SEALED v. SEALED

Filing 81

MEMORANDUM OPINION AND ORDER re 37 MOTION to Dismiss RELATORS' FIRST AMENDED COMPLAINT filed by Ameriteam Services, L.L.C., Team Health, Inc., Team Health Holdings, Inc., Team Finance, L.L.C.. Signed by District Judge Rodney Gilstrap on 8/20/2019. (nkl, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
MARSHALL DIVISION
UNITED STATES OF AMERICA,
CALEB HERNANDEZ & JASON
WHALEY, RELATORS; ET AL.;

§
§
§
§
§
§
§
§
§
§
§
§
§
§

Plaintiffs,
v.
TEAM FINANCE, L.L.C., TEAM
HEALTH, INC., TEAM HEALTH
HOLDINGS, INC., AMERITEAM
SERVICES, L.L.C.,
Defendants.

CIVIL ACTION NO. 2:16-CV-00432-JRG

MEMORANDUM OPINION AND ORDER
Before the Court is Defendants Team Health Holdings, Inc., Team Finance, LLC, Team
Health, Inc., and AmeriTeam Services, LLC’s (collectively, “Defendants” or “TeamHealth”)
Motion to Dismiss the Relators’ First Amended Complaint (the “Motion”). (Dkt. No. 37.) Having
considered the Motion, briefing, and relevant authorities, the Court hereby GRANTS the Motion
to the extend and for the reasons discussed herein.
I.

BACKGROUND
A. Procedural History
On April 25, 2016, Relators Caleb S. Hernandez and Jason W. Whaley (collectively,

“Relators”) filed suit against Defendants Team Health Holdings, Inc. (“THHI”), Team Finance,
LLC (“TF”), and Team Health, Inc. (“THI”) under the qui tam provisions of the Federal False
Claims Act, 31 US.C. §§ 3729 et seq. (“FCA”), and analogous state statutes. (Dkt. No. 1

1

(complaint).) 1 On June 28, 2018, the United States of America and the Plaintiff state governments
declined to intervene. (Dkt. No. 20.) Relators subsequently amended the Complaint on November
12, 2018 to add AmeriTeam Services, LLC (“AmeriTeam”) as a defendant. (Dkt. No. 33 (First
Amended Complaint).) Defendants now move to dismiss the First Amended Complaint (“FAC”)
under Federal Rules of Civil Procedure 12(b)(1), 12(b)(6) and 9(b). (Dkt. No. 37.)
B. The Parties and the Alleged Fraud
TeamHealth is a healthcare practice management company that “provides staffing,
operations, and billing services to emergency departments as an outside contractor.” (Dkt. No. 33
¶ 1.) According to Relators, TeamHealth “is one of the largest suppliers of outsourced physician
staffing and administrative services to hospitals in the United States,” “operates in at least fortyseven states, and employs at least 13,000 healthcare professionals.” (Id. ¶ 12.)
Relators are healthcare providers that formally worked for TeamHealth as independent
contractors. (Id. ¶¶ 10–11.) Relator Hernandez is a physician and has worked “at the following
hospital emergency departments managed and/or operated by TeamHealth: the North Colorado
Medical Center in Greely, Colorado (from 2011 to 2015); Sterling Regional Medical Center in
Sterling, Colorado (from 2014 to 2015); and Juan Luis Phillipe Hospital in St. Croix, United States
Virgin Islands (in 2010).” (Id. ¶ 10.) Relator Whaley is a physician assistant and worked “at the
emergency department at North Colorado Medical Center, located in Greely, Colorado (from 2011
to 2013), which was and is operated and/or managed by TeamHealth.” (Id. ¶ 11.)

