United States District Court, N.D. Illinois, Eastern Division
UNITED STATES OF AMERICA and the STATE OF ILLINOIS ex rel. AMY O'DONNELL, Relator/Plaintiff,
AMERICA AT HOME HEALTHCARE AND NURSING SERVICES, LTD., d/b/a ANGELS AT HOME HEALTHCARE, Defendants.
MEMORANDUM OPINION AND ORDER
Robert Blakey United States District Judge.
and Plaintiff Amy O'Donnell (“Relator”) filed
this qui tam action under the False Claims Act
(“FCA”), 31 U.S.C. § 3729, et seq.,
and its Illinois counterpart, the Illinois False Claims Act
(“IFCA”), 740 ILCS § 175/1, et
seq., on behalf of the United States and the State of
Illinois. Relator sues corporate Defendant America at Home
Healthcare and Nursing Services, Ltd. d/b/a Angels at Home
Healthcare (“AAH”), as well at its purported
successor, Great Lakes Acquisition Corp. d/b/a Great Lakes
Caring (“Great Lakes”). Relator also sues former
AAH employees Rachael Fitzpatrick
(“Fitzpatrick”), Tami Shemanske
(“Shemanske”), and Kim Richards
(“Richards”) (collectively, the “Individual
alleges that, beginning in 2006, AAH and the Individual
Defendants routinely engaged in multiple fraudulent Medicare
and Medicaid payment schemes, which continued after Great
Lakes purchased AAH in approximately March 2015. Relator
filed her Second Amended Complaint (“SAC”) 
on February 13, 2017. On March 14, 2017, Defendants AAH,
Fitzpatrick, Shemanske, and Richards (collectively, the
“AAH Defendants”) filed a joint Motion to Dismiss
Relator's complaint pursuant to Federal Rules of Civil
Procedure 9(b) and 12(b)(6). AAH Defs.' Mot. Dismiss
. Great Lakes filed its own Motion to Dismiss the same
day. Great Lakes' Mot. Dismiss . This Memorandum
Opinion and Order addresses both pending motions, which, for
the reasons discussed below, are granted in part and denied
Home Health Services Under Medicare and Medicaid
federal Medicare and Medicaid programs provide government
health insurance for elderly, disabled, and low-income
Americans. SAC  ¶ 45. Both programs, which are
administered by the Centers for Medicare and Medicaid
Services (“CMS”), reimburse health care providers
for certain “home health services” rendered to
eligible beneficiaries. Id. ¶¶ 46-47.
“Home health services” are defined as
“items and services” provided on a
“visiting basis” by a home health agency
(“HHA”) to individuals in their place of
residence. 42 U.S.C. § 1395x. Defendant AAH, and later
Defendant Great Lakes, are two such HHAs. Potential
“home health services” include, inter
alia, part-time or intermittent nursing care, physical
or occupational therapy or speech-language pathology
services, medical social services, and part-time or
intermittent services of a home health aide. SAC  ¶
qualify for home health services, a beneficiary must be: (1)
confined to his home or in an institution that is not a
hospital, skilled nursing facility, or nursing facility; (2)
under the care of a physician who establishes and
periodically reviews a plan of care; and (3) in need of at
least one of the aforementioned home health services, as
certified by a physician. Id. ¶ 50.
to Relator, HHAs may not solicit patients for home health
services. Id. ¶ 48. Instead, HHAs must receive
a physician referral. Id. Moreover, the federal
Anti-Kickback Statute (“AKS”), 42 U.S.C. §
1320a-7b, prohibits HHAs from paying kickbacks, bribes, or
rebates to doctors (or any other individual) in exchange for
home health service referrals. Similarly, the Stark Law, 42
U.S.C. § 1395nn(a)(1), prohibits a physician from
referring patients to entities with which the physician
maintains a financial relationship.
receipt of a physician's referral, an HHA conducts its
own initial medical assessment to determine a patient's
medical needs and eligibility for home health services. SAC
 ¶ 58. The HHA documents this initial assessment in
an Outcome and Assessment Information Set
(“OASIS”) form and transmits that form to the
government. Id. ¶ 59. Federal regulations
require that this data accurately reflect the patient's
status at the time of the assessment. Id. ¶ 88.
pays HHAs through what is known as the Prospective Payment
System (“PPS”). Id. ¶ 66. PPS
payments are based upon sixty-day “episodes” of
care, and are designed to reimburse HHAs for all items and
services provided during that period. Id. ¶ 67.
