1:12-cv JES-JEH # 113 Page 1 of 13 UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF ILLINOIS

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1 1:12-cv JES-JEH # 113 Page 1 of 13 UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF ILLINOIS UNITED STATES OF AMERICA ex rel. ) ALAN GRAVETT, ) ) Petitioner, ) ) v. ) Case No ) THE METHODIST MEDICAL CENTER OF ) ILLINOIS and COMPREHENSIVE ) EMERGENCY SOLUTIONS, S.C., ) ) Defendants. ) O R D E R This matter is now before e Court on Defendant, Meodist Medical Center s ( Meodist ) Motion to Dismiss, and a Motions to Dismiss by Defendant Comprehensive Emergency Solutions ( CES ). For e reasons set for below, Meodist s Motion to Dismiss [100] is GRANTED, and CES s Motion to Dismiss [98] is GRANTED. BACKGROUND E-FILED Wednesday, 04 March, :25:35 PM Clerk, U.S. District Court, ILCD Plaintiff, Dr. Alan Gravett ( Gravett ), is a former employee of CES. The complaint was initially brought as a qui tam action alleging violations of e False Claims Act and Illinois False Claims Act against Meodist, CES, and ree oer entities in e Norern District of Illinois in January The complaint was filed under seal and remained sealed until October 8, 2010, when e government declined to intervene, and Judge Holderman ordered e complaint unsealed and served on e defendants. For some reason, e complaint was not unsealed, and on October 19, 2010, Gravett filed a motion to unseal e complaint, which was not granted until February 7, By is time, e case had been reassigned to Judge Shadur, who granted an extension of time to serve under Rule 4(m) until July 5, Requests for waivers of service and a copy of e

2 1:12-cv JES-JEH # 113 Page 2 of 13 complaint were served on defendants; only two of e oer entities entered eir appearances in response to e waivers. Gravett s counsel widrew, and he was given until August 26, 2011 to retain counsel. On December 2, 2011, Gravett was given leave to file an amended complaint. The First Amended Complaint was filed on December 16, 2011, naming only Meodist and CES as defendants. Given is change in e parties, e action was transfered to is District in January Gravett was directed to file an amended complaint under seal, and on March 7, 2012, he filed e Second Amended Complaint under seal. For e next two years, e case remained sealed while e government investigated before ultimately deciding not to intervene in February On April 23, 2014, Gravett was directed to serve e Defendants, and summonses were formally served on May 5, Defendants have moved to dismiss is action for Gravett s failure to establish at he is e original source of e allegations or alternatively for failure to plead fraud wi sufficient particularity. Gravett has filed his response, and is Order follows. LEGAL STANDARD A complaint must provide a short and plain statement of e claim showing at e pleader is entitled to relief. FED. R. CIV. P. 8(a)(2). That statement must be sufficient to provide e defendant wi fair notice of e claim and its basis. Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7 Cir. 2008); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, (2007). This means at (1) e complaint must describe e claim in sufficient detail to give e defendant fair notice of what e... claim is and e grounds upon which it rests and (2) its allegations must plausibly suggest at e plaintiff has a right to relief, raising at possibility above a speculative level. EEOC v

3 1:12-cv JES-JEH # 113 Page 3 of 13 Concentra Heal Services, Inc., 496 F.3d 773, 776 (7 Cir. 2007); Twombly, 550 U.S. at 555. Conclusory allegations are not entitled to be assumed true. Ashcroft v. Iqbal, 129 S.Ct. 1937, (2009) (citing Twombly, 550 U.S. 544 (2007)). For purposes of a motion to dismiss, e complaint is construed in e light most favorable to e plaintiff; its well-pleaded factual allegations are taken as true, and all reasonably-drawn inferences are drawn in favor of e plaintiff. See Albright v. Oliver, 510 U.S. 266, 268 (1994); Hishon v. King & Spalding, 467 U.S. 69 (1984); Lanigan v. Village of East Hazel Crest, 110 F.3d 467 (7 Cir. 1997); M.C.M. Partners, Inc. V. Andrews-Bartlett & Assoc., Inc., 62 F.3d 967, 969 (7 Cir. 1995); Early v. Bankers Life & Cas. Co., 959 F.2d 75 (7 Cir. 1992). ANALYSIS The False Claims Act ( FCA ) provides bo criminal and civil penalties for presenting a 1 false claim for payment against e Government. United States v. Bank of Farmington, 166 F.3d 853, 857 (7 Cir. 1999). The terms of e FCA establish liability for any person who: (1) knowingly presents, or causes to be presented, to an officer or employee of e United States Government... a false or fraudulent claim for payment or approval; (2) knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by e Government; (3) conspires to defraud e Government by getting a false or fraudulent claim allowed or paid U.S.C. 3729(a). It also includes a qui tam provision at allows a private party to bring suit to allege fraud upon e Government; if e claim is proven, is party will receive a percentage of e 1 The elements of claims under e Illinois FCA are identical to ose under e federal version of e statute and will not be referenced separately

