendants shared a financial motive to perform non-compliant overlapping
surgeries. By doing so, Defendants were able to bill Medicare for a greater number of services
and therefore generate more revenue. (See Doc. 52, at 3 (“[Non-compliant overlapping
surgeries] were scheduled at or about the same time so that the teaching physician could
maximize the number of cases performed by him and his residents.”).) Erlanger could submit
more claims to Medicare for teaching physician services than it otherwise would be able to. (Id.)
9
Plaintiffs assert that Doctors Young and Burns were acting as representatives of ACE and USA
respectively. (See Doc. 54, at 27 (“Defendants entered into a conspiracy or conspiracies through
their member physicians, officers, and employees”)). ACE and USA deny this. (See Docs. 140–
141.) However, because the alleged conspiracy would benefit ACE and USA, it is reasonable to
infer that Doctors Young and Burns were acting consistently with the interests of those entities.
While it may be proven in time that Doctors Young and Burns were acting without the
knowledge or authorization of ACE and USA “it is not [the Court’s] task at the motion-todismiss stage to determine whether a lawful alternative explanation appears more likely from the
facts of the complaint.” SD3, LLC v. Black & Decker (U.S.) Inc., 801 F.3d 412, 425 (4th Cir.
2015); see Rudd v. City of Norton Shores, Mich., 977 F.3d 503, 517 (6th Cir. 2020) (“A
plaintiff’s specific allegations of a conspiracy will suffice as long as they are plausible . . . even
if a defendant’s briefing identifies a more likely alternative explanation for what occurred.”)
(internal quotations and citations omitted).
14
ACE could submit claims for longer periods of anesthesia because scheduling non-compliant
overlapping surgeries results in patients being under anesthesia for extended periods while they
wait for the teaching physician to finish the other overlapping surgeries. (Doc. 51, at 11.) While
Plaintiffs do not explicitly state as much, reading the amended complaint as a whole, it appears
Plaintiffs intend to allege that at least some USA surgeons are teaching physicians. Therefore,
USA would stand to benefit from non-compliant overlapping surgeries because it could submit
more claims via its teaching physician members.10 PSG would presumably benefit as well as
Plaintiffs allege that PSG submits claims to Medicare for “some of the bills for [PSG
physicians’] professional services.” (Doc. 51, at 21.)
Third, Plaintiffs allege that Defendants knew that submitting claims for non-compliant
surgeries violated the FCA but continued to do so. Plaintiffs do not suggest that they ever
notified any employee of PSG that they may be submitting false claims by participating in noncompliant overlapping surgeries. (See generally Docs. 51–54.) Plaintiffs state that they raised
their concerns directly with Erlanger’s leadership, as well as Doctors Young and Burns, and
therefore Erlanger, USA, and ACE had notice.11 (Doc. 52, at 2); (Doc. 54, at 14–15.) Despite
being put on notice, Defendants continued to submit false claims and eventually the Erlanger
Board, which Doctors Young and Burns sat on, terminated Plaintiffs when it became clear that
they represented a “threat to the enterprise.” (Doc. 54, at 22–23.)
10
Plaintiffs have explicitly stated only that USA physicians have admitting and surgical
privileges at Erlanger. (Doc. 51, at 21.) It is not entirely clear which services USA physicians
generally provide, but the Court interprets the operative complaint as asserting that the USA
physicians are teaching physicians at Erlanger. If USA physicians are not in fact teaching
physicians, or if USA does not submit claims for services provided by teaching physicians,
Defendant USA may seek relief from this order pursuant to Federal Rule of Civil Procedure 60.
11
Plaintiffs also argue that Defendants knew they were submitting false claims because Plaintiffs
“expressly detailed the fraud, including the violation of CMS billing rules in an e-safe report that
was reviewed by Erlanger’s Board of Trustees.” (Doc. 135, at 47–48.)
15
Drawing all reasonable inferences in favor of Plaintiffs, it is plausible that Erlanger,
ACE, and USA had a tacit or explicit agreement to submit false claims. However, Plaintiffs
have not alleged facts which allow the Court to infer that PSG was a part of this agreement.
ii.
