KEVIN H. SHARP, District Judge.
This is an action under the False Claims Act ("FCA"), 31 U.S.C. §§ 3729-3733, originally brought by Relators Rita Hayward (Case No. 3:11-00821), Terrence Scott (Case No. 3:15-00404), and Trammell Kukoyi (Case No. 3:15-01102). The Government elected to intervene,
The essence of the Government's Complaint is that, between October 1, 2008, and September 30, 2012, Defendants SavaSeniorCare, LLC, SavaSeniorCare Consulting, LLC, SavaSeniorCare Administrative Services, LLC, and SSC Submaster Holdings, LLC (collectively "Sava" or "Defendants,") improperly received millions of dollars by submitting false or fraudulent claims for payment to Medicare for rehabilitation services that were not medically reasonable and necessary and/or not skilled in nature. Defendants now move to dismiss that Consolidated Complaint, along with the First Amended Complaints filed by Relators Hayward and Kukoyi.
Common to the Motions to Dismiss is that the allegations fail to state a claim and, more specifically, that the alleged false statements are insufficiently plead. All of the parties point to the Consolidated Complaint to support their arguments on this central issue and it is for this reason, as well as the relevant standards of review, that the Court sets out the allegations in more detail than usual.
The Medicare program is divided into four "Parts" that cover different services. Medicare Part A, the one at issue here, generally reimburses inpatient hospital services, home health and hospice care, and skilled nursing and rehabilitation care. It covers up to 100 days of skilled nursing and rehabilitation care for a benefit period, following a qualifying hospital stay of at least three consecutive days.
The daily reimbursement rate from Medicare for skilled nursing services and rehabilitation care varies based on the anticipated nursing and rehabilitation needs of the beneficiary. It depends, in part, on the Resource Utilization Group ("RUG") to which a patient is assigned, and, in part, on the patient's ability to perform certain Activities of Daily Living ("ADL").
There are five RUG levels: Rehabilitation Ultra High ("RU"); Rehabilitation Very High ("RV"); Rehabilitation High ("RH"); Rehabilitation Medium ("RM"); and Rehabilitation Low ("RL"). The RUG level to which a patient is assigned depends upon both the number of skilled therapy minutes and the number of therapy disciplines the patient received during a seven-day assessment period as reflected in the following chart:
(CC ¶ 40). Obviously, Medicare reimburses more for patients that are in the RU category, which is intended to apply only to the most complex cases.
Within each RUG level, reimbursement varies based on the patient's ADL, which considers things such as eating, using the toilet, bed mobility, and transfers (e.g., from a bed to a chair). It also considers the extent to which the patient needs "extensive services," such as intravenous treatment, a ventilator, tracheotomy, or suctioning. ADL scores of A, B, C, L, or X are assigned to each patient. Generally, a patient who can perform the activities of daily living without assistance is an "A"; a patient who requires assistance with all of the activities, but does not require any of the extensive services, is a "C"; a patient who requires only one of the extensive services is an "L"; and a patient who requires several of the extensive services is an "X."
The Medicare daily reimbursement rate varies significantly depending upon the RUG level and ADL score. Just by way of examples, and using the 2012 rates, the rate was $737.08 for an RU patient with an "X" ADL score; $471.71 for an RH patent with a "C" ADL score; and $229.89 for RL patient with an "A" ADL score.
Skilled Nursing Facilities ("SNFs") are required to periodically assess each patient's condition and submit the results on a Minimum Data Set ("MDS") form, which is used to determine the daily reimbursement rate. Generally, patients must be assessed and the MDS form completed on the 5th, 14th, 30th, 60th, and 90th day of the patient's stay in the facility. The date of the assessment is known as the "assessment reference date," and that assessment (except for the first one) looks at the patient for the seven preceding days, which is the "look-back period." (CC ¶ 47). SNFs are required to report on the MDS the number of minutes of skilled rehabilitation therapy the facility provided to a patient during the look-back period as well as the type(s) of therapy provided.
Medicare payments are made prospectively for a defined period of time. For example, if a patient is assessed on day 14 of his stay, and received 720 minutes of therapy during days 7 through 14 of the stay, then the facility is paid for the patient at the Ultra High RUG level for days 15 through 30 of the patient's stay.
