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United States ex rel. Worthy v. Eastern Maine Health Care Systems

United States District Court, D. Maine

January 18, 2017

UNITED STATES OF AMERICA, ex rel. JENNIFER WORTHY, and in her own name solely regarding individual retaliation claims, Plaintiff/Relator,



         Jennifer Worthy claims that the Defendants violated the False Claims Act by submitting false and fraudulent claims to the Medicare program through unlawful billing practices. She also claims that the Defendants retaliated against her in violation of the False Claims Act and Maine Whistleblowers' Protection Act because of her efforts to stop the unlawful billing practices. Each of the Defendants moves to dismiss Counts I, II, IV, and V of the complaint. The Court grants in part and denies in part each of these motions. Specifically, the Court grants California Healthcare Medical Billing's motion to dismiss Count V, the retaliation count, in its entirety because there is no factual allegation that will support the conclusion that it was ever the Plaintiff's employer. The Court also grants Mercy and Accretive's motion to dismiss Count V, but only with respect to the Maine Whistleblowers' Protection Act retaliation claim for monetary damages and attorney's fees, based on the parties' concession that the Plaintiff failed to file her constructive discharge claim in a timely manner as required by Maine law. The Court denies the motions with respect to the remaining counts.

         I. BACKGROUND

         A. Procedural History

         On April 29, 2014, Jennifer Worthy filed a sealed qui tam complaint under the False Claims Act (FCA), 31 U.S.C. §§ 3729 et seq., for and on behalf of the United States of America, and on her own behalf regarding her § 3730(h) retaliation claim, against Mercy Hospital, Mercy Health System of Maine, Eastern Maine Healthcare Systems (EMHS), California Healthcare Medical Billing, Inc. (CHMB), and Accretive Health, Inc. (Accretive). Compl. (Filed Under Seal); Demand for Jury Trial; and Req. for Injunctive Relief (ECF No. 1). She amended her complaint on August 14, 2014, again filing it under seal. First Am. Compl. (Filed Under Seal); Demand for Jury Trial; and Req. for Injunctive Relief (ECF No. 9). On January 12, 2015, Ms. Worthy amended her complaint a second time and filed it under seal. Second Am. Compl. (Filed Under Seal); Demand for Jury Trial; and Req. for Injunctive Relief (ECF No. 21). On March 9, 2015, the United States declined to intervene in the action. United States Notice of Election to Decline Intervention (ECF No. 24). As a result, the Court ordered that Ms. Worthy unseal the Second Amended Complaint and serve it upon the Defendants. Order (ECF No. 27). On January 21, 2016, with consent of all the Defendants, Ms. Worthy amended her complaint for a third time, adding a claim under the Maine Whistleblowers' Protection Act (MWPA), 26 M.R.S. §§ 831 et seq. Third Am. Compl.; Demand for Jury Trial; and Req. for Injunctive Relief (ECF No. 58) (TAC).

         As refined by the Third Amended Complaint, Ms. Worthy is making the following claims:

(1) Count I: FCA against all Defendants for presentation of false claims in alleged violation of 31 U.S.C. § 3729(a)(1)(A);
(2) Count II: FCA against all Defendants for making or using false record or statement to cause claim to be paid in alleged violation of 31 U.S.C. § 3729(a)(1)(B);
(3) Count III: FCA against all Defendants for making or using false record or statement to conceal, avoid, and/or decrease obligation to repay money in alleged violation of 31 U.S.C. § 3729(a)(1)(G);
(4) Count IV: FCA against all Defendants for engaging in a conspiracy to defraud the Government in alleged violation of 31 U.S.C. § 3729(a)(1)(C); and
(5) Count V: Unlawful retaliation under the FCA, 31 U.S.C. § 3730(h) and under the MWPA, 26 M.R.S. §§ 831-840.

         On March 21, 2016, Mercy Hospital, Mercy Health System of Maine, and EMHS (collectively, the Mercy Defendants) moved for partial dismissal of the Third Amended Complaint. Mot. of Defs. Mercy Hospital, Mercy Health System of Maine, and Eastern Maine Healthcare Systems for Partial Dismissal (ECF No. 66) (Mercy's Mot.). On the same day, CHMB also moved to dismiss four of the five counts in the Third Amended Complaint. California Healthcare Medical Billing, Inc.'s Mot. to Dismiss (ECF No. 67) (CHMB's Mot.). Accretive joined Mercy's motion to dismiss Counts I, II, and IV, and separately moved to dismiss Count V. Def. Accretive Health's Mot. to Dismiss Count V and Joinder in Supp. of Mercy Defs.' Mot. to Dismiss Counts I, II, and IV (ECF No. 68) (Accretive's Mot.). Ms. Worthy objected to the Defendants' motions on May 11, 2016. Relator's Consolidated Obj. to Defs.' Mots. to Dismiss Third Am. Compl. (ECF No. 82) (Pl.'s Opp'n). On June 10, 2016, each of the Defendants replied. CHMB's Rely Mem. in Supp. of Mot. to Dismiss (ECF No. 88) (CHMB's Reply); Am. Reply of Defs.' Mercy Hospital, Mercy Health System of Maine, and Eastern Maine Healthcare Systems in Supp. of Their Mot. for Partial Dismissal (ECF No. 89) (Mercy's Reply); Def. Accretive Health's Reply in Supp. of its Mot. to Dismiss Count V and Joinder in Supp. of Mercy Defs.' Mot. to Dismiss Counts I, II, and IV (ECF No. 90) (Accretive's Reply).

