United States v. Universal Health Servs., Inc.

• Decision Date: 17 March 2015
• Docket Number: No. 14–1423.,14–1423.
• Citation: 780 F.3d 504
• Parties: UNITED STATES and Commonwealth of Massachusetts ex rel. Julio Escobar and Carmen Correa, Administratrix of the Estate of Yarushka Rivera, Plaintiffs, Appellants, v. UNIVERSAL HEALTH SERVICES, INC., Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

780 F.3d 504

UNITED STATES and Commonwealth of Massachusetts ex rel. Julio Escobar and Carmen Correa, Administratrix of the Estate of Yarushka Rivera, Plaintiffs, Appellants

v.UNIVERSAL HEALTH SERVICES, INC., Defendant, Appellee.

No. 14–1423.

United States Court of Appeals, First Circuit.

March 17, 2015.

Matthew P. McCue, with whom Law Office of McCue was on brief, for appellants.

Mark W. Pearlstein, with whom Laura McLane, Evan D. Panich, and McDermott Will & Emery LLP were on brief, for appellee.

Robert Ross, with whom Steven Sharobem and Martha Coakley, Attorney General, were on brief, for Commonwealth of Massachusetts, amicus curiae.

Jennifer M. Verkamp and Morgan Verkamp LLC, on brief for Taxpayers Against Fraud Education Fund, amicus curiae.

Before HOWARD, STAHL, and BARRON, Circuit Judges.

Opinion

STAHL, Circuit Judge.

The genesis of this False Claims Act case was the care of Relators' daughter at Arbour Counseling Services in Lawrence, Massachusetts. Relators alleged that their daughter—who died of a seizure in 2009—was treated by various unlicensed and unsupervised staff, in violation of state regulations. The crux of their complaint is that Arbour's alleged noncompliance with sundry supervision and licensure requirements rendered its reimbursement claims submitted to the state Medicaid agency actionably false under both the federal and Massachusetts False Claims Acts.

The district court dismissed the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). With one limited exception, we reverse.

I. Facts & Background

A. Regulatory framework

Arbour Counseling Services (“Arbour”), owned and operated by Defendant–Appellee Universal Health Services, Inc. (“UHS”), is a provider of mental-health services in Lawrence, Massachusetts.¹ Arbour participates in the state Medicaid program, known as MassHealth, and bills MassHealth for services rendered to individuals insured by the program.

The state has promulgated regulations governing the MassHealth program. See generally 130 Mass.Code Regs. §§ 401.401 –650.035.² Chapter 429 in particular pertains to the provision of mental-health services at both “parent centers” and “satellite facilities” around the state.³ In the regulations, a satellite facility, such as the Arbour clinic at issue in this case, is a “mental health center program at a different location from the parent center that operates under the license of and falls under the fiscal, administrative, and personnel management of the parent center.” Id. § 429.402. Satellite facilities are classified as either “autonomous” or “dependent”; autonomous facilities have “sufficient staff and services to substantially assume [their] own clinical management independent of the parent center,” while dependent facilities operate “under the direct clinical management of the parent center.” Id.

The regulations contemplate that mental health centers will employ qualified “core” staff members engaged in disciplines such as psychiatry, psychology, social work, and psychiatric nursing. See id. § 429.422 (setting forth staff composition requirements); id. § 429.424 (setting forth requisite staff qualifications). All staff must receive supervision within a formalized relationship, commensurate to the individual's skill and level of professional development. Id. § 429.438(E). Noncore counselors and unlicensed staff in particular “must be under the direct and continuous supervision of a fully qualified professional staff member trained in one of the core disciplines.” Id. § 429.424(F).

Satellite programs are subject to additional regulations regarding staff supervision and integration with parent centers; MassHealth payment for rendered services is conditioned on the satellites' compliance with these provisions. Id. § 429.439. As Arbour's Lawrence clinic is a satellite of a parent center located in Malden, Relators' claims are largely premised on a failure to conform to the strictures of the satellite-specific regulation.

B. Facts relevant to Relators' claims against UHS

Relators' daughter, Yarushka Rivera⁴ —a teenage recipient of MassHealth benefits—began seeing Arbour counselor Maria Pereyra in 2007 after experiencing behavioral problems at school. Pereyra, though on staff at Arbour, had no professional license to provide mental-health therapy. Relators met with Pereyra's supervisor, clinical director Edward Keohan, after Yarushka complained that she was not benefiting from counseling. During the meeting, Relators became concerned that Keohan was not supervising Pereyra and was unfamiliar with Yarushka's treatment.

