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United States v. NAPA Management Services Corp.

United States District Court, M.D. Pennsylvania

June 20, 2017



          MALACHY E. MANNION United States District Judge

         Defendant Pocono Medical Center moves to completely dismiss the redacted complaint, (Doc. 26), filed by plaintiff/relator, a nurse anaesthetist formerly employed by one of the other defendants, in this qui tam action alleging that all defendants violated the False Claims Act by submitting claims to Medicare for reimbursement regarding anesthesiology services that were in violation of the rules and regulations. Relator also asserts False Claims Act and state law Whistleblower claims against all defendants alleging that they retaliated against him for reporting the wrongdoing, as well as state law employment and contractual claims involving his termination of employment. The United States has declined to intervene in this action. The court will grant defendant Pocono Medical Center's motion in its entirety. (Doc. 50).


         On December 6, 2013, plaintiff/relator Michael S. Lord (“relator”) filed his original complaint under seal, (Doc. 1), against defendant Pocono Medical Center (“PMC”) and defendants NAPA Management Services Corporation, North American Partners In Anesthesia, LLP (“NAPA”), and North American Partners In Anesthesia (Pennsylvania), LLC (“NAPA-PA”), (collectively “NAPA defendants”). On November 7, 2016, the United States filed a notice of election to decline intervention in this case under 31 U.S.C. §§3730(b)(4)(B) of the FCA and allowed relator to continue with this case in the name of the United States. (Doc. 24). The court then issued an Order on November 8, 2016 directing relator to file a redacted version of his complaint by December 7, 2016 and, directing that the redacted complaint be unsealed on December 14, 2016. (Doc. 25). The court also directed relator to serve the redacted complaint on defendants after it was unsealed. On December 7, 2016, relator filed his redacted complaint against PMC and NAPA defendants. (Doc. 26). Subsequently, relator served defendants with the redacted complaint.

         On March 3, 2017, defendant PMC filed a motion to dismiss relator's claims asserted under the False Claims Act (“FCA”), 31 U.S.C. §3729, et seq., for failure to satisfy the heightened pleading requirements of Fed.R.Civ.P. 9(b). PMC also moves to dismiss all of the federal claims and the Pennsylvania state law claims pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief can be granted. (Doc. 50). NAPA defendants also jointly filed a motion to dismiss on March 3, 2017, (Doc. 52), regarding relator's complaint, (Doc. 26), pursuant to Fed.R.Civ.P. 9(b) and Fed.R.Civ.P. 12(b)(6). After being granted an extension of time, NAPA defendants filed their brief in support of their motion on March 22, 2017. (Doc. 59). In partial response to NAPA defendants' motion, relator filed a notice of voluntary dismissal on March 27, 2017, pursuant to Fed.R.Civ.P. 41(a)(1)(A)(i), dismissing defendant North American Partners In Anesthesia, LLP from this case without prejudice. (Doc. 60). Defendant North American Partners In Anesthesia, LLP was terminated from this case and a stipulation was filed to amend the caption by deleting this defendant from it. (Doc. 63). The stipulation was then approved by the court. (Doc. 66).

         On April 7, 2017, PMC filed its brief in support of its motion to dismiss. (Doc. 65).

         After being granted an extension of time, relator filed his omnibus brief in opposition to both motions to dismiss on May 3, 2017. (Doc. 69). PMC and NAPA defendants filed their respective reply briefs on May 17, 2017. (Doc. 70, Doc. 71).

         As such, both motions to dismiss are ripe for review. The court shall address PMC's motion to dismiss in this memorandum.[1]

         The court has jurisdiction over this case pursuant to 28 U.S.C. §1331. The court can exercise supplemental jurisdiction over relator's state law claims under 28 U.S.C. §1367. Venue is appropriate in this court since the claims arose in this district and all parties are located here. See 28 U.S.C. §1391.


