United States of America et al v. St. Mark's Hospital et al

Filing 125

MEMORANDUM OPINION OF THE COURT. Signed by Chief Judge Kevin H. Sharp on 4/13/2016. (DOCKET TEXT SUMMARY ONLY-ATTORNEYS MUST OPEN THE PDF AND READ THE ORDER.)(jw) [Transferred from Tennessee Middle on 4/14/2016.]

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF TENNESSEE
NASHVILLE DIVISION
UNITED STAETS OF AMERICA,
ex rel. GERALD POLUKOFF, M.D.,
Plaintiff/Relator,
v.
ST. MARK’S HOSPITAL,
INTERMOUNTAIN HEALTHCARE, INC.,
INTERMOUNTAIN MEDICAL CENTER,
SHERMAN SORENSEN, M.D., SORENSEN
CARDIOVASCULAR GROUP, and HCA,
INC.,
Defendants.

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No. 3:12-cv-01277
Judge Sharp

MEMORANDUM
Pending before the Court are Defendants’ Motions to Dismiss the Amended Complaint.
(Docket Nos. 100, 102, and 106). For the reasons set forth below, the Court finds that the claims
against Defendant HCA, Inc. warrant dismissal. Without HCA, Inc. as a party, venue in the
Middle District of Tennessee is no longer proper. Accordingly, the Court will dismiss the claims
against HCA, Inc., reserve ruling on all other pending motions, and transfer the case to the
District of Utah.
I.

Factual & Procedural Background
This is an action for fraudulent Medicare/Medicaid billing in violation of the False

Claims Act, 31 U.S.C. § 3729 et seq. (“FCA”).1

Plaintiff and Relator Gerald Polukoff

(“Relator”) brings this action against Defendants St. Mark’s Hospital (“St. Mark’s),
Intermountain Healthcare, Inc. (“IHI”), Intermountain Medical Center (“Intermountain”), Dr.
Sherman Sorensen (“Dr. Sorensen”), Sorensen Cardiovascular Group (“SCG”), and HCA, Inc.
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Unless stated otherwise, the following facts are drawn from the First Amended Complaint. (Docket No. 90).

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(“HCA”). All of the parties except for HCA are located in and residents of Utah. HCA, a large
healthcare company that owns hospitals in a number of states, is incorporated in Delaware with
its principal place of business in Nashville, Tennessee. HCA’s sole connection to the litigation is
that it owns St. Mark’s.
Relator alleges that Dr. Sorensen performed medically unnecessary cardiovascular
procedures on patients and conspired with the other Defendants to improperly bill the United
States Government (“the Government”) for those procedures by submitting false claims for
reimbursement under Medicare and Medicaid.

More specifically, Relator alleges that Dr.

Sorensen performed numerous medically unnecessary Patent Foramen Ovale (“PFO”) closures
on patients at Intermountain and St. Mark’s hospitals between December 2002 and December
2011. A PFO is a condition that arises when the foramen ovale, an opening in a fetus’s heart that
allows oxygenated blood to travel to the left side of the heart, does not close at birth. Many
people live with PFOs without complications and indeed never discover that they have a PFO.
Other individuals with PFOs may ultimately need to have the opening closed, such as those
patients who have recurring cryptogenic strokes or a transient ischemic attack.

In those

situations, a PFO closure is typically performed via percutaneous procedure. Both Intermountain
and the American Heart Association/American Stroke Association have taken the official
position that PFO closures are not to be used to treat migraine headaches or asymptomatic white
matter lesions. Medicare has not issued guidance on PFOs, but the Government reimburses
healthcare providers for only those treatments and procedures that are deemed medically
necessary.
Dr. Sorensen appears to have performed PFO closures with great regularity. According
to the Amended Complaint, during 2010 Dr. Sorensen performed 861 PFO closures while

