Healthcare Qui Tam Case Survives Motion to Dismiss on Back of Relator’s Personal Knowledge of Fraudulent Activity; United States District Court for the Middle District of Florida No. 8:16-cv-961-T-27AEP, U.S. ex rel. Delia Bell v. Cross Garden Care Center LLC and Karl E. Cross


The district court denied the defendants’ motion to dismiss a qui tam case alleging the submission of false claims to Medicare. The defendants argued the relator failed to allege fraud with particularity, but the court noted the relator identified patients who had received physical therapy without a medical need and others who were kept in skilled nursing facilities for the maximum reimbursement period irrespective of their diagnosis. However, the court agreed that the relator had not shown that the alleged false statements in patient files were attached to the submission of false claims or that the state-level claims were sufficiently related to the federal FCA claims to grant the court jurisdiction.

The defendants moved to dismiss a second amended complaint alleging the submission of fraudulent claims to Medicare.

Relator Delia Bell alleged violations of the federal False Claims Act and the Florida False Claims Act for claims relating to medical services and the length of patient stays submitted by a skilled nursing facility to the Center for Medicare and Medicaid Services. The United States and the State of Florida declined to intervene.

According to Bell, while she was employed as an administrator of the Cross Garden Care Center, she observed behavior that resulted in false claims. For example, Bell alleged CGC kept patients in skilled nursing facilities for 100 days—the maximum amount reimbursed by Medicare—regardless of patient welfare or medical necessity. Once a patient reached 100 days, they were immediately discharged. Bell also alleged the center reset the 100-day benefit period by transferring patients out of nursing care temporarily.

Bell also alleged that many of the facility’s residents did not require therapy services and were not eligible for treatment at the skilled nursing facility but nonetheless received services. For example, she identified patients who were provided occupational and physical therapy services despite their ability to perform related tasks without assistance. She also alleged CGC upcoded patients to obtain higher reimbursement rates for more skilled rehabilitation services. Finally, Bell argued that Karl Cross took money out of patients’ Florida Medicaid accounts and placed it into a general facility account for use to purchase furniture for the facility.

Bella brought three claims, including the submission of false claims, the making of a false record or statement to a false claim, and misappropriation of patients’ Medicaid funds.

The defendants moved to dismiss, arguing the complaint did not allege fraud with particularity. Second, they argued Bell invoked an incorrect basis for the court’s supplemental jurisdiction over the FFCA claim and that the conduct giving rise to the FFCA claim is not part of the same transaction or occurrence as the FCA claim. Third, they contended the Middle District of Florida was an improper venue. Finally, they argued the second amended complaint was an impermissible shotgun pleading.

First, although a close call, the court held that the relator’s allegations were sufficiently specific to state a claim for presentation of a false claim. The court found Bell supported her claim of unnecessary services by noting that patients received therapy despite being able to perform everyday functions. Bell also alleged she personally observed patients who were shuttled between services in order to reset the 100-day nursing home care benefit period, and patients who remained in facilities unnecessarily to maximize the Medicare reimbursement. The court noted that billing for unnecessary medical services is actionable under the FCA.

The court also found Bell alleged that the false claims were submitted knowingly, via her allegation of objectively unnecessary treatment. She also noted her direct knowledge of the submission of the false claims via her employment. Based on her personal observations, the court explained that it was not fatal to her claim that she did not work in a skilled nursing facility billing department. Bell also pointed to her internal reporting of these activities and the facility’s continuing fraud as evidence of scienter. Accordingly, the court denied the motion to dismiss Count I.

However, the court agreed that Count II, which alleged the creation of a false claim or statement to a false claim, did not satisfy the materiality requirement. The court found the complaint did not mention the creation of false narratives in patient notes nor make allegations about the content of the false narratives or whether they were included with the submitted claims. Therefore, the court could not determine the statements were material.

Next, the defendants argued Bell failed to plead the FFCA count with the required level of specificity, including details about the false claims allegedly submitted to Florida. In response, Bell argued the court had supplemental jurisdiction because the claims were so related to the FCA claims that they formed part of the same controversy.

However, the court found that the FFCA claims were not connected to the FCA claims. Bell alleged that CGC misappropriated patient Medicaid allowance funds to make purchases for the facility. While this might be improper activity, the court could not conclude this allegation was connected to the submission of false claims for reimbursement for unnecessary healthcare services to Medicare. Accordingly, the court held it lacked jurisdiction to hear this count.

Finally, the court found no basis to conclude the Middle District of Florida was the incorrect venue, nor to conclude that the complaint was a shotgun pleading.

FCA – Bell v Cross Garden Care LLC