U.S. ex rel. Harris v. Bernad

• Decision Date: 05 August 2003
• Docket Number: Civil Action No. 99-3384 (RMU).
• Parties: UNITED STATES of America, ex rel. Cornelius E. HARRIS, Plaintiff, v. Dr. Peter BERNAD and Neurology Services, Inc., Defendants.
• Court: U.S. District Court — District of Columbia

Page 1

275 F.Supp.2d 1

UNITED STATES of America, ex rel. Cornelius E. HARRIS, Plaintiff, v. Dr. Peter BERNAD and Neurology Services, Inc., Defendants.

Civil Action No. 99-3384 (RMU).

United States District Court, District of Columbia.

August 5, 2003.

COPYRIGHT MATERIAL OMITTED

Mark D. Polston, Washington, DC, for plaintiff.

Ronald Henry Clark, Arent, Fox, Kintner, Plotkin & Kahn, Washington, DC, for defendant.

Rudolph Contreras, Washington, DC, for Non Party.

MEMORANDUM OPINION

DENYING THE DEFENDANTS' MOTION TO DISMISS

URBINA, District Judge.

I. INTRODUCTION

The plaintiff, the United States ("the government"), brings this action, under the qui tam provision of the False Claims Act ("FCA"), 31 U.S.C. § 3729 et seq., against Dr. Peter Bernad and Neurology Services, Inc. (collectively, "the defendants"). The government alleges that the defendants knowingly submitted fraudulent claims or used fraudulent records to create claims for payment through various federal health insurance programs, including Medicare. The government also charges common-law claims of fraud, unjust enrichment and mistake of fact. This matter is before the court on the defendants' motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(6) and 9(b). Because the government alleges fraud with sufficient particularity and properly states a claim, the court denies the defendants' motion to dismiss.

II. BACKGROUND

Title XVIII of the Social Security Act, 42 U.S.C. § 1395 et seq., established the Health Insurance for Aged and Disabled program, commonly known as Medicare.¹ First Am. Compl. ("Compl.") ¶ 7. The program consists of two parts: Part A provides insurance for the costs of hospitalization and post-hospitalization, and Part B — which is at issue here — covers a percentage of the fees for physician and laboratory services. Id. ¶ 8 (citing 42 U.S.C. § 1395c-i, k-l, xx). The Department of Health and Human Services ("HHS"), through the Health Care Financing Administration² ("HCFA"), administers and reimburses doctors' claims filed under Part B. Id.

Doctors submit claims to HCFA for reimbursement on the HCFA 1500 claim form. Id. ¶ 16. The HCFA 1500 requires the doctor to describe the services provided to the patient using standardized numeric codes ("CPT codes"). Id. ¶ 17. The defendants provide medical services known as evaluation and management services ("E/M services"). Id. ¶ 18. The CPT codes for E/M services range from Level I (for the least complicated services for cases of low severity) to Level V (for complex services for cases of high severity). Id. The Medicare program reimburses the higher levels of E/M services at a significantly higher rate. Id.

The government alleges that the defendants engaged in "upcoding" — that is, submitted claims with CPT codes that represented a level of care higher than the defendants actually provided. Id. ¶ 21. Specifically, the government asserts that for the past six years, the defendants upcoded almost every claim to Levels IV and V when the actual level of service they provided was much lower. Id. According to several former Neurology Services employees, one method the defendants allegedly used to inflate the CPT code on a claim was to provide defendant Neurology Services' treating physicians with fee tickets pre-printed only with the codes for Levels III, IV and V. Id. ¶¶ 22, 24. The defendants' treating physicians used the tickets to document the services provided to patients, and the defendants then used the tickets to bill the government. Id. Because only the codes for Levels III, IV and V were printed on the fee ticket, physicians who provided Level I or II services had to write in the level of service, rather than simply check a box on the ticket. Id. As a result, the government states, physicians rarely documented and billed for Level I or II services. Id.

The government notes a large discrepancy in the level of claims that the defendants filed between 1992 and 1998. Id. ¶ 23. A review of the defendants' Medicare billings reveals that defendant Dr. Bernad billed 92.68% of his claims at Levels IV and V, and defendant Neurological Services billed 94.32% of its claims at these inflated levels. Id. By comparison, procedures at Levels IV and V account for only 27% of all procedures that other neurologists bill the government for. Id.

As additional support, the government points to 12 sample patient cases involving treatment by Dr. Bernad. Id. ¶ 25. A review of these claims found that the vast majority of the claims Dr. Bernad submitted did not correspond with the treatment that he administered and documented. Id. For example, Dr. Bernad repeatedly billed claims at Level IV or V when the treatment was a simple follow-up visit from a patient treated a week earlier. Id.

