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United States ex rel. Schramm v. Fox Valley Physical Services, S.C.

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

June 22, 2015

UNITED STATES OF AMERICA EX REL., CHELSEY SCHRAMM, M.S., PA-C, AND CHELSEY SCHRAMM, M.S., PA-C, INDIVIDUALLY, PLAINTIFFS,
v.
FOX VALLEY PHYSICAL SERVICES, S.C., AN ILLINOIS MEDICAL CORPORATION, ROBERT W. BOER, D.C., PA-C, INDIVIDUALLY MICHAEL DUNFORD, INDIVIDUALLY, PRIORITY HEALTH CHIROPRACTIC OF YORKVILLE, ILLINOIS, PAULA WEIHLER, D.C., INDIVIDUALLY, STUART WEIHLER, INDIVIDUALLY, DONALD BAIERLE, INDIVIDUALLY, HEALTHSHOURCE OF NAPERVILLE, AND MARK FRAHM, D.C., INDIVIDUALLY, DEFENDANTS

MEMORANDUM OPINION AND ORDER

THOMAS M. DURKIN, District Judge.

Plaintiff Chelsey Schramm, individually and on behalf of the United States of America, has sued three sets of defendants: (1) Fox Valley Physician Services, S.C. ("FVPS"), Robert W. Boer, and Michael Dunford (collectively, the "FVPS Defendants"); (2) Priority Health Chiropractic of Yorkville, Illinois ("Priority Health"), Paula Weihler, Stuart Weihler, and Donald Baierle (collectively, the "Priority Health Defendants"); and (3) Healthsource of Naperville ("HealthSource"), and Mark Frahm (the "HealthSource Defendants"), for alleged violations of the False Claims Act ("FCA"), for payment under a mistake of fact, and for unjust enrichment. The defendants have moved to dismiss Schramm's amended complaint with prejudice, arguing that she has not alleged fraud with particularity, as is required under Rule 9(b). For the following reasons, the Court grants the defendants' motions in part, and denies them in part.

BACKGROUND

FVPS is an Illinois medical corporation located in North Aurora, Illinois. R. 15 ¶¶ 7-8. Schramm was employed by FVPS as a licensed Physician Assistant from July 9, 2012, until her resignation effective October 9, 2012. Id. at ¶¶ 2, 8. She alleges that she provided medical services to patients at FVPS during her first week of employment. Id. at ¶ 8. Defendant Robert W. Boer is FVPS's owner and President, and also provides medical services on the company's behalf as a chiropractor and Physician Assistant. Id. at ¶ 11. Defendant Donald Baierle is the FVPS employee responsible for billing Medicare. Id. at ¶ 14. Schramm does not identify Defendant Michael Dunford's position or title, but the Court infers that he was employed by FVPS and/or defendant Priority Health, a medical service provider located in Yorkville, Illinois. See id. at ¶ 42. Although employed by FVPS, Schramm alleges that she was directed to provide medical services to patients of Priority Health. According to Schramm, FVPS and Priority Health operate as a "joint enterprise" for the purpose of obtaining Medicare proceeds. Id. at ¶¶ 9-10. Defendant Paula Weihler is a chiropractor and Priority Health's owner, id. at ¶ 12; defendant Stuart Weihler is Paula's husband and Priority Health's co-manager, id. at ¶ 13. Schramm alleges on information and belief that FVPS also has a "joint enterprise" relationship with defendant HealthSource, a medical provider located in Naperville, Illinois. Id. at ¶ 15.