         On June 10, 2016, Ms. Worthy filed a notice of supplemental authority regarding the United States Supreme Court's opinion in Green v. Brennan, 136 S.Ct. 1769 (2016). Pl.'s Notice of Suppl. Authority (ECF No. 86). On June 23, 2016, the Defendants also filed a notice of supplemental authority, this one regarding the United States Supreme Court's decision in Universal Health Services, Inc. v. United States ex rel. Escobar, 136 S.Ct. 1989 (2016). Defs.' Notice of Suppl. Authority (ECF No. 93). Ms. Worthy responded to the notice on July 5, 2016. Pl.-Relator's Resp. to Defs.' Notice of Suppl. Authority (ECF No. 94).

         On August 4, 2016, Ms. Worthy, with the consent of the Defendants, moved for oral argument on the motions to dismiss. Pl.'s Consent Mot. for Oral Arg. on Mots. to Dismiss (ECF No. 95). The Court granted the motion for oral argument on the same day. Order (ECF No. 96). On December 14, 2016, the Defendants filed a second notice of supplemental authority concerning the First Circuit's decisions in United States ex rel. Escobar v. Universal Health Services, Inc., 842 F.3d 103 (1st Cir. 2016) and Lawton ex rel. United States v. Takeda Pharmaceutical Company, Ltd., 842 F.3d 125 (1st Cir. 2016). Defs.' Second Notice of Suppl. Authority (ECF No. 103). Ms. Worthy responded on December 22, 2016. Pl.-Relator's Resp. to Defs.' Second Notice of Suppl. Authority (ECF No. 104). The Court held oral argument on January 5, 2017. In response to a question by the Court at oral argument, Ms. Worthy filed a second notice of supplemental authority on January 9, 2017 and the Defendants responded on January 12, 2017. Pl.-Relator's Notice of Suppl. Authority (ECF No. 106); Defs.' Resp. to Pl.-Relator's Notice of Suppl. Authority (ECF No. 109).

         B. Factual Background

         1. The Parties

         Plaintiff/Relator Jennifer Worthy is a resident of Cumberland County in Maine and was employed by Mercy Hospital at its Portland location from November 2, 2012 until February 21, 2014. TAC ¶ 9. Ms. Worthy began working at Mercy Hospital as a supervisor of patient accounts and was promoted to the position of manager of patient accounts in August 2013. Id. ¶¶ 10-11. Before working for Mercy Hospital, Ms. Worthy had worked for several medical practices as a billing manager for a total of about eleven years. Id. ¶ 12. She became a Certified Professional Coder in 2006 after passing a six-hour test and completing 1, 600 hours of formal classroom training and two years of on-the-job training. Id. ¶¶ 13-14.

         Defendant EMHS is a Maine nonprofit, tax-exempt corporation. Id. ¶ 23. Effective October 2, 2013, EMHS acquired Mercy Health System of Maine, a Maine nonprofit, tax-exempt corporation, which included Mercy Hospital, a non-profit, tax-exempt hospital in Portland, Maine. Id. Mercy Hospital wholly operates numerous physician practices under the name Mercy Medical Associates and provides inpatient and outpatient care in the greater Portland area. Id. As a result of this acquisition, Mercy Hospital ultimately became responsible for billing for services provided by the physician practices of Mercy Medical Associates. Id. ¶ 24.

         Defendant CHMB is a California corporation with its principal place of business in Escondido, California. Id. ¶ 19. It provides billing services to medical providers and hospitals, including Mercy Hospital. Id.

         Defendant Accretive is a Delaware corporation with its principal place of business in Chicago, Illinois. Id. ¶ 15. It provides hospital and other medical providers, including Mercy Hospital, with billing and debt collection services and other revenue management services. Id.

         2. The Medicare Program

         Medicare is a Government program primarily benefiting the elderly created by Congress in 1965. Id. ¶ 37. Medicare is administered by the Centers for Medicare and Medicaid Services (CMS), a federal agency that sets standards and regulations for participation in the program. Id. Medicare Part A primarily covers medical care for patients admitted to the hospital and Medicare Part B primarily covers doctor visits and medical care provided on an outpatient basis. Id. The Government, through its Medicare program, is one of the principal payers for medical services rendered by Mercy Hospital. Id. ¶ 36.