Specific False Claim
In addition to alleging an agreement, a plaintiff must also identify a specific false claim
submitted to the government as a part of the alleged conspiracy. See Crockett, 721 F. App’x at
459 (“An FCA conspiracy requires a “request or demand” intended to be paid by the
government.”) (quoting Allison Engine Co. v. U.S. ex rel. Sanders, 553 U.S. 662, 670 (2008)).
This is an indispensable element of an FCA conspiracy claim. See, e.g., United States v. WalMart Stores E., LP, No. CV 13-10568, 2019 WL 3936393, at *4 (E.D. Mich. Aug. 20, 2019),
aff’d, 858 F. App’x 876 (6th Cir. 2021) (“Relator’s conspiracy claim fails simply because . . .
Relator failed to sufficiently allege any underlying violations of the FCA that would support it.”).
Here, Plaintiffs have “identified a particular claim improperly made on the government
by virtue of the alleged conspiracy.” Crockett, 721 F. at 459. As discussed above, see supraSection III.A., Plaintiffs specifically identify ten claims that Erlanger submitted for noncompliant
overlapping surgeries. (Doc. 52, at 9–26). For reasons discussed in the Court’s opinion
addressing Defendant Erlanger’s motion to dismiss (Doc. 175, at 9–16), these claims satisfy the
requirements of Rule 9(b).
Because Plaintiffs have plausibly alleged that Defendants Erlanger, ACE, and USA
entered into an agreement with the purpose of violating the FCA and identified a claim submitted
in furtherance of the conspiracy, they have stated a claim upon which relief can be granted.
Plaintiffs have not plausibly alleged that PSG was involved in such an agreement and therefore
fail to state a claim against PSG upon which relief can be granted.
16
C.
FCA Retaliation Claim
An “employee, contractor, or agent” is protected from being “discriminated against in the
terms and conditions of employment because of lawful acts done . . . to stop 1 or more violations
of [the FCA].” 31 U.S.C. § 3730(h)(1). “In order to establish a claim for retaliatory discharge, a
plaintiff must show: (1) he engaged in a protected activity; (2) his employer knew that he
engaged in the protected activity; and (3) his employer discharged or otherwise discriminated
against the employee as a result of the protected activity.” Yuhasz v. Brush Wellman, Inc., 341
F.3d 559, 566 (6th Cir. 2003).
“Unlike an FCA violation claim, an FCA retaliation claim does not require a showing of
fraud and therefore need not meet the heightened pleading requirements of Rule 9(b).” Crockett,
721 F. App’x at 460 (quoting Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1103 (9th
Cir. 2008)). Furthermore, “proving a violation of [the FCA] is not an element of a § 3730(h)
retaliation claim.” Jones-McNamara v. Holzer Health Sys., 630 F. App’x 394, 399 (6th Cir.
2015) (citations omitted). As a result, even if a plaintiff’s other FCA claims are dismissed for
failing to satisfy the pleading standard of Rule 9(b), she can still potentially proceed on her FCA
retaliation claims. Crockett, 721 F. App’x at 460 (“Although [Plaintiff’s] three FCA claims
about [Defendant’s] billing were subject to dismissal, she is entitled to proceed on her FCA
retaliation claim”).
Plaintiffs fail to plausibly allege that Specialist Defendants took any retaliatory actions
against them.12 Plaintiffs allege that “Defendants” retaliated against Plaintiffs by “refusing to
provide or cutting necessary support and resources,” “attempt[ing] to abrogate [Plaintiffs’]
12
In their briefing in opposition to Defendants’ motions to dismiss, Plaintiffs do not argue that
Specialist Defendants retaliated against them. (See generally Doc. 135.)
17
contractual agreements,” and wrongfully terminating them. (Doc. 54, at 13–14.) However,
Plaintiffs do not allege any facts suggesting that any Defendant other than Erlanger took these
actions. (See, e.g., id. at 15) (“Ultimately, Erlanger’s campaign [of retaliation] has resulted in the
termination of [Plaintiffs] . . . .”). Nor does it seem possible that Specialist Defendants could
have “discriminated against [Plaintiffs] in the terms and conditions of employment” since
Plaintiffs do not allege that they were in a contractual relationship with Specialist Defendants.
