The district court granted the defendants’ motion to dismiss allegations of Anti-Kickback Statute and Stark Law violations that resulted in false claims for payment to Medicare. The relator alleged the defendants entered into financial arrangements with multiple physicians that created business associations, rendering any referrals to the hospital entities’ facilities and subsequent claims for payment tainted by AKS and self-referral violations. However, the court found the relator failed to adequately allege enough details of the alleged false claims for payment, such as the date range of the misconduct or the types of services provided. While the relator need not identify a specific false claim for payment, the court needed more information. The court denied the motion to dismiss the relator’s claim of unlawful employment retaliation, finding that the relator adequately pleaded that he raised concerns about potential fraud, that his managers were aware of his concerns, and that he was fired within a few weeks of this activity. The court also agreed that the relator had adequately pleaded a causal connection between the defendants and the withdrawal of an offer of employment with another company.
Defendants Acadia Healthcare Company Inc. and Vermilion Hospital LLC moved to dismiss a qui tam complaint alleging healthcare fraud and unlawful employment retaliation, arguing that
Plaintiff-Relator Jeffrey Byrd was a former chief financial officer of Vermilion, a provider of behavioral healthcare services. In his complaint, Byrd alleged the defendants failed to comply with multiple healthcare laws, including the Anti-Kickback Statute and Stark Law, and thereby violated the False Claims Act and the Louisiana Medical Assistance Programs Integrity.
First, the relator alleged that Vermilion billed Medicare for services provided by a psychiatric advanced practice registered nurse (APRN) who did not have a valid collaborative practice agreement, in violation of CMS rules. According to the complaint, the APRN routinely saw and treated patients without the supervision of a physician. When Vermilion received a complaint about the APRN’s treatment, the relator searched her file for the collaboration agreement, and found that the two physicians named in the agreement had not worked for Vermilion for some time, meaning that neither had collaborated with the APRN in the joint management of patients during that period. The relator alleged that after he inquired about an updated agreement, he was terminated.
In his complaint, the relator pointed out that the State of Louisiana had entered into a settlement agreement with the defendants regarding this allegation. Because the claims submitted to Louisiana were partly paid with federal funds, the relator argued these claims were also false under the False Claims Act.
Next, the relator alleged violations of the Stark Law and Anti-Kickback Statute. The relator alleged that the defendants provided free staff to Dr. Susan Uhrich in return for referrals. According to the relator, Uhrich is a significant source of referrals for Vermilion. The relator identified an APRN and a licensed practical nurse who worked at Ulrich’s office and were identified on various websites as staff, but were paid by Vermilion. The relator alleged that the nurses performed office management duties and conducted patient rounds for Ulrich and that claims for the patient services were submitted by Ulrich’s office. The relator also alleged that staff have questioned the medical appropriateness of Ulrich’s referrals.
In his complaint, the relator argued this arrangement constituted remuneration under the Stark Law and created a financial relationship between Ulrich and Vermilion. The relator argued that the provision of free services is by definition not fair market value and that the arrangement would not be commercially reasonable without referrals.
Because the arrangement should preclude Ulrich from making referrals to Vermilion, the relator alleged that any claims for payment tainted by these referrals were false. The relator also alleged this arrangement violated the AKS, because it was intended to induce Ulrich to make referrals to Vermilion. Therefore, any related claims were false. Again, the relator cited to the settlement agreement between Louisiana and the defendants, which identified this conduct as improper.
The relator also alleged the defendants violated the AKS and Stark Law in relation to financial arrangements with Dr. Daniel Salmeron. The relator alleged that Vermilion paid Dr. Salmeron about $350,000 per year, despite the fact that the doctor had his own private practice and only occasionally saw patients at AVH. The relator alleged this salary was high above fair market value even for a full-time physician in the area, where the typical internal medicine physician salary is approximately $130,000.
The relator provided a copy of Vermilion’s 2015 strategic plan, in which it identified Salmeron as a full-time employee, when in fact he did not work 40 hours at the hospital. Further, an internal audit found that physicians did not provide timesheets or invoices for payment, even though this was required by their contracts. Instead, they were paid based on scheduled hours. The relator also alleged that a division president expressed concern about Salmeron’s pay, stating that Salmeron did not refer enough patients to Vermilion to be paid that amount of money.