1

Relators also sued Defendants on behalf of the following state governments: Connecticut,
Florida, Georgia, Indiana, Louisiana, Massachusetts, Tennessee, and Texas. (Dkt. Nos. 1, 33.)
2

Relators allege that TeamHealth has engaged in two schemes to defraud Medicare and
several state Medicaid programs. The introductory paragraphs from the Relators’ FAC succinctly
summarize each alleged scheme:
2. The first Scheme is the “Mid-Level Scheme.” Under the Mid-Level Scheme,
TeamHealth overbills for services provided by “mid-level” practitioners. The term
“mid-level” refers to non-physician healthcare providers, such as Physician
Assistants (“PAs”) and Nurse Practitioners (“NPs”). Under [the Medicare and/or
Medicaid (collectively, “CMS”)] rules, a mid-level’s services are reimbursed at
85% of the standard physician rate, while services rendered by a physician are
reimbursed at 100% of the standard physician rate. These rates and percentages are
set by CMS, and the Plaintiff States have largely, if not entirely, adopted these same
rates and percentages for reimbursement.
3. The appropriate rate payable for services rendered to a CMS beneficiary is
automatically triggered by the National Provider Identifier (“NPI”) submitted with
the claim for reimbursement. Services rendered by a mid-level should be submitted
under the mid-level’s NPI, triggering the 85% rate. Services rendered by a
physician should be submitted under the physician’s NPI, triggering the 100% rate.
However, as outlined in ¶¶ 2-6, herein, and stated with more particularity in §§ VIV, infra (principally § V.B), TeamHealth—through its billing policies,
procedures, and protocols (which include training and guidelines), and through its
coordinated operation and influence over its subsidiaries and affiliated
professional entities—systematically submits claims for mid-level services under
various physicians’ NPIs (as assigning charts to a physician by a midlevel is usually
based on shift assignments and how shifts overlap), triggering the 100% rate when
in fact the 85% rate applied. TeamHealth does this intentionally and has done so
for years.
4. Through its billing policies and practices, TeamHealth attempts to cover up the
Mid-Level Scheme by characterizing mid-level services as “split/shared.” Under
CMS rules, “split/shared” services occur when both a mid-level and a physician
treat the same patient during the same visit, such that the services are split or shared
between a mid-level and a physician. When this happens, the mid-level’s services
may be billed under the physicians’ NPI at 100% of the physician rate. However,
true split/shared visits are exceedingly rare at TeamHealth facilities—they almost
never occur. This is because TeamHealth requires mid-levels to treat patients alone,
maximizing midlevels’ efficiency and profitability. To cover this up, TeamHealth
requires its healthcare providers to falsify medical records to reflect a split/shared
visit when none actually occurred.
5. TeamHealth accomplishes this cover-up in two ways. First, TeamHealth requires
its mid-levels to indicate on medical records that a physician was involved in each
patient encounter, when in fact a physician never saw the patient. Second,
3

TeamHealth requires on-duty physicians to sign mid-level medical records, again
suggesting that the physician treated the patient. The result is a medical record that
appears to indicate that a split/shared visit occurred. TeamHealth then sends these
falsified medical records to a coding and billing employee who “relies” on the
falsified record to submit claims for reimbursement under the physician’s NPI.
This results in the mid-level’s services being reimbursed at 100% of the physician
rate.
6. TeamHealth employs this Scheme through its billing policies and practices to
bill federal and state governments for millions of dollars for the services concerned.
Through the Scheme, TeamHealth has fraudulently obtained tens of millions of
dollars every year since it began employing the Mid-Level Scheme nationwide in
or around 2002 (the year the 85% regulation was established).
7. The second Scheme is the “Critical Care Scheme.” This Scheme is a classic
upcoding scheme. Under the Critical Care Scheme, TeamHealth bills CMS for
“critical care”—the highest level of emergency treatment—when in fact critical
care services were not rendered and/or were not medically necessary, thereby
submitting false claims through fraudulent billing. Because of the heightened skill
and decision-making critical care requires, CMS reimburses providers for critical
care services at a significantly higher rate than ordinary emergency services. To
capitalize on this upcharge, TeamHealth requires its providers to (1) meet stated
critical care quotas each month; (2) falsify critical care on patient medical records
when the care they provided did not meet CMS critical care requirements; and/or
(3) perform and chart critical care services when those services were not medically
necessary. Again “relying” on falsified medical records, TeamHealth coding and
billing employees submit claims for reimbursement for the critical care services
reflected in the patient chart.
8. TeamHealth employs this Scheme through its billing policies and practices to
bill federal and state governments for millions of dollars for the services concerned.
Through the Scheme, TeamHealth has fraudulently obtained multiple millions of
dollars through the Critical Care Scheme each year since at least 2008 (when the
critical care regulations were last updated).
9. Both of TeamHealth’s Schemes clearly violate CMS’s and the Plaintiff States’
billing regulations and guidelines. TeamHealth perpetrates both Schemes on a
nationwide basis. Additionally, both Schemes defraud CMS and the Plaintiff States
of tens of millions of dollars each year, with the exact amount being known only to
private accounting of the TeamHealth defendants. In this action, Relators seek
damages, civil penalties, and other remedies under the FCA and analogous laws of
the Plaintiff States arising from TeamHealth’s two fraudulent Schemes.
(Id. ¶¶ 2–9 (emphasis in original).)