4 1:12-cv JES-JEH # 113 Page 4 of 13 recovery. Bank of Farmington, 166 F.3d at ; United States ex rel. Lu v. Ou, 368 F.3d 773, 774 (7 Cir. 2004). To establish liability, a plaintiff must show: (1) a false or fraudulent claim; (2) which was presented, or caused to be presented, by e defendant to e United States for payment and approval; (3) wi e knowledge at e claim is false. United States ex rel. Fowler v. Caremark RX, LLC, 496 F.3d 730, 741 (7 Cir. 2007). Section 3730(e)(4) of e Act furer provides: (A) No court shall have jurisdiction over an action under is section based upon e public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or from e news media, unless e action is brought by e Attorney General or e person bringing e action is an original source of e information. 31 U.S.C. 3730(e)(4)(A); Bank of Farmington, 166 F.3d at 858. It is e original source requirement at is implicated in ese Motions to Dismiss. This determination involves a ree step inquiry: (1) Have e allegations made by e plaintiff been publicly disclosed? (2) If so, is e lawsuit based upon or substantially e same as at publicly disclosed information; (3) If so, is e plaintiff an original source of e information? Id. at 859, citing Cooper v. Blue Cross and Blue Shield of Florida, Inc., 19 F.3d 562, 565 (11 Cir. 1994); Glaser v. Wound Care Consultants, Inc., 570 F.3d 907, 913 (7 Cir. 2009); Fowler, 496 F.3d at 736. The jurisdictional bar arises only if e information upon which e qui tam claim is based has been publicly disclosed and e plaintiff was not e original source of e information. Bank of Farmington, 166 F.3d at 859, citing Hindo v. University of Heal Sciences/The Chicago Medical School, 65 F.3d 608, 613 (7 Cir. 1995)

5 1:12-cv JES-JEH # 113 Page 5 of 13 Here, Defendants argue at e lawsuit is based upon information at was disclosed to e U.S. Attorney s Office during e government s investigation of is case and two production requests, e first in 2010 and e second in and e analysis of a Government expert. Gravett is a physician who worked in e emergency room at Meodist from ; from 2004 to January 1, 2007, he was technically an employee of CES working at Meodist. In e Third Amended Complaint, Gravett includes examples of ree separate sets of patients whose treatment he alleges resulted in upcoding and false claims for payment from e Medicare or Medicaid programs. Table 1 identifies patients treated in e Meodist emergency room in 2006, eir age, e code assigned by e software, what he believes e code should have been, and his opinion as to why he believes e claim was not medically necessary and erefore fraudulent. The data contained in Table 2 and Chart 3 represents patients who were treated in , after Gravett was no longer employed at Meodist and cannot have been based on his personal observation. Defendants argue at because e specific examples of claims included in e Third Amended Complaint are based on documentation of patient visits received from e U.S. Attorney s office at had been requested from Defendants during e Government s investigation, e information has been publicly disclosed, and Gravett is not e original source of e information. A public disclosure occurs when e critical elements exposing e transaction as fraudulent are placed in e public domain. Fowler, 496 F.3d at 736. The Seven Circuit has held at a target s disclosure of information to prosecutors during e government s investigation of e target s business practices qualifies as a public disclosure of e Relators allegations, as e U.S. Attorney is e primary legal representative of e Government on a local level and would be responsible for brining claims against e target on is issue. Id., at In is respect, it is clear at e data - 5 -

