United States ex rel. Prather v. Brookdale Senior Living Cmtys., Inc.

• Decision Date: 05 November 2015
• Docket Number: Civil No. 3:12-CV-00764
• Court: U.S. District Court — Middle District of Tennessee
• Parties: UNITED STATES OF AMERICA, ex rel., MARJORIE PRATHER, Plaintiff, v. BROOKDALE SENIOR LIVING COMMUNITIES, INC.; BROOKDALE LIVING COMMUNITIES, INC.; BROOKDALE SENIOR LIVING, INC.; INNOVATIVE SENIOR CARE HOME HEALTH OF NASHVILLE, LLC; and ARC THERAPY SERVICES, LLC; Defendants.

UNITED STATES OF AMERICA, ex rel., MARJORIE PRATHER, Plaintiff, v. BROOKDALE SENIOR LIVING COMMUNITIES, INC.; BROOKDALE LIVING COMMUNITIES, INC.;BROOKDALE SENIOR LIVING, INC.; INNOVATIVE SENIOR CARE HOME HEALTH OFNASHVILLE, LLC; and ARC THERAPY SERVICES, LLC; Defendants.

Civil No. 3:12-CV-00764

UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF TENNESSEE NASHVILLE DIVISION

November 5, 2015

Judge Aleta A. Trauger

MEMORANDUM

Pending before the court is the defendants' Motion to Dismiss the Second Amended Complaint pursuant to Rules 12(b)(6) and 9(b) (Docket No. 78), to which the plaintiff has filed a Response in opposition (Docket No. 85), and the defendants have filed a Reply (Docket No. 88). For the following reasons, the defendants' motion will be granted.

BACKGROUND

I. The Parties

Marjorie Prather ("Prather") is an individual who resides in Tennessee. Prather is a registered nurse who was employed by the defendant Brookdale Senior Living, Inc. ("BSLI") as a Utilization Review Nurse ("URN") from September of 2011 until November 23, 2012. The United States of America is the real party in interest to Prather's action.

BSLI is a Delaware corporation with a principal address in Brentwood, Tennessee ("Brookdale Main Office"). (Docket No. 73 at ¶ 12.) BSLI owns retirement communities and assisted living facilities throughout the United States; it provides retirement living services, including home health services and skilled nursing services, to recipients of care under the Health Insurance for the Aged and Disabled Program, Title XVIII of the Social Security Act, 42 U.S.C. §§ 1395, et seq. ("Medicare") (Id. at ¶ 55.) Defendants Brookdale Senior Living Communities, Inc. and Brookdale Living Communities, Inc. (together, "Brookdale Communities") are Delaware corporations with principal addresses at the Brookdale Main Office. (Id. at ¶ 11.) The Brookdale Communities provide retirement living services, including home health services and skilled nursing services, to Medicare recipients.

Defendant Innovative Senior Home Health of Nashville, LLC d/b/a Innovative Senior Care Home Health ("ISC Home") is a Delaware limited liability company with a principal address at the Brookdale Main Office. (Id. at ¶ 13.) According to documents provided to Brookdale employees, ISC Home is BSLI's "ancillary rehabilitation and wellness organization." (Id.) ISC Home provides home health care to Medicare recipients. Defendant ARC Therapy Services, LLC d/b/a Innovative Senior Care ("ARC/ISC") is a Tennessee limited liability company with a principal address at the Brookdale Main Office. (Id. ¶ 14.) ARC/ISC provides outpatient and home health therapy services to Medicare recipients.¹ (Id.) BSLI is a principal of ISC Home and ARC/ISC. (Id. at ¶ 56.)

II. Legal Background

A. The False Claims Act

The False Claims Act ("FCA") imposes civil liability for knowingly presenting, or causing to be presented, false or fraudulent claims to the United States government for payment or approval. 31 U.S.C. § 3729(a)(1)(A). The FCA also imposes liability for knowingly making or using a false record or statement that is material to a false or fraudulent claim. 31 U.S.C. § 3729(a)(1)(B). In addition, the FCA imposes liability for knowingly or improperly avoiding or decreasing an obligation to pay or transmit money to the United States - what is known as a "reverse" false claim. 31 U.S.C. § 3729(a)(1)(G). In layman's terms, a reverse false claim occurs when a party owes funds to the government (such as in the case of an overpayment) but acts so that it does not meet its obligation to return those funds. Those who violate the FCA are liable for civil penalties and treble damages.

