The district court denied the defendants’ motion to dismiss a qui tam case alleging healthcare fraud. The defendants argued the complaint was not pled with particularity, but the court disagreed, finding the relators provided specific dates of the alleged fraud, identified individuals who directed or facilitated the conduct, and alleged enough detail to show what was done and how. The relators also asserted they had personally witnessed the conduct and been directed to misrepresent services they had provided. The defendants also argued they had plausible reasons for billing in the manner the relators alleged was fraudulent, and therefore the relators had failed to state a claim, but the court agreed there was no compliance-based reason for the activity and therefore it sufficiently suggested fraud to survive a motion to dismiss.
Caleb Hernandez and Jason Whaley filed this qui tam suit alleging the defendants violated the False Claims Act by fraudulently overbilling Medicare and Medicaid for hospital emergency room management services. The plaintiffs brought their suit based on information learned during their employment in emergency departments managed by the defendants. The defendants moved to dismiss.
The relators alleged TeamHealth engaged in two schemes to defraud Medicare and other government-funded health insurance programs. First, the relators alleged TeamHealth overbilled for services provided by “mid-level” practitioners, such as physician assistants and nurse practitioners. Under CMS rules, these services are reimbursed at 85 percent of the standard physician rate, while services rendered by physicians are reimbursed at 100 percent. The relators alleged TeamHealth submitted claims for reimbursement for services by mid-level practitioners using identifying codes for physicians, thereby inflating their reimbursement rate.
The relators alleged the defendant covered up this practice by characterizing mid-level services as “split/shared”, meaning both a physician and mid-level practitioner treated the same patient during the same visit. According to the relator, this almost never occurs at TeamHealth facilities, because mid-levels are required to treat patients alone in order to maximize efficiency. The relators alleged TeamHealth instructed personnel in how to bill for these services in this manner.
Second, the relators alleged TeamHealth billed CMS for critical care services—the highest level of emergency treatment—when in fact they were not necessary or were not provided. The relators provided an email stating that indicators such as abnormal vital signs or IV use warranted the critical care designation in every instance, when in fact such indicators do not necessarily, and likely do not, require critical care in every instance because they do not meet the CMS criteria for critical care. The relators asserted that TeamHealth imposed a billing quota for critical care services of 6 to 12 percent. The relators explained that critical care services are billed at a higher rate because of the heightened skill and decision-making required.
The relators alleged TeamHealth falsified medical records and provided services that were not necessary. According to the relators, these services are not subject to front-end auditing, which TeamHealth understood. The relators alleged this activity occurs on a nationwide level.
TeamHealth moved to dismiss, arguing that the relators had failed to describe the alleged fraud with particularity, failed to state a claim, and alleged conduct that was barred by the statute of limitations.
First, the defendants argued the relators had failed to allege the who, what, when, where, and how of the scheme. While the relators identified TeamHealth employees in their complaint, the defendant argued they had not connected these individuals to fraudulent behavior. They also argued the relators failed to show the when and where, other than to state a general timeline and identify some TeamHealth locations. They also argued the relators failed to include particularized information connecting their allegations to any false claims submitted to the government. In cases where the relators alleged practitioners were pressured to falsify billings, the defendants argued the complaint did not describe what type of pressure or who engaged in it.
However, the court disagreed. The court found the relators included a representative sample of individual participants involved in both schemes, including doctors who signed charts for patients seen only by mid-level practitioners, and supervisors who decided how critical care should be documented. The relators also asserted they had individual experience with some of the fraudulent activities, and identified which TeamHealth employees submitted bills to the government. The relators satisfied the “where” requirement by noting they observed the policies implementing the Critical Care Scheme in every facility in which they worked, and provided examples to establish a nationwide scope. They also identified the locations of the individuals who directed the fraud. The “when” requirement was satisfied because the relators pled the specific dates on which TeamHealth carried out the schemes, via patient charts and employment records. The court also held the relators described the schemes in enough detail to satisfy the what and how prongs.
Next, TeamHealth argued the relators failed to state a plausible claim for the Mid-Level Scheme under Rule 8(a). Specifically, TeamHealth argued that its requirement that physicians attest to supervising mid-level healthcare providers is in an effort to comply with federal and state law. In other words, TeamHealth argued there was a lawful explanation for the alleged unlawful conduct.
In response, the relators argued there are no Medicare regulations that require physicians to sign mid-level charts and that the regulations cited by TeamHealth pertain to licensing requirements, not billing requirements. Further, the regulations do not apply to every mid-level encounter. For example, they do not apply to nurse practitioners or, in the case of Colorado, to physician assistants who have been licensed for longer than six months, yet TeamHealth requires a physician signature in every instance. The court agreed that the relators’ factual allegations raised a right to relief above the speculative level. The court found the allegations that the purpose of obtaining physician signatures on mid-level charts was “for billing purposes” were supported by references to internal TeamHealth communications. That was enough to raise a plausible inference that the signatures were used to effectuate the billing fraud.
Finally, TeamHealth argued the FCA statute of limitations barred some of the claims. Because the United States did not intervene, the defendants argued that any alleged violations committed more than six years prior to the filing of the complaint are time-barred. Alternatively, TeamHealth argued that if the statute applies to non-intervened cases, a relator must have “raised concerns” with the government prior to filing the initial complaint in order for a relator to take advantage of the expanded statute of limitations.
In response, the relators argued that their allegations beginning in 2011 are within ten years of the complaint being filed, and as such, are timely. The relators also argued that they did “raise concerns” prior to filing their complaint and alleged that they did so in their second amended complaint.
The court sided with the defendants. Despite TeamHealth’s assertion to the contrary, the court noted the Supreme Court’s decision in Cochise made clear that subsection (b)(2) “applies in non-intervened actions.” As a result, the relators may be entitled to the FCA’s extended limitations period.
