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United States ex rel. Payton v. Pediatric Services of America, Inc.

United States District Court, S.D. Georgia, Savannah Division

September 6, 2017

UNITED STATES OF AMERICA, ex rel. Tracy Payton; STATE OF GEORGIA, ex. rel. Tracy Payton; STATE OF CALIFORNIA, ex. rel. Tracy Payton; STATE OF COLORADO, ex. rel. Tracy Payton; STATE OF CONNECTICUT, ex. rel. Tracy Payton; STATE OF FLORIDA, ex. rel. Tracy Payton; STATE OF ILLINOIS, ex. rel. Tracy Payton; STATE OF LOUISIANA, ex. rel. Tracy Payton; STATE OF MASSACHUSETTS, ex. rel. Tracy Payton; STATE OF NEW JERSEY, ex. rel. Tracy Payton; STATE OF NEW YORK, ex. rel. Tracy Payton; STATE OF NORTH CAROLINA, ex. rel. Tracy Payton; STATE OF TEXAS, ex. rel. Tracy Payton; STATE OF VIRGINIA, ex. rel. Tracy Payton; STATE OF WASHINGTON, ex. rel. Tracy Payton; Plaintiffs-Relator,
v.
PEDIATRIC SERVICES OF AMERICA, INC., a Delaware Corporation; PEDIATRIC SERVICES OF AMERICA, a Georgia Corporation; PEDIATRIC HEALTHCARE INC.; PEDIATRIC HOME NURSING SERVICES, collectively doing business as PSA Healthcare; PEDIATRIC SERVICES HOLDING CORPORATION; PORTFOLIO LOGIC, LLC; and J. H. WHITNEY CAPITAL PARTNERS, LLC; Defendants.

          ORDER

          WILLIAM T. MOORE, JR. UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF GEORGIA

         Before the Court are Defendants Pediatric Services of America, Inc. (GA) ("PSA Georgia") and Pediatric Home Nursing Services' Motion to Dismiss Claims in Relator's Amended Complaint Barred by the Public Disclosure Bar (Doc. 85), MotioDefendants' motions are GRANTED.[2] However, Relator shall have fourteen days from the date of this order to submit an amended complaint correcting the deficiencies identified below.[3]Relator is on NOTICE thatn to Dismiss Amended Complaint for Failure to State a Claim and Failure to Plead Fraud With Particularity (Doc. 87), and Amended Motion for Judicial Notice (Doc. 89).[1] For the reasons stated below, failure to do so will result in dismissal of this case.

         BACKGROUND

         Relator Tracy Payton brings this case on behalf of the United States and fourteen other Plaintiff States. (Doc. 1.) Relator brings violations of the False Claims Act ("FCA"), 31 U.S.C. § 3729; the Georgia False Medicaid Claims Act ("GMFCA"), O.C.G.A. § 49-4-168; the California False Claims Act, Cal. Gov't Code. § 12650; the Colorado Medicaid False Claims Act, Colo. Rev. Stat. § 25.5-4-303.5; the Connecticut False Claims Act for Medicaid Assistance Programs, Conn. Gen. Stat. § 17b-301(a); the Florida False Claims Act, Fla. Stat. § 68.081; the Illinois Whistleblower Reward and Protection Act, 740Ill.Comp.Stat. Ann. 175/1; the Louisiana Medical Assistance Programs Integrity Law, La. Stat. Ann. § 46.437.1; the Massachusetts False Claims Act, Mass. Gen. Laws § 5A; the New Jersey False Claims Act, N.J. Stat. Ann. § 2A:32C-1; the New York False Claims Act, N.Y. State. Fin. Law. § 187; the North Carolina False Claims Act, N.C. Gen. Stat. § 108A-70-10; the Texas Medicaid Fraud Prevention Act, Tex. Hum. Res. Code. Ann. § 36.001; the Virginia Fraud Against Taxpayers Act, Va. Code. Ann. § 8.01-216.3; and the Washington State Medicaid Fraud False Claims Act, Wash Rev. Code. § 77.66.005.[4] Specifically, Relator alleges that Defendants failed to return overpayments, failed to conduct nursing visits, did not maintain adequate documentation of nursing visits, and billed Medicaid for services that should have been submitted to Medicare or private insurers.