These episodic payments are further divided into an estimated
payment at the onset of the sixty-day period, followed by a
residual payment at the close of the episode. Id.
payments are occasionally subject to adjustments. One
potential downward adjustment-known as a
“low-utilization payment adjustment” or
“LUPA”-occurs when a patient is visited by the
HHA four or fewer times during the 60-day episode of care.
Id. ¶ 72. Upward adjustments, on the other
hand, may occur when an HHA reaches certain “therapy
thresholds.” Id. ¶ 73. Under this
three-tiered step system, payments are progressively
increased when a patient receives six, fourteen, or twenty
therapy visits during an episode of care. Id.
addition to payment adjustments within each episode
of care, payments across multiple episodes may be
adjusted to account for the patient's changing health
condition, clinical characteristics, and service needs (known
as the “case-mix adjustment”). Id.
¶¶ 67-68. There are eighty established case-mix
groups (known as “Home Health Resource Groups, ”
or “HHRGs”), which are based upon score values
derived from the patient's OASIS form. Id.
patient's sixty-day episode of care has ended, the
patient may be recertified for an additional sixty-day
period, provided that home health care continues to meet
coverage rules. Id. ¶ 74. To recertify, the HHA
must determine (through its own assessment) that the patient
remains homebound and continues to require a qualifying home
health service. Id. ¶ 63. Based upon the HHAs
findings, a physician then re-certifies the qualifying
conditions and plan of care for the patient. Id.
¶ 62. As with the initial episode of care, the HHA must
document its recertification assessment in an OASIS form and
transmit that form to the government. Id.
¶¶ 64, 87.
The Present Litigation
is a licensed registered nurse who was employed by AAH as a
case manager between January 2008 and June 2011. SAC 
¶ 10. Relator alleges that beginning in 2006, Defendants
fraudulently billed the government for millions of dollars of
Medicare and Medicaid services that violated the assorted
regulations discussed above. Id. ¶ 105.
Specifically, Relator alleges that Defendants:
• “Upcoded” or artificially inflated bills
to the government. See Id. ¶¶ 195-218.
Relator claims that Defendants, in an effort to maximize
revenues, instructed employees to inflate HHRG scores, as
well as increase patient visits to avoid LUPAs and exceed
therapy thresholds, without regard to medical necessity.
• Billed for unnecessary and duplicative personal care
services. See Id. ¶¶ 219-32. Relator
claims that Defendants instructed home health aides to
provide personal care services to residents of assisted
living facilities even though such services were already
provided by facility personnel.
• Provided illegal kickbacks to AAH staff and physicians
in exchange for referrals and certifications. See
Id. ¶¶ 168-94.
• Unlawfully solicited patients for home health
services. See Id. ¶¶ 146-67.
• Caused patients to be certified and/or recertified for
home health services that were not medically necessary.
See id. ¶¶ 108-45. Relator claims that
Defendants instructed employees to: falsify patient records,
including OASIS forms, to make it appear that home health
services were necessary; generate home health plans of care
for ineligible patients; and draft false physician orders for
claims that many of these instances involved the Individual
Defendants, and continued after Defendant Great Lakes
purchased AAH in March 2015. Id. ¶ 4.
originally filed suit in this Court on February 14, 2014.
See Compl. . The United States declined to
intervene on April 18, 2016, see Notice , and
the record was unsealed on April 26, 2016. Order .
Relator originally brought four claims in her SAC:
• Count I. Violations of the FCA for
knowingly presenting, or causing to be presented to the
government, a false or fraudulent claim for payment,
see 31 U.S.C. § 3729(a)(1)(A), as well as
knowingly making or using a false record or statement that is
material to a false or fraudulent claim paid by the
government, see Id. §
• Count II. Violations of the FCA for
knowingly making, using, or causing to be made or used, a
false record or statement material to an obligation to pay or
transmit money or property to the Government, or knowingly
concealing or knowingly and improperly avoiding or decreasing
an obligation to pay or transmit money or property to the
Government, see Id. § 3729(a)(1)(G);
• Count III. Conspiracy to violate the
FCA, see Id. § 3729(a)(1)(C); and
• Count V. Corresponding violations of
the IFCA, see 740 ILCS §§
SAC  ¶¶ 240-96.
response to Defendants' motions, Relator “does not
contest Defendants' challenges” to Counts II and
III. Rel.'s Resp.  3 n. 2. Defendants' motions to
dismiss are therefore granted as to those claims. The Court
analyzes Defendants' remaining challenges to Counts I and
motion to dismiss under Rule 12(b)(6) “challenges the
sufficiency of the complaint for failure to state a claim
upon which relief may be granted.” Gen. Elec.
Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074,
1080 (7th Cir. 1997). To survive a motion to dismiss, a
complaint must first provide a “short and plain
statement of the claim showing that the pleader is entitled
to relief, ” Fed.R.Civ.P. 8(a)(2), such that the
defendant is given “fair notice” of what the
claim is “and the grounds upon which it rests.”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)
(quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)).
the complaint must contain “sufficient factual
matter” to “state a claim to relief that is
plausible on its face.” Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at
570). That is, the allegations must raise the possibility of
relief above the “speculative level.”
E.E.O.C. v. Concentra Health Servs. Inc., 496 F.3d
773, 776 (7th Cir. 2007). The plausibility standard “is
not akin to a ‘probability requirement, ' but it
asks for more than a sheer possibility that a defendant has
acted unlawfully.” Williamson v. Curran, 714
F.3d 432, 436 (7th Cir. 2013). The “amount of factual
allegations required to state a plausible claim for relief
depends on the complexity of the legal theory alleged,
” but “threadbare recitals of the elements of a
cause of action, supported by mere conclusory statements, do
not suffice.” Limestone Dev. Corp. v. Vill. Of
Lemont, 520 F.3d 797, 803 (7th Cir. 2008). In evaluating
the complaint, the Court draws all reasonable inferences in
favor of Relator. Iqbal, 556 U.S. at 678.
the FCA “is an anti-fraud statute and claims under it
are subject to the heightened pleading requirements of Rule
9(b) of the Federal Rules of Civil Procedure.”
United States ex rel. Gross v. AIDS Research
All.-Chi., 415 F.3d 601, 604 (7th Cir. 2005). Rule 9(b)
mandates that in all averments of fraud or mistake, the
circumstances constituting fraud or mistake shall be stated
“with particularity.” In adding “flesh to
the bones of the word particularity, ” the Seventh
Circuit has “often incanted that a plaintiff ordinarily
must describe the who, what, when, where, and how of the
fraud-the first paragraph of any newspaper story.”
Pirelli Armstrong Tire Corp. Retiree Med. Benefits Trust
v. Walgreen Co., 631 F.3d 436, 441-42 (7th Cir. 2011)
(internal quotations omitted). In other words, if the
fraudulent scheme involves misrepresentation, the plaintiff
must state “the identity of the person who made the
misrepresentation, the time, place and content of the
misrepresentation, and the method by which the
misrepresentation was communicated[.]” Vicom, Inc.
v. Harbridge Merch. Servs., Inc., 20 F.3d 771, 777 (7th
same time, the Seventh Circuit has warned against taking
“an overly rigid” view of this shorthand
formulation. Pirelli, 631 F.3d at 442. The precise
details that must be included in a complaint-even one subject
to Rule 9(b)-“may vary on the facts of a given
case.” Id. The operative issue is whether a
plaintiff uses some means “of injecting precision and
some measure of substantiation into their allegations of
fraud.” United States ex rel. Presser v. Acacia
Mental Health Clinic, LLC, 836 F.3d 770, 776 (7th Cir.
2016) (internal quotations omitted).
9(b)'s heightened pleading requirements serve three main
purposes: (1) protecting a defendant's reputation from
harm; (2) minimizing “strike suits” and
“fishing expeditions”; and (3) providing notice
of the claim to the adverse party. Id. The
importance of providing fair notice means that a plaintiff
who pleads fraud “must ‘reasonably notify the
defendants of their purported role in the scheme.'”
Id. at 778 (quoting Midwest Grinding Co. v.
Spitz, 976 F.2d 1016, 1020 (7th Cir. 1992)); see
also Guarantee Co. of N. Am., USA v. Moecherville Water
Dist., N .F.P., No. 06-cv-6040, 2007 WL 2225834, at *2
(N.D. Ill. July 26, 2007) (“The purpose of the more
restrictive pleading standard is to ensure that the accused
party is given adequate notice of the specific activity that
the plaintiff claims constituted the fraud, so that the
accused party may file an effective responsive
pleading.”). To that end, “Rule 9(b) is of
especial importance in a case involving multiple defendants.