Completion of the MDS is a prerequisite to payment under Medicare. The MDS itself requires a certification by the provider that states, in part:
(CC ¶ 51). Forms are submitted electronically to Medicare payment processors.
Sava is "organized in a pyramidal corporate structure." (CC ¶ 54). Defendant SavaSeniorCare, LLC "sits atop" that structure, and, through its subsidiaries, owned and managed the operations of approximately 185 SNFs in 19 states (including Tennessee) during the relevant period. (CC ¶ 20). The remaining Defendants are (or were) wholly owned subsidiaries of SavaSeniorCare, LLC: (1) SavaSeniorCare Consulting, LLC provided consulting services and operational oversight to the SNFs, and employed most of the corporate-level rehabilitation and operations employees; (2) SavaSeniorCare Administrative Services, LLC performed certain "back-office" services for Sava's SNFs, including submitting claims to Medicare, and employed Sava's Chief Executive Officer ("CEO"), Chief Financial Officer ("CFO"), Senior Vice President ("SVP") of Rehabilitation Services, and high-level finance employees; and (3) SSC Submaster Holdings, LLC provided services for the SNFs and employed many of Sava's corporate-level rehabilitation and operations employees, some of whom later went to work for SavaSeniorCare Administrative Services and SavaSeniorCare Consulting when SSC Submaster Holdings ceased to exist in 2010.
Tony Oglesby "is at the top of Sava's corporate structure," serving as its CEO since 2005, and acquiring a majority ownership in Sava in October 2013. (CC ¶ 54). The corporate rehabilitation department is led by Stacey Hallissey, who served from 2006 through at least 2012 as SVP of Rehabilitation Services and reported directly to Mr. Oglesby.
"Sava is organized in geographic divisions below Mr. Oglesby," and, although its structure changed over time, for most of the relevant time period, it had two division, East and West, that, in turn, were subdivided into regions. (CC ¶ 55). Division Vice Presidents ("DVPs") of Rehabilitation Services report directly to Ms. Hallissey; the Regional Director of Rehabilitation ("RDR") in each region reported to his or her DVP.
The rehabilitation department at each SNF was managed by a Rehabilitation Program Manager ("RPM") who reported to the regional director and also reported to the SNF administrator. For the most part, the SNF administrators had no clinical training or certification in the provision of skilled rehabilitation therapy, but nevertheless often participated in planning patient care.
The therapy staff of each facility typically included physical therapists, physical therapy assistants, occupational therapists, certified occupational therapy assistants, and speech language pathologists. Each facility also had at least one MDS coordinator (usually a registered nurse) who was ostensibly responsible for collecting all of the information needed for the MDS and determining the assessment reference date. In practice, however, Sava's corporate rehabilitation department pushed facility-level employees to choose the days that would result in the highest RUG level and, therefore, the highest payment.
Control over the submission of claims for services provided at the SNFs was centralized, as was the receipt of reimbursements. That is, even though individual facilities had their own bank accounts, all payments received for Medicare services provided at Sava SNFs were placed into a "single `concentration' account maintained by the company." (CC ¶ 71).
Sava knew the financial benefits of increasing its Ultra High billings. SNF administrators, RPMs, and therapists were systematically pressured by corporate to meet targets for such billings and extend patient stays without regard to a patient's actual needs. Beginning in 2008, if not earlier, Sava's finance department set top-level goals — "budgets" — for the Company, that, in turn, trickled down to rehabilitation-specific goals at the divisional, regional and facility level. Thus, each of the SNFs was given set goals that were based on meeting pre-determined RU levels and Medicare Part A daily rates. Even though DVPs of Rehabilitation Services and RDRs could change the budget for a facility in their division or region, any changes had to be "budget neutral," meaning that if an RU goal was reduced at one facility, it had to be increased at another.
Internally-created metrics were used to monitor the Company's performance in billing Medicare for the highest-reimbursing RUG codes. Various strategies were employed to meet the RU and Medicare Part A daily rate budgets, including setting RU as the "default" RUG level for newly-admitted patients, and instructing SNFs to aim for an RU if the patient could "tolerate" 720 minutes of therapy each week.
