United States v. Generations Healthcare, LLC

• Decision Date: 14 August 2012
• Docket Number: Case No. 10 C 2413.
• Citation: 922 F.Supp.2d 695
• Parties: UNITED STATES of America and the State of Illinois, ex rel. Laurie GESCHREY and Laure Janus, Plaintiffs–Relators, v. GENERATIONS HEALTHCARE, LLC, Odyssey Healthcare, Inc., Narayan Ponakala, Catherine Ponakala, and John Does, Defendants.
• Court: U.S. District Court — Northern District of Illinois

922 F.Supp.2d 695

UNITED STATES of America and the State of Illinois, ex rel. Laurie GESCHREY and Laure Janus, Plaintiffs–Relators,

v.GENERATIONS HEALTHCARE, LLC, Odyssey Healthcare, Inc., Narayan Ponakala, Catherine Ponakala, and John Does, Defendants.

Case No. 10 C 2413.

United States District Court,

N.D. Illinois,

Eastern Division.

Aug. 14, 2012.

David Joel Chizewer, Frederick H. Cohen, Kathryn B. Walter, Goldberg Kohn Ltd., Chicago, IL, for Plaintiffs–Relators.

E. Michael Ciesla, Steven Mark Cloh, Ciesla & Ciesla, P.C., Northbrook, IL, John Louis Litchfield, Foley & Lardner LLP, Michael Joseph Hayes, Abram Isaac Moore, K&L Gates LLP, John Louis Litchfield, Lisa Marie Noller, Foley & Lardner Chicago, IL, for Defendants.

MEMORANDUM OPINION & ORDER

JOAN B. GOTTSCHALL, District Judge.

Plaintiffs–Relators Laurie Geschrey and Laure Janus (“Relators”) are former employees of hospice-care company Generations HealthCare, LLC (“Generations”), which was purchased by Odyssey HealthCare, Inc. (“Odyssey”) after Relators' employment was terminated. Relators brought an action against Generations, Odyssey, and Generations's founders Catherine and Narayan Ponakala, alleging fraud against the United States and the State of Illinois and retaliation against employees, under the federal False Claims Act (“FCA”), 31 U.S.C. §§ 3729 et seq., the Illinois False Claims Act, 740 Ill. Comp. Stat. 175/3, and the Illinois Whistleblower Reward and Protection Act (“IWRPA”), 740 Ill. Comp. Stat. 174/30. The United States has declined to intervene in the action. Now before the court are Generations's and Odyssey's motions to dismiss the complaint pursuant to Federal Rules of Civil Procedure 12(b)(6) and 9(b). The court denies Generations's and Odyssey's motions as to Counts I–III of the Complaint and dismisses Count IV without prejudice. The court also dismisses Relators' claims against Narayan Ponakala without prejudice.

I. Background

Viewing the facts in the light most favorable to Relators, as the court must on a motion to dismiss, the background of this case is as follows. Generations, located in Westchester, Illinois, is a hospice company that provides palliative care to terminally ill patients. During the time period at issue, most of its patients were Medicare and/or Medicaid recipients; it had very few patients with private insurance. Generations submitted bills to Medicare twice a month through an electronic billing system.

Janus was employed by Generations as a bereavement and spiritual-care coordinator and chaplain from 2002 until August 2008, when she was terminated for allegedly pretextual reasons after raising concerns about the company's practices. Geschrey, a chaplain and Psych–Social Field Supervisor, was terminated in 2007 for allegedly pretextual reasons after she refused to go along with Generations's practices. Both Relators went to work for Odyssey before it purchased Generations on or about December 31, 2009, and Janus still works for Odyssey. Odyssey hired all of Generations's employees and put Generations's patients onto its own patient roster.

A. Medicare and Medicaid Regulations Governing Hospice–Care Benefits¹

The Department of Health and Human Services reimburses hospice providers for services provided to eligible beneficiaries on a per diem basis. Patients are eligible for hospice care if they have a terminal diagnosis and a life expectancy of six months or less and if they have elected to forego further curative treatment. According to Medicare regulation 42 C.F.R. § 418.20, in order “to elect hospice care under Medicare, an individual must be—(a) entitled to Part A of Medicare; and (b) certified as being terminally ill in accordance with § 418.22.” The latter section provides that “[t]he certification must specify that the individual's prognosis is for a life expectancy of 6 months or less if the terminal illness runs its normal course.” § 418.22(b). The certification statements must be obtained from the hospice's medical director or physician and the individual's attending physician if the individual has one. § 418.22(c). The written certifications must be filed in the patient's medical record. § 418.22(d)(2).

