The opinion of the court was delivered by: Ricardo M. Urbina United States District Judge
MEMORANDUM OPINION DENYING THE DEFENDANTS' MOTION TO DISMISS
The plaintiff, the United States ("the government"), brings this action, under the qui tam provision of the False Claims Act ("FCA"), 31 U.S.C. § 3729 et seq., against Dr. Peter Bernad and Neurology Services, Inc. (collectively, "the defendants"). The government alleges that the defendants knowingly submitted fraudulent claims or used fraudulent records to create claims for payment through various federal health insurance programs, including Medicare. The government also charges common-law claims of fraud, unjust enrichment and mistake of fact. This matter is before the court on the defendants' motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(6) and 9(b). Because the government alleges fraud with sufficient particularity and properly states a claim, the court denies the defendants' motion to dismiss.
Title XVIII of the Social Security Act, 42 U.S.C. § 1395 et seq., established the Health Insurance for Aged and Disabled program, commonly known as Medicare.*fn1 First Am. Compl. ("Compl.") ¶ 7. The program consists of two parts: Part A provides insurance for the costs of hospitalization and post-hospitalization, and Part B – which is at issue here – covers a percentage of the fees for physician and laboratory services. Id. ¶ 8 ( citing 42 U.S.C. § 1395c-i, k-l, x(s)). The Department of Health and Human Services ("HHS"), through the Health Care Financing Administration*fn2 ("HCFA"), administers and reimburses doctors' claims filed under Part B. Id.
Doctors submit claims to HCFA for reimbursement on the HCFA 1500 claim form. Id. ¶ 16. The HCFA 1500 requires the doctor to describe the services provided to the patient using standardized numeric codes ("CPT codes"). Id. ¶ 17. The defendants provide medical services known as evaluation and management services ("E/M services"). Id. ¶ 18. The CPT codes for E/M services range from Level I (for the least complicated services for cases of low severity) to Level V (for complex services for cases of high severity). Id. The Medicare program reimburses the higher levels of E/M services at a significantly higher rate. Id.
The government alleges that the defendants engaged in "upcoding" -- that is, submitted claims with CPT codes that represented a level of care higher than the defendants actually provided. Id. ¶ 21. Specifically, the government asserts that for the past six years, the defendants upcoded almost every claim to Levels IV and V when the actual level of service they provided was much lower. Id. According to several former Neurology Services employees, one method the defendants allegedly used to inflate the CPT code on a claim was to provide defendant Neurology Services' treating physicians with fee tickets pre-printed only with the codes for Levels III, IV and V. Id. ¶¶ 22, 24.
The defendants' treating physicians used the tickets to document the services provided to patients, and the defendants then used the tickets to bill the government. Id. Because only the codes for Levels III, IV and V were printed on the fee ticket, physicians who provided Level I or II services had to write in the level of service, rather than simply check a box on the ticket. Id. As a result, the government states, physicians rarely documented and billed for Level I or II services. Id.
The government notes a large discrepancy in the level of claims that the defendants filed between 1992 and 1998. Id. ¶ 23. A review of the defendants' Medicare billings reveals that defendant Dr. Bernad billed 92.68% of his claims at Levels IV and V, and defendant Neurological Services billed 94.32% of its claims at these inflated levels. Id. By comparison, procedures at Levels IV and V account for only 27% of all procedures that other neurologists bill the government for. Id.
As additional support, the government points to 12 sample patient cases involving treatment by Dr. Bernad. Id. ¶ 25. A review of these claims found that the vast majority of the claims Dr. Bernad submitted did not correspond with the treatment that he administered and documented. Id. For example, Dr. Bernad repeatedly billed claims at Level IV or V when the treatment was a simple follow-up visit from a patient treated a week earlier. Id.
Turning to the procedural history of this case, the court notes that the relator, Cornelius Harris, filed the original complaint for this matter on December 21, 1999. The government intervened on January 29, 2002, and filed an amended complaint ("complaint") on March 6, 2002. The complaint alleges violations of the FCA, common law fraud, unjust enrichment, and payment under mistake of fact. Id. ¶¶ 31-54. In response, the defendants filed a motion to dismiss the complaint for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6) and a failure to follow the heightened pleading requirements for fraud claims pursuant to Federal Rule of Civil Procedure 9(b). Mot. to Dismiss at 1. The court now turns to the substance of the defendants' motion.
A. The Court Denies the Defendants' Motion to Dismiss Pursuant ...