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United States ex rel. McGinnis v. OSF Healthcare System

United States District Court, C.D. Illinois, Peoria Division

February 3, 2014

UNITED STATES OF AMERICA, ex rel. GAIL McGINNIS, THE STATE OF ILLINOIS ex rel. GAIL MCGINNIS, Plaintiff-Relator,
v.
OSF HEALTHCARE SYSTEM and OSF HOME CARE SERVICES, Defendants.

ORDER & OPINION

JOE BILLY McDADE, Senior District Judge.

This matter is before the Court on Defendants' Motion to Dismiss (Doc. 19) the Complaint (Doc. 1). The Complaint consists of nine counts alleging violations of the federal False Claims Act, 31 U.S.C. ยง 3729 et. seq. (the "FCA") (Counts I, II, III, and VII), the Illinois False Claims Act 740 ILCS 175/1 et. seq. (the "IFCA") (Counts IV, V, VI, and VIII), and the Illinois Whistleblower Reward and Protection Act, 740 ILCS 174/20 (Count IX). Defendants assert that Counts I through VI of the Complaint are pled without sufficient particularity as required by Rule 9(b) of the Federal Rules of Civil Procedure. Defendants also assert that 1) Counts I, II, IV and V through VI should be dismissed under Rule 12(b)(6) because Plaintiff has failed to plead prima facie FCA claims containing false or fraudulent information that was material to a government payment decision in regard to those Counts; 2) Counts III and VI of the Complaint fail to state claims for conspiracy; and 3) Plaintiff's retaliation claims at Counts VII through IX fail to state claims because Relator does not sufficiently allege that he took lawful acts in furtherance of an FCA action, that OSF had knowledge that Relator was engaged in protected conduct, or that his resignation was motivated by his protected conduct. For the reasons stated below, Defendants' motion (Doc. 19) is granted in part and denied in part.

LEGAL STANDARDS

Under Federal Rule of Civil Procedure[1] 8(a)(2), a complaint must include "a short and plain statement of the claim showing that the pleader is entitled to relief." The complaint must "give the defendant fair notice of what the claim is and the grounds upon which it rests." Bell Atl. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)).

"A motion under Rule 12(b)(6) challenges the sufficiency of the complaint to state a claim upon which relief may be granted." Hallinan v. Fraternal Order of Police of Chicago Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). "In evaluating the sufficiency of the complaint, [courts] view it in the light most favorable to the plaintiff, taking as true all well-pleaded factual allegations and making all possible inferences from the allegations in the plaintiff's favor." AnchorBank, FSB v. Hofer, 649 F.3d 610, 614 (7th Cir. 2011). "To survive a motion to dismiss, the complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Indep. Trust Corp. v. Stewart Info. Servs. Corp., 665 F.3d 930, 934-35 (7th Cir. 2012) (citing Ashcroft v. Iqbal, 556 U.S. 662 (2009)) (internal quotation marks omitted). "The complaint must actually suggest that the plaintiff has a right to relief, by providing allegations that raise a right to relief above the speculative level." Id. at 935 (citing Windy City Metal Fabricators & Supply, Inc. v. CIT Tech. Fin. Servs., 536 F.3d 663, 668 (7th Cir. 2008)) (internal quotation marks omitted). "[A] plaintiff's claim need not be probable, only plausible." Id. "To meet this plausibility standard, the complaint must supply enough fact[s] to raise a reasonable expectation that discovery will reveal evidence supporting the plaintiff's allegations." Id. (citing Twombly, 550 U.S. at 556) (internal quotation marks omitted)).

Rule 9(b) imposes a higher pleading standard than that required under Rule 8. See Pirelli Armstrong Tire Corp. Retiree Med. Benefits Trust v. Walgreen Co., 631 F.3d 436, 446 (7th Cir. 2011). "The [False Claims Act] is an anti-fraud statute and claims under it are subject to the heightened pleading requirements of Rule 9(b)."[2] United States ex rel. Gross v. AIDS Research Alliance-Chicago, 415 F.3d 601, 604 (7th Cir. 2005). Rule 9(b) requires a pleading to state with particularity the circumstances constituting the alleged fraud. See Fed.R.Civ.P. 9(b); Pirelli, 631 F.3d at 441-42. This "ordinarily requires describing the who, what, when, where, and how' of the fraud, although the exact level of particularity that is required will necessarily differ based on the facts of the case." Hofer, 649 F.3d at 615 (citation omitted).

