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United States ex rel. Tahlor v. Ahs Hospital Corporation

United States District Court, D. New Jersey

August 26, 2014

UNITED STATES OF AMERICA ex rel. PAUL TAHLOR, M.D., AND MARGARET MARINO, R.N., Plaintiffs,
v.
AHS HOSPITAL CORPORATION, ATLANTIC HEALTH SYSTEMS, INC., SUMMIT MEDICAL GROUP, EMERGENCY MEDICAL ASSOCIATES OF NEW JERSEY, HOSPITALIST ASSOCIATES, INC., DAVID SCHRECK, M.D., AND SAMIR PATEL, M.D., Defendant.

OPINION

WILLIAM J. MARTINI, District Judge.

The Relators in this qui tam False Claims Act ("FCA") case, Paul Tahlor and Margaret Marino, allege that several physicians and physician practice groups submitted false claims to Medicare. Defendants Summit Medical Group ("SMG"), Emergency Medical Associates of New Jersey ("EMA"), Hospitalist Associates, Inc. ("HA"), Dr. David Schreck, and Dr. Samir Patel move pursuant to Federal Rules of Civil Procedure 12(b)(6) and 9(b) to dismiss the Third Amended Complaint ("TAC") in part, and they also move pursuant to Federal Rule of Civil Procedure 12(f) to strike certain allegations in the TAC.[1] There was no oral argument. Fed.R.Civ.P. 78(b). For the reasons set forth below, the motions to dismiss are GRANTED IN PART, and DENIED IN PART, and the motions to strike are DENIED.

I. BACKGROUND

Because the Court set forth relevant background information in its prior opinion in this case, U.S. ex rel. Tahlor v. AHS Hosp. Corp., No. 8-2042, 2013 WL 5913627 (D.N.J. Oct. 31, 2013) (" AHS I "), this section summarizes the allegations and procedural history relevant solely to the instant motions.

Relators, one a physician advisor, and one a nurse case manager, worked at a hospital called OMC. TAC ¶¶ 13-14. Healthcare services at OMC and another hospital, MMC, were (and still are) provided by AHS Hospital Corporation. Id. ¶ 15. Prior to June 1, 2007, healthcare services at a third hospital, Mountainside, were also provided by AHS. Id. The Complaint alleges that Defendants and/or their employees worked at OMC, MMC, and Mountainside. Id. ¶¶ 3, 239.

On April 25, 2008, Relators filed a sealed qui tam Complaint against a host of individuals and entities, including Defendants. ECF No. 1. The Complaint alleged that Defendants violated the FCA by submitting false and fraudulent Medicare claims. Notably, the Complaint named OMC as a Defendant, but it did not name MMC or Mountainside as a Defendant. Moreover, the Complaint sought to recover for FCA violations at OMC, but not at MMC or Mountainside.

On May 20, 2008, the Court entered an order ("the Administrative Order") staying the case but not dismissing it. ECF No. 6. The Administrative Order states:

ORDERED that in the event this matter is administratively reopened for any reason, the rights of the Relators and the United States in the above-captioned matter be and are hereby fully preserved as they exist at the time of entry of this Order, including, but not limited to, Relators' rights under... [31 U.S.C.] § 3731(b) [the FCA's statute of limitations provision]

Id.

On November 7, 2012, after the case was reopened, Relators filed their First Amended Complaint ("FAC"). ECF No. 37. Unlike the original Complaint, the FAC sought to recover for FCA violations not just at OMC, but for FCA violations at MMC and Mountainside, as well. Specifically, in Counts 1 and 2, the FAC asserted that Defendants engaged in six "schemes" that allegedly violated the FCA. Two of those schemes warrant the Court's attention for purposes of the present motion, Schemes 1 and 6 (all other schemes have been abandoned or dismissed with prejudice):

• Scheme 1: Billing Medicare for inpatient hospital services for patients who did not meet medical necessity criteria for inpatient admission.
• Scheme 6: Improperly keeping patients on the inpatient service for three days so that Medicare would pay for those same patients to be admitted to skilled nursing facilities ("SNFs").

FAC ¶¶ 3(a), 3(f).

On February 21, 2013, Defendants moved to dismiss the FAC. ECF No. 55. Relators simultaneously opposed the motion and cross-moved to file a proposed Second Amended Complaint ("SAC"). ECF No. 69. In its decision in AHS I, the Court granted the motion to dismiss in part. On jurisdictional grounds, the Court dismissed the Scheme 1 claims based on (a) conduct at OMC that post-dated July 31, 2009; and (b) conduct at MMC. AHS I, 2013 WL 5913627, at *11. The Court dismissed the additional Scheme 1 claims against Defendants without prejudice. Id. at **12-14. Furthermore, the Court dismissed the Scheme 6 claims without prejudice against all Defendants except for Dr. Schreck. Id. at *14.

The Court denied Relators' cross-motion to amend. Id. at *17. The Court noted that Relators' proposed SAC cured pleading deficiencies in Relators' Scheme 1 claims against Defendants based on pre-August 1, 2009 conduct at OMC. However, because the proposed SAC included claims that were jurisdictionally barred, the Court granted leave for Relators excise the jurisdictionally barred claims and file a TAC.

On December 2, 2013, Relators filed the TAC. ECF No. 89. The TAC contains two counts, both of which are pled under the FCA. The TAC asserts FCA claims based on two schemes only: Scheme 1 (improper inpatient admissions) and Scheme 6 (improperly prolonging admissions so that ...


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