WILLIAM H. STEELE, Chief District Judge.
This matter comes before the Court on the Motion to Dismiss Amended Complaint (doc. 49) filed by defendants James Crumb, M.D. and Mobility Metabolism & Wellness PC, and on the Motion to Dismiss Amended Complaint (doc. 51) filed by defendant Coastal Neurological Institute, P.C. Both Motions have been exhaustively briefed and are now ripe.
The Government brought this action against a physician, the professional corporation he formed, and his former employer alleging that they engaged in several fraudulent billing schemes against federal health care programs. The Amended Complaint identifies three categories of purportedly fraudulent activities by defendants, to-wit: (i) "knowingly submitting, or causing to be submitted, false or fraudulent claims to federal health care programs;" (ii) "knowingly making or using false statements or records material to false or fraudulent claims paid by the United States;" and (iii) "knowingly concealing or improperly avoiding or decreasing an obligation to pay or transmit money or property to the United States." (Doc. 34, ¶ 5.) Based on this allegedly fraudulent conduct, the Amended Complaint asserts causes of action against defendants for submission of false claims, in violation of the False Claims Act, 31 U.S.C. §§ 3729(a)(1) and 3729(a)(1)(A); use of false records and statements material to false or fraudulent claims, in violation of the False Claims Act, 31 U.S.C. §§ 3729(a)(2) and 3729(a)(1)(B);
The Government has packaged these three False Claims Act ("FCA") and two common-law claims in an Amended Complaint spanning 69 pages and 307 numbered paragraphs, with nearly 300 pages of accompanying exhibits (consisting mostly of spreadsheets with detailed claims data filed under seal because they contain names and medical information for patients as to whom defendants purportedly made false claims for reimbursement). Defendants maintain that the Amended Complaint should be dismissed as inadequately pleaded pursuant to Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure. Because the sufficiency of the allegations of the Amended Complaint is central to both Motions to Dismiss, it is helpful at the outset to summarize that pleading.
Defendant James M. Crumb, M.D. ("Dr. Crumb") is a licensed Alabama physician specializing in Physical Medicine and Rehabilitation ("PM&R"). (Doc. 34, ¶ 16.) From 2002 through June 2011, Dr. Crumb practiced medicine as an employee of defendant Coastal Neurological Institute, P.C. ("CNI"). (Id.) During this time period, Dr. Crumb was one of a number of PM&R physicians employed by CNI, including (among others) non-parties Dr. Edward M. Schnitzer and Dr. Regina Phillips Gilliland. (Id., ¶ 73.) In 2010, CNI elected not to renew Dr. Crumb's contract. (Id., ¶ 79.) Effective July 1, 2011, after parting ways with CNI, Dr. Crumb conducted his medical practice under the banner of defendant Mobility Metabolism & Wellness, P.C. ("MMW"), an Alabama professional corporation as to which he is the sole shareholder and owner. (Id., ¶¶ 16-17, 80.) CNI continued to assist Dr. Crumb and MMW with billings and collections from July 2011 through mid-2013, and Dr. Crumb leased office space from CNI and used CNI's electronic charting and billing system for at least part of that time. (Id., ¶¶ 80-83.)
The first fraudulent billing practice identified in the Amended Complaint is that defendants "knowingly submitted false claims for Botox injections procedures and ultrasound guidance using false diagnoses of uncommon and rare neurological disorders, Spasmodic Torticollis and/or Genetic Torsion Dystonia, solely to create a covered and payable claim." (Doc. 34, at 21.) The Government's position is that Dr. Crumb "falsif[ied] diagnoses on hundreds and hundreds of patient medical charts to create covered claims." (Id., ¶ 256.)
The fraudulent practice worked like this: Government health insurers (including Medicare, Alabama Medicaid, and TRICARE) provide reimbursement of claims for Botox treatments for diagnoses of Cervical Dystonia ("ST") or Genetic Torsion Dystonia ("GTD"), which are described in the pleadings as "rare," an "uncommon diagnosis," and a "rare and disabling disorder." (Id., ¶¶ 85-86, 88.)
Part of this fraudulent practice was that Dr. Crumb "misrepresent[ed] patients' medical systems and true medical conditions using cloned and inaccurate information in hundreds and hundreds of medical charts." (Id., ¶ 256.) Dr. Crumb has acknowledged creating cloned language in patient charts "to describe his patient[`]s condition with a ST diagnos[i]s," "to describe the patients' symptoms" and "to document his patient assessment." (Id., ¶¶ 93-99.) Such cloned language was false because it did not document "the true condition of the patient." (Id., ¶ 100.) Review of CNI and MMW medical records reflects that Dr. Crumb "used the above referenced cloned language more than 275 times." (Id., ¶ 106.) Many of those patients were also treated by other physicians "who did not diagnose, treat, or even reference ST or GTD," and of 20 such patients interviewed during the Government's investigation, "none were aware that Dr. Crumb diagnosed them with rare neurological movement disorders," or had even heard of those diagnoses. (Id., ¶¶ 107-08.) From January 2007 through June 2011, Dr. Crumb administered roughly 350 Botox procedures on Medicare beneficiaries, of which 338 were for patients to whom he had assigned a diagnosis of ST or GTD. (Id., ¶ 114.)
Pursuant to this scheme, Dr. Crumb, MMW and CNI are alleged to have "knowingly submitted false claims to Medicare, Medicaid, and TRICARE ... for Botox injection procedures and multiple units of ultrasound guidance for the treatment of false diagnoses." (Id., ¶¶ 117-18.) The false diagnoses of ST or GTD were critical to the fraudulent submissions; indeed, without them defendants' "claim submissions for Botox injection procedures and ultrasound guidance would be denied as a non-covered claim." (Id., ¶ 119.) "Because the ST and GTD diagnoses are false, all claims that CNI and/or MMW submitted ... for reimbursement for the treatment of these diagnoses are not covered and payable claims, and thus constitute false claims under the FCA." (Id., ¶ 261.)
Another fraudulent billing scheme identified in the Amended Complaint relates to abuse of coding modifiers to inflate reimbursement amounts. A code modifier 76 indicates that a procedure was repeated "subsequent to and/or unrelated to the original procedure or service." (Doc. 34, ¶ 122.) Billing and reimbursement policy promulgated by the Centers for Medicare & Medicaid Services ("CMS") reflects that, for ultrasound guidance, only "one unit of service" is allowed "at a single patient encounter regardless of the number of needle placements performed." (Id., ¶ 121.) But defendants abused the 76 modifier by, in one specific example, using it to bill Medicare 32 separate times for a single patient encounter. (Id., ¶¶ 123-24.) Such a practice was not only contrary to CMS policy, but it was also fraudulent because those 32 units of service were not actually provided to the subject patient. Thus, "CNI knowingly created and submitted hundreds and hundreds of false claims ... for multiple units of ultrasound guidance that were not rendered." (Id., ¶ 269.)
Similarly, a code modifier 25 "represents a significant, separately identifiable evaluation and management (E&M) service by the same physician on the same day of the procedure," enabling the provider to recoup an additional fee for that additional E&M service. (Id., ¶¶ 170, 172.) Defendants "engag[ed] in a policy and practice of adding modifier 25 to [E&M] CPT codes on the same day injection procedures such as Botox and trigger point injections were performed." (Id., ¶ 169.)
