U.S. ex rel. Riley v. St. Luke's Episcopal Hosp.

• Decision Date: 03 April 2002
• Docket Number: No. CIV.A. H-94-3996.,CIV.A. H-94-3996.
• Parties: UNITED STATES of America, ex rel. Joyce RILEY, Plaintiff, v. ST. LUKE'S EPISCOPAL HOSPITAL, et al., Defendants.
• Court: U.S. District Court — Southern District of Texas

200 F.Supp.2d 673

UNITED STATES of America, ex rel. Joyce RILEY, Plaintiff, v. ST. LUKE'S EPISCOPAL HOSPITAL, et al., Defendants.

No. CIV.A. H-94-3996.

United States District Court, S.D. Texas, Houston Division.

April 3, 2002.

COPYRIGHT MATERIAL OMITTED

Jim M. Perdue, Sr., Perdue & Clore, Houston, TX, for Joyce Riley, plaintiff.

L. Boyd Smith, Jr., Vinson and Elkins, Jeffrey B. McClure, Mayor Day Caldwell and Keeton, Solace Kirkland Southwick, Mayor Day Caldwell and Keeton, Houston, TX, Toni Hunter, Office of Attorney General, Antoinette Hunter, Office of Attorney General, Kathlyn Claire Wilson, Asst. Attorney General, Austin, TX, Keith S. Dubanevich, Garvey Schubert et al, Portland, OR, Nancy June Locke, Fulbright & Joworski, Tamara M. Madden, Hanen Alexander et al., Brian P. Johnson, Hanen Alexander et al., Houston, TX, for St Luke's Episcopal Hospital, Branislav Radovancevic, Dr., O. Howard Frazier, MD, Surgical Associates of Texas, P.A., the University of Texas Houston Health Science Center, Baylor College of Medicine, Texas Heart Institute, Edward K. Massin, Dr., defendants.

AMENDED MEMORANDUM OPINION AND ORDER

HOYT, District Judge.

I. INTRODUCTION

Before the Court is the defendant's, St. Luke's Episcopal Hospital ("St.Luke's") motion to dismiss pursuant to Rule 12(b)(6) for failure to state a claim upon which relief can be granted.¹ The plaintiff, Joyce Riley, relator for the United States, filed suit against the defendants in accordance with 31 U.S.C. § 3729, the False Claims Act ("FCA"), alleging fraud against the United States. After thorough review, the Court determines that it should GRANT the defendant's 12(b)(6) motion to dismiss.²

II. FACTUAL BACKGROUND

The Court adopts the facts as they are recited in its Memorandum Opinion and Order dated December 21, 1997, and adds the following facts. The Court's prior ruling in this case, addressing relator's standing, was remanded by the Fifth Circuit for further consideration consistent with its ruling.³ Subsequent to the Fifth Circuit's ruling, the defendants renewed their earlier, unaddressed, motions to dismiss. As directed by the Court of Appeals, the Court will now consider the parties motions without regard to the relator's standing. On December 19, 2001, the Court called the parties before it to clarify the professional status of Dr. Branislav Radovancevic ("Dr.Radovancevic"). It was determined that Dr. Radovancevic graduated from the University of Belgrade with a degree in Medicine in 1978, and that he is an Associate Professor of Medicine at the University of Texas Medical School in Houston. Dr. Radovancevic, however, is not licensed to practice medicine in Texas or any other state in the United States.

III. CONTENTIONS OF THE PARTIES

A. St. Luke's Argument

St. Luke's moves the Court to dismiss Riley's claims pursuant to Rule 12(b)(6). In support of its motion, St. Luke's argues that Riley has failed to state a claim for which relief may be granted because the FCA is not a regulatory scheme for statutory compliance. Rather, it is a cause of action designed to remedy intentional acts of fraud. St. Luke's points out that Medicare recognizes hospital billings based on a patient's Diagnosis-Related Group ("DRG") regardless of who actually provides treatment. Therefore, Dr. Radovancevic's participation in patient care, which becomes a part of billing, is immaterial. Simply put, St. Luke's contends that claims were submitted only for services provided. Moreover, it argues, the government suffered no loss. And, when the Texas State Board of Medical Examiners investigated the circumstances giving rise to this suit it found "no violation of the Texas Medical Practice Act" by the defendants. See Texas State Board of Medical Examiner's letter dated May 12, 1997.

St. Luke's moves the Court to also dismiss Riley's charge of improper patient upgrades. The decision to upgrade a patient's status is a matter of professional judgment exercised by the treating physician. St. Luke's notes that "errors based on faulty calculations or flawed reasoning are not false under the FCA." United States ex rel. Lamers v. City of Green Bay, 168 F.3d 1013, 1018 (7th Cir.1999). And, that "expressions of opinion, scientific judgments, or statements as to conclusions about which reasonable minds may differ cannot be false." United States ex rel. Roby v. Boeing Co., 100 F.Supp.2d 619, 625 (S.D.Ohio 2000) citing Hagood v. Sonoma County Water Agency, 81 F.3d 1465, 1477-78 (9th Cir.1996). As a result, St. Luke's argues that Riley's claim of improper patient upgrades should be dismissed as baseless.