Sava consistently increased the budgets for each facility based upon its "past performance plus a `stretch' of that performance," even though it knew the "budgets were aggressive." (CC ¶¶ 81, 82). Facilities were told the budgets were not optional, notwithstanding opinions by corporate managers and facility RPMs that a given budget was unattainable.
Constant pressure was placed on both regional and facility-level employees to make their ever-increasing budgets. This pressure "was top-down, nationwide, and exerted by both rehabilitation and operations corporate-level employees." (CC ¶ 93). Enforcement of the goals was achieved through various devices, including action plans, performance evaluations, calls and visits to facilities, threats of repercussions or termination for poor performers, and bonuses for those that did well. Facilities were also ranked — those that performed well were applauded, while those that did not were singled out and "publicly shame[d] . . . into improving their performance." (CC ¶ 115).
A patient's refusal to participate in therapy was not an acceptable reason to miss scheduled therapy minutes. And, if a therapist in one discipline did not achieve enough minutes with a particular patient, a therapist in a different discipline would be instructed to make up minutes that were needed to move the patient into the RU category.
Therapists were instructed to allocate the time for group (involving two to four patients) and concurrent (involving two residents) therapy exercises so as to maximize RU billings,
The pressure was not limited to ensuring that patients fell into the RU level. It also extended to keeping patients in its Defendants' SNFs longer than was reasonable and necessary in order to increase reimbursement. "Census," or the number of inpatients, was a "wildly important goal," and this meant "not just getting the patients in the door," but "keeping them in there with extended lengths of stay." (CC ¶¶ 148, 149).
Strategies were employed to retain patients, such as requiring facilities to seek permission from RDRs before discharging Medicare beneficiaries who had yet to exhaust their 100-day SNF benefit, even though those RDRs had likely never met, evaluated, or had any firsthand knowledge regarding the clinical needs of any of the patients. One facility even used a form explicitly requiring therapists not to write discharge orders without first obtaining approval from an RPM and/or RDR, and explicit length of stay goals were imposed by Sava on some facilities. Such practices ignored patient needs, sometimes resulting in patients unnecessarily exhausting all 100 days of the Medicare SNF benefit.
Sava's efforts to increase Medicare Part A billings was enormously successful. In fiscal year 2006, Sava billed Medicare at the Ultra High level for 21 percent of all rehabilitation days. In fiscal years 2010 and 2011, Sava billed 63 percent of its rehabilitation days at the Ultra High level, tripling its fiscal year 2006 Ultra High percentage. Some specific SNFs were even more successful.
The allegations regarding budgeting, the enforcement of goals, the demand for increases in RU levels, the ranking and scrutinizing of facilities, the maximization of group and concurrent therapy, the use of modalities to increase minutes, and the avoidance of overages are all supported by emails excerpted in the Consolidated Complaint. These include emails between and among a wide variety of employees, including SVP Hallissey, DVPs, RDRs, RPMs, administrators and other managers.
The Consolidated Complaint identifies five specific patients, and attaches a summary chart of 20 allegedly false claims made by Sava for those patients that and are said to be "illustrative samples of the types of false claims submitted to Medicare by Sava between October 1, 2008 and September 30, 2012." (CC ¶ 198). The specific allegations regarding each of those patients are as follows:
Patient A is an 85-year-old female patient who was admitted to Sava's Northwest facility in Houston, Texas. She received physical and occupational therapy, and speech-language pathology services beginning in April 2011:
(CC ¶¶ 176-179).
Patient A also received group therapy throughout her stay, and, while her plan of care indicated group therapy as a treatment, the weekly physical therapy, occupational therapy, and speech-language pathology progress notes did not support her participation in group therapy. Without those minutes for group therapy, Patient A's total minutes would not have reached the Ultra High level during any assessment period, other than her 90-day initial assessment period.
Patient B is a 56-year-old female who was admitted to Sava's Cambridge North facility in Michigan in March 2011 following a hospital admission for acute psychosis. She received physical and occupational therapy:
(CC ¶¶ 181-182).
Patient C, a 55-year-old female, was admitted to Sava's Windsor facility in North Carolina in March 2009 for a craniotomy and then readmitted following the procedure. She received physical and occupational therapy and speech-language pathology services:
(CC ¶¶ 184-185).
