United States ex rel. Prather v. Brookdale Senior Living Cmtys., Inc.

• Citation: 265 F.Supp.3d 782
• Decision Date: 22 June 2017
• Docket Number: Case No. 3:12–cv–0764
• Parties: UNITED STATES of America, EX REL. Marjorie PRATHER, Plaintiff, v. BROOKDALE SENIOR LIVING COMMUNITIES, INC., et al., Defendants
• Court: U.S. District Court — Middle District of Tennessee

265 F.Supp.3d 782

UNITED STATES of America, EX REL. Marjorie PRATHER, Plaintiff,

v.BROOKDALE SENIOR LIVING COMMUNITIES, INC., et al., Defendants

Case No. 3:12–cv–0764

United States District Court, M.D. Tennessee, Nashville Division.

Filed June 22, 2017

Mark H. Wildasin, Office of the United States Attorney, Patrick M. Barrett, III, Barrett Law Office PLLC, William Michael Hamilton, Provost, Umphrey Law Firm, LLP, Nashville, TN, for Plaintiff.

Angela Lee Bergman, Brian D. Roark, J. Taylor Chenery, Bass, Berry & Sims (Nashville Office), Nashville, TN, for Defendants.

MEMORANDUM

ALETA A. TRAUGER, United States District Judge

Marjorie Prather, as relator, brings this action against defendants Brookdale Senior Living, Inc. ("BSLI"), Brookdale Senior Living Communities, Inc. and Brookdale Living Communities, Inc. (together, "Brookdale Communities"), and Innovative Senior Home Health of Nashville, LLC d/b/a Innovative Senior Care Home Health ("ISC Home") (collectively, "Brookdale" or "defendants") under the qui tam provisions of the False Claims Act ("FCA"), 31 U.S.C. §§ 3729 – 3733. Prather alleges that the defendants submitted false claims to Medicare for reimbursement of the cost of providing home health care services. Now before the court is the defendants' Motion to Dismiss Third Amended Complaint (Doc. No. 102). For the reasons explained herein, the motion will be granted.

In order to provide a basic vocabulary for understanding the plaintiff's claims, the court will first give a summary of the relevant legal framework, before laying out the procedural history, factual analysis, and then a discussion of the claims.

I. LEGAL FRAMEWORK

A. The FCA

"The False Claims Act, 31 U.S.C. §§ 3729 et seq., imposes significant penalties on those who defraud the Government." Universal Health Servs., Inc. v. U.S. ex rel. Escobar ("Escobar "), ––– U.S. ––––, 136 S.Ct. 1989, 1995, 195 L.Ed.2d 348 (2016). The FCA focuses primarily "on those who present or directly induce the submission of false or fraudulent claims." Id. at 1996 ; see 31 U.S.C. § 3729(a)(1)(A) (imposing civil liability on "any person who ... knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval"). It also imposes liability for knowingly or improperly avoiding or decreasing an obligation to pay or transmit money to the United States. 31 U.S.C. § 3729(a)(1)(G). Liability under § 3729(a)(1)(G) occurs when a party owes funds to the government but acts to avoid meeting its obligation to return those funds.

A "claim" includes direct requests to the government for payment and claims for reimbursement under federal benefits programs. Id. § 3729(b)(2)(A). The FCA defines "knowing" and "knowingly" to mean that a person has "actual knowledge of the information," "acts in deliberate ignorance of the truth or falsity of the information," or "acts in reckless disregard of the truth or falsity of the information." Id. § 3729(b)(1)(A). And the Act defines "material" to mean "having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property." Id. § 3729(b)(4).

Liability under the FCA is "essentially punitive in nature." Escobar , 136 S.Ct. at 196 (quoting Vt. Agency of Natural Res. v. U.S. ex rel. Stevens , 529 U.S. 765, 784, 120 S.Ct. 1858, 146 L.Ed.2d 836 (2000) ). Defendants who are found liable are subjected to treble damages plus civil penalties of up to $10,000 per false claim. 31 U.S.C. § 3729(a) ; 28 CFR § 85.3(a)(9) (2015) (adjusting penalties for inflation).

An FCA action may be commenced either by the government itself, 31 U.S.C. § 3730(a), or, alternatively, by a private person, referred to as a "relator." In the latter case, a relator brings a qui tam civil action "for the person and for the United States Government" against the alleged false claimant, "in the name of the Government." Id. § 3730(b)(1).

B. Home Health Care Services Under Medicare

The FCA applies to claims submitted by healthcare providers to Medicare. U.S. ex rel. Hobbs v. MedQuest Assocs. , 711 F.3d 707, 714 (6th Cir. 2013).

Medicare Part A "provides basic protection against the costs of ... home health services" for qualified individuals aged 65 and over. 42 U.S.C. § 1395c. Medicare Part B is "a voluntary insurance program to provide medical insurance benefits," 42 U.S.C. § 1395j, and it, too, provides coverage for certain home health services. 42 U.S.C. § 1395k(a)(2)(A). See United States ex rel. Prather v. Brookdale Senior Living Cmties., Inc. , 838 F.3d 750, 755, 775 (6th Cir. 2016).