         The Medicare program works by reimbursing health care providers for the cost of services and ancillary items at fixed rates. Id. ¶ 38. Reimbursements are made out of the Medicare Trust Fund, which is supposed to reimburse only for those services that were actually performed, were medically necessary for the health of the patient, and were ordered specifically by a physician using appropriate medical judgment and acting in the best interest of the patient. Id. CMS requires healthcare providers to certify that they complied with all laws and regulations. Id. ¶ 39. The Medicare Trust Fund relies on the implied representation of suppliers of Medicare services that the services billed are compensable under Medicare. Id. ¶ 38.


         In her sixty-five page Third Amended Complaint, Ms. Worthy provides background information about the billing and claims submission process at Mercy Hospital. She then sets forth facts alleging several different fraudulent schemes to support her claims in Counts I-IV that the Defendants violated the FCA by submitting false claims and by conspiring to commit that fraud. Additionally, Ms. Worthy alleges facts to support her claim in Count V that the Defendants unlawfully retaliated against her. The alleged facts are copious and dense and the Court has done its best to summarize the allegations below.

         A. Mercy's Billing and Claims Submission Processes

         1. Billing Services

         In approximately April 2012, Mercy Hospital contracted with Accretive to provide billing, collections, and revenue management services to the Hospital. Id. ¶¶ 16, 70. Because Mercy Hospital was struggling financially at the time, it contracted with Accretive with the goals of decreasing the costs of its revenue cycle and increasing its collections. Id. ¶¶ 17, 70. As part of its agreement with Mercy Hospital, Accretive agreed to be compensated for its services based on the increase in the Hospital's collections, referred to as “lift.” Id. ¶¶ 16, 70, 121. Thus, both Accretive and Mercy Hospital received a direct financial benefit from increases in the Hospital's collections. Id. ¶¶ 70, 121.

         Accretive employed an “infused management” structure whereby it inserted senior Accretive employees to oversee and manage Mercy Hospital's day-to-day billing and collections operations, including Hospital billing personnel. Id. ¶¶ 18, 71. Accretive also implemented several proprietary web-based tools to increase Mercy Hospital's collections, including its Yield Based Follow Up tool (YBFU tool). Id. ¶¶ 17, 71. The YBFU tool integrates with a hospital's billing system to track the status and expected reimbursement of unpaid claims, and to prioritize claims for follow-up by hospital billing staff. Id. ¶ 72. Accretive represented that the YBFU tool would both shorten the revenue cycle-that is, the time in which Mercy Hospital was paid for claims that it submitted to insurers-and increase Mercy Hospital's collections. Id.

         In about early 2013, Mercy Hospital also decided to contract with CHMB to perform the billing services for the Hospital and its wholly-owned and wholly-operated physician practices. Id. ¶ 19. Under its contract with Mercy Hospital, CHMB receives as compensation 3% of the gross collections from Mercy Medical Associate's physician practices. Id. ¶ 21. CHMB made frequent site visits to Mercy Hospital and integrated its billing operations into Mercy Hospital's patient accounts department. Id. ¶ 22.

         2. Claims Submission Process

         Mercy Hospital used an electronic health records system (Meditech) to document the services it provided to patients. Id. ¶ 75. In order to bill Medicare for services, Mercy Hospital's professional coders accessed the electronic health record in Meditech, analyzed the medical documentation associated with the services provided to the patient, and assigned codes that reflected those services as well as the diagnosis. Id. Once the coder finished assigning codes based upon the medical documentation, the codes were electronically routed to Mercy Hospital's billing department. Id. ¶ 76. Based upon the codes assigned by the coder, Mercy Hospital's billers then formulated the bill, and initiated the process by which a claim was electronically submitted to Medicare. Id. Billers then electronically submitted Medicare claims to a computer system known as the Fiscal Intermediary Standard System (FISS), the single standard Medicare Part A claims processing system used to process Medicare claims related to medical care provided by hospital and hospital based providers. Id. ¶ 77.

         The FISS system utilized a system of “edits” intended to promote correct coding of claims submitted to Medicare and to prevent inappropriate payment. Id. ¶ 78. Claim edits work by using automated edits to compare submitted Medicare claims to a defined set of criteria, in order to identify irregularities and prevent inappropriate payment. Id. When irregularities are identified, payment is stopped and the claim is returned to the provider for review. Id. Coding changes, made in response to edits, may then be made only if the clinical circumstances justify the change in coding and not solely to bypass a Medicare edit. Id.

         B. False Modification and Resubmission of Claims That Had Been Stopped by Medicare

         After it was integrated into Mercy Hospital's billing system in February 2013, the YBFU tool tracked and compiled claims submitted by Mercy for which Mercy had not received compensation, including claims that had been stopped due to the operation of Medicare edits, and ranked these claims based on dollar amount, payer, and length of time the claim had gone unpaid. Id. ¶ 79. The highest priority Medicare claims-claims in excess of $25, 000 that were unpaid after 21 days-were classified as Risk 1. Id. When ranking unpaid claims, the YBFU tool did not differentiate unpaid claims for which the Hospital was actually entitled to compensation from those that involved non-payable charges. Id. ¶ 80.

