United States ex rel. Herbold v. Doctor's Choice Home Care, Inc., Case No. 8:15-cv-1044-T-33AEP

• Decision Date: 31 October 2019
• Docket Number: Case No. 8:15-cv-1044-T-33AEP
• Parties: UNITED STATES OF AMERICA, ex rel. CORINA HERBOLD f/k/a Corina Duffy, Plaintiff, v. DOCTOR'S CHOICE HOME CARE, INC., TIMOTHY T. BEACH, and STUART C. CHRISTENSEN, Defendants.
• Court: U.S. District Court — Middle District of Florida

UNITED STATES OF AMERICA, ex rel. CORINA HERBOLD

f/k/a Corina Duffy, Plaintiff, v. DOCTOR'S CHOICE HOME CARE, INC., TIMOTHY T. BEACH,and STUART C. CHRISTENSEN, Defendants.

Case No. 8:15-cv-1044-T-33AEP

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION

October 31, 2019

ORDER

This matter comes before the Court upon consideration of Defendant Doctor's Choice Home Care, Inc.'s Motion to Dismiss (Doc. # 58), filed on August 21, 2019. Defendants Timothy T. Beach and Stuart C. Christensen joined in the Motion. (Doc. ## 59, 60). The United States responded in opposition on September 27, 2019. (Doc. # 73). Doctor's Choice replied on October 18, 2019, (Doc. # 76), and the United States filed a sur-reply on October 30, 2019. (Doc. # 80). For the reasons that follow, the Motion is denied.

I. Background

Relator Corina Herbold initiated this qui tam False Claims Act (FCA) case against Doctor's Choice, Beach, and Christensen on April 30, 2015. (Doc. # 1). In February 2019, the United States elected to intervene in the action, and the case was unsealed. (Doc. ## 29-31). The United States filed its Complaint in intervention on May 24, 2019. (Doc. # 38). The Complaint asserts claims under the FCA for presentation of false claims, false statements, and reverse false claims. (Id.). The Complaint also asserts claims under Florida state law for unjust enrichment and payment by mistake. (Id.).

The Complaint provides over fifty pages of detailed factual allegations. Thus, the Court recites only the allegations necessary to decide the Motion to Dismiss.

Doctor's Choice provides home health care services in Florida. (Id. at 5). These services are billed primarily to Medicare. (Id.). Christensen was Doctor's Choice's Chief Executive Officer and Vice President. (Id.). Beach was Doctor's Choice's President. (Id.). Health at Home Homecare, LLC, is a home health care services company affiliated with Doctor's Choice. (Id. at 6). Christensen and Beach are co-founders and executives of Health at Home. (Id.). The United States alleges, and cites emails supporting, that Doctor's Choice "jointly marketed their services" with Health at Home and encouraged Doctor's Choice Account Executives to"generate referrals of patients to" Health at Home. (Id. at 6-7).

Doctor's Choice submitted Medicare claims electronically through an intermediary company, Palmetto Government Benefits Administrators. (Id. at 17). To electronically submit claims to Medicare, Doctor's Choice entered into an Electronic Data Interchange Enrollment Agreement, through which Doctor's Choice agreed to "submit claims that are accurate, complete, and truthful." (Id.).

Doctor's Choice was also required to file an annual cost report with Palmetto. (Id.). Doctor's Choice was required to certify that its cost reports "were (1) truthful, i.e., that the cost information contained in the report is true and accurate; (2) correct, i.e., that it was entitled to reimbursement for the reported costs in accordance with applicable instructions; (3) complete, i.e., that the cost report is based upon all information known to DCHC; and (4) that the services identified in the cost report were not corrupted by kickbacks, and were otherwise provided in compliance with all applicable health care laws and regulations, including the Stark Statute and [Anti-Kickback Statute]." (Id. at 17-18).

The United States alleges that Defendants engaged in two unlawful schemes. First, from 2010 to 2016, Defendants allegedly "knowingly billed Medicare, or caused Medicare to be billed, for home health services to patients referred to [Doctor's Choice] by three physicians with whom [Doctor's Choice], Beach and Christensen had entered into sham Medical Director Agreements for the purposes of inducing and/or rewarding referrals." (Id. at 2). "None of the three implicated physicians performed the work they billed as DCHC Medical Directors, yet in order to continue to induce and generate referrals, Defendants continued to pay, or caused to be paid, the Medical Directors' invoices." (Id. at 2-3). The United States alleges Defendants violated the Stark Law (and thus the FCA) by submitting claims for reimbursement based on referrals from these three physicians. (Id. at 2). The United States also alleges that Defendants were unjustly enriched and paid by mistake as a result of this conduct. (Id.).

The United States describes the second scheme this way:

[Doctor's Choice], through Beach and Christensen, hired employees who were the wives of physicians who then began to refer more patients to [Doctor's Choice], and [Doctor's Choice] paid those employees based on the volume or value of referrals by their physician spouses in violation of the Stark Law, and therefore the FCA, and also in a manner that unjustly enriched Defendants and caused the United States to pay DCHC by mistake.

