United States District Court, D. Minnesota
United States of America, ex rel. Ricia Johnson and Health Dimensions Rehabilitation, Inc., Plaintiffs,
Golden Gate National Senior Care, L.L.C., GGNSC Holdings, L.L.C. and GGNSC Wayzata, L.L.C., all doing business as Golden LivingCenter Hillcrest of Wayzata, and Aegis Therapies, Inc., Defendants.
Jonathan M. Bye, Esq., Daniel N. Sacco, Esq., and Kelly G. Laudon, Esq., Lindquist & Vennum PLLP, counsel for Plaintiffs.
Thomas B. Heffelfinger, Esq., Cynthia L. Hegarty, Esq., Joseph J. W. Phelps, Esq., and Justin P. Short, Esq., Best & Flanagan LLP; and Kevin D. Hofman, Esq., and Ryan J. Burt, Esq., Halleland Habicht PA, attorneys for Defendants.
Chad A. Blumenfield, and D. Gerald Wilhelm, Assistant United States Attorneys, United States Attorney's Office, counsel for United States of America.
MEMORANDUM OPINION AND ORDER
DONOVAN W. FRANK, District Judge.
This matter is before the Court on the following: (1) Defendants Golden Gate National Senior Care, L.L.C., GGNSC Holdings, L.L.C., GGNSC Wayzata, L.L.C., all doing business as Golden LivingCenter - Hillcrest of Wayzata (together, "Golden"), and Aegis Therapies, Inc.'s (all together, "Defendants") objections to (Doc. No. 180) Magistrate Judge Jeffrey J. Keyes's May 1, 2014 Order and Memorandum (Doc. No. 175) relating to Relators' Motion for Leave to Amend Complaint (Doc. No. 162); and (2) Defendants' Motion to Dismiss Relators' Amended Complaint (Doc. No. 183). For the reasons set forth below, the Court overrules the objections and denies the motion.
I. General Background
Relators Ricia Johnson ("Johnson") and Health Dimensions Rehabilitation, Inc. ("HDR") (collectively, "Relators") initiated this qui tam action on behalf of the Government in May 2008. (Doc. No. 1, Compl.; see also generally Doc. No. 178, Am. Compl.) Johnson was employed by Aegis Therapies, Inc. ("Aegis") as an occupational therapy assistant from October 2004 to March 2007 at Golden LivingCenter - Hillcrest of Wayzata ("Hillcrest") in Wayzata, Minnesota. (Am. Compl. ¶ 8.) Aegis provides rehabilitative services to a large number of nursing home facilities, including Hillcrest. ( Id. ¶ 7.) Hillcrest is what is known as a skilled nursing facility ("SNF"). ( Id. ¶ 6.) Johnson began working at HDR after leaving Aegis. ( Id. ¶ 9.)
Beginning in December 2005, and through March 2007, Johnson was specifically assigned to work in an exercise room at Hillcrest known as the "Wellness Center." ( Id. ¶ 11.) Johnson was not a licensed physical therapist, physical therapy assistant, or physical therapy aid. ( Id. ¶ 15.) Relators allege that Johnson was directed by her supervisors to monitor patients while they used certain exercise machines, but to not provide instruction or clinical direction. ( Id. ¶¶ 11-12, 15.) Johnson then logged the time the patients used the machines, particularly when the patients used the Wellness Center for non-therapy purposes. ( Id. ¶¶ 12-13.) Relators allege that no physical therapists or occupational therapists were present during this time and they did not review or supervise Johnson's work. ( Id. ¶¶ 12, 15.) Relators allege that Johnson's time was then regularly billed as if it was performed by a licensed physical therapist or occupational therapist and for proper therapy purposes and that the time was then inappropriately submitted as claims to Medicare. ( Id. ¶¶ 13-14.) Relators further allege that the therapists negotiated over who was able to claim Johnson's time. ( Id. ¶¶ 13-14.) Relators also allege that Johnson often did this for a number of patients at the same time and in a group setting. ( Id. ¶ 17.) In addition to Johnson, Relators identify a number of other individuals employed by Aegis whose services were allegedly similarly falsely claimed as physical or occupational therapy. ( Id. ¶ 18.) Relators identify a number of examples of such false claims allegedly submitted by Defendants. ( Id. ¶¶ 16, 20, Ex. A.)
In the Amended Complaint, Relators include additional allegations based on new evidence of false claims obtained in discovery. Relators did not change any of the Counts or any of the parties in their Amended Complaint. ( See Am. Compl.) New allegations relate to the following: (1) additional representative examples of false claims and additional details regarding the false claims (Am. Compl. ¶ 20, Ex. A); (2) allegations that Defendants billed for services never provided and eight corresponding specific examples ( id. ¶ 21); and (3) allegations relating to Defendants' failure to properly document underlying therapy services in violation of a number of laws and regulations ( id. ¶¶ 22-28).
II. Procedural Background
Relators filed their action on May 1, 2008, asserting the following four claims against Defendants under the False Claims Act ("FCA") 31 U.S.C. § 3729(a): (1) False Claims; (2) Making or Using False Record or Statement; (3) Conspiring to Defraud the Government; and (4) Reverse False Claims. (Compl.; see also Am. Compl. ¶¶ 33-44.) The Government declined to intervene on June 27, 2011. (Doc. No. 31.) On June 28, 2011, the Court ordered the Complaint unsealed and served on Defendants. (Doc. No. 32.)
On September 9, 2011, Defendants moved to dismiss the Complaint. (Doc. No. 39.) The Court denied that motion on February 13, 2012, concluding that the Court was not divested of jurisdiction based on the so-called "public disclosure bar" and that Relators met the particularity requirements of Rule 9(b) of the Federal Rules of Civil Procedure. (Doc. No. 54.)
On February 23, 2012, the Court recommended two-phased discovery. (Doc. No. 62.) Magistrate Judge Keyes then ruled on a number of discovery-related motions throughout 2012 and 2013. ( See, e.g., Doc. Nos. 106, 112.)
On December 19, 2013, Relators filed a motion to amend the Complaint under seal. (Doc. No. 135.) On February 21, 2014, the government again declined to intervene. (Doc. No. 158.) On February 24, 2014, the Court denied Relators' motion without prejudice. (Doc. Nos. 156, 157.) The Court then unsealed the proposed Amended Complaint, allowing service upon the Defendants. (Doc. No. 159.) On March 20, 2014, Relators filed their renewed motion to amend. (Doc. No. 162.) On May 1, 2014, Magistrate Judge Keyes granted in part and denied in part the renewed motion to amend. (Doc. No. 175.) On May 8, 2014, Relators filed their Amended Complaint. (Doc. No. 178.)
The pending objections and motion both relate to the Amended Complaint. ( See Doc. Nos. 175, 183.) First, Defendants object to Magistrate Judge Keyes's May 1, 2014 Order ("May Order") (Doc. No. 175). (Doc. No. 180.) Second, Defendants move to dismiss the Amended Complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure and pursuant to Rule 9(b) requirements. ( See Doc. Nos. 183, 185.)
I. Objections to Magistrate Judge's Order and Memorandum
Defendants object to Magistrate Judge Jeffrey J. Keyes's May Order (Doc. No. 175), arguing that it "fundamentally alters and broadens the claims in the original Complaint by adding claims for physical and occupational therapy outside the Wellness Center." (Doc. No. 180.) Relators ...