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United States Ex Rel. Guardiola v. Renown Health

United States District Court, D. Nevada

August 20, 2014

UNITED STATES OF AMERICA ex rel. CECILIA GUARDIOLA, Plaintiff,
v.
RENOWN HEALTH, RENOWN REGIONAL MEDICAL CENTER, and RENOWN SOUTH MEADOWS MEDICAL CENTER, Defendants.

ORDER

LARRY R. HICKS, District Judge.

Before the Court is Defendants Renown Health, Renown Regional Medical Center, and Renown South Meadows Medical Center's (collectively "Renown") Motion to Dismiss. Doc. #28.[1] Relator Cecilia Guardiola ("Guardiola") filed an Opposition (Doc. #42), to which Renown replied (Doc. #43).

I. Factual and Procedural History

Renown Health, a Nevada nonprofit organization, is the umbrella corporation under which related entities, including Renown Regional Medical Center ("Regional") and Renown South Meadows Medical Center ("South Meadows"), provide acute health care services. Doc. #17, ¶11. Guardiola is a registered nurse and compliance professional who, on June 1, 2009, was hired by Renown as Director of Clinical Documentation. Id., ¶9. Guardiola's role was to improve medical documentation in order to support improved billing. Id. Guardiola was eventually promoted to Director of Clinical Compliance, but after her efforts at improving the billing system were allegedly stifled by Renown, she resigned on January 15, 2012. Id.

On January 10, 2014, Guardiola filed an Amended qui tam Complaint against Renown to recover damages resulting from Renown's knowing efforts to defraud government-funded health insurance programs, specifically Medicare.[2] Id., pp. 1-2. Guardiola alleges that, from July 2007 through March 2011, Renown knowingly submitted or, in reckless disregard of the truth, allowed to be submitted, short-stay inpatient claims ("zero-day stays" and "one-day stays") that should have been billed as outpatient claims. Id., ¶¶29, 72-77. Guardiola further alleges that these improperly billed claims were caused by (1) inadequate clinical documentation to support inpatient claims, (2) antiquated computer systems that generated false claims, (3) internal processes designed to improperly assign inpatient admission status, and (4) a lack of review to ensure appropriate inpatient status assignments. Id., ¶30. Guardiola became aware of the alleged deficiencies in the Renown billing system during the fourth quarter of 2009. Id., ¶33. Allegedly Renown did nothing to correct and/or prevent these problems. Id. Guardiola claims that she brought these problems to the attention of Renown management personnel and none of them acted to correct and/or prevent the Medicare claims from being improperly labeled and billed. Id., ¶¶49-71. Moreover, Guardiola alleges that Renown management encouraged, directed, and facilitated the continued fraudulent activity against Medicare. Id., ¶¶78-89. Finally, Guardiola alleges that Renown management engaged in the aforementioned fraudulent activity in order to obtain higher payments from Medicare. Id.

II. Legal Standard

Renown seeks dismissal of Guardiola's Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. To survive a motion to dismiss for failure to state a claim, a complaint must satisfy the Federal Rule of Civil Procedure 8(a)(2) notice pleading standard. See Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1103 (9th Cir. 2008). That is, a complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). The Rule 8(a)(2) pleading standard does not require detailed factual allegations; however, a pleading that offers "labels and conclusions' or a formulaic recitation of the elements of a cause of action'" will not suffice. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)).

Furthermore, Rule 8(a)(2) requires a complaint to "contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Id. (quoting Twombly, 550 U.S. at 570). A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference, based on the court's judicial experience and common sense, that the defendant is liable for the misconduct alleged. See id. at 678-79. "The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief." Id. at 678 (internal quotation marks and citation omitted).

In reviewing a motion to dismiss, the court accepts the facts alleged in the complaint as true. Id. The "factual allegations that are taken as true must plausibly suggest an entitlement to relief, such that it is not unfair to require the opposing party to be subjected to the expense of discovery and continued litigation." Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011). Moreover, "bare assertions... amount[ing] to nothing more than a formulaic recitation of the elements of a... claim... are not entitled to an assumption of truth." Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) (citing Iqbal, 556 U.S. at 681) (brackets in original) (internal quotation marks omitted). The court discounts these allegations because "they do nothing more than state a legal conclusion-even if that conclusion is cast in the form of a factual allegation." Id. (citing Iqbal, 556 U.S. at 681). "In sum, for a complaint to survive a motion to dismiss, the non-conclusory factual content, ' and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief." Id.

Moreover, because FCA claims are grounded in fraud, they must meet the heightened pleading standard of Federal Rule of Civil Procedure 9(b). See Cafasso v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1054 (9th Cir. 2011). Rule 9 provides that "[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." Fed.R.Civ.P. 9(b). An allegation of fraud must be "specific enough to give defendants notice of the particular misconduct which is alleged to constitute the fraud so that they can defend against the charge and not just deny that they have done anything wrong." Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir. 1985). Averments of fraud must be accompanied by "the who, what, when, where, and how of the misconduct charged, ' as well as what is false or misleading about [the purportedly fraudulent] statement, and why it is false.'" Cafasso, 637 F.3d at 1055 (quoting Ebeid ex rel. United States v. Lungwitz, 616 F.3d 993, 998 (9th Cir. 2010)).

Nevertheless, "this is a pleading requirement, not an evidentiary burden. Thus, although the focus of the FCA is on false claims, plaintiff need not identify representative examples of false claims at the pleading stage." United States ex rel. Huey v. Summit Healthcare Ass'n, Inc., 2011 WL 814898, at *4 (D. Ariz. March 3, 2011) (citing Ebeib, 616 F.3d at 998-99). "Instead, it is sufficient 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.'" Id.

III. Discussion

Here, Guardiola alleges that Renown violated subparagraphs (A), (B), and (G) when it knowingly submitted inpatient claims to Medicare for payment that should have been billed on an outpatient or outpatient observation basis. See Doc. #17, ¶¶ 90-108. As amended, the FCA extends civil liability to any person who:

(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 (G) knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or ...

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