4

II.

LEGAL STANDARDS
A. The False Claims Act
The FCA prohibits any person from defrauding the federal government. 31 U.S.C. §§ 3729

et seq. To aid in its enforcement, private persons may, in certain circumstances, sue for violations
of the FCA on behalf of the United States. Id. at § 3730(b); see also U.S. ex rel. Branch
Consultants v. Allstate Ins. Co., 560 F.3d 371, 376 (5th Cir. 2009). These lawsuits are known as
“qui tam” actions, and the person bringing the suit is referred to as the “relator.” Id. See also U.S.
ex rel. Laird v. Lockheed Martin Eng’g & Sci. Servs. Co., 336 F.3d 346, 351 (5th Cir. 2003).
Relators Hernandez and Whaley bring this qui tam action under two FCA provisions: 31
U.S.C. § 3792(a)(1)(A) and 31 U.S.C. § 3792(a)(1)(B). Section 3792 (a)(1)(A) imposes liability
on “any person who knowingly presents, or causes to be presented, a false or fraudulent claim for
payment or approval.” 31 U.S.C. § 3792 (a)(1)(A). Section 3792 (a)(1)(B) imposes liability on
“any person who 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. § 3792 (a)(1)(B). Under either provision, the
elements of a FCA violation are: “(1) . . . a false statement or fraudulent course of conduct; (2)
[that] was made or carried out with the requisite scienter; (3) that was material; and (4) that caused
the government to pay out or to forfeit money due (i.e., that involve a claim).”

Gonzalez v.

Fresenius Med. Care N. Am., 689 F.3d 470, 475 (5th Cir. 2012).
B. Pleading Standards
A court may dismiss a complaint for “failure to state a claim upon which relief can be
granted.” FED. R. CIV. P. 12(b)(6). “To survive dismissal, a plaintiff must plead ‘enough facts to
state a claim to relief that is plausible on its face.’” Thompson v. City of Waco, Texas, 764 F.3d
500, 503 (5th Cir. 2014) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). This

