By Leah S. Poniatowski, J.D.
A nurse anesthetist sufficiently alleged that her former employer, an anesthesia services provider, and others violated the federal False Claims Act and the California False Claims Act on a factually-false theory, although her pleadings were not sufficient to sustain the FCA claim based on the implied-false-certification theory, a federal district court in California ruled. The court also held that the nurse’s claims of retaliation were sufficiently pleaded to overcome the motion to dismiss (U.S. ex rel O’Neill v. Somnia, Inc., February 2, 2018, Drozd, D.).
Background. The nurse anesthetist, officially a Certified Registered Nurse Anesthetist (CRNA), contracted with Primary Anesthesia Services and Somnia, Inc. (the providers), which served patients in the Kaweah Delta Healthcare District in California. The majority of patients there received government-funded healthcare. At the time of the nurse’s employment, four types of billed services were provided: (1) the AA code for "Personally Performed" services personally and exclusively performed by a "Medical Doctor of Anesthesiology;" (2) the QK, QX, or QY codes for "Medical Direction" services in which the doctor receives assistance from a CRNA or other qualified individual when providing the service; (3) the AD code for "Medical Supervision" care in which the doctor is involved in more than four simultaneous procedures or the doctor’s services otherwise do not qualify as "Medical Direction;" and (4) the QZ code when the doctor is not involved and the service is provided by a CRNA. A provider overcharges the government if it bills for "Medical Direction" when "Medical Supervision" services were actually performed.
According to the nurse, she became aware of a pattern of improper billing of services—"Medical Direction" charges when "Medical Supervision" care was provided—and met with the district’s chief medical officer to share her discovery. A week later, a vice president of the company met with staff to discuss the allegations; one month later the nurse’s employment was terminated "without cause." She filed a qui tam lawsuit against the provider, district, and a third provider, PST Services, LLC, and several executives personally (collectively, the providers), alleging violations of the federal and California False Claims Acts, in addition to retaliation and related claims. The providers filed a motion to dismiss.
FCA claims. The nurse alleged that the providers violated 31 U.S.C. § 3729(a)(1)(A) and Cal. Gov’t Code § 12651(a)(1), which prohibits knowingly making false or fraudulent claims for payment, and 31 U.S.C. § 3729(a)(1)(B), which prohibits knowingly using a false record or statement material to a false claim. The California False Claims Act was modelled after the federal version and allegations thereof must meet the higher pleading standard; also, federal FCA case law is relied upon for interpreting the state act. The court explained that there are two general theories under the FCA—the "factually false" claims and the "implied false certification" claims.
Under the first theory, a relator must demonstrate: falsity, scienter, and payment. The nurse demonstrated that there was falsity in at least two claims that PST and Somnia, Inc. presented to the government for payment. She proffered emails between the providers showing that a doctor was billed incorrectly as "Personally Performing" a service that should have been billed as "Medically Directed" service, and a response stating that they were able to process service under another billing code—QZ, for those performed by a CRNA. The court determined that these allegations showed that the code used was not in compliance with Chapter 12 of the Medicare Claims Processing Manual in either respect. Another allegation asserted that a doctor who purportedly provided service to a patient actually was playing golf off-site, which if proven, did not match the service billed.
The court also held that the emails, and the fact that the nurse notifying management of her belief of improper billing, were sufficient to establish scienter. With respect to the payment of claims element, the Ninth Circuit applies the Fifth Circuit standard to not require as showing of direct knowledge of payment. Accordingly, the nurse’s pleading of specific facts showing improper billing and that the billing was processed demonstrated "particular details" of the scheme and "reliable indicia" of being processed for payment, especially when considering the proportion of patients covered by healthcare funded by the government. The court added that there was no authority to require a showing of economic loss to sustain the claim. Therefore, the motion to dismiss on the "factually false" theory was denied.
However, the nurse’s failure to allege facts in support of the contention that misuse of the QZ code was material was fatal to the FCA claim under the "implied false certification" theory and, thus, the motion to dismiss under that theory was granted.
Retaliation claims. The nurse also alleged that Somnia retaliated against her for bringing attention to the alleged billing issues in violation of the federal FCA and the CFCA. The court explained that analysis of both statutes was identical and that there must be facts alleged showing: (1) participation in protected activity; (2) knowledge of the activity; and (3) discrimination based upon engaging in the protected activity. First, the nurse pleaded facts demonstrating she had the good-faith belief that her employer was committing fraud against the government to meet the first element. Second, under the applicable test, the nurse’s job duties did not involve monitoring or reporting fraud and, thus, she satisfied this element when provided notice to her employer of the suspected improper billing. Finally, for causation the nurse only needed to meet the notice pleading standard, which she did by virtue of alleging that she was terminated without cause shortly after she brought the billing issue to the company’s attention. Consequently, the motion to dismiss the retaliation claims was denied. Similarly, the nurse’s other retaliation claims under California Health and Safety Code § 1278.5 and California Labor Code § 1102.5 survived dismissal.
The case is No. 1:15-cv-00433-DAD-EPG.
Attorneys: Kelli L. Taylor, U.S. Attorney Office, for the United States. Brian K. French (Nixon Peabody LLP) for Somina, Inc. and Primary Anesthesia Services. Bradley Jason Lingo (King & Spalding LLP) for PST Services LLC. William Scott Cameron (King & Spalding LLP) for McKesson Corp.
Companies: Somina, Inc.; Primary Anesthesia Services; PST Services LLC; McKesson Corp.
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