         Relator filed this case under seal in the Northern District of Georgia on September 22, 2015. (Doc. 1.) The original complaint named seven defendants. (Id.) It was later transferred to this district. On July 8, 2016, the United States and the other named Plaintiff States notified the Court of their decision not to intervene in this action. (Doc. 23.) The seal in the case was then lifted and Defendants were served with copies of the complaint. (Doc. 24.) Defendants filed a series of motions prior to answering the complaint. (Doc. 48; Doc. 50; Doc. 52; Doc. 54; Doc. 56; Doc. 57.) On November 21, 2016, the parties filed a series of stipulated dismissals (Doc. 78; Doc. 79; Doc. 80) and Relator amended her complaint (Doc. 81) . The claims contained in the amended complaint are against only two Defendants, PSA Georgia and Pediatric Home Nursing Services, Inc. (hereinafter the "Defendants"). (Id.) It is the amended complaint that forms the basis for this order.

         The remaining Defendants are healthcare providers that work with mentally fragile and chronically ill infants and children. (Doc. 81 at 6.) In this capacity, they often provide nursing services to these patients. (Id.) In association with this work, Defendants will submit claims to Medicare, Medicaid, and private insurers for reimbursement. (Id.) Accordingly, they are subject to both state and federal regulations in the submission of those claims. These regulations include requirements that they refund excess payments, provide certain supervision over their nursing employees, maintain a minimum level of documentation with regard to the services they provide, and seek reimbursement from Medicare and private insurers prior to seeking reimbursement from Medicaid. Relator has alleged that Defendants have committed fraud by failing to comply with each of these requirements.

         This is not the first time Defendants have dealt with allegations of fraud related to the medical services they provide. In August of 2015, Defendants settled two previously filed federal and state false claims act cases. (Id. at 18.) That settlement covered four allegations of wrongdoing:

         1. That Defendants submitted claims for services licensed practical nurses performed that were not reimbursable because Defendants had failed to document that a registered nurse conducted required monthly supervisory visits. (Id.)

2. That Defendants failed to return overpayments they had received from federally-insured health programs between January 1, 2007 and June 30, 2013. (Id. at 19.)
3. That Defendants submitted claims to state Medicaid programs for services that overstated the length of time services were rendered. (Id.)
4. That Defendants submitted claims to TRICARE/TriWest for services that overstated the length of time services were rendered. (Id.)

In connection with the settlements, Defendants entered into a Corporate Integrity Agreement ("CIA") with the Office of the Inspector General ("OIG") for the Department of Health and Human Services. (Id.) Certain details relating to the settlement, including the violations Defendants were accused of, were publicly disclosed via press releases and news articles. (Doc. 86, Attachs. 8-15.)

         Around the time Defendants settled the two cases, Relator began working for Defendants as an Accounts Receivable Collector. (Doc. 81 at 5.) Her term of employment with Defendants lasted less than three months and she filed her initial complaint in this case after being employed for less than two months. (Id.) However, Relator believes that she found evidence of continued Medicare and Medicaid fraud during the brief time she was employed with Defendants.

         Relator's amended complaint consists of thirty-two counts for various violations of federal and state Medicare and Medicaid laws. (Id. at 74-112.) These counts are based on seven claims. First, Relator alleges that from December 2014 through October 15, 2015, Defendants concealed and failed to promptly report and return overpayments to the Medicaid and TRICARE programs in California, Colorado, Connecticut, Florida, Georgia, Illinois, Louisiana, Massachusetts, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Texas, Virginia, and Washington. (Id. at 26.) Federal and state laws require that entities like Defendants identify and return overpayments within a certain period of time. (Id. at 30.) Relator discovered the alleged overpayments when she generated a report called the Aging Accounts Receivable Report ("AR Report") in her capacity as an Accounts Receivable ("AR") collector. (Id. at 34-35.) Upon review of the report, Relator found several claims for which overpayments had been made. Because Defendants had received excess compensation for their services, they were required refund that excess. (Id. at 36.) However, Relator alleges that no such refunds were made. (Id.) Relator identified approximately $613, 94 9.4 6 in overpayments that she alleges Defendants should have returned. (Id.)

