The district court mostly denied the defendants’ motions for summary judgment in a qui tam case alleging fraud in the provision of mental health services. The plaintiffs alleged the defendants knowingly skirted state healthcare regulations governing the supervision of unlicensed employees, including the certifications and time commitment required of supervisors. The defendants argued that state regulations contained no such requirements and, if they did, the requirements were ambiguous. However, the court found the regulations expressly defined certain requirements and incorporated by reference clear industry standards. The court also found the defendants failed to comply with their own related internal guidance and failed to implement working group recommendations that would have brought the company into compliance. The policies and the findings of the working group undermined the defendants’ assertions that they didn’t know or had misinterpreted the regulations. The court did partially grant summary judgment in favor of the defendants, on claims where the regulations did not spell out requirements with the specificity alleged by the plaintiffs.
The plaintiffs and defendants in a qui tam case alleging healthcare fraud cross-moved for summary judgment on multiple grounds, including falsity, materiality, and several affirmative defenses.
Relator Christine Martino-Fleming and the Commonwealth of Massachusetts sued South Bay Mental Health Center Inc.; Community Intervention Services; Community Intervention Services Holdings Inc.; H.I.G. Growth Partners LLC; H.I.G. Capital LLC; Dr. Peter Scanlon; and Kevin P. Sheehan. The plaintiffs alleged the defendants filed false claims for reimbursement for services provided by unlicensed and improperly supervised social workers and counselors.
Relator Martino-Fleming was formerly employed by the defendants as a coordinator of staff and training development, which required her to visit multiple facilities to train staff. She asserted that she learned of her allegations during the course of her employment and that she raised concerns about supervision and hiring practices.
Specifically, the relator raised concerns about unlicensed individuals receiving supervision from unlicensed clinicians, a practice which she believed to be in violation of the MassHealth regulations. The relator also raised concerns about the professional qualifications of new employees. Instead of having appropriate degrees in mental health counseling, some new hires had degrees in school counseling, forensic psychology, and pastoral counseling.
Despite frequent complaints, the defendants took no action to correct these issues. The defendants argued that the relator did not raise these concerns, but other former employees testified that they had discussed supervision issues with the companies’ leadership and that South Bay policy allowed licensed supervisors to review and sign off on the notes or charts of clinicians whom they were not directly supervising.
The relator also alleged that regulatory issues were raised during management meetings regarding employee retention. The retention working group raised the issue of improved supervision and proposed that licensure be a required criteria for supervisors. After the group was convened, concerns about the number of licensed staff were raised, including concerns about the need for non-licensed clinicians to supervise, due to the shortage of licensed professionals. Witnesses asserted that MassHealth regulations about supervision requirements were distributed during these working group meetings, which included several of the named defendants. The defendants asserted that no one raised concerns about regulatory violations. In any event, the issue of supervision was apparently not addressed and no working group recommendations were implemented.
First, the court considered whether the issue of supervisor credentials provided a basis for a claim. The parties agreed that unlicensed clinicians must be supervised, but the defendants that licensed clinical social workers (LCSWs) and licensed alcohol and drug counselors (LADCs) could provide this supervision, while the plaintiffs argued they could not.
The court sided with the plaintiffs, finding that the MassHealth regulations stated that unlicensed social workers must be supervised by a licensed independent clinical social worker (LICSW). To the extent socials workers were not supervised by LICSWs, the court found South Bay not in compliance with the regulations. The court also found that LCSWs and LADCs may not supervise counselors. To the extent that South Bay’s unlicensed clinicians were supervised by other unlicensed clinicians, the court found any relevant claims were false.
Next, the parties disagreed whether unlicensed clinicians must receive “clinical supervision,” and whether clinical supervision requires a discussion of individual client cases between the supervised clinician and the supervisor. The defendants argue that no regulation requires that “clinical supervision” be provided. Instead, they argued that administrative supervision or licensure supervision were sufficient. Even if clinical supervision were required, the defendants argued that there is no regulation requiring that a discussion of individual client cases occur during every individual supervision session or during group supervision sessions.
In response, the plaintiffs argued that the regulations require clinical supervision of the services provided by clinicians. According to the plaintiffs, the regulations focus on services, not licensure or administration, rendering the defendants’ interpretation non-sensical. The court found this interpretation more persuasive. The court also found that South Bay’s own policies supported the interpretation that the supervision must be clinical in nature.
The court found the defendants on stronger ground with their argument that clinical supervision need not necessarily include discussion of individual clients. The court found that while a discussion of individual clients may be standard and typical of the supervisory relationship, the regulations themselves were silent on the requirement. The court concluded that MassHealth regulations do not unambiguously require the discussion of individual clients at every clinical supervision session—even though that is one reasonable interpretation—nor the documentation of these discussions.
To the extent the plaintiffs argued that South Bay failed to hold or document discussions of individual clients, the court found this issue did not support a false claim allegation. However, the plaintiffs also alleged that some supervision documentation consisted of nothing more than a blank form. In those instances, the court held that South Bay did not provide an adequate record of clinical supervision.
