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United States ex rel. Strubbe v. Crawford County Memorial Hospital

United States Court of Appeals, Eighth Circuit

February 11, 2019

United States of America, ex rel. Stephanie Strubbe; Carmen Trader; Richard Christie, relators Plaintiffs - Appellants
v.
Crawford County Memorial Hospital; Bill Bruce, Individually Defendants - Appellees

          Submitted: November 13, 2018

          Appeal from United States District Court for the Northern District of Iowa - Sioux City

          Before BENTON, BEAM, and ERICKSON, Circuit Judges.

          BENTON, CIRCUIT JUDGE.

         Stephanie A. Strubbe, Carmen Trader, and Richard Christie sued Crawford County Memorial Hospital (CCMH) as relators in a qui tam action for violations of the False Claims Act. 31 U.S.C. § 3729(a). They also sued CCMH and its Chief Executive Officer, Bill Bruce, for violating the FCA's anti-retaliation provision. § 3730(h). The district court[1] granted CCMH's motion to dismiss all counts of the complaint, except Strubbe's retaliation claim. As for it, the district court granted CCMH's motion for summary judgment. Strubbe v. Crawford Cty. Mem'l Hosp., 2017 WL 8792692 (N.D. Iowa Dec. 6, 2017). Having jurisdiction under 28 U.S.C. § 1291, this court affirms.

         I.

         Crawford County Memorial Hospital is a county-owned nonprofit hospital in Iowa. In April 2012, Bruce became its Chief Executive Officer.

         At CCMH, Strubbe was an Emergency Medical Technician (EMT), and Christie and Trader were paramedics. They filed a sealed qui tam complaint as relators in April 2015. The United States declined to intervene. The relators filed an amended complaint. It alleges that CCMH submitted false claims for Medicare reimbursement and made false statements or reports to get fraudulent claims paid. Specifically, Count I alleges that CCMH violated the FCA by submitting (1) claims for breathing treatments administered by paramedics; (2) claims for laboratory services done by paramedics and EMTs; (3) claims with false credentials of service providers; (4) claims for EMT and paramedic services at Eventide, L.L.C. and Denison Care Center; and (5) cost reports with improper reimbursements and payments to vendors for non-CCMH expenses. Count II alleges CCMH knowingly made or used false statements to get false claims paid, including (1) records documenting breathing treatments at 30 minutes; (2) records listing paramedics as "specialized ancillary staff" for breathing treatments; (3) reimbursement requests and invoices for improper payments for non-CCMH expenses; (4) documents with false credentials for emergency medical staff; and (5) cost reports with false costs. Count III alleges that CCMH conspired with Eventide to violate the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b.

         Strubbe, Trader, and Christie also sued CCMH and Bruce for violating the FCA's anti-retaliation provision. According to the complaint, Strubbe began reviewing hospital financial documents in July 2014. Soon after, she "spoke to all Board members about the financial situation of CCMH [and] her belief that the finances were not adding up." In November, Strubbe tore her rotator cuff at work. Initially, CCMH put her on "light duty." In July 2015, however, CCMH told Strubbe her light-duty assignments were a financial hardship for the hospital and moved her to part-time status. CCMH removed Strubbe from part-time status in March 2016 (effectively a termination).

         Christie and Trader also began investigating CCMH's finances in 2014. They complained to other hospital staff that "there was something wrong with the changes in the breathing treatments." Christie also complained there was "potentially something wrong with the financial statements provided by CCMH to the Board." In January 2015, Christie reported to her supervisor that Jonathan Richard was "not properly licensed" as a paramedic. Both Christie and Trader then reported the license violation to the Iowa Department of Public Health. Four months later, CCMH transitioned Christie from night shifts to day shifts. It terminated Christie later that month for speeding while driving an ambulance. Trader still works at CCMH as a paramedic, but claims that it subjects him to harrassment and other discriminatory treatment.

         CCMH moved to dismiss the complaint. The district court dismissed the substantive FCA claims for failure to plead with particularity because the complaint did not set forth facts showing any false claims were submitted, or plead how the relators acquired this information. It also dismissed Christie and Trader's retaliation claims as not stating a plausible claim for relief. However, the court denied CCMH's motion to dismiss Strubbe's retaliation claim. CCMH then moved for summary judgment on it. Concluding that Strubbe could not prove a prima facie case of retaliation, the district court granted summary judgment to CCMH.

         II.