5

means the “factual allegations must be enough to raise a right to relief above the speculative level,”
Jabaco, Inc. v. Harrah’s Operating Co., Inc., 587 F.3d 314, 318 (5th Cir. 2009) (quoting Twombly,
550 U.S. at 555), and “allow[] the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged.” Thompson, 764 F.3d at 503 (quoting Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009)). The court must accept all well-pleaded facts as true, view those facts in
the light most favorable to the plaintiff, and draw all reasonable inferences in favor of the plaintiff.
See Thompson, 764 F.3d at 503 (citing Iqbal, 556 U.S. at 678). “[C]onclusory allegations and
unwarranted factual inferences or legal conclusions are not accepted as true.” U.S. ex rel. Foster
v. Bristol-Myers Squibb, Co., 587 F. Supp. 2d 805, 812 (E.D. Tex. 2008) (citing Ferrer v. Chevron
Corp., 484 F.3d 776, 780 (5th Cir. 2007)); see also U.S. ex rel. Doe v. Dow Chem. Co., 343 F.3d
325, 329 (5th Cir. 2003) (“[W]hile allegations may be based upon information and belief, ‘the
complaint must set forth the factual basis for such belief.’”) (quoting U.S. ex rel. Thompson v.
Columbia/HCA Healthcare Corp., 125 F.3d 899, 903 (5th Cir. 1997)).
In resolving a Rule 12(b)(6) motion, the court may only consider (1) the contents of the
complaint, (2) any matters of public record, and (3) matters that are incorporated by reference in
the complaint. See Randall D. Wolcott, M.D., P.A. v. Sebelius, 635 F.3d 757, 763 (5th Cir. 2011).
If the court considers matters outside the pleadings, then “the motion must be treated as one for
summary judgment under Rule 56.” FED. R. CIV. P. 12(d).
A complaint filed under the FCA must also meet the heightened pleading requirements of
Rule 9(b). 2 See U.S. ex rel. Colquitt v. Abbott Lab., 858 F.3d 365, 371 (5th Cir. 2017) (internal

2

In the Fifth Circuit, a motion to dismiss under Rule 9(b) is treated as a dismissal for failure to
state a claim upon which relief can be granted under Rule 12(b)(6). U.S. ex rel. Thompson v.
Columbia/HCA Healthcare Corp., 125 F. 3d 899, 901 (5th Cir. 1997). This means the pleading
must contain “‘simple, concise and direct’ allegations of the ‘circumstances constituting fraud,’
6

citation omitted). Rule 9(b) provides that a party “alleging fraud or mistake . . . must state with
particularity the circumstances constituting fraud or mistake.” FED. R. CIV. P. 9(b). At a minimum,
this requires a plaintiff to “specify the statements contended to be fraudulent, identify the speaker,
state when and where the statements were made, and explain why the statements were fraudulent.”
Williams v. WMX Tech., Inc., 112 F.3d 175, 177 (5th Cir. 1997). This is often referred to as the
“who, what, when, where, and how of the alleged fraud.” Colquitt, 858 F.3d at 371 (citing
Williams, 112 F.3d at 179). These particularity requirements serve four important screening
functions: “[1] [they] ensur[e] the complaint ‘provides defendants with fair notice of the plaintiffs’
claims; [2] [they] protect[] defendants from harm to their reputation and goodwill; [3] [they]
reduce[] the number of strike suits; and [4] [they] prevent[] plaintiffs from filing baseless claims
[and] then attempting to discover unknown wrongs.’” U.S. ex rel. Grubbs v. Kanneganti, 565 F.3d
180, 190 (5th Cir. 2009) (quoting Melder v. Morris, 27 F.3d 1097, 1100 (5th Cir. 1994)).
The Fifth Circuit applies Rule 9(b) “with ‘bite’ and ‘without apology,’” id. at 185, but also
recognizes that the rule is “context-specific.” Id. at 188. “[T]here is no single construction of Rule
9(b) that applies in all contexts,” and the specificity demanded will “depend[] on the elements of
the claim at hand.” Id. In FCA cases, Rule 9(b) should be applied in a way that still “effectuates
[the Rule] without stymieing . . . legitimate efforts to expose fraud.” Grubbs, 565 F.3d at 190.
Therefore, if a relator cannot sufficiently plead the details of an actually submitted false claim, the
complaint “may nevertheless survive [dismissal] by alleging particular details of a scheme to
submit false claims paired with reliable indicia that lead to a strong inference that claims were
actually submitted.” Id. This only means that a relator need not plead the specific contents of an

which after Twombly must make relief plausible, not merely conceivable, when taken as true.”
U.S. ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 186 (5th Cir. 2009).
7

