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United States ex rel. Thomas v. St. Joseph Hospice, LLC

United States District Court, S.D. Mississippi, Eastern Division

March 19, 2019

UNITED STATES ex rel. DARLENE THOMAS and JOHN O=NEILL, RELATORS
v.
ST. JOSEPH HOSPICE, LLC, et al. DEFENDANTS

          MEMORANDUM OPINION AND ORDER

          KEITH STARRETT UNITED STATES DISTRICT JUDGE.

         The Court grants in part and denies in part Defendants' Motion to Dismiss [47], as provided below.

         I. Background

         This is a qui tam action under the False Claims Act (“FCA”).[1] Defendants provide hospice services. Relator John O'Neill was the Executive Director of Defendants' office in Biloxi, Mississippi, and Relator Darlene Thomas was the Director of Nursing at Defendants' office in Hattiesburg, Mississippi. They claim that Defendants violated the FCA and the Anti-Kickback Statute (“AKS”)[2] by providing bonuses and incentives to medical directors and employees for referrals, improper certifications of terminal illness, and improper alterations of patient diagnoses to maintain Medicare reimbursement status. Defendants filed a Motion to Dismiss [47], which the Court now addresses.

         II. Public Disclosure Bar

         Some of Relators' FCA claims are premised upon violations of the AKS, and some are premised upon violations of other laws and/or other improprieties. The non-AKS claims can be categorized as follows. First, Relators allege that Defendants' Medical Director made “improper referrals.” Complaint at 3, United States ex rel. Thomas v. St. Joseph Hospice, LLC, No. 2:16-CV-143-KS-MTP (S.D.Miss. Sept. 4, 2016), ECF No. 3. They allege that Defendants' medical directors would write referrals themselves rather than the patients' treating physicians, referring patients who did not meet hospice criteria. Id. at 14-15. Second, Relators allege that Defendants “made it a company-wide practice to backdate” Certifications of Terminal Illness (“CTI's”), which were required by Medicare regulations before payment of hospice claims. Id. at 15. Third, Relators allege that Defendants “instructed staff to change patient diagnos[es]” to different codes that Medicare would reimburse. Id. at 16. Fourth, Relators allege that Defendants provided inadequate patient care by understaffing and failing to provide commonly used medications to their patients. Id. at 17-18. Defendants argue that the Court must dismiss these non-AKS claims pursuant to 31 U.S.C. § 3730(a)(4)(A)'s public disclosure bar.

         “[T]he Fifth Circuit has noted that a challenge under the FCA's public disclosure bar should be treated as a motion for summary judgment, as it is necessarily intertwined with the merits of the case.” United States ex rel. Jamison v. McKesson Corp., No. 2:08-CV-214-SA-DAS, 2010 WL 1276712, at *1 (N.D. Miss. Mar. 25, 2010), aff'd, 649 F.3d 322 (5th Cir. 2011). Therefore, although Defendants framed their argument under Rule 12(b)(6), Rule 56 applies.[3]

         Rule 56 provides that “[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see also Sierra Club, Inc. v. Sandy Creek Energy Assocs., L.P., 627 F.3d 134, 138 (5th Cir. 2010). The Court is not permitted to make credibility determinations or weigh the evidence. Deville v. Marcantel, 567 F.3d 156, 164 (5th Cir. 2009). When deciding whether a genuine fact issue exists, “the court must view the facts and the inference to be drawn therefrom in the light most favorable to the nonmoving party.” Sierra Club, Inc., 627 F.3d at 138. However, “[c]onclusional allegations and denials, speculation, improbable inferences, unsubstantiated assertions, and legalistic argumentation do not adequately substitute for specific facts showing a genuine issue for trial.” Oliver v. Scott, 276 F.3d 736, 744 (5th Cir. 2002).

         The FCA provides:

(A) The Court shall dismiss an action or claim under this section, unless opposed by the Government, if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed B
(i) in a Federal criminal, civil, or administrative hearing in which the Government or its agent is a party;
(ii) in a congressional, Government Accountability Office, or other Federal report, hearing, audit, or investigation; or
(iii) from the news media, unless the action is brought by the Attorney General or the person bringing the action is the original source of the information.
(B) For purposes of this paragraph, “original source” means an individual who either (1) prior to a public disclosure under subsection (e)(4)(A), has voluntarily disclosed to the Government the information on which allegations or transactions in a claim are based, or (2) who has knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions, and who has voluntarily provided the information to the Government before filing an action under this section.

31 U.S.C. § 3730(e)(4). Therefore, the Court must compare Relators' allegations with “public disclosures available at the time the complaint was filed.” United States ex rel. Solomon v. Lockheed Martin Corp., 878 F.3d 139, 144 (5th Cir. 2017). The Court applies a three-part test, “asking 1) whether there has been a public disclosure of allegations or transactions, 2) whether the qui tam action is based upon such publicly disclosed allegations, and 3) if so, whether the relator is the original source of the information.” Id. at 143 (punctuation omitted). But the analysis is flexible, and the Court may combine steps when expedient. United States ex rel. Jamison v. McKesson Corp., 649 F.3d 322, 327 (5th Cir. 2011).