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doctors at the Cleveland Clinic performed a combined total of 37 PFO closures during the same
one-year period. (Docket No. 90 at ¶ 136). Relator alleges that Dr. Sorensen performed so many
PFO closures because he relied on the procedure to treat migraine headaches. Relator alleges
that Dr. Sorensen falsified some patients’ medical records so that the closures looked medically
necessary and were therefore eligible for reimbursement from the Government. Relator states
that he even witnessed Dr. Sorensen creating a PFO puncture when he started the surgical
procedure only to learn that the patient’s atrial septum was in fact intact.
The Amended Complaint focuses on the sheer volume of PFO closures performed by Dr.
Sorensen as evidence of fraud. To that end, the Amended Complaint contains anonymized
billing data for many Dr. Sorensen’s patients, which Relator describes as “[a] listing of those
medically unnecessary PFO closures and the related procedures, which upon information and
belief, were billed to Medicare, Medicaid, or TRICARE.”2 (Docket No. 90 at ¶ 143). Relator
argues that many of Dr. Sorensen’s PFO closures were fraudulent insofar as medical providers
must certify that the services rendered were medically necessary in order to receive
reimbursement from the Government. Relator alleges that because many of the PFO closures
performed by Dr. Sorensen were not actually medically necessary, Defendants submitted false
certifications. Intermountain and St. Mark’s allegedly participated in this fraud by turning a
blind eye to Dr. Sorensen’s practice and by including the PFO closures in their annual Hospital
Cost Reports, which they submitted to Government carriers for reimbursements.
Relator gained knowledge of this alleged scheme when he worked as a cardiologist at
Intermountain Medical Center from 2008 until 2012, at St. Mark’s from 2008 until 2011, and at

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Medicare is a federal healthcare entitlement program (Docket No. 90 at ¶ 26), Medicaid is a joint state-federal
healthcare program that covers certain groups such as the poor and disabled (Docket No. 90 at ¶ 58), and TRICARE
is a federally funded healthcare coverage program for military service members and their families, (Docket No. 90 at
¶ 72).

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SCG from August to November 2011. Indeed, Relator joined Dr. Sorensen at SCG in June 2011
with the precise hope of learning about PFO closures from Dr. Sorensen. Soon after Relator’s
arrival, however, Intermountain suspended Dr. Sorensen because an internal investigation
revealed that he had performed multiple medically unnecessary PFO closures. After Interline
suspended Dr. Sorensen, he performed more PFO closures at St. Mark’s. Relator contends that
Intermountain, St. Mark’s, and HCA “allowed and encouraged Dr. Sorensen to perform and
submit claims to federal health benefit programs . . . despite clear compliance red flags.”
(Docket No. 90 at ¶ 3). The main red flag, as noted above, was the rate at which Dr. Sorensen
performed PFO closures as compared to other institutions/physicians.
The Amended Complaint includes approximately five to seven pages of background
information on HCA. This background information details previous compliance investigations
into and FCA cases against HCA, including a resulting Corporate Integrity Agreement that
bound HCA until 2009. Relator also describes how HCA’s current compliance policies still
incorporate many of the terms of the Integrity Agreement. The Amended Complaint does not
explain how HCA’s background pertains to Relator’s current allegations of Medicare fraud.
Neither does the Amended Complaint allege any conduct or omissions by HCA that are outside
the scope of the described compliance policies.
Relator filed the instant action under seal in accordance with the provisions of the FCA.
On June 15, 2015, the United States declined to intervene in the action, pursuant to 31 U.S.C. §
3730(b)(4)(B), giving Relator the right to continue prosecuting the action himself. This Court
lifted the seal and ordered the complaint served on June 19, 2015. All of the Defendants moved
to dismiss the claims against them in October and November 2015, and Relator amended his

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complaint on December 3, 2015.3 Now, Defendants again seek to dismiss the claims and/or to
transfer this case to the District of Utah. Because HCA, the sole party with ties to Tennessee,
should prevail on its motion to dismiss, the entire action must be transferred for improper venue.
II.