Finally, St. Luke's moves the Court to dismiss Riley's FCA conspiracy claim. "The essence of a conspiracy under the [FCA] is an agreement between two or more persons to commit fraud." United States ex rel. Atkinson v. Pennsylvania Shipbuilding Co., 2000 WL 1207162 (E.D.Pa.2000). St. Luke's argues that Riley has failed to allege any specific agreement of a conspiratorious nature, much less an agreement to defraud the government. Moreover, the mere fact that the defendants worked closely together for patients in the Hospital's transplant unit simply cannot support a claim for conspiracy. In sum, St. Luke's argues that Riley's conspiracy claim is baseless and conclusory.

B. Riley's Argument

Riley alleges three FCA causes of action: (1) false certification; (2) improper upgrades of patients; and (3) conspiracy to defraud the government. See 31 U.S.C. § 3729(a)(1-3). In straightforward fashion, Riley argues that it would be improper for this Court to dismiss the false certification claim because the Fifth Circuit has ruled that false certification gives rise to an FCA cause of action when the government conditions payment on certification. United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 902 (5th Cir.1997). Here, Riley argues that St. Luke's defrauded the government because when St. Luke's billed Medicare it impliedly certified that Dr. Radovancevic was a licensed physician when it knew that he was not.

Additionally, Riley argues that St. Luke's violated the FCA by allegedly upgrading transplant patients to a higher priority status on the donor list when their condition did not require such an upgrade. Riley argues that St. Luke's upgraded patients in order to receive additional monies from the government and to be known, generally, as the "hospital that will get you a transplant quicker." When hospitals falsely upgrade patients the government is forced to pay additional funds. Therefore, Riley argues that it would be improper for the Court to dismiss this claim. Finally, Riley argues that St. Luke's conspired to defraud the government when it allegedly instructed its nurses to sign Dr. O. Howard Frazier's ("Dr.Frazier") name instead of Dr. Radovancevic's on medical forms because it knew that Dr. Radovancevic was not licensed to practice medicine in Texas.

IV. STANDARD OF REVIEW

A. Rule 12(b)(6)

A motion to dismiss for failure to state a claim under Federal Rules of Civil Procedure 12(b)(6) "is viewed with disfavor and is rarely granted." Lowrey v. Texas A & M Univ. Sys., 117 F.3d 242, 247 (5th Cir. 1997); see also Henrise v. Horvath, 94 F.Supp.2d 768, 769 (N.D.Tex.2000). A district court cannot dismiss a complaint, or any part of it, for failure to state a claim upon which relief can be granted "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); see Blackburn v. City of Marshall, 42 F.3d 925, 931 (5th Cir. 1995); see also Henrise, 94 F.Supp.2d at 769.

In reviewing a Rule 12(b)(6) motion, the Court must accept all well-pleaded facts in the complaint as true and view them in the light most favorable to the plaintiff. Baker v. Putnal, 75 F.3d 190, 196 (5th Cir. 1996); see also Henrise, 94 F.Supp.2d at 769. In ruling on such a motion, the Court cannot look beyond the pleadings. Baker, 75 F.3d at 196. Further, the ultimate question is whether the complaint states a valid cause of action when it is viewed in the light most favorable to the plaintiff and with every doubt resolved in favor of the plaintiff. Lowrey, 117 F.3d at 247. Yet, a plaintiff must plead specific facts, not mere conclusory allegations, to avoid dismissal. Guidry v. Bank of LaPlace, 954 F.2d 278, 281 (5th Cir.1992); see also Henrise, 94 F.Supp.2d at 769.

B. False Claims Act ("FCA")

Claims for services rendered in violation of a statute are not necessarily false or fraudulent. United States ex rel. Thompson, 125 F.3d at 902. To ascertain whether FCA liability exists, the Court must determine: "(1) whether there was a false statement or fraudulent course of conduct; (2) made or carried out with the requisite scienter; (3) that was material; and (4) that caused the government to pay out money or to forfeit monies due." United States ex rel. Wilkins v. North Am. Constr. Corp., 101 F.Supp.2d 500, 514-15 (S.D.Tex.2000) (quoting Harrison v. Westinghouse Savannah River. Co., 176 F.3d 776, 788 (4th Cir.1999)) (cited with approval in United States ex rel. Russell v. Epic Healthcare Mgmt. Group, 193 F.3d 304, 308 (5th Cir.1999)). Under the FCA, an individual "knowingly" submits a false claim if the person: (1) has actual knowledge of the information; (2) acts in deliberate ignorance of the information; or (3) acts in reckless disregard of the truth or falsity of the information. 31 U.S.C. § 3729(b)(1-3).

(i). False Certification

Where the government conditions payment of a claim upon certification, the FCA is implicated. United States ex rel. Thompson, 125 F.3d at 902-03. Certification may be express or implied. Id. Federal courts, however, are reluctant to endorse an implied certification theory. See Luckey v. Baxter Healthcare Corp., 183 F.3d 730 (7th Cir.1999); (squarely rejecting implied certification for technical violations...