6 1:12-cv JES-JEH # 113 Page 6 of 13 obtained after Gravett s termination was publicly disclosed and would not have been available to him but for e Government s investigation. The question en becomes wheer e lawsuit is based on is publicly disclosed data. A lawsuit is based upon publicly disclosed information when it describes allegations or transactions at are substantially similar to ose already in e public domain. Glaser, 570 F.3d at 910, 920. When an FCA relator s allegations are substantially similar to information about an alleged fraud at is already publicly disclosed, e statute permits e relator to avoid e jurisdictional bar only if he has direct and independent knowledge of e information on which e allegations are based and voluntarily provided e information to e Government before filing a qui tam action. 31 U.S.C. 3730(e)(4)(B); Glaser, 570 F.3d at 910. Here, it is not possible for Gravett to have direct knowledge of e specific patients and treatments provided after his termination from employment at Meodist, as he would not have been present to personally observe ese situations, and he offers no oer basis to support e finding at he had direct knowledge of e data shown in Table 2 and Chart 3. Gravett s allegation at he believes at e fraudulent billing practices at he observed during his employment carried on after his termination does not demonstrate direct or independent knowledge. The information reflected in Table 1, on e oer hand, is alleged to be based on Gravett s direct, personal knowledge, as he was present and obtained e medical records underlying is data during e term of his employment. These allegations formed e basis for Gravett s original Complaint filed on January 25, 2007, ree years before e U.S. Attorney s Office began its investigation process wi Defendants in The record supports a finding at Gravett has direct and independent knowledge of e substance of e alleged fraud as supported by e 2006 data in Table 1; he must also have - 6 -

7 1:12-cv JES-JEH # 113 Page 7 of 13 voluntarily disclosed e information to e Government before filing a qui tam action in order to 2 avoid e jurisdictional bar. Id., at 917. Gravett s Affidavit states at he met wi Special Agent Gonzalez of e Federal Bureau of Investigation in Bloomington, Illinois in fall 2006 and provided him wi e information upon which is lawsuit is based. Special Agent Gonzalez referred him to e U.S. Attorneys Office for e Central District of Illinois, and Gravett called at office and provided e same information. Gravett en provided is information by calling a Medicare Fraud hotline around e same time. A written disclosure statement was provided by his attorney to e Government on January 22, 2007, ree days before he filed e Complaint in is case. Assuming at e statements in Gravett s Affidavit are true, as e Court must at is stage of e litigation, e requirement at e relator have voluntarily disclosed e information to e Government prior to filing suit would appear to have been satisfied in is case. Defendants jurisdictional challenge is erefore rejected. Defendants next argue at e Third Amended Complaint is insufficient to comply wi e particularity requirements of Rule 9(b). Under Rule 9(b), e complaint must allege e who, what, when, where, and how of e fraudulent conduct. DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7 Cir.1990). In Hefferman v. Bass, 467 F.3d 596, 601 (7 Cir.2006), e Seven Circuit deemed e complaint sufficient when it identified e person who made e misrepresentation and an inexact description of e time, place, and content (e complaint stated only at e time was late August or early September). 2 As Defendants note, while e Court is normally not permitted to review documents outside e pleadings in resolving a motion to dismiss, where e issue being addressed is e Court s jurisdiction based on prior public disclosures, e Court may view whatever evidence has been submitted to determine wheer subject matter jurisdiction exists. Apex Digital, Inc. v. Sears, Roebuck & Co., 572 F.3d 440, 444 (7 Cir. 2009)

8 1:12-cv JES-JEH # 113 Page 8 of 13 Defendants argue at Plaintiffs complaint fails because it does not plead wi sufficient particularity how e false statements were made, namely at false claims were in fact submitted for payment to e government. The Third Amended Complaint alleges at shortly after e implementation of e new computer program: (1) several specified Meodist employees/administrators told Gravett at Meodist purchased e Horizon Clinical Suite program specifically to increase its billings and recovery from government funded heal insurance programs; (2) Gravett and oer physicians noticed at e program had a tendency to inflate e oerwise applicable CPT codes for bo physician and hospital services; (3) e program s Quick Chart function generated content into e medical charts at made it appear at a physician had performed compensable services at were not actually performed or were performed by a non-physician; (4) after expressing concerns about e upcoding, Gravett was told by e Co-Directors of CES at ey were aware of e situation and at ere was no choice but to continue to use e system as instructed as Michael Bryant, Meodist s CEO, mandated e continued use despite his knowledge of concerns at it was being used to upcode; (5) Gravett was told by a Co-Director of CES at ey would have to continue using e program as instructed despite eir reservations if ey wanted to continue working as emergency room physicians at Meodist; (6) concerns continued to be expressed wiout any changes on e part of Meodist or CES rough January 2007, when Gravett was terminated; (7) Meodist and CES promulgated internal guidelines to encourage and demand at physicians utilize e electronic medical record to upcode patients to a 4" or 5" code; (8) upcoding practices began as early as 2003 by misrepresenting e severity of services wiin e emergency room in order to receive higher reimbursement an Defendants would oerwise receive; (9) forms were upcoded by CES for physician services and en Meodist submitted forms which - 8 -