         Instead of limiting themselves to identifying and correcting claims with legitimate errors, at daily huddles and during SWAT team meetings, Accretive staff members, including Jessica Martin, Brie Farmer, and Anvita Kumar, instructed Mercy Hospital billers on how to manipulate claims that Medicare legitimately held from payment by clearing Risk 1 claims in order to get those claims paid. Id. ¶¶ 81-84. The methods Accretive instructed Mercy billers to employ included systematically (1) unbundling claims that were required by Medicare payment rules to be bundled together for single payment; and (2) deleting and otherwise omitting accident and injury information in order to obtain payment of claims which Medicare held from payment in accordance with Medicare Secondary Payer (MSP) procedures. Id. ¶ 67. Ms. Worthy contends that as a result of these practices, Accretive and Mercy Hospital received overpayments from Medicare, which the Defendants did not report or return within the specified time period under the regulations. Id. ¶ 69.

         1. Unbundling Claims to Bypass Edits and Increase Payment

         “Unbundling” refers to the practice of billing separately for a group of procedures that are covered by a single comprehensive billing code. Id. ¶ 87. Intentional unbundling occurs when providers manipulate billing codes in order to maximize payment and otherwise bypass Medicare payment controls. Id. CMS has long identified unbundling as a common type of Medicare fraud. Id. ¶¶ 63, 87. Accretive instructed government team billers to unbundle claims in two primary ways: (a) through the false addition of -59 modifiers and (b) through the false addition of G0 condition codes. Id. ¶ 88.

         a. False Addition of -59 Modifiers

         Medicare requires that certain services, when performed together on the same individual, be bundled into one comprehensive charge rather than charged and paid separately. Id. ¶ 58. The payment for the bundled code includes payment for the individual services included within the Current Procedural Technology (CPT) code. Id. Under certain circumstances, a provider may need to indicate that a procedure or service was separate or distinct from other services performed on the same day. Id. ¶¶ 60, 90. Modifier -59 is appended to a bundled CPT code to identify procedures or services that are normally bundled, but are correctly being billed as separate services in that instance. Id. ¶¶ 60, 91. Modifier -59 may be appended to a lesser-included procedure or service if the service represented a different patient encounter or session, different procedure or surgery, different site or organ system, separate incision/excision, separate lesion, or a separate injury not ordinarily encountered or performed on the same day by the same physician. Id. ¶¶ 61, 91. Clinical documentation must support the use of the Modifier -59 and this modifier should never be used strictly to prevent a service from being bundled or to deceive the Medicare claims processing system. Id. ¶¶ 62, 92.

         Accretive personnel, acting with the authority of Mercy management, instructed Mercy's billers to bypass Medicare's edits by systematically retracting claims and adding -59 modifiers without a lawful basis to do so and without reference to clinical documentation. Id. ¶ 93. By instructing billers to regularly add the -59 modifier to claims without a legitimate basis to do so, Accretive caused claims to be submitted for multiple separate services that were legally required to be paid at a lower, bundled rate and that otherwise would have been paid at the lower rate. Id. Ms. Worthy repeatedly witnessed and objected when Accretive Revenue Cycle Analyst Jessica Martin ordered the use of a -59 modifier without a legitimate basis and solely to cause Medicare to pay more than it should. Id. ¶ 94.

         b. False Addition of G0 Condition Codes

         Hospitals report condition code G0 when a patient has multiple medical visits on the same day at the same revenue center, but the visits are for distinct, unrelated medical conditions. Id. ¶¶ 56, 95. The G0 code bypasses Medicare's audit system and certifies that the billed services are unrelated, separate services eligible to be paid separately and not as part of a packaged payment. Id. ¶¶ 57, 95.

         Accretive and Mercy Hospital falsely reported the G0 condition code for related claims to bypass Medicare edits, resulting in Medicare payment of duplicate facility fees for related medical conditions that should have been bundled together. Id. ¶ 96. As a result of the addition of false G0 codes, Medicare paid more for individual claims than it was legally required to pay. Id.

         2. Deleting Accident and Injury Information from Claims Billed to Medicare in Violation of the MSP Provision

         The MSP provisions provide that, under certain conditions, Medicare will be the secondary rather than primary payer for its beneficiaries. Id. ¶ 64. Under the MSP provisions, Medicare is precluded from making payment for services to the extent that payment has been made or can reasonably be expected to be made promptly under (1) worker's compensation, (2) liability insurance, or (3) no-fault insurance. Id. ¶¶ 64, 98. To participate in the Medicare program, providers must agree to bill other primary insurers before billing Medicare. Id. ¶ 65. A provider is only permitted to seek conditional payment from Medicare if it first billed the claim to the worker's compensation, liability, or no-fault insurer and it either did not receive payment at the end of the 120-day prompt period or has evidence that payment will not be made by the primary insurer within the 120-day prompt period. Id. ¶ 99. Medicare regularly withholds payments on accident or injury claims in order to determine whether there exists a primary insurer other than Medicare. Id. ¶ 100.

