United States of America and the Commonwealth of Virginia, ex rel, Katherine Hagood, Relator, and Jodi Cotner, Relator v. Riverside Healthcare Association, Inc. et al, No. 4:2011cv00109 - Document 55 (E.D. Va. 2015)
Court Description: OPINION AND ORDER GRANTING IN PART and DENYING IN PART Defendants' 48 Motion to Dismiss. The Court DISMISSES WITHOUT PREJUDICE Relators' First Amended Complaint, ECF No. 12. However, the Court PROVIDES Relators with leave to amend the First Amended Complaint to cure all defects within twenty-one (21) days after the entry of this Opinion and Order. If Relators fail to adequately amend the First Amended Complaint within the period prescribed, the Courtwill dismiss such complaint with prejudice, as outlined. (See Opinion and Order for Specifics) (Signed by District Judge Mark S. Davis on 3/23/15). Copies provided as directed 3/24/15. (ecav)
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United States of America and the Commonwealth of Virginia,...side Healthcare Association, Inc. et al Doc. 55 UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA Newport News Division UNITED STATES OF AMERICA, and the COMMONWEALTH OF VIRGINIA ex r e l . KATHERINE HAGOOD and JODI COTNER, Relator-Plaintiffs, Civil Action No: 4:llcvl09 RIVERSIDE HEALTHCARE ASSOCIATION, INC., ET AL.# Defendants. OPINION AND ORDER This matter is before the Court on a Motion to Dismiss, No. 48, filed Association, Inc. on Inc. January 2015 by Riverside ("Riverside Healthcare"), ("Riverside Hospital"), ("RPS"), 9, Healthcare Riverside Hospital, Riverside Physician Services, and Riverside Medical Equipment ECF Company, Inc. Inc. ("RMEC" and, collectively with Riverside Healthcare, Riverside Hospital, and RPS, record, "Defendants"). After examining the briefs and the the Court determines that oral argument is unnecessary because the facts and legal contentions are adequately presented and oral argument would not aid in the decisional process. R. Civ. P. 78(b); E.D. Va. Fed. Loc. R. 7(J). Dockets.Justia.com I. FACTUAL AND PROCEDURAL HISTORY1 A. Factual Background 1. The Parties Katherine Hagood ("Hagood") and Jodi Cotner ("Cotner," and collectively with Hagood, "Relators"), on behalf of the United States and Commonwealth of Virginia, have brought this qui tarn action to the against ("FCA") Defendants and Virginia Defendants are pursuant Fraud healthcare Against False Taxpayers providers. Claims Act More Act ("VFATA"). specifically, Riverside Hospital is a non-profit hospital located in Newport News, Virginia, and incorporated under Virginia law. Compl. 1 10, ECF No. 12. First Am. RPS is a non-profit corporation that engages in the business of providing healthcare. Like Riverside Hospital, RMEC is a division physician services. Riverside of it is located in Newport News. RPS that Id. 1 12. Hospital, Id. 1 11. RPS, and is responsible for Id. billing Riverside Healthcare operates RMEC, which are Riverside 1The facts of this case, drawn from the First Amended Complaint, are assumed true for the purpose of deciding the motion currently before the Court. See Burbach Broadcasting Co. of Del, v. Elkins Radio Corp. , 278 F. 3d 401, 406 (4th Cir. 2002) . The facts recited here are not to be considered factual findings for any purpose other than consideration of the pending motion. See Erickson v. Pardus, 551 U.S. 89, 94 (2007) (observing that, "when ruling on a defendant's motion to dismiss, a judge must accept as true all of the factual allegations contained in the complaint"); Nemet Chevrolet, Consumeraffairs.com, Inc• , 591 F.3d 250, 255 (4th Cir. 2009) Ltd. v. ("[I]n evaluating a Rule 12(b)(6) motion to dismiss, a court accepts all well-pled facts as true and construes these facts in the light most favorable to the plaintiff in weighing the legal sufficiency of the complaint."). Healthcare's wholly-owned subsidiaries. Relators, Defendants management "have structure," common such that Id. H 13. ownership the According to and managing a common officers of Riverside Hospital, RPS, and RMEC "report and answer directly to executives of RHA." Id. Relators are private citizens who have brought this action on Id. behalf of f 15. the United States Commonwealth of Virginia. Hagood is a United States citizen and resident of Virginia. Id. Defendants formerly emergency room administrator. supervised "the Department." billing of Id. Id. Id. employee. is H 16. Id. a employed Hagood as In such position, services Cotner resident of Texas. Defendants' and in Riverside's United States Like Hagood, she In such capacity, an Hagood Emergency citizen and was formerly she served as a registered nurse and Director of the Emergency Department. Id. "Areas under her responsibility included treatment and billing of patients in Riverside's Emergency Department." Id. Relators allege that Defendants submitted false claims, violation of the Medicaid, CHAMPUS, healthcare programs FCA and VFATA, FAMIS, and to federal Virginia the employee Medicaid, programs {collectively "Government Payors"). specifically, Relators allege federal FAMIS, 1) Medicare, veteran and See id. 1 3. that Defendants claims to Government Payors for: and in SANE More submitted false services not rendered; 2) pharmaceuticals not administered; 3) "upcoded" services;2 and 4) services provided by unqualified personnel. addition, Relators retaliation for allege her that opposition fraudulent billing practices. First, violated Counts I the FCA and terminated Hagood in Defendants' purported Services Not Performed in Counts I and V, that Defendants VFATA by billing Government services that were not actually performed. 65-69. In False Claims and V: Relators allege, to 1 19. Id. 1M 41-44. 2. a. Defendants Id. Id. Payors K1 19; for 45-49, According to Relators, Defendants frequently billed the Government for four types of services that were not actually performed: intubations; tracheostomies; medication pathways; and electrocardiograms ("EKGs"). Regarding intubations, Relators allege that Defendants' billing software program, IBEX, contained systemic flaws, id. U 23, that "rendered the billing system prone and/or inability double and, in to some correct erroneous instances, triple to erroneous entry keystrokes, such that intubation charges were levied against" Government Payors, id. 1 24. In support of such allegation Relators submitted a table of individuals allegedly 2 "'Upcoding,' a common form of Medicare fraud, is the practice of billing Medicare for medical services or equipment designated under a code that is more expensive than what a patient actually needed or was provided." United States ex rel. Bledsoe v. Community Health Sys., Inc•, 342 F.3d 634, 637 n.2 (6th Cir. 2003) (citation omitted). overcharged for intubations. patient account number, name, date assessed of by intubation service, Id. patient name, and alleged Defendants with procedures. The service extent respect Id. The table of to dates includes the item code and improper charges one-hundred of service five for the procedures listed in the table range from August 11, 2005 to May 8, 2006. of See id. the patients Government Payor Relators assert that twenty to thirty percent listed in program such because table were Government covered Payors by served at least twenty to thirty percent of Riverside's patient base. id. at As 8 a See n.3. to tracheostomies, Relators allege that "the Riverside Emergency Department sometimes billed for procedures believed to be intubation under an internal code that resulted being made" to Government payors for tracheostomies, more expensive procedure. coding, Relators assert Id. 1 25. in charges which are a Based on such internal that Government Payors paid more for those procedures than should have been paid." "$809.66 Id. To support their allegations, Relators submit a table of instances in which Defendants allegedly billed for tracheostomies when, fact, Defendants' staff expensive procedure. seventeen-month procedures, lists Id. period, the performed an intubation or in less The table includes information from a and, patient for seventeen account number, tracheostomy patient name, service item code and name, and date of service. Id. The dates of service range from July 23, 2005 to April 24, 2006. Relators assert that at least twenty to See id. thirty percent of the patients listed in such table were covered by Government Payors. See id. at 8 n.3. Relators also allege that Defendants submitted false claims to Government Payors while billing for medication pathways. 