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United States Ex Rel. Harris v. Dialysis Corp. of America

United States District Court, Fourth Circuit

October 1, 2013

UNITED STATES OF AMERICA ex rel. CORNELIUS HARRIS et al., Plaintiffs
v.
DIALYSIS CORP. OF AMERICA, Defendant

MEMORANDUM

JAMES K. BREDAR, District Judge.

I. Background

This lawsuit by Relators Cornelius Harris and Cindy Boonie asserts Defendant Dialysis Corporation of America ("DCA") violated the False Claims Act ("FCA"), 31 U.S.C. § 3729 et seq., in relation to DCA's billing of the United States Government for medical claims. (Am. Compl., ECF No. 68.) Filed on March 27, 2009, in the Eastern District of Pennsylvania, the case was transferred in September 2009 to the District of Maryland where it remained under seal pending the Government's decision whether to intervene. (ECF Nos. 1-4.) On February 25, 2013, the Government declined to intervene and, the next day, the original complaint was unsealed. (ECF Nos. 30, 31.) DCA has moved to dismiss the complaint[1] under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). (ECF No. 48.) The matter has been thoroughly briefed (ECF Nos. 69, 70), and no hearing is necessary, Local Rule 105.6 (D. Md. 2011). The motion will be granted in part and denied in part.

II. Standard for Dismissal under Rule 12(b)(1)

The burden of proving subject-matter jurisdiction is on the plaintiff. Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir. 1982) (noting challenge may be either facial, i.e., complaint fails to allege facts upon which subject-matter jurisdiction can be based, or factual, i.e., jurisdictional allegations of complaint are not true). See also Kerns v. United States, 585 F.3d 187, 192 (4th Cir. 2009) (same); Richmond, Fredericksburg & Potomac Ry. Co., 945 F.2d 765, 768 (4th Cir. 1991) (same). In the case of a factual challenge, it is permissible for a district court to "consider evidence outside the pleadings without converting the proceeding to one for summary judgment." Richmond, Fredericksburg, 945 F.2d at 768 (citing Adams, 697 F.2d at 1219).

III. Standard of Dismissal for Failure to State a Claim

A complaint must contain "sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Facial plausibility exists "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678. An inference of a mere possibility of misconduct is not sufficient to support a plausible claim. Id. at 679. As the Twombly opinion stated, "Factual allegations must be enough to raise a right to relief above the speculative level." 550 U.S. at 555. "A pleading that offers labels and conclusions' or a formulaic recitation of the elements of a cause of action will not do.'... Nor does a complaint suffice if it tenders naked assertion[s]' devoid of further factual enhancement.'" Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555, 557). Although when considering a motion to dismiss a court must accept as true all factual allegations in the complaint, this principle does not apply to legal conclusions couched as factual allegations. Twombly, 550 U.S. at 555.

Additionally, a fraud claim must be pleaded with particularity. Under Federal Rule of Civil Procedure 9(b), a party alleging fraud "must state with particularity the circumstances constituting fraud...." However, "[m]alice, intent, knowledge, and other conditions of a person's mind may be alleged generally." Id. The "circumstances constituting fraud" include time, place, and contents of the fraudulent representation, the identity of the person making the misrepresentation, and what that person obtained. Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 783-84 (4th Cir. 1999).

IV. Allegations of the Complaint

Relator Harris worked for DCA for approximately one year as its billing and collection manager; in that role, Harris was responsible for oversight of 45 of DCA's facilities and managed nine departments. (Am. Compl. ¶¶ 5, 6.) Relator Boonie also worked approximately one year for DCA as a billing department supervisor and was responsible for a variety of billing, production planning, payroll, diagnosis coding, and scheduling activities. ( Id. ¶¶ 8, 9.) DCA owns and operates freestanding kidney hemodialysis centers in Georgia, Maryland, New Jersey, Ohio, Pennsylvania, South Carolina, the District of Columbia, and Virginia, and it also provides in-hospital dialysis services on a contract basis to a number of hospitals located in those same states. ( Id. ¶¶ 11, 12.)

Relators assert DCA has violated several provisions of the FCA by knowingly presenting to the Government a false or fraudulent claim for payment or approval, by knowingly making a false record or statement to get a false or fraudulent claim paid or approved by the Government, by conspiring to defraud the Government by getting a false or fraudulent claim allowed or paid, and by knowingly making a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government, all contrary to 31 U.S.C. § 3729(a)(1), (2), (3), and (7).[2] (Am. Compl. ¶¶ 23, 69.) Specifically, Relators allege DCA, a, altered Social Security numbers on claims ( id. ¶¶ 25-38); b, changed patients' body mass index ("BMI") numbers on claims ( id. ¶¶ 39-50); c, overbilled for Epogen, an anti-anemia drug ( id. ¶¶ 51-54); d, overbilled District of Columbia ("D.C.") Medicaid and Ohio Medicaid ( id. ¶¶ 55-63); and, e, has not made reasonable efforts to collect patients' copayments and coinsurance ( id. ¶¶ 64-67). In responding to DCA's motion to dismiss, Relators have abandoned the last of these claims. (Pls.' Opp'n 19, ECF No. 69.) Consequently, the Court will address DCA's contentions only as they relate to claims a through d.

V. Analysis

A. Social Security Numbers

Relators contend that in 2007 and 2008, DCA used a "QMS" software billing system that did not account for the fact that certain of DCA's patients underwent regular dialysis treatment at one of its facilities and also subsequently travelled to and received treatment at another of its facilities. ( Id. ¶ 25.) Further, this software billing system was unable to allow billing entries for specific patients after a certain threshold number of "line item" entries had been exceeded. ( Id. ¶ 26.) Rather than repairing or replacing its billing system to address these inadequacies, DCA, between May 21, 2007, and June 30, 2008, and for several years prior, regularly issued bills to the Government for each of its facilities with altered digits in patients' Social Security numbers. ( Id. ¶ 27.) Relators contend that this resulted in bills for services that were never rendered to the individuals whose altered Social Security numbers were being used. ( Id. ¶¶ 29-31.) Additionally, ...


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