United States ex rel. Lord v. Napa Mgmt. Servs. Corp., CIVIL ACTION NO. 3:13-2940

Decision Date14 November 2017
Docket NumberCIVIL ACTION NO. 3:13-2940
PartiesUNITED STATES OF AMERICA, ex rel. MICHAEL S. LORD, Plaintiffs/Relator v. NAPA MANAGEMENT SERVICES CORPORATION, NORTH AMERICAN PARTNERS IN ANESTHESIA (PENNSYLVANIA), LLC, and POCONO MEDICAL CENTER, Defendants
CourtU.S. District Court — Middle District of Pennsylvania

(JUDGE MANNION)

MEMORANDUM

NAPA defendants move to dismiss the remaining claims against them contained in Counts I and II of the redacted complaint, (Doc. 26), filed by plaintiff/relator, a nurse anaesthetist formerly employed by one of the defendants, in this qui tam action alleging that the defendants violated the False Claims Act by submitting false claims to Medicare for reimbursement regarding anesthesiology services. Relator alleges that defendants engaged in a scheme to defraud Medicare in order to receive higher reimbursement by knowingly and falsely billing it for anesthesiology services provided at its client hospital as "medical direction" services when they should have properly been billed as "medical supervision" services. Relator also asserts a False Claims Act Whistleblower claim against NAPA defendants as well as a state law breach of contract claim involving his termination from employment, Counts III and VII, which are not subject to the motion to dismiss. The court will grant in part and deny in part the NAPA defendants' motion. (Doc. 52).

I. PROCEDURAL BACKGROUND1

On December 6, 2013, plaintiff/relator Michael S. Lord's ("relator") filed his original complaint under seal, (Doc. 1), against defendant Pocono Medical Center ("PMC") and defendants NAPA Management Services Corporation, North American Partners In Anesthesia, LLP ("NAPA"), and North American Partners In Anesthesia (Pennsylvania), LLC ("NAPA-PA"), (collectively the "NAPA defendants"). After the United States filed a notice of election to decline intervention in this case, relator filed his redacted complaint (the "complaint") against PMC and NAPA defendants on December 7, 2016. (Doc. 26).

On March 3, 2017, the NAPA defendants filed a motion to dismiss, (Doc. 52), relator's complaint, (Doc. 26), pursuant to Fed.R.Civ.P. 9(b) and Fed.R.Civ.P. 12(b)(6); relator's claims asserted under the False Claims Act ("FCA"), 31 U.S.C. §3729, et seq., for failure to satisfy the heightened pleading requirements of Fed.R.Civ.P. 9(b) and for failure to state a claim upon which relief can be granted; and, relator's Pennsylvania state law claims. NAPAdefendants filed their brief in support of their motion on March 22, 2017. (Doc. 59). Subsequently, defendant North American Partners In Anesthesia, LLP was dismissed from this case without prejudice. (Doc. 60).

Relator filed his brief in opposition to both PMC's and NAPA defendants' motions to dismiss on May 3, 2017. (Doc. 69). NAPA defendants filed their reply brief on May 17, 2017. (Doc. 71).

On June 20, 2017, the court issued a Memorandum, (Doc. 73), and Order, (Doc. 74), granting PMC's motion to dismiss, (Doc. 50), with prejudice. Additionally, the court dismissed Counts IV, V, and VI of relator's complaint against the NAPA defendants.

The court has jurisdiction over this case pursuant to 28 U.S.C. §1331. The court can exercise supplemental jurisdiction over relator's remaining state law claim under 28 U.S.C. §1367. Venue is appropriate in this court since the claims arose in this district and all parties are located here. See 28 U.S.C. §1391.

II. FACTUAL BACKGROUND

Relator was a certified registered nurse anaesthetist ("CRNA") who was employed by NAPA-PA during the relevant time of this case, i.e., June 2011 through June 21, 2013. NAPA-PA is owned by NAPA which is an anesthesia and perioperative management company employing over 1,000 providers in over 45 practice settings, including PMC. Relator alleges that NAPA-PAemployees, including himself and other CRNAs and anesthesiologists, performed services "for [NAPA-PA] at PMC." (Doc. 26, ¶ 54). Relator alleges that NAPA defendants violated the FCA by submitting false claims to Medicare for reimbursement of anesthesiology services relating to NAPA anesthesiologists who performed procedures at PMC. Specifically, relator alleges that during his employment with NAPA-PA when he worked at PMC, he witnessed NAPA's systematic practices to overbill Medicare by claiming it delivered "medically directed" services, when NAPA only provided "medical supervision" services to Medicare patients. (Doc. 26, ¶ 69). Relator alleges that these billing practices by NAPA defendants violated the regulations of the Centers for Medicare and Medicaid Services ("CMS") which administers the Medicare and Medicaid programs. 42 U.S.C. §§1302, 1395hh. Relator alleges that he told his supervisors and the chief compliance officers at NAPA and PMC about the false billing and that they failed to take any action to correct the fraudulent conduct. Rather, relator alleges that the NAPA defendants retaliated against him for reporting the wrongdoing which culminated in his termination from employment.