         There exist several means by which a claim may indicate to Medicare that an accident or injury occurred, thereby triggering Medicare's withholding of payment pending an inquiry and determination of primary insurance. Id. ¶ 101. One such method is inclusion on the claim of an external cause of injury code (E code), an ICD-9 diagnosis code that describes the cause of an injury, incident, or illness. Id. Other methods include completion of specific line items-10a, 10b, and 10c-on the CMS-1500 claim form to indicate that the patient's condition was employment or accident related. Id.

         To bypass the internal controls in Medicare's MSP determination process so that Medicare would believe itself to be the primary insurer, Accretive employees instructed and pressured Mercy Hospital government team billers to retract and remove accident and injury information, including E codes-information which had previously been assigned to claims by coders based upon review of clinical documentation-from Risk 1 claims in FISS, without regard to whether another payer was responsible for paying the claim. Id. ¶ 104. Additionally, to accelerate payment of Risk 1 claims billed to a worker's compensation, liability, or no-fault insurer which had not been paid within the expected YBFU time frame, Accretive instructed Hospital billers to create new claims without any accident or injury information- without E codes and with the answers to boxes 10a, 10b, and 10c of the CMS-1500 form switched from “yes” to “no”-and to bill these claims to Medicare rather than wait and conditionally bill Medicare at the end of the 120-day prompt period. Id. ¶ 105. For instance, in spring 2013, Ms. Worthy reviewed copies of unpaid Risk 1 claims that Accretive staff instructed a Mercy biller (AW) to submit to Medicare without accident or injury information in order to get the claim through the Medicare system. Id. ¶ 107. In this way, Defendants were able to improperly receive payment from Medicare on claims Medicare was not obligated to pay. Id. ¶ 106.

         3. Ms. Worthy Observed and Reported Submission of False Diagnosis & Billing Codes

         During this time, members of Mercy's billing staff began raising concerns about Accretive's practices. Id. ¶ 111. These billers informed Ms. Worthy of the pressure that the billing staff-particularly, the government team billers-received from Accretive every day to manipulate coding and clear high-value Medicare claims. Id. Ms. Worthy's personal observations heightened her concerns about the submission of false claims; specifically, she witnessed Accretive staff pressuring and directing government team billers to resubmit Medicare claims within FISS without accessing underlying clinical documentation or communicating with coders to ensure that changes were clinically warranted. Id. ¶ 112. This was evidenced not only in routine meetings between Accretive and billing staff, but also when Accretive managers stood at the cubicles of government team billers and gave specific instructions on how to modify the claims. Id. On more than one occasion, Ms. Worthy overheard Jessica Martin of Accretive instruct a government team biller to add -59 modifiers to unbundled procedures to bypass Medicare edits. Id. ¶ 113.

         Ms. Worthy's concerns were corroborated by her review of specific Medicare claims, and the patterns of changes she observed to unpaid Medicare claims in FISS, all of which confirmed what she had personally observed and what had been relayed to her by the billing staff. Id. ¶ 114. Specifically, in the fall of 2013, after recognizing a drastic increase in the number of claims that had been suspended or returned by Medicare, Ms. Worthy began receiving reports that listed FISS claims, sorted by the reason that the claim had been returned by Medicare. Id. ¶ 115. In reviewing these reports, Ms. Worthy, along with another Mercy biller (TH), were able to identify patterns of changes made to high-value claims in FISS by members of Mercy Hospital's government team, including the deletion of E-codes and the addition of G0 codes and -59 modifiers. Id. ¶ 116. The frequency of these changes substantially exceeded what Ms. Worthy and TH expected, based upon their experience, and these changes were particularly concerning given that the billing staff no longer maintained access to clinical coding information. Id.

         In addition, Ms. Worthy reviewed specific Medicare claims that had been returned for failing edits, changed in the FISS system at the direction of Accretive, and subsequently paid by Medicare. Id. ¶ 117. This was accomplished by identifying high-value claims that Medicare had returned or suspended based upon the fiscal intermediary's internal controls; examining the electronic claim in FISS to determine what changes were made to the coding after the claim had been returned; comparing the coding changes to the documentation in the Meditech system; and subsequently, determining whether the changed claim had been paid by Medicare. Id. In numerous instances, the final FISS claim was no longer consistent with the billing information contained in Meditech. Id. For example, in approximately December 2013, Ms. Worthy observed information provided by TH that revealed a pattern of questionable coding changes made in the FISS system by DD, a member of the government billing team. Id. ¶ 118. These changes included the systematic deletion of E codes from potential MSP claims. Id. Ms. Worthy questioned DD regarding the coding changes he made in FISS; DD responded that the changes were made at the direction of Accretive personnel. Id.