         Relator was a certified registered nurse anaesthetist (“CRNA”) who was employed by NAPA-PA during the relevant time of this case, i.e., June 2011 through June 21, 2013. NAPA-PA is owned by NAPA which is an anesthesia and perioperative management company employing over 1, 000 providers in over 45 practice settings, including PMC. Relator alleges that NAPA-PA employees, including himself and other CRNAs and anesthesiologists, performed services “for [NAPA-PA] at PMC.” (Doc. 26, ¶ 54). Relator alleges that NAPA defendants violated the FCA by submitting false claims to Medicare for reimbursement of anesthesiology services. Relator alleges that NAPA-PA submitted false claims to Medicare relating to NAPA anesthesiologists who performed procedures at PMC. Specifically, relator alleges that during his employment with NAPA-PA when he worked at PMC, he witnessed NAPA's systematic practices to overbill Medicare by claiming it delivered “medically directed” services, when NAPA only provided “medical supervision” services to Medicare patients. (Doc. 26, ¶ 69). Relator alleges that these billing practices by NAPA defendants violated the regulations of the Centers for Medicare and Medicaid Services (“CMS”) which administers the Medicare and Medicaid programs. 42 U.S.C. §§1302, 1395hh. Relator alleges that he told his supervisors, including Dr. Anthony Nostro, Chief of Anesthesiology at PMC but an employee of NAPA, about the false billing, and to the chief compliance officers at NAPA and PMC, and that they failed to take any action to correct the fraudulent conduct. Instead, relator alleges that defendants retaliated against him for reporting the violations.

         Relator also raises state law claims regarding the termination of his employment with NAPA-PA as well as Pennsylvania breach of contract and Wage Payment and Collection Law claims against all defendants. Additionally, relator raises FCA claims against PMC and avers that he informed PMC of the alleged wrongful conduct of NAPA defendants and that PMC failed to take any action to correct it. Further, while relator does not allege that PMC directly submitted any false claims, he alleges that PMC caused the NAPA defendants to submit false claims and caused the NAPA defendants to make or use a false record or statement material to a false claim, in violation of 31 U.S.C. §§3729(a)(1), (2). Relator also asserts FCA and state law Whistleblower retaliation claims against all defendants.

         In particular, Counts I and II of the complaint allege violations of the FCA under 31 U.S.C. §3729(a)(1) and §3729(a)(2), respectively. In Count I, (Doc. 26, pp. 73-75), relator basically alleges that “since 2007, the Defendants have been engaged in a scheme to defraud the United States Government into approving or paying false claims”, that “[he] reported in good faith what he believed to be serious violations of [the FCA]”, and that “[he] repeatedly advised the Defendants that the NAPA Break Model used by the NAPA Defendants did not comply with federal law.” Relator states that the NAPA Break Model at PMC was in violation of the law since it “does not provide for continued immediate availability of a medically directing anesthesiologist during CRNA breaks and consequently there is routinely no available replacement or any second anesthesiologist of record who has assumed (and documented) the responsibility for meeting the Medicare requirement of immediate availability while the attending anesthesiologist of record is unavailable while providing CRNA break relief.”

         In Count II, (Doc. 26, pp. 75-76), relator alleges “[f]or purposes of obtaining or aiding to obtain payment or approval of reimbursement claims made to federal health benefit programs, from at least the past six (6) years, the Defendants made or presented or caused to be made or presented to the United States false or fraudulent records, knowing these records to be false or fraudulent or acting with reckless disregard or deliberate ignorance thereof” and, that “the United States, through its carriers, was unaware of the foregoing circumstances and conduct of the Defendants and in reliance on said false and fraudulent records authorized payments to be made to the Defendants, made such payments, and has been damaged.” Count III is an FCA whistleblower retaliation claim in violation under 31 U.S.C. §3730(h). Relater alleges that “[he] was engaged in protected activity by repeatedly advising his superiors that he believed that Defendants had violated the law by, among other things, submitting false claims for reimbursement from Medicare” and, that “[a]s a direct result of Relator having lawfully investigated and reported to his superiors what he believed to be fraudulent conduct or wrongdoing, Defendants discharged, demoted, threatened, harassed, and/or discriminated against Relator in the terms and conditions of his employment.” Count IV is a claim under the Pennsylvania Whistleblower Law (“PWL”), 43 P.S. §1423(a), in which relator alleges that he is a whistleblower “because he was a person who witnessed or had evidence of wrongdoing while employed by NAPA and who made good faith reports of said wrongdoing in writing and verbally to NAPA during his employment” and, that defendants NAPA-PA and NAPA Management retaliated against him by making his employment situation untenable and by creating a hostile work environment which resulted in his constructive discharge for reporting wrongdoing by NAPA.