Medicare pays for home health services only if a physician certifies the patient's eligibility for and entitlement to those services. 42 U.S.C. § 1395n(a)(2) ; 42 C.F.R. § 424.22. Under the statute, payment for home health care "may be made ... only if" a physician certifies that: (1) home health services "are or were required because the individual is or was confined to his home ... and needs or needed" covered home-health services; (2) "a plan for furnishing such services to such individual has been established and is periodically reviewed by a physician"; (3) "such services are or were furnished while the individual is or was under the care of a physician"; and (4) "prior to making such certification the physician must document that the physician ... has had a face-to-face encounter ... with the individual during the 6–month period preceding such certification." 42 U.S.C. § 1395n(a)(2)(A) ; see also 42 U.S.C. § 1395f(a)(2)(C) (listing nearly identical requirements under Medicare Part A).

Under the Medicare regulations, "the certification of need for home health services must be obtained at the time the plan of care is established or as soon thereafter as possible and must be signed and dated by the physician who establishes the plan." 42 C.F.R. § 424.22(a)(2). The regulations state that the physician's certification of the necessity of services is "a condition for Medicare payment." See 42 C.F.R. § 424.10(a). Generally, "[d]elayed certification ... statements are acceptable when there is a legitimate reason for delay [but] must include an explanation of the reasons for the delay." 42 C.F.R. § 424.11(d)(3).¹

As the Sixth Circuit explained, "Medicare payments for home-health services are made pursuant to ‘a prospective payment system,’ 42 U.S.C. § 1395fff(a), which uses a 60–day ‘episode of care’ as its standard measurement." Prather , 838 F.3d at 756 (quoting 42 U.S.C. § 1395fff(a) ). To be reimbursed for the costs of providing care, a home health agency submits an initial "request for anticipated payment," or "RAP," at the beginning of each 60–day episode of care, pursuant to which Medicare pays a percentage of the total anticipated payment. The home health agency later submits a request for a "final residual payment." Id. (citing 42 C.F.R. § 484.205(b) ; 2011 Medicare Claims Processing Manual § 10.1.12). "Payment ... is not based on a fee-for-service model that would consider the precise treatments that were provided during the 60–day episode; rather, the entire episode payment ‘represents payment in full for all costs associated with furnishing home health services previously paid on a reasonable cost basis.’ " Id. (quoting 42 C.F.R. § 484.205(b) ).

The Centers for Medicare and Medicaid Services ("CMS"), a subsidiary of the Department of Health and Human Services, is the federal agency responsible for overseeing state compliance with federal Medicaid requirements. CMS is the government agency that makes the decision whether to pay a reimbursement claim under Medicare Part A. (Third Am. Compl. ¶¶ 16, 20, Doc. No. 98.)

II. PROCEDURAL HISTORY

Prather filed this lawsuit as a relator on July 24, 2012, asserting claims under the FCA as well as state law. (Compl., Doc. No. 1.) Generally, she alleged that the defendants knowingly submitted fraudulent statements and claims to Medicare seeking reimbursement for the provision of home health services beginning in 2011. After the United States declined to intervene (see Notice of Election to Decline Intervention, Doc. No. 23), the Complaint was unsealed and served on the defendants. (April 10, 2014 Order, Doc. No. 24.) Before the defendants responded to the initial Complaint, Prather filed an Amended Complaint. (First Am. Compl., Doc. No. 52.) The court granted the defendants' Motion to Dismiss the First Amended Complaint, but without prejudice to Prather's ability to amend her pleading to address the deficiencies identified by the defendants and the court at that time. (Doc. No. 71.)

Prather filed her Second Amended Complaint on June 1, 2015 (Doc. No. 73), narrowing the case to three legal claims: (1) the presentation of false claims to the United States, in violation of 31 U.S.C. § 3729(a)(1)(A) (Count I); (2) the making or using of false records or statements that were material to the submission of those false claims, in violation of 31 U.S.C. § 3729(a)(1)(B) (Count II); and (3) the failure to return overpayments, in violation of 31 U.S.C. § 3729(a)(1)(G) (Count III). (Id. ¶¶ 106–22.)

In a ruling issued on November 5, 2015 (Doc. Nos. 89, 90), the court granted the defendants' Motion to Dismiss the Second Amended Complaint. (Doc. No. 78.) Prather appealed, and the Sixth Circuit Court of Appeals reversed the dismissal of Counts I and III but affirmed the dismissal of Count II. United States ex rel. Prather v. Brookdale Senior Living Cmties., Inc. , 838 F.3d 750, 755, 775 (6th Cir. 2016). In reversing the dismissal of Counts I and III, the appellate court recognized that the Supreme Court's recent decision in Escobar might be relevant to the ultimate resolution of the case, but the court declined to analyze its effects, since the opinion had been issued after the briefs were filed in Prather.

Following remand, this court conducted a case management conference at which the defendants stated their intent to file a motion to dismiss the Second Amended Complaint for failure to meet the standards set...