1 26. was In particular, according to Relators, set up 'pathway' delivery to automatically irrespective of the of medication bill whether for "[t]he IBEX system medication this involved," Id. was and 'route' permitted this or with "resulted impermissible double charges being levied for 'routes.'" in Id. Lastly, with respect to false claims for services allegedly not rendered, Relators allege that Defendants impermissible billing practices for EKGs. to Relators, was performed physician's order, allege, with Counts a second and billed for EKGs without a and double-billed for EKGs that were properly II and VI: theory of in Counts II and VI, Government actually According Id. b. As ^ 27. in Defendants charged for EKGs when no such procedure performed, ordered. Id. engaged Payors administer. for Id. Pharmaceuticals Not Administered FCA and VFATA liability, Relators that Defendants filed false claims pharmaceuticals flU 50-54, that 70-74. they did According not to Relators, flaws in the IBEX system resulted in improper double or triple charges for medications. Id. H 29. Relators allege that such billing errors occurred with multiple different types and classes of medication. Id. In support of such allegations, Relators present a table of charges for one medication, during one two-month period in 2006. patient account extent of number, alleged patient Id. name, improper Versed, The table details the transaction charges for administrations of Versed during such period. date, and twenty-two The transaction dates in such table range from January 1, 2006 to February 25, 2006. Relators allege that See id. As with the prior tables, at least twenty to thirty percent of the patients listed in the table were covered by Government Payors. See id. at 8 n.3. c. Counts III and VIII: Upcoding Third, Relators Defendants submitted upcoding for services"). bill for false evaluation Id. 1M 55-59, Medicare Centers allege, for E/M Medicare & in Counts claims and 80-84. to III and VIII, Government management that Payors services by ("E/M For a healthcare provider to services provided to a Medicaid Services patient, ("CMS") require the the provider to use Current Procedural Terminology ("CPT") codes to identify such services. See generally CMS, Medicare Processing Manual ch. 12, § 30.6 (2014), available at Claims http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/ Downloads/clml04cl2.pdf. "Code sets used to bill for E/M services are organized into various categories and levels [and,] [i]n general, code the the more complex the visit, physician category." (2014), CMS, . . . may Evaluation available and at bill the higher level of within Management the appropriate Services Guide 8 http://www.cms.gov/Outreach-and- Education/Medicare-Learning-Network-MLN/MLNProducts/Downloads/ eval_mgmt_serv_guide-ICN006764.pdf. According to Relators, calculate each patient's Defendants [E/M] "relied acuity level," "between 1-5 or 'Critical Care.'" upon IBEX to assigning levels First Am. Compl. t 31. Level "'1' was the least intensive and least expensive level of caret, and] [e]ach level thereafter materially increased in acuity and expense." assigned Id. point "[V]arious values and point levels increased as tasks as more performed tasks by were providers performed, services were consumed ' [a] as would the patient's acuity level."3 Id. 1 32. a patient was assigned "Critical Care" status, and la carte' However, once Defendants could not continue to charge the patient for "a la carte" of services. were consumption Id. 3 According to Relators, in 2006, Defendants used the following allocation of points for each acuity level: 1-25 points; 2-40 points; 3-65 points; 4-90 points; 5 - 155 points; and Critical Care - 500 points. First Am. Compl. ^ 32. 8 Relators allege that Defendants submitted false claims to Government Payors through four methods of upcoding. First, Defendants "erroneously assigned 15 points to the administration of oral medications when the actual number should have been 5[,] resulting in a significant increase in charges." Second, Defendants "continued to charge '[a] Id. U 33. la carte' points to critical care patients for various tasks and services when no additional charges should have been applied." Id. Third, "[t]he IBEX system would sometimes double charge [] for whatever acuity level was administered." Fourth, "[i]f a patient left without Id. being seen they would a patient sometimes be charged and receive an acuity level as if they had been seen by a physician or other actually seen." Id. level of provider that they had not To support such allegations, Relators have included a table of patients whom Defendants allegedly billed for a higher level of E/M services than they actually provided in January 2009. name, and See id. level charged, patient account Relators allege Such table includes the patient's alleged actual level of service rendered, number for fifty-seven that such upcoding continued well after January, 2009." occurred patients. "well before Id. and Id. at 16 n.4. d. Counts IV and IX: Unqualified Personnel Finally, with respect to false claims, Relators allege, in Counts IV and IX, that Defendants submitted false claims to Government Payors by unqualified personnel. billing W IcL for 60-64, Relators allege that Beverly Atkins, by In particular, a registered nurse and the of program, performed pediatric SANE examinations even though she did have Commonwealth. submitted Atkins' the requisite IdL M false SANE Sexual 80-84. provided director not Defendants' services to examinations Nurse training 35-36. claims Abuse or Examiner ("SANE") certification by the According to Relators, Defendants Government despite Payors her lack by of billing for certification. Id. 3. Count IX: Wrongful Termination In Count IX, Relators allege that Defendants violated the FCA by terminating Hagood because she objected to Defendants' alleged fraudulent billing practices. allege that Hagood informed IcL HH 85-87. Defendants certain billing practices to be unlawful. to Relators, objective terminated even though Hagood was measures Hagood of employment "shortly Defendants' billing practices. after" that Relators she considered Id. H 42. According "performing well on all performance," she IcL H 43. Defendants complained about Relators allege that Defendants terminated Hagood to intentionally retaliate against her for her complaints about Defendants' billing practices. 11 44. 10 Id. 4. Defendants' Knowledge of Fraudulent Practices Relators broadly allege that Defendants knowingly submitted the alleged false claims stated above. With respect to Defendants' knowledge, Relators also allege that a 2006 audit of billing practices gave Defendants' senior managers actual knowledge of the alleged fraudulent billing practices. H 20. According to Relators, the 2006 audit See id. uncovered fraudulent and double billing in excess of $3,500,000. assert that the following members of Relators Defendants' senior management became aware of such allegedly fraudulent practices: "Golden Bethune, Audits; Diana CEO; Lisa Lovechio, Salsberry, Vice President & Chief Nursing Director President; Officer; Gwen of Internal Hartzog, William Downey, Vice CFO[;] [] Rene Roundtree, Vice President Emergency Services[;] and Ricelle Fliescher." Id. Relators also allege that "the senior managers within Riverside responsible for these practices knew about them prior to the audit results being reported." Id. Relators among assert that they possess emails Additionally, Defendants' employees corroborating their allegations regarding: IBEX system errors causing overbilling for medication pathways, id. K 26; fraudulent billing for EKG services not provided, id. 1 27; and fraudulent Finally, billing Relators "computerized for medication allege reporting that system," 11 not provided, Defendants the "Midas" id U maintain system, 30. a that "memorializes all According to practices were patient Relators, billing complaints." Defendants' "first made known alleged to Id. fraudulent the Relators reporting billing errors and complaints." H 22. billing by patients Id. B. Procedural History On July 11, Defendants. Relators 2011, Relators filed a sealed Complaint against Complaint, filed Complaint, their ECF No. ECF No. First 12. 