Patient D, a 77-year-old male, was admitted to Sava's Poplar Living Center in Wyoming after being found lying on the floor of his home, confused and combative, with slurred speech. He received physical and occupational therapy and speech-language pathology services beginning in June 2010:
(CC ¶¶ 187-191).
Patient E, a 55-year-old male, was admitted to Sava's Virginia Highlands facility in Wisconsin after the removal of a testicular mass. He received physical and occupational therapy. He also received group therapy throughout his stay. While the plan of care indicated group therapy as a treatment approach, the weekly physical and occupational therapy progress notes did not support his participation in group therapy as recorded by Sava. (CC at ¶ 198).
The Government brings three causes of action against all Defendants. Counts I and II are brought under the FCA and allege, respectively, false or fraudulent claims in violation of 31 U.S.C. § 3729(a)(1)(A), and false statements in violation of 31 U.S.C. § 3729(a)(1)(B). Count III, also against all Defendants, alleges a common law claim for unjust enrichment. Finally, in Count IV, the Government alleges payment by mistake as to all Defendants, except SSC Submaster Holdings, LLC.
Two standards of review govern this Court's consideration of the alleged false statements and Defendants' Motion to Dismiss the same. First, under Rule 12(b)(6), "all well-pleaded material allegations of the pleadings" are accepted as true, and those allegations must "be sufficient to give notice to the defendant as to what claims are alleged, and . . . plead `sufficient factual matter' to render the legal claim plausible, i.e., more than merely possible."
Second, "[t]he heightened pleading standard set forth in Rule 9(b) applies to complaints brought under the FCA."
The four Defendants have filed three separate Motion to Dismiss the Consolidated Complaint, and all Defendants have collectively filed a Motion to Dismiss the Complaints of Plaintiffs Haywood and Kukoyi. Because the arguments advanced in favor and against the Motion to Dismiss filed by Defendants SavaSeniorCare Administrative Services and SavaSeniorCare Consulting LLC's in their Motion to Dismiss are, to a greater or lesser extent, relied upon by the parties for purposes of the other Motions to Dismiss, the Court begins there.
SAS argues that, notwithstanding a four year investigation, examination of over 150,000 documents and emails, and the taking of multiple depositions, the Government's FCA allegations fail for three independent reasons: the Consolidated Complaint fails to (1) allege a violation of the governing legal standard; (2) plead with particularity examples of actual false claims; and/or (3) allege an objectively false claim. The Court is unpersuaded by any of these arguments.
Congress has set forth requirements for assuring the quality of care in SNFs. These are found in 42 U.S.C. § 1395i-3(b)(4)(A), which, so far as relevant, provides that SNF "must provide nursing services and specialized rehabilitative services to attain or maintain the highest practicable physical, mental, and psychological well-being of each resident[.]" Similarly, the regulation on which SAS relies provides that "[e]ach resident must receive and the facility must provide the necessary care and services to attain or maintain the highest practicable physical, mental, and psychological well-being, in accordance with the comprehensive assessment and plan of care." 42 C.F.R. § 483.25.
Characterizing the requirement that a patient receive such care as the "HPL Mandate," SAS insists that the Government's failure to acknowledge — let alone consider — this requirement is fatal to the Consolidated Complaint. It argues in relation to Patient B:
(Docket No. 116 at 11).
On its face, SAS's argument contains a fatal factual assumption — Patient B's highest practicable level was to climb 16 steps, and, therefore, there could be no fraud. This, of course, presupposes that this was a legitimate goal for Patient B, yet it is not incumbent on the Government at this point to prove what Patent B could or could not reasonably do.
There may be an even more fundamental problem with SAS's argument. "The False Claims Act is not a vehicle to police technical compliance with complex federal regulations," and, therefore, "conditions of participation, which are `the requirements providers must meet to participate in the Medicare program'" do "not lead to False Claims Act liability."
Regardless, "[m]edicare coverage is limited to services that are medically `reasonable and necessary.'"
It is true that "[w]hat constitutes `reasonable and necessary' services is not defined in the statute."