individual false claim to satisfy Rule 9(b). Id. (explaining that “a plaintiff does not necessarily
need the exact dollar amounts, billing numbers, or dates to prove to a preponderance that fraudulent
bills were actually submitted” because “[f]raudulent presentment [under the FCA] requires proof
only of the claim’s falsity, not of its exact contents”). A relator must still plead with particularity
the circumstances constituting the fraud—i.e., the who, what, where, when, and how. Id. See also
U.S. ex rel. Parikh v. Citizens Med. Ctr., 977 F. Supp. 2d 654, 671 (S.D. Tex. 2013) (“Grubbs
makes clear that it is the scheme, rather than individual instances of fraudulent claims, that an FCA
relator must plead with particularity. . . But although the Grubbs court relaxed the standard for
pleading presentment of false claims . . . it did not relax the pleading requirements for alleging the
existence of the more crucial element—the scheme.”).
III.

DISCUSSION
Defendants move to dismiss the FAC under Federal Rules of Civil Procedure 12(b)(6) and

9(b). (Dkt. No. 37.) 3

They assert that Relators only provide “conclusory allegations of

misconduct” and fail to allege any particularized facts that identify the “who, what, where, when,
and how” of each alleged scheme. (Id. at 1–2.) According to Defendants, “Relators do not plead
. . . with any remote specificity the who (to which patients the allegedly upcoded services were
provided, or the individuals who knowingly submitted the false claims), the when (the specific
dates on which the services were provided); the where (the particular locations the upcoded
services were provided), or the how (the mechanics of actually billing a false claim).” (Id. at 12;
see also id. at 15.) Instead, the FAC contains “boilerplate” language that “ask[s] the Court to draw

3

Defendants’ arguments under Rules 12(b)(6) and 9(b) are directed to both Relators’ federal and
state law claims. (Dkt. No. 37 at 26–27.) Since liability under both sets of claims are premised
on the same basic elements and are both held to the same pleading requirements, the Court’s
analysis is limited to only the federal claims. See U.S. ex rel. Colquitt v. Abbott Lab., 858 F.3d
365, 537–38 (5th Cir. 2017).
8

the sweeping inference that TeamHealth systematically” submits false claims to the government
under each scheme. (Id. at 12; see also id. at 15.) Defendants believe these allegations fail to meet
the heightened pleading requirements of Rule 9(b) and should be dismissed in their entirety.
Relators claim that they have plead the “who, what, where, when, and how” of each alleged
scheme. (Dkt. No. 46 at 13–22.) 4 For the “who,” Relators explain that “TeamHealth” is
responsible for the alleged fraud. (Id. at 13, 19.) They contend that specific individuals do not
have to be identified because Defendants perpetuated each scheme through “company-wide
policies” that “were not the product of a single employee.” (Id. at 13.) For the “where,” Relators
argue that each scheme occurred “nationwide” based on: (1) Relators’ experience at TeamHealth
emergency departments in Colorado and the Virgin Islands; and (2) the “national” and
“standardized” nature of TeamHealth’s billing and coding practices. (Id. at 15, 20–21.) As to
“when,” Relators allege that the Mid-Level Scheme began “in or around 2002 (the year the 85%
regulation was established)” and that the Critical Care Scheme began “since at least 2008 (when
the critical care regulations were last updated).” (Id. at 16, 21.) Relators rely on their personal
experience at TeamHealth locations from 2010 to 2015 to support these allegations. (Id. at 16–17,
21.) Finally, Relators claim that they have provided detailed allegations for the “what” and “how”