According to the version of the regulations in effect since 2006, “[a]n individual may elect to receive hospice care during ... (1) An initial 90–day period; (2) A subsequent 90–day period; or (3) An unlimited number of subsequent 60–day periods.” § 418.21 (2006).² “The hospice must obtain written certification of terminal illness for each of the periods listed in § 418.21, even if a single election continues in effect for an unlimited number of periods.” § 418.22(a)(1). The written certification is a prerequisite for payment. § 418.22(a).

Hospice-eligible individuals must also file a statement with the hospice-care provider electing hospice care. § 418.24. The statement includes the provisions that “the individual has been given a full understanding of the palliative rather than curative nature of hospice care,” and that payment for Medicare services related to the treatment of the terminal condition is waived by hospice election. § 418.24(b)(2), (d)(2). The hospice then files a notice of election with Medicare to begin the per diem payments.

Hospice providers must make services, including nursing services, available on a 24–hour basis. The rate of reimbursement by the government varies depending on the type of care provided: (1) routine (non-continuous) home care, (2) continuous home care “consisting predominantly of nursing case on a continuous basis at home ... during brief periods of crisis,” (3) short-term “inpatient respite care” in an approved facility, and (4) general inpatient care in a facility “for pain control or acute or chronic symptom management.” § 418.302(b), (c). Regarding (2) continuous home care, the regulations explain that “[e]ither homemaker or home health aide (also known as hospice aide) services or both may be covered on a 24–hour continuous basis during periods of crisis but care during these periods must be predominantly nursing care.” § 418.204(a). On any day that the patient is not receiving inpatient or continuous care, the hospice is paid the routine home care rate. The per diem rate for routine care (approximately $150 in Cook County) is paid regardless of the actual services provided on a given day. § 418.302(e).

The State of Illinois also covers hospice services for Medicaid recipients. To be eligible for reimbursement, the services must comply with the federal Medicare regulations in 42 C.F.R. §§ 418.1–418.405. See Handbook for Hospice Agencies, www. hfs. illinois. gov/ handbooks/ chapter 200. html (last visited August 13, 2012). The certification requirements and categories of care are identical to those set out in the Medicare regulations. Id.

B. Relators' Allegations of Fraudulent Billing1. Improper Enrollment and Fraudulent Certifications

Relators claim that Generations recruited and certified patients that it knew were ineligible for hospice care because they were not terminally ill. It then fraudulently billed Medicare and/or Medicaid for the patients' care on a per diem basis.³ Relators claim that patients were recruited from Chicago housing projects by Generations's sales staff, and that the staff, who offered housing-project residents free medical supplies and other perks, often failed to explain that signing up for hospice made patients ineligible for curative treatments. The sales staff obtained signed election forms prior to medical staff's evaluation of the patients. Relators claim that they were involved in the decisions to certify patients for hospice care because they were part of an “interdisciplinary team” assigned to each patient. A nurse and members of the interdisciplinary team would visit the patient, evaluate the patient's condition, and meet to report their findings. Based on the interdisciplinary team's findings, a written certification of eligibility for hospice care was prepared and the notice of hospice election was filed on the patient's behalf. Generations's medical director would sign off on the written certification without having seen the patient.

Relators allege generally that this procedure for certifying patients was improper because the medical director was not using his clinical judgment to assess whether the patient was terminally ill, as required by the hospice-benefit regulations. Relators further claim that, when patients were re-certified, nurses did not actually visit the patients but relied on vital signs taken by nursing assistants.

Relators also provide specific examples of allegedly improper certifications. First, they allege that patient “G.S.” was obese but not terminally ill and remained in Generations's care “for years.” She was discharged before she died. (Compl. ¶ 38.) Patient “A.W.,” a Medicare recipient with Alzheimer's, was certified as terminally ill, despite the fact that Janus, a social worker, and a nurse who visited the patient did not believe she was an appropriate candidate for hospice because she could talk, eat, and walk, which Relators allege were criteria for determining hospice eligibility for an Alzheimer's patient. ( Id. ¶ 42.) The staff who visited A.W. reported their opinions to Ms. Wickman, a nurse, and Mrs. Ponakala, but A.W. was certified as hospice-appropriate, and the government was billed for her care.

Geschrey and a social worker agreed that another unnamed patient was not an appropriate candidate for hospice. Although diagnosed with dementia, she could walk, talk, and eat. Nonetheless, the patient, who spoke Italian, was certified for hospice after Ms. Wickman told Geschrey to write “speech unintelligible to writer” in her notes, leaving out the fact that the woman's speech was unintelligible only to those who did not speak Italian. ( Id. ¶ 43.) Generations billed the government for the woman's care.

2. Submission of False Documents

Relators further allege that...