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United States ex rel. Cook v. Providence Health & Services

United States District Court, W.D. Washington, Seattle

August 18, 2014

UNITED STATES OF AMERICA ex rel. MARGARET COOK, relator, Plaintiff,
v.
PROVIDENCE HEALTH & SERVICES, et al., Defendants.

ORDER

RICHARD A. JONES, District Judge.

I. INTRODUCTION

This matter comes before the court on Defendants' motion to dismiss. Defendants requested oral argument; Plaintiff did not. The court finds oral argument unnecessary. For the reasons stated below, the court GRANTS the motion to dismiss. Dkt. # 22. The court declines Plaintiff's request for leave to amend, and thus directs the clerk to DISMISS this action with prejudice and enter judgment for Defendants.

II. BACKGROUND

The court describes the facts as Plaintiff Margaret Cook alleges them in her operative complaint, suggesting no opinion as to whether she can prove those allegations.

Ms. Cook is a former employee of Health Services Asset Management, LLC ("HSAM"). HSAM is responsible for collecting medical bill payments from patients of various health care providers under the Providence umbrella. Ms. Cook points to six Providence entities who provide health care services in Washington, Oregon, Idaho, Montana, and Alaska. Because it is not necessary to separately identify the Providence provider entities, the court will refer to them collectively as "Providence." HSAM is a Providence subsidiary; it collects payment solely from Providence patients.

Providence provides health care to patients who are either beneficiaries of the Medicare and Medicaid programs or are eligible to be beneficiaries of those programs. For purposes of this order, it suffices to observe that Medicare is a federally-administered health insurance program for people over the age of 64, and that Medicaid is a health insurance program jointly administered by the federal government and participating states for the benefit of people with low incomes. When a health care provider seeks reimbursement for services to Medicare or Medicaid beneficiaries, it must submit a claim to either the federal government (for Medicare) or a state agency (for Medicaid).

According to Ms. Cook, HSAM is at best a poorly-run organization that routinely makes errors with respect to Providence patient bills. It routinely fails to credit patient accounts when it receives payment from Medicare, Medicaid, private insurance programs, third parties, and the patients themselves. Ms. Cook was one of HSAM's many bill collectors. When she complained to her supervisor about HSAM's failure to properly credit patient accounts, she met with little success.

Providence, meanwhile, engages in practices that ensure that its bills are routinely in error by the time HSAM begins to collect on them. Providence routinely fails to identify patients who are eligible for Medicare or Medicaid, and fails to identify private insurance (whether belonging to the patient or to a third party who may be liable to the patient) that may cover a patient's medical care. In addition, Providence's physicians often erroneously describe the services they provide, and Providence's billing administrators often assign incorrect billing codes, leading to the denial of Medicare and Medicaid claims. At least in part because of these practices, Providence routinely bills Medicare and Medicaid beneficiaries (or patients eligible to be Medicare or Medicaid beneficiaries) directly. When it does so, it bills at much higher rates than the rates at which Medicare and Medicaid reimburse it. Patients sometimes fight against these improper billing practices, but some pay rather than fight.

If Ms. Cook's allegations are correct, Providence and HSAM are fleecing some of their patients. Some of those patients are paying even where Medicare or Medicaid has already paid for their services, and they are paying at higher rates. Patients who know they should owe nothing sometimes pay just so that HSAM will cease its collection efforts. Even if they succeed in convincing HSAM to bill correctly, they are forced to expend time quarreling with HSAM.

The difficulty underlying Ms. Cook's complaint is that she is not suing on behalf of Providence's fleeced patients, she is suing Providence and HSAM on behalf of the federal government via the False Claims Act. She invokes 31 U.S.C. § 3730(b), the portion of the False Claims Act that permits qui tam suits, in which a private actor (the "relator") files suit on behalf of the United States against a defendant who has violated 31 U.S.C. § 3729(a)(1), the portion of the Act that prohibits false claims. The United States has already declined its option to intervene and pursue the action. See 31 U.S.C. § 3730(b)(2)-(4) (regulating government's election to intervene). The question is whether Ms. Cook has stated a qui tam claim that she can continue to pursue.

Defendants' motion to dismiss points out the incongruities in Ms. Cook's approach to remedying their alleged wrongdoing. The False Claims Act addresses false claims to the federal government, not wrongdoing toward private parties like Providence's patients. Providence is not overbilling Medicare or Medicaid, it is overcharging its patients. Ms. Cook's theory is that Providence makes false claims by falsely certifying, as part of the process of participating in Medicare and Medicaid, that it has complied with all applicable Medicare or Medicaid statutes and regulations. Those certifications are false, she alleges, in light of Defendants' improper billing practices. Although Defendants acknowledge that courts have recognized qui tam claims based on false certifications, they contend that Ms. Cook has not plausibly alleged a false certification claim or any other species of qui tam claim. Defendants invoke Rule 12(b)(6) and ask the court to dismiss Ms. Cook's complaint for failure to state a claim. They also contend that Ms. Cook fails to allege fraud with the particularity that Federal Rule of Civil Procedure 9(b) requires. The court now considers Defendants' motion.

III. ANALYSIS

Rule 12(b)(6) permits a court to dismiss a complaint for failure to state a claim. The rule requires the court to assume the truth of the complaint's factual allegations and credit all reasonable inferences arising from those allegations. Sanders v. Brown, 504 F.3d 903, 910 (9th Cir. 2007). The plaintiff must point to factual allegations that "state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 568 (2007). If the plaintiff succeeds, the complaint avoids dismissal if there is "any set of facts consistent with the allegations in the complaint" that would entitle the plaintiff to relief. Id. at 563; Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009) ("When there are wellpleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief."). The plausibility requirement stems from Federal Rule of Civil Procedure 8(a)(2)'s requirement of a "short and plain statement of the claim showing that the pleader is entitled to relief." To clear that bar, the complaint must state "factual allegations" that, taken as true, "plausibly suggest an entitlement to relief, such that it is not unfair to require the opposing party to be subjected to the expense of discovery and continued litigation." Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011).

A court considering a Rule 12(b)(6) motion typically cannot consider evidence beyond the four corners of the complaint, although it may rely on a document to which the complaint refers if the document is central to the party's claims and its authenticity is not in question. Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006). The court may also consider evidence subject to judicial notice. United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003).

A. The False Claims Act and False Certification

The prototypical qui tam action arises where a contractor overcharges the United States, or supplies faulty products or services, or unlawfully manipulates prices. United States ex rel. Hopper v. Anton, 91 F.3d 1261, 1266 (9th Cir. 1996). But the False Claims Act encompasses not only explicitly or independently false claims, but claims that arise from false certifications to federal programs. United States ex rel. Hendow v. U. of Phoenix, 461 F.3d 1166, 1171 (9th Cir. 2006). Federal programs frequently require certification from their participants, either as a prerequisite to enrollment in the program, or as a prerequisite for the submission of each claim for payment from the program. Express false certification claims arise from a false certification of "compliance with a law, rule or regulation as part of the process through which the claim for payment is submitted." Ebeid v. Lungwitz, 616 F.3d 993, 998 (9th Cir. 2010). Implied false certification claims arise where "an entity has previously undertaken to expressly comply with a law, rule, or regulation, and that obligation is implicated by submitting a claim for payment even though certification of compliance is not required in the process of submitting the claim." Id. (emphasis in original). Courts also recognize "promissory ...


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