Next, the parties disputed when supervision must occur. The plaintiffs argued that supervision must occur within two weeks before or after a patient’s date of service, while the defendants argued there is no such requirement in the regulations. Instead, they argued the regulations required only “frequent” supervision. However, the court found the regulations expressly stated that supervision must comport with relevant licensing standards. In this case, the court found the standard required at least one hour per week or one supervisory hour for every 16 hours of client contact. The defendants offered alternative interpretations, none of which the court found persuasive.
Next, the defendants argued that the regulations do not require documentation of the supervision of unlicensed clinicians, while the plaintiffs disagreed. The court found that the regulations’ recordkeeping requirements referred only to a general requirement to keep medical records. However, the MassHealth administrative and billing regulations expressly state that the agency will not pay a provider if the provider lacks adequate documentation so substantiate their billings.
The plaintiffs argued that because supervision is required for the payment for services rendered by unlicensed clinicians, documentation of supervision is required to substantiate the provision of services payable under MassHealth. The court found that reasonable.
Next, the defendants argued that because all South Bay’s satellite programs were dependent on the South Bay parent clinic, the programs were not required to have their own licensed clinic directors. In contrast, the plaintiffs argued that MassHealth regulations require all satellite clinics to have licensed clinic directors. The court found the plain language of the regulations supported the plaintiffs. The regulation governing satellite programs expressly states that the director of clinical services of the parent center must designate one professional staff member at the satellite program as the satellite’s clinical director. The regulation also sets forth the qualifications and experience required of this individual.
Next, the plaintiffs argued that some South Bay counselors failed to meet the degree requirements of the regulation, which requires that all counselors hold a master’s degree in counseling education, counseling psychology, or rehabilitation counseling. The plaintiffs alleged that some clinicians had degrees in art therapy, early childhood education, or sociology, which did not qualify. The defendants argued that their counselors were properly credentialed, arguing that the regulations give providers the flexibility to determine what fields are “related” to counseling. The plaintiffs appeared to concede this point and the court agreed that the regulations give providers such discretion. The court therefore granted summary judgment in favor of the defendants on this issue.
Finally, the defendants argued that a claim submitted to Massachusetts Behavioral Health Partnership or the managed care organizations cannot be false based on the MassHealth regulations. Specifically, the defendants argued that MassHealth delegates authority to MBHP to makes its own payment rules. Because MBHP is a contractor with MassHealth, the defendants argued that claims submitted to MBHP are subject to MBHP’s requirements, not MassHealth regulations. The defendants made the same argument with regard to the MCOs.
However, the court found the defendants did not show how the billing, payment, and contractual terms of MBHP and the MCOs conflict with the clinical supervision requirements of MassHealth. Further, the court noted that MassHealth requires that all mental health centers comply with MassHealth regulations. An interpretation allowing MBHP and the MCOs to circumvent MassHealth regulations therefore made little sense.
Next, the defendants argued that even if they misinterpreted MassHealth regulations, their claims were not false because their interpretation was reasonable. However, the court noted this argument erroneously conflated falsity with knowledge. Rather than bearing on the falsity of the claims, the reasonableness of the defendants’ interpretation of the regulations was a consideration for the scienter examination.
Next, the defendants argued that the three illustrative examples of false claims attached to the complaint were insufficient to demonstrate falsity. However, the defendants conceded that all three of the examples involved the provision of services by unlicensed clinicians. In the three examples, the unlicensed clinicians received supervision from unlicensed clinicians at the time of the service. The court found those claims false under the only reasonable interpretation of the regulations. However, the court limited its finding to the three representative claims, without applying it more broadly to the other claims the plaintiffs identified as false but had not yet submitted for review.
Next, the court considered materiality. The defendants argued that the alleged noncompliance was not material to the state’s payment decision. However, the court noted that the First Circuit in Escobar considered the very regulations at issue here and found them material to the state’s goals for patient care and the state’s decision to pay claims. The circuit court held that the centrality of the licensing and supervision requirements in the MassHealth regulatory program went to the essence of the bargain of MassHealth’s contractual relationships, which was a strong indicator of materiality.
In response, the defendants noted that MassHealth continued to pay claims despite having knowledge of the defendants’ regulatory noncompliance. Further, MassHealth never audited South Bay for compliance with these regulations. Finally, the defendants asserted that MassHealth has not sanctioned mental health centers that had been found to have similar compliance problems.
In response, the plaintiffs argued that the materiality element is concerned with what MassHealth actually knew of South Bay’s regulatory noncompliance and not whether MassHealth could have learned of South Bay’s noncompliance through audits. According to the plaintiffs, any findings regarding other mental health centers were immaterial and there was no evidence MassHealth knew of those findings. The plaintiffs also noted that when MassHealth did become aware of the scope of the allegations once the complaint in the present case was unsealed, it stopped payment.
The court split the difference, finding that some minor issues of noncompliance were not material because MassHealth did not object to certain disclosures. However, the court found that no reasonable juror could find that misrepresentations of compliance with the licensure and supervision requirements were not material.