         Ms. Worthy reported her concerns to Mercy Hospital Coding Manager Shonda Menezes and Accretive Director of Revenue Cycle Judi Kieltyka. Id. ¶ 119. She also spoke with Brie Farmer, Anvita Kumar, and Jessica Martin from Accretive and voiced her concerns that the coding changes made at their direction were false. Id. Nonetheless, Accretive and Mercy Hospital continued to use the YBFU tool to identify high-value, unpaid claims and then resubmit false codes for high-dollar Risk 1 claims. Id. Ms. Worthy further reported the deletion of accident and injury codes in a meeting with Mercy Hospital Chief Medical Officer Scott Rusk, Ms. Kieltyka, and Mercy Hospital Senior Vice President and Chief Financial Officer Michael Hachey. Id. ¶ 120. This meeting did not result in any changes. Id.

         C. Accretive Instructed Staff to Falsify Patient Discharge Status Indicators to Increase Reimbursement

         Medicare pays for acute inpatient care in hospitals through the Inpatient Prospective Payment System (IPPS). Id. ¶ 41. Hospitals receive a predetermined rate for each discharge or each case, instead of billing Medicare for individual services provided during the patient's hospital stay. Id. The payment rate under the IPPS is determined by the patient's principal diagnosis upon discharge and any secondary diagnoses, comorbidities, complications, procedures performed during the hospital stay, and discharge status. Id. ¶ 42. Based on these factors, a patient is assigned to a diagnosis-related group (DRG). Id. Each discharge is assigned only one DRG, regardless of the number of conditions treated or services furnished during the patient's stay. Id. The payment for each DRG is based on the expenses associated with the patient's condition and treatment, and the hospital's capital and operating costs. Id.

         Under Medicare's IPPS, when a patient is discharged from the hospital, the hospital indicates the patient's discharge status to Medicare as part of its claim for reimbursement. Id. ¶ 123. The discharge status indicates where the patient is being discharged to, such as a skilled nursing facility or the patient's home. Id. If a patient is discharged from the hospital to a skilled nursing facility, the hospital and the skilled nursing facility share in the reimbursement. Id. By contrast, if a patient is discharged to his or her home, the hospital gets the entire reimbursement amount. Id. Therefore it is to the hospital's financial advantage to have the discharge status indicator be “discharge to home” because the hospital's reimbursement amount from Medicare is greater. Id.

         Beginning in 2012, Ms. Martin created a spreadsheet each quarter listing Medicare claims that had been submitted with a discharge status indicator other than “discharge to home” and noting the difference in reimbursement for Mercy Hospital if the listed claims had “discharge to home” status indicators rather than their current discharge status indicator. Id. ¶ 124. Ms. Martin provided Ms. Worthy with the discharge indicator spreadsheet every quarter from July 2013 until the end of her employment in February 2014. Id. ¶ 125.

         In July 2013, Ms. Martin provided Ms. Worthy with the discharge indicator spreadsheet for Q1 2013 and instructed her to enter the FISS system, retract the claims, change the discharge status indicator to “discharged to home” and resubmit the claims so that Mercy Hospital would receive a greater DRG payment. Id. ¶ 126. Ms. Martin later provided Ms. Worthy with the discharge status indicator spreadsheet from Q2 2013 with the same instructions. Id. Because Accretive did not have its own access to FISS, only a Mercy Hospital employee with access to FISS could change the discharge status indicators on those claims. Id.

         Ms. Worthy was concerned about the appropriateness of this practice and believed these changes should be made by Mercy Hospital's coding department based on medical documentation. Id. ¶ 127. However, when Ms. Worthy sent the spreadsheet to Ms. Menezes of the coding department and asked her why a professional coder was not handling the discharge status indicator changes, Ms. Menezes informed her that the coding department was not supposed to make the changes based on Accretive's instructions. Id. After speaking with Ms. Menezes, Ms. Worthy investigated the electronic medical records in Meditech associated with approximately seventy of the claims listed in the Q1 and Q2 2013 spreadsheets she was provided, and found that there was no documentation, such as an addendum or telephone record, which supported changing the discharge status indicator on the claims as Accretive demanded. Id. ¶ 128. Ms. Worthy observed that the claims listed on the spreadsheets were for high-value DRGs and that each spreadsheet indicated that Mercy Hospital and Accretive would receive an increase of approximately $100, 000 in Medicare reimbursement by changing the discharge status indicator on the claims. Id.