         In addition to the general allegation of withheld refunds, Relator provides further detail as to the method in which Defendants retained these overpayments. She alleges that Defendants placed overpayments in an account called the "Unapplied Cash Report." (Id. at 38.) Relator alleges that Defendants used the Unapplied Cash account to hide overpayments that should have been returned. (Id.) Relator brought her concerns regarding these overpayments to the attention of Patrick Cunningham-Defendants' Chief Compliance Officer-and Doddie Gartman Sutton. (Id. at 36.) To Relator's knowledge, no action was taken either to identify or return these alleged overpayments. (Id. at 40.) In addition, Relator contends that Defendants failed to disclose these reports to OIG auditors, failed to self-report these overpayments and unapplied cash, submitted false certification attesting that they were in compliance with the CIA, and failed to conduct an investigation regarding the alleged overpayments. (Id. at 39-40.) In that capacity, Relator also alleges that Defendants violated the CIA. (Id. at 33.)

         In her second claim, Relator alleges that Defendants failed to ensure that registered nurses conducted required supervisory visits. (Id. at 41.) Federal law requires these visits for any patient receiving home health services. 42 C.F.R. § 484.36 (2017). Moreover, these visits should be conducted regardless of whether the patient is receiving services from a home health aide or a licensed practical nurse. (Doc. 81 at 43.) Relator alleges that Defendants failed to conduct these required visits beginning in 2009 in Colorado, Illinois, Louisiana, New Jersey, New York, North Carolina, Pennsylvania, and Virginia and in Georgia since August 2011. (Id. at 41.) Relator claims that in the documents she examined during the course of her work, at least sixty-eight patients lacked nurse supervisory notes. (Id. at 45.)

         In Relator's third claim, she states that since at least 2009, Defendants' nursing notes do not meet minimum documentation requirements in California, Colorado, Connecticut, Florida, Georgia, Illinois, Louisiana, Massachusetts, North Carolina, New Jersey, New York, Pennsylvania, Texas, Virginia, and Washington. (Id. at 47.) As part of her job, Relator identified denied claims and reviewed the documentation to determine whether all of the billing requirements had been fulfilled. (Id. at 49.) In the course of this review, Relator identified several patients whose records did not include sufficient detail in the nursing notes. (Id. at 50-51.) Specifically, Relator alleges that many of the nursing notes-which should have contained detailed descriptions of the services rendered-lacked accurate reports and did not contain signatures. (Id.) Relator alleges that, despite these incomplete notes, Defendants submitted claims knowing that they did not comport with state and federal regulations. (Id. at 51.)

         Relator's fourth claim also deals with deficiencies in nurse documentation. (Id. at 52.) Specifically, Relator asserts that during her review of denied claims, she was unable to locate required nursing notes for several patients residing in California, Colorado, Connecticut, Florida, Illinois, Louisiana, Massachusetts, North Carolina, New Jersey, New York, Pennsylvania, Texas, Virginia, and Washington beginning January 1, 2009 and in Georgia since 2012. (Id. at 52.) Relator claims that after reviewing nursing notes in Defendants' Intranet and Image Freeway system, she discovered that many patients completely lacked nurses' notes. (Id. at 53-54.) Despite the absence of these notes, Relator alleges that Defendants billed Medicare and Medicaid for these patients in violation of regulations. (Id. at 55.)

