Bannon v. Edgewater Medical Center
| Decision Date | 28 November 2005 |
| Docket Number | No. 00 C 7036.,00 C 7036. |
| Citation | 406 F.Supp.2d 907 |
| Parties | Anne BANNON, Individually and ex rel. United States of America and the State of Illinois Relator, v. EDGEWATER MEDICAL CENTER; Dr. Andrew Cubria; Dr. Ravi Barnabas; Universal Geriatric Services, Inc.; Anthony Todd; The Wellness Institute, Inc.; Dr. Krishnaswami Sriram; Two Hundred Pharmacy, Inc.; Jeff W. Veal; Doctors Hospital of Hyde Park, Inc. Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
Sidney R. Berger, Attorney at Law, Devon C. Bruce and Joseph A. Power, Jr., Powers, Rogers & Smith, Chicago, IL, for Relator.
Scott T. Mendeloff, Eric S. Pruitt, Gabriel Aizenberg, Kathryn Ann Watts, Sidley, Austin, Brown & Wood, LLP, John A. Culver, Terry Alan Fox, McKenna, Storer, Rowe, White & Farrug, Willis Everette Brown, Willis E. Brown, Ltd., Chicago, IL, for Defendants.
On April 29, 2004, Anne Bannon filed the fourth version of her qui tam False Claims Act complaint. It came just two weeks after Judge Lindberg granted the motion of Edgewater Medical Center ("EMC"), to dismiss the second amended complaint for failure to plead fraud with the particularity required by Rule 9(b), Federal Rules of Civil Procedure. Like its predecessors, the third amended complaint alleged that the defendants knowingly submitted false claims to Medicare and Medicaid in violation of the False Claims Act ("FCA"), 31 U.S.C. § 3729(a)(1), and the Illinois Whistleblower Reward and Protection Act ("IWRPA"), 740 ILCS 175/3. Unlike its predecessors, however, the third amended complaint explicitly referred to and extensively relied upon information that had been publicly disclosed in cases involving the events and dramatis personae in this case. EMC has moved to dismiss this iteration of the complaint, pursuant to § 3730(e)(4)(A) of the FCA — the so-called public disclosure bar — which provides that "[n]o court shall have jurisdiction over an action under this section based upon the public disclosure of allegations or transactions" unless the action is brought by the Attorney General or the person bringing the action "is an original source" of the information.
Ms. Bannon's argument that the public disclosure bar has no application unless the public disclosure antedates the filing of the complaint is contrary to the encompassing and unambiguous language Congress used in § 3730(e)(4)(A). The question is whether the "action" — not the complaint — is "based upon" the public disclosures. Acceptance of her argument would not only be faithless to Congresses' command, but would frustrate one of the central goals Congress sought to achieve in 1986 when it amended the FCA by adding § 3730(e)(4)(A), namely "prevent[ing] `parasitic' qui tam actions in which relators, rather than bringing to light independently discovered information of fraud, simply feed off of previous disclosures." United States ex rel. Bledsoe v. Community Health Systems, Inc., 342 F.3d 634, 646 (6th Cir.2003). There is no principled difference between a complaint based upon information in public disclosures (of which the relator is not the source) and an amended complaint that is based upon and can only be sustained by resort to that information. The goal of prohibiting parasitic suits requires application of the public disclosure bar in the latter case no less than in the former.
The April 15, 1996 edition of Modern Healthcare Magazine, a weekly Crain's Business magazine servicing healthcare management, contained an extensive and disquieting report on an FBI investigation into an overarching fraud by Edgewater, its doctors, and Universal Geriatric Services. The article said that the investigation had its genesis in complaints that Edgewater had "illegally funneled senior citizens from federally subsidized housing projects to boost its profits...." Edgewater, which the article branded as the most expensive hospital in the Chicago area from 1994 to 1995, had attracted a substantial number of low income senior citizen patients from Chicago Housing Authority projects on Chicago's South Side, even though as many as 30 community acute-care hospitals were closer to the housing projects than Edgewater. (EMC's Memorandum in Support of Motion to Dismiss Third Amended Complaint, Ex. K) ("the Memorandum").
