United States District Court, N.D. Ohio, Western Division
United States of America, ex rel. Kathi Holloway, Plaintiff
Heartland Hospice, Inc., et al., Defendants
G. Carr Sr. U.S. District Judge.
a False Claims Act case.
Kathi Holloway alleges that defendant HCR ManorCare, Inc. and
its subsidiaries HCR Home Health Care & Hospice, LLC,
Heartland Hospice Services, LLC, and ManorCare Health
Services, LLC (collectively, Heartland) violated the False
Claims Act (FCA), 31 U.S.C. §§ 3729, et
seq., by billing the government for hospice services it
provided patients not qualified for such care and avoiding
its obligation to repay funds so obtained.
worked for Heartland as a Regional Hospice Consultant. She
claims that, during her employment, she came to believe that
Heartland engaged in practices that induced employees to
certify as hospice-eligible patients who were not terminally
ill (and thus unqualified for hospice care) and billed
Medicare and Medicaid for their treatment. Holloway further
alleges that Heartland ignored its responsibility to refund
the government amounts it overpaid for such improperly billed
is proper pursuant to 28 U.S.C. § 1331.
is Heartland's motion to dismiss (Doc. 82). For the reasons
that follow, I grant the motion.
provides hospice services to its patients, many of whom are
enrolled in Medicare or Medicaid.
Statutory and Regulatory Framework
and Medicaid programs reimburse hospice providers for
treatment they provide “terminally ill”
patients. 42 C.F.R. § 418.20(b). A patient is
terminally ill if his or her prognosis “is for a life
expectancy of 6 months or less if the terminal illness runs
its normal course.” Id. at §
418.22(b)(1). If a patient is not terminally ill, he or she
is ineligible for hospice care. See Id. at §
each treatment period, the hospice provider must obtain, as a
condition precedent to payment, a written certification from
the patient's attending physician (and, for an initial
ninety-day period, the hospice's medical director) that
the patient is terminally ill. Id. at § 418.22;
42 U.S.C. § 1395f(7). In turn, hospice providers submit
CMS Form UB-04 to the government as a claim for payment.
(Doc. 69 at 10, ¶ 20). The form acknowledges that
“[p]hysician's certifications and re-certifications
. . . are on file.”
Holloway's Employment With Heartland
November, 2009, Heartland hired Holloway as a Regional
Hospice Consultant (RHC). Her job was to evaluate Heartland
providers' entitlement to payment for hospice services.
To make her evaluations, Holloway reviewed patients'
clinical and insurance documentation, including their
eligibility for Medicare or Medicaid. (Doc. 69 at 12, ¶
25). Some patients' files were designated as “Bill
Hold Chart Audits, ” meaning Heartland held
“claims to Medicare for payment . . . pending . . .
Holloway's review.” (Id. (internal
including Holloway, prepared for executives' review
“workbooks” discussing patients'
“clinical records and billing histories” and
identifying for discharge patients who the RHCs concluded
were not terminally ill. (Doc. 69 at 14, ¶ 28).
“Holloway routinely followed up” on her
recommendations and often found that the patients she
identified in her workbooks “had not been discharged
but remained on hospice and continued to be the subject of
claims to the Medicare Part A and Medicaid systems.”
(Id. at 34, ¶ 72).
October, 2010, Holloway's employment at Heartland ended.
(Doc. 69 at 12, ¶ 25).
Holloway's Qui Tam Action
originally filed her qui tam complaint alleging FCA
violations on August 24, 2010. (Doc. 1). After a seven and
one-half-year investigation, the government filed its notice
of election to decline intervention on March 1, 2018. (Doc.
55). In response to an August 6, 2018 motion to dismiss (Doc.
