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United States ex rel. Carver v. Physicians' Pain Specialists of Alabama, P.C.

United States District Court, S.D. Alabama, Southern Division

October 27, 2017




         This matter is before the Court on the motion of defendant Castle Medical, LLC (“Castle”) for judgment on the pleadings. (Doc. 125). The parties have filed briefs in support of their respective positions, (Docs. 125, 133, 136), and the motion is ripe for resolution. After careful consideration, the Court concludes that the motion is due to be granted.


         The relator in this False Claims Act case was employed by defendant Physicians Pain Specialists of Alabama, P.C. (“Pain”). In August 2013, she filed this action against Pain and against the two doctors (“Ruan” and “Couch”) who owned Pain. (Doc. 1). In August 2014, she filed a first amended complaint that added a pharmacy as a defendant. (Doc. 8). In October 2016, the government filed its notice of non-intervention. (Doc. 24). The relator then filed a second amended complaint that added four more defendants, including Castle. (Doc. 29). In December 2016, the government gave notice of non-intervention as to this pleading. (Doc. 30).

         Of the eight defendants named in the second amended complaint, only Castle continues the fight. The three defendants added along with Castle were dismissed without prejudice on the relator's unopposed request, and the other defendants have suffered entry of default. (Docs. 93, 99-100, 122-23).

         The second amended complaint is 56 pages long. It incorporates the relator's Supplemental Disclosure Statement of Material Evidence (“Disclosure Statement”), (id. at 22), itself 37 pages long. (Doc. 29-1). The parties agree that these documents allege nine different schemes against varying sets of defendants. (Doc. 133 at 15; Doc. 136 at 2). Only one of these schemes implicates Castle. Similarly, while the second amended complaint asserts eight causes of action, only three are alleged against Castle.

         The alleged scheme, in a nutshell, is that Castle and Ruan reached and fulfilled an agreement pursuant to which Ruan, in exchange for monthly payments of $7, 000, referred to Castle all urine drug screen (“UDS”) testing. This arrangement is said to violate both the Stark Law and the Anti-Kickback Statute. Count III alleges that Castle violated the False Claims Act by violating the Stark Law. Count IV alleges that Castle violated the False Claims Act by violating the Anti-Kickback Statute. Count VIII alleges that Castle conspired with Pain and other defendants to violate the False Claims Act. (Doc. 29 at 42-46, 52-54).

         Castle's motion for judgment on the pleadings is brought pursuant to Rule 12(c). Castle argues thereunder that Counts III, IV and VIII fail to state a claim on which relief against Castle can be granted. Castle also argues that these counts are not pleaded with the specificity required by Rule 9(b). (Doc. 125 at 1, 5).


         “Judgment on the pleadings is proper when no issues of material fact exist, and the moving party is entitled to judgment as a matter of law based on the substance of the pleadings and any judicially noticed facts.” Cunningham v. District Attorney's Office, 592 F.3d 1237, 1255 (11th Cir. 2010) (internal quotes omitted). “We accept all the facts in the complaint as true and view them in the light most favorable to the nonmoving party.” Id. The Court “need not accept as true, however, conclusory legal allegations made in the complaint.” Andrx Pharmaceuticals, Inc. v. Elan Corp., 421 F.3d 1227, 1230 n.1 (11th Cir. 2005). The parties agree that the adequacy of a pleading challenged under Rule 12(c) is measured and determined as it is for a challenge under Rule 12(b)(6). (Doc. 125 at 6; Doc. 133 at 9). “In order to survive a motion to dismiss, … claims of fraud … also must satisfy the requirements of Fed.R.Civ.P. 9(b).” Ziemba v. Cascade International, Inc., 256 F.3d 1194, 1202 (11th Cir. 2001).

         With nuances and exceptions not relevant here, the Stark Law prohibits a physician from making a referral, for services otherwise covered under Medicare, to an entity with which he has a financial relationship. 42 U.S.C. § 1395nn(a)(1). The Stark Law also prohibits the payment of any Medicare claim for services provided in violation of this provision. Id. § 1395nn(g)(1). The Anti-Kickback Statute makes it a felony to offer or pay any remuneration to induce a person to refer an individual for the furnishing of any service for which payment may be made under a federal health care program. 42 U.S.C. § 1320a-7b(b)(2)(A). Castle concedes that violation of the Stark Law or the Anti-Kickback Statute can support a claim under the False Claims Act. (Doc 125 at 7). See McNutt ex rel. United States v. Haleyville Medical Supplies, Inc., 423 F.3d 1256, 1257, 1259 (11th Cir. 2005) (violation of the Anti-Kickback Statute can form the basis for a False Claims Act claim); see also United States ex rel. Kosenske v. Carlisle HMA, Inc., 554 F.3d 88, 94 (3rd Cir. 2009) (“Falsely certifying compliance with the Stark or Anti-Kickback Acts in connection with a claim submitted to a federally funded insurance program is actionable under the FCA.”).

