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

Decision Date31 March 2015
Docket NumberCivil No. 3:12-CV-00764
PartiesUNITED 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.
CourtU.S. District Court — Middle District of Tennessee

Judge Aleta A. Trauger

MEMORANDUM

Pending before the court is the defendants' Motion to Dismiss the Amended Complaint pursuant to Rules 12(b)(6) and 9(b) (Docket No. 56), to which the relator has filed a Response in opposition (Docket No. 60), and the defendants have filed a Reply (Docket No. 65). In addition, the United States of America ("United States") has filed a "Statement of Interest Regarding Defendants' Motion to Dismiss" (Docket No. 66), to which the defendants have filed a Response (Docket No. 70). For the following reasons, the defendants' motion will be granted without prejudice.

BACKGROUND
I. The Parties

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

Defendant BSLI is a Delaware corporation with a principal address in Brentwood, Tennessee ("Brookdale Main Office"). BSLI provides retirement living services, including home health aide 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"). Defendants Brookdale Senior Living Communities, Inc. and Brookdale Living Communities, Inc. (together, "Brookdale Communities Defendants") are Delaware corporations with principal addresses at the Brookdale Main Office. The Brookdale Communities Defendants provide retirement living services, including skilled nursing services, to Medicare recipients. Defendant Innovative Senior Home Health of Nashville, LLC ("ISC Home Health") is a Delaware limited liability company with a principal address at the Brookdale Main Office. ISC Home Health provides home health care to Medicare recipients. Defendant ARC Therapy Services, LLC ("ARCTS") is a Tennessee limited liability company with a principal address at the Brookdale Main Office. ARCTS provides outpatient therapy services to Medicare recipients.

II. Legal Background

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 ordecreasing 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. Finally, the FCA provides for a cause of action for conspiracy to commit violations thereunder. 31 U.S.C. § 3729(a)(1)(C). 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.1 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)).

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. Reimbursement for Medicare claims 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. 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.

Individuals 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). These services generally include skilled nursing, physical therapy, speech-pathology therapy, and occupational therapy.

Home health agencies' patients are referred for home health services by their physicians. The physician is required to certify that the patient is under his or her care, that the physician has established and will periodically review a sixty-day plan of care, that the patient is homebound, and that the patient requires one of the types of home health services that qualifies for Medicare. 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 whoestablishes the plan. See 42 C.F.R. § 424.22. A physician is also required to certify that an appropriate face-to-face encounter occurred with the individual. See id. Face-to-face documentation must be a separate and distinct section of, or an addendum to, the certification and must be clearly titled, dated, and signed by the certifying physician. See id.

After receiving a patient referral, a home health agency is required to provide its own patient-specific, comprehensive assessment, called an Outcome and Assessment Information Set ("OASIS"). 42 C.F.R. § 484.55. During this initial assessment, the home health agency must determine the immediate care and support needs of the patient and, for Medicare patients, determine eligibility for the Medicare home health benefit, including homebound status. Id. The comprehensive OASIS assessment must be completed "in a timely manner, consistent with the patient's immediate needs, but no later than [five] calendar days after the start of care." 42 C.F.R. § 484.55(b).

A sixty-day plan of care is called an "episode." After each episode, a patient must be recertified to receive funds from Medicare. To be recertified, the patient's physician must review and sign the patient's plan of care, making any necessary changes, and the home health agency must complete a new assessment and determine that the patient is still eligible to receive Medicare-funded home health services. See 42 C.F.R. § 424.22; 42 C.F.R. § 484.55.

A Medicare beneficiary is homebound if, due to underlying illness or injury, the beneficiary has conditions that restrict the ability to leave the home. Medicare Benefit Policy Manual, ch. 7, § 30.1.1. Homebound status does not require a beneficiary to be bedridden; instead, a beneficiary is considered homebound if leaving their residence requires considerable or taxing effort. Id.

Home health agencies are not paid per service rendered. Instead, Medicare pays themunder a prospective payment system that provides a predetermined amount for the entire sixty-day episode.2 See 42 U.S.C. § 1395fff et seq.; 42 C.F.R. § 484.205 et seq. Medicare reimbursement is typically paid in two parts - home health providers may submit a request for payment ("RAP") to the FI to be paid a percentage of the final Medicare sixty-day episode payment up front, with the balance of the payment to be made at the end of the episode. See 42 C.F.R. § 484.205(b)(1), (2). If the RAP is based on physician verbal orders for home health services, the verbal order must be recorded in the plan of care, include a description of the patient's condition and the services to be provided by the home health agency, include an attestation by the recipient of the verbal order, and the plan of care must be copied and immediately submitted to the physician. See 42 C.F.R. § 409.43(c). Before submitting a claim for the final percentage payment, the plan of care must be signed and dated by a qualifying physician. See 42 C.F.R. § 409.43(c)(3). Similarly, oral orders must be countersigned and dated before the final bill is submitted. 42 C.F.R. § 409.43(d).

Certain additional adjustments are made to the reimbursement rate, including a low utilization payment adjustment and an outlier payment adjustment. The...

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