The opinion of the court was delivered by: Judge Munley
Before the court are defendants' motion to dismiss for lack of subject matter jurisdiction, defendants' motion for summary judgment and plaintiff's motion for summary judgment.*fn1 Having been fully briefed, the matters are ripe for disposition.
This case involves Relator Rodney J. Repko's ("relator") claims that Defendants Guthrie Clinic ("GC" or "the Clinic"), Guthrie Healthcare System ("GH Robert Packer Hospital, Dr. Terrance Devine and Guthrie Health engaged in large- S"), scale health-care fraud involving millions of dollars in reimbursements from federal programs. Relator alleges that an improper financial relationship existed between the various defendants, and that these financial relationships led to misuse of funds from federal programs. The relator contends that the defendants created an improper financial relationship between the Guthrie Clinic and the other defendants. The other defendants provided the Guthrie Clinic with millions of dollars in financial benefits over a period of years. In exchange for these financial benefits, the Clinic provided the other defendants with referrals and thus income. This arrangement violated federal laws, and relator argues that these improper relationships caused the defendants to fraudulently receive hundreds of millions of dollars in Medicare and Medicaid payments.
Relator Rodney Repko formerly served as General Counsel for the Guthrie Clinic and Guthrie Heathcare System. (Defendants' Statement of Facts (Doc. 203) (hereinafter "defendants' statement") at ¶ 14). He served the Guthrie Clinic from August 1982 until September 1998 and the Healthcare System from January 1990 until March 1993. (Id.). Defendant Guthrie Clinic ("GC") is a professional corporation consisting of multi-specialty group medical practice that operates in the "Twin Tiers" region of southern New York and northern Pennsylvania. (Id. at ¶ 1). Defendant Guthrie Healthcare System ("GHS") is a non-profit corporation consisting of acute care hospitals, nursing homes, home care services and other related health-care operations in that same region. (Id. at ¶ 7). Defendant Robert Packer Hospital is a tertiary care teaching hospital located in Sayre, Pennsylvania. (Id. at ¶ 9).
Defendant Guthrie Health ("GH") is a non-profit corporation organized in June, 2001. (Id.). GC and GHS are members of GH, which was formed to allow those two entities better to fulfill their missions. (Id. at ¶ 12). Defendant Terrance Devine, M serves as Chief of Ophthalmology at GC. (Id. at ¶ 13). Devine has worked at GC at least twenty-five years. (Id. at ¶ 13). He is a cataract surgeon. (Id.).
Relator left his employment with defendants in 1998 (Id. at ¶ 14). He filed initial complaint in this matter in 2004, after he had been arrested on federal financial charges and signed a plea agreement that required him to provide information on the illegal activities of others as a condition of that agreement. (See Doc. 1). Relator then filed two amended complaints over the course of the next three years. Relator's third amended complaint, filed in October 2007, contained ten counts. (See Doc. 64). Count I raises a claim under the False Claims Act ("FCA") for presenting false claims to the government. Count II alleges a violation of the FCA through defendants' use of false records or statements to obtain payment of a claim from the government. Count III raises a retaliation claim under the FCA. Count IV is a common-law unjust enrichment claim. Count V alleges a common-law mistake-of-fact claim. Count VI is an FCA claim for concealment. Count VII raises a claim for circumvention under the Stark Law. Count VIII raises another FCA claim for presentation of false claims. Count IX alleges defendants violated the FCA by employing excluded physicians. Count X is an FCA conspiracy cause of action.
Defendants filed a motion to dismiss this complaint and the parties briefed the issue. On March 12, 2008, Judge McClure issued an opinion that granted the defendants' motion in part and denied it in part. The court denied the motion to dismiss with respect to defendants' claim that relator had failed to state claims for fraud with sufficient particularity. The court granted the motion to dismiss for failure to state a claim with respect to Counts III, IV, V, VI and VII of the third amended complaint. Relator's (two) claims for false claims under the FCA, filing of false records under the FCA, employment of excluded physicians, and conspiracy all remained part of the case. The court also ordered the defendants to file an answer to the counts remaining in the complaint. The parties engaged in discovery and at the close of the discovery period filed the instant motions. The parties briefed the issues.
