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United States ex rel. Prather v. Brookdale Senior Living Communities, Inc.

United States District Court, M.D. Tennessee, Nashville Division

March 31, 2015



ALETA A. TRAUGER, District Judge.

Pending before the court is the defendants' Motion to Dismiss the Amended Complaint pursuant to Rules 12(b)(6) and 9(b) (Docket No. 56), to which the relator has filed a Response in opposition (Docket No. 60), and the defendants have filed a Reply (Docket No. 65). In addition, the United States of America ("United States") has filed a "Statement of Interest Regarding Defendants' Motion to Dismiss" (Docket No. 66), to which the defendants have filed a Response (Docket No. 70). For the following reasons, the defendants' motion will be granted without prejudice.


I. The Parties

Relator Marjorie Prather ("relator" or "Prather") is an individual who resides in Tennessee. Prather is a registered nurse who was employed by Brookdale Senior Living, Inc. ("BSLI") as a Utilization Review Nurse ("URN") from September 2011 until November 23, 2012. The United States is the real party in interest to Prather's action.

Defendant BSLI is a Delaware corporation with a principal address in Brentwood, Tennessee ("Brookdale Main Office"). BSLI provides retirement living services, including home health aide services and skilled nursing services, to recipients of care under the Health Insurance for the Aged and Disabled Program, Title XVIII of the Social Security Act, 42 U.S.C. §§ 1395, et seq. ("Medicare"). Defendants Brookdale Senior Living Communities, Inc. and Brookdale Living Communities, Inc. (together, "Brookdale Communities Defendants") are Delaware corporations with principal addresses at the Brookdale Main Office. The Brookdale Communities Defendants provide retirement living services, including skilled nursing services, to Medicare recipients. Defendant Innovative Senior Home Health of Nashville, LLC ("ISC Home Health") is a Delaware limited liability company with a principal address at the Brookdale Main Office. ISC Home Health provides home health care to Medicare recipients. Defendant ARC Therapy Services, LLC ("ARCTS") is a Tennessee limited liability company with a principal address at the Brookdale Main Office. ARCTS provides outpatient therapy services to Medicare recipients.

II. Legal Background

The False Claims Act ("FCA") imposes civil liability for knowingly presenting, or causing to be presented, false or fraudulent claims to the United States government for payment or approval. 31 U.S.C. § 3729(a)(1)(A). The FCA also imposes liability for knowingly making or using a false record or statement that is material to a false or fraudulent claim. 31 U.S.C. § 3729(a)(1)(B). In addition, the FCA imposes liability for knowingly or improperly avoiding or decreasing an obligation to pay or transmit money to the United States - what is known as a "reverse" false claim. 31 U.S.C. § 3729(a)(1)(G). In layman's terms, a reverse false claim occurs when a party owes funds to the government (such as in the case of an overpayment) but acts so that it does not meet its obligation to return those funds. Finally, the FCA provides for a cause of action for conspiracy to commit violations thereunder. 31 U.S.C. § 3729(a)(1)(C). Those who violate the FCA are liable for civil penalties and treble damages.

To promote enforcement of the FCA, private individuals (called "relators") can bring qui tam actions on behalf of the United States.[1] 31 U.S.C. § 3730(b). After the relator files a complaint, the United States has the option of intervening and conducting the litigation itself. 31 U.S.C. § 3730(b)(4). If the government opts not to intervene, the relator may proceed individually. 31 U.S.C. § 3730(c)(3). Successful relators are awarded a portion of the recovery ranging from ten to thirty percent, depending upon the relator's role in the case and whether or not the government chose to intervene. 31 U.S.C. § 3730(d). This award encourages "whistle blowers to act as private attorneys-general in bringing suits for the common good." U.S. ex rel. Poteen v. Medtronic, Inc., 552 F.3d 503, 507 (6th Cir. 2009) (citing Walburn v. Lockheed Martin Corp., 431 F.3d 966, 970 (6th Cir. 2005)) (internal quotation marks omitted).