The third fraudulent billing scheme identified in the Amended Complaint is that when Dr. Crumb began phasing out his Botox practice in 2011, he began a new practice of "billing Medicare for ultrasound guidance with a routine blood draw," thereby converting (for example) a $3.00 reimbursement for a blood draw into a reimbursed ultrasound claim of $150.77. (Doc. 34, ¶¶ 12-29.) Data shows that Dr. Crumb went from making zero claims to Medicare or Alabama Medicaid for ultrasound guidance in connection with blood draws in 2010, to making hundreds of such claims in years 2011 through 2014, reaching a highwater mark of 1,198 such claims in 2012. (Id., ¶ 128.) The Government states that "the use of ultrasound guidance with routine blood draws is not the accepted standard of medical care, not reasonable, and not medically necessary." (Id., ¶ 131.) To justify these billings, Dr. Crumb used preprinted forms with criteria such as "patient afraid of needles" or "patient states veins collapse," none of which are adequate to show that the use of ultrasound guidance for such a routine procedure is "reasonable or medically necessary for the treatment of the patient." (Id., ¶ 133.) Defendants' "sole purpose" for using this procedure was "to fraudulently increase reimbursements." (Id., ¶ 134.)
Defendants' performance of medically unnecessary services and procedures also extended to "ultrasound guidance for needle placement ... for almost all Botox and Trigger point injections that they performed." (Id., ¶ 137.) Use of ultrasound guidance in those circumstances "is not the established standard of care and routinely does not provide clinical value," except in certain particular situations (i.e., "where the guidance is necessary to guide the needle around a structure" or "medical necessity is adequately reflected in the patient's medical chart"). (Id., ¶¶ 138-40.) Certain "medical professionals" reviewing CNI and MMW patient files found that defendants' chart documentation as to those ultrasound guidance procedures was insufficient in specifically enumerated ways. (Id., ¶¶ 142-48.)
The Amended Complaint alleges facts to support defendants' liability on an additional theory of "[f]ailure to return to the federal government any overpayment received from either Medicare or Alabama Medicaid." (Doc. 34, ¶ 179.) This is a so-called "reverse false claim." Defendants had "actual knowledge" for several years of improper 76 modifier claims, "were reckless in failing to scrutinize and audit Dr. Crumb's Botox practice," and "did not take any steps to identify and return" overpayments received because of improper 76 modifiers, but instead "knowingly continued with the same course of conduct." (Id., ¶¶ 180-81.) Even after being notified in September 2014 of the Government's False Claims Act investigation, "CNI did not conduct a self-audit, investigate, or inquire into whether" any of the subject reimbursement claims might necessitate repayment. (Id., ¶ 184.) And Dr. Crumb and MMW "failed to take any corrective or repayment action." (Id., ¶ 185.) Defendants have made "recent partial payment" of overpayments for false and fraudulent claims; however, they did not do so within 60 days, but instead delayed for years from the time they were first placed on notice. (Id., ¶¶ 187-89.)
The Amended Complaint pleads knowledge by defendants taking various forms. The overarching theme is that "CNI and Dr. Crumb/MMW knew that they were submitting claims or causing the submission of claims to Medicare, Alabama Medicaid, TRICARE, and other federal health care programs in violation of the FCA." (Doc. 34, ¶ 191.) In that regard, CNI failed to "provide specific PM&R coding and billing training" to its billing personnel during the relevant time period, and denied these employees "access to critical updates, guidelines and regulations." (Id., ¶¶ 195, 201.) Defendants "failed to read and monitor published" Medicare updates, alerts and notifications, and "deliberately ignored program guidelines and instructions that were received." (Id., ¶ 204.) When CNI learned in 2007 that using the 76 modifier would bypass Medicare's denial of claims as duplicate billings, CNI and Dr. Crumb "began appending modifier 76 to almost all 76942 billings, and thus increased reimbursement to which CNI and Dr. Crumb/MMW were not entitled." (Id., ¶¶ 209-10.)
Despite written notification by program authorities and private payers alike that this practice was improper, CNI persisted until late 2010 or early 2011, when it finally instructed its physicians and billing personnel no longer to use modifier 76 with CPT Code 76942. (Id., ¶¶ 214-21.) Yet CNI employees, including Dr. Crumb, "continued to chart multiple units of ultrasound guidance, and CNI continued to bill multiple units," with Dr. Crumb carrying on with that practice until October 2014. (Id., ¶¶ 222-23.) CNI knew that Dr. Crumb was making "large orders of a very expensive, diagnosis restricted medication" (Botox), but did not investigate or question it. (Id., ¶ 228.) CNI also knew of audits and investigations for "Dr. Crumb's excessive billing of Botox injections, multiple units of ultrasound guidance for needle placement, and ultrasound guidance used with routine blood draws," yet its "billing department continued to assist with the submission of claims" for him even after he left CNI's employ and started MMW. (Id., ¶¶ 231-32.) And during relevant times, Dr. Crumb was "providing services to patients as a part of his[] duties as a CNI physician," while "CNI directly received funds from claims submitted" by Dr. Crumb and others "for medically unnecessary Botox injections and ultrasound guidance for needle placement." (Id., ¶¶ 235-37.)
Based on these and numerous other factual allegations, the Government asserts five claims for relief against defendants, including three under the False Claims Act and two common-law claims. The first FCA claim, labeled "Submission of False Claims" and asserted pursuant to 31 U.S.C. § 3729(a)(1), alleges that defendants presented "false or fraudulent claims for payment or approval to the United States, acting through its federal health care programs, ... for Botox injections procedures and ultrasound guidance for needle placement (with and without modifier 76), on patients who did not suffer from ST and/or GTD." (Doc. 34, ¶¶ 286-87.) That claim also alleges that defendants presented false or fraudulent claims "for multiple unit billing of CPT Code 76942 with modifier 76, unreasonable and medically unnecessary services, procedures, and medications; up-coded 25 and 76 modifier procedures, services not rendered, and medication not administered." (Id., ¶ 288.)
The second FCA cause of action, labeled "Use of False Records and Statements" and asserted pursuant to 31 U.S.C. § 3729(a)(2), alleges that defendants falsified "patient diagnoses of ST and/or GTD in CNI and MMW medical charts, on Form 1500 for claims submissions, and in the Medicaid certifications for medication overrides, and representations made and caused to be made ... to get false or fraudulent claims paid and approved by the United States. Those false records or statements were material to false or fraudulent claims." (Id., ¶ 291.)
The Government's third FCA cause action, labeled "Concealing or Avoiding Obligation to Pay" and asserted pursuant to 31 U.S.C. § 3729(a)(1), alleges that defendants "made and used or caused to be made or used false records or statements material to an obligation to pay or transmit money to the United States, or knowingly concealed, avoided, or decreased an obligation to pay or transmit money to the United States." (Id., ¶ 294.) That claim includes further allegations that "[s]aid concealment, avoidance or decreased obligation to pay or transmit money to the United States was made with actual knowledge, or with reckless disregard or deliberate indifference." (Id., ¶ 296.)
Finally, the two common-law claims found at Counts IV and V of the Amended Complaint sound in theories of "Payment Under Mistake of Fact" and "Unjust Enrichment." The first of those causes of action alleges that the Government is entitled to recover monies paid to defendants through Medicare, Alabama Medicaid and TRICARE reimbursements "as a result of mistaken understandings of facts." (Id., ¶ 299.) The Amended Complaint alleges that the Government paid defendants' claims for reimbursement from federal health care programs "based upon mistaken or erroneous understandings of material fact caused by CNI and Dr. Crumb/MMW." (Id., ¶ 300.) As for the unjust enrichment cause of action, the Amended Complaint specifies that "[b]y directly and indirectly obtaining government funds to which they were not entitled, CNI and Dr. Crumb/MMW were unjustly enriched, and are liable to account and pay such amounts" to the Government. (Id., ¶ 304.)
