U.S. v. SouthernCare, Inc. (Summary)

FALSE CLAIMS ACT

U.S. v. SouthernCare, Inc., No. CV410-124 (S.D. Ga. Sept. 29, 2014)

The United States District Court for the Southern District of Georgia granted in part and denied in part a motion to dismiss a qui tam action brought against a hospice provider (“Hospice”). The qui tam relator (“Relator”), a former employee at the Hospice, alleged that the Hospice violated the False Claims Act and the Georgia Medicaid False Claims Act by improperly admitting and recertifying patients who did not meet hospice criteria, as well as falsifying documents to support this activity.

In an earlier, separate lawsuit, the Hospice had entered into a settlement agreement with the government regarding false claims it had submitted. As part of the settlement agreement, the Hospice was required to establish a compliance program under its Corporate Integrity Agreement (“CIA”).

In this case, the Relator alleged that the Hospice did not comply with the CIA and instead continued to submit false claims to the government. The Relator cited to patients who received hospice care despite ineligibility, as well as others whose diagnoses were fraudulently altered. The Relator even claimed that the Hospice had improperly drugged a patient in order to make the patient decline in health and thus become eligible for hospice care.

The Hospice raised a number of arguments in its defense. It first asserted that the Relator was merely relying upon publicly available information, from the earlier suit. The court disagreed, finding that the Relator pled sufficient facts to establish himself as an original source of the information.

The Hospice also claimed that the Relator was bringing up claims that had previously been the subject of an earlier settlement agreement. The court explained that while the Relator was not permitted to re-litigate claims that had already been addressed in the settlement agreement, the Relator was permitted to sue over similar types of claims so long as the specific claim arose after the settlement agreement.

Furthermore, the Hospice argued that the Relator failed to meet certain pleading standards for fraud claims. While the court found that the Relator’s complaint was sufficient to put the Hospice on notice of the particular acts of fraud at issue, the court agreed that the Relator had failed to allege the necessary link between the alleged fraud and the submission of those claims to the government. The court granted the Relator leave to amend the complaint to cure the pleading deficiencies.

In the same opinion, the court granted the Relator’s motion to dismiss the Hospice’s claim for breach of duty of loyalty. This claim arose after the Relator left his employment at the Hospice and went to work for a competitor. The court concluded that the Hospice had offered only speculative allegations of any harm caused by the Relator’s actions. It described the claim as “baseless” and granted the Relator’s motion to dismiss.