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United States ex rel. Groat v. Boston Heart Diagnostics Corp.

United States District Court, District of Columbia

June 9, 2017

UNITED STATES OF AMERICA, et al., ex rel. TINA D. GROAT, Plaintiffs,


          REGGIE B. WALTON United States District Judge.

         The plaintiff/relator, Tina D. Groat, M.D., brings this qui tarn action against the defendant, Boston Heart Diagnostics Corporation ("Boston Heart"), under the federal False Claims Act, 31 U.S.C. § 3729 (2012), and various analog state false claims statutes. See Relator's Second Amended Complaint Pursuant to the Federal False Claims Act, 31 U.S.C. §§ 3729 et seq. and Pendent State False Claims Acts ("2d Am. Compl.") ¶ 1. Currently before the Court are the Relator's Motion for Judicial Notice ("Relator's Mot.") and Boston Heart Diagnostics Corporation's Motion to Dismiss Relator's Second Amended Complaint ("Def's Mot."), which seeks dismissal of the plaintiffs Second Amended Complaint pursuant to Federal Rules of Civil Procedure 9(b) and 12(b)(6). See Def's Mot. at 2. Upon careful consideration of the parties' submissions, [1] the Court concludes that it must grant the relator's motion for judicial notice and grant in part and deny in part Boston Heart's motion to dismiss.

         I. BACKGROUND

         A. Statutory Background

         A brief overview of the Medicare program will help elucidate the relator's allegations in this case. Medicare is a federal health insurance program for the elderly and people with disabilities. See 42 U.S.C. § 1395c (2012). Medicare Part B, which provides outpatient coverage for, among other things, diagnostic laboratory tests, see 42 C.F.R. § 410.32 (2016), only covers medical services that are “reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member, ” 42 U.S.C. § 1395y(a)(1)(A). “[Laboratory t]ests that are performed in the absence of signs, symptoms, complaints, personal history of disease, or injury are not covered except when there is a statutory provision that explicitly covers tests for screening as described.” Medicare Claims Processing Manual: Chapter 16-Laboratory Services § 120.1, available at Regulations-and-Guidance/Guidance/Manuals/downloads/clm104C16.pdf (last visited May 16, 2017).

         Medicare establishes its national payment policy for covered items or services through national coverage determinations, which are formal decisions by the Secretary of Health and Human Services regarding whether, and under what circumstances, Medicare covers a particular item or service. See 42 U.S.C. § 1395ff(1); 42 C.F.R. § 405.1060(a). National coverage determinations are binding on both Medicare contractors and administrative law judges, who preside over Medicare coverage appeals. See 42 U.S.C. § 1395ff(1)(A)(i); 42 C.F.R § 405.1060(a). Medicare contractors process and pay Medicare claims within a specified jurisdiction on behalf of the Centers for Medicare and Medicaid Services (“CMS”), and have authority to issue local coverage determinations for that jurisdiction. See 42 U.S.C. § 1395ff(f)(2); see also id. § 1395m-1(g)(noting that Medicare contractors may issue local coverage determinations regarding clinical diagnostic laboratory tests under the same process). Local coverage determinations, like national coverage determinations, govern Medicare coverage for a particular item or service. See id. § 1395ff(f)(2)(b). Administrative law judges “give substantial deference” to local coverage determinations, but they are not bound by them. 42 C.F.R. § 405.1062.

         An entity seeking reimbursement for services provided to Medicare patients must submit a CMS-1500 form to the Medicare contractor. See United States ex rel. Hobbs v. MedQuest Assocs., Inc., 711 F.3d 707, 711 (6th Cir. 2013). “The[ CMS-1500] form[] reflect[s] the treatment or services provided and identif[ies] the [entity that] provided them. Tests, supplies, and services are correlated to a series of unique numbers, called CPT codes, which quickly convey to the [claims processor] what reimbursable expenses the [entity] has incurred.” Id. at 711. The CMS-1500 form requires the entity to certify that, among other things, “the services on this form were medically necessary.” Health Insurance Claim Form (“CMS-1500”) at 2, available at (last visited May 16, 2017).

         B. Factual Background and Procedural History

         The relator is a medical doctor and the National Medical Director of Women's Health and Genetics at United Healthcare (“United”), 2d Am. Compl. ¶ 6, which is a health insurance company that offers Medicare and Medicaid insurance coverage, TriCare health insurance coverage, as well as employer-sponsored and individual health insurance coverage, id. ¶ 23. The relator alleges the following in her Second Amended Complaint.

