Bachman et al v. Healthcare Liaison Professionals Inc et al

Motion to Dismiss for Failure to State a Claim

N.D. Tex.July 11, 2016

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS DALLAS DIVISION UNITED STATES OF AMERICA, EX. REL. GORDON GRANT BACHMAN, RELATOR; Plaintiff, v. HEALTHCARE LIAISON PROFESSIONALS, INC., D/B/A US PHYSICIANHOME VISITS, ET AL; Defendants. § § § § § § § § § § § § Case No. 3:13-cv-0023-P JURY TRIAL DEMANDED DEFENDANT ASSUREX HEALTH, INC.’S MOTION TO DISMISS SECOND AMENDED COMPLAINT AND MEMORANDUM OF LAW IN SUPPORT Respectfully submitted, s/ Jared M. Slade William H. Jordan (application pro hac vice forthcoming) Ga. State Bar No. 405112 bill.jordan@alston.com Wade P. Miller (application pro hac vice forthcoming) Ga. State Bar No. 569289 wade.miller@alston.com ALSTON & BIRD LLP 1201 West Peachtree Street Atlanta, Georgia 30309-3424 Telephone: (404) 881-7000 Facsimile: (404) 881-7777 Jared M. Slade Texas State Bar No. 24060618 jared.slade@alston.com ALSTON & BIRD LLP 2828 North Harwood Street, Suite 1800 Dallas, Texas 75201 (214) 922-3424 - Telephone (214) 922-3884 - Facsimile Attorneys for Defendant Assurex Health, Inc. Case 3:13-cv-00023-M Document 75 Filed 07/11/16 Page 1 of 21 PageID 527 ASSUREX’S MOTION TO DISMISS SECOND AMENDED COMPLAINT - TABLE OF CONTENTS TABLE OF CONTENTS I. INTRODUCTION............................................................................................................. 1 II. FACTUAL ALLEGATIONS........................................................................................... 2 III. ARGUMENT..................................................................................................................... 6 a. Standard of Review............................................................................................... 6 b. Applicable Law...................................................................................................... 7 c. Relator Fails to Sufficiently Allege an FCA Claim Against Assurex. .............. 8 i. Relator’s Allegations Fail to Show that Assurex Could Be Liable Under the FCA for Violating the AKS........................................ 8 ii. Relator’s Remaining FCA Allegations Fail to State a Claim.............. 11 d. Relator’s Conspiracy Claims Against Assurex Must be Dismissed for Failing to Specifically Plead any Unlawful Agreement or Act in Furtherance of any Agreement.......................................................................... 16 IV. PRAYER FOR RELIEF................................................................................................. 17 Case 3:13-cv-00023-M Document 75 Filed 07/11/16 Page 2 of 21 PageID 528 ASSUREX’S MOTION TO DISMISS SECOND AMENDED COMPLAINT - TABLE OF AUTHORITIES TABLE OF AUTHORITIES CASES PAGE(S) Amphastar Pharms. Inc. v. Aventis Pharma SA, No. EDCV-09-0023 MJG, 2012 WL 5512466 (C.D. Cal. Nov. 14, 2012) ...............................9 Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009)..........................................................................................................6, 13 Johnson v. TEVA Pharms. USA, Inc., 758 F. 3d 610 (5th Cir. 2014) ....................................................................................................6 U.S. ex rel. Cafasso v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047 (9th Cir. 2011) .................................................................................................15 U.S. ex. rel. Colquitt v. Abbott Labs., 864 F. Supp. 2d 499 (N.D. Tex. 2012) ............................................................................ passim U.S. ex rel. Dekort v. Integrated Coast Guard Sys., 705 F. Supp. 2d 519 (N.D. Tex. 2010) ....................................................................................16 U.S. ex rel. Foster v. Bristol-Myers Squibb Co., 587 F. Supp. 2d 805 (E.D. Tex. 2008).....................................................................................10 U.S. ex rel. Graves v. ITT Educ. Servs. Inc., 284 F. Supp. 2d 487 (S.D. Tex. 2003), aff’d, 111 F. App’x 296 (5th Cir. 2004) ....................16 U.S. ex rel. Grubbs v. Kanneganti, 565 F.3d 180 (5th Cir. 2009) .........................................................................................6, 14, 16 U.S. ex rel. King v. Solvay S.A., 823 F. Supp. 2d 472 (S.D. Tex. 2011), vacated in part on other grounds, 2012 WL 1067228 (S.D. Tex. Mar. 28, 2012)....................................................................................7 U.S. ex rel. Nunnally v. W. Calcasieu Cameron Hosp., 519 F. App’x 890 (5th Cir. 2013) ..........................................................................................8, 9 U.S. ex rel. Pervez v. Beth Israel Med. Ctr., 736 F. Supp. 2d 804 (S.D.N.Y. 2010)......................................................................................16 U.S. ex rel. Rafizadeh v. Cont’l Common, Inc., 553 F.3d 869 (5th Cir. 2008) ...................................................................................................14 U.S. ex rel. Ruscher v. Omnicare, Inc., No. 4:08-cv-3396, 2015 WL 51780074 (S.D. Tex. Sept. 3, 2015) ......................................9, 10 Case 3:13-cv-00023-M Document 75 Filed 07/11/16 Page 3 of 21 PageID 529 ASSUREX’S MOTION TO DISMISS SECOND AMENDED COMPLAINT - TABLE OF AUTHORITIES U.S. ex rel. Spicer v. Westbrook, 751 F. 3d 354 (5th Cir. 2014) ..........................................................................................6, 7, 11 U.S. ex rel. Steury v. Cardinal Health, Inc., 625 F.3d 262 (5th Cir. 2010) .....................................................................................................6 U.S. ex rel. Steury v. Cardinal Health, Inc., 735 F.3d 202 (5th Cir. 2013) .....................................................................................................6 U.S. ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899 (5th Cir. 1997) ...............................................................................................7, 13 U.S. v. Davis, 132 F.3d 1092 (5th Cir. 1998) .................................................................................................10 U.S. v. Southland Mgmt. Corp., 326 F.3d 669 (5th Cir. 2003) (en banc) .....................................................................................7 Villarreal v. Wells Fargo Bank, N.A., 814 F.3d 763 (5th Cir. 2016) .....................................................................................................2 Wilkins v. United Health Grp., Inc., 659 F.3d 295 (3d Cir. 2011).....................................................................................................15 RULES Fed. R. Civ. Proc. 8................................................................................................................ passim Fed. R. Civ. Proc. 9(b) ........................................................................................................... passim Fed. R. Civ. Proc. 12(b)(6) ....................................................................................................6, 8, 17 STATUTES 31 U.S.C. § 3729(a)(1).....................................................................................................................7 42 U.S.C. § 1320a-7b(b) ..............................................................................................................7, 8 42 U.S.C. § 1395y(a)(1)(A) ...........................................................................................................11 False Claims Act, 31 U.S.C. §§ 3729 et seq. ......................................................................... passim Case 3:13-cv-00023-M Document 75 Filed 07/11/16 Page 4 of 21 PageID 530 ASSUREX’S MOTION TO DISMISS SECOND AMENDED COMPLAINT - PAGE 1 I. INTRODUCTION This is a qui tam complaint brought by a former officer/member/employee of a handful of entities that allegedly participated in what Relator claims was the largest home health care fraud in the history of the United States on behalf of the United States government. The complaint includes pages of information about a May 14, 2014 raid and indictment of four named defendants in this case. Relator asserts claims against 74 defendants, including Assurex Health, Inc. (“Assurex”), which “screen[s] buccal samples of DNA to determine the safety and efficacy of neuropsychiatric