Health Law Daily Qui tam action failed to allege referrals from school officials
Thursday, May 2, 2019

Qui tam action failed to allege referrals from school officials

By Jeffrey H. Brochin, J.D.

Although second amended complaint alleged more facts about the scheme, it did not allege details with particularity that the school principals did anything other than accept the free gifts.

A federal district court in Texas has dismissed the False Claims Act (FCA) (31 U.S.C. §3729 et seq) and Anti-kickback Statute (AKS) (42 U.S.C. §1320a-7b) claims brought by a former consultant of a Texas mental health counseling service against the medical provider. Although the complaint set out numerous facts about the alleged kickback scheme, it did not recite the "why-what-when-where" details with enough sufficiency to meet the strict particularity pleading requirements of the FCA, and did not allege that school principals actually referred student-patients in exchange for the free gifts and services (U.S. ex rel. Headen v. Abundant Life Therapeutic Services Texas, LLC, April 30, 2019, Rosenthal, L.).

Free gifts as kickbacks. The qui tam relator was a consultant for Abundant Life Therapeutic Services Texas, LLC (Abundant Life), a Texas a medical-services provider from April 2017 to February 20, 2018. He alleged that in January 2018, Abundant Life’s manager told him that in order to induce the referral of Medicaid patients to the provider, he had paid kickbacks to officials at various area schools, and that the kickbacks were paid through a nonprofit organization that the manager directed. The manager allegedly transferred at least $42,000 to the nonprofit for use in the scheme, and that free computers, uniforms, educational supplies and free skills-building services were provided during school hours to students at an elementary school. The manger also allegedly instructed an Abundant Life independent contractor to refer students to Abundant Life for mental health services and assessments, which she did on numerous occasions.

Previous deficiencies not cured. In the court’s analysis of the second amended complaint, it found that the relator had not addressed nor cured the previously identified deficiencies in the allegations as to three schools nor as to defendant physicians and independent contractors. Therefore, the court dismissed the allegations concerning those organizations and individuals with prejudice and without leave to amend, because the relator had amended twice without curing the identified pleading deficiencies.

No nexus between gifts and referrals. For the remaining allegations involving two other schools, Abundant Life contended that the second amended complaint failed to describe how the improper remuneration related to the inducement of referrals, and that the complaint remained deficient because the relator did not explain why the donations could or would induce referrals from the schools, whether anyone associated with the schools was aware of the illicit purpose motivating the donations, or whether any students were referred to Abundant Life by anyone at the schools in exchange for the free items. Furthermore, there was no other information leading to an inference that any false claims were actually presented as a result of those referrals.

The court agreed with Abundant Life and found that the complaint failed to meet the strict pleading requirements for fraud with particularity. The court granted Abundant Life’s motion to dismiss the qui tam action.

The case is No.: 4:18-cv-00773.

Attorneys: Volney Brand (Brand Law PLLC) for Thomas Headen, III. Mary Michelle Zingaro, U.S Attorney's Office, for the United States. Christopher Renick Hefner, Office of the Attorney General, for the State of Texas. Geoffrey Berg (Berg Plummer Johnson & Raval, LLP) for Abundant Life Therapeutic Services Texas, LLC.

Companies: Abundant Life Therapeutic Services Texas, LLC

MainStory: TopStory CMSNews AntikickbackNews FCANews FraudNews MedicaidNews ProgramIntegrityNews QuiTamNews

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