United States District Court, W.D. Pennsylvania
UNITED STATES OF AMERICA, ex rel, J. WILLIAM BOOKWALTER, III, et al., Plaintiffs,
UPMC, et al., Defendants.
Bissoon United States District Judge.
reasons that follow, Defendants' Motion to Dismiss (Doc.
88) will be granted, and Plaintiffs will be afforded an
opportunity to amend the complaint.
are familiar with the factual averments and legal issues
presented, and the Court writes for their benefit only.
Plaintiffs have initiated this qui tarn action
against Defendants under the False Claims Act
("FCA"), and the only remaining theories are that
Defendants violated the Anti-Kickback Statute
("AKS") and the Stark Law. See generally
Pls.' Opp'n (Doc. 91) at 1. Other allegations have
been released pursuant to settlement, see Id. at 1,
and Plaintiffs have disavowed the notion that "specific
claims for payment are false because the underlying services
were not medically necessary." Id. at 26.
Plaintiffs challenge Defendants' physician-compensation
system, which is based on the doctors' "wRVU"
production. "The more complex [a medical] procedure, the
greater [the] number of wRVUs . . . assigned." Am.
Compl. (Doc. 31) at ¶ 79. Pursuant to the
physicians' employment contracts, each doctor is required
to generate a minimum number of wRVUs per calendar year in
order to earn base compensation. Id. at ¶ 104.
Once the minimum is achieved, the doctor receives "bonus
pay, " at a rate of $45 per wRVU generated, even though
the federal healthcare program(s) compensate UPMC at "a
lower rate of approximately $35 per wRVU." Id.
at ¶ 105. Plaintiffs contend that this violates the AKS
and Stark Law, which prohibit certain self-interested
referral and ownership arrangements, because the wRVU
compensation system encourages physicians to "perform
medically unnecessary and/or [unnecessarily] complex
surgeries, " thereby driving up their wRVUs, and,
consequently, their personal remuneration. See
Pls.' Opp'n (Doc. 91) at 7.
Motion challenges Plaintiffs' Amended Complaint on a
number of different grounds, most of which center on the
"plausibility" standard under
Iqbal/Twombly, and the requirement that FCA
allegations be plead with specificity under Federal Rule
9(b). See generally Defs.' Br. (Doc. 89) at
12-25. The Court agrees with Defendants that Plaintiffs'
allegations, as currently plead, fail under the plausibility
and Rule 9(b) standards; their Motion will be granted; and
their analyses are incorporated by reference herein.
urge, however, that if Defendants' Motion is granted,
they be afforded an opportunity to amend their pleadings in
an attempt to state legally-viable claims. Pls.'
Opp'n (Doc. 91) at 26-27. While the Court has strong
doubts regarding their ability to do so, it will grant them
one last, best chance to plead legally cognizable claims. In
addition to Defendants' arguments, Plaintiffs also must
be prepared to address the following.
Plaintiffs' current pleadings is particularly difficult
for two reasons: (1) the Amended Complaint contains averments
regarding claims that since have been settled; and (2),
Plaintiffs expressly have disavowed the notion that false
claims were submitted because they were not "medically
necessary." See discussions supra. As
to the settled claims, they correspond to the only
allegations in the Amended Complaint that approach the level
of specificity contemplated under Rule 9(b). See Foglia
v. Renal Ventures Mgmt, LLC, 754 F.3d 153, 156 (3d Cir.
2014) (Rule 9(b) requires a plaintiff to allege
"particular details of a scheme to submit false claims[,
] paired with reliable indicia that lead to a strong
inference that claims were actually submitted")
(citation to quoted source omitted); compare
Stipulated Order of Dismissal (Doc. 78) (addressing dismissal
of claims related to billing of assisting-physician services,
services related to "residents, fellows and physician
assistants, " and "multi-level laminectomies"
performed "on fewer levels than reflected" in
claims for payment) with Am. Compl. at ¶¶
161-175, 176-203, 204-210 (providing greater specificity
regarding these theories than as relates to Plaintiffs'
to "medical necessity, " it is difficult to
reconcile Plaintiffs' disavowal of such claims with their
insistence that Defendants' compensation system
encourages and/or induces unlawful referrals under the AKS
and Stark Law. This is so because, in order to establish that
additional (or more complex) surgeries were caused to be
undertaken, by seemingly-inevitable implication, they
must show that a given procedure would fail the "medical
necessity " standard. See Pls.' Opp'n Br.
