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U.S. v. FRANKLIN-WILLIAMSON HUMAN SERVICES INC.
March 11, 2002
UNITED STATES OF AMERICA AND STATE OF ILLINOIS, EX. REL. TENNA L. HUMPHREY, PLAINTIFF,
FRANKLIN-WILLIAMSON HUMAN SERVICES, INC., DEFENDANT.
The opinion of the court was delivered by: Phil Gilbert, District Judge.
This matter comes before the Court on the motion of defendant
Franklin-Williamson Human Services, Inc. ("FWHS") to dismiss this case
pursuant to Federal Rule of Civil Procedure 12(b)(6) (Doc. 70). Plaintiff
Tenna L. Humphrey ("Humphrey") has responded to the motion (Docs. 76 &
77), and FWHS has replied to the response (Doc. 79). The Court also
considers Humphrey's motion to strike the exhibits attached to FWHS's
motion to dismiss (Doc. 74). FWHS has responded to the motion (Doc. 80).
As a preliminary matter, FWHS's motion to dismiss refers to matters
outside the pleading. When such material is presented in connection with
a Rule 12(b)(6) motion to dismiss, the Court may convert the motion to
dismiss into a motion for summary judgment or it may exclude the
additional material from consideration. In this case, the Court declines
to consider the additional materials and will consider this motion as it
was captioned, under Rule 12(b)(6). Because the Court is well able to
confine itself to considering the appropriate materials, there is no need
to strike the matters outside the pleading. Accordingly, the Court
DENIES as moot Humphrey's motion to strike (Doc. 74) those matters.
FWHS asks the Court to dismiss the complaint for failure to state a
claim pursuant to Rule 12(b)(6). Although the motion purports to seek
dismissal of the entire complaint, it only addresses the claims brought
in counts 1 and 2 but not the claim brought in count 3. The Court will
therefore limit its consideration to counts 1 and 2.
When reviewing a Rule 12(b)(6) motion to dismiss, the Court accepts all
allegations as true and draws all reasonable inferences in favor of the
plaintiff. Holman v. Indiana, 211 F.3d 399, 402 (7th Cir.), cert.
denied, 531 U.S. 880 (2000). The Court should not grant a motion to
dismiss unless it appears beyond doubt that the plaintiff cannot prove
his claim under any
set of facts consistent with the complaint. Id. at 405.
Humphrey filed this qui tam action pursuant to 31 U.S.C. § 3730(b)(1)
and 740 ILCS 175/4(b)(1), alleging that FWHS violated the False Claims
Act ("FCA"), 31 U.S.C. § 3729(a)(1) and (2), and the Illinois
Whistleblower Reward and Protection Act ("Whistleblower Act"), 740 ILCS
175/3(a)(1) and (2) in connection with its billing practices, as outlined
below. FWHS agrees that Humphrey's description of its billing practices
are accurate but denies that such practices violate the law. The
following section outlines the allegations in counts 1 and 2 of
Humphrey's complaint against the general regulatory background.
1. Medicaid and the Spenddown Programs*fn1
FWHS provides medical services to needy people. The Medicaid program
assists needy people to pay medical bills and is funded by the federal
government and the state of Illinois. Some of FWHS's indigent patients
qualify for Medicaid assistance because their incomes and/or assets are
below the threshold necessary to qualify for the Medicaid program.
Others who exceed the Medicaid income/asset threshold qualify for
assistance only after they have incurred certain costs for their medical
care that are not covered by Medicaid. This program of contingent
receipt of Medicaid assistance is called the Spenddown Program. Under
the Spenddown Program, the state looks at a patient's finances and
determines the amount of medical costs that the patient must incur before
becoming eligible for Medicaid assistance ("spenddown obligation"). The
spenddown obligation is equivalent to the amount by which the patient's
income and/or asset level exceeds the threshold to qualify for Medicaid.
After the patient incurs the spenddown obligation, he is eligible for
Medicaid assistance for additional medical costs. If a patient does not
incur enough costs to reach his spenddown obligation, he is not eligible
for Medicaid assistance.
The patient must show documentary proof to the Illinois Department of
Public Aid ("IDPA") that he has incurred the spenddown obligation before
he can receive a medical card that entitles him to Medicaid assistance
for additional medical costs. Two types of documents are sufficient
documentary evidence: (1) receipts or other documents showing the amount
of money that a patient has paid for medical care and (2) bills from a
medical provider showing that the patient is liable for costs for medical
care (he need not actually have paid those costs yet).
2. Grant Assisted Fee Program
Independent of Medicaid, FWHS provides additional medical cost
assistance to some patients though grants from the state of Illinois.
FWHS enters into Grant Assisted Fee ("GAF") agreements with those
patients ("GAF patients"). Under those agreements, patients agree to be
liable for reduced payments for services they receive — normally
between $2.00 and $7.00 per hour depending on the patient's income,
household size and insurance coverage — as opposed to the rates
billed to other patients or the rates charged to Medicaid eligible
patients ("Medicaid allowable rate"). The Medicaid allowable rate is
significantly higher than the rate GAF patients agree to pay under the
GAF agreements. State grants pay the difference between the actual
charge to the
patient ($2.00 to $7.00) and the Medicaid allowable rate.
3. Alleged Fraudulent Practices
The alleged fraud occurs at the intersection of the Spenddown and GAF
programs. After FWHS serves a GAF patient who is also in the Spenddown
Program, it prepares a statement showing that the GAF patient is liable
for the Medicaid allowable rate for the services provided, not the rate
agreed to under the GAF agreement. It then instructs the GAF patient to
present the statement to the IDPA as documentary support that the patient
has incurred medical costs that count toward the spenddown obligation.
The patient is actually liable by virtue of the GAF agreement for far
less, and FWHS instructs the patient not to submit to IDPA receipts for
any amounts that they actually paid pursuant to the GAF agreement.
Once the patient has documentation that he has satisfied his spenddown
obligation and receives his medical card, FWHS submits Medicaid claims on
behalf of the patient for additional medical services at Medicaid
allowable rates. Medicaid pays those claims.
4. The Complaint — Counts 1 and 2
Humphrey alleges that FWHS has violated the FCA and the Whistleblower
Act since August 1991 by causing its GAF patients who are also in the
Spenddown Program to provide IDPA with false statements in support of the
patients' claims for Medicaid assistance. The statements prepared by FWHS
are false, she alleges, because they assert that the patients are liable
for the Medicaid allowable rates when they are really only liable for
rates agreed to under the GAF agreements. As a result, a patient is able
to receive Medicaid assistance before he has become liable for the amount
of his spenddown obligation. Thus, FWHS is able to submit and receive
payment for Medicaid claims on behalf of the patient for Medicaid
allowable rates sooner — assuming the patient would even satisfy
his entire spenddown obligation — than it would if the patient had
only counted his ...
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