Health Law Daily FCA claims against therapy practice survive, one claim barred under public disclosure
Wednesday, May 10, 2017

FCA claims against therapy practice survive, one claim barred under public disclosure

By Kelly J. Rooney, J.D.

The motion to dismiss of a therapy practice, against whom an employee-relator brought a quit tam action claiming violations of federal and state false claims laws related to reimbursement under Medicaid and Tricare, was granted in part and denied in part. The relator claimed the practice required therapists to specify that therapy was needed on a more frequent or longer basis than what may have been medically necessary and to code all services under a single CPT code (which the court refers to as "upcoding"). The relator provided specific enough claims to meet the heightened pleading standard regarding the medical necessity of services, but the court agreed with the practice that the relator is precluded from raising claims regarding upcoding under the public disclosure bar (U.S. ex rel. Welch v My Left Foot Children’s Therapy, LLC, May 9, 2017, Du, M.).

Therapy. My Left Foot Children’s Therapy (MLF) provides physical, occupational, speech, and aquatic therapy and adaptive swimming lessons for children with special needs and is owned by a qualified occupational therapist and her husband, who has no therapy qualifications. Approximately 70 percent of MLF’s services are billed to Medicaid and 20 to 25 percent to TRICARE, both payers, under state and federal law, require services to be medically necessary.

Qui tam action. The relator, a former speech pathologist with MLF, brought a quit tam action on behalf of the United States government against MLF and its owners (collectively "MLF") under the federal False Claims Act (31 U.S.C. §3729) and Nevada false claims law claiming that MLF’s billing practices resulted in false claims being submitted to Medicaid and Tricare. The relator allegedly observed improper treatment and billing practices designed to defraud the Nevada Medicaid program; specifically, MLF allegedly provided unnecessary speech and language therapy to children who could not benefit from the services due to severe medical or cognitive impairments or to children who exhibited no speech or language problems. Additionally, MLF allegedly required therapists to draft inaccurate progress reports, noting that therapy should be continued or held at the highest number of sessions per week even when not needed, and prevented therapists for discharging patients. The relator also claimed that MLF required therapists to use of a single code for billing (CPT code 97530), even when a different code was appropriate, to obtain the highest rate of reimbursement and eliminating certain administrative costs (see My Left Foot Children’s Therapy fails to kick FCA claims to arbitration, June 16, 2016).

Motion to dismiss. Before the court is MLF’s motion to dismiss claiming that the complaint does not meet Rule 9(b)’s heightened pleading standard. MLF argued the relator "alleges nothing more than a difference of opinion" as to medical necessity of services and that the upcoding claims are barred by the FCA and Nevada’s FCA public disclosure bar, among other claims.

Pleading. In an FCA action, a complaint "must state enough fact[s] to raise a reasonable expectation that discovery will reveal evidence of [the misconduct alleged]." The FCA details the process for submitting claims for Medicaid reimbursement (the process is similar for Tricare): a physician refers a child for what he or she considers to be medically necessary therapy; the child sees the therapist to receive services; before therapy commences, the therapy organization requests authorization from Medicaid to perform the services, along with therapists’ notes; Medicaid reviews the request and approves a certain number of sessions for the approved types of services; and after the therapy sessions, the organization submits a claim for reimbursement which must match the prior authorization. To successfully plead under the FCA, the complaint must allege the defendant (1) made a false statement or engaged in fraudulent course of conduct; (2) made with scienter; (3) that was material to; and (4) caused the government to pay out money. The court found the pleading to be sufficient because the relator alleged that MLF required staff to treat patients even if the therapist found the frequency or continuation of services to be medically unnecessary (which was supported by an email from one of the owners to therapists directing them to put down the highest number of recommended weekly visits for patients) and these false documents were used to support claims for reimbursement; MLF acted with deliberate indifference as to the truth or falsity of statements related to medical necessity of the frequency of visits; the court can infer the therapists’ notes were material to the government’s decision to reimbursement for the services since they were a precondition to funding; and the complaint raised communications from the owners which showed they caused false claims to be submitted for payment.

Medical necessity. Despite MLF’s claims to the contrary, the court is able to reasonably infer from the complaint that the therapists’ recommendations and the facts used to justify the medical necessity of services were false statements made in support of claims for reimbursement. It was MLF’s policies that directed therapists to recommend a frequency or continuation of services whether or not the therapist found them medically necessary. The court can reasonably infer that because of the policies, at one point "some if not all therapists…falsified their progress notes."

Allegations of upcoding. MLF claims the upcoding allegations are barred by the public disclosure bar. The public disclosure bar, both under federal and Nevada law, requires the court to establish (1) that relator’s allegations are substantially based on the same allegations or transaction that have been publicly disclosed in a criminal, civil, or administrative hearing where the government is a party, and if satisfied, establish (2) whether the relator is an "original source." MLF points to the Nevada State Board of Physical Therapy Examiners’ meeting as the point when the public disclosure occurred, during which the Board was asked by an MLF employee about the appropriateness of billing just one code for all physical therapy treatments to which the Board responded that only licensed therapists can determine the appropriate code for services rendered. A letter to this effect was also issued. The court found the meeting constitutes an administrative hearing under the FCA’s public disclosure bar. There was a specific allegation of fraud because it was stated that before the meeting, MLF provided a variety of therapy services but billed them under just one CPT code. Further, the complaint’s allegations are substantially based on statements made at the meeting and in the letter considering the relator attended the meeting and received a copy of the letter. The court was unable to determine whether the relator was the original source of the information because the relator did not allege she wrote the letter to the Board and didn’t amend the original complaint until months after the public disclosure occurred at the Board meeting. The court found the claims based on the relator’s theory of upcoding are barred.

The case is No. 2:14-cv-01786-MMD-GWF.

Attorneys: Jonathan Gold, U.S. Department of Justice, for the United States of America. Kelli A. Kiernan (Akin Gump Strauss Hauer & Feld LLP) and Suzanne L. Martin (Ogletree, Deakins, Nash, Smoak, & Stewart, PC) for My Left Foot Children's Therapy, LLC.

Companies: United States of America; My Left Foot Children's Therapy, LLC

MainStory: TopStory CaseDecisions BillingNews FCANews FraudNews MedicaidNews MedicaidPaymentNews QuiTamNews NevadaNews

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