FCA Claims and the Motion to Dismiss Standard
The FCA penalizes anyone who “knowingly presents, or causes to be presented, a false or

fraudulent claim for payment or approval.” 31 U.S.C. § 3729(a)(1)(A). It also punishes any
person who “knowingly makes, uses, or causes to be made or used, a false record or statement to
get a false or fraudulent claim paid or approved by the Government,” id. § 3729(a)(1)(B), or who
“knowingly makes, uses, or causes to be made or used, a false record or statement material to an
obligation to pay or transmit money or property to the Government, or knowingly conceals or
knowingly and improperly avoids or decreases an obligation to pay or transmit money or
property to the Government,” id. § 3729(a)(1)(G). A separate provision of the FCA penalizes
those who conspire to commit any of the foregoing violations. Id. § 3729(a)(1)(C). If the
government declines to intervene in an action, the relator may proceed independently and be
awarded a “reasonable amount”—between 25 and 30 percent—of any proceeds or settlement,
along with reasonable costs and attorney’s fees. Id. § 3730(d)(2).
Complaints alleging FCA violations must comply with Federal Rule of Civil Procedure
9(b)’s requirement that fraud be pled with particularity because “defendants accused of
defrauding the federal government have the same protections as defendants sued for fraud in
other contexts.” Yuhasz v. Brush Wellman, Inc., 341 F.3d 559, 563 (6th Cir. 2003). Rule 9(b)
requires that “[i]n alleging fraud or mistake, a party must state with particularity the
circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of

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The Court will terminate Defendants’ previous motions to dismiss (Docket Nos. 67, 81, 86) as moot because they
address the original complaint, which is no longer operative.

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a person’s mind may be alleged generally.” The purpose of the heightened pleading standard is
to alert defendants “as to the particulars of their alleged misconduct” so that they may respond.
United States ex rel. Bledsoe v. Cmty. Health Sys., Inc., 501 F.3d 493, 503 (6th Cir. 2007). It is
also designed to prevent “fishing expeditions,” id. at 503 n.11, to protect defendants’ reputations
from allegations of fraud, ibid., and to narrow potentially wide-ranging discovery to relevant
matters, United States ex rel. SNAPP, Inc. v. Ford Motor Co., 532 F.3d 496, 504 (6th Cir. 2008).
Rule 9(b) “is to be interpreted in conjunction with Federal Rule of Civil Procedure 8,”
which requires a “short and plain statement of the claim.” Id. at 503. To survive, a complaint
must contain sufficient factual matter, which the Court must accept as true, to state a claim to
relief that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662 (2009). A claim has facial
plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged. Id. Threadbare recitals of the
elements of a cause of action, supported by mere conclusory statements, do not suffice. Id. A
legal conclusion couched as a factual allegation need not be accepted as true on a motion to
dismiss, nor are recitations of the elements of a cause of action sufficient. Fritz v. Charter
Township of Comstock, 592 F.3d 718, 722 (6th Cir. 2010).
To plead fraud with particularity, the plaintiff must plausibly 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) (citing Bledsoe, 501 F.3d at 504). To survive HCA’s motion to dismiss, then, Relator
must have plausibly and particularly alleged that HCA knowingly presented a false claim to the
Government, falsified a statement or record submitted to the Government, falsified a statement
material to payment by the Government, avoided paying money owed to the Government, or

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conspired with the other Defendants to commit any of the preceding violations.

Because

Relator’s allegations concerning HCA fall far short of the mark, the claims against HCA must be
dismissed.
III.

Whether Relator’s Claims Satisfy the Applicable Standard
The sum total of Relator’s specific allegations relating to HCA’s purported participation

in the fraud Relator alleges are:


“HCA directly profited from medically unnecessary PFO closures performed at
St. Mark’s through an agreement, combination, or conspiracy with St. Mark’s to
defraud the government by getting a false or fraudulent claim allowed or paid and
for the purpose of obtaining or aiding to obtain payment from the government or
approval of a claim to the Medicare Program, the Medicaid Program, or the
TRICARE Program.” (Docket No. 90 at ¶ 19).



