U.S. ex rel. Joslin v. Community Home Health

• Decision Date: 17 November 1997
• Docket Number: No. Y-96-2467.,Y-96-2467.
• Citation: 984 F.Supp. 374
• Parties: UNITED STATES of America ex rel. Mike JOSLIN v. COMMUNITY HOME HEALTH OF MARYLAND, INC., et al.
• Court: U.S. District Court — District of Maryland

984 F.Supp. 374

UNITED STATES of America ex rel. Mike JOSLIN v. COMMUNITY HOME HEALTH OF MARYLAND, INC., et al.

No. Y-96-2467.

United States District Court, D. Maryland.

November 17, 1997.

COPYRIGHT MATERIAL OMITTED

Lynne A. Battaglia, United States Attorney, Baltimore, Maryland; Charles J. Peters, Assistant United States Attorney, Baltimore, Maryland, for the Government.

J. Stephen Simms, Baltimore, Maryland; Robin Page West, Baltimore, Maryland, for Relator.

Marta D. Harting, Baltimore, Maryland; E. Leslie Hoffman, Washington, DC; Barbara Rowland, Washington, DC, for Defendants.

MEMORANDUM OPINION

JOSEPH H. YOUNG, Senior District Judge.

I.

Relator Mike Joslin has brought this case under the qui tam provisions of the False Claims Act, 31 U.S.C. § 3729 et seq., alleging that Defendants violated the Act by submitting Medicare claims to which they were not entitled because of their alleged noncompliance with certain state licensing requirements for home health care facilities. The Government has declined to intervene. The Court previously denied various motions to dismiss and for summary judgment. Subsequent to the Court's denial of the parties' summary judgment motions, the parties entered into a stipulation of fact and filed cross-motions for summary judgment, maintaining that the stipulation of fact permits the Court to resolve the case.

The stipulation and record before the Court establish the following undisputed facts. Defendant Community Home Health of Maryland, Inc. ("CHH") provides home health care services to patients in ten Maryland counties, and participates in the federal Medicare program. Federal law requires home health care providers like CHH to be in "compliance with all applicable Federal, State and local laws and regulations" as a condition of participation in the Medicare program. 42 U.S.C.A. § 1395bbb(a)(5) (West 1992 & Supp.1997); 42 C.F.R. § 484.12(a) (1996). CHH is the product of an acquisition in which Defendant Medical Services of America, Inc. ("MSA") acquired Family Care Home & Health Care Services, Inc. ("Family Care"). Family Care was incorporated on August 22, 1986, and its charter required a majority of its directors to be employees, officers or directors of a specific health maintenance organization ("HMO"). Family Care received the necessary Maryland operating license on October 22, 1986. On July 1, 1993, M.S.A. acquired the stock of Family Care. Prior to this acquisition, Family Care amended its charter to require that a majority of its Board of Directors be employees, officers or directors of one or more HMOs. The Maryland Licensing Office agreed with M.S.A. that the transfer of Family Care's stock to M.S.A. did not result in a change of ownership because the Family Care corporation continued to exist. On September 17, 1993, M.S.A. changed Family Care's name to the current CHH name. CHH has been providing home health services since that time.

These events occurred against the changing backdrop of Maryland's health care licensure laws. Maryland requires health care organizations to obtain a "certificate of need" ("CON") prior to providing most health care services. See MD. CODE ANN., HEALTH-GEN. II §§ 19-115 & 19-116 (1996 & Supp.1997). At the time of Family Care's incorporation, however, HMOs or health care facilities controlled directly or indirectly by a HMO were exempt from the CON requirement unless otherwise required by federal law. MD. CODE ANN., HEALTH-GEN. II § 19-116(b) (Supp.1982). The Maryland legislature granted this exemption in response to the Federal Health Planning and Resources Development Amendments of 1979, Pub.L. No. 96-79, 93 Stat. 592, 614 et seq. (1979), which imposed restrictions on the states' ability to require a CON for HMOs. In 1986, Congress repealed these amendments effective January 1, 1987. Pub.L. No. 99-660, 100 Stat. 3743, 3799 (1986). The Maryland General Assembly responded by amending § 19-116(b) to eliminate the HMO exemption to Maryland's CON requirement. 1987 Md. Laws 2112. As amended, § 19-116(b) required HMOs or health care facilities controlled directly or indirectly by an HMO to obtain a CON before building, developing, operating, purchasing, or participating in building, developing, operating, or establishing a facility required under § 19-115 to have a CON. MD. CODE ANN., HEALTH-GEN. II § 19-116(b) (1987).