         Ms. Worthy refused to falsify the discharge status indicators in accordance with Accretive's instructions or to allow her staff to do so. Id. ¶ 129. She also met with Ms. Martin and Ms. Kieltyka of Accretive to express her concerns about the practice. Id. Ms. Kieltyka and Ms. Martin dismissed Ms. Worthy's objections, stating that this was a “best practice” that Accretive implemented at other client hospitals and that Mercy Hospital would be “leaving money on the table” if she did not do this. Id. Because Ms. Worthy refused to falsify these claims in accordance with Accretive's instructions, upon information and belief, after Ms. Worthy's employment with Mercy Hospital ended, Mercy Hospital biller TH changed and resubmitted the claims listed on the Q1 and Q2 2013 spreadsheets with false discharge status indicators based on the instructions of Ms. Martin and Ms. Kieltyka. Id. ¶ 130. Upon information and belief, under the direction of Ms. Martin and Ms. Kieltyka, TH also changed the discharge status indicators of Medicare claims listed on the Q3 2013, Q4 2013, and Q1 2014 spreadsheets. Id.

         D. Fraudulent or Duplicative Billing for Facility Fees Within Three-Day and Same-Day Billing Windows

         The three-day payment window or “Three-Day Rule, ” is designed to prevent multiple claims for facility fees when a patient receives medical treatment at more than one facility operated by the same hospital. Id. ¶ 47. Under the Three-Day Rule, if a hospital or entity wholly operated by a hospital provides outpatient services to a patient in the three days prior to an inpatient hospital stay, the technical component, which covers the cost of equipment and supplies for a service, or facility fee for those services, must be bundled with the claim for the inpatient stay and not separately billed. Id. ¶ 48. Similarly, any diagnostic services within the three-day window, and any non-diagnostic services that are clinically related to the reason for the patient's hospital admission, must be bundled with the claim for the hospital stay. Id.

         Additionally, Medicare pays for outpatient care for beneficiaries through its Outpatient Prospective Payment System (OPPS). Id. ¶ 51. Under the OPPS, Medicare pays predetermined amounts for designated services. Id. Medicare classifies outpatient services into ambulatory payment classifications (APCs). Id. ¶ 52. APCs group procedures together that are clinically similar and use a similar amount of resources so that comparable procedures receive comparable reimbursement rates. Id. APC payments include overhead and supplies, which cannot be billed separately under OPPS. Id. ¶ 53. Items and services that must be included as packaged cost items and not billed separately from services include, but are not limited to: use of operating room, procedure or treatment room, recovery room, and observation services; medical supplies including surgical supplies and equipment, certain pharmaceuticals, surgical dressings, substitute skin products and other products that aid wound healing; supplies and equipment related to anesthesia or sedation; certain clinical diagnostic tests; and durable medical equipment that is implantable. Id. ¶ 54. When multiple claims for certain outpatient services occur on the same day, Medicare regulations require that these claims be packaged together under the “Same-Day Rule” to avoid overpayment for the fixed costs that are incorporated into the payment for that APC. Id. ¶ 55.

         1. Defendants' Scheme to Submit False Claims in Violation of Same-Day and Three-Day Rules

         On about April 17, 2013, representatives from CHMB, including its owner, Janet Boos, and its account executive for Mercy Hospital, Michelle Pena, visited Mercy Hospital to discuss billing procedures. Id. ¶ 134. The CHMB representatives met with, among others, Accretive's Judi Kieltyka, and Mercy's Michael Hachey, Vice President of Physician Practices Judi Hawkes, Chief Information Officer Craig Dreher, and Ms. Worthy. Id. During the April visit, the CHMB representatives did not spend any time reviewing claims processing or the process by which Mercy Hospital reviewed claims and ensured their accuracy. Id.

         Based upon comments by the CHMB representatives during the April 2013 visit, Ms. Worthy became concerned that CHMB was unfamiliar with the Three-Day and Same-Day Rules and began to raise questions internally. Id. ¶ 135. The Hospital executives assured her that CHMB had experience with provider-based billing for Medicare and had several hospital clients. Id. Ms. Worthy raised similar concerns at a subsequent meeting on June 19, 2013, and again in an email to representatives from CHMB, Accretive, and Mercy. Id. ¶¶ 136, 138. She received no response. Id. ¶ 138.

         Before August 1, 2013, Mercy Hospital used Meditech billing software to process all of its hospital and physician billing, thereby ensuring that all facility billing was bundled in a single claim in compliance with Medicare's legal requirements. Id. ¶ 140. When CHMB assumed responsibility for the billing of claims for Mercy Hospital's wholly-owned physician practices, it used a different software, Allscripts, to process all physician-practice claims including both facility fees and professional fees. Id. Allscripts was not integrated with and did not communicate with Meditech. Id. Because Allscripts would miss all claims subject to the Same-Day and Three-Day Rules, Defendants knew that CHMB needed to manually check all physician practice claims for the date of service to ensure that these claims complied with the three-day and same-day billing requirements. Id. Defendants did not conduct this manual review after CHMB assumed responsibility for billing for the wholly owned and operated physician practices. Id.