The relator alleged these payments amounted to remuneration under the Stark Law and created a financial arrangement between Salmeron and Vermilion. Again, the relator argued the payments were intended to induce referrals, in violation of the AKS. Because of these relationships, the relator alleged that any related claims for payment were tainted by AKS and Stark Law violations, and were therefore false. The relator again noted that the settlement between the state and defendants identified this specific conduct.
Next, the relator alleged that his corporate supervisor, an Acadia CFO who worked at the corporate headquarters, discussed the use of patient brokers to bring Medicare, Medicaid, and TRICARE patients to the hospital. According to the complaint, after the relator questioned the legality of paying for referrals, he was summoned to the corporate headquarters and fired. The relator alleged he was terminated within two weeks of the initial conversation about patient brokers. The relator provided examples of improper payments to brokers or improper remuneration to patients, including airfare charged to the hospital, and alleged that any claims tainted by these payments were false.
Next, the relator alleged improprieties related to disproportionate share payments received by Vermilion. The complaint explained that the United States provides these payments to the states to compensate hospitals who serve a great number of Medicaid or uninsured patients. According to the complaint, Vermilion received at least $150,000 in DSH payments in 2010 and 2011. The relator alleged Vermilion was not entitled to these payments because it did not have at least two obstetricians with staff privileges who agreed to provide obstetric services to individuals entitled to medical assistance for such services, as required.
The relator also alleged that when Vermilion was audited regarding DSH payments, Vermilion prepared reports falsely indicating that certain bad debts for patient care had been written off during the 2010-2011 period, when in fact they were not written off until the 2014 audit. According to the relator, an independent CPA engaged by Vermilion believed the defendant was not entitled to the DSH payments. In an email to the relator during his employment, the CPA indicated that if Louisiana noticed the problems, Vermilion would have to repay $150,000. However, if the state did not notice the problems, Vermilion was likely to receive an additional $135,000.
The relator was fired before this audit was complete, but stated upon information and belief that Vermilion had not returned the payments it was not entitled to receive. Again, the relator noted that the settlement between Louisiana and the defendants identified this specific allegation.
Finally, the relator alleged that he was terminated when he raised concerns about the defendant’s actions. Further, he alleged the defendants had interfered with his ability to find comparable employment after his termination. According to the relator, he received an offer of employment, but this offer was withdrawn without explanation. The relator alleged he was later told that the withdrawal was the result of information provided by the defendants.
The defendants moved to dismiss, first arguing that the relator had not identified a single false claim associated with his allegations of misconduct, nor alleged any facts to create a strong inference that such claims were submitted. For example, in connection with the APRN who treated patients without a valid collaborative practice agreement, the defendants argued the complaint did not address the patients she treated, when she treated them, if claims for this treatment were submitted to government payors, and if so, when the submissions occurred. The defendants made similar arguments about the allegations of AKS and Stark Law violations.
Regarding the patient brokering allegations, the defendants argued that advertising efforts do not violated the AKS or FCA. They also argued the relator did not provide any details of the alleged remuneration given to patients to induce them to use the hospital’s services, even though he said he had personal knowledge of them. For the DSH payments, the defendants argued the relator did not allege that Vermilion received DSH funds as the result of a claim it submitted.
In response, the relator argued he plausibly alleged the AKS and Stark Law violations and how the defendants submitted claims connected to referrals from those physicians. The relator argued he need not identify specific claims. Rather, because any claims from the named physicians were tainted by AKS and Stark Law violations, any claims submitted for patients referred by these physicians were false.
The relator argued the complaint contained sufficient indicia of reliability to show the defendants submitted such claims. For example, the relator cited to the defendants’ strategic plan, which identified Ulrich as a significant source of referrals and which noted her primary payor source was Medicare. The relator argued that it was impossible to conclude that the defendants would provide Ulrich with staff and then never bill for services provided to patients she referred. The relator also noted the complaint that Dr. Salmeron did not refer enough patients to Vermilion to warrant his annual salary.
The relator also noted that Vermilion had paid Louisiana $500,000 to settle the allegations raised in his complaint, which it would not have done had it not submitted any claims for payment.
The court agreed that the relator’s allegations lacked detail. While the court agreed that it was logical to infer that the defendants submitted claims to Medicare based on the referrals of Ulrich and Salmeron, some details of the scheme are necessary, such as the dates claims were submitted and the services provided. For example, with regard to the APRN allegations, the relator vaguely alleged the APRN was paid a monthly stipend “for several years” and that she “saw and treated patients.”