4

Relators also argue that Defendants apply the incorrect legal standard in their Motion. (Dkt. No.
46 at 10–12.) According to Relators, Defendants apply the minority rule, which requires “specific
allegations of at least one false claim actually submitted for reimbursement.” (Id. at 11.) Relators
explain that the Fifth Circuit has rejected this approach, and that Rule 9(b) may be satisfied without
alleging the details of any specific claims actually submitted. (Id. at 10 (citing Grubbs, 565 F.3d
at 190).) Having reviewed the parties’ briefing, the Court finds that Defendants applied the correct
legal standard. While Defendants do state in their Motion that Relators allegedly failed to plead
with particularity the facts of any specific false claims submitted, the substance of their arguments
falls in line with Fifth Circuit precedent: a complaint alleging violations of the FCA must plead
with particularity the “who, what, where, when, and how” of the alleged fraud and contain factual
allegations to support a strong inference that false claims were submitted to the government. (See
Dkt. No. 37 at 11–17; Dkt. No. 51 at 2.)
9

of each alleged scheme. For the Mid-Level Scheme, Relators point to allegations “describing the
operations of [the] CMS system in detail ([Dkt. No. 33] ¶¶ 22–31, 44–54); the TeamHealth billing
policies and practices used to effectuate [the] Scheme ([id.] ¶¶ 36–43, 55–56); the ways in which
TeamHealth aimed those billing policies at the federally-reimbursed healthcare system ([id.] ¶¶
57–74); the different roles and functions that medical providers serve in completing charts and
placing them into the TeamHealth revenue stream ([id.] ¶¶ 57–74); and confirmatory accounts of
three confidential witnesses ([id.] ¶¶ 63–74).” (Dkt. No. 46 at 19.) Similarly, for the Critical Care
Scheme, Relators allege that TeamHealth: (1) imposes “unrealistic critical care quotas;” (2)
“threatens to pay-dock, suspend, or terminate those providers who fail to meet such quotas;” (3)
“requires” its clinicians “to provide [critical care] documentation for encounters in which critical
care treatment was not necessary” in order “to capitalize” on critical care billing; and (4) redefines
what constitutes critical care to capture services that are not medically necessary. (Id. at 21.)
Taken together, Relators believe these allegations are sufficient under Rules 12(b)(6) and 9(b).
Having considered the parties’ arguments and after a careful review of the FAC, the Court
finds that Relators have not satisfied the strict and heightened pleading requirements of Rule
9(b). 5,6

5

Defendants also move to dismiss under the Public Disclosure Bar and the statute of limitations.
(Dkt. No. 37 at 17–26.) Since the FAC fails to satisfy the pleading requirements of Rule 9(b), the
Court does not reach these alternative grounds for dismissal.
6
Both parties incorporate matters outside the pleadings in their respective briefing. (Dkt. No. 461 (Declaration of Relator Hernandez); Dkt. No. 46-2 (Declaration of Relator Whaley); Dkt. No.
51 at 7–8 (discussion of Colorado state law regulations concerning physician-assistant performed
services).) “It is well known that when ‘matters outside the pleading’ are presented with a motion
to dismiss under 12(b)(6), a district court has complete discretion to either accept or exclude the
evidence.” Gen. Retail Servs., Inc. v. Wireless Toyz Franchise, LLC, 255 F. Appx. 775, 783 (5th
Cir. 2007) (internal citation omitted); see also FED. R. CIV. P. 12(d). The Court, in exercising its
discretion, declines to consider those outside materials and resolves the present Motion solely on
the pleadings. (See also Dkt. No. 51 at 2 n.2 (“[B]oth parties agree the Motion should not be
converted into a motion for summary judgment.”).)
10