         Before taking over responsibility for billing for the physician practices and with knowledge that they would bill in violation of the Same-Day and Three-Day Rules, Ms. Worthy alleges on information and belief that CHMB conducted no testing of its billing system to ensure compliance with Medicare regulations, even after she and others raised concerns. Id. ¶ 141. Senior leadership at Mercy Hospital, including but not limited to Michael Hachey, Judi Hawkes, Craig Dreher, and Ms. Worthy, and Judi Kieltyka from Accretive met biweekly as part of the Committee on Revenue Excellence (CORE). Id. ¶ 142. At a CORE meeting on August 21, 2013, Ms. Worthy reminded those present, including but not limited to Mr. Hachey, Ms. Hawkes, Mr. Dreher, and Ms. Kieltyka, that CHMB still had no plan in place for complying with Medicare billing regulations. Id.

         2. CHMB Takes Over Billing with Knowledge of Problems

         CHMB assumed responsibility for the Mercy Hospital outpatient physician practice billing on August 1, 2013, despite knowing it was not prepared to handle Mercy's Medicare billings in a compliant manner. Id. ¶ 143. Based on concerns about CHMB's ability to submit Medicare bills in a compliant manner, Ms. Kieltyka instructed CHMB to hold all Medicare billing until a process was in place to ensure compliance with Medicare regulations. Id. ¶ 144. At an August 21, 2013 CORE meeting, approximately three weeks after CHMB took over Medicare billing responsibilities, Ms. Worthy informed the group that CHMB was now holding about $750, 000 in Medicare billings on behalf of Mercy Hospital, about 60% of which was tainted by unlawful facility charges that were not bundled as required by the Same-Day and Three-Day Rules. Id. ¶ 145.

         In early September 2013, Ms. Worthy accessed the FISS system and determined that CHMB was not holding billings as directed but actually had received about $1 million in Medicare reimbursements on behalf of Mercy Hospital. Id. ¶ 147. Ms. Worthy determined that contrary to Ms. Kieltyka's directions, CHMB was billing and receiving payment from Medicare for office visits and other medical services subject to the Same-Day and Three-Day Rules. Id. ¶ 148. She further observed that while claims to Medicare submitted by CHMB were increasing, Mercy Hospital's accounts receivable was decreasing. Id. Ms. Worthy reported the apparent Medicare overbilling violations to Ms. Kieltyka at Accretive. Id. ¶ 149. She received no response to her reports. Id. CHMB officials Janet Boos, Michelle Pena, and Paula Kacsir (a CHMB Vice President of Client Services who was assigned to the Mercy Hospital account in the fall of 2013) all subsequently denied that CHMB was submitting Medicare claims on behalf of Mercy Hospital and asserted that CHMB was holding all Medicare claims as instructed. Id. ¶ 150. In fact, CHMB was receiving Medicare payments and posting them to accounts at this time, but falsely represented to Accretive and Mercy that it was holding Medicare billings. Id. ¶¶ 150-51.

         3. Creation of Dummy Accounts to Conceal Same-Day and Three-Day Violations

         In December 2013, Ms. Worthy did an analysis of two weeks of the claims submitted by CHMB using the FISS system. Id. ¶ 152. She noticed that CHMB first billed Medicare for services in violation of the Same-Day and Three-Day Rules. Id. ¶ 155. Medicare then paid CHMB for the claims. Id. After receiving payment for the claim, CHMB was supposed to pass the payment on to Mercy Hospital. Id. ¶ 156. Instead, once CHMB received payment, CHMB voided the correct patient account, and created a dummy account under a different name. Id. It then posted the payment received to Medicare to the dummy account for the same dollar amount and CPT code as the original claim. Id. Ms. Worthy was able to determine through the FISS system that CHMB was not billing Medicare for these dummy accounts, having already billed Medicare under the correct patient account. Id. ¶ 159.

         The voiding of patient accounts and creation of dummy accounts, which was internal to CHMB and not reported to Medicare, allowed CHMB to falsely represent to Accretive and Mercy Hospital that it had not violated the Same-Day or Three-Day requirements. Id. ¶ 157. The dummy accounts also served to falsely inflate Mercy Hospital's accounts receivable and hampered any future attempts at audits or repayments for violations of the Same-Day or Three-Day Rules because the payment now appeared under another patient's name. Id. ¶ 159.

         Tyler Chase and Richard Moulton, who work for Mercy Hospital Information Services, attempted to run an audit trail on the Allscripts computer system to determine who entered the voids and payments. Id. ¶ 160. They determined that CHMB had created the dummy accounts but, because an anonymous computer user had set up the dummy accounts, they could not link the creation of the dummy accounts to a specific Mercy Hospital, Accretive, or CHMB employee. Id. In particular, Mr. Chase informed Ms. Worthy that there were 112 vouchers in CHMB's Allscripts system that had a “no charge” listing, indicating that there were no services in the account to be billed. Id. ¶ 161. Mr. Chase discovered that approximately sixty of these “no charge” accounts had payments posted, totaling approximately $6, 000. Id. These payments had been entered by a user called “chmb401” which had entered more payments into Allscripts than any ...

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