The article noted that more than 10% of Edgewater's inpatients lived in low income South Side neighborhoods, where the CHA operated 18 senior residential facilities. Edgewater leased space in one of the CHA's South Side locations, the Artensa Randolph Healthcare Center, for a dollar a year. In 1993 Edgewater's inpatient admissions skyrocketed 24% to 6,600 patients. Near bankruptcy in 1989, Edgewater, itself, attributed its resurrection to new patients from "senior programs." Incredibly, three physicians were responsible, the article reported, for over 95% of the admissions in the 65-plus age category. In the overwhelming majority of cases, the seniors had been bused long distances from their homes to Edgewater Hospital. (Ex. K).
The Modem Healthcare article quoted a Dr. G, a physician who worked at Artensa Randolph, who complained that he had been dismissed earlier in the year "because Edgewater executives said he wasn't referring enough patients to their facility." The article also explained that the probe was focusing on Edgewater's relationship with Universal Geriatric Services, which assisted Edgewater in the management of the Artensa Randolph Healthcare Center. The federal probe centered on admissions from this particular clinic. The article reported that residents had complained that patients who visited EMC's onsite clinic ended up at the hospital whether they needed to or not. At the same time, the Illinois attorney general was investigating the sale of EMC to Permian from Peter Rogan, another defendant in the instant case, as well as its conversion from a not-for profit to a for-profit facility. The Modern Healthcare article contained quotations from Mr. Rogan, who was Edgewater's CEO, and who the article noted was a focus of the State's investigation regarding the price Permian paid for Edgewater and the nature of the relationship between Permian and Rogan. (Ex. K, at 2-3).
In early November, 2000, more than four years after the Modern Healthcare article appeared, Ms. Bannon filed her complaint as relator. She filed an amended complaint (under seal) on February 20, 2001, in which she added some defendants, and a second amended complaint on February 24, 2004, which terminated some, and added other defendants. After the government declined to intervene, and the complaint was made public in November of 2002, EMC answered the second amended complaint in November of 2004. It raised three separate affirmative defenses based on the claim that Ms. Bannon's suit was predicated on publicly disclosed information, and that she was not an original source of that information. Hence, the answer contended, the court lacked "subject matter jurisdiction" of the case. 31 U.S.C. § 3730(e)(4)(A). That same day, it filed a motion for judgment on the pleadings under Rule 12(c), Federal Rules of Civil Procedure, and a motion to dismiss under Rule 9(b).
On April 14, 2005, Judge Lindberg granted the motion in part and denied it in part. United States ex rel. Bannon v. Edgewater Hosp., Inc., No. 00 C 7036, 2005 WL 991757 (N.D.Ill. April 14, 2005). Judge Lindberg rejected EMC's argument that a qui tam plaintiff was required as a jurisdictional matter to plead that there had not been prior public disclosure of the underlying facts of the complaint or, if there had been that the plaintiff was the original source:
In order for there to be a specificity requirement in pleading, it is necessary to be able to trace the requirement to a statute or the Federal Rules of Civil Procedure. See Leatherman et al. v. Tarrant County Narcotics Intelligence and Coordination Unit, 507 U.S. 163, 164[, 113 S.Ct. 1160, 122 L.Ed.2d 517] (1993). Rule 8(a)(2) only requires that a complaint include "a short and plain statement of the claim that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). Contrary to EMC's contention, Rule 8(a)(2) does not require a plaintiff to set out in detail the facts upon which she bases her claim. Conley v. Gibson, 355 U.S. 41, 45, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).
The court was receptive to EMC's contentions that the claimed fraud was not pled with the requisite particularity in that there were not the necessary allegations of when the misrepresentations were made and who was responsible for submitting the fraudulent claims to Medicare and Medicaid. It further found that the relator only alleged that EMC acted with deliberate ignorance, was negligent in managing the operations and billing practices, and in submitting bills to Medicare. The court went on to find that, although the complaint generally alleged that EMC made false claims under the FCA, it did not "associate specific sets of statements with particular agents of EMC, specify the content of these statements, or articulate a time or place that the fraudulent claims were made." 2005 WL 991757, *2-3. The relator was thus given leave to file the third amended complaint that is now under consideration.
In response to Judge Lindberg's ruling, the third amended complaint has added 28 new paragraphs. (¶¶ 32, 35, 48-68, 83-87). It also refers to: the April 1996 Modern Healthcare article that publicly disclosed the FBI's investigation (¶¶ 32, 86-87); the publicly disclosed, extensive and highly detailed discovery materials from the government's pending, related case, United States v. Rogan...
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