United States ex rel. Garrett v. Kootenai Hosp. Dist.

• Decision Date: 17 June 2020
• Docket Number: Case No. 2:17-cv-00314-CWD
• Parties: UNITED STATES OF AMERICA, ex rel. Robbie Garrett and James Daniel Garrett, and ROBBIE GARRETT and JAMES DANIEL GARRETT, individually, Plaintiffs, v. KOOTENAI HOSPITAL DISTRICT d/b/a KOOTENAI HEALTH, Defendant.
• Court: U.S. District Court — District of Idaho

UNITED STATES OF AMERICA, ex rel. Robbie Garrett and James Daniel Garrett,and ROBBIE GARRETT and JAMES DANIEL GARRETT, individually, Plaintiffs, v. KOOTENAI HOSPITAL DISTRICT d/b/a KOOTENAI HEALTH, Defendant.

Case No. 2:17-cv-00314-CWD

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF IDAHO

June 17, 2020

MEMORANDUM DECISION AND ORDER RE: MOTION TO DISMISS (DKT. 36)

INTRODUCTION

Robbie Garrett and James Daniel Garrett (Relators) filed this qui tam action under seal against Defendant Kootenai Hospital District, d/b/a Kootenai Health (Kootenai Health), on July 31, 2017. (Dkt. 1.) An amended complaint was filed on September 19, 2019, asserting claims under the False Claims Act (FCA), 31 U.S.C. § 3729 et seq. and Idaho common law. (Dkt. 29.) The FCA fraud claims stem from the Relators' assertion that Kootenai Health engaged in a scheme to commit fraud by systemically violating Medicare laws to collect undeserved reimbursements from the United States. (Dkt. 29 at ¶¶ 2, 3.) Ms. Garrett, individually, brings claims of FCA retaliation and termination of employment in violation of public policy under Idaho common law.

Following a period of investigation, the United States of America declined to intervene and the case was unsealed (Dkt. 11, 12, 32, 34.) Presently before the Court is Kootenai Health's motion to dismiss all claims in the amended complaint. (Dkt. 36.) The parties have filed responsive briefing and the motion is ripe for the Court's review. (Dkt. 42, 46.) Upon finding the facts and legal arguments are adequately presented in the briefs and record, the Court will decide the motion on the record without oral argument. For the reasons that follow, the Court will deny the motion to dismiss.¹

BACKGROUND²

Relator Robbie Garrett worked for Kootenai Health from approximately August of 2015 until July 24, 2017, as the executive director of quality services. (Dkt. 29 at ¶ 19.) Relator James Daniel Garrett is Ms. Garrett's spouse. Kootenai Health owns and operates a hospital, Kootenai Medical Center, located in Coeur d'Alene, Idaho, as well as approximately fifty affiliated clinics and other facilities in Idaho, Montana, Oregon, and Washington. The complaint alleges the majority of Kootenai Health's patients were Medicare beneficiaries and just over one-half of Kootenai Health's net patient-service revenues came from the Medicare program. (Dkt. 29 at ¶ 29.)

Medicare is a federally funded program that pays for certain healthcare services provided to qualified Medicare beneficiaries. 42 U.S.C. § 1395c. The program is administered by the Centers for Medicare & Medicaid Services (CMS), which is part of the United States Department of Health and Human Services (HHS). CMS enters into agreements with healthcare providers, such as Kootenai Health, to establish their eligibility to participate in the Medicare program. Eligible participating providers may seek reimbursement from CMS for services rendered to Medicare program beneficiaries. During the time relevant to the claims, Kootenai Health was an authorized participating provider of Medicare and, therefore, eligible to submit claims to CMS for reimbursement from federal funds.

Part A of the Medicare program authorizes payment of federal funds for inpatient hospital services and other health services. Part B applies to outpatient services. To become an authorized Medicare participating provider in both Medicare Part A and Part B, Kootenai Health certified that it would abide by Medicare laws, regulations, and program instructions, and agreed that Medicare's payment of claims was conditioned upon its compliance with the same and with all conditions of participation.

To receive reimbursement from Medicare for services provided to beneficiaries, Kootenai Health submitted claim form CMS-1500, which made the following certification:

In submitting this claim for payment from federal funds, I certify that: 1) the information on this form is true, accurate and complete ... 3) I have provided or will provide sufficient information required to allow the government to make an informed eligibility and payment decision; 4) this claim, whether submitted by me or on my behalf by my designated billingcompany, complies with all applicable Medicare and/or Medicaid laws, regulations, and program instructions for payment.

....

(Dkt. 29 at ¶ 146 and Ex. J.)

