United States v. Deming Hosp. Corp.

• Decision Date: 21 November 2013
• Docket Number: No. CV 11–0566 WPL/CG.,CV 11–0566 WPL/CG.
• Citation: 992 F.Supp.2d 1137
• Parties: UNITED STATES of America, and State of NEW MEXICO, ex rel. Sally Hansen, Relator, Plaintiffs, v. DEMING HOSPITAL CORPORATION d/b/a Mimbres Memorial Hospital, Community Health Systems, Inc., Community Health Systems Professional Services Corporation, and Jerry Bossell, Defendants.
• Court: U.S. District Court — District of New Mexico

992 F.Supp.2d 1137

UNITED STATES of America, and State of NEW MEXICO, ex rel.Sally Hansen, Relator, Plaintiffs,

v.DEMING HOSPITAL CORPORATION d/b/a Mimbres Memorial Hospital, Community Health Systems, Inc., Community Health Systems Professional Services Corporation, and Jerry Bossell, Defendants.

No. CV 11–0566 WPL/CG.

United States District Court,

D. New Mexico.

Nov. 21, 2013.

Robert R. Rothstein, Rothstein Law Firm, Santa Fe, NM, Anand Swaminathan, Michael Kanovitz, Loevy & Loevy, Chicago, IL, Brendan K. Egan, The Rothstein Law Firm, Jody Curran, New Mexico Attorney General's Office, Carolyn M. Nichols, Rothstein, Donatelli LLP, Albuquerque, NM, for Plaintiffs.

David H. Johnson, Greg L. Gambill, Montgomery & Andrews, William C. Madison, Madison, Harbour & Mroz, P.A., Albuquerque, NM, Mark Hiller, Michael Waldman, Robbins Russell Englert LLC, Washington, DC, for Defendants.

ORDER GRANTING DEFENDANTS' MOTION TO DISMISS RELATOR'S FIRST AMENDED COMPLAINT

WILLIAM P. LYNCH, United States Magistrate Judge.

This matter is before me on the motion to dismiss Relator Sally Hansen's first amended complaint filed by Defendants Deming Hospital Corporation d/b/a Mimbres Memorial Hospital (“Mimbres”), Community Health Systems Professional Services Corporation, and Jerry Bossell.¹ (Doc. 62 (motion); Doc. 63 (memorandum).) Having reviewed the motion, the responsive filings, and the relevant law, I conclude that Hansen has failed to state viable claims under either the substantive provisions of the False Claims Act (“FCA”), 31 U.S.C. § 3729(a)(1), or the FCA's anti-retaliation provision, id. § 3730(h), and I therefore decline to exercise supplemental jurisdiction over her analogous state law claims. Accordingly, I dismiss Hansen's FCA claims with prejudice, and I dismiss her state law claims without prejudice.

Background

The following well-pleaded factual allegations are accepted as true for purposes of this motion. Mimbres operates a laboratory that is certified under the Clinical Laboratory Improvement Amendments of 1988 (“CLIA”), Pub.L. No. 100–578, § 2, 102 Stat. 2903 (1988), to perform a variety of specialized testing. (Doc. 50 at 8.) Since 2004, Mimbres has received its biannual CLIA certification through accreditation by the Joint Commission, an accrediting organization approved by the government.² ( Id. at 10.) Mimbres renewed its CLIA certificate of accreditation in October 2009 and again in October 2011. ( Id. at 4.)

Hansen, an experienced medical technologist, began working at Mimbres in May 2010. ( Id. at 13.) Immediately upon starting at Mimbres, she observed “numerous CLIA violations” in the microbiology division of the hospital's laboratory. ( Id.) Over the next two months, Hansen became aware of many other CLIA violations throughout the laboratory, including personnel and training deficiencies, inadequate quality control procedures, insufficient testing and calibration of equipment, and poor documentation practices. ( Id. at 4, 13–14; see also id. at 14–38.) Hansen believed that these violations threatened the accuracy of the tests performed in the laboratory, which in turn led to an increased risk to patient health and safety. ( Id. at 4; see also id. at 20, 23, 26, 34, 36.)

Hansen investigated these violations further and discovered a wide-ranging effort by Defendants to cover up or ignore the laboratory's deficiencies. She learned that a June 2009 self-survey at Mimbres revealedmany of these violations but that Defendants failed to report these problems to the government or the Joint Commission during the October 2009 recertification process. ( Id. at 38–40.) Instead, Defendants falsely represented to the Joint Commission that Mimbres was fully compliant with its regulatory obligations. ( Id. at 40.) Moreover, on at least one occasion a fellow medical technologist falsified records to make it appear as though Mimbres's laboratory was CLIA-compliant. ( Id. at 39.) After the Joint Commission discovered numerous CLIA violations anyway, Defendants later falsely represented to the organization that it had rectified these problems when in fact the violations continued. ( Id. at 40.)