First, Relators do not adequately identify the “who” of each scheme. Rule 9(b) requires
that “the identity of the person making the misrepresentation must be stated in the complaint.”
Gregory v. Hous. Indep. Sch. Dist., No. H-14-2768, 2016 WL 56610701, at *5 (S.D. Tex. Sept.
30, 2016) (quoting U.S. ex rel. Doe v. Dow Chem. Co., 343 F.3d 325, 329 (5th Cir. 2003)). This
standard is met where a general scheme is alleged “so long as specific or representative examples
of entities involved in the scheme are also offered.” Id. (citation omitted). No such representative
sample is alleged here. Instead, Relators allege “TeamHealth” without identifying any specific
TeamHealth-affiliated hospital, practice group, agent, or clinician. Relators base their FAC on
experiences at TeamHealth hospitals in Colorado and the Virgin Islands, but do not tie any specific
experiences at those facilities relating to either scheme. (Dkt. No. 33 ¶¶ 10–11.) See Gregory,
2016 WL 56610701, at *5 (finding complaint against corporate entities deficient because “Relators
fail[ed] to provide even a representative example of an individual involved in the fraudulent
scheme as part of a specific or representative example”); U.S. ex rel. Bennett v. Boston Scientific
Corp., No. H-07-2467, 2011 WL 1231577, at *30 (S.D. Tex. Mar. 31, 2011) (“The relator has not
identified any hospital or physician who did in fact ‘upcode’ improperly in a Medicare
reimbursement submission. . . . [A]lthough the Fifth Circuit qualified the ‘time, place, and
contents’ requirements in Grubbs, the relator’s complaint in this case is still deficient.”) (internal
citation omitted).
Relators also fail to plead with particularity “when” each scheme occurred. To satisfy Rule
9(b), “allegations must be more specific than a course of years.” Gregory, 2016 WL 56610701, at
*5; see also U.S. ex rel. Wismer v. Branch Banking and Trust Co., No. 3:12-cv-1894, 2013 WL
5989312, at *5 (N.D. Tex. Nov. 12, 2013) (“[The Complaint] also fails to adequately allege when
the false representations were made, vaguely asserting that false claims were submitted in ‘2010,’

11

‘December 2010,’ and ‘numerous occasion subsequent’ to these dates.”). While it is not necessary
to provide the date of each and every fraudulent occurrence over a multi-year period, a relator must
at least allege “a ‘representative sample’ or even an ‘instance of submission.’” Bennett, 2011 WL
1231577, at * 17 (quoting U.S. ex rel. Bledsoe v. Cmty. Health Sys., Inc., 501 F.3d 493, 509–10
(6th Cir. 2007)). The FAC contains no such allegations. Instead, Relators assert that the MidLevel Scheme began “in or around 2002” and that the Critical Care Scheme began “since at least
2008.” (Dkt. No. 33 ¶¶ 6, 8.) Relators must allege more than a span of years.
The allegations also fail under Rule 12(b)(6). Relators claim that each scheme occurred in
2002 and 2008, respectively, because that is when the at-issue Medicare regulations were
established. (Dkt. No. 33 ¶¶ 6, 8.) However, Relators were employed by Defendants from 2010
to 2015, and offer no facts to support that either scheme occurred before 2010. 7 The Court will
not rely on speculation to reach unwarranted factual inferences or conclusions covering those
interim years. See Wismer, 2013 WL 5989312, at *6 (“Here, Wismer neither contends that these
facts are peculiarly within BB & T’s knowledge nor sets forth the factual basis for his conclusory
belief. Accordingly, these allegations fall short of meeting the Rule 9(b) standard.”); see also
Foster, 587 F. Supp. 2d at 812.
The Court reaches much the same conclusions as to Relator’s allegations of “where” the
fraud occurred. Relators broadly allege that Defendants have violated the FCA “nationwide”
based on their experiences at TeamHealth hospitals in Colorado and the Virgin Islands. (Dkt. No.
46 at 15–26, 20–21.) Like the “who” and “when” of each scheme, Relators provide no facts about
their experiences at those locations to support a plausible claim of nationwide fraud. At most, they

