U.S. ex rel. Butler v. Magellan Health Services

Citation74 F.Supp.2d 1201
Decision Date05 November 1999
Docket NumberNo. 97-1925-CIV-T-17B.,97-1925-CIV-T-17B.
PartiesUNITED STATES of America ex rel., F. Kevin BUTLER, Plaintiffs, v. MAGELLAN HEALTH SERVICES, INC., a/k/a Charter Medical Corporation, et al., Defendants.
CourtU.S. District Court — Middle District of Florida

Jay G. Trezevant, U.S. Attorney's Office, Tampa, FL, Andrew Grosso, Law Office of Andrew Grosso, Washington, DC, for U.S.

Todd Alan Foster, Cohen, Jayson & Foster, Tampa, FL, Andrew Grosso, Law Office of Andrew Grosso, Washington, DC, for F. Kevin Butler.

James J. Kennedy, III, Buchanan Ingersoll, P.C., Tampa, FL, for Magellan Health Services, Inc., Charter Medical Corp., Charter Behavioral Health System of Tampa Bay, Inc., Florida Health Facilities, Inc., Charter Glades Behavioral System, Inc., Charter Springs Behavioral Health System, Inc., Charter Kissimmee Behavioral Health System, Inc., Charter Behavioral Health System at Manatee Adolescent Treatment Service, Inc. and Charter Behavioral Health System of Bradenton, Inc.

Gregg Darrow Thomas, David S. Bralow, Kimberly A. Stott, Holland & Knight, LLP, Tampa, FL, for Tribune Co.

ORDER ON DEFENDANTS' MOTIONS TO DISMISS

KOVACHEVICH, Chief Judge.

This cause is before the Court on Defendants' Motions to Dismiss Plaintiff's Amended Complaint (Dkts.48, 50), and responses. The Court also has for consideration a Motion for Leave to File Reply (Dkt.62).

STANDARDS

A complaint should not be dismissed for failure to state a claim 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, 101-02, 2 L.Ed.2d 80 (1957). A trial court, in ruling on a motion to dismiss, is required to view the complaint in the light most favorable to the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974); Interfase Marketing Inc. v. Pioneer Technologies Group, 774 F.Supp. 1355, 1356 (M.D.Fla.1991).

FACTS

This action is brought by Dr. Kevin Butler under the "qui tam" provision, 31 U.S.C. 3730, of the False Claims Act (FCA), 31 U.S.C. §§ 3729-3733 (1994), alleging fraud on the part of the Defendants, Magellan Health Services, Inc., Charter Behavioral Health System of Tampa Bay, Inc., Charter Glades Behavioral Health System, Inc., Ft. Myers, Florida, Charter Springs Health System, Inc., Ocala, Florida, Charter Kissimmee Behavioral Health System, Inc., Orlando Florida, Charter Behavioral System at Manatee Adolescent Treatment Service, Inc., Charter Behavioral Health System of Bradenton, Inc., and Florida Health Facilities, Inc.

Plaintiff was employed as the Medical Director of the Charter Behavioral Health Center System of Tampa Bay, Inc. and as Regional Medical Director for Texas Magellan Health Service, Inc.

Plaintiff alleges that Defendants submitted fraudulent claims to the United States Department of Health and Human Services (HHS) under the Medicare program, and to the Department of Defense (DOD) through the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS), to obtain benefits and accreditation to which they were not entitled. Plaintiff additionally alleges Defendants fraudulently extended and reduced the duration of patient stays without regard to medical necessity, presenting false certifications to HHS and DOD to augment benefits and obtain selected state accreditations. Further, Dr. Butler asserts that the Defendants encouraged unnecessary patient admissions by waiving Medicare deductibles and CHAMPUS co-payments, then submitting false claims derived from the unnecessary admissions. As a result of Plaintiff's refusal to participate in the system, Plaintiff charges that Defendants implemented a business strategy with the intent to divide him from his position, finally resulting in his constructive discharge.

Plaintiff and his company, Behavioral Healthcare Options, Inc. (BHO) filed suit in state court on March 16, 1994, against Charter Medical Corporation and its parent company, Magellan Health Services, on claims of breach of contract, tortious interference with contract, and breach of covenant of good faith and fair dealing.

On March 17, 1994, the following day after filing his state claim, Plaintiff held a press conference announcing the suit, naming one of the Defendants in this qui tam complaint as effectuating a "heads on the beds" (taken to mean provoking inappropriate admissions and demanding physicians not release patients who had insurance benefits regardless if the patient required hospitalization) policy to maximize profits. He also alleged Charter guaranteed some of the Physicians salaries in return for the referral of patients needing inpatient treatment. See Jeff Testerman, Doctor Sues Charter of Tampa Bay, St. Petersburg Times, March 17, 1994 at 1B, available in 1994 WL 4786478. "The doctor's allegations are contained in a civil lawsuit filed in Hillsborough Circuit Court on Wednesday accusing the hospital of fraud and breach of contract." See id. Three years after instituting the state court suit, which has teen largely dismissed, Plaintiff filed this qui tam action under seal as required by the statute, pending a decision by the Department of Justice on whether or not to intervene. On November 13, 1998, the Government elected not to intervene in this action. See United States' Notice of Election to Decline Intervention, Nov. 13, 1998 (Dkt.40).