31 U.S.C.A. § 3730(h)(1). See Munson Hardisty, LLC v. Legacy Pointe Apartments, LLC, 359
F. Supp. 3d 546, 558 (E.D. Tenn. 2019) (“[R]elief is available to [plaintiffs] who retain an
employment, contractual, or agency relationship [with a defendant].”).
Because Plaintiffs have not plausibly alleged that Specialist Defendants have engaged in
any retaliatory behavior, they have failed to state a claim upon which relief can be granted.
D.
Tort Claims
A bare “the-defendant-unlawfully-harmed-me accusation,” is not sufficient to satisfy the
pleading standard of Rule 8.13 Iqbal, 556 U.S. at 678 (2009). A complaint must allege “factual
content that allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Id.
Here, Plaintiffs broadly allege that “Defendants” engaged in a variety of tortious
behavior. (Doc. 54, at 31–34.) However, Plaintiffs’ factual allegations only support their claims
against Erlanger, not any Specialist Defendant:14
1. Breach of Contract: Plaintiffs allege that “Defendant Erlanger breached its contractual
obligations” with them by wrongfully terminating them. (Doc. 54, at 31–32) (emphasis
added). Plaintiffs do not allege they were in a contractual relationship with any
13
Because none of the tort claims Plaintiffs alleged requires a showing of fraud, Plaintiffs “need
not meet the heightened pleading requirements of Rule 9(b).” Crockett, 721 F. App’x at 460.
14
In their briefing in opposition to Defendants’ motions to dismiss, Plaintiffs do not argue that
Specialist Defendants committed any tortious acts. (See generally Doc. 135.)
18
Defendant except Erlanger, so there is no basis for the Court to infer that any other
Defendant could have breached a contract with Plaintiffs. (See generally Docs. 51–54.)
2. Tortious Interference with Business Relationships: Plaintiffs’ theory for tortious
interference with business relationships is that “in terminating [Plaintiffs’] employment,
Erlanger was well aware it was wrongfully interfering with [their] academic
appointments . . . from UTCOM.” (Doc. 54, at 23–24.) Plaintiffs also allege that
Erlanger staff “met with UTCOM’s Dean [Bruce] Shack and again requested the
[Plaintiffs] be removed.” (Id. at 19.) Plaintiffs make no allegations which would allow
the Court to infer that any Defendant except Erlanger interfered with their relationship
with UTCOM.
3. Inducement to Breach of Contract: Plaintiffs allege that “Erlanger’s wrongful
termination of [Plaintiffs’] contract was a foreseeable and proximate cause of the ultimate
termination of UTCOM’s contracts with [Plaintiffs].” (Id. at 33.) Plaintiffs also allege
that Erlanger Orthopedic Medical Director Mark Freeman met with UTCOM’s Dean
Shack to request their removal. (Id. at 19.) Plaintiffs do not allege that Specialist
Defendants contacted UTCOM or otherwise induced UTCOM to terminate Plaintiffs’
contracts. (Id.)
4. Intentional Interference with Prospective Business Relationships: Plaintiffs allege
that they have been turned down for numerous employment opportunities under
suspicious circumstances. (Id. at 24.) Plaintiffs state that this is because “Erlanger, and
specifically its employed surgeons and administrators, have purposefully continued their
retaliation by spreading malicious falsehoods about [Plaintiffs].” (Id.) Plaintiffs do not
allege that any other Defendants are involved in this campaign of retaliation and there are
no facts which suggest that they are. (Id.)
Because Plaintiffs have not plausibly alleged that Specialist Defendants have engaged in tortious
behavior, they have failed to state a claim upon which relief can be granted.
IV.
CONCLUSION
For the reasons above, Defendant ACE and USA’s motions will be GRANTED IN
PART and DENIED IN PART (Docs. 104, 107). Defendant PSG’s motion will be GRANTED
(Doc. 111.) Because no claims remain against it, Defendant PSG is DISMISSED from this
action.
SO ORDERED.
/s/ Travis R. McDonough
TRAVIS R. MCDONOUGH
19
UNITED STATES DISTRICT JUDGE
20
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