For the patient brokering allegations, the court found the relator failed to describe these arrangements in detail or allege that the brokers successfully brought patients to Vermilion. The court also held that the AKS and Stark Law allegations failed to provide sufficient detail of the timeline, services provided, or claims submitted. Because the relator did not have first-hand knowledge of the treatment practices or Vermilion’s billing system, he could not allege his inside knowledge gave him any special insight into the schemes. Accordingly, the court dismissed these claims.
Next, the defendants argued the relator failed to state a false certification claim, again arguing that the relator failed to allege the submission of any false claims with the required particularity. Without an adequate allegation of claims, the defendants argued the relator could not show they expressly or impliedly falsely certified compliance with any regulations in connection with a claim. They also argued the relator failed to identify any certifications they allegedly made.
The defendants also argued the relator failed to plead that any violation of Louisiana state law was material to payment. For example, they argued that the relator failed to show that a violation related to a collaborative practice agreement was material to the government’s decision to pay for services rendered by the APRN.
The relator argued that Stark Law and AKS violations render claims for payment false by definition, and that there is no requirement that the claims be accompanied by a false certification. Alternatively, the relator argued that the submission of a claim includes an implied representation that the party is not violating the law by doing so.
The court granted the motion to dismiss, holding that a relator must still allege certification, even with a FCA claim rooted in the AKS. The court also found the claims failed to meet the materiality standard with respect to the APRN allegations. The court explained that the FCA is not an all-purpose anti-fraud statute. While the lack of a valid collaborative practice agreement was a regulatory violation, the court found the relator had not known the state would have withheld payments had it known such an agreement was not in place.
The court also found the relator’s reliance on the state settlement misplaced, noting that entities can enter into a settlement agreement for any number of reasons not connected to fraudulent claims or even liability. The court found the relator failed to allege that the settlement payments were made because the defendants were in fact liable to the state for the alleged violations.
Next, the defendants moved to dismiss the count of reverse false claims, arguing the claims were redundant of the false statement claims. They also argued the relator failed to allege a known obligation they were required to pay the government.
As a preliminary matter, the court found the relator did not respond to the defendants’ argument about the reverse false claim with respect to multiple allegations. Accordingly, the court found the relator waived these claims.
Leaving only the claim that the defendants failed to return DSH payments to which they were not entitled, the court found this allegation was not pleaded with particularity. Because the relator was terminated before the audit was complete, the court found he had no way of knowing whether the funds were properly obtained and, if not, whether they were returned. Because the court could not conclude the defendants failed to repay any obligation to the government, it dismissed the reverse false claims count in full.
Next, the defendants argued that any claim related to the DSH payments failed. The relator alleged that Vermilion did not qualify for the payments because it did not have at least 2 obstetricians who have staff privileges at the hospital and who have agreed to provide obstetric services to individuals who are entitled to medical assistance. The defendants argued that the statute governing these payments provides an exception for a hospital that does not offer nonemergency obstetric services to the general population, which Vermilion satisfies.
The defendants also argued that the relator failed to show that the independent CPA’s opinion about Vermilion’s ineligibility for the payments was accurate. Further, they argued that the letter from the CPA did not state how the hospital failed to meet any requirements nor that the audit was complete.
Because the court already found the relator failed to state his claims, the court passed on deciding this issue. However, the court agreed with the relator’s argument that he need not prove at the pleading stage that the exception to the obstetrician requirement does not apply. Rather, the defendants had the burden of proof demonstrating this affirmative defense.
Finally, the defendants moved to dismiss the retaliation claim. The defendants argued the complaint did not state who terminated the relator’s employment. Second, they argued the relator failed to connect the alleged post-employment interference with his job search to his termination.
In response, the relator argued that he had shown that he raised concerns about possible violations of regulatory and statutory requirements in the context of fraud and was fired soon after. He also argued that he was expressly told that his offer of employment was withdrawn due to information provided by the defendants.
The court sided with the relator, finding that he engaged in protected activity and believed in good faith that his employer could be violating the FCA. The court also found that the relator’s supervisor knew about his concerns and that there was temporal proximity between his protected activity and his termination. The court also found the relator pleaded an adequate causal connection between his former employer and the withdrawal of his later job offer.
