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United States. v. Select Specialty Hospital-Wilmington, Inc.

United States District Court, D. Delaware

March 30, 2018

UNITED STATES OF AMERICA and STATE OF DELAWARE, ex rel, TERESA KELLY, Plaintiffs
v.
SELECT SPECIALTY HOSPITAL-WILMINGTON, INC., et al., Defendants

          MEMORANDUM

          CHRISTOPHER C. CONNER, CHIEF JUDGE

         Qui tarn plaintiff Teresa Kelly ("Kelly") commenced this action against defendants Select Specialty Hospital-Wilmington, Inc. (the "hospital"), Select Specialty Hospitals, Inc., Select Employment Services, Inc., Select Medical Corporation ("Select Medical") (collectively, the "Select defendants"), and Crystal Cheek ("Cheek") pursuant to the False Claims Act ("FCA"), 31 U.S.C. § 3729 et seq., and the Delaware False Claims and Reporting Act, Del. Code. Ann. tit. 6 §§ 1201-11. (See Doc. 16). Before the court is a motion (Doc. 17) to dismiss filed by the Select defendants pursuant to Federal Rule of Civil Procedure 12(b)(6).[1] For the reasons that follow, the court will grant in part and deny in part the motion.

         I. Factual Background & Procedural History

         Kelly is the chief nursing officer at the hospital, which provides long-term acute care. (Doc. 16 ¶¶ 6, 27). She has held this position since September 2014. (Id. ¶ 6) As chief nursing officer, Kelly "oversees [the] day-to-day operations" of hospital staff, clerks, and technicians. (Id.) She also serves on the hospital's medical executive committee. (Id.)

         The Select defendants receive payment from Medicare, Medicaid, and the Federal Employee Health Benefits Program (collectively, "state and federal healthcare programs") as reimbursement for certain medical services performed. (See id. ¶¶ 23, 30). Payment from these state and federal healthcare programs is conditioned upon certification (or recertification) from a physician, nurse practitioner, or clinical nurse specialist (collectively, "medical practitioners") that the medical service rendered was necessary. (Id. ¶¶ 17, 23, 25, 30-31). The hospital is required to ensure that all medical practitioners are credentialed. (Id. ¶ 35).

         Cheek was the hospital's health information management manager from 2008 until January 2016. (Id. ¶¶ 38, 62). As manager, Cheek was responsible for ensuring that the hospital's medical records complied with federal and state regulations. (Id. ¶ 39). After she reviewed these records, Cheek submitted them to Select Medical's corporate office for "coding and billing to the [f]ederal and [s]tate [h]ealthcare [p]rograms." (Id. ¶ 45; see also id. ¶ 35). Cheek was also responsible for ensuring that medical practitioners responsible for treating patients were "properly credentialed." (Id. ¶ 40).

         Cheek took a medical leave of absence in March 2015, and Kathleen Dawiedczyk ("Dawiedczyk") temporarily assumed Cheek's responsibilities. (Id. ¶ 42). That same month, Dawiedczyk discovered that Cheek kept cut-outs of medical practitioners' signatures underneath her desk calendar. (Id. ¶ 43; see also Doc. 16-1). Dawiedczyk purportedly showed these cut-outs to Kelly. (Doc. 16 ¶ 43).She also showed Kelly a previously discharged patient's chart where Cheek had used the cut-outs to forge the signatures of medical practitioners for services charged to federal and state healthcare programs. (Id.) Kelly allegedly reported what she saw to the hospital's chief executive officer, Sharon Rosetti ("Rosetti"). (Id. ¶ 47).

         Cheek returned to work in April 2015 and allegedly "continued to forge [medical practitioners'] signatures on unsigned medical records." (Id. ¶ 51). In September 2015, the hospital hired Donna Gares ("Gares") as its new chief executive officer. (Id. ¶ 53). Kelly told Gares about Cheek's conduct shortly after Gares was hired. (Id.) Two months later, health information management assistant Katie Desmond allegedly showed Kelly additional medical records "in which Cheek had forged medical practitioner signatures." (Id. ¶ 54). Kelly immediately approached Gares about Cheek's conduct. (Id. ¶ 55). Kelly discovered five more patient charts purportedly containing forged signatures in January 2016, and again reported Cheek's conduct to Gares. (Id. ¶¶ 57-58). After this third meeting, Gares "initiated an investigation" into Cheek's actions. (Id.) The hospital fired Cheek on January 26, 2018. (Id. ¶ 62). Kelly contends that Gares's investigation also revealed that Cheek "had not been examining the credentials of medical practitioners." (Id. ¶63).

         In February 2016, Kelly spoke with Robert Breighner ("Breighner"), Select Medical's Vice President of Compliance and Audit Services. (Id. ¶ 66). Kelly expressed to Breighner her frustration regarding the manner in which the Select defendants handled "Cheek's forging of medical practitioner signatures." (Id.) Breighner responded that Cheek's conduct was "not a reportable offense to any government entity" because it was a "he said, she said situation." (Id.) Breighner further indicated that "he 'was comfortable with the charts at risk.'" (Id.)