Judge McClure unfortunately passed away before he could rule on those motions. The matter was then transferred to the undersigned judge. Seeking to address defendants' motion to dismiss, the court held an evidentiary hearing. The parties then engaged in additional briefing, bringing the case to its present posture. Jurisdiction
Plaintiff brings this claim pursuant to the False Claims Act, 31 U.S.C. § 2729, et seq. The court therefore has jurisdiction pursuant to 28 U.S.C. § 1331 ("The district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States.").
At issue in this case is whether the court has jurisdiction to hear plaintiff's claims brought pursuant to the False Claims Act. The court begins with an explanation of the statute at issue in this case and the bars to jurisdiction that statute raises.
The False Claims Act, 31 U.S.C. § 3729(a), provides that
Any person who--(1) knowingly presents, or causes to be presented, to an officer or employee of the United States Government or a member of the Armed Forces of the United States a false or fraudulent claim for payment or approval;
(2) knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government;
(3) conspires to defraud the government by getting a false or fraudulent claim allowed or paid United States ex rel. Schmidt v. Zimmer, Inc., 386 F.3d 235, 241 (3d Cir. 2004) (quoting 31 U.S.C. § 3729(a)), "is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000." To make out a prima facie claim under section 3729(a)(1) of this statute, "a plaintiff must show that: '(1) the defendant presented or caused to be presented to an agent of the United States a claim for payment; (2) the claim was false or fraudulent; and (3) the defendant knew the claim was false or fraudulent.'" Id. at 242 (quoting Hutchins v. Wilentz, Goldman & Spitzer, 253 F.3d 176, 182 (3d Cir. 2001)). A claim under Section 3729(a)(2) also requires a showing that "the defendant made or used (or caused someone else to make or use) a false record in order to cause the false claim to be actually paid or approved." Id.
The Third Circuit Court of Appeals has recently noted that "[t]here are two categories of false claims under the FCA: a factually false claim and a legally false claim." United States ex rel. Wilkins v. United Health Group, Inc., No. 10-2747, Slip Op. at 19 (3d Cir. June 30, 2011). A "factually false" claim occurs "when the claimant misrepresents what goods or services that it provided to the Government." Id. A "legally false" claim, on the other hand, occurs "when the claimant knowingly falsely certifies that it has complied with a statute or regulation the compliance with which is a condition for Government payment." Id. Further, two types of false certifications exist. Id. at 20. First, courts have identified an "express false certification theory," wherein "an entity is liable under the FCA for falsely certifying that it is in compliance with regulations which are prerequisites to Government payment in connection with the claim for payment of federal funds." Id. The "implied false certification theory . . . is premised 'on the notion that the act of submitting a claim for reimbursement itself implies compliance with governing federal rules that are a precondition of payment.'" Id. (quoting Mikes v. Straus, 274 F.3d 687, 699 (2d Cir. 2001)).*fn2
Suits under the False Claims Act may be brought in two ways: either by the United States Department of Justice, which can "file suit to collect damages suffered as the result of fraudulent claims which cause government money to be expended from the United States Treasury," or by a private plaintiff who brings "a qui tam action on behalf of the government to recover losses incurred because of the fraudulent claims." Schmidt, 386 F.3d at 242 (quoting Hutchins v. Wilentz, Goldman & Spitzer, 253 F.3d 176, 181-82 (3d Cir. 2001)). If a private plaintiff initiates the action, "the government is permitted to intervene." Id. If the government chooses not to participate, "the private plaintiff may continue his suit even if the government declines to intervene." Id. If the private plaintiff (the "relator") succeeds in the action, that relator "is entitled to up to 30% of the funds the government recovers." Id.
Here, the relator filed his initial claim under seal. The government examined the allegations in the complaint and declined to intervene. The court then unsealed the complaint and the relator prosecuted the case.
Judge McClure's decision on the motion to dismiss explains the theory on which relator is proceeding:
Relator has alleged that every claim submitted to the government by Hospital during the relevant time period was fraudulent. This is because each of these claims was the result of a referral that was allegedly illegal under the Stark and Anti-Kickback laws. Thus, the theory is that the certification of compliance with the Stark and Anti-Kickback laws that was on each claim rendered each claim false.