Yarushka was eventually transferred to another staff member, Diana Casado, also ostensibly supervised by Keohan. Like Pereyra, Casado was unlicensed. Relators quickly became unsatisfied with her treatment of their daughter and believed that Casado was not being properly supervised.

In February 2009, Yarushka was once again assigned to a new therapist, Anna Fuchu. Fuchu held herself out as a psychologist with a Ph.D., though Relators later learned that she had trained at an unaccredited online school and that her application for a professional license had been rejected. Notwithstanding Fuchu's lack of essential credentials, she treated Yarushka and eventually diagnosed her with bipolar disorder

.

Several months later, when Yarushka's behavioral problems had not abated, officials at her school informed Relators that she would be permitted to attend classes only if she saw a psychiatrist. When Relators told this to Fuchu, she referred Yarushka to Maribel Ortiz, another staff member at Arbour. Believing Ortiz to be a psychiatrist, Relators referred to her as “Dr. Ortiz.” They eventually discovered, however, that she was not a psychiatrist, but rather a nurse, and that she was not under the supervision of the one Arbour staff psychiatrist, Maria Gaticales—herself not board-certified, or eligible for board certification, as contemplated by the regulations. See 130 Mass.Code Regs. § 429.424(A)(1). Nonetheless, on May 6, 2009, Ortiz prescribed a medication called Trileptal

for Yarushka's purported bipolar disorder.

Yarushka soon experienced an adverse reaction to the drug. Although she called Ortiz for guidance, her two phone messages went unreturned. When her condition worsened, Yarushka decided to discontinue the medication, having not heard from anyone at Arbour in several days. On May 13, Yarushka had a seizure and was hospitalized.

In the days following Yarushka's seizure, Relators spoke with Keohan and voiced their dissatisfaction with their daughter's care. Yarushka's stepfather Julio Escobar “began to suspect that no-one at Arbour was supervising Ms. Ortiz when Mr. Keohan claimed to have no knowledge of the Relators [sic] repeated efforts to reach Ms. Ortiz, and of Yarushka's recent seizure.” After their conversation, Keohan directed the staff psychiatrist Gaticales to supervise Ortiz. Yarushka resumed treatment at Arbour, but suffered another seizure in October 2009, this one fatal.

After Yarushka's death, Relators spoke with Anna Cabacoff, a social worker at Arbour who had worked with Yarushka in the past. Cabacoff informed them that the counselors who had cared for Yarushka were not properly licensed to provide treatment without supervision or to prescribe medication, and that Gaticales was not board-certified⁵ and accordingly unqualified to supervise the other staff members.

In the months following the death of their daughter, Relators filed complaints with several state agencies, including the Disabled Persons Protection Committee (“DPPC”), Division of Professional Licensure (“DPL”), and the Department of Public Health (“DPH”). Although the ensuing DPPC report found that there was insufficient evidence of abuse of a disabled person, it concluded that Ortiz and Gaticales “may have been” out of compliance with relevant requirements concerning qualifications and supervision.

DPH determined, after an investigation, that Arbour had violated fourteen distinct regulations, including those relating to staff supervision and licensure.⁶ The DPH report deemed Relators' allegations “valid” and found that

[t]he Psychiatrist's personnel record indicated that she was not qualified to supervise a nurse practitioner because she was not Board Certified in psychiatry. Clinical Therapist # 8's and Clinical Therapist # 11's personnel files indicated they were not licensed. Clinic Director # 2 said that he supervised Clinical Therapist # 8 and Clinical Therapist # 11, but did not document these meetings.

The report also concluded, based on a comprehensive review of Arbour's personnel files, that “23 therapists were not licensed for independent practice and also ... were not licensed in their discipline.” Though all twenty-three therapists required clinical supervision, there was no documentation to show that any had received such supervision prior to January 2012, despite having been hired as early as 1996. As a result of the DPH report, Arbour entered into a plan of correction with the agency to rectify the identified deficiencies.

In addition, Arbour's clinical director Keohan entered into a consent agreement with the Board of Registration of Social Workers, within the DPL.⁷ In the agreement, Keohan admitted to sufficient facts meriting the Board's conclusion that, inter alia, he had authorized Pereyra's unlicensed practice of social work at the clinic, in violation of Massachusetts law. As a consequence, the agreement imposed a two-year period of supervised probation on Keohan's license to practice social work in the state. Fuchu, another staff member who had treated Yarushka, also entered into a consent agreement wherein she admitted to holding herself out as a psychologist despite not being licensed. She agreed to pay a $1,000 civil penalty.

C. Procedural background

Relators filed their second amended complaint in February of 2013, reciting the above allegations and setting forth fourteen counts against Defendant UHS under both the federal and...