Defendants move for dismissal of the Amended Complaint pursuant to Rule 12(b)(6), Fed.R.Civ.P., for failure to state a claim on which relief will be granted. In particular, defendants repeatedly and vigorously contest the sufficiency of the Government's pleading to state actionable claims against them under applicable pleading standards.
Ordinarily, to withstand Rule 12(b)(6) scrutiny and satisfy Rule 8(a), a plaintiff must merely plead "enough facts to state a claim to relief that is plausible on its face," so as to nudge[] [its] claims across the line from conceivable to plausible." Bell Atlantic Co. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citation omitted). "This necessarily requires that a plaintiff include factual allegations for each essential element of his or her claim." GeorgiaCarry.Org, Inc. v. Georgia, 687 F.3d 1244, 1254 (11
Notwithstanding this general pleading standard, the parties correctly recognize that the heightened pleading standard of Rule 9(b) also applies to the Government's FCA claims. See, e.g., Hopper v. Solvay Pharmaceuticals, Inc., 588 F.3d 1318, 1324 (11th Cir. 2009) ("[a] complaint under the False Claims Act must meet the heightened pleading standard of Rule 9(b)"); United States ex rel. Clausen v. Laboratory Corp. of America, Inc., 290 F.3d 1301 (11th Cir. 2002) ("we now make clear that Rule 9(b) does apply to actions under the False Claims Act"). "A False Claims Act complaint satisfies Rule 9(b) if it sets forth facts as to time, place, and substance of defendants' allegedly fraudulent acts, when they occurred, and who engaged in them." Hopper, 588 F.3d at 1324 (citations and internal quotation marks omitted).
Of course, the Rule 9(b) particularity requirement "must be read in conjunction with Federal Rule of Civil Procedure 8's directives that a complaint need only provide a short and plain statement of the claim," and courts considering motions to dismiss for failure to plead fraud with particularity "should always be careful to harmonize the directives of [R]ule 9(b) with the broader policy of notice pleading found in Rule 8." Hill v. Morehouse Medical Associates, Inc., 2003 WL 22019936, *3 (11
For the Government's FCA claim brought pursuant to 31 U.S.C. § 3729(a)(1) on a theory of presentment of a false or fraudulent claim, binding precedent mandates that "actual presentment of a claim be pled with particularity," meaning "the who, what, where, when, and how of fraudulent submissions to the government." Hopper, 588 F.3d at 1327 (citation and internal quotation marks omitted); see also United States ex rel. Mastej v. Health Management Associates, Inc., 591 Fed.Appx. 693, 703-04 (11
As to the Government's FCA claim brought pursuant to § 3729(a)(2) on a theory of use of false records and statements, the Complaint "must allege with particularity, pursuant to Rule 9(b), that [defendants'] false statements ultimately led the government to pay amounts it did not owe." Hopper, 588 F.3d at 1329. Indeed, to state a claim under this subsection, "a plaintiff must show that (1) the defendant made a false record or statement for the purpose of getting a false claim paid or approved by the government; and (2) the defendant's false record or statement caused the government to actually pay a false claim." Urquilla-Diaz, 780 F.3d at 1052 (citation omitted).
For the reverse false claim pleaded as Count III of the Amended Complaint, the applicable legal standard depends on whether the claims are brought under the version of the False Claims Act that predated the Fraud Enforcement & Recovery Act of 2009, § 4(a), Pub.L. No. 111-21, 123 Stat. 1617, 1621-22 (2009) ("FERA"), or whether they proceed under the version of the Act that prevails post-FERA.
It bears emphasis that "[i]n evaluating whether a complaint should be dismissed under Rule 12(b)(6) for failure to state a claim, a court is generally limited to reviewing what is within the four corners of the complaint." Hayes v. U.S. Bank Nat'l Ass'n, ___ Fed.Appx. ___, 2016 WL 1593415, *3 (11
In their joint Motion to Dismiss, defendants Dr. Crumb and MMW advance numerous arguments for dismissal of the Amended Complaint against them. The Court has sorted those contentions by category, and will address each in turn.
For starters, Dr. Crumb and MMW assert that the Amended Complaint is a prohibited "shotgun pleading" because each count contains only boilerplate language and incorporates all preceding factual allegations. The abusive, obfuscatory practice of shotgun pleading has been roundly criticized at both the appellate and district court levels, and rightfully so. See, e.g., Weiland v. Palm Beach County Sheriff's Office, 792 F.3d 1313, 1321 (11
A complaint's incorporation by reference in each count of all preceding paragraphs may be a disfavored drafting technique; however, for better or worse, it is also an altogether commonplace convention in pleadings filed in federal court. Typically, this practice appears to stem from overanxious litigants striving to plead their claims as broadly as possible so as to avoid constraining the universe of facts on which a given claim might rely. If the mere utilization of such an unwelcome-but-pervasive pleading device mandated that a complaint be jettisoned as a shotgun pleading, then precious few civil pleadings would survive. The defining defect in shotgun pleadings is not the incorporation by reference per se, but is instead the net effect that it is "virtually impossible to know which allegations of fact are intended to support which claim(s) for relief." Anderson v. District Bd. of Trustees of Cent. Florida Community College, 77 F.3d 364, 366 (11
Undoubtedly, the Amended Complaint is voluminous to the point of being unwieldy. Undoubtedly, the incorporation of all factual allegations in each count is a frowned-upon drafting practice. Upon careful review of the Amended Complaint, however, the Court does not concur with movants' assessment that it is a shotgun pleading. Specifically, Counts I and II (the FCA claims for submission of false claims and use of false records) are not confined to mere boilerplate allegations, but instead identify the specific categories of facts on which they rely.
The point is straightforward: Although Dr. Crumb and MMW are correct that the Amended Complaint could have been pleaded with greater clarity and should have omitted the generic incorporation-by-reference paragraphs in each cause of action, the Government was not required to present each claim with the greatest possible specificity. See, e.g., Brown v. Endo Pharmaceuticals, Inc., 38 F.Supp.3d 1312, 1323 (S.D. Ala. 2014) ("For better or worse, the Federal Rules of Civil Procedure do not permit district courts to impose upon plaintiffs the burden to plead with the greatest specificity they can.") (citation omitted). The Amended Complaint, in its present form, gives adequate notice to defendants of which facts go with which claims. As the Eleventh Circuit recently observed, "[t]he unifying characteristic of all types of shotgun pleadings is that they fail to one degree or another, and in one way or another, to give the defendants adequate notice of the claims against them and the grounds upon which each claim rests." Weiland, 792 F.3d at 1323. Viewed in the context of the pleading as a whole, the aspects of the Amended Complaint to which Dr. Crumb/MMW's argument is directed (i.e., use of boilerplate language and incorporation by reference of factual allegations in each count) do not deprive defendants of adequate notice of the claims against them or the grounds upon which each claim rests. For that reason, defendants' "shotgun pleading" objection is not meritorious.
Next, Dr. Crumb and MMW take aim at the Amended Complaint to the extent it would predicate FCA liability on a theory of false certification of medical necessity. In particular, movants lambaste the Government for failing to "cite the opinion of a single physician, much less a peer, who suggests that Dr. Crumb's treatments or use of ultrasound were medically inappropriate," and for failing "to cite any peer-review studies, treatises, or other authoritative medical literature to that effect." (Doc. 69-2, at 9.)