(Doc. 91) at 7 (physicians inflated their wRVUs by
"performing medically unnecessary and/or more complex
surgeries when simpler and safer procedures were the standard
of care"); see also Am. Compl. (Doc. 31) at
¶¶53, 67, 73 & 75 (emphasizing "medical
necessity" standard, as applied under each federal
healthcare program, including Medicare, Medicaid,
TRICARE/CHAMPUS and FEHBP).
conclusions notwithstanding, Plaintiffs posits that, while
they expressly disavow "medical necessity"
averments, "[f]his does not mean that evidence of the
performance of medically unnecessary procedures is
irrelevant" to their remaining claims, and they
"fully intend to pursue such evidence in
discovery." See Pls.' Opp'n (Doc. 91) at 26n.11.
The Court does notbelieve, however, that Plaintiffs can
"have it both ways." Plaintiffs cannot properly be
permitted to engage in a fishing-expedition to seek out
claims whose medical necessity may be questioned, while at
the same time eschewing "medical necessity"
averments to avoid the rigorous standards under Rule 9(b).
Plaintiffs must be prepared to offer more specific and
plausible allegations in support of their AKS and Stark Law
claims should they wish to avoid Defendants' arguments
regarding the application of seemingly obvious exceptions
built into the statutory framework. See generally Defs.'
Br. (Doc. 89) at 12-25. While Plaintiffs retort that
Defendants carry the burden of proving the exceptions are
satisfied, and/or that such matters cannot properly be
resolved at the 12(b)(b) stage, the lack of plausible and
sufficiently-specific allegations of liability make their
objections ring hollow. In the Amended Complaint, Plaintiffs
recount page-after-page of boilerplate standards regarding
the statutory and regulatory schemes, yet they offer only
bald conclusions that "the [contracting] parties did not
satisfy any exception[s]." Compare, e.g., Am. Compl.
(Doc. 31) at ¶¶ 81-95 (recounting standards under
Stark Law, including detailed recitation of exceptions for
"bona fide employment relationships, "
"personal service arrangements, " "fair market
value arrangements" and "indirect compensation
relationships") with Id. at If 152 (flatly
stating that the exceptions do not apply).In addition,
Plaintiffs' averments fail to offer a meaningful
distinction between purportedly-unlawful claims, submitted
pursuant to the "standard" compensation agreements
of physicians targeted in the Amended Complaint, and the
presumably-lawful claims submitted pursuant to the
Realtor-physician(s) ' own compensation agreements. See
Defs.' Br. (Doc. 89) at 17.
even assuming Plaintiffs eventually do assert sufficiently
specific and plausible averments in support of their AKS and
Stark Law claims, the Court has no reason to believe that
Defendants' arguments regarding the statutory exceptions
could not properly be converted to summary judgment. The
contractual dealings and provisions in question would,
presumably, speak for themselves, and the Court has
difficulty imagining why, and what, discovery would be
necessary for Plaintiffs properly to resist. Should such a
conversion be requested, and should Plaintiffs persuade the
Court that any modicum of discovery is appropriate (and
cannot be avoided by way of a voluntary informational
exchange), the parties may rest assured that any discovery
granted would be narrowly limited, and expedited, so that the
Court promptly may resolve the threshold issues. 
with the above, Defendants' Motion to Dismiss (Doc. 88)
is GRANTED, and Plaintiffs' deadline for filing a
curative amendment is July 10, 2017. No further
opportunity for amendment will be afforded, and Plaintiffs
must be prepared to make last, best efforts to state viable
claims. See generally Renze v. Longo. 2017 WL
782893, *4 (W.D. Pa. Mar. 1, 2017) ("[it] would be
inequitable to require [a defendant, who already once has
exhaustively and successfully defended [the plaintiffs]
grievances, to respond to a continuous stream of. . .
attempted amendments") (citation to quoted source
omitted). In amending, Plaintiffs shall account not only for
the discussions herein, but also for Defendants'
remaining arguments for dismissal. In addition,
Plaintiffs' amended pleadings shall omit allegations in
support of claims that have settled, as well as those made in
support of "medical necessity, " as disclaimed by
their counsel. Finally, and although it probably goes without
saying, the Court's grant of leave to amend does not
extend an invitation for Plaintiffs to espouse new theories
of putative-liability. See In re Chemed Corp.. 2017
WL 1712530, *13 (D. Del. Apr. 25, 2017) (when a court grants
leave for curative amendment, it properly may dismiss
proposed amendments that exceed the bounds of what was
considered) (collecting cases).
Plaintiffs have filed a second amended complaint, Defendants
shall plead or ...