1. On Amended After Complaint remained under seal, February Complaint. lengthy proceedings on July 3, 2014, No. States July 28, intervention. Notice, Court that ordered Defendants. 12(b)(6) to the United ECF No. 33. Thus, the Complaint Ex Parte Order, On January seeking 2014, 9, dismissal be ECF No. 2015, Defendants Notice, also ECF declined on August 8, 2014, unsealed and the served upon 34. filed the Mot. asserted false-claims 48. Amended instant motion, and 9(b) of the Federal Rules of Civil Procedure. No. First the Rules ECF the while under Dismiss, of Am. the Commonwealth matter. On 2012, First of Virginia declined intervention in this 32. 15, Defendants causes of Complaint contend action fail that because: Relators' 1) Relators have failed to plead with particularity that the alleged false claims were actually presented to Government Payors; and 2) Relators have not pleaded sufficient allegations of scienter to state a claim under the FCA or 12 VFATA. See Defs.' Mem. Supp. Mot. to Dismiss at 12-14, ECF No. 49. In addition, Defendants contest the sufficiency of Relators' allegations with respect to retaliation and false claims stemming from services provided by Id. at 14-16. allegedly unqualified personnel. On February 6, Defendants' Dismiss, motion ECF No. 2015, to Relators dismiss. 52. filed their opposition to Relators' Relators concede Opp'n that to they Mot. have to not adequately pleaded causes of action for retaliation or false claims based on billing Government Payors for services provided by unqualified personnel. amend such claims. IdL at 2. Id. Relators request leave to Regarding the sufficiency of their other claims, Relators argue that they have sufficiently alleged presentment to Government Payors through the "[d]etailed tables" included in the First Amended Complaint and the fact that it is "a practical submitted to certainty the that some and state federal First Amended Complaint." IcL of these payors at 8. billings identified in were the As to their scienter allegations, Relators contend that the allegations regarding the 2006 audit are sufficient to allow Relators' See id. at 7-8. Defendants' motion to dismiss. event the Court dismisses claims to survive any of Relators' Finally, in the claims, request leave to amend the First Amended Complaint. 10. 13 Relators Id. at 8- On February 12, Defs.' Rebuttal 2015, Mem. Defendants filed their reply brief. Supp. Mot. to Dismiss, ECF No. 53. In addition to reiterating the points presented in their brief in support of their motion, Defendants argue that the Court should deny Relators because any Defendants. leave to amendment Id. at amend their would be First futile Amended and prejudicial to 5. II. STANDARD OF REVIEW Federal Rule of Civil Procedure 12(b)(6) of a complaint, Complaint permits dismissal or a claim within a complaint, based on the plaintiff's "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). A motion to dismiss pursuant to Rule 12(b)(6) must be read in conjunction with Rule 8(a)(2), which requires "a short and plain statement of the claim showing that the pleader is entitled to relief," Fed. R. Civ. P. 8(a)(2), what the . . . claim is and the grounds upon which it rests,'" Bell Atl. Conley so as to "'give the defendant fair notice of v. original). Corp. v. Gibson, Twombly, 355 550 U.S. U.S. 41, 544, 47 555 (2007) (1957)) (quoting (omission in The United States Supreme Court has interpreted the pleading standard set forth in Rule 8(a) as requiring that a complaint include enough facts for the claim to be "plausible on its face" and thereby "raise a right to relief above the speculative level on the assumption that all the allegations in 14 the complaint are true (even if doubtful in fact)." 570 is (internal citations omitted). "not akin more than Ashcroft 550 v. U.S. to a 'probability requirement, ' but possibility" Iqbal, at 556 556). U.S. In plausibility when the allows to the The plausibility requirement sheer a Id. at 555, court that 662, other the defendant (2009) words, plaintiff draw 678 a "[a] pleads claim factual reasonable 12(b)(6) motion tests is for liable. (quoting Twombly, has the complaint without resolving factual disputes, facial content inference defendant is liable for the misconduct alleged." Because a Rule it asks that that the Id. at 663. sufficiency of a a district court "'must accept as true all of the factual allegations contained in the complaint' of the and 'draw all reasonable inferences in favor plaintiff.'" Montgomery County, E.I, du Pont 435, 440 Kensington 684 F.3d 462, de Nemours (4th Cir. & Co. 2011)). v. Volunteer 467 Fire (4th Cir. Kolon Dep't 2012) Indus. , Inc., Accordingly, v. (quoting 637 F.3d "'Rule 12(b)(6) does not countenance . . . dismissals based on a judge's disbelief of a complaint's factual allegations.'" (quoting Neitzke v. Williams, (omission in original). motion to dismiss U.S. 550 U.S. 319, 327 at 555 (1989)) A complaint may therefore survive a "even if it appears remote and unlikely.'" 232, 490 Twombly, Id. 'that a recovery is very (quoting Scheuer v. Rhodes, 416 U.S. 236 (1974)). 15 In addition to the general pleading standard set forth in Rule 8(a), Rule 9 of the Federal Rules of Civil Procedure establishes pleading requirements for "special matters." R. Civ. P. 9. Fed. Subsection (b) of Rule 9 addresses the pleading requirements for "fraud or mistake" and "conditions of mind" and provides that: (b) In alleging fraud or mistake, with particularity fraud or mistake. conditions of the Malice, a a party must state circumstances intent, person's constituting knowledge, mind may and other be alleged generally. Fed. R. Civ. P. 9(b). particularity A plaintiff's failure to plead fraud with under Rule 9(b)'s pleading requirements treated as a failure to state a claim under Rule Harrison v. Westinghouse Savanna River Co., "is 12(b)(6)." 176 F.3d 776, 783 n.5 (4th Cir. 1999) (citation omitted). FCA Appeals claims sound under the Act." Am., omitted), fraud and, therefore, for the Fourth Circuit has strictures of Rule 9(b) N. in Inc., cert, the Court "adhered firmly to the in applying its terms to cases brought United States ex rel. Nathan v. Takeda Pharm. 707 F.3d 451, denied, 456 134 S. (4th Cir. Ct. 1759 2013) (2014). (citations The Fourth Circuit has underscored that: The multiple providing of purposes notice to of a Rule defendant 9(b), of namely, its of alleged misconduct, of preventing frivolous suits, of 'eliminat[ing] fraud actions in which all the facts are learned after discovery,' and of 'protect[ing] 16 defendants from harm to their goodwill and reputation,' are as applicable in cases brought under the Act as they are in other fraud cases. Id. at 456 (internal citation omitted) (quoting Harrison, 176 F.3d at 784). III. A. Among other DISCUSSION The FCA and VFATA things, the FCA prohibits a person from knowingly submitting false claims for payment to the United States. Under the FCA, Congress has established that: any person who— (A) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval; ... is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, as adjusted by the Federal Civil Penalties Inflation Adjustment Act of 1990 (28 U.S.C. 2461 note; Public Law 104-410), plus 3 times the amount of damages which the Government sustains because of the act of that person. 