United States v. Millennium Radiology, Inc.
| Decision Date | 30 September 2014 |
| Docket Number | Case No. 1:11cv825 |
| Parties | United States of America, et al., Plaintiffs, v. Millennium Radiology, Inc., et al., Defendants. |
| Court | U.S. District Court — Southern District of Ohio |
OPINION & ORDER
This matter is before the Court upon Defendants Mercy Health Partners of Southwest Ohio and Mercy Hospitals West's Motion to Dismiss (Doc. 33) and Defendant Millennium Radiology, Inc.'s Motion to Dismiss (Doc. 36). These motions are fully briefed. (Docs. 42, 43, 47, 48). In addition to these briefs, the United States filed a Statement of Interest in response to Defendants' Motions to Dismiss. (Doc. 49). Plaintiff/Relator Dr. G. Daryl Hallman ("Hallman") filed a Response to the Government's Statement (Doc. 51), to which Defendants Mercy Health Partners of Southwest Ohio, Mercy Hospitals West ("Mercy") then responded (Doc. 58).
In addition, Plaintiff-Relator filed a Notice of Additional Authority (Doc. 56), to which Defendant Millennium Radiology filed a Response (Doc. 59).
Also pending before the Court is Defendant Millennium Radiology, Inc.'s ("MRI") Motion to Strike Document No. 50. (Doc. 52). Hallman filed a Memorandum in Opposition to that Motion. (Doc. 53).
Plaintiff/Relator Dr. G. Daryl Hallman ("Hallman") is a former employee ofMillennium Radiology, Inc. ("MRI"). In his Second Amended Complaint, Hallman claims that MRI has participated in an exclusive referral and marketing system with Defendants Mercy Health Partners of Southwest Ohio, Mercy Hospitals West's ("Mercy") which violates the Anti-Kickback Statute ("AKS"), 42 U.S.C. § 1320a-7b and the False Claims Act ("FCA"), 31 U.S.C. §§ 3729 et seq.
As part of its participation in Medicare, Mercy is required to provide radiology services to its patients. Between 2002 and 2011, Mercy and MRI entered into three agreements which required MRI to be the exclusive provider of radiology services for patients at Mercy's hospital facilities. (Doc. 24-4 Exs. 5 & 11; Doc. 24-5, Ex. 14). The parties agreed that Mercy would bill for the technical component of the services and MRI would bill for the professional component. (See, e.g., Doc. 24-4, PAGEID # 1030). Under all three of the agreements, Mercy agreed to provide the space and equipment that MRI needed to perform its services under the contract. (See, e.g. Doc. 24-4, PAGEID # 1027).
The first agreement was entered into in 2002 and required MRI to provide radiology services at Mercy's Mt. Airy Hospital. MRI also agreed to provide a Medical Director of Radiology Services. Mercy agreed to make a one-time payment of $150,000 to cover MRI's start-up costs, to pay a monthly advance to cover operating losses, and to pay $40,000 per year for the cost of the medical director services. In 2007, the 2002 agreement was amended to reduce the compensation for the medical director services to $12,000.
In 2006, Mercy and MRI entered into the second agreement, which required MRI to provide radiology services at Mercy's Western Hills Hospital. Mercy agreed to payMRI an initial advance of $150,000 and a recruiting allowance of up to $25,000 per physician to recruit two physicians to join MRI. MRI agreed to provide a Medical Director of Radiology Services, but at no additional compensation.
In 2011, Mercy and MRI entered into the third agreement, which was a consolidated exclusive services agreement for MRI to provide radiology services at both the Mt. Airy and Western Hills Hospitals. As part of the agreement, MRI was required to provide a medical director at both facilities, but the agreement did not include compensation for the medical director services.
Beginning in 2010, MRI has assisted in marketing Mercy's services to other physicians in the area. Hallman claims that MRI performed these marketing services and provided a medical director for free in exchange for the referral of patients from Mercy. Hallman claims that this kickback scheme resulted in the submission of false claims for payment to the United States under its Medicare program.
