United States ex rel. Kalec v. NuWave Monitoring, LLC, 12 C 69

• Decision Date: 26 March 2015
• Docket Number: No. 12 C 69,12 C 69
• Citation: 84 F.Supp.3d 793
• Parties: United States, ex rel. John M. Kalec, M.D. and Loreta Kalec, and The State of Illinois ex rel. John M. Kalec, M.D. and Loreta Kalec, Plaintiffs–Relators, v. NuWave Monitoring, LLC, Thomas Boecker, and Greg Lesiak, individuals, Defendants.
• Court: U.S. District Court — Northern District of Illinois

84 F.Supp.3d 793

United States, ex rel. John M. Kalec, M.D. and Loreta Kalec, and The State of Illinois ex rel. John M. Kalec, M.D. and Loreta Kalec, Plaintiffs–Relators

v.NuWave Monitoring, LLC, Thomas Boecker, and Greg Lesiak, individuals, Defendants.

No. 12 C 69

United States District Court, N.D. Illinois, Eastern Division.

Signed March 26, 2015

AUSA, United States Attorney's Office, Michael Kevin Goldberg, Robert Andrew Bauerschmidt, Goldberg Law Group, LLC, Daniel J. Marovitch, Burke Law Offices, LLC, Chicago, IL, for Plaintiff.

Jeffrey J. Halldin, John M. Heaphy, Harrison & Held, LLP, Chicago, IL, for Defendant.

OPINION AND ORDER

SARA L. ELLIS, United States District Judge

Believing that their employer was fraudulently billing Medicare and Medicaid for services that they rendered as a physician and neuro-monitoring technician, respectively, Plaintiffs–Relators John and Loreta Kalec (“Dr. Kalec” and “Loreta”), brought a qui tam action against Defendants NuWave Monitoring, LLC (“NuWave”), and Thomas Boecker and Greg Lesiak (“Defendants Boecker and Lesiak”) as owners and operators of NuWave, alleging that Defendants conspired to submit and submitted fraudulent claims to Medicare and Medicaid in violation of the False Claims Act (“FCA”), 31 U.S.C. § 3729 et seq., and the equivalent provisions of the Illinois False Claims Act (“IFCA”), 740 Ill. Comp. Stat. § 175/1 et seq.¹ Defendants filed a motion to dismiss Plaintiffs' FCA and IFCA claims pursuant to Federal Rule of Civil Procedure 12(b)(6) arguing that the Complaint fails to meet the heightened pleading standard of Rule 9(b).² Because Plaintiffs have adequately pleaded Count I with respect to Defendant NuWave, Defendants' motion to dismiss Count I is denied. However, Plaintiffs failed to adequately plead Count I with respect to Defendants Boecker and Lesiak, as well as Counts II, IV, V and VI with respect to all Defendants. The Court, therefore, grants Defendants' motion [63] as to those Counts.

BACKGROUND³

NuWave, an Indiana limited liability corporation, provides neuro-monitoring services to hospitals throughout Illinois and Indiana. Neuro-monitoring is a service whereby technicians and doctors monitor a patient's neurological activity during surgical procedures in an attempt to prevent neurological damage

, including brain damage. NuWave provides the monitoring equipment as well as on-site technicians to set up the equipment and observe the monitors during surgery. Loreta worked as a technician for NuWave from November 2009 until June 2014. NuWave also employs licensed medical doctors who monitor the data relayed by the neuro-monitoring equipment remotely and advise the surgical staff as to the patient's neurological status when necessary. Due to the nature of the services, the off-site physicians are able to monitor multiple patients at a time. Dr. Kalec, a licensed medical doctor, provided remote neuro-monitoring services for NuWave from November 2009 through August 2011. Dr. Kalec typically monitored three to five surgical patients at a time.

Neuro-monitoring is a designated health service. In order for the service to be provided, therefore, it must be requested by the surgeon performing the surgery. Dr. James Gottlieb (“Dr. Gottleib”) requested that NuWave perform neuro-monitoring services in a large number of his cases from 2009 to the present. NuWave compensated Dr. Gottlieb for these referrals by making him a Director of NuWave and paying him a salary despite the fact that he did not perform any services for NuWave in this capacity.

NuWave is considered a provider of medical services, able to bill both Medicare and Medicaid. Medicare and Medicaid claims for neuro-monitoring services include both a technical and professional component. The technical component is billed by the hospital and includes hospital overhead, the cost of NuWave's technicians, and the cost of NuWave's monitoring equipment. NuWave charges most hospitals a five-hour minimum for its technicians' services regardless of whether the procedure lasts five hours. For a few other hospitals, NuWave directs its technicians to start billing their time an hour before the patient enters the surgical suite and to continue billing their time for fifteen minutes after the patient leaves the room. This billing practice was explained to Loreta and other NuWave technicians in a June 27, 2011 email. These billing practices are in direct violation of Medicare's policy of reimbursing providers solely for actual time spent monitoring patients. Nonetheless, NuWave submitted invoices to hospitals based on these fraudulent billing practices and the hospitals knowingly used this fraudulent documentation in preparing its claims to Medicare and Medicaid. Medicare and Medicaid paid NuWave, through the hospitals, for the falsely inflated technician time.

