United States ex rel. Zaldonis v. Univ. of Pittsburgh Med. Ctr.

• Decision Date: 14 May 2021
• Docket Number: 2:19-CV-01220-CCW
• Parties: UNITED STATES OF AMERICA, ex rel. DIANA ZALDONIS, Plaintiffs, v. UNIVERSITY OF PITTSBURGH MEDICAL CENTER, UNIVERSITY OF PITTSBURGH PHYSICIANS, UNIVERSITY OF PITTSBURGH OF THE COMMONWEALTH SYSTEM OF HIGHER EDUCATION, Defendants.
• Court: U.S. District Court — Western District of Pennsylvania

UNITED STATES OF AMERICA, ex rel. DIANA ZALDONIS, Plaintiffs, v. UNIVERSITY OF PITTSBURGH MEDICAL CENTER, UNIVERSITY OF PITTSBURGH PHYSICIANS,UNIVERSITY OF PITTSBURGH OF THE COMMONWEALTH SYSTEM OF HIGHER EDUCATION, Defendants.

2:19-CV-01220-CCW

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA

May 14, 2021

MEMORANDUM OPINION AND ORDER

Before the Court is a Motion to Dismiss under Federal Rules of Civil Procedure 8(a), 9(b), and 12(b)(6) filed jointly by Defendant University of Pittsburgh Medical Center ("UPMC") and Defendant University of Pittsburgh Physicians ("UPP"). See ECF No. 23. Because the Court agrees with UPMC and UPP that Relator Diana Zaldonis has failed to adequately plead materiality, as required under the False Claims Act, 31 U.S.C. § 3729 et seq., the Motion will be GRANTED. Counts I and II of the Complaint will be dismissed without prejudice and Ms. Zaldonis will be given leave to file an amended complaint.

I. Background

A. Procedural History

Ms. Zaldonis filed her sealed Complaint in this qui tam action on September 24, 2019. See ECF No. 1; see also 31 U.S.C. § 3730(b) (providing for actions by private persons under the False Claims Act). After the United States declined to intervene, ECF No. 5, the Complaint was unsealed on June 5, 2020. See ECF Nos. 6-7. Defendant University of Pittsburgh filed an answer, see ECF No. 25, while UPMC and UPP together moved to dismiss. See ECF No. 23. The Court held oral argument on UPMC and UPP's Motion on March 5, 2021. See ECF No. 40.

B. The Alleged FCA Violations

The Complaint sets out four causes of action, only two of which are brought against UPMC and UPP and are therefore relevant to the Motion. According to Ms. Zaldonis, UPMC and UPP, in violation of 31 U.S.C. § 3729(a)(1)(A)-(B), knowingly presented false claims for payment to government payors (Count I) and made or used false records or statements material to those claims for payment (Count II).¹ See ECF No. 1 at ¶¶ 131-138. In broad strokes, and as relevant to UPMC and UPP's Motion to Dismiss, the Complaint alleges as follows:

[B]etween at least 2013 and the present, attending surgeons in the UPMC Department of Cardiothoracic Surgery, including but not limited to doctors James Luketich and Pablo Sanchez, improperly delegated the responsibility to obtain patients' consent for surgical procedures to residents, fellows, nurse practitioners, and physician assistants, in violation of federal and state law as well as UPMC policy. These cardiothoracic surgeons often signed a consent form falsely certifying that they had explained to the patient all of the information in the consent form, when, in fact, they had not.

ECF No. 1 at ¶ 7. UPMC and UPP would then bill government payors—specifically the U.S. Centers for Medicare & Medicaid Services ("CMS"), the Defense Health Agency (administrator of TRICARE), and the Veterans Health Administration Office of Community Care (administrator of CHAMPVA)—"for hospital costs associated with cardiothoracic surgeries...as well as for certain costs associated with the clinical trials for medical devices used during [lung] transplants" where the primary surgeon allegedly delegated the task of obtaining patient consent to another practitioner. See id. at ¶¶ 10-11. According to Ms. Zaldonis, this practice violated the FalseClaims Act, 31 U.S.C. § 3729 et seq., because "[t]hese claims [for payment] falsely certified compliance with CMS regulations, including those requiring them to obtain their patients' informed consent properly prior to surgery," which in turn "caused Medicare and other government payors to remit funds to UPMC and UPP." ECF No. 1 at ¶ 104.