(Docket No. 147 at 4, quoting Compliance Program Guidance for SNFs, 65 Fed. Reg. 14,289, 14,295 n.44 (Mar. 16, 2000)).
To say that a SNF is required to provide and maintain the highest practicable level of care, and that reasonableness and necessity can only be determined by considering this benchmark, does not mean that failure to allege or even acknowledge the "HPL mandate" makes a Medicare FCA claim deficient. Sava points to no case authority to support this conclusion and the Court has found none, or even any case that references the "HPL mandate" as such.
SAS next argues that "[a]lthough the Complaint dedicates page after page to portraying an alleged corporate `scheme' to pressure therapists to provide more therapy without regard to patient needs, the Complaint fails to state a claim because it does not adequately allege actual false claims arising out of that alleged scheme." (Docket No. 116 at 12). It points out that the Government has not alleged that: (1) "any of the claimed services to the focus patients was not provided"; (2) "the focus patients did not need at least some skilled rehabilitation in a SNF"; (3) "the therapy was not provided by qualified therapists"; (4) "a physician did not approve the therapy provided to each of the focus patients"; (5) "anyone lied to or withheld critical information from the patients, therapists or physicians"; (6) "any of the individual therapists providing services to the focus patients did not believe that the services were reasonable and necessary to help patients reach their `highest practicable' level of function"; or (7) "corporate pressure or any specific emails reflecting corporate pressure actually resulted in unnecessary therapy received by any of the focus patients." (
First, "`Rule 9(b)'s particularity requirement does not mute the general principles set out in Rule 8; rather the two rules must be read in harmony.'"
Second, "[i]n this Circuit, there is `[a] clear and unequivocal requirement that a relator allege specific false claims' when pleading a violation of the FCA,"
Leaving aside for the moment the specific allegations regarding each of the five patients discussed in the body of the Consolidated Complaint, that document attaches and incorporates by reference a chart that list twenty alleged false claims: four each for Patients A, B, and D; five for Patient C; and three for Patient E. Each of the claims are identified by patient,
Further, the specific allegations regarding each of the five patients suggest why the billings were allegedly false and at least render plausible the Government's overriding allegations that Defendants billed for therapy that was excessive or unnecessary, and pushed the use of modalities that were unnecessary, and billed for unreasonable or unnecessary group therapy. By way of example, while the progress notes for Patient A indicated that she was to be discharged soon due to lack of progression, she was kept on therapy for two more months; Patient B was provided with occupational therapy, even though it became repetitive in nature and were no longer required; Patient C was kept on physical therapy 44 days after her therapist had documented that she was ambulating independently with a walker; 43 percent of Patient D's physical therapy was attributed to E-stim, even though the medical record did not support that amount; and both Patients A and E received group therapy that was not supported by their progress notes.
In its reply brief, SAS challenges each of the Government's assertions that the Consolidated Complaint is sufficient to show false statement in regard to each patient. For example, it claims the allegation that Patient A was unnecessarily kept on physical therapy for two extra months based on a therapist's progress notes "ignores the Complaint's very next factual allegation" that the therapist who wrote the progress note "rarely treated Patient A moving forward," thus "undermining the Government's argument." (Docket No. 147 at 6). SAS also contends the Government's argument with respect to Patient B "rests on the legal fallacy that Patient B was not entitled to therapy to maximize her abilities" by climbing 16 steps, and that the mere fact that Patient C "was using a rolling walker does not mean or even imply that additional physical therapy is unreasonable or necessary." (
These arguments as well as the others raised by SAS may be accepted by the factfinder, but the question now is not whether the Government is ultimately correct in its assertions. "So long as [the Government] pleads sufficient detail — in terms of time, place and content, the nature of a defendant's fraudulent scheme, and the injury resulting from the fraud — to allow the defendant to prepare a responsive pleading, the requirements of Rule 9(b) will generally be met."
Finally, SAS argues that the Complaint fails to allege an objectively false claim because the purported falsities are based on no more than clinical disagreements. It goes on to assert that "the objective-falsity principle is of profound significance in the Medicare context, where individuals providing health care must exercise clinical judgment on a daily basis." (Docket No. 116 at 25). In fact, according to SAS, the CMS has promulgated "a regulation stating that, with respect to treatment provided by SNFs, `[c]linical disagreement does not constitute a material and false statement.'" (
Many cases hold that objective falsity is a prerequisite to FCA liability, albeit, more often than not in the context of what must be proven, not pled.