7

For the Mid-level Scheme, Relators offer accounts from three confidential witnesses. (Dkt. No.
33 ¶¶63–74.) However, those witnesses were employed by Defendants from 2011 to 2015,
collectively. As such, the Court reaches the same conclusion.
12

allege that Defendants’ billing and coding practices are the impetus of each scheme and that those
policies are “national” and “standardized.” (Id. at 15.) Relators also rely on accounts from three
confidential witnesses for the Mid-Level Scheme, but those allegations are equally vague and
conclusory. (Dkt. No. 33 ¶¶63–74.) See U.S. ex rel. Bibby v. Wells Fargo Bank, N.A., 165 F.
Supp. 3d 1340, 1347–49 (N.D. Ga. 2015) (upholding nationwide claims of fraud because relators
plead facts regarding their “years of experience in the mortgage industry” and how “[t]hat
experience spans across almost the entire South all the way to Texas”); U.S. ex rel. Spay v. CVS
Caremark Corp., 913 F. Supp. 2d 125, 177 (E.D. Pa. 2012) (upholding nationwide claims of fraud
given “the sheer number of claims identified by Plaintiff in at least three states and Puerto Rico”).
Finally, the FAC does not provide sufficient facts to support the “what” and “how” of the
Critical Care Scheme. Relators allege that Defendants “require” clinicians to code for services as
“critical care” when no such services were rendered. (Dkt. No. 33 ¶ 88.) Relators also allege that
Defendants set critical care quotas, and “redefine[] what constitutes critical care for its healthcare
providers” “to capitalize” on critical care billing. (Id. ¶¶ 86, 88–89.) The FAC defines “requires”
in a footnote to mean “that TeamHealth has made the issue concerned a protocol, business practice,
policy, procedure, matter of training, and/or something that can be, and is, used to threaten
employment if there they do not comply.” (Id. ¶ 4 n.4.) Nowhere do Relators allege why the
services billed as “critical care” are unnecessary or provide an example of such. Nor do Relators
provide any facts about Defendants’ alleged “requirement” that physicians code certain services
as “critical care.” These allegations are conclusory. They fail to contain the necessary detail to
establish the “what” and “who” of the alleged fraud. See Colquitt, 858 F.3d at 373; see also
Gregory, 2016 WL 56610701, at *4 (finding relators’ allegation that defendants provided

13

“medically unnecessary” services conclusory because relators did not “specify[] why the services
are medically unnecessary or even provide an example of a service that was provided”). 8
Even though the FAC fails to meet the pleading standards of Rules 12(b)(6) and 9(b), the
Court believes that Relators should be granted leave to amend before dismissing the case with
prejudice. See U.S. ex rel. Adrian v. Regents of Univ. of California, 363 F.3d 398, 403 (5th Cir.
2004) (“Leave to amend should be freely given, Fed. R. Civ. P. 15(a), and outright refusal to grant
leave to amend without a justification such as ‘undue delay, bad faith, or dilatory motive on the
part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue
prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment,
etc.’ is considered an abuse of discretion.”) (internal citation omitted). In this case, there is no
showing of any basis upon which leave to amend might be refused.
IV.

CONCLUSION
For the reasons described herein, the Court GRANTS Defendants Team Health Holdings,

Inc., Team Finance, LLC, Team Health, Inc., and AmeriTeam Services, LLC’s Motion to Dismiss
the Relators’ First Amended Complaint (Dkt. No. 37). The Relators’ First Amended Complaint
(Dkt. No. 33) is DISMISSED WITHOUT PREJUDICE. It is further ORDERED that Relators
are granted leave to replead their claims by filing a second amended complaint, with such second
amended complaint to be filed within 30 days from the date of the issuance of this Order.

8

To be clear, Relators are not required to offer factual allegations tantamount to proof of an FCA
violation at this stage of the proceedings. However, they must provide some underlying facts to
support a reasonable inference that a violation occurred. See Gregory, 2016 WL 5661701, at *7
(“The first amended complaint does not provide enough factual basis for the court to infer these
poor educational outcomes were caused by HISD’s alleged fraudulent scheme without providing
the factual basis to support that conclusion.”).
14

So ORDERED and SIGNED this 20th day of August, 2019.

____________________________________
RODNEY GILSTRAP
UNITED STATES DISTRICT JUDGE

15