31 U.S.C. § 3729(a)(1). In the FCA, Congress has defined the terms "knowingly" and "claim" as follows: (1) the terms "knowing" and "knowingly"(A) mean that a person, with respect to information-- (i) has actual knowledge of the information; (ii) acts in deliberate ignorance of the truth or falsity of the information; or (iii) acts in reckless disregard of the truth or falsity of the information; and (B) require no proof of specific intent to defraud; (2) the term "claim"- (A) means any request or demand, whether under a contract or otherwise, 17 for money or property and whether or not the United States has title to the money or property, that— (i) is presented to an officer, employee, or agent of the United States; or (ii) is made to a contractor, grantee, or other recipient, if the money or property is to be spent or used on the Government's behalf or to advance a Government program or interest, and if the United States Government-- (I) provides or has provided any portion of the money or property requested or demanded; or (II) will grantee, reimburse or other such contractor, recipient for any portion of the money or property which (B) does is requested or demanded; and not include requests or demands for money or property that the Government has paid to an individual employment as or restrictions as on compensation an that income for Federal subsidy individual's with use no of the money or property .... Id. § 3729(b). Thus, "[a] false statement is actionable under the Act only if it constitutes a 'false or fraudulent claim. '" Nathan, 707 F.3d at 454 Harrison, 176 F.3d at 785). (emphasis in original) (quoting This is so because "'[t]he statute attaches liability, not to the underlying fraudulent activity or to the government's wrongful payment, payment.'" Rivera, but to the claim for Harrison, 176 F.3d at 785 (quoting United States v. 55 F.3d 703, 709 (1st Cir. 1995)). Therefore, "to trigger liability under the Act, a claim actually must have been submitted to the federal government for reimbursement, resulting in 'a call upon the government fisc.'" (quoting Harrison, 176 F.3d at 785) 18 Nathan, 707 F.3d at 454 (citing Hopper v. Solvay Pharm., Inc., 588 F.3d 1318, 1325-26 (11th Cir. 2009)). In short, the Fourth Circuit has distilled the elements of an FCA claim down to the following test: "To prove a false claim, a plaintiff must allege four elements: (1) a false statement or fraudulent made course of conduct; (2) with the requisite scienter; (3) that is material; and (4) that results in a claim to the Government." United States v. Triple Canopy, Inc., 775 F.3d 628, 634 (4th Cir. 2015) (citation omitted). As noted above, an FCA plaintiff must plead his claim with particularity under Rule 9(b). "To satisfy Rule 9(b), 'an FCA plaintiff must, at a minimum, describe the time, place, and contents of the false representations, as well as the identity of the person making the misrepresentation and what he obtained thereby.'" United States ex rel. Ahumada v. NISH, 756 F.3d 268, 280 (4th Cir. 2014) (quoting United States ex rel. Wilson v. Kellogg Brown & Root, Inc., 525 F.3d 370, 379 (4th Cir. 2008)). "More precisely, the complaint must allege 'the who, what, when, where and how of the alleged fraud.'" F.3d at 379). IcL_ (quoting Wilson, 525 Furthermore, in considering the interplay between the FCA and Rule 9(b) , the Fourth Circuit has agreed with the Eleventh Circuit that: the particularity requirement of Rule 9(b) "does not permit a False Claims Act plaintiff merely to describe a private scheme in detail but then to allege simply and without any stated reason for his belief that claims requesting illegal payments must have been 19 submitted, were likely submitted or should have been submitted to the Government." Nathan, 707 Clausen v. 2002)). F.3d Lab. at Corp. Instead, reliability' allegation of Am., "Rule 9(b) that an Id. actual not claims, false 290 United States F.3d 1301, requires that false 1311 'some claim was at 457 (quoting Clausen, "when a defendant's reasonably inferred from need (quoting must be provided in the complaint government." Therefore, 456-57 necessarily actions, the allegations, have led, to the ex rel. (11th Cir. indicia of to support the presented to the 290 F.3d at 1311). as alleged and could have led, submission of as but false a relator must allege with particularity that specific claims payment."4 actually Id. were presented (emphasis in original). to the government However, for the Fourth 4 The Court notes that the courts of appeals have divided on the level of detail that Rule 9(b) requires for a plaintiff to state an FCA claim. Compare, e.g., United States ex rel. Bledsoe v. Community Health Sys., Inc. 501 F.3d 493, 504 (6th Cir. 2007) (holding that "pleading an actual false claim with particularity is an indispensable element of a complaint that alleges a FCA violation in compliance with Rule 9(b)"), with, e.g., United States ex rel. Lusby v. Rolls-Royce Corp. , 570 F.3d 849, 854 (holding that a plaintiff need not allege a specific individual claim to satisfy Rule 9(b)). See generally Br. of the United States as Amicus Curiae, Nathan, 134 S. Ct. 1759 (2014) (No. 12-1349). Indeed, even panels of the same courts of appeals have inconsistently applied Rule 9(b). See Br. of the United States, supra, at 13-14. Despite this conflict of authority, the Fourth Circuit has expressly stated that "[t]o the extent that other cases apply a more relaxed construction of Rule 9(b) [than that construction set forth in Nathan] 707 F.3d at 457-58. Court declined to ... we disagree with that approach." Nathan Moreover, in Nathan, the United States Supreme consider "whether Rule 9 (b) requires that a complaint under the False Claims Act allege with particularity that specific false claims actually were presented to the government for payment ... or whether it is instead sufficient to allege the 20 Circuit has suggested that, even in the absence of "particularized allegations of false claims," a plaintiff can satisfy Rule 9(b)'s strictures where the "specific allegations of the defendant's fraudulent conduct necessarily le[ad] to the plausible inference that false claims were presented to the government." Similar Id. to the FCA, the VFATA prohibits a person from submitting a false or fraudulent claim to the Commonwealth of Virginia. More specifically, the General Assembly has established that: Any person who: 1. Knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval; . . . shall be liable to the Commonwealth for a civil penalty of not less than $5,500 and not more than $11,000, plus three times the amount of damages sustained by the Commonwealth. Va. Code Ann. § 8.01-216.3 (A) (1) . In addition, the General Assembly has defined the terms "knowing" and "knowingly" to mean that "a person, with respect to information, (i) has actual knowledge of the information; (ii) acts in deliberate ignorance of the truth or falsity of the information; or (iii) acts in reckless disregard of the truth or falsity of the information and require no proof of specific intent to defraud." Id^ § particular details of the scheme together with sufficient indicia that false claims were submitted." Pet. for Writ of Cert, at i, Nathan, 134 S. Ct. 1759. Therefore, notwithstanding contrary authority from other courts of appeals, the Court must apply the law governing the FCA and Rule 9(b) as established by the Fourth Circuit. 21 8.01-216.3(0. part, Furthermore, a "claim" is defined, in pertinent as: any request or demand, whether under a contract or otherwise, for money or property, regardless of whether the Commonwealth has title to the money or property, that (i) is presented to an officer, employee, or agent of the Commonwealth or (ii) is made to a contractor, grantee, or other recipient (a) if the money or property is to be spent or used on the Commonwealth's behalf or to advance a governmental program or interest and (b) if the Commonwealth provides or has provided any portion of the money or property requested or demanded or will reimburse such contractor, grantee, or other recipient for any portion of the money or property that is requested or demanded. Id. § 8.01-216.2. As a claim sounding in fraud, a plaintiff must plead a VFATA claim with particularity under Rule 9(b). See Virginia ex rel. Hunter Labs., Inc. , Civil Action No. I:13cvll29, (E.D. Va. May 13, 2014) (Lee, J.) LLC v. Quest Diagnostics, 2014 WL 1928211, at *7-8 (dismissing a VFATA claim for failure to plead fraud with particularity under Rule 9(b)). B. The Sufficiency of Relators' Presentment Allegations The Court must sufficient factual now consider whether Relators matter requirement of Rule 9(b) claims. Relators concede to satisfy the have pleaded particularity with respect to their FCA and VFATA that they have not satisfied such requirements for their retaliation and billing-for-unqualified- personnel claims, Relators' Opp'n to Mot. to Dismiss at 2, and, 22 therefore, the Court will GRANT Defendants' motion as to those claims. Regarding the remaining claims, as in Nathan, the "critical question" is Defendants whether "caused Relators a false have claim plausibly to be alleged presented that to the government" under the theories of liability set forth in the First Amended Complaint. 