Where there are allegations of a fraudulent scheme with more
than one defendant, the complaint should inform each
defendant of the specific fraudulent acts that constitute the
basis of the action against the particular defendant.”
Balabanos v. N. Am. Inv. Grp., Ltd., 708 F.Supp.
1488, 1493 (N.D. Ill. 1988).
The FCA and IFCA
seeks “to protect the funds and property of the
Government from fraudulent claims, ” Rainwater v.
United States, 356 U.S. 590, 592 (1958), by
“imposing civil liability on an individual or entity
that makes such a claim.” U.S. ex rel. Heath v.
Wisconsin Bell, Inc., 111 F.Supp.3d 923, 926 (E.D. Wis.
2015); see also 31 U.S.C. § 3729(a)(1). Enacted
in 1863, the FCA “was originally aimed principally at
stopping the massive frauds perpetrated by large contractors
during the Civil War.” United States v.
Bornstein, 423 U.S. 303, 309 (1976). Since then,
“Congress has repeatedly amended the Act, but its focus
remains on those who present or directly induce the
submission of false or fraudulent claims.”
Universal Health Servs., Inc. v. United States ex rel.
Escobar, 136 S.Ct. 1989, 1996 (2016) (“Escobar
“claim” includes “direct requests to the
Government for payment, ” as well as
“reimbursement requests made to the recipients of
federal funds under federal benefits programs” such as
Medicare and Medicaid. Id.; see also 31
U.S.C. § 3729(b)(2)(A). In its present incarnation, the
FCA allows the government to recover treble damages, as well
as a $5, 000-$10, 000 penalty for each fraudulent submission,
regardless of actual damage. Neal v. Honeywell,
Inc., 826 F.Supp. 266, 268 (N.D. Ill. 1993),
aff'd, 33 F.3d 860 (7th Cir. 1994). The FCA also
permits private citizens, or “relators, ” to file
a civil action on behalf of the government. 31 U.S.C. §
3730(b)(1). These actions are referred to as qui tam
actions. United States ex rel. Yannacopoulos v.
General Dynamics, 652 F.3d 818, 822 (7th Cir. 2011). As
an “incentive to bring suit, ” a prevailing
relator “may collect a substantial percentage of any
funds recovered for the benefit of the government.”
Id. IFCA claims are evaluated under standards
identical to those applied in cases arising under the FCA.
Cunliffe v. Wright, 51 F.Supp.3d 721, 740 (N.D. Ill.
and IFCA each prohibit: (1) knowingly presenting, or causing
to be presented, a false or fraudulent claim for payment,
see 31 U.S.C. § 3729(a)(1)(A); 740 ILCS §
175/3(a)(1)(A); and (2) knowingly making or using, or causing
to be made or used, a false record or statement that is
material to a false or fraudulent claim. See 31
U.S.C. § 3729(a)(1)(B); 740 ILCS § 175/3(a)(1)(B).
Here, Relator alleges violations of both provisions.
adequately plead a violation of § 3729(a)(1)(A) of the
FCA (or § 175/3(a)(1)(A) of the IFCA), Relator must
allege: (1) a false or fraudulent claim; (2) which was
presented, or caused to be presented, by the defendant to the
United States for payment or approval; (3) with the knowledge
that the claim was false. United States ex rel. Fowler v.
Caremark RX, L.L.C., 496 F.3d 730, 741 (7th Cir. 2007),
overruled on other grounds by Glaser v. Wound Care
Consultants, Inc., 570 F.3d 907 (7th Cir. 2009).
adequately plead a violation of § 3729(a)(1)(B) of the
FCA (or § 175/3(a)(1)(B) of the IFCA), a plaintiff must
allege that: (1) the defendant made a statement in order to
receive money from the government; (2) the statement was
false; and (3) the defendant knew the statement was false.
Thulin v. Shopko Stores Operating Co., 771 F.3d 994,
998 (7th Cir. 2014). In addition, the misrepresentation
“must be material to the other party's course of
action.” Escobar II, 136 S.Ct. at 2001.
broadly, the AAH Defendants argue that the allegations in
Relator's SAC: (1) do not allege materially false
misrepresentations under the FCA; (2) are not sufficiently
particular under Rule 9(b); and (3) fail to state claims for
which relief may be granted under Rule 12(b)(6).
Additionally, Defendant Great Lakes separately asserts that
Relator has failed to plead any cognizable claims against
Great Lakes. Finally, all Defendants contend that ...