medicines as well as analgesic safety and efficacy.” Assurex, a clinical laboratory, is not alleged to have any involvement in the home health care fraud described in the complaint, was not part of the raid nor any indictment, and is not alleged to have any relation to the other defendants. Strangely, despite being the self-proclaimed leader in reporting what he claims is “one of the largest cases of home health care fraud in the history of the United States,” the Government reviewed Relator Grant Bachman’s allegations and made the considered determination not to intervene in this case. Relator has decided to proceed independently to pursue his claims. Despite asserting claims that are governed by the heightened pleading standard of Rule 9(b) - federal False Claims Act (“FCA”) violations and conspiracy to commit FCA violations - Relator does not name a single person affiliated with Assurex, reference any single communication involving Assurex, assert that Assurex acted with the requisite scienter required for a FCA claim, or include any details about even a single false claim Assurex allegedly knowingly submitted or caused to be submitted to a federal payer. Even taking Relator’s allegations as true for the purpose of this motion, his claims against Assurex should fail. First, the majority of Relator’s allegations as to Assurex fail to meet Rule 8’s plausibility standard, as they are nothing more than legal conclusions masquerading as facts. Case 3:13-cv-00023-M Document 75 Filed 07/11/16 Page 5 of 21 PageID 531 ASSUREX’S MOTION TO DISMISS SECOND AMENDED COMPLAINT - PAGE 2 Second, none of Relator’s claims is set forth with the particularity required under Federal Rule of Civil Procedure 9(b). For example, nowhere in his complaint is he able to draw the requisite connection between an alleged kickback and a claim submitted to a government payer. Third, Relator fails to allege facts from which the Court could infer that Assurex knowingly made or caused to be made a false claim to a government payer. Fourth, Relator fails to provide even reliable indicia that lead to a strong inference that false claims were submitted by Assurex. II. FACTUAL ALLEGATIONS1 Relator Gordon Grant Bachman (“Relator”) asserts an army of “Defendants” violated the federal False Claims Act and, in certain circumstances, conspired to do so. See generally Pls.’ Second Am. Compl. (ECF No. 31) [hereinafter, “Complaint”]. In his third pleading, Relator claims that, from 2009 until May 2014, entities he was affiliated with as “an officer, member and/or employee of one or more of Defendant USPHV, AGood, Essence and/or other Defendants as well as other entities affiliated with Defendants USPHV and Parcon” participated in what he purports was “the largest home health care fraud committed in the history of the United States.” Compl. ¶¶ 40, 10. “[B]ased upon his direct, independent, and personal knowledge” (Compl. ¶10), he made claims against 74 Defendants,2 including fifty unknown “Home Health Care Agencies” he could 1 Because the Court must “accept as true the well-pled factual allegations in the complaint,” Villarreal v. Wells Fargo Bank, N.A., 814 F.3d 763, 766 (5th Cir. 2016) (alterations omitted) (internal quotation marks omitted), Assurex takes its facts from Plaintiffs’ Second Amended Complaint while reserving its right to challenge, dispute, or counter such allegations if this case is allowed to proceed against Assurex. 2 The named include Healthcare Liaison Professionals, Inc. d/b/a US Physician Home Visits (“USPHV”); Dallas Medical Center, LLC (“Dallas Medical Center”); Be Good Healthcare, Inc. d/b/a A Good Homehealth (“AGood”); Primary Angel, Inc. d/b/a Essence Home Health Case 3:13-cv-00023-M Document 75 Filed 07/11/16 Page 6 of 21 PageID 532 ASSUREX’S MOTION TO DISMISS SECOND AMENDED COMPLAINT - PAGE 3 not even identify. Included among the named is Assurex, which is mentioned in only 5 of the 102 paragraphs of allegations before the recitation of Relator’s claims. Compare Compl. ¶¶ 36, 89-90, 93, 102(l)-(n) with Compl. ¶¶ 1-102.3 Assurex, a private Delaware corporation headquartered in Ohio, is a personalized medicine company that specializes