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United States v. My Left Foot Childrens Therapy LLC

United States District Court, D. Nevada

May 9, 2017




         I. SUMMARY

         This case involves allegations of Medicaid and Tricare fraud brought against a Las Vegas children's rehabilitative functional therapy company and the company's owners. Before the Court is Defendant My Left Foot (“MLF”), Jon Gottlieb and Ann Marie Gottlieb's (collectively, “the Gottliebs”) Motion to Dismiss the First Amended Complaint (“Motion”). (ECF No. 68.) The Court has reviewed Plaintiff's response (ECF No. 69) and Defendants' reply (ECF No. 71), as well as the federal government's Statement of Interest (ECF No. 80) and Defendants' reply (ECF No. 81). Defendants also filed a Notice of Supplemental Authority (ECF No. 86) without leave of court as is required by Local Rule LR 7-2(g). The Court will strike the notice. The Court's analysis is based solely on the briefs mentioned above. Plaintiff's motion and amended motion to strike the supplement (ECF Nos. 87, 88) are denied as moot.

         For the reasons stated below, Defendants' Motion is granted in part and denied in part.


         Plaintiff-relator Mary Kaye Welch (“Welch” or “Plaintiff”) brings suit under both the federal and Nevada False Claims Act on behalf of the Government.[1] Both the federal and the Nevada False Claims Act make liable anyone who: knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval; or, knowingly makes, uses, or causes to be made or used, a false record or statement to get a claim paid or approved by the Government. 31 U.S.C. § 3729(a)(1)(A) & (B); NRS § 357.040(1)(a) & (b). Welch filed her initial Complaint under seal pursuant to the federal False Claims Act (“FCA”), 31 U.S.C. § 3279 et seq., and the Nevada False Claims Act (“Nevada FCA”), NRS § 357.010 et seq., on October 28, 2014. (ECF No. 1.) The Court unsealed the Complaint on June 1, 2015 (ECF No. 10). Welch filed the First Amended Complaint (“FAC”) on September 28, 2015 (ECF No. 15). In the FAC, Welch added allegations concerning Defendants' alleged policy of “upcoding” therapy services to obtain higher rates of reimbursement under the Medicaid and Tricare programs. The facts below are taken from the FAC.

         MLF provides physical, occupational, speech, and aquatic therapy as well as adaptive swimming lessons and group classes for children with special needs. It is owned by Ann Marie Gottlieb and her husband, Jonathan Gottlieb. Ann Marie is a qualified occupational therapist. Jonathan has no qualifications in occupational, speech, or physical therapy. MLF has four Las Vegas locations, roughly 55 to 100 employees, and as of 2012 was treating approximately 1, 200 children per week. MLF now treats closer to 1, 800 children per week. Of the roughly 55 to 100 employees at MLF, approximately 31 work exclusively on administrative matters.

         MLF bills roughly 70 percent of its services to Medicaid. The Medicaid program provides health care benefits to low-income children and is funded jointly by the federal and state governments. MLF also bills roughly 20 to 25 percent of its services to Tricare. Tricare is a federally-funded program that provides health care benefits to service members and their families. Under both Nevada and federal law, services reimbursed under Medicaid and Tricare must be medically necessary.[2]

         Welch claims that certain of Defendants' policies have resulted in the submission and approval of false claims by the Medicaid and Tricare programs. Before MLF provides services, Defendants pre-fill medical authorization forms for those doctors who make therapy referrals. As a result, children receive all forms of therapy, including medically unnecessary occupational and physical therapy for children who come to MLF for speech therapy services. Once a child begins therapy at MLF, the Gottliebs have a policy of treating every child that comes through the door, regardless of medical necessity or proper medical authorization. Moreover, they do not permit therapists to discharge patients. In order to continue services for certain patients, Defendants require therapists to change patients' progress reports to note that therapy should be continued, that there is parental involvement and that therapists require at least two sessions per week, even if none of these statements is actually true. Therapists are also required to recommend the highest number of weekly therapy sessions without regard to a patient's specific medical needs. In addition, MLF's policies that every child should be treated and that all children make some progress result in patients who are too low-functioning, too high-functioning, and who speak Spanish receiving medically unnecessary therapy services. The FAC also contains allegations that the Tricare program was billed for therapy sessions which did not, in fact, occur. (ECF No. 15 at 20-21.)

         An additional theory of liability emerges from Welch's allegations concerning upcoding. She claims that Defendants require all therapists who work for MLF to bill services[3] under the same code-CPT code 97530-regardless of whether the therapist believes a different code more accurately describes the services rendered. Reprimand and/or termination supposedly results when therapists do not comply with this requirement. The purpose of using the one CPT code is to obtain the highest rate of reimbursement while also eliminating particular administrative costs.