68), Holloway sought, and I granted, leave to amend her
complaint (Doc. 70). The amended complaint (Doc. 69) is the
subject of the pending motion (Doc. 82).
amended complaint asserts that Heartland 1) presented false
or fraudulent claims for payment to the government (the
“presentment” claim); 2) prepared false records
in support of such claims for payment (the “false
records” claim); and 3) retained payments from the
government to which Heartland was not entitled (the
“reverse” false claim). (See Doc. 69 at
support of these claims, Holloway alleges corporate-wide
practices aimed at inflating Heartland's hospice census:
• A reward/punishment system, whereby
Heartland 1) promised certain employee groups bonuses if
hospice agencies met targets for new enrollments and achieved
census and billing benchmarks (Doc. 69 at 15-16, ¶ 31);
2) promised additional vacation hours to the agency with the
largest census increase in its region (id. at 17-18,
¶ 35); and 3) threatened to terminate certain
Toledo-based employees if facilities failed to meet census
requirements (id. at 18, ¶ 36).
• Employee training that discouraged
“clinical personnel charged with preparing [patient]
documentation” from using “ship sinkers, ”
that is, language depicting patient improvement, and instead
encouraged “negative charting, ” or
“focus[ing] . . . on purported clinical indicia of
medical decline” as would support hospice
recertification. (Doc. 69 at 22-23, ¶¶ 42-44).
• Authorizing non-physician employees to
override physician recommendations to
discharge patients from hospice care where physicians'
notes indicated the patient no longer needed such care. (Doc.
69 at 27-28, ¶¶ 56-57).
submits that these practices caused employees to produce
“distorted records, ” on which medical directors
and physicians relied when “deciding whether or not to
certify or recertify” patients as hospice-eligible.
(Doc. 69 at 20, ¶¶ 39-40). In turn, she asserts,
Heartland submitted claims for payment that falsely
represented the patients' eligibility. (Id. at
20, ¶ 41).
also alleges that Heartland retained funds the government
paid for treating unqualified patients by:
• Instructing employees not to review discharged
patients' records beyond the most recent billing
period to determine whether the agency should have discharged
such patients sooner (and, thereby, ceased billing for their
treatment sooner) (Doc. 69 at 35, ¶ 76); and
• Refusing to respond to Medicare auditors'
requests for additional documentation when
“Heartland knew (or realized upon inquiry)” that
subject patients “were not eligible for hospice
services, ” causing the auditors to deny one
month's worth of claims but take no further action
(Doc.69 at 37, ¶ 79).
survive a motion to dismiss under Rule 12(b)(6), the
complaint “must contain sufficient factual matter,
accepted as true, to state a claim that is plausible on its
face.” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009). “A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Id. At this
stage, I must “draw all reasonable inferences in favor
of [plaintiffs].” Courtright v. City of Battle
Creek, 839 F.3d 513, 520 (6th Cir. 2016).
alleging fraud or mistake, a party must state with
particularity the circumstances constituting fraud or
mistake.” Fed.R.Civ.P. 9(b). “[A] complaint
alleging FCA violations must allege the underlying
facts” in accordance with Rule 9(b). United States
ex rel. Bledsoe v. Cmty. Health Sys., Inc., 342 F.3d
634, 641 (6th Cir. 2003) (hereinafter Bledsoe I)
(citing Yuhasz v. Brush Wellman, Inc., 341 F.3d 559,
562-63 (6th Cir. 2003)). This means that a qui tam
plaintiff must “state with particularity the
circumstances (i.e., the time, place, and substance)
surrounding the fraudulent activity.” Id. at
The FCA, 31 U.S.C. § 3729, imposes civil liability on a
(A) knowingly presents, or causes to be presented, a false or
fraudulent claim for payment or approval;
(B) knowingly makes, uses, or causes to be made or used, a
false record or statement material to a false or fraudulent
claim; [or] . . .
(F) knowingly conceals or knowingly and improperly avoids or
decreases an obligation to pay or transmit money or property
to the Government.
private individual, known as a relator, may bring a qui
tam suit for alleged FCA violations on the
government's behalf. United States ex rel. Jones v.
Horizon Healthcare Corp., 160 F.3d 326, 329 (6th Cir.
1998) (citing 31 U.S.C. § 3730(b)(1)). On receiving a
qui tam complaint, the government may choose whether
to participate in the case. 31 U.S.C. § 3730(a)(2). If
the government declines to intervene, the relator
“shall have the right to conduct the action.”
Id. at § 3730(c)(3).
argues that the FCA's public disclosure rule bars
Holloway's complaint, and, alternatively, that Holloway
fails to plead her claims with particularity.