(Id.).

A. Medical Director Referrals Scheme

Regarding the first alleged scheme, Doctor's Choice had numerous Medical Directors over the years and the Complaint contains allegations about Doctor's Choice's payment of Medical Directors and the Medical Director's referral rates. (Id. at 21-52).

The Complaint alleges that Doctor's Choice made a practice of closely tracking Medical Directors' referrals, and that Doctor's Choice executives, including Christensen and Beach, would push Medical Directors for more referrals. (Id. at 21) When a Medical Director did not refer as many patients as hoped, Doctor's Choice would terminate the Medical Directorship early. (Id.).

For example, in a July 2010 email, Christensen expressed disappointment with Dr. Gelvin, a Medical Director who had not referred as many patients as Doctor's Choice expected:

Dr. Gelvin is not working out as a med director. As you can see, he has only given us 17 ref in 6 mo. He was good for 7 last month and 1 this month. I think we could find someone more productive with his spot. We have paid him 6K so far.

(Id. at 22). Dr. Gelvin continued to refer fewer patients than desired, and his Medical Directorship was allegedly terminated as a result. (Id.).

Likewise, on October 24, 2012, Christensen emailed a Doctor's Choice Account Executive about Medical Director Dr. Ruano, attaching a spreadsheet of referrals for the month and stating: "I feel it is time to start to think of a new Med Director. Dr. Ruano is not pulling his weight." (Id. at 23). About a year later, on October 10, 2013, Christensen emailed multiple Account Executives regarding referrals from Medical Directors generally and Dr. Ruano in particular. (Id.). Christensen stated that Dr. Ruano was "not good" because he had made no referrals that month. (Id.) Christensen also remarked that Doctor's Choice's Medical Directors were "not doing good. My suggestion is to have a talk with them and let them know what the expectation is." (Id.). A few weeks later, Dr. Ruano and Doctor's Choice agreed to terminate his Medical Directorship early. (Id.).

Christensen expressed similar dissatisfaction with Medical Director Dr. Janick's rate of referrals. On January 14, 2014, Christensen emailed a Doctor's Choice Account Executive and others, stating: "Did Dr. J get his check[?] Where are his referrals[?] I need to turn the business on[.]" (Id. at 42). Again, on January 29, 2014, Christensen sent another email, directing Doctor's Choice's Vice President of Marketing and Sales to

[G]o see Dr. Janick and have a very frank conversation about the volume we are receiving. He is our Medical Director and he has NOT sent us as much as we agreed he would. I need him to know that we are not getting business so if it comes down to us making a change because we are not getting business he will understand.

(Id.). In early March 2014, Dr. Janick resigned as Medical Director. (Id. at 43).

Moreover, after Dr. Stolarski ended his term as Medical Director with Doctor's Choice and became a Medical Director at a competitor, Beach emailed Dr. Stolarski on October 15, 2012. (Id. at 33). In that email, Beach expressed his understanding that Dr. Stolarski owed Doctor's Choice half of his referrals for home health care services and threatened to "[n]otify all State and Federal Agencies of [Relator Herbold's] illegal activities," including "medical director invoices," unless Dr. Stolarski continued to refer half of his referrals to Doctor's Choice. (Id. at 33-34).

According to the United States, these emails — and other allegations discussed below — show that the Medical Director Agreements with Dr. Stolarski, Dr. Frey, and Dr. Janick were shams. (Id. at 11). Importantly, the claims in the Complaint are based only on Doctor's Choice's relationship with these three doctors: Dr. Stolarski, Dr. Janick, and Dr. Frey. (Id.at 2). The allegations about each doctor's relationship with Doctor's Choice follow.

1. Dr. Stolarski

Doctor's Choice was aware that Dr. Stolarski would be a good source of referrals because he had many patients who required home health services. (Id. at 24). Ultimately, Dr. Stolarski ended up serving as a Medical Director for either Doctor's Choice or the affiliated Health at Home on three occasions. (Id.). First, in mid-2010, Beach and Christensen offered Dr. Stolarski the position of Medical Director for Health at Home because "the Medical Director position in DCHC's Sarasota office was then filled by Dr. Gelvin, and Florida law permits only one Medical Director per location." (Id. at 25). Although he had referred only one patient to Doctor's Choice between January and June 2010, Dr. Stolarski's referrals to Doctor's Choice increased after this job offer. (Id.).

Once Dr. Stolarski "signed a Job Description to be Medical Advisor for [Health at Home] and also completed an IRS Form W-9 for [Health at Home]" in September 2010, his referrals to Doctor's Choice increased even more. (Id.). Between September 16 and November 30, 2010, Dr. Stolarski referred fifty-six patients to Doctor's Choice. (Id.). TheUnited States includes a list of representative claims...