To promote enforcement of the FCA, private individuals (called "relators") can bring qui tam actions on behalf of the United States. 31 U.S.C. § 3730(b). After the relator files a complaint, the United States has the option of intervening and conducting the litigation itself. 31 U.S.C. § 3730(b)(4). If the government opts not to intervene, the relator may proceed individually. 31 U.S.C. § 3730(c)(3). Successful relators are awarded a portion of the recovery ranging from ten to thirty percent, depending upon the relator's role in the case and whether or not the government chose to intervene. 31 U.S.C. § 3730(d). This award encourages "whistle blowers to act as private attorneys-general in bringing suits for the common good." U.S. ex rel. Poteen v. Medtronic, Inc., 552 F.3d 503, 507 (6th Cir. 2009) (citing Walburn v. Lockheed Martin Corp., 431 F.3d 966, 970 (6th Cir. 2005)) (internal quotation marks omitted).

The FCA applies to claims submitted by healthcare providers to Medicare; "indeed, one of its primary uses has been to combat fraud in the health care field." U.S. ex rel. Osheroff v. HealthSpring, Inc., 938 F. Supp. 2d 724, 731 (M.D. Tenn. 2013) (citing U.S. ex rel. Chesbrough v. VPA P.C., 655 F.3d 461, 466 (6th Cir. 2011)).

B. Medicare and Home Health Services

Medicare is a health insurance program administered by the United States that is funded by taxpayer revenue. Medicare is overseen by the United States Department of Health and Human Services through its Center for Medicare and Medicaid Services ("CMS"). Medicare is designed to provide for the payment of, inter alia, hospital services, medical services, and durable medical equipment to persons over sixty-five years of age and for certain others who qualify under special terms and conditions. The Medicare program is divided into multiple parts. Part A of the Medicare program covers certain health services provided by hospitals, skilled nursing facilities, and Medicare-certified home health care agencies, including those provided by the defendants. Reimbursement for claims under Medicare Part A is made by the United States through CMS, which contracts with private insurance carriers, known as fiscal intermediaries ("FIs"), to administer and pay claims from the Medicare Trust Fund. See generally 42 U.S.C. § 1395u.

In order to become Medicare certified (i.e., to obtain a Medicare provider number and to be eligible to file a claim for payment with Medicare), a home health care agency must submit a Medicare Enrollment Application for Institutional Providers ("Form 855A"). As part of Form 855A, the home health care agency must sign the following certification:

I agree to abide by the Medicare laws, regulations and programinstructions that apply to this provider. The Medicare laws, regulations, and program instructions are available through the Medicare contractor. I 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.

Form 855A. The provider must also sign a certification statement that contains the following provisions:

1. I agree to notify the Medicare contractor of any future changes to the information contained in this application in accordance with the time frames established in 42 C.F.R. § 424.516(e);

2. I have read and understand the Penalties for Falsifying Information . . . I understand that any deliberate omission, misrepresentation, or falsification of any information contained in this application or contained in any communication supplying information to Medicare . . . may be punished by criminal, civil or administrative penalties, including but not limited to the denial or revocation of Medicare billing privileges, and/or the imposition of fines, civil damages, and/or imprisonment;

3. I agree to abide by the Medicare laws, regulations and program instructions that apply to this provider. The Medicare laws, regulations, and program instructions are available through the Medicare contractor. I 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; and

. . .

6. I will not knowingly present or cause to be presented a false or fraudulent claim for payment by Medicare, and I will not submit claims with deliberate ignorance or reckless disregard of their truth or falsity.

(Docket No. 73 at ¶ 28 (citing Form 855A).) Claims are subsequently submitted to FIs by homehealth care agencies on CMS Form 1450, which contains a certification that the form was prepared in compliance with all Medicare laws are regulations. (Docket No. 73 at ¶¶ 34-35.)

Patients who receive benefits under Medicare are commonly referred to as "beneficiaries." Medicare beneficiaries who are homebound can receive certain medically necessary services at home. See 42 U.S.C. §§ 1395f(a)(2)(C); 1395n(a)(2)(A). Home health agencies' patients are referred for home health services by physicians. These services generally include skilled nursing, physical therapy, speech-pathology therapy, and occupational therapy. Medicare conditions payment on the physician's certification that the beneficiary is homebound and in need of skilled services. 42 C.F.R. § 409.41(b). Medicare also conditions payment on a beneficiary actually being homebound and actually needing skilled services. 42 C.F.R. § 409.41(c) (conditioning payment on all requirements contained in §§ 409.42-409.47 being met, including 42 C.F.R. § 409.42(a)). The most basic requirements for reimbursement eligibility under Medicare are that the service provided must be reasonable and medically necessary. See, e.g., 42 U.S.C. §§ 1395y(a)(1)(A); 1396, et seq.; 42 C.F.R. § 410.50.

Home health agencies are not paid per service rendered. Instead, Medicare pays them under a Home Health Prospective Payment System that provides a predetermined...