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United States v. Long Grove Manor, Inc.

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

July 2, 2019

United States of America, State of Illinois, State of North Carolina Ex rel. Raymond Dolan, Plaintiff,
v.
Long Grove Manor, Inc. d/b/a Arlington Rehabilitation & Living Center, et al., Defendants.

          MEMORANDUM OPINION AND ORDER

          ELAINE E. BUCKLO, UNITED STATES DISTRICT JUDGE

         Plaintiff-Relator Raymond Dolan (“Dolan”) brings this qui tam action on behalf of the United States and the State of Illinois alleging Medicare fraud on the part of defendants Simply Rehab, LLC (“Simply Rehab”); Long Grove Manor, Inc. d/b/a Arlington Rehabilitation & Living Center (“Arlington”); Aurora Manor, Inc. d/b/a Aurora Rehabilitation & Living Center (“Aurora”); and Broomfield Skilled Nursing & Rehabilitation Center LLC (“Broomfield”). Before me is the defendants' motion for summary judgment.[1] For the reasons explained below, the motion is granted.

         I.

         Simply Rehab employs licensed therapists who provide skilled nursing and rehabilitation care (i.e., physical, occupational, and speech therapy) to patients in skilled nursing facilities (“SNFs”). In addition to other SNFs throughout the country, Simply Rehab supplied therapists to supervise, organize, and administer skilled nursing and therapy programs at the Arlington, Aurora, and Broomfield facilities.

         Insurance for skilled nursing and rehabilitation services is covered by Part A of the Medicare program. To qualify for coverage, the services must be medically necessary. See 42 U.S.C. § 1395y(1)(A) (providing that no payment may be made under [Medicare Part A] for any expenses incurred for items or services . . . [that] are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member”). The daily rate Medicare pays providers for these services depends on the level of care a patient requires. SNFs are required to assess patients' medical needs periodically and to assign them to one of several Resource Utilization Groups (“RUGs”) based on the type and amount of therapy they need. Generally speaking, the higher the RUG level, the greater the daily rate an SNF receives for the skilled nursing care it provides to a patient.

         Dolan was hired as a Corporate Nurse for the Arlington and Aurora SNFs in April 2003. He alleges that, beginning in 2000, the defendants participated in a scheme to improperly assign patients to the highest RUG category - the “Ultra High” Level - and to provide them with therapeutic services regardless of the patients' medical needs, solely to maximize their profits. According to Dolan, defendants engaged in this so-called “upcoding” by setting “aggressive targets” for the number of days that Medicare would be billed for care at the Ultra High Level. 2d Am. Compl. ¶ 59. He alleges that defendants pressured therapists to meet these targets through “corporate meetings and presentations, through regular emails and facility visits by corporate personnel, through employee performance evaluations, by imposing action plans on underperforming facilities, and various other means.” Id. ¶ 4. In short, Dolan claims that defendants committed fraud by submitting claims to Medicare seeking payment for skilled nursing services they knew were not medically necessary.

         The scheme as originally outlined by Dolan involved more than twenty-five defendants. These included a total of twelve SNFs (including Arlington, Aurora, and Broomfield), six “supportive living centers, ” as well as several individuals. The scheme also allegedly involved several forms of wrongdoing in addition to upcoding, including kickbacks for physician referrals and prescription discounts. Dolan's complaint asserted a claim under the False Claims Act (“FCA”), 31 U.S.C. § 3729(a)(1); the Illinois Whistleblower Reward and Protection Act (“IWRPA”), 740 ILCS 175/1, et seq.;[2] the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b); and the Stark Law, 42 U.S.C. § 1395nn. Dolan also brought common law equitable claims for unjust enrichment and payment by mistake. Lastly, he asserted claims for retaliation under the FCA, 31 U.S.C. § 3730(h), and IWRPA, 740 ILCS 175/4(g), asserting that he was fired after calling defendants' attention to the improper practices he alleges.

         After successive motions by various parties to dismiss previous iterations of Dolan's complaint, only Simply Rehab, Arlington, Aurora, and Broomfield remain as defendants. The only remaining causes of action are those under the FCA and IWRPA, and Dolan's common law equitable claims. See United States Ex rel. Dolan v. Long Grove Manor, Inc., No. 10 C 368, 2014 WL 3583980 (N.D. Ill. July 18, 2014) (granting five separate motions to dismiss Dolan's first amended complaint); United States v. Long Grove Manor, Inc., No. 10 C 368, slip op. (Apr. 21, 2015) (ECF No. 138) (granting in part and denying in part various defendants' motions to dismiss Dolan's second amended complaint).