The FCA applies to claims submitted by healthcare providers to Medicare; "indeed, one of its primary uses has been to combat fraud in the health care field." U.S. ex rel. Osheroff v. HealthSpring, Inc., 938 F.Supp.2d 724, 731 (M.D. Tenn. 2013) (citing U.S. ex rel. Chesbrough v. VPA P.C., 655 F.3d 461, 466 (6th Cir. 2011)). Medicare is a health insurance program administered by the United States that is funded by taxpayer revenue. Medicare is overseen by the United States Department of Health and Human Services through its Center for Medicare and Medicaid Services ("CMS"). Medicare is designed to provide for the payment of, inter alia, hospital services, medical services and durable medical equipment to persons over sixty-five years of age, and for certain others who qualify under special terms and conditions. Reimbursement for Medicare claims is made by the United States through CMS, which contracts with private insurance carriers known as fiscal intermediaries ("FIs") to administer and pay claims from the Medicare Trust Fund. See generally 42 U.S.C. § 1395u. The most basic requirements for reimbursement eligibility under Medicare are that the service provided must be reasonable and medically necessary. See, e.g., 42 U.S.C. §§ 1395y(a)(1)(A); 1396, et seq. ; 42 C.F.R. § 410.50.

Individuals who receive benefits under Medicare are commonly referred to as "beneficiaries." Medicare beneficiaries who are homebound can receive certain medically necessary services at home. See 42 U.S.C. §§ 1395f(a)(2)(C); 1395n(a)(2)(A). These services generally include skilled nursing, physical therapy, speech-pathology therapy, and occupational therapy.

Home health agencies' patients are referred for home health services by their physicians. The physician is required to certify that the patient is under his or her care, that the physician has established and will periodically review a sixty-day plan of care, that the patient is homebound, and that the patient requires one of the types of home health services that qualifies for Medicare. The certification of need for home health services must be obtained at the time the plan of care is established or as soon thereafter as possible and must be signed and dated by the physician who establishes the plan. See 42 C.F.R. § 424.22. A physician is also required to certify that an appropriate face-to-face encounter occurred with the individual. See id. Face-to-face documentation must be a separate and distinct section of, or an addendum to, the certification and must be clearly titled, dated, and signed by the certifying physician. See id.

After receiving a patient referral, a home health agency is required to provide its own patient-specific, comprehensive assessment, called an Outcome and Assessment Information Set ("OASIS"). 42 C.F.R. § 484.55. During this initial assessment, the home health agency must determine the immediate care and support needs of the patient and, for Medicare patients, determine eligibility for the Medicare home health benefit, including homebound status. Id. The comprehensive OASIS assessment must be completed "in a timely manner, consistent with the patient's immediate needs, but no later than [five] calendar days after the start of care." 42 C.F.R. § 484.55(b).

A sixty-day plan of care is called an "episode." After each episode, a patient must be recertified to receive funds from Medicare. To be recertified, the patient's physician must review and sign the patient's plan of care, making any necessary changes, and the home health agency must complete a new assessment and determine that the patient is still eligible to receive Medicare-funded home health services. See 42 C.F.R. § 424.22; 42 C.F.R. § 484.55.

A Medicare beneficiary is homebound if, due to underlying illness or injury, the beneficiary has conditions that restrict the ability to leave the home. Medicare Benefit Policy Manual, ch. 7, § 30.1.1. Homebound status does not require a beneficiary to be bedridden; instead, a beneficiary is considered homebound if leaving their residence requires considerable or taxing effort. Id.