The Public Disclosure Bar
qui tam suit cannot proceed if “the basis of
the lawsuit” has been publicly disclosed unless the
relator “establish[es] [her]self as the original source
of the information.” United States ex rel. Antoon
v. Cleveland Clinic Found., 788 F.3d 605, 614 (6th Cir.
2015). This so-called “public-disclosure bar
‘provides a broad sweep' and is
‘wide-reaching.'” United States ex rel.
Armes v. Garman, 719 Fed. App'x 459, 462-63 (quoting
Shindler Elevator Corp. v. U.S. ex rel. Kirk, 563
U.S. 401, 408 (2011)).
Amendments to the Public Disclosure Bar
amended the public disclosure bar in March, 2010.
Id. Because Holloway's complaint concerns
conduct beginning in 2004 and ending in 2018 (see
Doc. 69 at 11, ¶ 24), “the amended complaint is
subject to both versions of the public-disclosure bar.”
United States ex rel. Ibanez v. Bristol-Meyers Squibb
Co., 874 F.3d 905, 918 (6th Cir. 2017) (citing
Antoon, supra, 788 F.3d at 614-15).
“But . . . any difference in statutory language is
irrelevant if the outcome would be the same under either
the pre-amendment version of the public disclosure rule:
No court shall have jurisdiction over an action under this
section based upon the public disclosure of allegations or
transactions in a criminal, civil, or administrative hearing,
in a congressional, administrative, or Government Accounting
Office report, hearing, audit, or investigation, or from the
news media, unless the action is brought by the Attorney
General or the person bringing the action is an original
source of the information. 31 U.S.C. § 3730(e)(4)(A)
(effective through March 22, 2010).
post-amendment version of the statute is non-jurisdictional:
The court shall dismiss an action or claim under this
section, unless opposed by the Government, if substantially
the same allegations or transactions as alleged in the action
or claim were publicly disclosed-
(i) in a Federal criminal, civil, or administrative hearing
in which the Government or its agent is a party;
(ii) in a congressional, Government Accountability Office, or
other Federal report, hearing, audit, or investigation; or
(iii) from the news media, unless the action is brought by
the Attorney General or the person bringing the action is an
original source of the information.
31 U.S.C. § 3730(4)(A) (March 23, 2010 amendment);
see also United States ex rel. Harper v. Muskingum
Watershed Conservancy Dist., 842 F.3d 430, 435 (6th Cir.
2016) (“[T]he public disclosure bar is no longer
jurisdictional and instead may be pleaded as an affirmative
defense.”) (internal quotations and citation omitted).
Sixth Circuit has employed the same analytical framework to
both versions of the statute, compare United States ex
rel. Poteet v. Medtronic, Inc., 552 F.3d 503, 511 (6th
Cir. 2009) with Armes, supra, 719 Fed.
App'x at 463. Accordingly, I likewise apply that
framework here: “To determine whether [the public
disclosure] bar applies, a court must consider ‘first
whether there has been any public disclosure of fraud, and
second whether the allegations in the instant case are
‘based upon' the previously disclosed
fraud.'” Poteet, supra, 552 F.3d
at 511 (quoting United States ex rel. Gilligan v.
Medtronic, Inc., 403 F.3d 386, 389 (6th Cir. 2005))
(additional internal citations and quotations omitted).
“If the answer is ‘no' to any of these
questions, the inquiry ends, and the qui tam action
may proceed; however, if the answer to each of the above
questions is ‘yes,' then [the court] must determine
whether the relator nonetheless qualifies as an
‘original source[.]'” Walburn v. Lockheed
Martin Corp., 431 F.3d 966, 974 (6th Cir. 2005) (citing
Jones, supra, 160 F.3d at 330).
Whether Holloway's Claims Were Publicly
a relator's qui tam action to be barred by a
prior ‘public disclosure' of the underlying fraud,
the disclosure must have (1) been public, and (2) revealed
the same kind of fraudulent activity against the government
as alleged by the relator.” Poteet,
supra, 552 F.3d at 511 (citing 31 U.S.C. §