Thus, Family Care was not required to obtain a CON at the time of its incorporation in 1986, and it received a valid Maryland license without first obtaining a CON. At the time of MSA's acquisition of Family Care, however, this CON exemption had been repealed, and the relevant requirements of §§ 19-115 and -116, as amended in 1987, have remained largely unchanged. Specifically, Maryland law currently requires HMOs or HMO-controlled health care facilities to obtain a CON before developing, operating, or participating in: (1) the building, development, or establishment of a new health care facility; (2) the relocation of a health care facility to a new site; (3) changing the bed capacity of a health care facility in certain circumstances; (4) changing the type or scope of certain health care services; and (5) making certain capital expenditures. MD. CODE ANN., HEALTH-GEN. II §§ 19-115 & 19-116(b)(ii) (1996 & Supp. 1997).¹

Relator contends Defendants have violated the False Claims Act ("FCA") by certifying their compliance with Maryland law under § 1395bbb(a)(5), yet submitting Medicare claims to the Government while not in compliance with Maryland's CON requirements. Relator maintains that, though Maryland law did not require Family Care to obtain a CON before commencing operation in 1986 because it received its license under the now-repealed HMO exemption to the CON requirement, Defendants nonetheless violated Maryland's CON requirement by not obtaining a CON in connection with MSA's 1993 acquisition of Family Care and subsequent participation in the Medicare program. Relator notes that federal law required Defendants to certify their compliance with relevant state laws and regulations as a prerequisite to participation in the Medicare program. Accordingly, Relator argues, Defendants' certifications of compliance to the Government constitute actionable fraud under the FCA because: (1) Defendants failed to obtain a CON, and failed to report their lack of a CON to the Government, after the 1993 acquisition; (2) Defendants "ranged far beyond the scope of" the CON exemption by changing CHH's Board of Directors to no longer be comprised of HMO employees, officers, and directors; and (3) Defendants provided services to non-HMO enrollees. In short, Relator contends the above facts demonstrate the Defendants' failure to comply with relevant state law, rendering their demands for payment under the Medicare program fraudulent.

Defendants contend they are entitled to summary judgment. First, Defendants argue that they have not violated Maryland's CON requirement because CHH was not required to obtain a CON when it eliminated HMO control, and because MSA's acquisition of Family Care did not trigger the CON requirements. Defendants also maintain that even if their conduct violated the CON requirements, no false statements or certifications were made regarding compliance with Maryland law. Specifically, Defendants believe a violation of the law does not, standing alone, always trigger the false claims statute, and that the Act requires scienter before liability attaches.

II.

Before considering the merits of the parties' arguments, a brief review of the relevant legal standards for summary judgment is useful to help frame the issues. Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c). Regarding materiality, the substantive law will identify which facts are material. Only disputes over facts that might affect the outcome of the litigation under governing law will preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be considered. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). Regarding genuineness, a dispute about a material fact is genuine "if the evidence is such that a reasonable jury could return a verdict for the non-moving party." Id.

The party seeking summary judgment bears the initial burden of showing that there is an absence of evidence to support the nonmoving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 2553-54, 91 L.Ed.2d 265 (1986). This burden does not require the moving party to produce evidence showing the absence of a genuine issue of material fact, but only to point out the absence of a material fact. Id. In response, the non-moving party "may not rest upon the mere allegations or denials of the adverse party's pleadings, but ... must set forth specific facts showing that there is a genuine issue for trial." FED. R. CIV. P. 56(e); Anderson, 477 U.S. at 248, 106 S.Ct. at 2510; Sylvia Dev. Corp. v. Calvert County, 48 F.3d 810, 817 (4th Cir.1995). The nonmovant's failure to do so requires summary judgment be granted. Strag v. Board of Trustees, 55 F.3d 943, 951 (4th Cir.1995). The mere existence of a scintilla of evidence in support of Plaintiff's case will be insufficient; there must be evidence on which the jury could reasonably find for the non-moving party. Anderson, 477 U.S. at 252, 106 S.Ct. at 2512. The evidence of Plaintiff, however, is to be believed and all justifiable inferences are to be drawn in his favor. Id. at 255, 106 S.Ct. at 2513-14 (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59, 90 S.Ct. 1598, 1608-09, 26 L.Ed.2d 142 (1970)).

III.

The parties agree that CHH's predecessor, Family Care, was not required to...