         Boston Heart is a clinical laboratory located in Framingham, Massachusetts, which “provides diagnostic testing related to cardiovascular health, ” 2d Am. Compl. ¶ 24, by “conducting laboratory tests that are ordered by doctors and other healthcare providers, ” id. ¶ 50.[2] “To facilitate the ordering of those tests, [Boston Heart] supplies doctors with pre-printed test requisition forms which that doctor fills out and sends to the [Boston Heart] laboratory along with the patient's specimen that is to be tested.” Id.

These test requisition forms include a list of the tests that the lab[oratory] performs for the doctor to select based on the doctor's examination of the patient and subsequent diagnosis. The form also groups certain tests together in test panels, which allows the doctor to easily order several tests at once simply by checking one box on the form.

Id. ¶ 51. “After the lab[oratory] conducts the tests ordered, it bills the government [or government intermediary] . . . for tests performed for Medicare [and other government health insurance] patients.” Id. ¶ 55.

         The relator alleges that various genetic and non-genetic tests[3] performed by Boston Heart are not medically necessary for patients with the following four diagnostic codes: (1) routine general medical examination at a health care facility; (2) essential hypertension (high blood pressure); (3) other and unspecified hyperlipidemia (high cholesterol); and (4) other malaise and fatigue (collectively, “the four diagnostic codes”). See id. ¶¶ 57-59. Specifically, the relator alleges:

when any of these four [ ] diagnostic codes are given to a patient in the absence of other diagnostic codes, the tests set forth above are . . . known to be medically unnecessary because they (1) do not and cannot predict the patient's risk of future heart disease, (2) do not and cannot screen for any currently existing heart disease in the patient, and (3) provide no additional information regarding the cardiovascular-related diagnoses sometimes used to justify these tests, such as hypertension, hyperlipidemia, or malaise and fatigue, and (4) have no bearing on any potential treatments for those diagnoses.

Id. ¶ 59. According to the relator, when these tests are ordered for patients with some or all of the four diagnostic codes, they are used solely for screening purposes on adults who do not exhibit “signs, symptoms, complaints, or personal history of heart disease, ” and thus are not covered by Medicare or other government health care programs. Id. ¶ 70; see also id. ¶ 67. To support her allegation, the relator relies on the Guideline for Assessment of Cardiovascular Risk in Asymptomatic Adults in November 2010 (the “Guideline”), jointly published by the American Heart Association and the American College of Cardiology, id. ¶¶ 61-62 (noting that the Guideline “specifically recommends against certain of these tests to assess the risk of developing heart disease”), as well as various national and local coverage determinations made by the government and its contractors, respectively, id. ¶¶ 67-69, 73-74.

         The relator also relies on the data examined by her team at United, which, in order to “evaluat[e] the drivers of increased costs in women's care and genetic testing[, ] . . . examined the volume and type of genetic testing purportedly related to cardiac risk performed for thousands of patients by hundreds of laboratories that bill to United.” Id. ¶ 119. “Because [United] provides and services [health insurance plans that] are funded by Medicare and Medicaid dollars, [the r]elator received and evaluated [United] data that showed that Boston Heart submitted claims to [United] on behalf of patients insured under [government health insurance plans] for the tests at issue here.” Id. ¶ 136. “[B]y examining data for the year 2013, ” id. ¶ 120, the relator “identified a combination of seven tests that are frequently performed and billed by Boston Heart and specifically compared Boston Heart's billing of that combination to other laboratories, ” id. ¶ 121. According to the relator, the comparison revealed that “Boston Heart was an extreme outlier in the frequency of billing this combination of seven tests, ” id. ¶ 122, and that examination “of specific claims submitted to United [ ] show that Boston Heart was billing for medically unnecessary tests to screen for cardiac-related issues and predict future cardiac risk, ” id. ¶ 124. The relator alleges that “Boston Heart encourages providers to order these medically unnecessary tests, ” id. ¶ 132, through marketing materials and test panels on pre-printed test requisition forms, see id. ¶¶ 52, 94, 127, 132, and that “General Practitioners and other non-cardiology physicians are Boston Heart's primary target” for its allegedly false marketing statements regarding the medical necessity of its tests, id. ¶ 127, and their ability “to predict cardiac risk, ” id. ¶ 131. Ultimately, the relator met with Boston Heart's CEO and its Vice President of Payer Innovation and Strategy on August 15, 2014, and told them “that their test panels included many unnecessary tests.” Id. ¶ 128-30; see also Relator's Opp'n at 35 (identifying the Boston Heart meeting attendees as the CEO and Vice President of Payor Innovation and Strategy).

