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United States v. UnitedHealthcare Insurance Co.

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

June 12, 2018



          Honorable Thomas M. Durkin United States District Judge.

         Relator Jeffery Gray brought this action against UnitedHealthcare Insurance Company and related entities (collectively, “United”) seeking damages and civil penalties against United for violations of the False Claims Act (Count I) and the Illinois False Claims Act (Count II). Before the Court is United's motion to dismiss the operative Second Amended Complaint (R. 41). For the reasons explained below, United's motion is granted.


         A Rule 12(b)(6) motion challenges the sufficiency of the complaint. See Hallinan v. Fraternal Order of Police of Chicago Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). Under Rule 8(a)(2), a complaint must include “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Under the federal notice pleading standards, a plaintiff's “factual allegations must be enough to raise a right to relief above the speculative level.” Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007). “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). A defendant may raise the statute of limitations in a motion to dismiss if “the allegations of the complaint itself set forth everything necessary to satisfy the affirmative defense.” United States v. Lewis, 411 F.3d 838, 842 (7th Cir. 2005).

         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 “state with particularity the circumstances constituting fraud or mistake.” Fed.R.Civ.P. 9(b). “The reference to ‘circumstances' in the rule requires the plaintiff to 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 to the plaintiff [.]” United States v. Sanford-Brown, Ltd., 788 F.3d 696, 705 (7th Cir. 2015); see also United States ex rel. Lusby v. Rolls-Royce Corp., 570 F.3d 849, 853 (7th Cir. 2009) (“particularity . . . means the who, what, when, where, and how”). Nevertheless, courts should not “take an overly rigid view of the formulation, ” and the “requisite information . . . may vary on the facts of a given case.” Pirelli v. Armstrong Tire Corp. Retiree Med. Benefits Trust v. Walgreen Co., 631 F.3d 436, 442 (7th Cir. 2011). Thus, although plaintiffs “‘are not absolutely required to plead the specific date, place, or time of the fraudulent acts, '” they “still must ‘use some alternative means of injecting precision and some measure of substantiation into their allegations of fraud.'” Id. (quoting 2 James Wm. Moore, Moore's Federal Practice § 9.03[1] [b], at 9-18 (3d ed. 2010)). 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. The Medicare Advantage Program

         The Medicare Act, 42 U.S.C. § 1395 et seq., establishes a federal health insurance program for disabled and elderly individuals. Parts A and B of the Act create the traditional, commonly-known Medicare program. Under this program, the Center for Medicare and Medicaid Services (“CMS”) within the Department of Health and Human Services pays for medical care that eligible individuals receive from participating providers-e.g., doctors, hospitals, and medical groups. The government sets rates for the care and reimburses providers for each service provided. Accordingly, this program is often called Medicare “fee-for-service.”

         Part C of the Act creates the Medicare Advantage program. This program allows eligible individuals to receive healthcare benefits through private insurance plans instead of through traditional Medicare. See Id. § 1395w-21 et seq. Under Part C, a private insurer contracts with CMS to bear the health costs and manage the care of Medicare beneficiaries. The insurer creates a “Medicare Advantage plan” that provides at least the same level of benefits as provided by traditional Medicare. R. 31, Second Am. Compl., ¶ 5. In return, the federal government pays the plan set (or “capitated”) per-member-per-month payments calculated to reflect the average amount the government would otherwise expect to spend providing care for those same individuals. The capitated amount is a fixed monthly payment regardless of the volume of services an enrollee uses.

         Risk Adjustment Data.

         The capitated payments are adjusted by CMS based on “risk adjustment data” reported by Medicare Advantage organizations. The data includes information on their members' ages, genders, health and disability statuses, and whether members are receiving treatment or care in an institutional setting, such as a hospital or skilled nursing facility. See 42 U.S.C. § 1395w-23(a)(1)(C); see also 42 C.F.R. §§ 422.308, 422.310.