Home health agencies are not paid per service rendered. Instead, Medicare pays them under a prospective payment system that provides a predetermined amount for the entire sixty-day episode.[2] See 42 U.S.C. § 1395fff et seq.; 42 C.F.R. § 484.205 et seq. Medicare reimbursement is typically paid in two parts - home health providers may submit a request for payment ("RAP") to the FI to be paid a percentage of the final Medicare sixty-day episode payment up front, with the balance of the payment to be made at the end of the episode. See 42 C.F.R. § 484.205(b)(1), (2). If the RAP is based on physician verbal orders for home health services, the verbal order must be recorded in the plan of care, include a description of the patient's condition and the services to be provided by the home health agency, include an attestation by the recipient of the verbal order, and the plan of care must be copied and immediately submitted to the physician. See 42 C.F.R. § 409.43(c). Before submitting a claim for the final percentage payment, the plan of care must be signed and dated by a qualifying physician. See 42 C.F.R. § 409.43(c)(3). Similarly, oral orders must be countersigned and dated before the final bill is submitted. 42 C.F.R. § 409.43(d).

Certain additional adjustments are made to the reimbursement rate, including a low utilization payment adjustment and an outlier payment adjustment. The reimbursement rate is subject to a low utilization payment adjustment when the home-health agency visits the patient four or fewer times during a sixty-day episode. See 42 C.F.R. §§ 484.205(c); 484.230. In such a situation, Medicare will calculate its payment using a per-visit amount. Id. An outlier adjustment is the opposite - CMS makes an additional payment for a visit-intensive episode for which the cost is estimated to exceed a predicted threshold amount for the beneficiary's representative case-mix group (as determined by CMS via a series of national calculations). See 42 C.F.R. §§ 484.205(e); 484.240. In short, when a home-health agency reaches a certain number of visits during a given sixty-day episode, Medicare will increase the reimbursement paid on the patient's behalf.

Medicare conditions payment on the physician's certification that the beneficiary is homebound and in need of skilled services. 42 C.F.R. § 409.41(b). Medicare also conditions payment on the beneficiary's actually being homebound and actually needing skilled services. 42 C.F.R. § 409.41(c) (conditioning payment on all requirements contained in §§ 409.42-409.47 being met, including 42 C.F.R. § 409.42(a)). Additionally, Congress has statutorily prohibited the payment of any Medicare claim for services that are not medically reasonable and necessary. 42 U.S.C. § 1395y(a)(1) (A)(stating that "no payment may be made for any expenses incurred for items or services which... are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member").

III. Allegations of the Amended Complaint

BSLI owns retirement communities and assisted living facilities throughout the United States; it offers skilled nursing services to Medicare patients. (Docket No. 52 at ¶ 68.) BSLI is a principal of ISC Home Health and ARCTS. ( Id. at ¶ 69.) BSLI, the Brookdale Communities Defendants, ISC Home Health, and ARCTS share the same corporate office. ( Id. ) As mentioned supra, Prather was employed as a URN from September 2011 through November 23, 2012. ( Id. at ¶ 70.) Prior to September 2011, each office location of ISC Home Health and ARCTS (commonly known as "agencies") submitted its own claims directly to Medicare. ( Id. at ¶ 71.) But in the September 2011 time frame, BSLI made the decision to centralize the billing of most of the agencies into the Brookdale Main Office. ( Id. )

In September 2011, BSLI had a large backlog of about 7, 000 unbilled Medicare claims worth approximately $35 million dollars. ( Id. at ¶ 72.) These claims were referred to as "held claims." ( Id. ) These claims were allegedly backlogged because they were not in compliance with Medicare rules, primarily because they related to care that was provided without properly certified plans of care or without required face-to-face encounter documentation. ( Id. ) Copies of patient charts concerning the held claims were forwarded to the Brookdale Main Office to be audited and billed to Medicare. This was referred to as the "held claims project." ( Id. at ¶ 73.) The defendants issued weekly reports, called the "Home Health Held Claims Report, " that showed how many claims had been released for billing to Medicare. ( Id. at ¶ 74.)