On the other hand, it has been held that "proof of an objective falsehood is not the only means of establishing an FCA claim" because, in enacting the FCA, "Congress wrote expansively, meaning `to reach all types of fraud, without qualification, that might result in financial loss to the Government.'"
Again, however, the Court's present concern is not what must be proven, but rather what must be pled. "To plead fraud with particularity, the plaintiff must allege (1) `the time, place, and content of the alleged misrepresentation,' (2) `the fraudulent scheme,' (3) the defendant's fraudulent intent, and (4) the resulting injury."
In
(Docket No. 147 at 9). True, the allegations regarding the 92-year-old patient in Life Care (identified as Patient D in that case) are more alarming than any of the ones here, but the essence of the claims are the same. And, while the Consolidated Complaint in this action may not reference the "clinical characteristics" or allege the Patients could not reasonably be expected to participate in certain activities, it does allege that "[i]n many instances, Sava imposed therapy services on its patients that did not take into account — or were contrary to — their clinical needs," and that "Sava routinely failed to provide support for the reasonableness and necessity of the skilled therapy services provided to patients," (CC ¶¶ 172, 173), along with a slew of other allegations suggesting the filing of false claims.
In addition to the reasons advanced by SAS, Defendant SeniorCare moves to dismiss on the grounds that it is barely mentioned in the Consolidated Complaint and "[f]ew averments directly referenc[e] any actions allegedly taken by, or attributable to" SeniorCare. (Docket No. 114 at 2). "Furthermore," SeniorCare argues, "the Government's Complaint fails to satisfy Rule 9(b)'s heightened pleading requirements because it indiscriminately groups all of the individual defendants into one wrongdoing monolith." (
It is true, as SeniorCare correctly observes, that "[b]eing a parent corporation of a subsidiary that commits a FCA violation, without some degree of participation by the parent . . . is not enough to support a claim against the parent for the subsidiary's FCA violation[.]"
While the specific allegations against SeniorCare are sparse, the Court finds them sufficient to allow discovery. A fair reading of the Consolidated Complaint suggests that the Defendants, acting in concert, created and implemented policies in an effort to wrongfully enlarge Medicare billing. Aside from alleging that SeniorCare "sits atop the corporate structure," and, through its subsidiary owned and managed the 185 or so SNFs at issue in this case, the Consolidated Complaint also alleges that Medicare payments were swept into one centralized account and there was a complex and changing structure with certain high-level employees moving among the subsidiaries.
In addition to incorporating the arguments made by SAS and SeniorCare, Defendant Submaster argues for dismissal on the grounds that the Consolidated Complaint itself states that SeniorCare ceased to exist in 2010. Therefore, "the only false claim alleged by the Government during the period of Submaster's alleged involvement pertains to Patient C" and because "the Government's allegations fail as to Patient C," the Consolidated Complaint should be dismissed for failure to state a claim. (Docket No. 112 at 3, emphasis in original). This argument fails because the Court has found the claims relating to the referenced patients, including Patient C, sufficient.
Defendants have collectively moved to dismiss Relators Hayward's and Kukoyi's First Amended Complaints. With regard to the former, the parties have entered into a Joint Stipulation, the upshot of which is that the motion as to Hayward should be denied as moot given certain concessions by her.
The record reflects no such stipulation as to Relator Kukoyi's Complaint. It does, however, reflect that, prior to the filing of the Motion to Dismiss, he voluntarily dismissed certain claims and, after the motion was briefed, filed a Consent Motion to have his retaliation claim severed and stayed. As the Court understands the record then, Relator Kukoyi's claims on which the Government intervened remain pending, along with other Medicare, Medicaid and state law claims.
The law regarding the effect of the Government's intervention on a relator's complaint is unsettled. As Defendants recognize, some courts have held that "[o]nce the Government has intervened, the relator has no separate free-standing FCA cause of action."