The professional component of a Medicare and Medicaid claim compensates the physician for his time spent providing neuro-monitoring services. Unlike the technical component, this portion of the claim is prepared and submitted by NuWave. NuWave is required to certify the accuracy of each claim pursuant to 42 C.F.R. §§ 424.32(a)(3), 424.33. While Medicare allows physicians to provide neuro-monitoring services to multiple patients at one time, it only reimburses doctors for their actual time spent monitoring each patient. See Medicare's Local Coverage Determination, LCD 2924 (“[m]ore than one patient may be monitored at once; however, claims for physician services must be submitted for the time devoted to each individual patient by the monitoring physician, i.e., not all patients simultaneously.”). Doc. 32 ¶ 24. In other words, if a physician monitors three patients during one six-hour time period, the physician may bill Medicare only for a total of six hours; he may not bill for 18 hours of neuro-monitoring services. The physician must apportion his time for each of the three patients into the six hours.

Defendants repeatedly violated these Medicare and Medicaid regulations by billing the physicians' time simultaneously for multiple patients and by falsely inflating its technicians' time. Specifically, on June 18, 2010, Dr. Kalec monitored eight surgeries over the course of eight hours. The respective surgeries lasted four, five, one, four, five, two, one, and one hours. NuWave prepared the professional component of its Medicare and Medicaid claims for Dr. Kalec's services claiming twenty-three hours of neuro-monitoring services rather than eight hours. NuWave received reimbursement from Medicare and Medicaid for these surgeries and made disbursements to Dr. Kalec in accordance with his agreement with NuWave. In addition, for each June 18 surgery, NuWave billed each hospital at least five hours for its technicians' time or by adding an additional hour and fifteen minutes of technician time to each surgery, depending on which hospital hosted the surgery. The hospitals knew that Defendants were improperly inflating their technicians' time because the hospitals knew the true duration of each procedure. Regardless, the hospitals submitted the false claims to Medicare and Medicaid. NuWave collected all amounts paid by Medicare and Medicaid to the hospitals for these claims.

Defendants Boecker and Lesiak, owners and operators of NuWave, knew that NuWave was not properly apportioning their physicians' neuro-monitoring time and that NuWave was falsely inflating its technicians' time. Suspecting such, Dr. Kalec asked Defendants Boecker and Lesiak whether NuWave was properly billing Medicare and Medicaid. Both Defendants responded that NuWave's billing practices were not Dr. Kalec's concern. Dr. Kalec demanded to see the bills submitted for his services and was denied. Thereafter, Defendants Boecker and Lesiak pressured Dr. Kalec to resign in 2011.

LEGAL STANDARD

A motion to dismiss under Rule 12(b)(6) challenges the sufficiency of the complaint, not its merits. Fed.R.Civ.P. 12(b)(6) ; Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir.1990). In considering a Rule 12(b)(6) motion to dismiss, the Court accepts as true all well-pleaded facts in the plaintiff's complaint and draws all reasonable inferences from those facts in the plaintiff's favor. AnchorBank, FSB v. Hofer, 649 F.3d 610, 614 (7th Cir.2011). To survive a Rule 12(b)(6) motion, the complaint must not only provide the defendant with fair notice of a claim's basis but must also be facially plausible. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ; see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678, 129 S.Ct. 1937.

Rule 9(b) requires a party alleging fraud to “state with particularity the circumstances constituting fraud.” Fed.R.Civ.P. 9(b). This “ordinarily requires describing the ‘who, what, when, where, and how’ of the fraud, although the exact level of particularity that is required will necessarily differ based on the facts of the case.” AnchorBank, 649 F.3d at 615 (citation omitted). Rule 9(b) applies to “all averments of fraud, not claims of fraud.” Borsellino v. Goldman Sachs Grp., Inc., 477 F.3d 502, 507 (7th Cir.2007). “A claim that ‘sounds in fraud’—in other words, one that is premised upon a course of fraudulent conduct—can implicate Rule 9(b)'s heightened pleading requirements.” Id.

ANALYSIS

The FCA and IFCA prohibit knowingly presenting, or causing to be presented to the government, a false or fraudulent claim for payment, 31 U.S.C. § 3729(a)(1)(A) ; 740 Ill. Comp. Stat. § 175/3(a)(1)(A), knowingly making or using a false record or statement that is material to a false or fraudulent claim paid by the government, § 3729(a)(1)(B) ; § 175/3(a)(1)(B), or conspiring to do either, § 3729(a)(1)(C) ; § 175/3(a)(1)(C). The FCA...