“HCA boasted of St. Mark’s profitability and could not have possibly been
oblivious to the financial contribution of Sorensen’s activities to its bottom line,
over and above their ‘affiliate’ institutions throughout the nation.” (Docket No.
90 at ¶ 151).

All other mentions of HCA in the Amended Complaint refer to previous FCA suits, the
now-expired Corporate Integrity Agreement, HCA’s compliance policies, and the
relationship between HCA and its wholly-owned subsidiaries. For example, Relator
details the obligations previously imposed on HCA by the Corporate Integrity Agreement
and references HCA’s current compliance policies relating to Medicare Reimbursement,
yet does not provide any facts that might give rise to the inference that HCA has violated
even a single policy. Relator also makes much of the fact that HCA calls its subsidiaries
“affiliates,” yet does not explain how that terminology might somehow impose liability
on HCA for its affiliates’ actions. (Docket No. 90 at ¶ 129). It seems that Relator hopes
to elide the well-established principle that parent corporations are not liable for the acts of
their subsidiaries, even if they are wholly owned. See Corrigan v. U.S. Steel Corp., 478

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F.3d 718, 724 (6th Cir. 2007) (citing United States v. Bestfoods, 524 U.S. 51, 61 (1998)).
Without any factual allegations that HCA’s own conduct violated the FCA, the
relationship to St. Mark’s does not alone impose liability on HCA.
Relator provides no particular allegations about when HCA would have learned
about the allegedly unnecessary PFO closures or what actions HCA might have taken to
perpetuate this fraud. The Amended Complaint is completely devoid of any mention of
claims for reimbursement or reports made by HCA to the Government. Moreover,
although Relator alleges that HCA participated in a conspiracy to defraud the
Government, it does not include any facts about any agreement or even any
communication between HCA and the other parties to the litigation. Indeed, although he
does not actually say this, Relator seems to rest his claims against HCA on the hope that
the Court will intuit that because of HCA’s past compliance issues and current
compliance policies, HCA should have known of Dr. Sorensen’s alleged scheme.
Without more, this unsubstantiated speculation simply cannot survive a motion to
dismiss, especially not when Rule 9(b)’s heightened pleading standard must be satisfied.
Accordingly, the claims against HCA must be dismissed.
IV.

Venue
Dismissing the claims against HCA renders venue improper in the Middle District

of Tennessee. Claims under the FCA “may be brought in any judicial district in which
the defendant or, in the case of multiple defendants, any one defendant can be found,
resides, transacts business, or in which any act proscribed by Section 3729 occurred.” 31
U.S.C. § 3732.

None of the remaining Defendants resides, transacts business, or

allegedly committed fraud in the Middle District of Tennessee.

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Not even the general venue provision, 28 U.S.C. § 1391(b), applies here. Section
1391(b) allows suit in any judicial district in which any defendant resides, if all
defendants are residents of the State in which the district is located; in which a substantial
part of the events or omissions giving rise to the claim occurred, or a substantial part of
property that is the subject of the action is situated; or, if there is no district in which an
action may otherwise be brought as provided in this section, in which any defendant is
subject to the court’s personal jurisdiction with respect to such action. All Defendants
other than HCA reside elsewhere. Relator has not specified any events in Tennessee and,
in fact, the factual allegations in the Amended Complaint are limited to allegedly
unnecessary PFO closures that Dr. Sorensen performed in Utah. Neither has Relator
provided the Court with any argument that venue in the District of Utah would be
improper. Accordingly, venue is not proper in this District under either Section 3732 or
Section 1391 and the matter must be transferred for further proceedings.
V.

Conclusion
For the reasons stated herein, St. Mark’s and HCA’s Motion to Dismiss (Docket

No. 106) will be granted in part. Specifically, the Motion will be granted with respect to
the claims against HCA. The Court declines to rule on the Motion to Dismiss insofar as
it seeks dismissal of the claims against St. Mark’s and declines to address the other
pending motions to dismiss. This matter will be transferred to the District of Utah. A
separate Order shall enter.
_______________________________
KEVIN H. SHARP
UNITED STATES DISTRICT JUDGE

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