9 1:12-cv JES-JEH # 113 Page 9 of 13 paralleled e CES forms for hospital services, ereby inflating e value of facility services; (10) e improperly inflated claims resulted in improperly inflated payments being received by Meodist and CES; (11) CES generated a Lost Charge Analysis wi e knowledge and agreement of Meodist to reflect, per physician, how much billing opportunity was lost when e physician failed to code e patient s chart to e highest service level; (12) e system would prompt e user to add more chart content and/or documentation until e audit level number matched e recommended level on e screen; and (13) physicians were instructed to always select e option for all oer ROS (Review of Systems) obtained and negative function at automatically populates data to indicate at all body systems were examined regardless of wheer ey were actually checked or were even marginally relevant to e patient s presenting problem. He includes Table 1, which sets for a list of patients Gravett has first-hand knowledge of based on his employment in 2006 whose treatment allegedly resulted in upcoding of services. Gravett en baldly alleges at ese false claims resulted in payment, in whole or in part, by e United States and State of Illinois rough Medicare/Medicaid; ere is no indication of e basis for is assertion, which appears to be supposition or conjecture. Here, e who is generally identified as Meodist and CES, as Gravett s references to individuals refer to persons who directed or participated in e alleged upcoding of patient charts and/or medical records; individuals involved in e billing/claims process are not specifically identified. This is not surprising, as Gravett mostly points to physician and nurse statements, and it would be highly unlikely at ese medical providers were involved in e actual submission of bills for payment. The what, where, and when of which he has personal knowledge are patient charts and medical records alleged to have resulted in knowingly false, upcoded charges generated by CES - 9 -

10 1:12-cv JES-JEH # 113 Page 10 of 13 and Meodist based on specified emergency room visits in The recipients of ese misrepresentations are alleged to be e Medicare and Medicaid programs of e federal and state governments respectively, but it is unclear how Gravett has personal knowledge at allows him to exclude e possibility at Defendants billed private payors or insurance companies for ese 16 patients. Missing are any paticulars regarding e false claims emselves, at is, evidence of any actual billing, invoices, statements,or requests for payment at incorporated e upcoding and were submitted to e Government to obtain greater reimbursement an Defendants were oerwise entitled. Courts of Appeal are in agreement at unless e relator is in a special position of personal knowledge or involvement in e billing practices of e defendant at affords some indicia of reliability to e allegations, e failure to provide specific information of at least a single false claim at was actually submitted for payment is fatal to a relator s action under e FCA. United States ex rel. Crews v. NCS Healcare of Illinois, Inc., 460 F.3d 853, 856 (7 Cir. 2006), citing United rd States ex rel. Quinn v. Omnicare, Inc., 382 F.3d 432 (3 Cir. 2004); United Staes ex rel. Clausen v. Lab. Corp. of Am., Inc., 290 F.3d 1301 (11 Cir. 2002); United States ex rel. Aflatooni v. Kitsap Physicians Serv., 314 F.3d 995 (9 Cir. 2002). Examples of information to look for could include: details concerning e dates of e claims, e content of e forms or e bills submitted, eir identification numbers, e amount of money charged to e government, e particular goods and services for which e government was billed, e individuals involved in e billing, and e leng of time between e alleged fraudulent practices and e submission of claims based on ose practices. United States ex rek, Grant v. Thorek Hospital and Medical Center, 2008 WL ,