         Count V is a claim under the Pennsylvania Wage Payment and Collection Law (“WPCL”), 43 P.S. §260.1, et seq., in which relator seeks the repayment of unpaid wages and benefits that he would have earned if his employment with NAPA-PA had not ended prematurely.

         Count VI is a common law claim for wrongful termination. Relator alleges that “[o]n or about June 21, 2013, the NAPA Defendants constructively discharged [him] from his employment with [NAPA-PA]” and, that “the NAPA Defendants terminated [his] employment in retaliation of [his] good faith reporting of billing fraud and abuse and the violations of the standard of care in the treatment of patients.” In addition to seeking compensatory damages with respect to this claim, relator alleges that “[a]s a result of the NAPA Defendants' outrageous conduct, [he] is entitled to punitive damages.” In Count VII, relator raises a breach of contract claim in which he alleges that “[i]n 2009, [he] entered into a [5-year employment] contract with [NAPA-PA] so that he could: (a) obtain tuition reimbursement for the purpose of becoming a CRNA; and (b) continue to provide CRNA services at PMC which was close to his home.” Relator also alleges that he “intended to work for [NAPA-PA] during the entire length of his contract while he pursued his doctorate at Yale.” However, relator alleges that NAPA-PA breached several provisions of the Employment Agreement and, that it ultimately breached the Agreement by constructively discharging him when he had about three years of employment left on the Agreement. He further alleges that his attempts to mitigate his damages by obtaining alternate employment have been hindered since the NAPA defendants “effectively black listed” him and have provided “negative references to prospective employers.”


         Defendant PMC's motion to dismiss is brought pursuant to the provisions of Fed.R.Civ.P. 12(b)(6). This rule provides for the dismissal of a complaint, in whole or in part, if the plaintiff fails to state a claim upon which relief can be granted. The moving party bears the burden of showing that no claim has been stated, Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005), and dismissal is appropriate only if, accepting all of the facts alleged in the complaint as true, the plaintiff has failed to plead “enough facts to state a claim to relief that is plausible on its face, ” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1974 (2007) (abrogating “no set of facts” language found in Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). The facts alleged must be sufficient to “raise a right to relief above the speculative level.” Twombly, 550 U.S. 544, 127 S.Ct. at 1965. This requirement “calls for enough fact[s] to raise a reasonable expectation that discovery will reveal evidence of” necessary elements of the plaintiff's cause of action. Id. Furthermore, in order to satisfy federal pleading requirements, the plaintiff must “provide the grounds of his entitlement to relief, ” which “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Phillips v. County of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008) (brackets and quotations marks omitted) (quoting Twombly, 550 U.S. 544, 127 S.Ct. at 1964-65).

         In considering a motion to dismiss, the court generally relies on the complaint, attached exhibits, and matters of public record. See Sands v. McCormick, 502 F.3d 263 (3d Cir. 2007). The court may also consider “undisputedly authentic document[s] that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff's claims are based on the [attached] documents.” Pension Benefit Guar. Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993). Moreover, “documents whose contents are alleged in the complaint and whose authenticity no party questions, but which are not physically attached to the pleading, may be considered.” Pryor v. Nat'l Collegiate Athletic Ass'n, 288 F.3d 548, 560 (3d Cir. 2002). However, the court may not rely on other parts of the record in determining a motion to dismiss. See Jordan v. Fox, Rothschild, O'Brien & Frankel, 20 F.3d 1250, 1261 (3d Cir. 1994).

         Generally, the court should grant leave to amend a complaint before dismissing it as merely deficient. See, e.g., Fletcher-Harlee Corp. v. Pote Concrete Contractors, Inc., 482 F.3d 247, 252 (3d Cir. 2007); Grayson v. Mayview State Hosp., 293 F.3d 103, 108 (3d Cir. 2002); Shane v. Fauver, 213 F.3d 113, 116-17 (3d Cir. 2000). “Dismissal without leave to amend is justified only on the grounds of bad faith, undue delay, prejudice, or futility.” Alston v. Parker, 363 F.3d 229, 236 (3d Cir. 2004).


         In its motion, PMC moves to dismiss all Counts of relator's complaint with prejudice. PMC argues that all of the claims against it should be dismissed under Rule 12(b)(6) for failure to state cognizable claims. PMC also argues that the substantive FCA claims against it should be dismissed for ...

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