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

• Decision Date: 11 June 2018
• Docket Number: No. 17-5826,17-5826
• Citation: 892 F.3d 822
• Parties: UNITED STATES of America ex rel. Marjorie Prather, Relator-Appellant, v. BROOKDALE SENIOR LIVING COMMUNITIES, INC. et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

892 F.3d 822

UNITED STATES of America ex rel. Marjorie Prather, Relator-Appellant,

v.BROOKDALE SENIOR LIVING COMMUNITIES, INC. et al., Defendants-Appellees.

No. 17-5826

United States Court of Appeals, Sixth Circuit.

Argued: April 25, 2018

Decided and Filed: June 11, 2018

ARGUED: Patrick Barrett, Barrett Law Office, PLLC, Nashville, Tennessee, for Appellant. Brian D. Roark, Bass, Berry & Sims PLC, Nashville, Tennessee, for Appellees. Megan Barbero, United States Department of Justice, Washington, D.C., for Amicus Curiae. ON BRIEF: Patrick Barrett, Barrett Law Office, PLLC, Nashville, Tennessee, Michael Hamilton, Provost Umphrey Law Firm, LLP, Nashville, Tennessee, for Appellant. Brian D. Roark, J. Taylor Chenery, Angela L. Bergman, Bass, Berry & Sims PLC, Nashville, Tennessee, for Appellees. Megan Barbero, Charles W. Scarborough, United States Department of Justice, Washington, D.C., for Amicus Curiae.

Before: MOORE, McKEAGUE, and DONALD, Circuit Judges.

MOORE, J., delivered the opinion of the court in which DONALD, J., joined.

McKEAGUE, J. (pp. 838–53), delivered a separate dissenting opinion.

OPINION

KAREN NELSON MOORE, Circuit Judge.

Brookdale Senior Living Communities employed Marjorie Prather to review Medicare claims prior to their submission for payment. Many of these claims were missing the required certifications from physicians attesting to the need for the medical services that the defendants had provided. These certifications need to "be obtained at the time the plan of care is established or as soon thereafter as possible." 42 C.F.R. § 424.22(a)(2). But the defendants were allegedly obtaining certifications months after patients' plans of care were established.

In July 2012, Prather filed a complaint pleading violations of the False Claims Act under an implied false certification theory. The district court dismissed her complaint, holding that Prather did not allege fraud with particularity or that the claims were false. This panel reversed the district court in part, holding that Prather had pleaded two of her claims with the required particularity and that the claims submitted were false.

United States ex rel. Prather v. Brookdale Senior Living Cmties., Inc. (Prather I) , 838 F.3d 750, 775 (6th Cir. 2016). In doing so, we interpreted the phrase "as soon thereafter as possible" in 42 C.F.R. § 424.22(a)(2) to mean that a delay in certification is "acceptable only if the length of the delay is justified by the reasons the home-health agency provides for it" and held that the reason alleged for the defendants' delay was not justifiable. Id. at 765.

On remand, the district court granted Prather leave to file her Third Amended Complaint ("complaint") in light of the Supreme Court's clarification of the materiality element of a False Claims Act claim in Universal Health Services., Inc. v. United States ex rel. Escobar , ––– U.S. ––––, 136 S.Ct. 1989, 195 L.Ed.2d 348 (2016). The defendants moved to dismiss again on the grounds that Prather did not plead sufficiently the materiality and scienter elements of her two alleged False Claims Act violations. The district court granted that motion, and Prather now appeals. For the reasons set forth below, we REVERSE the district court's dismissal of Prather's complaint and REMAND for proceedings consistent with this opinion.

I. BACKGROUND

A. Legal Background

The False Claims Act, 31 U.S.C. § 3729 et seq. , imposes civil liability that is "essentially punitive in nature" on those who defraud the U.S. government. Escobar , 136 S.Ct. at 1996 (quoting Vt. Agency of Nat. Res. v. United States ex rel. Stevens , 529 U.S. 765, 784, 120 S.Ct. 1858, 146 L.Ed.2d 836 (2000) ). Here, Prather is asserting a theory of liability under the False Claims Act known as "implied false certification." Under this theory, "liability can attach when the defendant submits a claim for payment that makes specific representations about the goods or services provided, but knowingly fails to disclose the defendant's non-compliance with a statutory, regulatory, or contractual requirement." Id. at 1995. This misrepresentation through omission "renders the claim 'false or fraudulent' under § 3729(a)(1)(A)." Id. "A misrepresentation about compliance with a statutory, regulatory, or contractual requirement must be material to the Government's payment decision in order to be actionable under the False Claims Act." Id. at 1996.