11 1:12-cv JES-JEH # 113 Page 11 of 13 at *2 (N.D.Ill. April 25, 2008), citing United States ex rel. Karvelas v. Melrose-Wakefield Hospital, st 360 F.3d 220, (1 Cir. 2004). In United States v, Lockheed Martin Corp., 328 F.3d 374, 378 (7 Cir. 2003), e Seven Circuit found at to satisfy Rule 9(b), a plaintiff must allege at defendant said someing knowing at e time at e representation was false in order to obtain payment. While it is not always necessary or possible for a relator to produce copies of e actual fraudulent invoices or requests for payment at e outset of e suit, e role played by e relator and/or his exposure to a defendant s billing practices or receipt of payments is significant, and a complaint at amounts to noing more an a eory at e claims must have been submitted cannot survive a motion for summary judgment. United States ex rel. Lusby v. Rolls-Royce Corp., 570 F.3d 849, (7 Cir. 2009)(noting at while relator had not seen any of e invoices or representations actually submitted for payment, he nevereless had personal knowledge about e shipments and details of payments as a result of his position at provided an indicia of reliability supporting e inference at false claims had in fact been made or payment would not have been received); Crews, 460 F.3d at 856; Clausen, 290 F.3d at 1311 (holding at a plaintiff cannot describe a scheme in detail and en rely on an unsupported belief at claims requesting illegal payments must have been, were likely, or should have been submitted); United States ex rel. Atkins v. McInteer, 470 F.3d 1350 (11 Cir. 2006); United States ex rel. Mastej v. Heal Management Associates, Inc., Fed. Appx., 2014 WL , at *9 (11 Cir. 2014). To comply wi Rule 9(b), an FCA complaint must generally provide e identity of e person making e misrepresentation, e time, place, and content of e misrepresentation, and e meod by which e misrepresentation was communicated to e plaintiff. United States ex rel

12 1:12-cv JES-JEH # 113 Page 12 of 13 Grenadyor v. Ukranian Vill. Pharm., Inc., 772 F.3d 1102, 1106 (7 Cir. 2014). At a minimum, to survive e Motions to Dismiss, Gravett must allege specific details concerning how Defendants submitted false claims to e Government, such as identifying claims, dates, or details of payment, in order to promote e reliable inference at e claims were actually submitted and/or reimbursed by e Government. Lusby, 570 F.3d at 854; United States ex rel. McGinnis v. OSF Healcare System, 2014 WL , at *8 (C.D.Ill. July 1, 2014). Gravett was employed as an emergency room physician; his involvement was in e area of filling out patient charts; ere is no indication at he was responsible for or has oer first hand knowledge of Defendants actual billing practices, submission of claims for payment, or receipt of payments from e Government payors. While e instructions he was given for using e Horizon system and CES review of e Lost Charge Analysis could suggest at upcoded billings may have been being prepared, in light of Gravett s lack of involvement in e claims or billing practices of eier Defendant, is is akin to a reliance on rumor or innuendo at has been found to lack e indicia of reliability necessary to support a FCA action under Rule 9(b). Nor can e gap be bridged by first hand knowledge at payments were conditioned on billings being accompanied by certifications of e type alleged to be false and at payments were in fact received from e government payors, as was e case in Lusby. Gravett does not allege at he had any first hand knowledge of payment details or what payments were actually received. Alleging generally at e upcoded information in e medical records resulted in false claim forms or at certain patients treated on certain days had charts at were upcoded for more treatment an was medically necessary does not provide e requisite link to e actual false claim submitted to e Government for payment or rule out e possibility at e levels of service

13 1:12-cv JES-JEH # 113 Page 13 of 13 indicated by physicians/nurses on e medical records were reviewed or adjusted by billing personnel prior to being submitted for payment. See McInteer, 470 F.3d at 1359, citing Clausen, 290 F.3d at 1315; United States ex rel. Miller v. SSM Heal Care Corporation, 2014 WL , at 8 (W.D.Wis. June 19, 2014)(noting at e relator was employed as a coder in a facility where coders submit bills for payment and at she had personal knowledge by patient name and date of seven specific instances of improperly coded bills containing false statements being submitted to 3 Medicare). Having had ree opportunities to provide sufficient detail of his claims, e Court is now of e opinion at Gravett will never be able to do so, and e Motions to Dismiss are granted. CONCLUSION For e reasons set for above, Meodist s Motion to Dismiss [100] is GRANTED, and CES s Motion to Dismiss [98] is also GRANTED. This matter is now terminated. ENTERED is 4 day of March, s/ James E. Shadid James E. Shadid United States District Judge 3 The Court notes at e decision in Miller is not binding precedent, and to e extent at e portion of e decision cited by Gravett interprets Seven Circuit precedent differently from is Court, e Seven Circuit opinion speaks for itself