in pharmacogenomics and is dedicated to helping healthcare providers get the genetic information they need to determine the genetically appropriate medication(s) for individual patients suffering from neuropsychiatric and other mental health conditions. For purposes of the lawsuit, Relator asserts that “[t]he major mission of Defendant AssureRx was to screen buccal samples of DNA to determine the safety and efficacy of neuropsychiatric medicines as well as analgesic safety and efficacy.” Compl. ¶ 90. Relator first asserts that Assurex engaged in prohibited behavior by merely quoting from an Office of Inspector General Fraud Alert: “In July of 2014, OIG issued another bulletin specifically outlining prohibited behavior that was a constant practice of Defendants USPHV, Parcon, and AssureRx as described below and elsewhere herein, the pertinent portion of which stated as follows …” Compl. ¶ 89. The fraud alert generally describes prohibited remuneration in the form of referral or payment kickbacks for blood specimen collection, processing, and packaging and for inducing duplicative tests. Id. Relator alleges, without any detail, that Assurex received prohibited referral business from USPHV.4 Compl. ¶ 90. Relator also alleges, “[o]n (“Essence”); and Merna Parcon (“Parcon”). USPHV (a physicians’ practice) allegedly delivered services to home health agencies AGood and Essence; Relator, again, “has been an officer, member and/or employee” of all three, which were controlled by Parcon. Compl. ¶ 10. 3 From the allegations and despite his general averment about being “an officer, member and/or employee of one or more … other Defendants,” it does not appear, based on his allegations referencing Assurex, that Relator contends he had any role with Assurex. 4 Notably, Relator does not allege Assurex has any involvement with blood specimens - only that it tested cheek swabs - and that Relator and USPHV accessed test results to ensure duplicative tests were not ordered. Compl. ¶¶ 90, 93. Case 3:13-cv-00023-M Document 75 Filed 07/11/16 Page 7 of 21 PageID 533 ASSUREX’S MOTION TO DISMISS SECOND AMENDED COMPLAINT - PAGE 4 information and belief, AsssureRx gave kick-backs to Defendant Merna Parcon from proceeds billed to and paid by Medicare for reasons which follow.” Compl. ¶ 90. These are the totality of Relator’s anti-kickback allegations against Assurex. Relator seems to suggest that Assurex did something wrong by allowing USPHV to review the results from the buccal swabs it chose to conduct on its patients. Compl. ¶ 93. USPHV used “AssureRx’s web-based data facility to keep track of who was tested for what rather than its own database,” that he “routinely used this database for said purposes,” and that “[t]he sole purpose of USPHV using AssureRx’s database was to accurately capture and test the entire USPHV patient population portfolio without duplicating tests.” Compl. ¶ 93. Apparently by allowing the clinic to access the test results it ordered, “AssureRx and USPHV through the use of the lab’s registry, by operation, ordered the tests on the entire USPHV patient portfolio.” Compl. ¶ 93. Relator also alleges that Assurex “fraudulently billed Medicare for these swabs knowing that in an overwhelmingly majority of the cases they were (a) not ordered by a doctor first, and (b) were not medically necessary in accordance with Medicare guidelines and regulations set forth in detail above.” Compl. ¶ 93.5 Relator does not claim that Assurex (or any Defendant) billed for fabricated buccal swabs or tests, only that some unidentified tests were not eligible based on unspecified Medicare guidelines. See generally Compl. 