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United States ex rel. Bellevue v. Universal Health Services of Hartgrove Inc.

United States District Court, N.D. Illinois, Eastern Division

April 24, 2015

UNITED STATES OF AMERICA ex rel. GEORGE BELLEVUE; STATE OF ILLINOIS ex rel. GEORGE BELLEVUE; and GEORGE BELLEVUE, individually, Plaintiffs,
v.
UNIVERSAL HEALTH SERVICES OF HARTGROVE INC., d/b/a HARTGROVE HOSPITAL, Defendant.

MEMORANDUM OPINION AND ORDER

THOMAS M. DURKIN, District Judge.

George Bellevue brings this action on behalf of the United States of America and the State of Illinois alleging that Universal Health Services of Hartgrove Inc. ("Hartgrove"), violated the False Claims Act ("FCA"), 31 U.S.C. §§ 3729(a)(1)(A), (B), and the Illinois False Claims Act ("IFCA"), 740 ILCS 175/3(a)(1)(A), (B), when it submitted certain Medicaid reimbursement claims. See R. 1. Hartgrove has moved to dismiss the complaint pursuant to Federal Rules of Civil Procedure 12(b)(1), 12(b)(6), and 9(b), for lack of jurisdiction and failure to state a claim. R. 30. For the following reasons, Hartgrove's motion is granted.

Legal Standard

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(1) challenges the Court's subject matter jurisdiction. "The standard of review for a Rule 12(b)(1) motion to dismiss depends on the purpose of the motion." Bolden v. Wells Fargo Bank, N.A., 2014 WL 6461690, at *2 (N.D. Ill. Nov. 18, 2014) (citing Apex Digital, Inc. v. Sears, Roebuck & Co., 572 F.3d 440, 443-44 (7th Cir. 2009)). "If a defendant challenges the sufficiency of the allegations regarding subject matter jurisdiction (a facial challenge), the Court must accept all well-pleaded factual allegations as true and draw all reasonable inferences in the plaintiffs favor." Bolden, 2014 WL 6461690, at *2 (citing United Phosphorus, Ltd. v. Angus Chem. Co., 322 F.3d 942, 946 (7th Cir. 2003)). A factual challenge to the court's subject matter jurisdiction, on the other hand, is based on the assertion that "the complaint is formally sufficient but... there is in fact no subject matter jurisdiction." United Phosphorus, 322 F.3d at 946 (emphasis in original). When considering a factual challenge to the court's jurisdiction, "[t]he district court may properly look beyond the jurisdictional allegations of the complaint and view whatever evidence has been submitted on the issue to determine whether in fact subject matter jurisdiction exists." Evers v. Astrue, 536 F.3d 651, 656-57 (7th Cir. 2008). "Where jurisdiction is in question, the party asserting a right to a federal forum has the burden of proof, regardless of who raised the jurisdictional challenge." Craig v. Ontario Corp., 543 F.3d 872, 876 (7th Cir. 2008).

A Rule 12(b)(6) motion challenges the sufficiency of the complaint. See, e.g., Hallinan v. Fraternal Order of Police of Chi. Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). A complaint must provide "a short and plain statement of the claim showing that the pleader is entitled to relief, " Fed.R.Civ.P. 8(a)(2), sufficient to provide defendant with "fair notice" of the claim and the basis for it. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). This standard "demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). While "detailed factual allegations" are not required, "labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555. The complaint must "contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.'" Mann v. Vogel, 707 F.3d 872, 877 (7th Cir. 2013) (quoting Iqbal, 556 U.S. at 678). In applying this standard, the Court accepts all well-pleaded facts as true and draws all reasonable inferences in favor of the non-moving party. Mann, 707 F.3d at 877.

Additionally, it is well-established that the FCA "is an anti-fraud statute and claims under it are subject to the heightened pleading requirements of Rule 9(b)." Thulin v. Shopko Stores Operating Co., LLC, 771 F.3d 994, 998 (7th Cir. 2014). Rule 9(b) requires a "plaintiff to do more than the usual investigation before filing [a] complaint. Greater precomplaint investigation is warranted in fraud cases because public charges of fraud can do great harm to the reputation of a business firm or other enterprise (or individual)." Ackerman v. Nw. Mut. Life Ins. Co., 172 F.3d 467, 469 (7th Cir. 1999) (citations omitted). A complaint generally "must provide the who, what, when, where and how" of the alleged fraud. United States ex rel. Fowler v. Caremark RX, LLC, 496 F.3d 730, 740 (7th Cir. 2007).

Background

Hartgrove is a psychiatric hospital that is enrolled with the Illinois Department of Healthcare and Family Services to receive reimbursement under the federal Medicaid program, which provides medical assistance for individuals and families with low incomes. R. 1 at 2 (¶ 5), 4-5 (¶ 15). Hartgrove's license with the Illinois Department of Public Health permits it to maintain 150 beds for acute mental illness patients. Id. at 5 (¶ 18). Prior to September 30, 2009, Hartgrove was approved to maintain 136 beds for acute mental illness patients. Id. (¶¶ 17-18). Hartgrove has attached letters to its motion dated March 23, 2009, and May 5, 2009, that the Illinois Department of Public Health sent to Hartgrove, informing Hartgrove that government audits had determined that Hartgrove had more patients than authorized beds (i.e., it was "over census") on at least 52 separate occasions between December 3, 2008 and February 28, 2009. See R. 39-3; R. 39-4.