The theme of medically unnecessary procedures crops up repeatedly in the Amended Complaint. Three examples illustrate the point. First, the Amended Complaint alleges that Dr. Crumb "manipulated patients' diagnoses to create covered claims or to increase reimbursement." (Doc. 34, at § VIII.A.3.) The allegation is that Dr. Crumb fabricated phony diagnoses of ST or GTD, then used "Botox injection procedures and multiple units of ultrasound guidance for the treatment of false diagnoses." (Id., ¶ 118.) Rudimentary logic and common sense confirm that a procedure or service is medically unnecessary when the provider administers it to treat a condition that the patient does not have, based on a diagnosis that the provider knowingly falsified for the purpose of creating covered claims.
The gravamen of Dr. Crumb/MMW's Motion to Dismiss on this issue is that the Amended Complaint flunks Rule 9(b) because the Government was obliged to identify in its pleading the identities of physicians, studies or treatises establishing that the described treatments are not medically necessary. The fundamental problem with this argument is that Dr. Crumb and MMW cite no cases interpreting Rule 9(b) to impose such a stringent pleading burden on the Government in a FCA case.
As the next ground for their Motion to Dismiss, Dr. Crumb and MMW posit that it is "impossible to know what theories of FCA liability (beyond false certification of medical necessity) the government is pursuing." (Doc. 69-2, at 13.) This argument cannot be reconciled with the plain text of the Amended Complaint. Any reasonable reading of that document confirms that the touchstone of the Government's theory of liability is that defendants knowingly made false diagnoses of hundreds of patients for the purpose of obtaining reimbursements for Botox injections that otherwise would not have been compensable. Representative of the Government's extensive pleading of this basis for relief is the following language from the Amended Complaint:
(Doc. 34, ¶ 7(a) (emphasis added).) Such themes ripple throughout the Amended Complaint.
Relatedly, Dr. Crumb and MMW attack the FCA claims for failing sufficiently to plead a false claim within the meaning of the statute. Of course, the Government's claims for relief in Counts I and II require a false or fraudulent claim. "There are two categories of false claims under the FCA: a factually false claim and a legally false claim." United States ex rel. Wilkins v. United Health Group, Inc., 659 F.3d 295, 305 (3
"False certifications can be either express or implied." Science Applications, 626 F.3d at 1266. "Under the `express false certification' theory, an entity is liable under the FCA for falsely certifying that it is in compliance with regulations which are prerequisites to Government payment in connection with the claim for payment of federal funds." Wilkins, 659 F.3d at 305 (citation omitted). By contrast, liability has been found to attach on an "implied false certification" theory "when a claimant seeks and makes a claim for payment from the Government without disclosing that it violated regulations that affected its eligibility for payment." Id. (citation omitted); see also United States ex rel. Keeler v. Eisai, Inc., 568 Fed.Appx. 783, 799 (11
Defendants' position is that the Government has failed "to pick and clearly articulate which of the above theories of liability are being pursued
At any rate, a fair reading of the Amended Complaint shows that, contrary to the arguments of Dr. Crumb/MMW, the Government has set forth in sufficient detail how the "false diagnosis" theory gives rise to FCA liability here. For example, the Amended Complaint describes in substantial detail the so-called "Form CMS-1500" that a provider must use to submit a claim for reimbursement under Medicare. (Doc. 34, ¶¶ 38-46.) In that regard, the Government has pleaded facts showing that (i) the Form CMS-1500 requires that the provider list a diagnosis code for each service or procedure for which reimbursement is sought, (ii) the Form CMS-1500 also requires the provider to assign a CPT code to each such service or procedure, (iii) diagnosis-restricted procedures are not reimbursable unless an approved diagnosis code is used, (iv) health care benefit programs utilize these codes to determine whether to issue or deny payments as well as the amount of any such payments, and (v) the Form CMS-1500 includes an express certification by the provider that "the services shown on this form were medically indicated and necessary for the health of the patient and were personally furnished by me." (Id.) The Amended Complaint further alleges that claims for Alabama Medicaid reimbursement are also submitted via Form CMS-1500. (Id., ¶ 60.) And the Complaint expressly alleges that defendants included falsified diagnoses of ST and GTD on Form CMS-1500s that they submitted to Medicare, Alabama Medicaid and TRICARE. (Id., ¶¶ 256-59.)
Taken in the aggregate, then, a fair reading of these factual allegations is that Dr. Crumb knowingly falsified diagnoses of ST/GTD in hundreds of cases, then listed those falsified diagnoses on Form CMS-1500s that were submitted to federal health care programs in order to obtain reimbursement for diagnosis-restricted procedures. The Government relied on the false diagnosis codes recited on the Form CMS-1500 to pay the claims, which otherwise would have been non-payable in the absence of such diagnoses. This is the Government's "false diagnosis" theory of liability. It sounds in both factual falsity and legal falsity. And it is adequately pleaded in the Amended Complaint to comport with Rule 9(b).
As with the false diagnosis claims, Dr. Crumb and MMW profess inability to discern how the Government is accusing them of FCA violations with respect to use of ultrasound and coding modifiers 25 and 76. With respect to the ultrasound issue, these defendants indicate that they do not know whether the Government is asserting that "Dr. Crumb intentionally over-utilized the machine" or whether its theory is that "Dr. Crumb's medical judgment in using the ultrasound during the procedures at issue was ... clearly unreasonable." (Doc. 69-2, at 15-16.) With respect to the coding modifiers, defendants query whether the Government's theory is that "Dr. Crumb intentionally misused those modifiers" or that his "use of those modifiers was so objectively incorrect that including them on claims he submitted for reimbursement was a reckless disregard of the claims' falsity." (Id., at 16.) More generally, for both categories of claims, Dr. Crumb and MMW express concern that they cannot tell what is alleged to be false about them.
Once again, the Amended Complaint addresses defendants' challenges with sufficient specificity to discharge the Government's pleading obligations under the Federal Rules of Civil Procedure. The pleading sets forth the ultrasound guidance claims in the following terms: Even though "the use of ultrasound guidance with routine blood draws is not the accepted standard of care, not reasonable, and not medically necessary," Dr. Crumb "implemented a new ultrasound fraud scheme for routine blood draws," whereby his "sole purpose for using ultrasound guidance with routine blood draws is to fraudulently increase reimbursements." (Doc. 34, ¶¶ 126-35, 274-77.) As a separate component of the ultrasound guidance claims, the Amended Complaint alleges that Dr. Crumb, among others, "used and billed ultrasound guidance for needle placement (CPT Code 76942) for almost all Botox and Trigger point injections that they performed," even though the use of ultrasound guidance for needle placement with such injections "is not the established standard of care and routinely does not provide clinical value." (Id., ¶¶ 136, 138.) Such a practice, as alleged in the Amended Complaint, was "medically unnecessary." (Id., ¶ 149.) The nature of these ultrasound guidance claims, and the manner in which the Government contends they were false, are thus sufficiently set forth in the Amended Complaint to comport with applicable pleading standards.