         This court reviews de novo the district court's dismissal of a claim under Rule 9(b), "accepting the allegations contained in the complaint as true and drawing all reasonable inferences in favor of the nonmoving party." United States ex rel. Joshi v. St. Luke's Hosp., Inc., 441 F.3d 552, 555 (8th Cir. 2006). The False Claims Act (FCA) imposes liability on anyone who "knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval" or who "knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim." 31 U.S.C. § 3729(a)(1)(A)-(B). "The FCA attaches liability, not to the underlying fraudulent activity, but to the claim for payment." Olson v. Fairview Health Servs. of Minn., 831 F.3d 1063, 1070 (8th Cir. 2016). Qui tam provisions permit private persons, relators, to sue for violations in the name of the United States and to recover part of the proceeds if successful. § 3730(b), (d).

         "Because the FCA is an anti-fraud statute, complaints alleging violations of the FCA must comply with Rule 9(b)." Joshi, 441 F.3d at 556. Under Rule 9(b), "a party must state with particularity the circumstances constituting fraud or mistake." This gives defendants notice and protects them from baseless claims. United States ex rel. Thayer v. Planned Parenthood of the Heartland, 765 F.3d 914, 918 (8th Cir. 2014). While Rule 9(b) is "context specific and flexible," id., a plaintiff cannot meet this burden with conclusory and generalized allegations. Joshi, 441 F.3d at 557. Where "the facts constituting the fraud are peculiarly within the opposing party's knowledge," the "allegations may be pleaded on information and belief" if "accompanied by a statement of facts on which the belief is founded." Drobnak v. Andersen Corp., 561 F.3d 778, 783-84 (8th Cir. 2009).

         To satisfy the particularity requirement for FCA claims, "the complaint must plead such facts as the time, place, and content of the defendant's false representations, as well as the details of the defendant's fraudulent acts, including when the acts occurred, who engaged in them, and what was obtained as a result." Joshi, 441 F.3d at 556. A relator can meet the Rule 9(b) requirements by pleading (1) "representative examples of the false claims," or (2) the "particular details of a scheme to submit false claims paired with reliable indicia that lead to a strong inference that claims were actually submitted." Thayer, 765 F.3d at 918. To satisfy the particular details requirement, the complaint must "provide sufficient details to enable the defendant to respond specifically and quickly to the potentially damaging allegations." Id. at 918-19.

         A.

         In Count I, the relators contend that CCMH submitted false claims through a wide-ranging fraudulent scheme. First, the complaint alleges that shortly after Bruce became CEO, CCMH required paramedics to perform breathing treatments previously provided by nursing staff. Hospital management told employees this change was for "billing" and "cost reimbursement purposes" and required them to document each treatment at 30 minutes, regardless of its length. The complaint alleges-upon information and belief-that these changes allowed CCMH to bill these treatments separately to get a higher reimbursement from Medicare. Further, the complaint alleges that CCMH treats paramedics as "specialized staff," making the treatments separately billable. Relators also contend-upon information and belief-that patients are receiving breathing treatments who do not need them.

         Second, the complaint alleges that CCMH ordered paramedics and EMTs to perform laboratory services, like blood draws. The relators claim-upon information and belief-that this change, like the breathing treatments, was intended to increase Medicare reimbursement by allowing CCMH to bill these services separately. Third, the complaint identifies three employees with misclassified titles. For example, the complaint alleges-upon information and belief-that CCMH billed Medicare for Richard's services as a paramedic, though he was "not properly licensed." Fourth, the relators claim paramedics and EMTs provided services at two other health care facilities-Eventide and Denison. Based on information and belief, CCMH instituted this change to increase Medicare reimbursement. Finally, the complaint alleges that CCMH reported improper expenses to Medicare. Relators contend-upon information and belief-that CCMH submitted cost reports to Medicare with payments to Bruce's relatives above the market value and with duplicate payments to the credit card companies and the sellers.

         Relators did not plead representative samples of false claims. In Joshi, a hospital anesthesiologist brought a qui tam claim alleging that the hospital sought Medicare reimbursements at higher rates and submitted claims for services and supplies not provided. Joshi, 441 F.3d at 554. Joshi did not provide representative samples, but alleged that every claim over a sixteen-year period was fraudulent. Id. at 556-57. Though Rule 9(b) does not require alleging the "specific details of every alleged fraudulent claim," this court dismissed Joshi's claim because a relator "must provide some representative ...


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