         The FAC asserts the following claims against each of the three Defendants individually:[4] (1) knowingly presenting or causing to be presented a false or fraudulent claim for payment or approval under the FCA, 31 U.S.C. § 3729(a)(1)(A); (2) knowingly making, using, or causing to be made or used, a false record or statement material to a false or fraudulent claim under the FCA, 31 U.S.C. § 3729(a)(1)(B); (3) knowingly presenting or causing to be presented a false claim for payment or approval under the Nevada FCA, NRS § 357.040(a); and (4) knowingly making, using, or causing to be made or used, a false record or statement material to a false or fraudulent claim under the Nevada FCA, NRS § 357.010(b). (See Id. at 29-70.)


         A. Legal Standard

         Complaints brought pursuant to the FCA must fulfill the heightened pleading requirements of Rule 9(b). Bly-Magee v. California, 236 F.3d 1014, 1018 (9th Cir. 2001). A motion to dismiss “grounded in fraud under Rule 9(b) for failure to plead with particularity is the functional equivalent of a motion to dismiss under Rule 12(b)(6) for failure to state a claim.” Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1107 (9th Cir. 2003) (internal quotation marks omitted). “Because a dismissal of a complaint or claim grounded in fraud for failure to comply with Rule 9(b) has the same consequence as a dismissal under Rule 12(b)(6), dismissals under the two rules are treated in the same manner.” Id.

         Under Rule 12(b)(6), a complaint may be dismissed for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). A properly pleaded complaint must provide “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). The Rule 8 notice pleading standard requires Plaintiff to “give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.” Id. (internal quotation marks and citation omitted). While Rule 8 does not require detailed factual allegations, it demands more than “labels and conclusions” or a “formulaic recitation of the elements of a cause of action.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 555). “Factual allegations must be enough to rise above the speculative level.” Twombly, 550 U.S. at 555. Thus, to survive a motion to dismiss, a complaint must contain sufficient factual matter to “state a claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 678 (internal quotation marks omitted).

         In Iqbal, the Supreme Court clarified the two-step approach district courts are to apply when considering motions to dismiss. First, a district court must accept as true all well-pleaded factual allegations in the complaint; however, legal conclusions are not entitled to the assumption of truth. Id. at 678. Mere recitals of the elements of a cause of action, supported only by conclusory statements, do not suffice. Id. Second, a district court must consider whether the factual allegations in the complaint allege a plausible claim for relief. Id. at 679. A claim is facially plausible when the plaintiff's complaint alleges facts that allow a court to draw a reasonable inference that the defendant is liable for the alleged misconduct. Id. at 678. Where the complaint does not permit the court to infer more than the mere possibility of misconduct, the complaint has “alleged―but it has not show[n]― that the pleader is entitled to relief.” Id. at 679 (internal quotation marks omitted). When the claims in a complaint have not crossed the line from conceivable to plausible, the complaint must be dismissed. Twombly, 550 U.S. at 570. A complaint must contain either direct or inferential allegations concerning “all the material elements necessary to sustain recovery under some viable legal theory.” Id. at 562 (quoting Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1106 (7th Cir. 1989)).

         B. Analysis

         Defendants move to dismiss the FAC on five grounds. First, Defendants argue that the FAC fails to meet Rule 9(b)'s heightened pleading standard. (ECF No. 68 at 4.) Second, they argue that Welch alleges nothing more than a difference of opinion as to the medical necessity of the therapy provided. (Id. at 12.) Third, they argue that Welch's claims of upcoding are barred by the FCA and Nevada FCA's public disclosure bar. (Id. at 16.) Fourth, they contend that Welch's allegations of improper practices promoted through MLF's policies are insufficient to establish liability under either the FCA or Nevada FCA. (Id. at 21.) Defendants also make a fifth argument relating to patient H.W., for whom MLF allegedly billed thirteen therapy services that were not actually provided. (Id. at 22.)

         The Court agrees with Defendants that Welch's claims premised on upcoding are barred by both the FCA and Nevada FCA public disclosure bar. The Court, however, finds that the claims concerning billing for medically unnecessary services and the claims concerning patient H.W. satisfy Rule 9(b).[5]

         1. Rule 9(B)

         Defendants contend that Counts I, II, III, VII, VIII and X should be dismissed pursuant to Rule 9(b) because Welch “does not identify a single false claim that resulted in a violation of the FCA, let alone state with any specificity who submitted the false claim, how the claim was false, or when the false claim was submitted.” (ECF No. 68 at 4.) They also request that Counts IV (page 40), V, VI, IV (page 61), [6] XI and ...

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