As for the coding modifier 76 claims, the Amended Complaint outlines the Government's theory as being that defendants "knowingly submitted claims for multiple billing of CPT Code 76942 in violation of CMS' National Correct Coding Initiative Policy." (Doc. 34, § VIII.B.) To flesh out the claim, the Amended Complaint recites a passage from the National Correct Coding Initiative Policy Manual reflecting that for radiologic guidance for needle placement under CPT Code 76942, only one unit of service is allowed at a single patient encounter, regardless of the number of needle placements performed. (Doc. 34, ¶ 121.) Notwithstanding that rule, the Amended Complaint continues, defendants effectively circumvented it by using the modifier 76 (denoting a procedure repeated by the same physician that was unrelated to the original procedure) to bill for as many as dozens of ultrasound guidances for a single patient encounter. (Id., ¶¶ 122-25.) The Amended Complaint also alleges that defendants billed federal health programs "for multiple units of ultrasound guidance that were not rendered." (Id., ¶ 269.) Thus, the Government's stated theory is that defendants' modifier 76 billings were "false as repeat procedures were not performed and CPT Code 76942 can only be billed one time per patient encounter." (Id., ¶ 263.) The Amended Complaint hammers the point home as follows: "CNI, MMW and Dr. Crumb engaged in an up-coding scheme of appending modifier 76 to multiple units of ultrasound guidance for needle placement (CPT Code 76942) when repeat ultrasound procedures were not performed." (Id., ¶ 7(f).) This claim is also adequately pleaded, inasmuch as defendants are reasonably notified of the manner in which the Government contends their alleged abuse of modifier 76 yielded false or fraudulent claims.
Finally, the modifier 25 claims are specified as being that defendants "engaged in an up-coding scheme of appending modifier 25 to evaluation and management CPT codes, when in fact a `significant and separately identifiable service' was not provided." (Id., ¶ 7(g).) The Amended Complaint explains that "Modifier 25 represents a significant, separately identifiable evaluation and management (E&M) service by the same physician on the same day of the procedure or other service," for which the provider is entitled to additional reimbursement. (Id., ¶ 170.) Thus, "[b]y adding modifier 25 to an E&M code on the same date of service ..., the provider is seeking additional reimbursement for what he/she claims to be a significant and separately identifiable E&M service from the Botox or trigger point procedure." (Id., ¶ 172.) As pleaded in the Amended Complaint, Dr. Crumb would "[t]reat the patient for the same neck and back complaints, but us[e] a different diagnosis," so as to add a modifier 25, even though "a significantly separate and identifiable service has not been performed." (Id., ¶¶ 173, 175.) Also, CNI would add modifier 25 anytime there was "[a]n unscheduled procedure performed during an office visit." (Id., ¶ 174.) What makes these claims fraudulent then, according to the Government's pleading, is "the use of modifier 25 to falsely create a separate and identifiable service" where none existed. (Id., ¶ 260.) The manner in which defendants' alleged abuse of modifier 25 gives rise to a false or fraudulent claim for purposes of FCA liability is adequately pleaded in the Amended Complaint.
As previously discussed, Count III of the Amended Complaint proceeds on a "reverse false claim" theory. Under the FCA, liability for a reverse false claim may accrue where a defendant "knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government." 31 U.S.C. § 3729(a)(1)(G).
Insofar as defendants seek dismissal of the reverse false claim action because the Amended Complaint "fails to allege with particularity a specific false statement or record used to conceal, avoid, or decrease an obligation to pay money to the government" (doc. 69-2, at 21), that argument is not persuasive. In the wake of the FERA amendments to the False Claims Act in May 2009, it is no longer imperative for a plaintiff to identify a false record or statement in order to prevail on a reverse false claim theory of liability. See, e.g., United States ex rel. Prather v. Brookdale Senior Living Communities, Inc., 2015 WL 1509211, *16 (M.D. Tenn. Mar. 31, 2015) (explaining that, after FERA, "there is no longer a need to show the affirmative use of a false record or statement in connection with the avoidance of an obligation to pay money to the United States"). The Government has unequivocally professed its intent to proceed under the "knowingly and improperly avoids or decreases an obligation to pay" clause of § 3729(a)(1)(G), rather than the "false record or statement" clause. (See doc. 82-3, at 30-31.) Therefore, the Amended Complaint is not deficient for failing to allege affirmative use of a false record or statement in connection with avoidance of defendants' obligation to pay the United States.
Additionally, Dr. Crumb and MMW contend that Count III is insufficiently pleaded because the Amended Complaint does not identify "a concrete obligation to pay the government at the time of any purported misrepresentations." (Doc. 69-2, at 23.) To be sure, a reverse false claim cause of action requires an "obligation to pay or transmit money or property to the Government." 31 U.S.C. § 3729(a)(1)(G); see also Matheny, 671 F.3d at 1223 ("To sustain a reverse false claim action, relators must show that the defendants owed an obligation to pay money to the United States ..."); Petratos, 141 F. Supp.3d at 322 (noting that reverse false claims liability requires "a `clear' obligation or liability to the [G]overnment") (citations omitted). And the FCA defines "obligation" as meaning "an established duty, whether or not fixed, arising from an express or implied contractual, grantor-grantee, or licensor-licensee relationship, from a fee-based or similar relationship, from statute or regulation, or
On its face, the Amended Complaint identifies sufficient facts to show that defendants had a concrete obligation to pay the Government at the time of the alleged avoidance. In particular, the Amended Complaint alleges that, at least by 2010, defendants "had actual knowledge of the improper 76942 and 76 modifier claim submissions," yet they "did not take any steps to identify and return said moneys to Cahaba and/or Alabama Medicaid within 60 days as required by the ACA." (Doc. 34, ¶ 181.)
In their reply, Dr. Crumb and MMW unveil a new argument that the reverse false claim count should be dismissed because, as pleaded in the Amended Complaint, it fails to rebut the defense that repayment "occur[red] within the 8-month time period CMS has deemed presumptively reasonable and timely." (Doc. 83, at 5.) As an initial matter, this kind of new, previously available argument in support of a motion is not appropriately presented for the first time in a reply.
As the final ground for their Motion to Dismiss, Dr. Crumb and MMW take aim at Count IV (payment under mistake) and Count V (unjust enrichment). Movants' position is that these two federal common-law claims "should be dismissed because they are purely derivative of the deficient FCA claims." (Doc. 69-2, at 24.) As a legal matter, however, that statement is incorrect. These common-law claims are independent of, alternative to, and have distinct elements of proof from, the Government's claims under the False Claims Act.
Review of applicable authorities confirms that it is commonplace for the Government to plead common-law theories of payment by mistake and unjust enrichment contemporaneously with FCA claims. Moreover, federal courts have routinely allowed common-law claims and FCA claims to coexist. See, e.g., United States ex rel. Heesch v. Diagnostic Physicians Group, P.C., 2014 WL 2154241, *11 (S.D. Ala. May 22, 2014) ("even where the Government cannot establish that a defendant acted knowingly for purposes of the False Claims Act, the Government may be entitled to recovery under the alternative theory of payment by mistake of fact.").
In its Motion to Dismiss, defendant Coastal Neurological Institute, P.C., raises numerous challenges to the sufficiency of the Amended Complaint. Despite repeated admonitions to minimize overlap, there is considerable redundancy between the arguments presented in CNI's Motion and those set forth in Dr.Crumb/MMW's Motion. It would serve no constructive purpose for the Court to reiterate its analysis of duplicative grounds for dismissal set forth in both Motions to Dismiss; however, CNI's Motion will be addressed herein insofar as it raises arguments distinct from those submitted by Dr. Crumb and MMW.