5 Section V.L, titled “AssureRx and Medically Unnecessary “Buccal Swabs,” features four other paragraphs of allegations. Paragraph 88 references a 1994 OIG bulletin, but no Defendant. Paragraphs 91 and 92 assert that USPHV inappropriately billed and received payments from Medicare. Therein, Relator indicates “he has no medical training whatsoever” to take buccal samples but did so in purported violation of Medicare guidelines; “in Relator’s opinion,” it was not medically necessary to swab certain USPHV patients; and “USPHV screened most if not all of its home health patients for buccal swabs and billed and received payment from Medicare for same regardless of the diagnosis of the patient as to whether this service was needed or not.” Compl. ¶¶ 91-92. Finally, Paragraph 94 claims that Relator violated Medicare and DNA guidelines in his treatment of samples and “[t]his happened routinely with others within USPHV who were likewise similarly not following chain of custody guidelines.” Case 3:13-cv-00023-M Document 75 Filed 07/11/16 Page 8 of 21 PageID 534 ASSUREX’S MOTION TO DISMISS SECOND AMENDED COMPLAINT - PAGE 5 Based on these vague and conclusory allegations, Relator claims Assurex violated the FCA by (1) administering buccal swab testing whether medically warranted or not (Compl. ¶ 102(l), ¶ 133(l)); (2) billing Medicare for buccal swab testing without having a doctor first order the buccal swab testing (Compl. ¶ 102(m), ¶ 133(m)); and (3) submitting claims to Medicare for buccal swabs obtained from others despite knowing they were not medically necessary. (Compl. ¶ 102(n), ¶ 133(n)). Relator also claims Assurex conspired with USPHV, Dallas Medical Center, and AGood and Essence to violate the FCA. Compl. ¶¶ 143-148. Alleged Co- Conspirator(s) Purported Conspiracy USPHV “to systemically bill Medicare for services rendered to all or substantially all of the patient population of Defendant USPHV whether medically warranted or not” as “USPHV requested and AssureRx allowed USPHV to maintain its data base for patients who had been administered buccal swabs in the offices of AssureRx in order to ensure that ALL of its patients received buccal swabs.” (Compl. ¶143) Dallas Medical Center “to bill Medicare for services rendered to substantially all of the patient population of Dallas Medical Center for the systemic administering of buccal swab testing (a) without a doctor’s order for each such buccal swab prior to it being performed, and/or (b) whether medically warranted or not.” (Compl. ¶145) AGood & Essence “to bill Medicare for services rendered to patients of AGood and Essence for the systemic administering of buccal swab testing (a) without a doctor’s order for each such buccal swab prior to it being performed, and/or (b) whether medically warranted or not.” (Compl. ¶ 147) These are the extent of Relator’s conspiracy allegations, as he does not identify any person involved in making the alleged agreement, identify when the conspiracy allegedly began (or ended), or offer any other details. See generally Compl. After reviewing his claims (Compl. ¶ 8), the United States declined to intervene (Not. of Election to Decline Intervention (ECF No. 28)). Case 3:13-cv-00023-M Document 75 Filed 07/11/16 Page 9 of 21 PageID 535 ASSUREX’S MOTION TO DISMISS SECOND AMENDED COMPLAINT - PAGE 6 III. ARGUMENT A. Standard of Review To avoid dismissal under Rule 12(b)(6), “a plaintiff must plead sufficient facts to state a claim for relief that is plausible on its face.” Johnson v. TEVA Pharms. USA, Inc., 758 F. 3d 605, 610 (5th Cir. 2014). Rule 8 “demand[s] more than an unadorned accusation devoid of factual support.” U.S. ex. rel. Colquitt v. Abbott Labs., 864 F. Supp. 2d 499, 530 (N.D. Tex. 2012) (citing Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009)). Also, “[w]hile a court must accept all of the plaintiff’s allegations as true, it is not bound to accept as true ‘a legal conclusion couched as a factual allegation.’” Id. (quoting Iqbal, 129 S.Ct. at 1949-50). “Where the facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has stopped short of showing that the pleader is plausibly entitled to relief. Id. (citing Iqbal, 129 S.Ct. at 1950). That is, “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not establish facial plausibility.” U.S. ex rel. Spicer v. Westbrook, 751 F. 3d 354, 365 (5th Cir. 2014) (quotations omitted). “Claims brought under the FCA must also comply with Rule 9(b), which requires a plaintiff to set forth the ‘who, what, when, where, and how’ of the alleged fraud.” U.S. ex rel. Spicer, 751 F. 3d at 365 (quoting U.S. ex rel. Steury v. Cardinal Health, Inc., 625 F.3d 262, 266 (5th Cir. 2010)). If a party cannot meet its pleading burden under either standard, the allegations fail to state a claim upon which relief can be granted and must be dismissed in accordance with Rule 12(b)(6). U.S. ex rel. Steury v. Cardinal Health, Inc., 735 F.3d 202, 204 (5th Cir. 2013) (quoting U.S. ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 185 n. 8 (5th Cir. 2009)). Case 3:13-cv-00023-M Document 75 Filed 07/11/16 Page 10 of 21 PageID 536 ASSUREX’S MOTION TO DISMISS SECOND AMENDED COMPLAINT - PAGE 7 B. Applicable Law Relator brings his claims under the FCA, which imposes civil liability on those who, among other things, submit or cause to be submitted false claims6 for payment to the government or make or cause to be made false statements material to a false claim. E.g., 31 U.S.C. § 3729(a)(1). The Fifth Circuit has “adopted four elements that a relator must satisfy to state a cause of action under the FCA generally: (1) a false statement or fraudulent course of conduct; (2) that was made or carried out with the requisite scienter; (3) that was material; and (4) that caused the government to pay out money (i.e., that involved a claim).” U.S. ex rel. Spicer, 751 F. 3d at 365. Liability under the FCA is premised entirely on false claims; merely alleging that a defendant violated some other statute does not state a claim. U.S. ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 902 (5th Cir. 1997) (“[V]iolations of laws, rules, or regulations alone do not create a cause of action under the FCA.”). Also, violations of the Anti-Kickback Statute (“AKS”) can support a FCA violation for claims made after July 1, 2010 or before July 1, 2010 if the entity submitting the claim to the government payer filed a certification of compliance with health care laws and regulations. See U.S. ex rel. King v. Solvay S.A., 823 F. Supp. 2d 472, 505-07 (S.D. Tex. 2011), vacated in part on other grounds, 2012 WL 1067228 (S.D. Tex. Mar. 28, 2012). The AKS imposes criminal liability against any person who knowingly and willfully offers or pays remuneration to induce or reward referrals of items or services reimbursable by a federal health care program. See 42 U.S.C. § 1320a- 6 “[A claim] is a ‘request or demand’ made in connection with a ‘contract or otherwise,’ the ‘contract or otherwise’ allegedly warranting the making of the claim. Thus, whether a claim is valid depends on the contract, regulation or statute that supposedly warrants it. It is only those claims for money or property to which a defendant is not entitled that are ‘false’ for purposes of the False Claims Act.” Colquitt, 864 F. Supp. 2d at 530 (quoting U.S. v. Southland Mgmt. Corp., 326 F.3d 669, 674-75 (5th Cir. 2003) (en banc)). Case 3:13-cv-00023-M Document 75 Filed 07/11/16 Page 11 of 21 PageID 537 ASSUREX’S MOTION TO DISMISS SECOND AMENDED COMPLAINT - PAGE 8 7b(b). To state a prima facie claim that a defendant violated the AKS, a complaint must allege that the defendant offered or paid remuneration with the intent to induce referrals, and knew that its conduct was wrongful. See id. C. Relator Fails to Sufficiently Allege an FCA Claim Against Assurex. Relator’s allegations against Assurex are woefully deficient as Relator has failed to meet the applicable pleading standard for any of the four FCA elements. Relator attempts, but fails, to adequately allege that Assurex violated the FCA by conclusively asserting Assurex violated the AKS and committed other wrongs. Relator fails to assert a plausible claim under Rule 8 or offer the requisite details to fulfill Rule 9(b)’s heightened pleading requirement under either theory. i. Relator’s Allegations Fail to Show that Assurex Could Be Liable Under the FCA for Violating the AKS Relator’s first theory of FCA liability stems from conclusory allegations of purported AKS violations. This theory of liability must be dismissed under Rule 12(b)(6) because Relator fails to even allege that Assurex violated all of the required elements to state a claim, let alone make plausible allegations or ones that provide requisite detail under Rule 9(b). See, e.g., U.S. ex rel. Nunnally v. W. Calcasieu Cameron Hosp., 519 F. App’x 890, 894 (5th Cir. 2013) (“The elements of the AKS