FACTUAL BACKGROUND[3]

Plaintiff was employed as the Director of Reimbursement at OSF Home Care Services from March 21, 2011 until July 18, 2011. OSF Home Care Services appears to be some sort of subsidiary of an entity known as the OSF Healthcare System. Plaintiff has named both the OSF Healthcare System and OSF Home Care Services as defendants. The Complaint (Doc. 1) merges and refers to both Defendants as a single defendant, "OSF". OSF offers health care services through many separate facilities operated by four separate service channels known as Hospice, Home Health Services, Durable Medical Equipment ("DME"), and Pharmacy Infusion. Plaintiff alleges that OSF agencies have their own distinct provider numbers that are used to identify claims for reimbursement by Medicare and Medicaid. Only some of OSF's facilities are able to receive Medicare and Medicaid reimbursements.

OSF used a software program called CPR to process its billing data and submit DME claims for reimbursement from payers, including Medicare and Medicaid. OSF used a different program provided by McKesson for processing Home Health Service Medicare and Medicaid claims. Prior to and during Plaintiff's term of employment with OSF, CPR caused several thousand DME claims from the year 2009 to be deemed as "ready" to be submitted to insurers including Medicare and Medicaid. Plaintiff believes these claims have a 70 to 75% error rate because they were billed after one year and/or contained errors and omissions of required information with regards to statements of medical necessity, physician orders, diagnoses, physician names, modifiers, non-billable items listed on the claims, and insurance validation. Claims older than one year old were ineligible for Medicare/Medicaid reimbursement. OSF knew of the problems with CPR. A representative from CPR visited OSF and recommended that OSF submit all the claims classified as "ready" to the respective insurers, including Medicare and Medicaid.

On May 13, 2011, Plaintiff advised OSF's CFO, Belinda Muck, that he disagreed with the CPR representative's recommendation because the Plaintiff believed the submission of such error-ridden claims would constitute fraud. The CFO disagreed with Plaintiff, reminded him that he was her subordinate, warned him that he should not be talking about fraud and attempted to intimidate him.

In June 2011, Plaintiff witnessed CFO Muck instruct OSF claims processers to submit Home Health Services claims for reimbursement to Medicare and/or Medicaid with false information regarding the facility where the care was administered. These claims had been previously submitted to Medicare and/or Medicaid and rejected. The resubmitted claims were altered to show they came from facilities that were eligible for reimbursement to Medicare and/or Medicaid.

On July 8, 2011, Lisa Peck, an OSF Home Medical Equipment Accounts Receivable Manager, informed the Plaintiff that CFO Muck was upset about writing off two million dollars of untimely claims. On July 11, 2011, CFO Muck signed a termination form for Plaintiff citing resignation effective as of August 15, 2011.

On July 13, 2011, Plaintiff explained to OSF executives and administrators that approximately 7, 000 outstanding claims needed to be reviewed to verify and correct information relating to statements of medical necessity, physician orders, diagnoses, physician names, modifiers, non-billable items listed on the claims, insurance validation, and claim timeliness. Plaintiff explained further that this needed to be done at the billing level to ensure accuracy as opposed to simply mass submitting the claims before such a review process.

On July 14, 2011, CFO Muck accused Plaintiff of lying about the need to review the outstanding claims further. CFO Muck then directed the Plaintiff to mass submit the outstanding claims. However, Plaintiff reminded CFO Muck that he believed mass submission of the claims would constitute fraud and he would be obligated to report it since he was a licensed Nursing Home Administrator. CFO Muck became very upset and yelled at Plaintiff to never use the words "fraud and abuse" again. CFO Muck told Plaintiff that she directed certain members of the OSF accounting staff to monitor Plaintiff's activities and report back to her daily. Plaintiff then informed CFO Muck that he would neither instruct his staff to submit the claims nor resign. CFO Muck responded that she would help Relator make the decision to resign. Later that same day, Plaintiff submitted a complaint to the OSF Compliance Committee. Plaintiff returned to work the next day and met with an Employee Relations Manager who informed him that the CEO, AJ Querciagrossa, wanted him to complete an updated action plan outlining his approach to the situation and to prepare data regarding claims that were apparently not ready to be submitted prior to a meeting on July 18, 2011. The Employee Relations Manager also told Plaintiff that OSF executives determined that no fraud and abuse was being requested of him.

Plaintiff began compiling billing data for a July 18, 2011 meeting requested by the CEO. By the end of the day, the ready to bill claims that were audited showed between a seventy and seventy-five percent error rate. On the morning of July 18, 2011, Plaintiff was informed that the rest of the billing data showed there was a seventy and seventy-five percent error rate for all data that was processed. Later that morning, on July 18, 2011, Relator met with the CEO, the Employee Relations Manager, and the Corporate Human Resources representative. There, he presented an action plan and the findings that the outstanding claims showed a 70-75% error rate. The Employee Relations Manager asked him for a resignation letter but promised that he would not be deemed unable to be rehired and ...


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