As its first line of attack, CNI maintains that the Amended Complaint runs afoul of Rule 9(b) because it lacks specificity as to the Government's investigation and the specifics of the alleged wrongdoing. (Doc. 52, at 8.) In that regard, for example, CNI objects to the pleading's allegations that "ZPIC medical professionals conducted a medical record review of 20 patient files" and "concluded that the chart documentation was insufficient." (Doc. 34, ¶ 142.) CNI's insistence that the Amended Complaint fails to specify what documentation was insufficient or how it was lacking is counterfactual.
Similar problems abound with CNI's other, related arguments along these lines. (Doc. 52, at 9-11.) CNI balks that the Amended Complaint fails to identify which patients were interviewed in the Government's investigation (doc. 34, ¶ 108), but again points to no legal requirement mandating dismissal of the Amended Complaint unless those patients' names are pleaded. CNI quibbles with the Amended Complaint's allegations that the patients interviewed by the Government failed to exhibit symptoms of ST or GTD (id., ¶ 109); however, in so doing, defendant ignores other well-pleaded allegations bolstering the "false diagnosis" claims, the fact that the procedural posture of this action is a Rule 12(b) motion (not a summary judgment motion), and the legal requirement that reasonable inferences in the pleadings be drawn in the Government's favor, not the defendant's. CNI further criticizes the Amended Complaint for referencing a "a policy of adding modifier 25 to any office visit wherein a[n unscheduled procedure was performed]." (Id., ¶ 174.) Specifically, CNI complains that a copy of the policy is not attached to the pleading and that the Amended Complaint fails to allege "who at CNI put this policy into effect, or when it was implemented." (Doc. 52, at 10.) Of course, the Amended Complaint does not characterize this "policy" as being a formal written document, and CNI does not point to anything in Rule 9(b) that would require the plaintiff to enumerate the entire organizational history (including its architects, genesis, derivation, evolution and implementation) of any such policy in the pleading in order to pass muster under baseline pleading rules.
In this same series of arguments, CNI sees fit to attack the Amended Complaint for containing factual allegations that, according to CNI, "have no basis in fact" and that the Government "knows are inaccurate." (Doc. 52, at 10-11.) Such inflammatory argument — accusing the Government of knowingly misrepresenting the facts in its pleading — is manifestly inappropriate at the Rule 12(b)(6) stage and does not constitute a cognizable basis for dismissal of the Amended Complaint. As defendant knows, well-pleaded facts in a pleading are accepted as true at this stage, no matter how vehemently a defendant may dispute their veracity. See, e.g., Resnick v. AvMed, Inc., 693 F.3d 1317, 1321-22 (11
CNI also contends that the Amended Complaint is subject to dismissal because it fails to specify whether the extensive Medicare and Medicaid claims data attached to the pleading "constitute[s] all of the allegedly false claims to Medicare and Medicaid." (Doc. 52, at 13.) In that same general category of argument, CNI seeks dismissal of the Amended Complaint because it "fails to identify the allegedly false claims submitted to TRICARE," or to quantify the unreimbursed sums that form the basis of the reverse false claim action at Count III. (Id. at 13-14.) Once again, movant's argument is untethered to Rule 9(b) or the authorities construing it. The Eleventh Circuit has instructed that "while dates, amounts, and account numbers can provide particularity, Rule 9(b) does not mandate all of that information for each alleged claim, only some of the information for at least some of the claims." Matheny, 671 F.3d at 1227 (citations and internal quotation marks omitted). The Amended Complaint unquestionably does that. Exhibits B through D to that pleading are nearly 300 pages of Medicare and Alabama Medicaid claims printouts, identifying patient names, providers, dates of service, diagnoses, CPT codes, modifiers, amounts billed and paid, claim numbers, and more. These exhibits thus provide extensive, particularized, raw data underlying the false diagnosis claims, false ultrasound guidance claims, ultrasound/routine blood draw claims, and 25/76 modifier claims.
As another ground for dismissal, CNI laments the Amended Complaint's inclusion of alternative theories of liability, reasoning "that should not be the case in an Amended Complaint filed by the United States after a fifteen month investigation." (Doc. 52, at 17.) Of course, the Federal Rules of Civil Procedure expressly allow pleading in the alternative, and make no distinction in pleading standards between complaints filed by the Government after extensive investigation and those filed by private actors after a lesser quantum of prior inquiry. See, e.g., Rule 8(d)(3), Fed.R.Civ.P. ("A party may state as many separate claims or defenses as it has, regardless of consistency."); United Technologies Corp. v. Mazer, 556 F.3d 1260, 1273 (11
For its next category of objections, CNI criticizes the Amended Complaint for making "extensive and generalized allegations referencing only `CNI,'" without naming the specific representatives of CNI who were involved. (Doc. 52, at 11.) It is true that Rule 9(b) has been interpreted as requiring pleadings to identify the agents or corporate representatives of an entity who participated in the alleged fraud.
It is also true, however, that the Amended Complaint identifies (by name and/or position) various CNI agents or employees who are alleged to have participated in the FCA violations. In that regard, the Amended Complaint includes the following facts: (i) the identities of CNI's physician shareholders, employee physicians (with dates of employment) and Chief Administrative Officer during the relevant timeframe (doc. 34, ¶¶ 15-16, 71, 73-76); (ii) statements that the CNI billing department submitted all claims for payment to Medicare, Alabama Medicaid and TRICARE, and completed the CMS-1500 Forms (id., ¶ 76); (iii) statements that CNI physician shareholders and physician employees completed charts, ordered tests, performed procedures, made diagnoses and devised treatment plans (id., ¶ 77); and (iv) statements that CNI billing representatives report to billing managers, who in turn report to the Chief Administrative Officer and ultimately the shareholders (id., ¶ 78). The Amended Complaint attributes many acts and omissions material to the fraud to specific CNI agents, including numerous references to Dr. Crumb and others in their capacity as physician employees, references to billing directives by the Chief Administrative Officer, and passages identifying participants by their corporate role (i.e., "CNI billing personnel").
To be sure, defendant is correct that, on certain occasions, the Amended Complaint references CNI generally, without identifying a particular actor, speaker, or decisionmaker. But CNI cites no authority standing for the proposition that Rule 9(b) requires a plaintiff to identify with specificity each corporate agent who engaged in each act or omission giving rise to the fraud claims in the complaint.
As its next ground for Rule 12(b)(6) relief, CNI contends that the Amended Complaint must be dismissed because it "has not identified a single specific certification (much less [a] false one) made by CNI." (Doc. 52, at 18.)
This argument cannot be reconciled with the plain language of the pleading. As previously discussed herein, the Amended Complaint documents in detail the central role of the Form CMS-1500 in the reimbursement process under both Medicare and Alabama Medicaid. (Doc. 34, ¶¶ 38-46, 60.) It specifies the contents of that Form CMS-1500, including the diagnosis codes, the CPT codes and modifiers that classify the services performed, and the express certification that "the services on this form were medically indicated and necessary for the health of the patient and were personally furnished by me." (Id., ¶¶ 39-44.) It indicates that Medicare providers are required to submit an electronic Form CMS-1500 for payment. (Id., ¶ 38.) And it reflects that CNI "submits all claims to Medicare electronically" and was "enrolled in the Alabama Medicaid Program and authorized to bill Alabama Medicaid." (Id., ¶¶ 45, 53.) The Amended Complaint also identifies hundreds of claims submitted by CNI to Medicare and Alabama Medicaid. (Id. at Exhs. B-D.) The point is simple: Each one of those claims submitted by CNI would have been submitted on a Form CMS-1500, and therefore would have contained the express certifications embodied within that form. Given these factual allegations, CNI's contention that the Amended Complaint "does not identify a single specific certification made by CNI" (doc. 52, at 18) is counterfactual.