707 F.3d at 456. In this case, Relators have not alleged with particularity that specific false claims actually were presented to Government Payors for payment. To be sure, the First Amended Complaint includes particularized allegations that Defendants overbilled specific individuals for certain services; overbilled Compl. specific Relators have individuals H 24, tracheostomies, alleged for id_^ 1 25, id. H 29, and E/M services, id. H 33. that intubations, Defendants First Am. the medication Versed, However, Relators have not specifically alleged that Defendants presented claims for payment in connection with any of the individual claims enumerated in the First Amended Complaint. In fact, to Government Payors Relators have conceded that they "did not identify the specific type of payor and/or insurance associated with each specific claim identified." at 8. Relators' Opp'n to Mot. to Dismiss Accordingly, given that Relators have not alleged "with particularity that specific false claims actually were presented to the government for payment," 23 the sufficiency of Relators' presentment allegations le[ad] to allegations of turns [Defendants'] the plausible whether fraudulent inference presented to the government." Court will assess, on in turn, the conduct that "specific necessarily false claims were Nathan, 707 F.3d at 457-58. the sufficiency of Relators' The claims based on their level of detail. 1. To begin, Relators' EKGs FCA claim based on Defendants' billing practices for EKGs falls well short of Rule 9(b)'s requirement that Relators plead presentment with particularity. their conclusory allegations when none were received," that Defendants performed Other than "charged for EKGs and billed for EKGs that were not ordered by a physician, and "frequently double bill[ed] for valid, Relators properly present reasonably infer ordered no EKGs," allegations that such First that Am. Compl. the resulted practices allow in 11 27, Court to Defendants actually presenting any fraudulent claim to Government Payors. Relators broadly assert that " [a]t least 20-30% of [Defendants'] patient base was served by [Government Payors]." Id. at 8 n.3. However, the Court cannot reasonably infer, based on such bare- bones, conclusory allegations, that Defendants fraudulent scheme to overbill for EKGs, "necessarily" Government. led to Nathan, the much less a submission of 707 F.3d at 458. 24 engaged false in a scheme that claims to the From the mere fact that Government Payors patient base, fraudulently cover a certain percentage of Defendants' it does not necessarily follow that Defendants billed Government respect to such patients. Payors for EKG services with Cf. id. at 459 (finding that it was an "implausible inference" to infer, from an allegation of the "general statistics," that 93 percent of the sales of Kapidex, a prescription drug, were for dosages of 60 mg, that any of the 98 prescriptions for Kapidex identified in the complaint were for 60 mg dosages) . to reasonably fraudulent coextensive None of Relators' allegations permit the Court infer billing with that for the the of Defendants' services EKG extent is proportional percentage covered by Government Payors. of Defendants' In addition, alleged to patient or base Relators have not alleged facts to plausibly establish that Defendants' general scheme of overcharging patients for EKGs resulted in Defendants' overbilling Government Payors for EKGs. reasonably infer that Defendants' Thus, the Court cannot allegedly fraudulent EKG- billing practices caused Defendants to present any claims to Government have Payors because Relators not connected such practices to the submission of any claims to Government Payors. Therefore, the Relators' claim Court that will GRANT Defendants Defendants' presented motion false as to claims to Government Payors in billing for EKGs.5 5 In their briefing on the sufficiency of the 25 First Amended 2. Tracheostomies, E/M Services - Oral Medications, E/M Services - «a la Carte" Points, E/M Services - Patient Not Actually Seen Relators' practices allegations with respect to Defendants' for tracheostomies, oral medications, E/M services E/M services patients services for administering for critical care patients, physicians provide an added level of detail beyond Relators' conclusory allegations not because actually seen and by EKG-billing for E/M billing Relators identify individuals whom Defendants allegedly overbilled. such added details do not sufficiently specific Nevertheless, establish that the alleged fraudulent scheme "necessarily" led to the submission of false claims to Government Payors. Like Relators' EKG claims, Relators allege in conclusory fashion that Defendants engaged in fraudulent billing practices for tracheostomies, medications, E/M services for administering E/M services for critical care patients, oral and E/M Complaint, the parties did not distinguish between Relators' FCA and VFATA claims. Thus, they appear to agree that such claims rise or fall together. At least one court within this District has considered FCA and VFATA causes of action as analogous. United States ex rel. Rector v. Bon Secours Richmond Health Corp., Civil Action No. 3:ll-cv- 38, 2014 WL 1493568, at *14 (E.D. Va. Apr. 14, 2014) (holding that "[b]ecause the VFATA and FCA are analogous and Relator incorporates all of his arguments into both causes of action, Relator's VFATA claims will be dismissed for the very same reasons that his FCA claims fail."); see also Hunter Labs., 2014 WL 1928211, at *7-8 (applying the Nathan standard to assess the sufficiency of a VFATA claim). Given the similarity between the language in the FCA and VFATA and the parties' failure to distinguish between Relators' asserted causes of action under each statute, the Court will apply the same standard in assessing the pleading of Relators' alleged FCA and VFATA causes of action. 26 services for patients not actually seen by physicians. specifically, Relators allege that Defendants: More sometimes billed for an intubation using an internal code for a more expensive procedure, a tracheostomy, First Am. Compl. H 25; overbilled for E/M services by assigning a point value for the administration of oral medications in excess of the actual acuity level of such services, id. H 33; overbilled for E/M services by charging "a la carte" should points not to critical have been care patients applied, id. ; and when such points overbilled for E/M services by sometimes charging a patient with an acuity level as if he had been seen by a physician, when no physician actually had performed E/M services for such patient, those conclusory allegations—like allegations—are insufficient to allow id. Without more, Relators' EKG-billing the Court to reasonably infer that Defendants presented any false claims to Government Payors as a practices. result The Court fact that Defendants that they did because of so Government cannot with Complaint also fraudulent charges in respect Payors unlike cover fraudulent extrapolate fraudulent to billing Government twenty billing to from practices Payors thirty the simply percent of See supra Part III.B.l. Relators' includes for allegedly reasonably engaged Defendants' client base. However, such EKG claims, allegations tracheostomies 27 and the First detailing E/M Amended specific services. As noted above, fraudulent Relators have alleged seventeen specific allegedly tracheostomy charges, First Am. Compl. H fifty-seven specific allegedly fraudulent E/M charges, Admittedly, fraudulent Relators' charges allegations are sufficient involving for the 25, id. such Court to and H 33. specific reasonably infer that Defendants engaged in a scheme of fraudulent billing practices state for an claim, it is allegations present FCA tracheostomies of a Defendants defrauded, certain persons. Relators that must Defendants' Defendants fraudulent facts a 707 However, Relators scheme at a fraudulent false to simply through to which claim to 456-57. Rather, reasonable inference scheme resulted in Payors, not Government See id. at 456-58. for examples of specific allegedly tracheostomies, and E/M services for patients not actually seen Defendants permit engaged in "necessarily lead to the a Court to fraudulent the plausible services for for care patients, physician, E/M services of a medication, E/M administration by oral F.3d permitting even though Relators' charges for fraudulent alleged presenting services. enough Nathan, merely persons in general. Here, not E/M or submitted illegal payment requests to, See allege and reasonably scheme, inference" infer they The court's decision in 28 another case do that not that false claims were presented to the Government because of such scheme. 