Prather was directly involved in the held claims project. Prather's primary responsibilities included: (1) pre-billing chart reviews in order to ensure compliance with the requirements and established policies of the defendants, as well as state, federal and insurance guidelines; (2) working directly with the BSLI Regional Director, BSLI Director of Professional Services, and BSLI clinical associates to resolve documentation, coverage, and compliance issues; (3) acting as resource person to the agencies for coverage and compliance issues; (4) reviewing visits utilization for appropriateness pursuant to care guidelines and patient condition; and (5) keeping BSLI Directors of Professional Services apprised of problem areas requiring intervention. All of these responsibilities directly related to the defendants' efforts to bill the held claims to Medicare. ( Id. at ¶ 75.)

Prather worked with Denise Tucker, a fellow URN, on the held claims project. ( Id. at ¶ 76.) The URNs reported directly to Lance Blackwood, Senior Director of Home Health Product Line for ISC Home Health ("Blackwood"). ( Id. at ¶ 77.) BSLI also hired a group of temporary employees to help audit the held claims. Diana Sharp, Interim Director of Professional Services for ISC Home Health, headed up the group of temporary employees. ( Id. at ¶ 78.)

The purpose of the URNs' work was to review held claims for a variety of items necessary to submit claims for billing, including signed orders, completed face-to-face documentation, and completed therapy reassessments. ( Id. at ¶¶ 70, 75, 81, 84, 103.) Initially, the URNs sent attestation forms to doctors for them to sign to correct the problem of missing signatures, but the URNs received only a few signed and completed forms back from doctors. ( Id. at ¶ 79.) Thereafter, in January 2012, Shad Morgheim ("Morgheim"), Senior Vice-President of ISC Home Health, moved the audit process back to the BSLI agencies' offices, so that the agencies would complete the claims that were older than one hundred and twenty days. ( Id. at ¶ 80.) The agencies were instructed to get the doctors to sign the old documents, as well as ask them to complete the face-to-face documentation. ( Id. ) Once the agencies received the signed documents, they forwarded them to the URNs, who completed the final reviews and checklists in order to release the claims for billing to Medicare. ( Id. at ¶ 81.) The URNs were instructed to only do a "quick review" for missing signatures and dates and were specifically instructed not to look for any other problems related to Medicare billing; when the URNs noted problems, they were told to ignore them. ( Id. at ¶ 82.)

Prather alleges that she raised concerns about the manner in which the agencies were auditing the beneficiaries' charts, because she was finding compliance problems with face-to-face documentation, doctors' orders and plans of care, and therapy evaluations. ( Id. at ¶ 83.) In response, Blackwood told Prather that it was the agencies' responsibility to correct the charts. ( Id. ) Blackwood allegedly further instructed the URNs to not read documents (such as plans of care and face-to-face documentation), but only to make sure that orders affecting billing were signed and dated, that the plans of care were signed and dated by a physician, and that face-to-face documentation contained an encounter date in the right time period, clinical findings, and a reason why the patient was homebound. ( Id. at ¶ 84.) The URNs were instructed not to read any other substantive content, other than to confirm that the documentation did not say such things as "not homebound." ( Id. at ¶ 85.)

Prather alleges that the URNs were instructed to ignore whether the reason for home care documented by the physician's office matched the start of care order and the plan of care orders. ( Id. at ¶ 86.) According to the Amended Complaint, in many of the plan of care orders (known in Medicare parlance as "485s"), the primary diagnosis justifying home health care billing to Medicare was inconsistent with the care actually provided to the patient. ( Id. at ¶ 87.) For example, Patient A, a dementia patient who was a resident of a secured memory unit in a BSLI facility in Chandler, Arizona, was diagnosed with "abnormality of gait" on the plan of care order, but she did not receive physical therapy. ( Id. ) In addition, the skilled nursing services that Patient A received included medication teaching that was inconsistent with a diagnosis of dementia, because Patient A received her medication from a nurse. ( Id. ) Prather further alleges that, although Patient A received home health care services from December 14, 2011, through February 11, 2012, no doctor certified the ...

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