Bellevue has been a Hartgrove employee since October 2009, and is currently employed there as a "nursing counselor." R. 1-1 at 2 (¶ 4). Bellevue alleges that Hartgrove actually maintains 152 beds for acute mental illness patients, even though it is only authorized to maintain 150 such beds. Id. at 5 (¶ 19). Additionally, Bellevue alleges that "some newly admitted adolescent patients suffering from acute mental illness [are] not placed into patient rooms, but instead [are] placed into dayrooms." Id. at 11 (¶ 42). These patients sleep on a "rollout bed.... until a patient room becomes available." Id. at 12 (¶ 47). Bellevue provides 13 examples of patients who were treated this way between January 1, 2011 and June 3, 2011. Id. at 13-16 (¶¶ 52-64). Bellevue alleges that "[a]lthough these patients are not assigned a room, Hartgrove nevertheless submits a claim to Medicaid for inpatient care of the beneficiary, which essentially includes a patient room." Id. at 12 (¶ 49).

Bellevue alleges that "[w]henever a patient was admitted in excess of Hartgrove's capacity, Hartgrove was in violation of State laws, rules, and regulations." Id. at 12-13 (¶ 50). Specifically, Bellevue alleges that Hartgrove violated 77 Ill. Admin. Code § 250.230(b), which requires that a hospital shall ensure that its "occupancy does not at any time exceed capacity, except in the event of unusual emergency and then only as a temporary measure." Id. at 9-10 (¶ 36). Bellevue alleges that "[c]ompliance with these laws, rules, and regulations are material and a condition of payment." Id. at 12-13 (¶ 50).

Bellevue also alleges that in order to become a Medicaid provider in Illinois, Hartgrove has twice certified that it will comply with federal and state regulations. R. 1-1 at 6-8 (¶¶ 20-27). On April 8, 2004, Hartgrove signed a "Provider Enrollment Application." Id. at 6 (¶ 20); see id. at 41-42. By signing the "Provider Enrollment Application, " Hartgrove certified that it understood "that knowingly falsifying or willfully withholding information may be cause for termination of participation in the Medical Assistance Program." Id. at 42. Hartgrove also certified that it was "in compliance with all applicable federal and state laws and regulations." Id.

On April 8, 2004, Hartgrove also signed an "Agreement for Participation in the Illinois Medical Assistance Program." Id. at 6 (¶ 20); see id. at 22-23. By signing the "Agreement for Participation, " Hartgrove agreed "to comply with all current and future program policy provisions as set forth in the applicable Department of Public Aid Medical Assistance Program handbooks." Id. at 22 (¶ 1). Hartgrove also agreed "to comply with applicable licensing standards as contained in State laws or regulations." Id. (¶ 2). The "Agreement for Participation" provided that Hartgrove would "receive payment based on the Department's reimbursement rate, " and that Hartgrove "agrees to be fully liable for the truth, accuracy and completeness of all claims submitted electronically or on hard copy to the Department for payment." Id. (¶¶ 6-7). Hartgrove also certified that "all services rendered on or after [the effective date of the agreement] were rendered in compliance with and subject to the terms and conditions of this agreement." Id. at 23 (¶ 17).

Bellevue alleges that by signing the "Agreement for Participation, " Hartgrove also agreed to be bound by the terms of the Illinois Department of Healthcare and Family Service's "Handbook for Providers of Medical Services." Id. at 7-8 (¶¶ 26-27), 9 (¶ 31); see id. at 50-51. The Handbook provides the following:

For consideration for payment by the Department under any of its authorized programs, covered services must be provided to an eligible participant by a medical provider enrolled for participation in the Illinois Medical Assistance Program. Services provided must be in full compliance with applicable federal and state laws....

Id. at 51.

Additionally, Bellevue alleges that "[u]pon receipt of [Medicaid] payments, [Hartgrove] is required to sign and retain a billing certification which certifies that the services provided in the billing information were provided." Id. at 8 (¶ 29). Bellevue does not attach any of these "billing certifications, " but he alleges that "[o]riginal billing certifications are in the possession of Hartgrove." Id. at 9 (¶ 30).

Based on Hartgrove's various certifications that it would comply with federal and state regulations, Bellevue claims that when Hartgrove requested reimbursement for patients who were admitted beyond Hartgrove's authorized capacity, "Hartgrove knowingly submitted a false or fraudulent claim for that patient." Id. at 12 (¶ 50). Bellevue alleges that "[t]hese claims are false in that Hartgrove certified either explicitly or implicitly that it was in compliance with all licensing standards contained in state law, rules, or regulations, " even though it was allegedly in violation of 77 Ill. Admin. Code § 250.230(b) when Hartgrove was over census. Id. at 13 (¶ 50). Bellevue alleges that Hartgrove has "submitted false and/or fraudulent claim[s] from August 2001 to present." Id. at 16 (¶ 65).

Bellevue alleges that he "voluntarily provided the information [on which the allegations are based] to the [federal and state] Governments before filing this action." Id. at 3 (¶ 11). Bellevue also attached to his brief in opposition to Hartgrove's motion a letter from Bellevue's counsel to the United States Attorney's Office in Chicago and the Illinois Attorney General's Office, dated August 4, 2011, stating:

Enclosed please find a copy of a disclosure statement, without exhibits, and a complaint which I intend on filing on behalf of George Bellevue in the United States District Court, Northern District of Illinois, alleging violations of the Federal and State False Claims Act.

R. 41-8. Bellevue did not attach the referenced "disclosure statement" to his complaint or brief, but in his brief, Bellevue contends that the "disclosure statements... outline[d] the fraud in detail." R. 41 at 7.

Bellevue filed this complaint under seal on August 5, 2011. See R. 1. The United States and the State of Illinois declined to intervene in the case, and Chief Judge Castillo entered an order on ...


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