         Information regarding health status is reported in the form of various codes, including diagnosis codes that describe their members' medical conditions. See 42 C.F.R. § 422.310(b). Physicians and other health care providers submit diagnosis codes to the Medicare Advantage organizations, which in turn submit them to CMS. These diagnosis codes contribute to an enrollee's risk score, which is used to adjust a base payment rate. The data submitted must be supported by properly documented medical records. See 42 C.F.R. § 422.310(e). This data ensures Medicare Advantage “organizations are paid appropriately for their plan enrollees (that is, less for healthier enrollees and more for less healthy enrollees).” Establishment of the Medicare Advantage Program, 70 Fed. Reg. 4588, 4657 (Jan. 28, 2005). The capitated payments are prospective-CMS uses risk adjustment data from the prior year to establish payments for the following year. 42 C.F.R. § 422.310(g).


         Because the program lends itself to fraud, Medicare Advantage organizations must certify the accuracy, completeness, and truthfulness of the data they provide to CMS, including risk adjustment data, as a condition for receiving payment:

As a condition for receiving a monthly payment under subpart G of this part, the [Medicare Advantage] organization agrees that its chief executive officer (CEO), chief financial officer (CFO), or an individual delegated the authority to sign on behalf of one of these officers, and who reports directly to such officer, must request payment under the contract on a document that certifies (based on best knowledge, information, and belief) the accuracy, completeness, and truthfulness of relevant data that CMS requests. Such data includes specified enrollment information, encounter data and other information that CMS may specify.

42 C.F.R. § 422.504(1).

         B. Gray's Allegations

         United is a Medicare Advantage provider. R. 31 ¶ 7. Gray was a Medicare Advantage beneficiary enrolled in United's plan. Id. ¶ 8. Gray's complaint stems from a service that United provided to its plan beneficiaries. Specifically, Gray alleges that in November 2014, United had a program called “HouseCalls” that sent licensed healthcare providers to beneficiaries' homes to conduct in-home physical examinations. Id. ¶ 14. Gray initially declined the offer for a HouseCalls visit, but eventually accepted after he was offered a $25 Walmart gift card. Id. ¶ 15. In April 2015, a United nurse practitioner conducted an in-home examination at Gray's house. Id. ¶ 16. He received his gift card later that month. Id. ¶ 17. Gray alleges that he did not have a certification from his physician asserting that in-home services were medically warranted, and that United never asked him for such a certification. Id. ¶ 16. Gray, on “information and belief, ” believes that United has been offering its Medicare Advantage beneficiaries these services since at least 2012. Id. ¶ 19. He also alleges that the “vast majority of [United's] in-home examined beneficiaries were not certified as being medically warranted to receive an in-home examination.” Id. ¶ 28. Finally, Gray alleges that CMS overpaid United to the extent its payments were based upon the diagnosis codes United obtained through its HouseCalls examinations. Id. ¶ 29. Gray does not identify any other United Medicare Advantage beneficiary who underwent this in-home examination. From the complaint, it does not appear Gray has any medical experience or training. Id. ¶ 4.

         Gray asserts that the HouseCalls program was a fraudulent scheme intended to increase the capitated payments made to United each month. Gray contends that United was not legally permitted to submit diagnostic information identified through these in-home exams as risk adjustment data because the visits were not medically necessary or a covered benefit under United's plan. R. 31 ¶¶ 11, 21. Gray also asserts that the free in-home clinical visits and the gift cards offered to beneficiaries violate the Anti-Kickback Statute. Id. ¶ 30. Because these visits were not covered and the “incentives” violated the Anti-Kickback Statute, Gray alleges United's periodic certifications under 42 C.F.R. § 422.504(1) were false because they were not “accurate, complete, and truthful, ” in violation of the False Claims Act, 31 U.S.C. § 3729(a)(1).

         The United States and Illinois have declined to intervene. R. 10. United has moved to dismiss. R. 41.


         I. The ...

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