In her position at Kootenai Health, Ms. Garrett was responsible for auditing Kootenai Health's practices to ensure compliance with federal regulations. Ms. Garrett alleges that, during the course of her employment, she personally observed, and her audits revealed, widespread violations of federal laws, regulations, and guidelines. The complaint identifies six specific acts that make up the alleged fraudulent scheme. Namely, that Kootenai Health presented false claims and used false records or statements material to those claims to obtain Medicare reimbursements for:

Services rendered at facilities it fraudulently represented as "provider-based" facilities.

Services provided by non-physicians using the Medicare Physicians' Fee Schedule (MPFS).

Inpatient admissions without physicians' orders.

Patients billed for co-payments in violation of the Emergency Medical Treatment and Labor Act (EMTLA).

Claims that contained false diagnosis codes.

Patients whose rights Kootenai Health had violated by failing to provide the requisite discharge notices and using handcuffs as restraints.

(Dkt. 29.) Relators allege these fraudulent acts caused Medicare to pay Kootenai Health reimbursements it was not otherwise entitled to receive based on Kootenai Health's false certification that it had provided services or complied with all Medicare laws, regulations, and program requirements when, in fact, it had not done so. (Dkt. 29 at ¶¶ 1-5.)

Ms. Garrett contends that, while working at Kootenai Health, she made numerous attempts to correct the alleged illegal practices and made numerous reports about those practices to her supervisors and Kootenai Health's directors, but was met with resistance, harassment, and, ultimately, termination from her employment. As a result, Relators filed this action raising the following claims against Kootenai Health:

First Claim for Relief: presentation of false claims in violation of Section 3729(a)(1)(A) of the FCA.

Second Claim for Relief: making or using false record or statement to cause false claim to be paid in violation of Section 3729(a)(1)(B) of the FCA.

Third Claim for Relief: retaliation in violation of Section 3730(h) of the FCA.

Fourth Claim for Relief: termination of employment in violation of public policy.

(Dkt. 29.) Kootenai Health moves to dismiss all of the claims pursuant to Federal Rules of Civil Procedure 8, 9(b), and 12(b)(6). (Dkt. 36.)

STANDARD OF LAW

Federal Rule of Civil Procedure 8(a)(2) requires "a short and plain statement of the claim showing that the pleader is entitled to relief," sufficient to "give the defendant fair notice of what the ... claim is and the grounds upon which it rests." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). To survive a challenge under Rule 12(b)(6), a "complaint must plead 'sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Godecke, ex rel. U.S. v. Kinetic Concepts, Inc., 937 F.3d 1201, 1208 (9th Cir. 2019) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570)).

"A Rule 12(b)(6) dismissal 'can be based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.'" Godecke, 937 F.3d at 1208 (quoting Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990)). When reviewing a motion to dismiss, the Court must accept all factual allegations in the complaint as true and construe the pleadings in the light most favorable to the nonmoving party. Knievel v. ESPN, 393 F.3d 1068, 1072 (9th Cir. 2005).

Fraud claims under the FCA must not only be plausible, under Rule 8(a), but also must be pled with particularity under Rule 9(b). Godecke, 937 F.3d at 1208 (citing U.S. ex rel. Cafasso v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1054-55 (9th Cir. 2011)). "Rule 9(b) requires that the circumstances alleged to constitute fraud be specific enough to give the defendant notice of the particular misconduct so that it can defend against the charge." Id. (citing Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009)). To adequately plead fraud with particularity, a plaintiff must allege the "'who, what, when, where, and how' of the misconduct charged," as well as 'what is false or misleading about [the purportedly fraudulent] statement, and why it is false.'" U.S. ex rel. Silingo v. WellPoint, Inc., 904 F.3d 667, 676 (9th Cir. 2018) (quoting Cafasso, 637 F.3d at 1055); see also Ebeid ex rel. U.S. v. Lungwitz, 616 F.3d 993, 998 (9th Cir. 2010).

ANALYSIS

1. Fraud Under the FCA

The FCA imposes liability on anyone who "knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval," or "knowingly makes, uses, or causes to be made or used, a false record or statement material to a false orfraudulent claim." 31 U.S.C. §§ 3729(a)(1)(A), (B). To state a claim under the FCA for both the first and second claims for relief, the Relators must show: "(1) a false statement or fraudulent course of conduct, (2) made with scienter, (3) that was material, causing (4) the government to pay out money or forfeit moneys due." Godecke, 937 F.3d at 1208 (U.S. ex rel. Campie v. Gilead Sciences, Inc., 862 F.3d 890, 899 (9th Cir. 2017)). The falsity and materiality allegations must satisfy Rule 9(b)'s particularity standard, while scienter allegations need satisfy only the Rule 8 notice pleading standard. See Silingo, 904 F.3d at 679 ("Although the circumstances of a fraud must be pleaded with particularity, knowledge may be pleaded generally.").

On this motion, Kootenai Health argues both FCA claims should be dismissed because...