Turning to the procedural history of this case, the court notes that the relator, Cornelius Harris, filed the original complaint for this matter on December 21, 1999. The government intervened on January 29, 2002, and filed an amended complaint ("complaint") on March 6, 2002. The complaint alleges violations of the FCA, common law fraud, unjust enrichment, and payment under mistake of fact. Id. ¶¶ 31-54. In response, the defendants filed a motion to dismiss the complaint for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6) and a failure to follow the heightened pleading requirements for fraud claims pursuant to Federal Rule of Civil Procedure 9(b). Mot. to Dismiss at 1. The court now turns to the substance of the defendants' motion.

III. ANALYSIS

A. The Court Denies the Defendants' Motion to Dismiss Pursuant to Rule 12(b)(6)

The defendants argue that the government's complaint fails to state a claim on which the court could grant relief. According to the defendants, the complaint does not adequately allege violations of section 3729(a)(2) of the FCA. As to the FCA claims generally, the defendants contend that the claims fail because they are based on differences in opinion and failure to follow administrative procedures. The court disagrees and views the government's complaint as properly pleaded to state a claim under Rule 12(b)(6).

1. Legal Standard for Rule 12(b)(6)

For a complaint to survive a Rule 12(b)(6) motion to dismiss, it need only provide a short and plain statement of the claim and the grounds on which it rests. FED.R.CIV.P. 8(a)(2); Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). A motion to dismiss under Rule 12(b)(6) tests not whether the plaintiff will prevail on the merits, but instead whether the plaintiff has properly stated a claim. FED.R.CIV.P. 12(b)(6); Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974), overruled on other grounds by Harlow v. Fitzgerald, 457 U.S. 800, 102 S.Ct. 2727, 73 L.Ed.2d 396 (1982). The plaintiff need not plead the elements of a prima-facie case in the complaint. Swierkiewicz v. Sorema N.A., 534 U.S. 506, 511-14, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002) (holding that a plaintiff in an employment-discrimination case need not establish her prima-facie case in the complaint); Sparrow v. United Air Lines, Inc., 216 F.3d 1111, 1114 (D.C.Cir.2000). Thus, the court may dismiss a complaint for failure to state a claim only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations. Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984); Atchinson v. District of Columbia, 73 F.3d 418, 422 (D.C.Cir.1996).

In deciding such a motion, the court must accept all of the complaint's well-pled factual allegations as true and draw all reasonable inferences in the nonmovant's favor. Scheuer, 416 U.S. at 236, 94 S.Ct. 1683. The court need not accept as true legal conclusions cast as factual allegations. Kowal v. MCI Communications Corp., 16 F.3d 1271, 1276 (D.C.Cir.1994). While the court must generally limit its review to facts alleged within the complaint, the court may also consider facts of which judicial notice may be taken and documents that are both referenced in the complaint and central to the plaintiff's claim. Phillips v. Bureau of Prisons, 591 F.2d 966, 969 (D.C.Cir.1979); Lipton v. MCI Worldcom, Inc., 135 F.Supp.2d 182, 186 (D.D.C.2001).

2. The Government Has Stated A Legitimate Cause of Action Under Section 3729(a)(2)

The defendants argue that the court should dismiss Count II of the complaint under Rule 12(b)(6) for failure to state a claim because the complaint does not adequately allege a violation of section 3729(a)(2) of the FCA. Mot. to Dismiss at 13. The defendants aver that the only false records the complaint alleges are the fee tickets that the defendants produced. Id. The defendants contend that since they never submitted these fee tickets to the government, a FCA claim under section 3729(a)(2) is invalid. Id. The government responds that this case involves both false claims and false records. Opp'n at 26-27. According to the government, its claim for a violation of section 3729(a)(2) is viable because it alleges that the defendants used false records to get the government to pay false claims. Id. at 28.

Under section 3729(a)(1) of the FCA, a defendant is liable if she "knowingly presents, or causes to be presented, to an officer or employee of the United States Government or a member of the Armed Forces of the United States a false or fraudulent claim for payment or approval." 31 U.S.C. § 3729(a) (emphasis added). Under section 3729(a)(2), a defendant is liable if he "knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government." Id. Thus, the elements of section 3729(a)(1) are (1) the defendant submitted a claim to the government, (2) the claim was false, and (3) the defendant knew the claim was false. United States v. Southland Mgmt. Corp., 288 F.3d 665, 674-75 (5th Cir.2002), aff'd en banc, 326 F.3d 669 ...