Because the FCA is concerned with "fraud, not medical malpractice," Universal Health Servs. v. U.S. ex rel. Escobar, 136 S.Ct. 1989, 2004 (2016), Ms. Zaldonis' claims against UPMC and UPP hinge on the allegedly false certifications made by UPMC and UPP in connection with claims for payment submitted to government payors. According to the Complaint, UPMC bills government payors using CMS Form 1450 (or its electronic equivalent, Form 837I), while UPP uses Form 1500 (or its electronic equivalent, Form 837P). See ECF No. 1 at ¶ 100. UPMC and UPP use these forms when submitting claims to CMS (for Medicare and Medicaid), the Defense Health Agency (for TRICARE), and the Veterans Health Administration Office of Community Care (for CHAMPVA). See id. These forms contain the following relevant certification language:

Form 1450: "Submission of this claim constitutes certification that the billing information as shown on the face hereof is true, accurate and complete. The submitter did not knowingly or recklessly disregard or misrepresent or conceal material facts."

Form 1500: "[T]his claim...complies with all applicable Medicare and/or Medicaid laws, regulations, and program instructions for payment including but not limited to the Federal anti-kickback statute and Physician Self-Referral Law (commonly known as the Stark Law)."

See ECF No. 1 at ¶¶ 100-102. In addition to the Form 1450 and Form 1500 certifications accompanying every request for payment, Ms. Zaldonis also points out that UPMC and UPP certified compliance "with applicable laws and regulations at the time of enrollment in Medicare." See id. at ¶ 103. Form 855A, Medicare's Enrollment Application, which providers like UPMC and UPP submit at the time they enroll in the program, requires providers to certify, in relevantpart, that they "understand that payment of a claim by Medicare is conditioned upon the claim and the underlying transaction complying with such laws, regulations, and program instructions (including, but not limited to, the Federal anti-kickback statute and the Stark law), and on the provider's compliance with all applicable conditions of participation in Medicare." See id.

C. The Motion to Dismiss

UPMC and UPP advance three arguments in support of their Motion to Dismiss. First, they contend that the Complaint fails to state a claim because it fails to identify an applicable regulation prohibiting a patient's principal surgeon from delegating the informed consent process to other practitioners. See ECF No. 24 at 13. Next, UPMC and UPP argue that, even if delegation of the informed consent process is prohibited, as alleged here, the Complaint fails to plead either an express or implied false certification claim under the FCA. See id. at 18; see also ECF No. 34 at 11. In short, UPMC and UPP assert that because the certifications at issue do not make any representations about the consent process used, do not specifically affirm compliance with any consent-related regulation, and fail to adequately plead materiality, the Complaint fails to state either type of false certification claim. Finally, UPMC Defendants maintain that the Complaint satisfies neither Fed. R. Civ. P. Rule 8(a)'s plausibility requirement nor Rule 9(b)'s particularity requirement. See ECF No. 24 at 25.

II. Standard of Review

A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of a claim. In reviewing a motion to dismiss, the court accepts as true a complaint's factual allegations and views them in the light most favorable to the plaintiff. See Phillips v. Cty. of Allegheny, 515 F.3d 224, 228 (3d. Cir. 2008). Although a complaint need not contain detailed factual allegations to survive a motion to dismiss, it cannot rest on mere labels and conclusions. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). That is, "a formulaic recitation of the elements of a cause of action will not do."Id. Accordingly, "[f]actual allegations must be enough to raise a right to relief above the speculative level," id., and be "sufficient to state a claim for relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than the sheer possibility that a defendant has acted unlawfully." Id. (quoting Twombly, 550 U.S. at 556).

The United States Court of Appeals for the Third Circuit has established a three-step process for district courts to follow in analyzing a Rule 12(b)(6) motion:

First, the court must "tak[e] note of the elements a plaintiff must plead to state a claim." Second, the court should identify allegations that, "because they are no more than conclusions, are not entitled to the assumption of truth." Finally, "where there are well-pleaded allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief."

Burtch v. Milberg Factors, Inc., 662 F.3d 212, 221 (3d Cir. 2011) (quoting Santiago v. Warminster Twp., 629 F.3d 121, 130 (3d Cir. 2010)).

III. Legal Framework - False Claims Act

"The False Claims Act is meant 'to reach all types of fraud . . . that might result in financial loss to the Government.'" U.S. ex rel. Petratos v. Genentech Inc., 855 F.3d 481, 486 (3d Cir. 2017) (quoting Cook Cty. v. U.S. ex rel. Chandler, 538 U.S. 119, 129 (2003)). In relevant part, the FCA imposes liability on any person who: "(A) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval; [or] (B) knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim." 31 U.S.C. § 3729(a)(1)(A)-(B). Applying these provisions, the Third Circuit has held that four elements are necessary to state a claim for violation of the FCA: "falsity, causation, knowledge, and materiality." Petratos, 855 F.3d at 487.

Claims for payment which violate the FCA fall into two broad categories: factually false claims and legally false claims. A factually false claim is one in which "the claimant misrepresents what goods or services that it provided to the Government." U.S. ex rel. Wilkins v. United Health Grp., Inc., 659 F.3d 295, 305 (3d Cir. 2011) (citing U.S. ex rel. Conner v. Salina Reg'l Health Ctr., Inc....