The claims and alleged misrepresentations at issue in this case arise in the context of Medicare and home-health services. Medicare Parts A and B provide coverage for certain home-health services. Prather I , 838 F.3d at 755 (citing 42 U.S.C. §§ 1395c and 1395k(a)(2)(A) ). These services include: "skilled nursing services, home health aide services, physical therapy, speech-language pathology services, occupational therapy services, and medical social services." Id. (internal quotation marks and brackets denoting alterations omitted). " 'Medicare Part A or Part B pays for home health services only if a physician certifies and recertifies' the patient's eligibility for and entitlement to those services." Id. (quoting 42 C.F.R. § 424.22 ).

These certifications are projections about the patient's medical need and plan of care, and Medicare payments for the care provided are made on a prospective system of 60-day periods, known as an "episode of care." Id. at 756. Payments for each episode are made in two parts. The initial payment—the "request for anticipated payment" or "RAP"—is a percentage of the total expected reimbursement. Id. (citing 42 C.F.R. § 484.205(b) ). The second payment—the "residual final payment"—is disbursed at the end of the episode. Id. (citing 42 C.F.R. § 484.205(b) ).

"The certification of need for home health services must be obtained at the time the plan of care is established or as soon thereafter as possible and must be signed and dated by the physician who establishes the plan." 42 C.F.R. § 424.22(a)(2). This regulation "permits a home-health agency to complete a physician certification of need after the plan of care is established, but ... such a delay [is] acceptable only if the length of the delay is justified by the reasons the home-health agency provides for it." Prather I , 838 F.3d at 765.¹ If the required certification was not obtained in compliance with the timing requirement in 42 C.F.R. § 424.22(a)(2), the RAP and final payment claims are "impliedly false." Id. at 766–67.

B. Factual Background

Prather, the relator in this case, "was employed by Brookdale Senior Living, Inc. as a Utilization Review Nurse from September of 2011 until November 23, 2012."² R. 98 (Third. Am. Compl. ¶ 10) (Page ID #1462). Defendant Brookdale Senior Living, Inc., along with defendants Brookdale Senior Living Communities, Inc., Brookdale Living Communities, Inc., Innovative Senior Care Home Health of Nashville, LLC, and ARC Therapy Services, LLC, "are interconnected corporate siblings who operate senior communities, assisted living facilities, and home health care providers." Id. ¶ 3 (Page ID #1460).

Prather alleges that it was the defendants' policy to "enroll[ ] as many of their assisted living facility residents as possible in home health care services that were billed to Medicare," id. , even when these treatments "were not always medically necessary or did not need to be performed by nurses who billed to Medicare." Prather I , 383 F.3d at 765; R. 98 (Third. Am. Compl. ¶¶ 70, 105, 110) (Page ID #1477, 1486, 1488). This "aggressive solicitation of their senior community and assisted living facility residents ultimately generated thousands of Medicare claims that were 'held' because they did not meet basic Medicare requirements ...." R. 98 (Third Am. Compl. ¶ 3) (Page ID #1460). "In September of 2011, there was a large backlog of about 7,000 unbilled Medicare claims worth approximately $35 million." Id. ¶ 77 (Page ID #1478). To facilitate the processing of these claims, the defendants initiated the "Held Claims Project," and Prather was hired to work on this specific assignment. Id. ¶ 77–80 (Page ID #1478–49).

Prather's job responsibilities included:

(1) pre-billing chart reviews in order to ensure compliance with the requirements and established policies of Defendants, as well as state, federal, and insurance guidelines; (2) working directly with the Regional Directors, Directors of Professional Services, and clinical associates to resolve documentation, coverage, and compliance issues; (3) acting as resource person to the agencies for coverage and compliance issues, (4) reviewing visits utilization for appropriateness pursuant to care guidelines and patient condition; and (5) keeping Directors of Professional Services apprised of problem areas requiring intervention.

Id. ¶ 80 (Page ID #1479).

The Held Claims Project team "used a 'billing release checklist' to identify items that needed to be completed before [a] claim could be released for final billing to Medicare." Id. ¶ 82 (Page ID #1480). The checklist and corresponding documents for each claim were then given to the billing office. Id. Once the billing office had all the documentation required, it submitted the bill to Medicare. Id.

One of the required documents frequently missing was the physician certification. Initially, Prather and the other project members "sent attestation forms to doctors for them to sign to correct the problem of missing signatures," but they "only received a few signed and completed forms back from the doctors." Id. ¶ 86 (Page ID #1481). Beginning in May 2012, to facilitate the process of gathering the required certifications, "Defendants paid physicians to review outstanding held claims and sign orders for previously provided care." Id. ¶ 98 (Page ID #1483). Additionally, team members visited physicians in order to obtain certifications. Id. ¶ 104 (Page ID #1818–19). Prather also alleges that the defendants repeatedly "billed RAPs without having physician certifications, and then re-billed them...