457. critical in this Id. at District subsequent to the Fourth Circuit's decision in Nathan, States ex rel. Rector v. United Bon Secours Richmond Health Corp., is instructive as to why Relators' specific examples do not satisfy Rule 9(b). Civil Action No. 3:llcv38, 2014 WL 1493568 (E.D. Va. Apr. 14, 2014) (Spencer, J.). In Rector, the court found that a very detailed spreadsheet of alleged false claims was not sufficient to satisfy Rule 9(b)'s heightened pleading requirements because such spreadsheet did not permit the court to reasonably infer that the defendants necessarily billed the Government Rector relator alleged that claims to the United based Id. at on More the defendants States by billing "unsubstantiated *3. the for inter The had submitted false Medicare or unsupported specifically, procedures. and Medicaid medical alia, diagnoses." staff from the defendants' "concierge program," pursuant to instructions in the defendants' manuals, selected codes for procedures "to ensure that patient procedures or administered tests were coverable by relevant third-party payers or insurance programs." Allegedly, Id. at *1. defendants instructed their concierge program staff to change codes for procedures that third-party payors did not cover to codes for procedures that such payors would cover. To support his allegation, defendants' procedures concierge for which the relator—a former employee in the program—included the id. defendants 29 a patient allegedly log submitted of false claims. icL_ at *8. The log included: "patient names and social security numbers, types of procedures scheduled, scheduled dates of procedures, actual dates and times of procedures, facilities in which procedures were completed, physician[s] patients." and Id^ their practices, the names of referring and the insurance of the However, despite the detail in the patient log, the Rector court concluded that the relator had failed to plead with particularity the presentment element of an FCA claim. Even though the patient log indicated that some of the patients were covered by Medicare, Medicaid, or TriCare, that such requirements allegations of Rule were 9(b). insufficient See id^ at the Court found to satisfy *8-9. The the Court concluded that it could not necessarily infer from the patient log that the procedures took place billed by [the defendants]." "or that the Government was Id. at *9. The Court underscored that the relator's claim "[did] not involve an integrated scheme in which presentment of a claim for payment was a necessary result because the patients could have paid prescriptions and procedures themselves." for the relevant In short, the Court found that "Relator [was] missing the final link in the chain of causation." Id. at *9. In this case, like the relator in Rector, Relators have failed to plead sufficient factual matter to allow the Court to plausibly infer that Defendants presented to Government Payors 30 any of the claims enumerated in the First Amended Complaint based on tracheostomies, or E/M Services in connection with oral medications, "a la carte" points for critical care patients, or patients not actually seen. As in Rector, reasonably infer from Relators' the Court cannot listing of alleged fraudulent claims that Defendants actually submitted any such claim to Government Payors because the mere existence of specific individual fraudulent claims does not necessarily indicate that Defendants submitted such claims to Government Payors. at *8-9; cf^ Nathan, 707 F.3d at 459 See id. (finding that general statistics did not allow the plausible inference that any of the 98 prescriptions identified in the complaint were for off-label uses). Indeed, Relators' allegations here are even more tenuous than those rejected in Rector-a patient log that identified certain patients as covered by Medicare, Medicaid, and TriCare- because Relators have not even alleged that Government Payors covered any of the specific patients Amended Complaint. See id^ at *8-9.s enumerated in the First To the contrary, Relators concede that they "did not identify the specific type of payor and or insurance identified." associated Relators' Opp'n with to each Mot. to specific Dismiss claim at 8. 6 As discussed supra Part III.B.1, Relators' broad allegation that twenty to thirty percent of Defendants' patients are covered by Government Payors does not satisfy Rule 9(b)'s requirement that Defendant plead with particularity that Defendants presented a false claim to Government Payors. 31 Therefore, in this case, not only is it possible, as in Rector, that the patients identified could have paid for the specified procedures themselves, third party private insurers also could have paid for the specified procedures. Accordingly, the Court finds that Relators have failed to allege facts that permit the Court to reasonably infer that any of the specified claims based on tracheostomies, medications, the E/M services assignment of "a for administering la carte" points for oral E/M services for critical care patients, or E/M services billed for patients not actually seen by physicians, actually resulted in Defendants Payors. presenting false claims for payment to Government Therefore, the Court will GRANT Defendants' motion with respect to such claims. 3. Medication Pathways Next, the Court will consider the sufficiency of Relators' allegations with respect to fraudulent billing for medication pathways. Defendants' Regarding medication pathways, Relators allege that IBEX billing system automatically billed for medication routes or pathways regardless whether CMS regulations permitted billing for the delivery of the medication involved. First Am. Compl. H 26. Thus, Relators allege, "[t]his resulted in impermissible double charges being levied for 'routes,'" and such "charges were made routinely and systematically over the course of several years." Id. 32 Relators' medication-pathways allegations the heightened pleading standard of Rule 9(b). provide an added allegations level discussed of detail above do not Such allegations compared because satisfy with Relators Relators' describe a systematic mechanism by which the Defendants allegedly levied double charges for medication pathways. The allegation that such double charges resulted from the Defendants' system "automatically" billing for IBEX billing medication routes or pathways, if true, suggests that the IBEX program systematically overcharged for all medication pathways. Therefore, given the allegedly automatic nature of the errors in the IBEX system, the Court arguably might infer from such allegations that Defendants would have overcharged any patient covered by a Government Payor for whom Defendants administered a single medication.7 However, such allegations do not satisfy the particularity requirement of Rule 9(b) because they do not permit the Court to plausibly infer that the answer to the "whether the defendant[s] to the government"-is "critical question"- caused a false claim to be presented yes. See Nathan, 707 F.3d at 456. 7 The Court notes that, even if the Court can infer that the IBEX system automatically overcharged Court cannot plausibly infer, Government Payors covered for all from only medication pathways, the general twenty to thirty percent statistics the that of Defendants' patients, that Defendants submitted any excessive medication-pathways charges to Government Payors. See supra n.6. It is an implausible inference to extrapolate from the makeup of Defendants' patient base that Defendants provided medication-pathways services to patients covered by Government Payors in proportion to such makeup. 