         The party raising the public disclosure bar “must first point to documents plausibly containing allegations or transactions on which [the relator's] complaint is based.” Id. Then, “to survive summary judgment, [the relator] must produce evidence sufficient to show that there is a genuine issue of material fact as to whether his action was based on those public disclosures.” Id. The Court views the relator's evidence “in the light most favorable to him, ” id., and the Court looks at the relator's “original complaint to define the scope of his action and to determine whether it was based on public disclosures of allegations or transactions, ” rather than any subsequent amended complaints. Id. at 328.[4]

         First, the Court must determine whether the allegations or transactions of Relators' initial Complaint had already been publicly disclosed at the time this suit was filed. According to the statute, a public disclosure occurs when the allegations or transactions are disclosed in “a Federal criminal, civil, or administrative hearing in which the Government or its agent is a party;” “in a congressional, Government Accountability Office, or other Federal report, hearing, audit, or investigation;” or by the “news media.” 31 U.S.C. § 3730(e)(4)(A). Defendants must only identify public disclosures that could plausibly be the source of Relators” FCA claims. Solomon, 878 F.3d at 144.

         A. Prior Qui Tam Complaint

         First, Defendants contend that Relators' claims were publicly disclosed in the complaint of a prior qui tam action. See Complaint, United States ex rel. Diamond v. St. Joseph Hospice, No. 1:12-CV-393-LG-JCG (S.D.Miss. Dec. 14, 2012), ECF No. 2; Exhibit 2 to Motion, United States ex rel. Thomas v. St. Joseph Hospice, LLC, No. 2:16-CV-143-KS-MTP (S.D.Miss. Aug. 27, 2018), ECF No. 47-3. In Diamond, the relators were Defendant's employees. Exhibit 2 [47-3], at 2. They made the following allegations:

• “Defendants routinely admit into hospice patients who are not eligible to receive hospice benefits from Medicare Part A.” Id. at 5.
• “Defendants falsify patients' life expectancy in order to qualify those patients for hospice reimbursement from Medicare, maintain patients on hospice after their medical condition has stabilized rather than discharging them from hospice as required by Medicare regulations, and exaggerate patients' signs and symptoms in order to qualify them for hospice reimbursement for Medicare.” Id. at 5-6.
• “Defendants aggressively market continuous care hospice services and routinely bill continuous care services to the government for patients who do not qualify for that level of care.” Id. at 6.
• “Defendant St. Joseph Hospice, through its marketers and other staff, engaged in a concerted effort to convince hospitals and the families of hospice patients that hospice patients should be enrolled in St. Joseph's continuous care hospice program, ” by making certain representations to hospital administrators and the families of hospice patients. Id. 6. “As a result of these efforts, the continuous care revenues of St. Joseph increased from $26, 000 in 2009 to $373, 000 in 2010, $2.57 million in 2011, and $3.9 million from January 1, 2012, through August 31, 2012.” Id. at 7.
• Relators alleged that they reviewed patient charts for “numerous Medicare beneficiaries” and discovered that “a substantial percentage of patients enrolled with St. Joseph were not eligible for the Medicare hospice benefit, ” and that “a substantial percentage of St. Joseph patients from whom continuous care services were billed were not in crisis situations at the time those claims were submitted and therefore did not qualify for the continuous care benefit.” Id.
• Finally, in Diamond, the Relators provided a list of patients admitted by St. Joseph who did not actually qualify for hospice care. See Exhibits A & B to Complaint, United States ex rel. Diamond v. St. Joseph Hospice, No. 1:12-CV-393-LG-JCG (S.D.Miss. Dec. 14, 2012), ECF No. 2-2, 2-3.

         These allegations are substantially identical to Relators' allegations of improper referrals, and, therefore, the Court concludes that they could plausibly be the source of those claims.

         Next, the Court must determine whether Relators' Complaint was “based upon” the public disclosures. Jamison, 649 F.3d at 331. “A plaintiff's FCA complaint is based upon public disclosures if one could have produced the substance of the complaint merely by synthesizing the public disclosures' description of the joint venture scheme.” Solomon, 878 F.3d at 144. “[T]he publicly disclosed allegations or transactions need only be as broad and as detailed as those in the relator's complaint . . . .” Jamison, 649 F.3d at 327. “The public disclosures must therefore provide specific details about the fraudulent scheme and the types of actors involved in it sufficient to set the government on the trail of the fraud.” Solomon, 878 F.3d at 144 (quoting Jamison, 649 F.3d at 329).

         The Fifth Circuit has adopted a test to determine “whether public disclosures contain sufficient indicia of an FCA violation to bar a subsequently filed FCA complaint.” Id.

[T]he combination of X and Y must be revealed, from which the readers or listeners may infer Z. Z is an inference of fraud under the FCA, while the X and Y are two required elements for the inference: a misrepresented state of facts and a true state of facts. The presence of one or the other in the public domain, but not both, cannot be expected to set government investigation on the trail of fraud.

Id. (citing United States ex rel. Colquitt v. Abbot Labs., 858 F.3d 365, 374 (5th Cir. 2017); United States ex rel. Springfield Terminal Ry. Co. v. Quinn, 14 F.3d 645, 654 (D.C. Cir. 1994)).

         In the Court's opinion, Relators “could have produced the substance” of the improper referral allegations “merely by synthesizing” the allegations of the Diamond complaint. Id. The Diamond relators alleged a substantially similar scheme involving the referral of patients who did not qualify for hospice services. Therefore, the Court finds that the current Complaint's allegations of improper referrals were “based on” the prior disclosure in the Diamond case.

         Although Relators' allegations of improper referrals were based on a prior public disclosure, those claims may proceed if Relators are the “original source” of the publicly disclosed information. Id. at 146. The statute defines an “original source” as:

. . . an individual who either (1) prior to a public disclosure under subsection (e)(4)(A), has voluntarily disclosed to the Government the information on which allegations or transactions in a claim are based, or (2) who has knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions, and who has ...

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