         Defendants have now moved for summary judgment. While they seek summary judgment as to all of Dolan's claims, the parties' briefing focuses exclusively on his FCA claim. Defendants maintain, and Dolan agrees, that all three claims are based on essentially the same facts and therefore stand or fall together. See Defs.' Reply Br. at 11; Rel.'s Resp. Br. at 11-12 & n.1[3] Hence, the discussion that follows focuses solely on whether Dolan has presented sufficient evidence to withstand summary judgment on his FCA claim. I conclude that he has not.

         II.

         Summary judgment is appropriate when, viewing all facts and drawing all reasonable inferences in the light most favorable to the non-moving party, the record shows that there is no genuine dispute as to any material fact and that the moving party is entitled to judgment as a matter of law. See, e.g., Massey v. Johnson, 457 F.3d 711, 716 (7th Cir. 2006). If a reasonable jury could, on the evidence presented, return a verdict for the non-moving party, a genuine dispute exists, and summary judgment is unwarranted. See, e.g., Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

         The FCA imposes liability on “any person who...knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval, ” or who “knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim.” 31 U.S.C. § 3729(a)(1)(A) & (B). “To establish civil liability under the FCA, a relator generally must show that ‘(1) the defendant made a statement in order to receive money from the government; (2) the statement was false; (3) the defendant knew the statement was false; and (4) the false statement was material to the government's decision to pay or approve the false claim.'” Bellevue v. Universal Health Servs. of Hartgrove, Inc., 867 F.3d 712, 716 (7th Cir. 2017) (quoting United States ex rel. Marshall v. Woodward, Inc., 812 F.3d 556, 561 (7th Cir. 2015)).[4]

         Defendants contend that they are entitled to summary judgment because Dolan has failed to present evidence that: (1) defendants provided medically unnecessary treatment to any patient; or (2) submitted any claims for reimbursement in connection with any purportedly medically unnecessary treatment. Defendants additionally argue that Dolan has failed to present sufficient evidence of scienter - i.e., that defendants knew any medically unnecessary care was provided to any of the patients at issue in the case. As discussed below, I conclude that defendants prevail on the first two of these arguments. While the issue of scienter may present a closer question, it is unnecessary to reach that question because each of defendants' first two grounds constitutes a sufficient basis for granting summary judgment.

         A.

         As previously noted, to prevail on an FCA claim, Dolan must show that defendants made a false statement. Dolan alleges that defendants made false statements by representing that the skilled nursing and rehabilitation services they provided to the SNFs' patients were medically necessary. See 2d Am. Compl. ¶ 7. Accordingly, Dolan's suit fails unless he is able to present evidence from which a jury reasonably could conclude that the services provided by defendants were not medically necessary. This he has failed to do.

         Dolan relies heavily on the opinion of Dr. Vivek Shah, an expert in economics and data analysis. Dr. Shah reviewed Medicare beneficiary data maintained by defendants and opined in an expert report that defendants had provided excessive amounts of therapy to patients during periods when patients' RUG levels were being determined (thereby ensuring a high Medicare reimbursement rate until the next assessment period). United States v. Long Grove Manor, Inc., 315 F.Supp.3d 1107, 1111 (N.D. Ill. 2018).[5] According to Dolan, it can be inferred on the basis of Dr. Shah's analysis that defendants provided some of its patients with medically unnecessary treatment.

         Defendants contend that, under the Seventh Circuit's decision in U.S. ex rel. Crews v. NCS Healthcare of Illinois, Inc., 460 F.3d 853 (7th Cir. 2006), statistical and probabilistic evidence of this sort is not enough to overcome a summary judgment motion. The relator in Crews alleged that a pharmacy was engaged in double-billing for medications that it supplied to patients of a particular nursing home. Crews noted that ten to twenty percent of the medications dispensed to the home's patients were regularly returned to the pharmacy unused (when, for example, a patient passed away). Id. at 855. Crews further alleged that the pharmacy reused these medications in filling prescriptions for other patients at the nursing home. Id. Given that sixty percent of the facility's patients were enrolled in Illinois' Medicaid program, Crews maintained that, as a matter of mathematical probability, between six and twelve ...


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