CNI's three subsidiary objections on this issue do not strengthen its Motion to Dismiss. First, CNI protests that the Amended Complaint says nothing about "alleged certifications to Alabama Medicaid and TRICARE." (Doc. 52, at 20.) But the Amended Complaint expressly links CNI claim submissions under both Alabama Medicaid and TRICARE to the Form CMS-1500, such that they would be covered by the same express certifications in the Form CMS-1500 as the Medicare claims are.
Third, CNI argues that any certifications identified in the Amended Complaint fall short because they fail to "state
CNI also takes issue with the Amended Complaint insofar as the Government is proceeding on a theory of implied certifications, rather than express certifications. (Doc. 52, at 21-23.) The leading case explaining this theory of FCA liability is Universal Health Services, Inc. v. United States ex rel. Escobar, ___ U.S. ___, 136 S.Ct. 1989 (2016), which the Supreme Court decided near the conclusion of its most recent term. The Escobar Court unanimously held "that the implied certification theory can be a basis for liability, at least where two conditions are satisfied: first, the claim does not merely request payment, but also makes specific representations about the goods or services provided; and second, the defendant's failure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations misleading half-truths." 136 S.Ct. at 2001.
Review of the Amended Complaint readily confirms that the Government's implied certification allegations satisfy both prongs of the Escobar standard. As to the first requirement, the Amended Complaint clearly alleges that the Form CMS-1500 claims that CNI submitted were much more than bare requests for payment, but also made specific representations about the services provided and the reasons for those services (i.e., diagnoses). As to the second element, the Amended Complaint alleges that CNI failed to disclose such matters as (i) that the listed diagnoses did not conform to the International Classification of Diseases system because they had been falsified to create covered claims, (ii) that the Botox and ultrasound guidance procedures performed were not actually provided for covered and eligible diagnoses, and (iii) that the 76 modifiers and 25 modifiers used in the Form CMS-1500 claims did not comport with CMS policy and program requirements. Because of those nondisclosures, the representations in the claim forms (e.g., that the Botox injections were medically necessary, that the patients had covered diagnoses, that the 76 modifier applied to particular patient encounters, that CNI physicians had provided significant and separate E&M services on the same day as another procedure) were, at best, misleading half-truths.
Nor can Escobar's discussion of the "materiality" requirement avail CNI at the Rule 12(b)(6) stage. In Escobar, the Court recognized that "a misrepresentation about compliance with a statutory, regulatory, or contractual requirement must be material to the Government's payment decision in order to be actionable under the False Claims Act." 136 S.Ct. at 2002. "To be material, a misrepresentation must have the ability to influence the government's decision-making." Matheny, 671 F.3d at 1228. "[W]hen evaluating materiality under the False Claims Act, the Government's decision to expressly identify a provision as a condition of payment is relevant, but not automatically dispositive. Likewise, proof of materiality can include ... evidence that the defendant knows that the Government consistently refuses to pay claims in the mine run of cases based on noncompliance with the particular statutory, regulatory, or contractual requirement." Escobar, 136 S.Ct. at 2003. By contrast, "if the Government pays a particular claim in full despite its actual knowledge that certain requirements were violated, that is very strong evidence that those requirements are not material." Id.
Taken as a whole, the allegations of the Amended Complaint raise a compelling inference that the purported misrepresentations in question were material to the Government's payment decision. For example, the Amended Complaint reflects that the Botox injection services would not have been reimbursable unless they were provided for a covered diagnosis. CNI's alleged undisclosed noncompliance with applicable requirements for diagnosing a patient is thus adequately pleaded to be "material" to the Government's payment decision because "claims billed for the treatment of [these] false diagnoses are not covered and payable claims" under applicable rules, regulations, policies and contract terms. (Doc. 34, ¶ 262.) Under the circumstances, given the specific form and nature of the alleged misrepresentations at issue, the Court concludes that the Government has adequately pleaded materiality under Escobar.
CNI also objects that "the Amended Complaint contains absolutely no specific allegations of any factually false claims." (Doc. 52, at 23.) CNI goes on to protest that any such "factually false claims" for services not rendered or medication not administered are not identified in the pleading, "much less the date of such claims, who allegedly submitted them, or the beneficiary who allegedly did not receive the services." (Id. at 24.)
A reasonable reading of the Amended Complaint reflects that multiple categories of factually false claims have been pleaded. For example, the "worthless services" claims
As an additional ground for seeking dismissal of the Amended Complaint, CNI asserts that the Amended Complaint's use of the term "false diagnosis" is nothing more than a way of "artfully pleading" medical necessity, and that the Government has failed to plead sufficient facts to support any such theory of liability. (Doc. 52, at 24-25.)
As an initial matter, it is not correct to assert, as CNI appears to do, that the only medical necessity claims presented in the Amended Complaint hinge on a theory of false diagnosis. (Doc. 52, at 24-29.) To the contrary, and as discussed in considerable detail supra, the Amended Complaint raises various other FCA claims against CNI that do not depend on the truth or falsity of the diagnosis. Indeed, the Amended Complaint identifies instances of medically unnecessary services performed "regardless of patient diagnosis" (see e.g., doc. 34, ¶ 120; § VIII.C.4), particularly in the areas of 76 modifiers, 25 modifiers, ultrasound guidance with routine blood draws, and ultrasound guidance for almost all Botox and Trigger point injections. In other words, certain categories of claims for medically unnecessary services identified in the Amended Complaint would remain intact and in play even if every patient had been correctly and accurately diagnosed. Thus, the false diagnosis claims are a subset — not the complete universe — of the Government's medical necessity claims.
On the subject of false diagnoses, however, CNI's position is that the Amended Complaint is devoid of specific allegations "to prove that the beneficiaries who were diagnosed with [ST and GTD] did not have them," and that no reasonable inference of such false diagnoses may be drawn. (Doc. 52, at 26.) This argument is at odds with the language of the Amended Complaint. Indeed, a reasonable reading of that pleading reveals that it alleges numerous factual allegations that would support a determination that the patients Dr. Crumb diagnosed with ST and GTD did not actually suffer from those conditions. Among other indicia of falsity, the Amended Complaint alleges as follows: (i) Dr. Crumb admitted "that he assigned diagnoses for the patient depending on the procedure administered on a particular date" (doc. 34, ¶ 111); (ii) when Dr. Crumb phased out Botox injection procedures, his ST/GTD diagnoses likewise declined (id., ¶ 115); (iii) ST is an "uncommon diagnosis" and GTD is a "rare and disabling disorder" (id., ¶¶ 86, 88); (iv) despite the infrequency of these types of dystonia, Dr. Crumb "submitted over 2,000 claims ... for the treatment of low back pain with Botox injections and assigned a diagnosis of GTD or Idiopathic Dystonia" (id., ¶ 92); (v) although GTD is caused by a genetic mutation that may be identified by a blood screening test, medical records do not reflect that Dr. Crumb ever ordered genetic testing or took family histories related to that disorder (id., ¶¶ 88-89); (vi) Dr. Crumb used cloned documentation to describe conditions and treatments for hundreds of medical charts for patients to whom he assigned these diagnoses (id., ¶¶ 93-106); (vii) many of these patients were also treated by physicians other than Dr. Crumb "who did not diagnose, treat, or even reference ST or GTD" (id., ¶ 107); (viii) interviews with more than 20 patients that Dr. Crumb had diagnosed with ST or GTD revealed that none of them were aware that he had so diagnosed them, had ever even heard of these conditions, or exhibited any symptoms of same (id., ¶¶ 108-09); and (ix) "Dr. Crumb was warned on numerous occasions that his medical charts did not support diagnoses of either ST or GTD" (id., ¶ 249).