         Castle raises a number of arguments in support of its motion, but one is dispositive. “[T]he False Claims Act is a fraud statute for the purposes of Rule 9(b).” United States ex rel. Clausen v. Laboratory Corp. of America, Inc., 290 F.3d 1301, 1309 (11th Cir. 2002) (internal quotes omitted). Therefore, “complaints alleging violations of the False Claims Act are governed by Rule 9(b).” Corsello v. Lincare, Inc., 428 F.3d 1008, 1012 (11th Cir. 2005); accord United States ex rel. Walker v. R&F Properties, Inc., 433 F.3d 1349, 1360 (11th Cir. 2005). As Castle asserts, the second amended complaint does not satisfy the particularity standard of that rule.

         “To state a claim under the False Claims Act with particularity, the complaint must allege facts as to time, place, and substance of the defendant's alleged fraud, and the details of the defendant's allegedly fraudulent acts, when they occurred, and who engaged in them.” Corsello, 428 F.3d at 1012 (internal quotes omitted). There are two parts to this burden. First, the plaintiff must “provid[e] the ‘who, ' what, ' ‘where, ' ‘when, ' and ‘how' of improper practices.” Id. at 1014. Second - and this is the critical point in this case - she must “allege the ‘who, ' ‘what, ' ‘where, ' ‘when, ' and ‘how' of fraudulent submissions to the government.” Id.

         “The False Claims Act does not create liability merely for a health care provider's disregard of Government regulations or improper internal policies unless, as a result of such acts, the provider knowingly asks the Government to pay amounts it does not owe.” Clausen, 290 F.3d at 1311. “Without the presentment of such a claim, … there is simply no actionable damage to the public fisc as required under the False Claims Act.” Id. (emphasis in original). “The submission of a claim is thus … the sine qua non of a False Claims Act violation.” Id. “As such, Rule 9(b) … does not permit a False Claims Act plaintiff merely to describe a private scheme in detail but then to allege simply and without any stated reasons for his belief that claims requesting illegal payments must have been submitted, were likely submitted or should have been submitted to the Government.” Id. Rather, “[b]ecause it is the submission of a fraudulent claim that gives rise to liability under the False Claims Act, that submission must be pleaded with particularity and not inferred from the circumstances.” Corsello, 428 F.3d at 1013. At a minimum, “some indicia of reliability must be given in the complaint to support the allegation of an actual false claim for payment being made to the Government.” Clausen, 290 F.3d at 1311 (emphasis in original). Firm enforcement of Rule 9(b) in this context “ensures that the relator's strong financial incentive to bring an FCA claim - the possibility of recovering between fifteen and thirty percent of a treble damages award - does not precipitate the filing of frivolous suits.” United States ex rel. Atkins v. McInteer, 470 F.3d 1350, 1360 (11th Cir. 2006).

         Counts III and IV allege generally that Castle unlawfully submitted claims to Medicare for goods and services supplied as a result of the referrals and kickbacks made unlawful by the Stark Law and the Anti-Kickback Statute. (Doc. 29 at 43, ¶ 63; id. at 45, ¶ 73).[1] The relator points to nothing in the body of the second amended complaint that provides any factual support for the allegation that Castle actually submitted false claims. Instead, she points to her attached Disclosure Statement for the proposition that Pain's billing department supervisor told her that “Medicare comprises approximately 60% of the practice's third-party-payor revenue.” (Doc. 29-1 at 3).[2] According to the relator, this single statement provides indicia of reliability sufficient to survive scrutiny under Rule 9(b). (Doc. 133 at 14, 15, 16, 17-18, 26). The statement, however, plainly will not carry the heavy burden the relator places upon it.[3]

         First, the statement does not, as the relator asserts in her brief, assert with particularity that 60% of Pain's patients were covered by Medicare. All it says is that a majority of Pain's revenue (not patients) from third-party payors (not all payors, including uninsured patients and the uninsured expenses of insured patients) comes from Medicare.[4] For all this statement shows, Pain might have had relatively few Medicare patients, with those patients responsible for a disproportionately high ...

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