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From Health Law Daily, August 12, 2014

Late, speculative and conclusory is not the way to file

By Harold M. Bishop, JD

qui tam action brought by a former employee against a mental health and substance abuse facility was dismissed on the grounds that several of relator’s claims were time barred by the False Claims Act’s (FCA) six-year statute of limitations, and because the complaint failed to state a claim for relief as a matter of law under the heighted pleading requirements for FCA fraud claims. The time-barred allegations were dismissed with prejudice. The court granted the relator 30 days to amend his complaint as to the counts dismissed for failure to meet the heightened pleading requirements (U.S. ex rel. Joseph v The Brattleboro Retreat, August 8, 2014, Sessions III, W).

Background. Relator Thomas Joseph (Joseph) brought an action pursuant to the qui tam provisions of the FCA against the Brattleboro Retreat (Brattleboro), a mental health and substance abuse health care facility organized and operated in Brattleboro, Vermont. Brattleboro serves individuals who are eligible for government health care benefits including Medicare and Medicaid. Joseph was formerly employed by Brattleboro as a Self-Pay Collections Representative. Joseph filed his qui tam action on April 12, 2013, alleging that for the years 2003 through 2012, Brattleboro had knowingly or recklessly concealed the existence of overpayments due and payable to Medicare and State Medicaid programs totaling up to $11 million. The United States declined to intervene in the action.

The complaint contained three FCA counts: (1) presenting false or fraudulent claims under 31 U.S.C. Sec. 3729(a)(1)(A); (2) making false records or statements for the purpose of obtaining payment of false claims under 31 U.S.C. Sec. 3729(a)(1)(B); and (3) making false records or statements with the purpose of concealing, avoiding, or decreasing an obligation to pay or transmit money or property under 31 U.S.C. Sec. 3729(a)(1)(G).

On March 11, 2014, Brattleboro filed a motion to dismiss the complaint on the grounds that several of Joseph’s claims were barred by the FCA’s six-year statute of limitations and because the complaint failed to state a claim for relief under the heighted pleading requirements of Federal Rule of Civil Procedure 9(b).

Statute of limitations. The FCA applies a six-year statute of limitations precluding relator claims filed more than six years after the date on which the violation of the FCA is committed (31 U.S.C. Sec. 3731(b)(1)). Because Joseph filed his complaint on April 12, 2013, any allegations based on false claims that occurred prior to April 12, 2007, would be time barred. The complaint identified alleged overpayments with respect to 32 patient accounts. Nine of the alleged misdeeds occurred more than six years prior to the date of filing. Because they fell outside the statute of limitations, they could not form the basis of Joseph’s complaint and were dismissed with prejudice.

Failure to plead fraud with particularity. Because the FCA is an anti-fraud statute, the heightened pleading requirements of Rule 9(b) applies. To satisfy this heightened pleading standard, the complaint must: (1) specify the actions that the plaintiff contends to be fraudulent; (2) identify the fraudulent actor; (3) state where and when the fraudulent activity occurred; and (4) explain why the actions were fraudulent. Basically, what is required is the who, what, where, when, and how of the alleged fraud.

Counts I and II of the complaint asserted claims for alleged violations of Sec. 3729(a)(1)(A), which applies where one knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval, and (a)(1)(B), which creates liability for making a false record or statement material to a false or fraudulent claim. The court found that Counts I and II of the complaint did not cite to a single identifiable record or billing submission that Joseph claimed to be false, or give a single example of when a purportedly false claim was presented for payment by Brattleboro at a specific time. As a result, the court found that the allegations in Counts I and II of the complaint were too speculative and conclusory to support an inference of a fraudulent claim and were dismissed for failure to state a claim as a matter of law.

Count III of the complaint asserted a violation of the “reverse false claims” provision of the FCA, which creates FCA liability for (1) making a false record or statement material to an obligation to pay or transmit money or property to the government or (2) knowingly concealing, avoiding, or decreasing an obligation to pay or transmit money or property to the government (31 U.S.C. Sec. 3729(a)(1)(G)). With regard to the first prong, Joseph offered the quarterly and annual reports of Brattleboro as evidence of false statements regarding the Brattleboro’s obligations. According to the court, however, these statements failed to meet the Rule 9(b) requirements because the complaint does not identify any specific report, much less any specific false statement or inaccuracy it contains. With regard to the second prong, the court also found that the complaint failed to plead facts specifically showing that Brattleboro knowingly and improperly avoided or decreased an obligation to pay or transmit money or property to the government. While the complaint described several patient ledgers, in none of the descriptions does the complaint describe the actual amount Brattleboro should have been paid, or whether any alleged overpayment was actually retained by Brattleboro. As such, Count III was also dismissed.

The actions dismissed under Rule 9(b) were dismissed with leave to amend.

The case number is 2:13-cv-55.

Attorneys: Richard T. Cassidy (Hoff Curtis, P.C.) for Thomas Joseph. Elizabeth R. Wohl (Downs Rachlin Martin PLLC) for The Brattleboro Retreat.

Companies: The Brattleboro Retreat

MainStory: TopStory QuiTamNews CMSNews BillingNews FCANews FraudNews IPFNews MedicaidNews MedicaidPaymentNews PaymentNews VermontNews

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