U.S.A v. Dialysis Clinic Inc
| Decision Date | 19 January 2011 |
| Docket Number | Case:No 5:09-CV-00710 NAM/DEP |
| Parties | UNITED STATES OF AMERICA, the PEOPLE OF THE STATE OF NEW YORK and the COUNTY OF ONONDAGA, ex. rel. PAUL BLUNDELL, Relator, Plaintiffs, v. DIALYSIS CLINIC, INC., Defendant. |
| Court | U.S. District Court — Northern District of New York |
APPEARANCES:
OFFICE OF PETER HENNER
P.O. Box 326
Clarksville, New York 12041-0326
Attorney for Plaintiff Blundell
CARTER, CONBOY, CASE, BLACKMORE,
MALONEY & LAIRD, PC.
20 Corporate Woods Boulevard
Albany, New York 12211
Attorneys for Defendant
BUCHANAN, INGERSOLL & ROONEY, PC
Two Liberty Place
50 S. 16th Street, Suite 3200
Philadelphia, Pennsylvania 19102
Attorneys for Defendant
OF COUNSEL:
Peter Henner, Esq.
Michael J. Murphy, Esq.
James M. Becker, Esq.
MEMORANDUM DECISION AND ORDER
On June 22, 2009, plaintiff Paul Blundell filed this qui tam action under seal in accordance with the provisions of the False Claims Act ("FCA"), 31 U.S.C. § 3729 etseq. as arelator on behalf of the United States of America, the State of New York and the County of Onondaga. On July 10, 2009, plaintiff filed an amended complaint under seal. Plaintiff asserted claims based upon the federal FCA and the New York State False Claims Act, §§ 188-194 of the New York State Finance Law. On February 24, 2010, the United States filed its Notice of Election to Decline Intervention and on the same day, the complaint was unsealed. On April 21, 2010, plaintiff served defendant. Presently before the Court are three motions: (1) defendant's motion pursuant to Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure to dismiss the amended complaint for failure to plead fraud with particularity and failure to state a cause of action (Dkt. No. 27); (2) plaintiffs motion for leave to file a second amended complaint (Dkt. No. 30); and (3) defendant's motion pursuant to Rule 12(b)(1) to dismiss the second amended complaint for lack of subject matter jurisdiction. (Dkt. No. 34).
In support of the claims herein, plaintiff makes the following factual and legal averments: Dialysis Clinic, Inc. ("DCI" or defendant) is a dialysis treatment center with over 200 outpatient dialysis facilities in the United States. Plaintiff, a resident of Liverpool, New York, was employed at DCI's University Dialysis Center ("UDC") from August 2007 until October 2008 as a staff nurse, team leader and charge nurse. Dialysis is a method of treating End Stage Renal Disease ("ESRD").2 The federal Medicare program provides coverage for most individuals who are diagnosed with ESRD and organizations that provide these services are eligible for Medicarereimbursement. During plaintiff's employment with defendant, he questioned DCI's documentation of dialysis treatment which implicated billing issues for Medicare, Medicaid and Veterans' Administration patients. Plaintiff was not directly involved in the billing procedures and did not have access to the bills that were submitted for government reimbursement.
In 2008, the New York State Office of the Medicaid Inspector General ("OMIG")3conducted an audit and reviewed payments made from the New York State Medicaid Program to defendant from January 1, 2004 through December 31, 2005. On October 23, 2008, the OMIG issued a "Final Audit Report". The report was publicly available on the internet after October 23, 2008. The purpose of the report was described as follows:
This review consisted of a random sample of 200 services with Medicaid payments of $26,940.54. The purpose of the audit was to ensure that: Medicaid reimbursable services were rendered for the dates billed; appropriate rate or procedure codes were billed for services rendered; patient related records contained the documentation required by the regulations; and claims for payment were submitted in accordance with Department regulations and the Provider Manuals for Clinics.
The Audit Report contained four "Detailed Findings" set forth in pertinent part as follows:
• missing documentation
In 12 instances pertaining to 8 patients, the kidney dialysis services were not documented. Of these services, we found 5 instances where the written order for services was missing and 5 instances where the written order lacked the required signature. In 2 instances the Hemodialysis Flowsheet was missing.
• service delivery documents not signed by a licensed health professionalIn 11 instances pertaining to 7 patients, the signature of a licensed health care professional, attesting to the delivery of the treatment service, was lacking on the Hemodialysis Flowsheet.
• threshold visit billed for incomplete treatment session
In 4 instances relating to 4 patients, a threshold visit was incorrectly billed for hemodialysis sessions terminated before the treatment was completed.