violation must also be pleaded with particularity under Rule 9(b), because they are brought as a FCA claim.”). First, Relator’s allegations about remuneration are fatally deficient. Relator makes two conclusory assertions that Assurex paid improper remuneration. Compl. ¶¶ 89 & 90. Relator first quotes from an OIG bulletin and claims it outlines “prohibited behavior that was a constant practice of Defendants USPHV, Parcon and Assurex as described below and elsewhere herein.” Compl. ¶ 89. But Relator does not actually identify the prohibited behavior: Relator fails to allege what the remuneration was, who paid it, for what, when, or even to whom. See id. Moreover, the Case 3:13-cv-00023-M Document 75 Filed 07/11/16 Page 12 of 21 PageID 538 ASSUREX’S MOTION TO DISMISS SECOND AMENDED COMPLAINT - PAGE 9 bulletin addresses topics not at issue here: (1) cheek swabs, which Assurex screened, are not blood specimens covered by the bulletin; and (2) inducing physicians to order duplicative tests.7 Relator then asserts, “[o]n information and belief, AssureRx gave kick-backs to Defendant Merna Parcon from proceeds billed to and paid by Medicare.” Compl. ¶ 90. In addition to omitting the required who, what, when, where, and how, this allegation fails to meet Rule 9(b) as a matter of law because it is a speculative “on information and belief” allegation. See Amphastar Pharms. Inc. v. Aventis Pharma SA, No. EDCV-09-0023 MJG, 2012 WL 5512466, at *13 (C.D. Cal. Nov. 14, 2012) (“At least in the present context, the allegations, on ‘information and belief,’ are insufficient to satisfy the particularity requirements of Rule 9(b) without factual allegations of the information on which the belief is plausibly based.”). In fact, these allegations also fail to assert claims under Rule 8’s plausibility standard. Relator’s OIG bulletin allegation does not permit the court to infer more than the mere possibility of misconduct and the Parcon allegation is the quintessential “legal conclusion couched as a factual allegation” a court may disregard. Colquitt, 864 F. Supp. 2d at 530. As in Nunnally, the Complaint “merely offers sweeping and conclusory allegations” of AKS violations “without a shred of detail or particularity.” U.S. ex rel. Nunnally, 519 F. App’x at 894. Relator’s kickback allegations are deficient because, inter alia, the Complaint does not allege “the identity of any physicians, actual inducements, or improper referrals.” Id. Second, Relator fails to even conclusory plead that Assurex acted with the requisite scienter, which is independently fatal to his claims. The AKS is an intent-based statute with two separate heightened intent elements as Relator must allege that Assurex acted both “knowingly and willfully.” See, e.g., U.S. ex rel. Ruscher v. Omnicare, Inc., No. 4:08-cv-3396, 2015 WL 51780074, 7 Relator alleges the test result database allowed USPHV to avoid duplicating tests. Compl. ¶¶ 90, 93. Case 3:13-cv-00023-M Document 75 Filed 07/11/16 Page 13 of 21 PageID 539 ASSUREX’S MOTION TO DISMISS SECOND AMENDED COMPLAINT - PAGE 10 at *13-14 (S.D. Tex. Sept. 3, 2015). Accordingly, Relators must allege that Assurex took an action (a) “voluntarily and intentionally, not because of mistake or accident” as well as (b) “voluntarily and purposely with the specific intent to do something the law forbids; that is to say, with bad purpose either to disobey or disregard the law.” Id. (quoting U.S. v. Davis, 132 F.3d 1092, 1094 (5th Cir. 1998)). Again, the Complaint is lacking in all respects as it fails to name a single person who purportedly acted with either aspect of the requisite scienter on behalf of Assurex. See generally Compl. Finally, Relator does not “provide any factual details from which this Court can reasonably infer a link between the kickback scheme [it] describes and the submission of a claim for payment to the United States.” U.S. ex rel. Foster v. Bristol-Myers Squibb Co., 587 F. Supp. 2d 805, 825 (E.D. Tex. 2008). Mere “speculation” that false claims might have resulted is not sufficient under Rule 9(b). See Foster, 587 F. Supp. 2d at 825. But speculation is all Relator offers. He does not even attempt to draw a connection