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From Health Law Daily, June 16, 2017

FCA claim dismissed where whistleblower failed to plead that secondary payer laws were material to decision to pay Medicaid/Medicare claims

By Robert B. Barnett Jr., J.D.

A whistleblower complaint under the False Claims Act (FCA), alleging that the provider improperly billed Medicare and Medicaid for services that were covered by private insurance, will be dismissed where the whistleblower failed to plead that the Medicare Secondary Payer laws were material to the government’s decision to pay these Medicare and Medicaid claims, a New Jersey federal district court ruled in an unpublished opinion. The court gave the whistleblower 30 days to file an amended complaint (U.S. ex rel. Jersey Strong Pediatrics, LLC v. Wanaque Convalescent Center, June 14, 2017, Wigenton, S.).

A pediatric physician, owned and operated a New Jersey corporation named Jersey Strong Pediatrics, LLC. From 2003-2008. The physician served as the medical director for Wanaque Convalescent Center (WCC), a Haskell, New Jersey-based long-term care facility for geriatric and pediatric residents. Wanaque Operating Co., L.P., owned WCC, and Seniors Management North, Inc, was WCC’s administrator. The physician came to believe that WCC was (1) delivering sub-standard care for some in-state patients by preferring out-of-state residents because they paid higher rates and (2) maximizing profits by ignoring, or failing to ascertain, the existence of private insurance before billing Medicare or Medicaid. In 2014, he filed a qui tam whistleblower suit in New Jersey federal court against the three entities, alleging violations of the (1) federal FCA, (2) New Jersey False Claims Act, and (3) New York False Claims Act. In November 2016, the U.S., New York, and New Jersey all declined to intervene in the suit. The three corporate entity defendants filed a motion to dismiss.

Private insurance. The whistleblower asserted that WCC violated the Medicare Secondary Payer (MSP) laws in submitting Medicare and Medicaid claims for patients that either did, or may have had, private insurance. In asserting a violation of the FCA under these facts, a plaintiff must plead the three basic elements of an FCA claim: (1) the defendant presented claim for payment to the U.S., (2) the claim was fraudulent, and (3) the defendant knew the claim was false. In addition, a plaintiff in this circumstance must also plead that the MSP laws were material to the government’s decision to pay the submitted claims. The court concluded that, although the whistleblower adequately pleaded the three basic elements of an FCA claim, he failed to plead materiality at all. The complaint completely ignored whether the MSP laws were material to the government’s decision in this context. As a result, the court granted the three entities’ motion to dismiss this claim.

Substandard care. The court also dismissed all claims based on substandard care because (1) the complaint only vaguely alluded to it and (2) the whistleblower’s brief in opposition to the motion to dismiss never addressed it. Thus, these claims (the substandard care claim also included a conspiracy claim) were dismissed both because they failed to state a claim upon which could be granted and because they violated Rule 9(b)’s requirement that fraud allegation be pleaded with specificity.

State law claims. Once the federal claims were dismissed, the court was left with two state law claims. It declined to exercise supplemental jurisdiction over those two claims, and it granted the three entities’ motion to dismiss claims based on state false claims law.

The court, therefore, granted the motion to dismiss without prejudice and gave the whistleblower 30 days to file his amended complaint.

The case is No. 14-6651-SDW-SCM.

Attorneys: Anthony J. LaBruna, Jr., U.S. Attorney's Office, for the United States. Eric R. Breslin (Duane Morris, LLP) for Wanaque Convalescent Center, Wanaque Operating Co., L.P. and Seniors Management North, Inc.

Companies: Wanaque Convalescent Center; Wanaque Operating Co., L.P.; Seniors Management North, Inc.

MainStory: TopStory CaseDecisions CMSNews BillingNews FCANews FraudNews PaymentNews MSPNews ProgramIntegrityNews NewJerseyNews

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