         Relator's fifth claim deals with a fraudulent billing scheme in California, Colorado, Connecticut, Georgia, Louisiana, Massachusetts, New Jersey, North Carolina, Pennsylvania, Texas, Virginia, and Washington since at least March 1, 2014. (Id. at 56.) Relator discovered this alleged fraud when she reviewed rejected Medicare claims in several states in her capacity as a high dollar collector. (Id. at 60-61.) Relator states that in her review of rejected Medicare claims, she learned that Medicaid had paid out many of the rejected Medicare claims. (Id. at 62.) Based on her review, Relator believes that Defendants were submitting to Medicare bills for private duty nursing for the sole purpose of obtaining a denial.[5] (Id. at 63.) Upon receiving the rejection, Defendants would then bill Medicaid for skilled nursing, a service that Medicare had not considered when rejecting the previous claims. (Id.) Relator also points to several patients for whom Defendants submitted claims to Medicaid even though Medicare was the primary insurer. (Id. at 64.) She alleges that, as a result, Medicare never even considered these patients' claims. (Id. at 66.) In essence, Relator claims that Defendants were billing Medicaid for services that Medicare had not considered. Because Medicaid is a payer of last resort, Defendants were obligated to submit all claims for consideration to Medicare before submitting them to Medicaid. (Id. at 62.) Relator brought these concerns to the attention of management. (Id. at 65-66.) However, none of the information provided during this meeting was sufficient to alleviate her concerns. (Id.)

         In Relator's sixth claim, she sets forth a variation of the claim described above. (Id. at 67.) Specifically, Relator claims that Defendants submitted claims to commercial insurance companies using one procedure code, which were denied and then Medicaid for payment in full using other procedure codes the commercial insurance companies had not considered. (Id.) According to Relator, this scheme occurred in Connecticut, Florida, Georgia, Massachusetts, North Carolina, New Jersey, Pennsylvania, Texas, Virginia, and Washington. (Id.) As in claim five, Relator asserts that Defendants engaged in a bait and switch scheme. Relator claims that Defendants used one inaccurate billing code for nursing care when submitting claims for private insurance. (Id. at 66-67.) Relator alleges that Defendants then submitted claims to Medicaid using a different code, knowing that the primary commercial insurance had not considered that code. (Id. at 67-68.)

         In Relator's seventh claim, she alleges that PSA failed to comply with state and federal rules for participation in state Medicaid Programs. (Id. at 70.) Specifically, Relator claims that Defendants were not Medicare certified. (Id.) However, Relator has withdrawn this claim, so the Court will provide no further detail. (Doc. 102 at 3.)

         ANALYSIS

         I. PARTY DISMISSALS

         Prior to filing the amended complaint in this case, Plaintiff filed stipulations dismissing Defendants Pediatric Healthcare, Inc.[6] and J.H. Whitney Capital Partners, LLC with prejudice (Doc. 78; Doc. 79); and dismissing Defendants Pediatric Services of America, Inc., a Delaware Corporation; Pediatric Services Holding Corporation; and Portfolio Logic, LLC without prejudice (Doc. 80) . The United States and the named Plaintiff States have advised the Court (Doc. 100) that they approve of the dismissal of these parties so long as the dismissal of Defendants Pediatric Healthcare, Inc. and J.H. Whitney Capital Partners, LLC is without prejudice as to the United States and other named Plaintiff States. See 31 U.S.C. § 3730(b)(1). The Court has reviewed the settlement terms, if any (Doc. 92; Doc. 93; Doc. 94), and also consents to dismissal. See 31 U.S.C. § 3730(b)(1). Accordingly, Defendants Pediatric Healthcare, Inc. and J.H. Whitney Capital Partners, LLC, are DISMISSED WITH PREJUDICE as to the Relator and WITHOUT PREJUDICE as to the United States and other named Plaintiff States. Defendants Pediatric Services of America, Inc., a Delaware Corporation; Pediatric Services Holding Corporation; and Portfolio Logic, LLC are DISMISSED WITHOUT PREJUDICE.

         II. PUBLIC ...


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