The FCA provides that, "[i]f the Government proceeds with the action, it shall have the primary responsibility for prosecuting the action, and shall not be bound by an act of the person bringing the action." 31 U.S.C. § 3730(c)(1). However,
Here, Defendants assert that they "would face undue burdens and expense if they had to litigate four different sets of FCA claims based on different theories of false-claims liability." (Docket No. 126 at 6). This is a bit disingenuous since the parties agree the Consolidated Complaint is controlling, Scott's claims have gone by the wayside, and Hayward's claims are effectively on hold.
Simply put, the Court will not dismiss Kukoyi's First Amended Complaint merely because the Government has intervened. And, because the Government's Complaint is controlling, Defendants' arguments as to the sufficiency of the intervened claims are moot.
As for the non-intervened FCA claims,
Defendants claim that "[d]ismissal is appropriate because, even as to the one SNF where she was employed, Kukoyi fails to plead with particularity `the who, what, when, where, and how of the alleged fraud.'" (Docket No. 126 at 11) (citation and emphasis omitted). They argue instead that, with respect to Windwood Lakes, Kukoyi relies entirely on "conclusory allegations," including:
Defendants then argue that "Kukoyi provides no concrete examples to buttress her general and conclusory allegations of fraud." (
The above-paragraphs that Defendants cite are incomplete, and, both before and after those paragraphs, the allegations are somewhat fleshed out. The "Woodwind Lakes' administrator" is identified as Kukoyi's supervisor Angela McArthur who, she claims, instructed Kukoyi on her first day of work to add notes to patients' charts so that they would continue to qualify for skilled nursing care under Medicare Part A. She also claims that other staff members were likewise instructed to supplement patient charts by adding fictitious conditions in order to keep Medicare reimbursements up, and to fill out documents in such a way that the highest reimbursement rates would apply. Kukoyi also alleges that, as a licensed social worker, she was required to fill out certain portions of the MDS sheets and her review of those sheets indicated that they often did not reflect the patients' condition or treatment. Far from simple conclusions, Plaintiff alleges that she witnessed firsthand, and was forced to participate in, improprieties directed at obtaining improper reimbursements.
Defendants next argue that Relator "does not identify any individual patients, much less any medically unnecessary services" and that the "closest Kukoyi ever comes to pleading an actual patient example is in Paragraph 325 of her FAC, where she alleges that she `knows of two elderly male patients who were continually billed under Medicare Part A but did not receive the services for which Medicare was billed.'" (
Defendants also argue that Kukoyi's failure to plead particular examples of fraud "is especially telling in light of the contradictory, speculative, and implausible nature of Kukoyi's general allegations." (Docket No. 126 at 13). Defendants continue: "Taking as true Kuyoki's allegations, these allegations are entirely consistent with legal conduct." (
Given the scope of Defendants' request (dismissal of all claims), the brevity and wide sweep of their arguments, and their failure to acknowledge certain allegations, the Court finds it unnecessary to go any further, other than to make three general observations. First, "[t]he purpose undergirding the particularity requirement of Rule 9(b) is to provide a defendant fair notice of the substance of a plaintiff's claim in order that the defendant may prepare a responsive pleading."
Defendants correctly observe that "[g]ranting a motion to dismiss after the Government files a complaint in intervention is unusual." (Docket No. 147 at 9). Contrary to Defendants' belief, however, the Consolidated Complaint sets forth sufficient factual averments to suggest the claims are plausible, and pleads the alleged false statements with particularity. Accordingly, the Motions to Dismiss the Consolidated Complaint will be denied.
The Motion to Dismiss Relator Kukoyi's Complaint will be denied because the Court has not been persuaded that it fails to state a claim on which relief can be granted, or that the allegations of fraud are insufficiently pled. The Motion to Dismiss Relator Hayward's Complaint will be denied as moot in accordance with the parties' stipulation. However, those Relators' Motions to Sever and Stay their retaliation claims will be granted.
Finally, Defendants request oral arguments on their Motions to Dismiss the Consolidated Complaint. Those requests will be denied. The pleading standards relating to FCA claims are clear, the Consolidated Complaint succeeds or fails on its own terms, and the parties have thoroughly argued their positions.
An appropriate Order will enter.