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United States v. Molina Healthcare of Illinois, Inc.

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

July 31, 2019



          Virginia M. Kendall Judge.

         Plaintiff Thomas Prose (“Relator”) filed this qui tam lawsuit on behalf of the United States against Defendants Molina Healthcare of Illinois, Inc. (“MHIL”) and Molina Healthcare, Inc. (“MHC”). (Dkt. 1). Relator's two-count Complaint alleges that MHIL and MHC violated the False Claims Act (“FCA”) (31 U.S.C. § 3729) and Illinois False Claims Act (“ILFCA”) (740 ILCS 175/1, et seq.) by knowingly submitting claims for payment of services it did not provide. Both the United States and the State of Illinois declined to intervene in Relator's lawsuit. (Dkt. 9). MHIL and MHC moved to dismiss under Federal Rules of Civil Procedure 8(a), 9(b), and 12(b)(6). (Dkt. 29). Because Relator has failed to plead his FCA and ILFCA claims with the required particularity, Defendants' Motion to Dismiss is granted.


         All of the Complaint's well-pleaded facts are taken as true and any reasonable inferences are drawn in Relator's favor. Hecker v. Deere & Co., 556 F.3d 575, 580 (7th Cir. 2009).

         Relator is a medical doctor that owns General Medicine P.C. (“GM”) which provides specialized care for Medicaid recipients living in Skilled Nursing Facilities (“SNF”). (Dkt. 1, ¶ 22). GM employs “board-certified physicians and advanced nurse practitioners” (“SNFist”) to work in SNFs. (Id. at ¶ 23). MHIL is a managed care organization (“MCO”) that has previously contracted with the Illinois Department of Healthcare and Family Services (“IDHFS”) and the United States Department of Health and Human Services for Medicare and Medicaid Services to administer healthcare services to Illinois Medicaid recipients. (Id. at ¶ 2). MHIL is a subsidiary of MHC, a “multi-state healthcare organization.” (Id. at ¶ 29). Finally, the Center for Medicare and Medicaid Services (“CMS”) is the federal agency that manages Medicaid nationwide. (Id. at ¶ 51).

         In April 2014, MHIL entered into a risk contract with IDHFS for capitated payments on a monthly “per-member” basis. (Id. at ¶ 61). As part of that risk contract, MHIL was required to provide IDHFS with Encounter Data Reports (“EDRs”) that outlined Medicaid covered services on both in-patient and out-patient claims. (Id. at ¶ 62). The EDRs also included an attestation that the reported data was accurate, truthful and in accordance with applicable laws and contracts. (Id. at ¶ 63). Further, the contract required MHIL to submit a quarterly report to CMS on “estimated costs, including MCO services and a quarterly expenditure report.” (Id. at ¶ 64). To fulfill the risk contract, MHIL subcontracted with GM to render SNFist services on behalf of MHIL. (Id. at ¶ 2). MHIL later breached its contract with GM when it stopped paying GM after January 2015. (Id. at ¶ 42). Specifically, MHIL breached the contract in order to “eliminate the immediate, short-term costs associated with the program.” (Id. at ¶ 43). GM continued providing unpaid SNFist services until April 2015. (Id. at ¶ 42).

         The parties resolved the breach of contract dispute through an arbitration process and Relator was accordingly compensated. (Dkt. 43, ¶ 6). However, during the arbitration process, Relator learned from deposition testimony that MHIL did not provide SNFist services in Illinois for at least two years. (Dkt. 1, ¶ 3). Nonetheless, during those two years, MHIL still received government payments. (Dkt. 1, ¶ 2). MHIL's contract with IDHFS required MHIL to continually provide SNFist services and to disclose any changes in contracted providers to the federal government. (Id. at ¶¶ 35-36). Relator brought this lawsuit, on behalf of the federal and state government, to recover the government's payments to MHIL. (Dkt. 29, ¶ 2).


         To state a claim upon which relief can be granted, a complaint must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). “Detailed factual allegations” are not required, but the plaintiff must allege facts that, when “accepted as true ... ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)). In analyzing whether a complaint has met this standard, the “reviewing court [must] draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679. Where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has not shown that the plaintiff is entitled to relief. (Id.).

         The FCA, as an anti-fraud statute, is subject to the heightened pleading requirements of Rule 9(b) of the Federal Rules of Civil Procedure. United States ex rel. Presser v. Acacia Mental Health Clinic, LLC, 836 F.3d 770, 775 (7th Cir. 2016). Complaints sounding in fraud have an elevated pleading standard: “In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.” Fed.R.Civ.P. 9(b). To meet the particularity standard, a plaintiff must assert in their complaint the “who, what, when, where, and how” of the alleged fraud. United States ex rel. Lusby v. Rolls-Royce Corp., 570 F.3d 849, 853 (7th Cir. 2009). Plaintiffs need to “use some … means of injecting precision and some measure of substantiation into their allegations of fraud.” Pirelli Armstrong Tire Corp. Retiree Med. Benefits Tr. v. Walgreen Co., 631 F.3d 436, 442 (7th Cir. 2011); see also U.S. ex rel. Grenadyor v. Ukrainian Vill. Pharmacy, Inc., 772 F.3d 1102, 1106 (7th Cir. 2014) (The complaint must demonstrate the “...[T]ime, place, and content of the misrepresentation, and the method by which the misrepresentation was communicated to the plaintiff.”).

         Private individuals, as “relators” are allowed to prosecute qui tam actions on behalf of the United States government for fraud. 31 U.S.C. § 3730; see State Farm Fire & Cas. Co. v. United States ex rel. Rigsby, 137 S.Ct. 436, 440, (2016). A Relator who successfully prosecutes a qui tam action is entitled to receive a portion of the recovery. 31 U.S.C. § 3730(d)(1)-(2); see United States ex rel. Conner v. Mahajan, 877 F.3d 264, 267 (7th Cir. 2017).


         To sufficiently demonstrate liability under the FCA, a Relator must establish that (1) the defendant made a statement or submitted a claim in order to receive money from the government; (2) the statement or claim was false; and (3) the defendant knew it was false. 31 U.S.C. § 3729(a). However, Rule 9(b)'s requirement does not require a plaintiff to produce actual copies of the allegedly fraudulent documents or statements. Leveski v. ITT Educ. Servs., 719 F.3d 818, 839 (7th Cir. 2013). Since the IFCA mirrors the FCA, the same standard applies in analyzing both Counts I and II. Grenadyor, 772 F.3d at 1109; see also United States ex rel. Absher v. Momence Meadows Nursing Ctr., Inc., 764 F.3d 699, 704 (7th Cir. 2014).

         Here, Relator fails to sufficiently plead his false claims counts with particularity pursuant to Rule 9(b). See Borsellino v. Goldman Sachs Grp., Inc., 477 F.3d 502, 507 (7th Cir. 2007). Relator asserts that MHIL and MHC knowingly violated the FCA by not providing a SNFist program and failing to report it to IDHFS or CMS. (Dkt. 1, ¶ 74). However, a mere violation of a regulation is not sufficient to give rise to a false claim. Grenadyor, 772 F.3d at 1107. Relator points to arbitration deposition testimony from GM's contract dispute as evidence of FCA liability. (Dkt. 1, ΒΆ 3). The testimony, however is void of any specific falsified claim, and more significantly, Re-lator fails to clearly point to any ...

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