Next, the defendants moved for summary judgment on the scienter element, arguing that the plaintiffs could not demonstrate scienter because the regulations were ambiguous and South Bay’s interpretation was reasonable. South Bay also argued that it had sought clarification of the regulations and were told that they were in compliance. However, the court found no facts in evidence showing that South Bay sought this clarification. Further, even if there was evidence, the plaintiffs had presented sufficient evidence to show reckless disregard for the regulations that the court already determined were not ambiguous.
The H.I.G. defendants sought to be dismissed from the complaint, arguing that their members and principals were not aware of South Bay’s noncompliance. However, the plaintiffs alleged that H.I.G. members knew that South Bay received Medicaid reimbursement that was conditioned on its compliance with MassHealth regulations and that H.I.G. members knew that South Bay had submitted false claims.
The court found sufficient evidence to raise a genuine dispute of material fact about H.I.G.’s knowledge of noncompliance. First, the plaintiffs demonstrated that H.I.G.’s leadership understood that South Bay’s revenues were tied to Medicaid. They also showed that H.I.G. understood that Medicaid had terms and conditions of payment. Second, the plaintiffs pointed to evidence that H.I.G.’s members were aware that MassHealth regulations required certain forms of supervision. The court found this sufficient at the summary judgment phase. Third, the plaintiffs pointed to multiple pieces of evidence that H.I.G. members were informed that clinicians at South Bay were provided with inadequate supervision.
The court found that the plaintiffs had provided enough evidence to show that H.I.G. should have known that misrepresentations concerning compliance with the supervision and licensing requirements were material to payment. Accordingly, H.I.G.’s motion for summary judgment was denied on the scienter element.
Next, the defendants argued that H.I.G. members were not involved in the decision-making process with respect to claims submission and could not have caused their submission. While H.I.G. could not have caused the submission of false claims dated prior to its acquisition of South Bay, the court explained that it could be held liable if the plaintiffs showed that H.I.G. ratified previous policies and practices that resulted in the submission of false claims. The court found that the plaintiffs had submitted such evidence. For example, the plaintiffs showed that H.I.G. was aware of working group recommendations about supervisory requirements and knew that these recommendations had not been implemented. The court found sufficient evidence to show that H.I.G. had the power to fix the regulatory violations that caused the presentation of false claims but failed to do so.
Next, Dr. Peter Scanlon argued that the plaintiffs provided no evidence to satisfy the scienter element with regards to the claims against him. However, the court found these facts in dispute, as the plaintiffs submitted evidence that Scanlon was aware of and familiar with the regulatory requirements at issue. In fact, Scanlon himself admitted that he referred to the regulations regularly while in charge of South Bay. Scanlon also testified that he would be responsible for ensuring compliance with certain provisions of the MassHealth regulations. The relator also testified that she had multiple conversations with Scanlon in which she addressed her concerns about the noncompliance. Another witness testified that Scanlon and other employees met to discuss compliance after the relator raised her concerns.
The court also rejected Scanlon’s arguments on causation, finding that the plaintiffs provided sufficient evidence to show that Scanlon had the power, authority, and duty to stop the submission of false claims up until the time when he left his positions at C.I.S. in December 2014. The court denied the motion for summary judgment on claims submitted prior to that date, and granted the motion on claims submitted after that date.
Next, defendant Kevin Sheehan also moved for summary judgment, arguing that he did not learn of potential compliance issues until mid-2014, when the issue of South Bay’s compliance with MassHealth’s supervision regulations was brought to his attention after the relator sent an email expressing her concerns.
However, the court noted testimony stating that Sheehan oversaw regulatory interpretation and compliance at South Bay. Further, the relator stated that she began informing leadership, including Sheehan, as early as 2012. Based on these asserted facts, the court found sufficient evidence for a jury to determine that Sheehan at least recklessly disregarded evidence of noncompliance prior to 2014. Further, Sheehan himself admitted that he had heard about the potential noncompliance from the retention working group, even though he argued that he was not aware the noncompliance was material to South Bay’s claims.
The court also found the plaintiffs had provided sufficient evidence as to the causation element. Although Sheehan claimed to have instructed his subordinates to implement stringent policies to address the supervision problems at South Bay after being notified about the relator’s concerns in 2014, the record showed that Sheehan was provided with recommendations to bring supervision into compliance as early as 2012. The court found sufficient support for the claim that Sheehan did not adopt any functional measures to address noncompliance, even after being made aware of it.
The court granted the plaintiffs’ motion for partial summary judgment on a range of affirmative defenses. The court noted that it had already rejected several and that the defendants did not oppose the motion for several others.
The defendants did oppose the plaintiffs’ motion as to the defenses of public disclosure, prior civil suit, or administrative proceeding standing. They also opposed the plaintiffs’ motion regarding their 19th affirmative defense, which sought to reserve their right to rely upon any affirmative or additional defenses that may become known to the defendants during the action. However, because the defendants did not point to evidence in the record supporting the affirmative defenses of public disclosure and the existence of a prior civil suit or administrative proceeding, the court granted the plaintiffs’ motion.