         Based on these factual allegations, the relator filed her original complaint under seal on February 3, 2015.[4] See Relator's Complaint Pursuant to the Federal False Claims Act, 31 U.S.C. §§ 3729 et seq. and Pendent State False Claims Acts at 1, ECF No. 1. On May 11, 2015, the relator filed her first amended complaint. See Relator's Amended Complaint Pursuant to the Federal False Claims Act, 31 U.S.C. §§ 3729 et seq. and Pendent State False Claims Acts at 10, ECF No. 19. On August 19, 2016, the United States, along with the twenty-seven states and the District of Columbia on whose behalf the relator asserted false claims act violations, declined to intervene in this case, see Notice of Election to Decline Intervention and to Dismiss Claims Asserted on [ ] Behalf of Maryland (Aug. 19, 2016), ECF No. 28, and the Court dismissed the “claims brought by the relator on behalf of the State of Maryland” and ordered that the case be unsealed, Order at 1-2 (Aug. 24, 2016), ECF No. 29.[5]

         On October 27, 2016, the relator filed her Second Amended Complaint. See 2d Am. Compl. at 1. Count I of the Second Amended Complaint alleges both a violation of 31 U.S.C. § 3729(a)(1)(A), the “false claims” provision of the False Claims Act, as well as a violation of 31 U.S.C. § 3729(a)(1)(B), the “false statements” provision. See 2d Am. Compl. ¶¶ 143-44. Count II alleges a violation of 31 U.S.C. § 3729(a)(1)(G), the “reverse false claims” provision of the False Claims Act. See 2d Am. Compl. ¶ 150. Counts III through XXXI allege violations of twenty-seven states' and the District of Columbia's false claims statutes. See id. ¶¶ 154-381. The defendant now moves to dismiss all of the relator's claims pursuant to Federal Rules of Civil Procedure 9(b) and 12(b)(6).


         A complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Thus, to survive a motion to dismiss for “failure to state a claim upon which relief can be granted, ” Fed.R.Civ.P. 12(b)(6), the complaint “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face, '” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). Although the Court “must treat the complaint's factual allegations as true [and] must grant [the] plaintiff the benefit of all reasonable inferences from the facts alleged, ” Trudeau v. Fed. Trade Comm'n, 456 F.3d 178, 193 (D.C. Cir. 2006) (first alteration in original) (citation omitted), legal allegations devoid of factual support are not entitled to this assumption, see, e.g., Kowal v. MCI Commc'ns Corp., 16 F.3d 1271, 1276 (D.C. Cir. 1994). Moreover, a plaintiff must provide more than “a formulaic recitation of the elements of a cause of action.” Hinson ex rel. N.H. v. Merritt Educ. Ctr., 521 F.Supp.2d 22, 27 (D.D.C. 2007) (quoting Twombly, 550 U.S. at 555). “And, ‘[i]n determining whether a complaint states a claim, the court may consider the facts alleged in the complaint, documents attached thereto or incorporated therein, and matters of which it may take judicial notice.'” Farah v. Esquire Magazine, 736 F.3d 528, 534 (D.C. Cir. 2013) (alterations in original) (quoting Abhe & Svoboda, Inc. v. Chao, 508 F.3d 1052, 1059 (D.C. Cir. 2007)).

         Fraud claims are also subject to the heightened pleading requirement of Rule 9(b), which provides that “[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.” Fed.R.Civ.P. 9(b); see also United States ex rel. Heath v. AT & T, Inc., 791 F.3d 112, 123 (D.C. Cir. 2015) (applying Rule 9(b) to claims filed pursuant to the False Claims Act). “The rule serves to ‘discourage[] the initiation of suits brought solely for their nuisance value, and safeguards potential defendants from frivolous accusations of moral turpitude.'” Heath, 791 F.3d at 123 (alteration in original) (quoting United States ex rel. Williams v. Martin-Baker Aircraft Co., 389 F.3d 1251, 1256 (D.C. Cir. 2004)). Further, “the complaint must be particular enough to ‘guarantee all defendants sufficient information to allow for preparation of a response.'” Id. (quoting Williams, 389 F.3d at 1256). “Rule 9(b) is not an antithesis of Rule 8(a)'s ‘short and plain statement' requirement, but rather a supplement to it.” Baker v. Gurfein, 744 F.Supp.2d 311, 315 (D.D.C. 2010) (Walton, J.) (citing Williams, 389 F.3d at 1256). Accordingly, in order to withstand a motion to dismiss for failure to plead a False Claims Act claim with the degree of particularity required by Rule 9(b), a “complaint must . . . provide a defendant with notice of the who, what, when, where, and how with respect to the circumstances of the fraud.” Stevens v. InPhonic, Inc., 662 F.Supp.2d 105, 114 (D.D.C. 2009) (Walton, J.) (internal quotation marks and citations omitted)).

         III. ANALYSIS

         A. ...

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