Schramm alleges that FVPS and Priority Health, and, upon information and belief, HealthSource, receive roughly eighty percent of their income from the United States Government through the Medicare program. Id. at ¶ 19. Medicare is a federally funded health insurance program that provides insurance coverage for people over the age of sixty-five and for people with disabilities. Id. at ¶ 21. It is administered by the Centers for Medicare and Medicaid Services ("CMS"). Id. at ¶ 5. CMS requires medical providers to: (1) meet all requirements in the Medicare Provider Manual; (2) comply with all contractual terms and policies outlined in federal and state rules; (3) order or prescribe only services that meet the accepted standards for medical necessity, appropriateness, and quality of health care; (4) promptly notify CMS of any payment received by the provider to which it is not entitled or which exceeds the amount to which it is properly entitled; and (5) certify that a claim for payment is true, accurate, prepared with the knowledge and consent of the provider, and does not contain untrue, misleading, or deceptive information or claims. Id. at ¶ 20. Providers such as FVPS, Priority Health, and HealthSource submit claims to the appropriate Medicare carrier by listing numerical codes corresponding to administered procedures and services. Id. at ¶¶ 33-34. Providers who submit health care claims to Medicare are required to certify that each claim is true, correct, and complete. Id. at ¶ 26.

Schramm contends that Boer, Dunford, and Baierle told her that she could immediately begin seeing and treating Medicare patients at FVPS and Priority Health because her application to be approved as a medical provider had been submitted to CMS. Id. at ¶ 42. As such, beginning on Schramm's first day of work on July 9, 2012, she was instructed to begin seeing patients. Id. at ¶ 43. On October 3, 2012, Baierle "formally advised" her that CMS had approved her application. Id. at ¶ 43. She resigned six days later. Schramm claims that Boer, Dunford, and Baierle also instructed her to use certain numerical codes for services that, under the applicable Medicare rules, require physician supervision by CMS. Id. at ¶¶ 45, 47. They directed her to electronically sign both her name and her supervising physician's name (Dr. Angelo Reyes) on Medicare patient records, even though Dr. Reyes never saw the patients or their files. Id. at ¶ 45. Schramm further alleges that Stuart Weihler, Priority Health's co-manager, improperly tampered with Medicare patient files by adding and/or changing numerical codes to falsely and unlawfully increase Medicare billings. Id. at ¶ 49.

Schramm also alleges upon information and belief that since September 2012, defendants HealthSource and Frahm (its owner) entered into an agreement with FVPS whereby FVPS agreed to employ Harmony Reese (a physician assistant) to treat Medicare patients under the supervision of Dr. Reyes at HealthSource's Naperville facility. Id. at ¶ 50. Schramm alleges on information and belief that Dr. Reyes did not actually supervise Reese. Id. at ¶¶ 50-51.

Schramm has filed a seven-count complaint against the defendants, asserting claims under the FCA for conspiracy (Count I); presentation of false claims (Count II); false statements (Count III); possession of the Government's money (Count IV); and concealing of an obligation (Count V). She has also asserted a claim to recover payments made pursuant to a mistake of fact (Count VI), and a claim for unjust enrichment (Count VII). The Priority Health, FVPS, and HealthSource Defendants have filed separate motions to dismiss, R. 32, 35, 55.

LEGAL STANDARD

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.

Schramm's fraud allegations are subject to Rule 9(b)'s heightened pleading requirements. See, e.g., United States ex rel. Oughatiyan v. IPC The Hospitalist Co., No. 09 C 5418, 2015 WL 718345, at *5 (N.D. Ill. Feb. 17, 2015); Fed.R.Civ.P. 9(b) ("In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake."). A plaintiff satisfies this standard by pleading "the who, what, when, where, and how" of the alleged fraud. DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir. 1990). A plaintiff may plead fraud on information and belief only if "(1) the facts constituting the fraud are not accessible to the plaintiff and (2) the plaintiff provides the grounds for his suspicions." Pirelli Armstrong Tire Corp. Retiree Med. Benefits Trust v. Walgreen Co., 631 F.3d 436, 443 (7th Cir. 2011).

ANALYSIS

I. The FVPS and HealthSource Defendants' Motions to Dismiss

The FVPS and HealthSource Defendants contend that Schramm's complaint does not satisfy the heightened pleading standards applicable to her FCA ...


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