         Kelly contends that the Select defendants violated the FCA and the Delaware False Claims and Reporting Act by submitting claims for reimbursement to federal and state healthcare programs premised on medical records that contained forged signatures. (Id. ¶¶ 72-77). She avers that the federal and state healthcare programs would not have remitted payment to the Select defendants had they known the signatures were forged. (Id. ¶¶ 78-79). Kelly also contends that the Select defendants violated the FCA and the Delaware False Claims and Reporting Act by failing to ensure that medical practitioners were credentialed. (Id. ¶¶ 83-84).

         Kelly commenced the instant action on May 12, 2016, (Doc. 2), and filed an amended complaint (Doc. 16) on May 17, 2017. She asserts four claims: presenting or causing presentment of a false claim under 31 U.S.C. § 3729(a)(1)(A) (Count I); knowingly presenting a false or fraudulent record under 31 U.S.C. § 3729(a)(1)(B) (Count II); knowingly making a "reverse false claim" under 31 U.S.C. § 3729(a)(1)(G) (Count III); and violation of the Delaware False Claims and Reporting Act, Del. Code. Ann. tit. 6 §§ 1201-11 (Count IV). (Id.) The Select defendants move to dismiss the amended complaint in its entirety under Federal Rule of Civil Procedure 12(b)(6). (Doc. 17). The motion is fully briefed and ripe for disposition.[2]

         II. Legal Standard

         Rule 12(b)(6) of the Federal Rules of Civil Procedure provides for the dismissal of complaints that fail to state a claim upon which relief may be granted. Fed.R.Civ.P. 12(b)(6). When ruling on a motion to dismiss under Rule 12(b)(6), the court must "accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Phillips v. Cty. of Allegheny. 515 F.3d 224, 233 (3d Cir. 2008) (quoting Pinker v. Roche Holdings. Ltd.. 292 F.3d 361, 374 n.7 (3d Cir. 2002)). In addition to reviewing the facts contained in the complaint, the court may also consider "matters of public record, orders, exhibits attached to the complaint and items appearing in the record of the case." Oshiver v. Levin. Fishbein. Sedran & Berman. 38 F.3d 1380, 1384 n.2 (3d Cir. 1994); Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993).

         Federal notice and pleading rules require the complaint to provide "the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Phillips, 515 F.3d at 232 (alteration in original) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). To test the sufficiency of the complaint, the court conducts a three-step inquiry. See Santiago v. Warminster Twp., 629 F.3d 121, 130-31 (3d Cir. 2010). In the first step, "the court must 'tak[e] note of the elements a plaintiff must plead to state a claim.'" Id. at 130 (alteration in original) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 675 (2009)). Next, the factual and legal elements of a claim must be separated; well-pleaded facts are accepted as true, while mere legal conclusions may be disregarded. Id. at 131-32; see Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009). Once the court isolates the well-pleaded factual allegations, it must determine whether they are sufficient to show a "plausible claim for relief." Iqbal 556 U.S. at 679 (citing Twombly, 550 U.S. at 556); Twombly, 550 U.S. at 556. A claim is facially plausible when the plaintiff pleads facts "that allow[] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal 556 U.S. at 678.

         FCA claims are subject to the heightened pleading standard set forth in Federal Rule of Civil Procedure 9(b). United States ex rel. Petras v. Simparel, Inc., 857 F.3d 497, 502 (3d Cir. 2017). Rule 9(b) mandates that a party alleging fraud or mistake "state with particularity the circumstances constituting fraud or mistake." Fed.R.Civ.P. 9(b). Its purpose is to notify defendants "of the precise misconduct with which they are charged, and to safeguard defendants against spurious charges of. . . fraudulent behavior." Smith v. Carolina Med. Ctr., 274 F.Supp.3d 300, 308 (E.D. Pa. 2017) (quoting Seville Indus. Mach. Corp. v. Southmost Mach. Corp., 742 F.2d 786, 791 (3d Cir. 1984)).

         At the motion to dismiss stage, an FCA claimant must 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." Foglia v. Renal Ventures Mgmt., LLC, 754 F.3d 153, 157-58 (3d Cir. 2014) (quoting United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 190 (5th Cir. 2009)). They should allege "'the who, what, when, where[, ] and how of the events'" constituting the fraud. United States ex rel. Customs Fraud Investigations, LLC v. Victaulic Co., 839 F.3d 242, 272 (3d Cir. 2016) (quoting United States ex rel. Moore & Co., P.A. v. Majestic Blue Fisheries, LLC, 812 F.3d 294, 307 (3d Cir. 2016)). "Describing a mere opportunity for fraud will not suffice, " but a '"representative sample' of the ...


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