• No EOB for Medicare covered services
In 4 instances pertaining to 2 patients, no Explanation of Medical Benefits was found for a Medicare eligible patient.
As a result of the aforementioned, the audit revealed sample overpayments in the amount of $4,171.20 resulting in a "mean per unit point" estimate of $160,508.00.4 The report provided defendant with repayment options and further indicated:
Failure to arrange payment within 20 days of the issuance of this report will result in initiation of a 10% withhold of your Medicaid billings to recover the lower confidence limit amount of $113,499.00. If the repayment term exceeds ninety (90) days, repayment interest will be charged as stated in the previous paragraph.
Plaintiff's employment with DCI ended two weeks before the Audit Report was issued and plaintiff was not aware of the audit report until after the report was posted on the Internet.
In the amended complaint, plaintiff alleges that DCI failed to comply with the New York State Public Health Law Regulations governing the operation of dialysis facilities and Title 42 of the Code of Federal Regulations, Public Health, Part 405, Subpart U-Conditions of Coverage of Suppliers of End-State Renal Disease (ESRD) Services.5 (Am. Compl.,}} 18). Plaintiff claimsthat 42 C.F.R. § 494 requires compliance with standards, "to protect dialysis patients' health and safety and to ensure that quality care is furnished to all patients in Medicare approved dialysis facilities." (Id. at ¶ 22). Plaintiff contends that DCI violated those procedures and regulatory requirements resulting in compromised patient care. Thus, defendant's submission of claims for payment to Medicare, Medicaid and the Veterans' Administration were fraudulent as they were based upon "false certifications". Specifically, plaintiff alleges that defendant violated the standards and regulatory requirements in the following respects: (1) by failing to provide adequate staffing; (2) using unqualified personnel; (3) falsifying records; (4) permitting Personal Care Technicians ("PCT") to perform nursing functions; (5) permitting PCTs to administer Heparin; (6) permitting an Licensed Practical Nurse ("LPN") or PCT to assess a patient's condition; (7) allowing a PCT to verify prescription medication; (8) allowing home dialysis treatment to fail due to the lack of appropriate supervision; (9) failing to employ the appropriate techniques to prevent cross-contamination; (10) failing to provide comfortable temperatures within the facility; (11) failing to adequately survey or monitor patients receiving dialysis services; (12) failing to adequately train employees in all aspects of emergency preparedness; (13) failing to provide patients with information and to ensure that they understood their rights; (14) falsifying initial comprehensive assessment records; (15) failing to allow a register nurse to participate in interdisciplinary meetings; and (16) appointing nurses with inadequate experience.
Plaintiff claims that DCI defrauded the United States, State of New York and Onondaga County when it submitted Medicare claims and falsely certified that it was in compliance with applicable state and federal regulations pertaining to dialysis services. Plaintiff alleges four causes of action against defendant including Medicaid fraud, Medicare fraud, fraud against the Veterans Administration and Medicaid fraud against the State of New York and Onondaga County. Plaintiff alleges:
Because DCI's claims for payment are based upon false certification that the UDC facility is in compliance with the applicable rules and regulations and of generally accepted practices for quality of care, DCI's claims for payment are false claims within the meaning of FCA. (Am. Compl., ¶ 131).
... services rendered at UDC were of low quality care and constituted a significant danger to patients undergoing dialysis treatment. (Id. at ¶ 132).
DCI knew, or should have know, that the United States of America would not pay for such services under the Medicaid program, if it had been aware of the poor quality of treatment and of the risks to patients. (Id. at ¶ 133).
[ ], the UDC facility owned and operated by DCI has failed to meet a number of the standards for Medicare coverage set forth [in] Part 405 and in Part 494. (Id. at ¶ 144).
Consequently, the claims for payment that had been submitted by DCI for services rendered at UDC represent reimbursement payments for services to which DCI was not entitled. (Id. at ¶ 145).
DCI submitted claims for Medicare payments for services that were not rendered in compliance with the requirements of federal regulations pertaining to ESRD services. (Id.at ¶ 146).
Upon information and belief, the Veterans Administration would not have paid DCI's claims, had it been aware of the violations of state and federal regulations, including violations of the Medicare regulations for ESRD treatment, the low quality of care provided at the UDC facility, and of the significant risks to patient health which were created by UDC practices and non-compliance with regulatory criteria. (Id. at ¶ 161).
Upon information and belief, DCI's receipt of funds for Medicaid...
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