Defendants move to dismiss Hallman's claims, arguing that he failed to particularly allege violations of the AKS or the FCA.
Before addressing Defendants' Motions to Dismiss, the Court must address Defendant MRI's Motion to Strike Document No. 50. (Doc. 52). In that Motion, MRI asks this Court to strike Hallman's Memorandum in Opposition to MRI's request that its attorney's advice be stricken from the record. In response, Hallman asks that its Memorandum in Opposition be deemed a Sur-Reply to MRI's Motion to Dismiss. The Court finds that good cause to do so exists, and therefore Hallman's Memorandum inOpposition (Doc. 50) will be deemed a Sur-reply to MRI's Motion to Dismiss (Doc. 36). Accordingly, MRI's Motion to Strike is DENIED as MOOT.
"In assessing a motion to dismiss under Rule 12(b)(6), this court construes the complaint in the light most favorable to the plaintiff, accepts the plaintiff's factual allegations as true, and determines whether the complaint 'contain[s] sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Heinrich v. Waiting Angels Adoption Servs., Inc., 668 F.3d 393, 403 (6th Cir. 2012) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)) (alteration in original). To properly state a claim, a complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). "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. The factual allegations of a pleading "must be enough to raise a right to relief above the speculative level." "[T]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.' " Id. (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
The FCA "is an anti-fraud statute that prohibits the knowing submission of false or fraudulent claims to the federal government." United States ex rel. Bledsoe v. Community Health Sys., Inc., 501 F.3d 493, 502-503 (2007). The Fraud Enforcement and Recovery Act of 2009 ("FERA"), Pub.L. No. 111-21, 123 Stat. 1617 (May 20,2009), amended and renumbered certain provisions of the FCA. The Second Amended Complaint sets forth claims under the FCA's provisions both before and after FERA's enactment.1 The applicable pre-FERA provisions of the FCA provide that:
(b) For purposes of this section, the terms "knowing" and "knowingly" mean that a person, with respect to information (1) has actual knowledge of the information; (2) acts in deliberate ignorance of the truth or falsity of the information; or (3) acts in reckless disregard of the truth or falsity of the information, and no proof of specific intent to defraud is required.
31 U.S.C. § 3729. The applicable post-FERA provisions of the FCA create civil liability for any person who:
(C) conspires to commit a violation of subparagraph (A), (B), (D), (E), (F), or (G);
31 U.S.C. § 3729(a)(1). Under the statute, "the terms 'knowing' and 'knowingly'-(A) mean that a person, with respect to information—(i) has actual knowledge of the information; (ii) acts in deliberate ignorance of the truth or falsity of the information; or (iii) acts in reckless disregard of the truth or falsity of the information; and (B) require no proof of specific intent to defraud." 31 U.S.C. § 3729(b)(1).
As this Court has explained:
FCA claims must comply with Fed.R.Civ.P. 9(b). United States ex rel. SNAPP, Inc. v. Ford Motor Co., 532 F.3d 496, 502 (6th Cir. 2008). Rule 9(b) adds additional pleading requirements for allegations of fraud or mistake. Id. at 503. Thus, under Rule 9(b), a plaintiff must allege the time, place and content of the alleged misrepresentation, the fraudulent scheme, the fraudulent intent of the defendants and the injury resulting from the fraud. Id. at 504. Therefore, a qui tam case may proceed to discovery if the relator's complaint pleads a complex and far-reaching fraudulent scheme with particularity and provides examples of specific false claims submitted to the Government pursuant to that scheme. Id. at 507. However, Rule 9(b) exempts allegations of malice, intent, knowledge and other conditions of a person's mind from its heightened pleading standards. Id. at 509.
United States ex rel. Antoon v. Cleveland Clinic Found., 978 F. Supp. 2d 880, 891 (S.D. Ohio 2013).
To be eligible for payment under the Medicare program, providers and suppliers must certify that they understand that payments of claims are conditioned on the claims and the underlying transactions complying with applicable laws, including the AKS.United States ex rel....
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