Relator's claims thus implicate two Federal Statutes, the Stark Act, 42 U.S.C. § 1395nn, and the Anti-Kickback law, 42 U.S.C. § 1320a-7b. "The Stark Act prohibits the presentation of a claim to Medicare for a designated health service by an entity where the service was furnished pursuant to a prohibited referral by a physician that has a financial relationship with the entity." Schmidt, 386 F.3d at 239 n.6 (citing 42 U.S.C. § 1395nn(a)(1)(A)). Under the statute, "a physician may not refer Medicare patients to an entity for 'designated health services,' including inpatient and outpatient hospital services, if the referring physician has a nonexempt 'financial relationship' with such entity." Id. "Falsely certifying compliance with the Stark or Anti-Kickback Acts in connection with a claim submitted to a federally funded insurance program is actionable under the FCA." United States ex rel. Kosenske v. Carlisle HMA, Inc., 554 F.3d 88, 94 (3d Cir. 2009). In Kosenske, the parties agreed that, "in the context of this case, the requirements of the Anti-Kickback Act and its implementary regulations are indistinguishable from those the Stark Act," and the court "refer[red] only to the latter in" its "analysis." Id. at 91.
Defendants claim that this court lacks jurisdiction to hear those claims. At issue here is whether a provision of the FCA precludes this court from assuming jurisdiction over plaintiff's claims. "In broad strokes, the FCA imposes penalties on persons who knowingly submit fraudulent claims to the government." United States ex. rel. Paranich v. Sorgnard, 396 F.3d 326, 332 (3d Cir. 2005). In an attempt to expose "fraud against the government, the FCA incentivizes private individuals aware of such fraud to bring civil actions as relators against those submitting such claims by allowing relators to collect a percentage of any recovery." Id. Before filing a civil "qui tam" action, "the relator must disclose the information regarding the fraud to the government." Id. If the government does not choose to intervene in the action within sixty days, "the relator may continue with the action unless the FCA's jurisdictional bar provision is triggered." Id. That jurisdictional bar provides that:
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, or Government Accounting Office [sic] 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.
United Sates ex. rel. Mistick PBT v. Housing Authority of the City of Pittsburgh, 186 F.3d 376, 382 (3d Cir. 1999) (quoting 31 U.S.C. § 3730(e)(4)(A)).
As such, courts have enumerated five elements which, if met, divest courts of jurisdiction over FCA qui tam claims: "(1) there was a 'public disclosure; (2) 'in a criminal, civil or administrative hearing, in a congressional, administrative, or Government [General] Accounting Office report, hearing, audit or investigation, or from the news media'; (3) of 'allegations or transactions of the fraud; (4) that the relator's action was 'based upon'; and (5) the relator was not an 'original source' of the information." Paranich, 396 F.3d at 332. In this context, an "original source" is "'an individual who has direct and independent knowledge of the information on which the allegations are based and has voluntarily provided the information to the Government before filing an action under this section which is based on the information.'" Id. (quoting 31 U.S.C. § 3730(e)(4)(B)). The court must determine whether the jurisdictional bar applies to each of relator's claims.
Courts have found that "in applying section (e)(4), it seems clear that each claim in a multi-claim complaint must be treated as if it stood alone." United States ex rel. Marena v. SmithKline Beecham Corp., 205 F.3d 97, 102 (3d Cir. 2000). The court's discussion will therefore examine whether each of relator's remaining claims are subject to the jurisdictional bar. First, the court will determine whether there was a public disclosure, and whether relator's claims are "based on" that disclosure. If there was a public disclosure, the court will then determine whether relator was an original source of the information. Since most of the relator's claims are based on the same theory--that defendants' falsely certified claims for medicare reimbursement based on an improper financial relationship between the various Guthrie entities in violation of the Stark and Anti-Kickback Acts--the court will address those claims together, and then examine the relator's other claims.
Essential to this analysis is an understanding of plaintiff's remaining claims. The claims that still exist in the complaint after Judge McClure's ruling are Count I, which alleges that defendants knowingly submitted false and fraudulent claims, cost reports and payment request certifications to agents and officials of the United States Government in violation of 31 U.S.C. § 3729(a)(1). Count II, which alleges that defendants knowingly constructed or used, or caused to be constructed or used, false records, documents and statements in order to get payment and/or approval of false or fraudulent claims, cost reports or payment certifications by officials and agents of the United States in violation of 31 U.S.C. § 3729(a)(2). Count VIII, which alleges that the Defendant Clinic conspired to and did knowingly refer patients to defendants GHS and the Hospital even though financial relationships prohibited by the Stark Law existed, and that the Hospital then submitted unlawful claims to Pennsylvania and New York Medicare and Medicaid, as well as ...