Shifting gears, CNI maintains that the Government's FCA claims against it should be dismissed because CNI cannot be held vicariously liable under the statute for the alleged wrongdoing of employees like Dr. Crumb. In so doing, CNI invokes the so-called "benefit rule" applied in this Circuit to FCA claims. Pursuant to that rule, "in cases brought under the False Claims Act ... the knowledge of an employee is imputed to the corporation when the employee acts for the benefit of the corporation and within the scope of his employment." Grand Union Co. v. United States, 696 F.2d 888, 891 (11th Cir. 1983) (citations omitted); see also United States v. Route 2, Box 472, 136 Acres More or Less, 60 F.3d 1523, 1528 (11
The Court finds this argument uncompelling for two distinct reasons. First, CNI identifies no authority for the proposition that the Government was required to plead facts supporting application of the benefit rule with the particularity required by Rule 9(b). The benefit rule relates to scienter because it describes circumstances in which an employee's knowledge will be imputed to the corporation. And the Eleventh Circuit has consistently noted in False Claims Act cases that scienter need not be pleaded with particularity. See, e.g., Urquilla-Diaz v. Kaplan University, 780 F.3d 1039, 1051 (11
Second, scrutiny of the Amended Complaint reveals sufficient allegations to support a reasonable inference that Dr. Crumb's purportedly fraudulent activity was for the benefit of CNI. The Government pleads that CNI hired Dr. Crumb in the first place "[i]n an effort to maintain and expand its patient base, generate more referrals, increase MRI and X-ray orders performed at CNI Imaging, defray overhead costs, and otherwise increase overall revenue and profits." (Doc. 34, ¶¶ 72-73.) The Amended Complaint goes on to allege that the knowledge of Dr. Crumb and the other PM&R physicians at CNI is "imputed to CNI inasmuch as the PM&R physicians acted to benefit the corporation." (Id., ¶ 234.) Such benefits were manifested in the Government's allegations that Dr. Crumb and his colleagues at CNI "assisted with patient care, covered a portion of overhead expenses, provided expertise and services beyond that which could be provided by CNI's shareholder physicians, referred patients for tests or further treatment by CNI's imaging department or shareholder physicians, accepted referrals from CNI's shareholder physicians, and provided post-surgery care for patients with complications or unsuccessful surgery outcomes." (Id., ¶ 236.) In terms of the interplay between the alleged false claims and benefit to CNI, the Amended Complaint asserts that "CNI directly received funds from claims ... [for] treatment of patients for medically unnecessary Botox injections and ultrasound guidance," and that "CNI directly received funds from MRI's and X-Rays ordered by the PM&R physicians, and further realized benefits from a defray in shared overhead costs." (Id., ¶ 237.)
As its final ground for Rule 12(b)(6) relief, CNI contends that the Amended Complaint flunks the scienter requirement for FCA claims. This Order has already cited binding authority establishing that a plaintiff need only plead scienter generally in an FCA case. See Urquilla-Diaz, 780 F.3d at 1051 ("Rule 9(b) provides that a party alleging fraud `must state with particularity the circumstances constituting fraud' but may allege scienter generally."); Matheny, 671 F.3d at 1224 ("At the pleading stage, knowledge, and other conditions of a person's mind may be alleged generally.") (citation and internal quotation marks omitted). Indeed, Rule 9(b) itself specifies that while the circumstances constituting fraud or mistake must be stated with particularity, "[m]alice, intent, knowledge, and other conditions of a person's mind may be alleged generally." Rule 9(b), Fed.R.Civ.P.
Notwithstanding these well-settled principles, CNI cites a number of non-FCA cases for the proposition that the Government in this case must "plead the factual basis which gives rise to a `strong inference' of fraudulent intent." (Doc. 52, at 33 (citations omitted). No such pleading requirement exists in the False Claims Act context. See, e.g., United States v. Bollinger Shipyards, Inc., 775 F.3d 255, 260 (5
More fundamentally, leaving aside any lingering debate as to the appropriate pleading standard for scienter in FCA cases, the Court has little trouble concluding that the Amended Complaint sufficiently pleads scienter in a manner that withstands CNI's Rule 12(b)(6) challenge. As noted, "[t]he FCA's scienter requirement does not demand specific intent to defraud and can be satisfied by proving only reckless disregard of the truth or falsity of the information." United States ex rel. Owens v. First Kuwaiti General Trading & Contracting Co., 612 F.3d 724, 728 (4
CNI takes the position that the Amended Complaint pleads nothing more than "honest mistakes" or "mere negligence." (Doc. 52, at 35.) Review of the Amended Complaint, however, reveals that the Government has set forth 65 paragraphs of allegations (spanning nearly 11 pages) on the topic of scienter. (Doc. 34, ¶¶ 191-255.) Among other things, the Amended Complaint pleads the following: (i) CNI and others "knew that they were submitting claims ... in violation of the FCA" (id., ¶ 191); (ii) CNI engaged in "reckless and deliberately ignorant conduct" vis a vis claim submissions by not training or educating billing personnel, not having policies to procedures in place to receive information and updates from agencies regarding billing guidelines, and prioritizing claim payment over claim accuracy (id., ¶¶ 195-202); (iii) CNI acted with reckless disregard and deliberate ignorance in paying no mind to Medicare billing and coding guidelines, ignoring Alabama Medicaid updates that notified providers of 76 modifier errors such as those being committed by CNI, and overlooking warnings from private payers about problems with CNI's billing practices (id., ¶¶ 203-25); (iv) as discussed supra, Dr. Crumb's knowledge was imputed to CNI for purposes of the FCA's scienter requirement, and Dr. Crumb had direct and actual knowledge of the falsity of the claims he was submitting or causing to be submitted (id., ¶¶ 234-50); and (v) CNI violated its own written Compliance Plan by failing to monitor or ensure compliance with the FCA and program rules and regulations, and refusing to take steps to investigate allegations of billing impropriety (id., ¶¶ 251-54).
On the strength of these and other allegations, the Court readily concludes that, at a minimum, the pleading alleges that CNI had reason to know of facts that would lead a reasonable person to realized that harm would likely result from submitting the subject claims to Medicare, Alabama Medicaid and TRICARE under these circumstances. As such, the Amended Complaint adequately pleads that CNI, at a minimum, recklessly disregarded the truth or falsity of the claims it was submitting or causing to be submitted, so as to satisfy the FCA's scienter requirement.
The Amended Complaint is not perfect, but perfection is not the applicable pleading standard. After painstaking review, the Court readily finds that the Government has satisfied its pleading obligations under the Federal Rules of Civil Procedure. The theories of False Claims Act liability, and the factual allegations upon which they rest, are set forth in ample detail to alert the defendants in this case to the precise misconduct with which they are charged, all with sufficient indicia of reliability to protect defendants against spurious charges. Rules 8 and 9(b) require nothing more in the False Claims Act context.
For all of the foregoing reasons, it is