Relator also asserts a FCA Whistleblower claim as well as a Pennsylvania breach of contract claim against NAPA defendants.

Specifically, Counts I and II of the complaint allege substantive violations of the FCA under 31 U.S.C. §3729(a)(1) and §3729(a)(2), respectively. In Count I, (Doc. 26, pp. 73-75), relator alleges that "since 2007,the Defendants have been engaged in a scheme to defraud the United States Government into approving or paying false claims", that "[he] reported in good faith what he believed to be serious violations of [the FCA]", and that "[he] repeatedly advised the Defendants that the NAPA Break Model used by the NAPA Defendants did not comply with federal law." Relator states that the NAPA Break Model used at PMC was in violation of the law since it "does not provide for continued immediate availability of a medically directing anesthesiologist during CRNA breaks and consequently there is routinely no available replacement or any second anesthesiologist of record who has assumed (and documented) the responsibility for meeting the Medicare requirement of immediate availability while the attending anesthesiologist of record is unavailable while providing CRNA break relief."

In Count II, (Doc. 26, pp. 75-76), relator alleges "[for purposes of obtaining or aiding to obtain payment or approval of reimbursement claims made to federal health benefit programs, from at least the past six (6) years, the Defendants made or presented or caused to be made or presented to the United States false or fraudulent records, knowing these records to be false or fraudulent or acting with reckless disregard or deliberate ignorance thereof" and, that "the United States, through its carriers, was unaware of the foregoing circumstances and conduct of the Defendants and in reliance on said false and fraudulent records authorized payments to be made to the Defendants, made such payments, and has been damaged."

Count III is a claim of wrongful employment discharge and harassment in violation of the FCA under 31 U.S.C. §3730(h). Relater alleges that "[he] was engaged in protected activity by repeatedly advising his superiors that he believed that Defendants had violated the law by, among other things, submitting false claims for reimbursement from Medicare" and, that "[as a direct result of Relator having lawfully investigated and reported to his superiors what he believed to be fraudulent conduct or wrongdoing, Defendants discharged, demoted, threatened, harassed, and/or discriminated against Relator in the terms and conditions of his employment." This claim is relator's whistleblower retaliation claim under the FCA.

Count VII is a state law beach of contract claim in which relator alleges that "[in 2009, [he] entered into a [5-year employment] contract with [NAPA-PA] so that he could: (a) obtain tuition reimbursement [for] the purpose of becoming a CRNA; and (b) continue to provide CRNA services at PMC which was close to his home." Relator also alleges that he "intended to work for [NAPA-PA] during the entire length of his contract while he pursued his doctorate at Yale." However, relator alleges that NAPA-PA breached several provisions of the Employment Agreement by constructively discharging him when he had about three years of employment left on the Agreement. He further alleges that his attempts to mitigate his damages by obtaining alternate employment have been hindered since the NAPA defendants "effectively black listed" him and have provided "negative references toprospective employers."

III. STANDARD OF REVIEW

NAPA defendants' motion to dismiss is brought pursuant to the provisions of Fed.R.Civ.P. 12(b)(6). This rule provides for the dismissal of a complaint, in whole or in part, if the plaintiff fails to state a claim upon which relief can be granted. The moving party bears the burden of showing that no claim has been stated, Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005), and dismissal is appropriate only if, accepting all of the facts alleged in the complaint as true, the plaintiff has failed to plead "enough facts to state a claim to relief that is plausible on its face," Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955, 1974 (2007) (abrogating "no set of facts" language found in Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). The facts alleged must be sufficient to "raise a right to relief above the speculative level." Twombly, 550 U.S. 544, 127 S. Ct. at 1965. This requirement "calls for enough fact[s] to raise a reasonable expectation that discovery will reveal evidence of" necessary elements of the plaintiff's cause of action. Id. Furthermore, in order to satisfy federal pleading requirements, the plaintiff must "provide the grounds of his entitlement to relief," which "requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Phillips v. County of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008) (...

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