Hansen brought her concerns to her fellow medical technologist. ( Id. at 44.) She also repeatedly notified Bossell, the lab director, of the problems she had learned about and observed, but Bossell refused to review her evidence, took no action, and told Hansen that she was being disruptive. ( Id.) About a month after arriving at Mimbres, Hansen presented evidence of the violations she had discovered to the hospital's human resources director and spoke to her about her colleagues' refusal to address these problems. ( Id.) Several weeks later, Hansen ran into Mimbres's corporate compliance officer at a restaurant and told her that the microbiology division of the laboratory should be shut down due to the many CLIA violations. ( Id. at 45.) Although someone from another hospital later conducted an “inspection” of the laboratory and found no problems, Hansen says that this person, a friend of Bossell's, was not a certified inspector and that the inspection was “bogus.” ( Id.) Hansen later discovered that her fellow medical technologist had again falsified records so as to give the impression that Mimbres was in compliance with regulations. ( Id.) Finally, in late June 2010, Hansen wrote a letter to Mimbres's chief executive officer laying out these problems and notifying him that she had contacted the state health department about the flawed testing procedures. ( Id.)

After Hansen sent the letter, Bossell told her “on a daily basis” that he would fire her if she did not quit. ( Id. at 46.) The medical technologist also “warned her about continuing to raise concerns with management” and at one point yelled at her, but Bossell did nothing to stop him. ( Id.) In late July 2010, approximately two months after starting at Mimbres, Hansen was placed on administrative leave. ( Id.) This leave extended for over six months until February 2011, at which point Defendants assigned Hansen to “a different, less desirable shift” without explaining why she had been put on leave or why she could not return to her previous schedule. ( Id.) Hansen ultimately quit her job in light of Defendants' treatment. ( Id. at 47.)

Even after Hansen was placed on leave, Defendants' CLIA violations and falsification efforts continued. In August and September 2010, Defendants sent in different inspectors who substantiated many of Hansen's allegations, discovered the falsified records, and shut down most of the laboratory's microbiology division. ( Id. at 41–42.) However, despite an obligation to do so, Defendants did not report these issues to the Joint Commission. ( Id.) Another self-survey in June 2011 uncovered additional problems, but Defendants again concealed the violations from the Joint Commission during the October 2011 recertification process. ( Id. at 42–43.)

Procedural Posture

In June 2011, Hansen filed the original complaint in this qui tam action on behalf of the United States and the State of New Mexico pursuant to 31 U.S.C. § 3730(b) and analogous state law. (Doc. 1.) The complaint was unsealed and served on Defendants (Doc. 22) after both state and federal governments declined to intervene (Doc. 20; Doc. 21). After Defendants timely filed a motion to dismiss pursuant to Rule 12(b)(6) (Doc. 44; Doc. 45), Hansen filed her first amended complaint under seal pursuant to Rule 15(a)(1)(B) and Court instructions (Doc. 50; see also Doc. 22). The United States and the State of New Mexico again declined to intervene in this case (Doc. 55; Doc. 56), at which point I unsealed the first amended complaint (Doc. 58) and found Defendants' original motion to dismiss to be moot (Doc. 59).

Defendants next filed the instant motion (Doc. 62), in which they primarily argue that Hansen's substantive FCA claim must be dismissed for failure to plead the violation of a condition of payment under Medicare ³ regulations (Doc. 63 at 3–22 (memorandum)). Defendants also seek dismissal of Hansen's FCA anti-retaliation claim for failure to plead that she provided them with notice that she was engaged in protected activity. ( Id. at 23–26.) Finally, Defendants contend that Hansen's state law claims should be dismissed for substantially the same reasons warranting dismissal of her federal claims. ( Id. at 26.)

In her response brief, Hansen argues that she has adequately pleaded facts showing that Defendants violated conditions of payment, that Defendants sought government payment for worthless services, and that her actions constituted notice of protected activity within the meaning of the FCA's recently revised anti-retaliation provisions. (Doc. 69.) Defendants filed a reply brief that essentially reiterates their earlier arguments and asserts that Hansen's worthless services theory was not properly pleaded. (Doc. 74.) ⁴

Standard of Review

Rule 12(b)(6) authorizes a court to dismiss a complaint in whole or in part for failing to state a claim upon which relief is available. Without weighing the evidence, the court must evaluate whether it is plausible, and not merely possible, that the plaintiff is entitled to relief under the relevant law. Ashcroft v. Iqbal, 556 U.S. 662, 679–80, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009); Robbins v. Oklahoma, 519 F.3d 1242, 1247 (10th Cir.2008). “[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged—but it has not show[n]—that the pleader is entitled to relief.” Iqbal, 556 U.S. at 679, 129 S.Ct. 1937 (quotations omitted). In considering Rule 12(b)(6) motions, courts must look within the four corners of the complaint, accept all well-pleaded factual allegations as true, and determine if the plaintiff is plausibly entitled to relief. Id. at 678–79, 129 S.Ct. 1937 (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)); ...