Plaintiffs filed the Amended Complaint (Dkt.38) on September 15, 1998, alleging that Defendants defrauded the United States by tendering fraudulent claims to the United States Department of Health and Human Services Medicare Program and the Department of Defense Civilian Health and Medical Program of the Uniformed Services to maximize insurance benefits by stretching or reducing the duration of patients' hospitalization without regard for medical necessity and by encouraging unnecessary patient admissions.

DISCUSSION
I. The False Claims Act

The chronicles and intricate policy goals behind the FCA's qui tam provision have been recited by numerous courts. See, e.g., U.S. ex rel. Findley v. FPC-Boron Employees' Club, 105 F.3d 675, 679-81 (D.C.Cir.1997); U.S. ex rel. Springfield Terminal Ry. Co. v. Quinn, 14 F.3d 645, 649-52. Also known as the Lincoln Law, the aim of the FCA is to recover money fraudulently taken from the government. United States ex rel. Marcus v. Hess, 317 U.S. 537, 551, 63 S.Ct. 379, 387, 87 L.Ed. 443 (1943). A Civil War statute passed in 1863, President Lincoln sought such a law as a weapon to weed out fraud against the federal government and punishing fraudulent claims of war profiters. United States ex rel. Williams v. NEC Corp., 931 F.2d 1493, 1497 (1991). It provided for criminal and civil penalties for submitting a false claim to the United States. See S.Rep. No. 99-345, at 8 (1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5273. At inception, the FCA contained a qui tam provision allowing a private party to bring an action alleging fraud upon the government.

The statute has since been amended twice in its 136 year history, once in 1943 and mere recently in 1986, in response to alarming court decisions. In United States ex rel. Marcus v. Hess, 317 U.S. 537, 63 S.Ct. 379, 87 L.Ed. 443 (1943), the Supreme Court permitted a qui tam suit based entirely on information assembled from a public criminal indictment to which defendants already had pleaded nolo contendere. See Quinn, 14 F.3d at 649-50; see also S.Rep. No. 345, 99th Cong., 2d Sess. 10, reprinted in 1986 U.S.C.C.A.N. at 5275. The case was typical of a growing tide of opportunistic lawsuits filed in the 1930's and 1940's. Reacting to Marcus, Congress immediately amended the FCA in 1943 to prevent all qui tam suits based on information in the possession of the federal government. Williams, 931 F.2d at 1497. The 1943 amendments to these provisions, signed into law by President Roosevelt on December 21, 1943, codified the restrictions. See S.Rep. No. 345, 99th Cong., 2d Sess. 12, reprinted in 1986 U.S.C.C.A.N. at 5277. However, by barring even those qui tam suits brought by individuals who themselves gave information of fraud to the government, Congress eliminated the financial incentive to come forward in the first place.

Again Congress responded to a troubling court decision in United States ex rel. Wisconsin v. Dean, 729 F.2d 1100, 1104 (7th Cir.1984). The Dean decision showed that "Congress, in its attempt to evade Scylla, had steered precipitously close to Charybdis." Springfield Terminal, 14 F.3d at 650. The Seventh Circuit prohibited a qui tam action by the state of Wisconsin because Wisconsin had conducted a large scale Medicaid fraud investigation and had conveyed that fraud to the Federal government as required by its reporting process. The Seventh Circuit held Wisconsin's action was barred because the Government already possessed the information upon which the complaint was based. See id.

Trying to find a middle line, the 1986 amendments "sought to resolve the tension between ... encouraging people to come forward with information and ... preventing parasitic lawsuits." Cooper ex rel. United States v. Blue Cross and Blue Shield of Florida, Inc., 19 F.3d 562, 565 (11th Cir.1994) (citations omitted). The amendments endeavored to refresh qui tam suits by private individuals, to strengthen the Government's ability to prosecute fraud by government contractors, and to expose fraud against the government. United States v. NEC Corp., 11 F.3d 136, 139 (11th Cir.1993). Congress repealed the "government knowledge" jurisdictional bar, and alternatively enacted narrow exceptions to qui tam jurisdiction.

In effect, the 1986 modifications broadened the qui tam provisions, rewarding private individuals who take personal risks in exposing wrongdoings, breaking conspiracies of silence among employees of malfeasors, and to promote whistleblowing. See S.Rep. No....

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