33 Although Relators must how of the and allege the alleged fraud," internal quotation "who, Wilson, marks 525 what, when, F.3d at omitted), 379 Relators' where, and (citations medication- pathways allegations do not allow the Court to plausibly infer the "when" or the "how" of the alleged false claims. the general "several allegation years," that First Am. such alleged Compl. U fraud 26, the Other than occurred First over Amended Complaint lacks specific allegations of when any false claims were submitted to Government Payors. Furthermore, while Relators detail an intricate scheme by which Defendants used the IBEX system to double-bill for medication pathways, critically, Defendants have failed to plead facts to connection between the IBEX system and the claims alleged charge to Government how Payors. Defendants In other fraudulently for medication pathways, the submission of false words, used but have establish the Relators IBEX have system to not alleged how such conduct led to the submission of any bills to Government Payors. Therefore, under Nathan, Relators' medication-pathways allegations do not meet Rule 9(b)'s heightened pleading standard because they "fraudulent do not conduct false establish necessarily inference that claims Payors]." le[ads] Defendants' to presented the Kernan Hosp., 34 880 to alleged plausible 707 F.3d at 456.8 8 See also United States v. were that F. [Government Supp. 2d 676, Importantly, even if the IBEX system errors led Defendants to automatically overcharge for medication pathways, finds that sufficient such automaticity indicia of allegation reliability to does the Court not support provide Relators' conclusory allegation that Defendants submitted false claims to Government Payors. In Nathan, the Fourth Circuit cited United States ex rel. Grubbs v. Kanneganti with approval as an example of which a case fraudulent in conduct "specific necessarily allegations led to of the defendant's the plausible that false claims were presented to the government." inference The Nathan court summarized Grubbs as follows: the relator alleged a conspiracy by doctors to seek reimbursement from governmental health programs for services concluded that that, never were because the performed. The court complaint included the dates of specific services that were recorded by the physicians but never were provided, constituted "more circumstantial than evidence probable, that the such allegations nigh doctors' likely, fraudulent records caused the hospital's billing system in due course to present fraudulent claims to the Government." Accordingly, the court further concluded that it would "stretch the imagination" for the 687 (D. Md. 2012) (holding that, despite allegations of a detailed scheme of upcoding for malnutrition diagnoses, the Government failed to plead an FCA claim with particularity because the complaint did not include the "next step or link in the False Claims Act liability mechanism-namely, that these fraudulent diagnoses made their way to cost reports submitted to the [Government] and actually caused the [Government] to pay [the defendant] for services not rendered."); cf. Rector, 2014 WL 1493568, at *l-3, *9 (holding, in a case in which the complaint included detailed allegations of a fraudulent scheme to bill for claims based on unsubstantiated or unsupported medical diagnoses, that allegations that certain specific procedures took place were "not enough to plausibly allege that . . . the government was billed by [the defendant] ." 35 doctors to continually record services provided, track but at "to the deviate last moment from so that were not the regular billing that the recorded, but unprovided, services never get billed." Nathan, 707 United States 2009)). 457 ex (internal rel. Grubbs, In Grubbs, specific specific 565 F.3d omitted) 180, 192 dates in the operative complaint, instances indicated but Complaint, Civil Action No. 31, had in that services, Jan. citations (quoting (5th Cir. Here, the indicia of reliability present in Grubbs are lacking. alleged F.3d 2007). defendants billed Thus, documented, did not perform, which medical physicians Medicaid had anyway. l:05cv-323, the relator records from not performed Second Amended ECF No. 131 (E.D. Tex. given the express allegations that the in medical records, services and then billed Medicaid therefor, that they it is not surprising that the Fifth Circuit found that it would "stretch the imagination" for the defendants "to deviate from the regular billing track at the last unprovided, 192. moment so that services never get billed." the recorded, Grubbs, but 565 F.3d at In this case, while errors in the IBEX system may have led such system to automatically overcharge for medication pathways, the automaticity of the "circumstantial evidence that IBEX program [such errors] errors is not caused [Defendants'] billing system in due course to present fraudulent claims to the Government," because, unlike Grubbs, 36 Relators have not alleged that Defendants ever submitted to Government Payors any specific excessive bills for medication pathways as a result of the IBEX errors. with See Grubbs, Grubbs, 565 Relators' F.3d at 192. allegations Therefore, do not establish alleged IBEX system errors "necessarily le[ad] inference that [Defendants] [Government Payors]." the Court will submitted Nathan, GRANT in that the to the plausible false claims 707 F.3d at 458. Defendants' contrast motion as to Accordingly, to Relators' medication-pathways claims. 4. Intubation, Medication, E/M Services - Double Charging Finally, regarding the sufficiency of Relators' allegations, the Court will assess whether Relators have pleaded with particularity the presentment of any false claims based on double and triple charges charges for medications, E/M services. Defendants' for IBEX billing intubations, allege system Compl. that resulted medications, See First Am. double and triple such as Versed, and double charges for Relators intubations, services. for systemic in excessive including 1M 24, 29, such allegations, Relators have alleged, and 57 specific excessive charges. flaws Versed, 33. charges and E/M In support of respectively, See id. in Thus, 105, 22, Relators' most detailed allegations in the First Amended Complaint concern charges for intubations, Relators have alleged medications, both the 37 and E/M services because manner in which Defendants automatically errors in overcharged the conduct. IBEX Such Relators' system-and allegations previously claims-specific detail for procedures-through combine discussed instances in Relators' specific of systemic instances the level tracheostomy of and overcharging—with previously the of such detail in E/M-services the level of discussed medication-pathways allegations-a description of an automatic mechanism by which Defendants allegedly overcharged for procedures. as with Relators' other claims, Nonetheless, such allegations fall short of the heightened pleading standard of Rule 9(b). Relators can have plausibly failed infer to that plead facts Defendants from which actually Government Payors false claims for intubations, E/M services. the As discussed above, mechanism by intubations, which and Court presented to medications, or neither the automaticity of Defendants medications, the allegedly services, E/M overcharged see supra for Part III.B.3 & n.7, nor the specific instances of fraudulent charges, see supra Part III.B.2, alone, allow the Court to infer that Defendants submitted any false claims Payors. Moreover, allegations Relators' widespread services, does combining such not cure their allegations that errors overcharging in for conjunction independently-insufficient the intubations, with 38 to Government deficiencies. in their reasonably IBEX To be system medications, allegations of sure, led and to E/M numerous specific instances of such fraudulent charges, if true and assuming Defendants possessed the requisite knowledge of such overcharging, easily establish beyond the speculative level that Defendants engaged in a fraudulent scheme. But, as noted earlier, FCA false-claim liability hinges not on the existence of a fraudulent scheme, but on false claim to be presented to 707 F.3d at 456. As "whether [Defendants] caused a [Government Payors]." Nathan, with their earlier claims, Relators have failed to plead facts to establish that the IBEX system errors necessarily led Government. Although the Court might reasonably infer that IBEX program errors procedures, to the automatically led facts linking procedures to false claims overcharging to for the certain containing excessive charges to Government See supra Part III.B.3. to plead of Relators have not connected such overcharging to the submission of bills Payors. presentment listed in Likewise, the excessive the First Relators have failed charges Amended for the specific Complaint presentment of any such charges to Government Payors. to the For the Court to find that Relators adequately had pleaded presentment of the remaining claims, the Court solely on the general makeup Defendants' fraudulent alleged would have of Defendants' scheme to infer based patient base resulted both that in Defendants overcharging persons covered by Government Payors and Defendants then billing Government Payors for such charges. 