United States District Court, E.D. Virginia, Richmond Division
UNITED STATES OF AMERICA, ex rel HULDA PAIGE ORGNON and DR. GLEN L. MOORE and, COMMONWEALTH OF VIRGINIA, ex rel HULDA PAIGE ORGNON and DR. GLEN L. MOORE, Plaintiffs,
DR. EUGENE CHANG, et al., Defendants.
JOHN A. GIBNEY, JR UNITED STATES DISTRICT JUDGE
Relator-plaintiffs Hulda Paige Orgnon and Dr. Glen L. Moore (together "the relators"), on behalf of the United States of America and the Commonwealth of Virginia, allege that the defendants, Delta Oncology Associates ("Delia"), Dr. Eugene Chang ("Chang"), and seven entities affiliated with Bon Secours Health Systems ("Bon Sccours") submitted fraudulent medical claims to federal and state agencies. The relators filed this action alleging two counts: (1) a violation of the federal False Claims Act ("FCA"); and (2) a violation of Virginia's Fraud Against Taxpayers Act ("VFATA"). Specifically, they allege that the defendants submitted claims to federal and stale agencies for unnecessary breast exams, which the agencies paid because Chang falsely indicated the patients' presenting problems. The defendants seek to dismiss the relators' action for failure to state a claim because the relators have not pleaded their allegations as specifically as necessary under the FCA. The Court denies Chang's and Bon Secours's motions to dismiss, but grants Delta's motion to dismiss and dismisses the relators' claims against Delta.
A. The Parties
Orgnon, an experienced medical coder, worked for Maryview Hospital ("MH") from November 2007 to September 2012, and began working for Tidewater Surgical Specialists ("TSS") in November 2007. Orgnon supervised the billing of services for physicians for both companies. Dr. Moore, a licensed physician, worked for MH and TSS from November 2007 to October 2012, practicing, in part, as a breast surgeon at TSS.
The relators name nine defendants in this suit. The relators refer to eight of these defendants jointly as the “Bon Sccours Defendants." Based on the defendants" affiliation and common ownership, the relators believe that the “Bon Secours Defendants" conduct such closely related business operations to justify referring to them collectively in their amended complaint. Bon Secours includes seven affiliated health care providers: Bon Secours Health Systems, Inc.; Bon Sccours Virginia Health Systems, Inc.; Bon Secours Virginia Medical Group I, LLC; Bon Secours Virginia Medical Group II, LLC; Bon Secours Hampton Roads Health Systems, Inc.; MH; and TSS.
Delta operates in Hampton Roads as a for-profit surgical oncology practice incorporated under Virginia law. Defendant Chang specializes in surgical oncology, including breast and general surgeries, and performs breast exams. Chang worked for Delta from 2003 until May 2010, and in June 2010 began his employment with Bon Secours, B. Facts
The relators allege that Chang, during his employment with Bon Secours, engaged in a scheme of fraudulently charging for medically unnecessary breast exams. Chang charged a majority of his patients for single breast exams, which federal and state agencies will only reimburse for if the patient has a presenting problem or complaint (such as a lump) justifying the service. As indicated by Chang's office notes, Chang knew that no such problems existed for certain patients, but he allegedly documented presenting problems on those patients' billings slips anyway. As alleged in the amended complaint, Chang used these false billing codes solely to obtain reimbursement from government agencies. The relators include numerous examples of the falsely coded billings slips and subsequently submitted claims. (Am. Compl., ¶¶ 28-29.)
In August 2011, the relators discovered Chang's scheme and filed complaints with Bon Secours. Bon Secours subsequently held many meetings with Chang and audited Chang's billing practices, which confirmed the improper coding. Orgnon attended one of the meetings, at which Chang allegedly admitted that he had used the same billing practices while employed by Delta. Orgnon also claims that at another meeting, Chang inquired about "blanket diagnoses that he could use on all of these claims to get them paid[, ] like fibrocystic mastopathy." (Am. Compl., ¶ 35 (internal quotation marks omitted).) This statement allegedly indicated Chang's intention to continue manipulating Bon Secours's billing system. Between September 2011 and February 2012, Chang allegedly recorded false diagnoses of fibrocystic mastopathy ("FM") for some patients in order to continue his fraudulent practices.
The relators claim that Chang perpetrated his scheme while employed by Delta as well. The relators rely most firmly on Chang's admission that he used the same billing practices at Delia that he used at Bon Secours. They also point to the fact that some of Chang's patients received treatment from him at both Delta and Bon Secours. The relators argue that because Chang's practices were the same at Delta. Delta must have filed false claims for these patients. Chang might have engaged in this scheme during all seven years of his employment by Delta, so, according to the relators. Delta must have or should have known about it at some point during Chang's lengthy employment.
In order to survive a Rule 12(b)(6) motion, a claim under the FCA. an anti-fraud statute. must be pleaded with specificity in accordance with Rule 9(b) of the Federal Rules of Civil Procedure. The FCA includes four elements, all of which the relators must sufficiently plead for each defendant to properly state a claim. 31 U.S.C. § 3729(a)(1); see Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 788 (4th Cir. 1999). The relators must show that: "(1)  there was a false statement or fraudulent course of conduct; (2) made or carried out with the requisite scienter; (3) that was material; and (4) that caused the government to pay out money." Harrison. 176 F.3d at 788. Rule 9(b), as applied to the FCA, requires the relators to plead each element "with particularity, '' with the exception of the scienter element, which the relators may "allege generally." Fed.R.Civ.P. 9(b). Under the Fourth Circuit's standards, to plead with "particularity, " one must plead the "time, place, and contents of the false representation, as well as the identity of the person [or entity] making the misrepresentation and what [it] obtained thereby." Harrison, 176 F.3d at 784.
A. Delta's Motion to Dismiss
The Court grants Delta's motion to dismiss because the relators failed to plead facts sufficient to show that Delta knew or should have known that Chang used ...