39 In light of the heightened pleading standard that Rule 9(b) imposes and the Fourth Circuit's decision in Nathan, is not reasonable.9 Therefore, the Court will GRANT Defendants' motion as to Relators' claims such an inference to Government claims that Defendants Payors by overcharging submitted false for intubations, medication, and E/M services.10 C. In light of the Leave to Amend Court's conclusion that Relators have failed to plead with particularity the presentment element of an FCA or VFATA claim, the Court must now consider whether to grant 9 The Court finds unpersuasive the out-of-circuit authority relied on by Relators. As an initial matter, the inter- and, apparently, intra-circuit split regarding the level of pleading that Rule 9(b) requires for FCA claims, see supra n.4, lessens the persuasiveness of out-of-circuit authority on such issue. Relators rely on the Eighth Circuit's decision in United States ex rel. Thayer v. Planned Parenthood of the Heartland, for the proposition that a relator's personal knowledge of a defendant's billing practices provides sufficient indicia of reliability to establish a plausible inference that the defendant actually submitted false claims to the Government. See Relators' Opp'n to Mot. to Dismiss at 7 (quoting Thayer, 765 F.3d 914, 918-19 (8th Cir. 2014)). However, in Nathan, the relator, as one of the defendant's sales managers, likely had detailed knowledge of the fraudulent scheme allegedly perpetrated by the defendant, yet, the Fourth Circuit concluded that his allegations failed under Rule 9(b). this District found that Moreover, in Rector, a relator could not another court within cure his failure to plausibly allege that the defendants actually submitted false claims to the Government "by asserting any firsthand knowledge of the billing processes of any [defendant] ." 2014 WL 1493568, at *8 (citing United States ex rel. Atkins v. Mclnteer, 470 F.3d 1350, 1358-59 (11th Cir. 2006). Therefore, Thayer does not alter this Court's conclusion with respect to Relators' FCA or VFATA claims. 10 Having concluded that Relators have failed to adequately plead presentment, the Court need not consider Defendants' alternative argument that Relators have failed to plead the scienter element of an FCA cause of action. 40 Relators leave to amend their First Amended Complaint to attempt to cure the deficiencies therein. Under Federal Rule of Civil Procedure 15(a): (1) A party may amend its pleading once as a matter of course within: (A) 21 days after serving it, or (B) if the pleading is one to which a responsive pleading is required, 21 days after service of a responsive pleading or 21 days after service of a motion under Rule 12(b), (e), or (f), whichever is earlier. (2) In all other cases, a party may amend its pleading only with the opposing party's written consent or the court's leave. The court should freely give leave when justice so requires. . . . Fed. R. Civ. P. 15(a) (1) -(2) . In this case, Relators have not filed within an amended pleading Defendants' Rule 12(b)(6) motion. twenty-one days Thus, Relators may only amend their First Amended Complaint with the Court's leave. The text of Federal requires that the Court justice so requires." Rule of "freely Id^ after Civil give See id. Procedure leave [to 15(a)(2) amend] when "This liberal rule gives effect to the federal policy in favor of resolving cases on their merits instead of Harvey, disposing of 438 F.3d 404, 426 omitted). After a them on technicalities." (4th Cir. 2006) dismissal under (en banc) Federal Rule Laber v. (citations of Civil Procedure 12(b)(6), a court "normally will give plaintiff leave to file an amended complaint" because "[t]he federal rule policy of deciding cases on the basis of the substantive rights involved rather than on technicalities requires that plaintiff 41 be given every opportunity to cure a formal defect in his pleading." Ostrzenski v. Seigel, 177 F.3d 245, 252-53 (4th Cir. 1999) (emphasis omitted). Likewise, "[t]ypically, '[f]ailureto plead fraud with particularity . . . does not support a dismissal with prejudice. To the contrary, leave to amend is 'almost always' allowed to cure deficiencies in pleading fraud." Rector, 2014 WL 1493568, at *14 (second alteration in original) (quoting Firestone v. Firestone, 76 F.3d 1205, 1209 (D.C. Cir. 1996)). However, "a district court may deny leave to amend if the amendment 'would be prejudicial to the opposing party, there has been bad faith on the part of the moving party, or the amendment would have been futile.'" (4th Cir. 2013) (quoting Laber, Nathan, 707 F.3d at 461 438 F.3d at 426)). "' [A] n amendment may be considered futile where [the plaintiff] ha[s] previously had two full opportunities to plead [his] Hunter Labs., 2014 WL 1928211, at *ll claim.'" (quoting Iron Workers Local 16 Pension Fund v. Hilb Rogal & Hobbs Co., 432 F. Supp. 2d 571, 595 (E.D. Va. 2006)). insufficient reason to deny But, [a] "[d] elay alone ... is an plaintiff's motion to amend." Laber, 438 F.3d at 427 (citation omitted). The Court will dismiss the First Amended Complaint without prejudice, but complaint. First, there is no evidence of bad faith on the part of Relators. will grant Relators leave to amend such Second, although Defendants assert that leave to 42 amend would prejudice them because "if this case is permitted to drag out even longer, . . . trial will inevitably involve evidence of events from more than a decade ago," Defs.' Rebuttal Mem. Supp. Mot. to Dismiss at 5, Defendants have not identified any evidence in particular that is in danger of being lost if the Court provides Relators with an additional opportunity to plead their claims. to amend, alone, Moreover, Relators' delay in seeking leave is not a sufficient reason for the Court to deny leave to amend. stage, Laber, 438 F.3d at 427. Third, at this the Court cannot conclude that an amendment would be futile. While the Court recognizes that Relators have had two opportunities to plead their claims, this is not a case in which Relators had notice of any deficiencies in the First Amended Complaint prior to the resolution of the instant motion. Cf. Hunter Labs., 2014 WL 1928211, at *li (dismissing a VFATA claim with prejudice because the court's prior ruling granting a motion to dismiss provided the deficiencies in the complaint). relator Thus, with notice of it is possible that Relators may be able to allege sufficient additional facts to satisfy Rule 9(b)'s heightened pleading standard. the Court will DENY IN PART Defendants' they sought dismissal of the prejudice. 43 First Accordingly, motion to the extent Amended Complaint with IV. CONCLUSION For the reasons stated above, the Court GRANTS IN PART and DENIES IN PART Defendants' motion to dismiss, ECF No. 48. Court DISMISSES WITHOUT Complaint, ECF No. 12. PREJUDICE Relators' First The Amended However, the Court PROVIDES Relators with leave to amend the First Amended Complaint to cure all defects within twenty-one (21) days after the entry of this Opinion and Order. If Relators fail to adequately amend the First Amended Complaint within the period prescribed, the Court will dismiss such complaint with prejudice. The Clerk is REQUESTED to send a copy of this Opinion and Order to all counsel of record. IT IS SO ORDERED. /s/3n&£Mark S. Davis UNITED STATES DISTRICT JUDGE Norfolk, Virginia March 3.3 , 2015 44
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