between the separate conclusory assertions that Assurex paid illegal remuneration and the submission of false claims: Relator does not assert that Assurex knew USPHV, as it is alleged to have, would submit buccal swab testing to a federal payer, nor does Relator even allege that the purported remuneration was paid to induce buccal swabs and testing to be reimbursed by a government payer. See generally Compl. ¶¶ 89-94. Even when Relator asserts Assurex “fraudulently billed Medicare,” it is not linked in any way to the alleged improper remuneration. Compl. ¶ 93.8 Nor has Relator attempted to offer anything that would constitute 8 If nothing else, any cause of action based on alleged AKS violations before July 1, 2010 must be dismissed. Before July 1, 2010, “[a] violation of the AKS does not amount to an FCA violation unless claims for payment were conditioned on a certification of compliance with the AKS by the party requesting payment, and that party falsely certifies compliance with the AKS, thus making the claims ‘false.’” Colquitt, 864 F. Supp. 2d at 536. To the extent Relator is asserting claims against Assurex for any alleged claims before July 1, 2010 based on AKS violations, those must Case 3:13-cv-00023-M Document 75 Filed 07/11/16 Page 14 of 21 PageID 540 ASSUREX’S MOTION TO DISMISS SECOND AMENDED COMPLAINT - PAGE 11 reliable indicia that would lead to a strong inference that false claims were actually submitted or offer details supporting his conclusions pleaded as facts that the providers must have submitted false claims to a government payer. Colquitt, 864 F. Supp. 2d at 533; see generally Compl. Accordingly, Relator has not sufficiently plead any of the elements of an AKS claim and, accordingly, his AKS allegations must be dismissed for failure to state a FCA claim. ii. Relator’s Remaining FCA Allegations Fail to State a Claim In addition to his deficient FCA claims based on alleged AKS violations, Relator asserts Assurex is liable for false claims based on the behavior alleged of USPHV, Dallas Medical Center, and Ritz. Compl. ¶¶ 91-94. These allegations of fraud are no more than legal conclusions being couched as factual allegations that are insufficient to state a plausible claim under Rule 8, let alone meet the specificity the claim requires under Rule 9(b). See U.S. ex rel. Spicer, 751 F. 3d at 365 (a plaintiff must specify, at a minimum, the “who, what, when, where, and how” of the alleged fraud). First, Relator asserts that Assurex is liable for USPHV, Dallas Medical Center, and Ritz allegedly choosing to take buccal swabs and test most every patient. Compl. ¶¶ 91, 93. Relator baldly asserts that these were done “regardless of the diagnosis of the patient as to whether this service was needed or not” or even “when most if not all of the patients did not need that service performed.” Id. Notably, Relator does not allege that a federal payer was billed for tests not actually performed (i.e., a factually false claim), only that the work was somehow legally false. Medicare coverage is generally available for any item or service that a medical practitioner deems “reasonable and necessary for the diagnosis or treatment of illness or injury.” 42 U.S.C. be dismissed because Relator has not alleged Assurex or any other entity made the required certifications of compliance with the AKS in connection with submitting claims to a federal payer. See generally Compl. Case 3:13-cv-00023-M Document 75 Filed 07/11/16 Page 15 of 21 PageID 541 ASSUREX’S MOTION TO DISMISS SECOND AMENDED COMPLAINT - PAGE 12 § 1395y(a)(1)(A). Relator does opine that eight (unidentified) patients whom he swabbed in September 2012 had no “medical reason for getting the test other than for USPHV to bill and receive payments from Medicare” (Compl. ¶ 91) but, in the next paragraph, reveals that he has “no medical training” whatsoever, thereby undermining his qualifications to opine about medical reasons (Compl. ¶ 92). Relator fails to plead facts that would allow there to be a reasonable inference that Assurex knew or would have had reason to believe that any swab taken or test performed did not meet this standard. See generally Compl. Relator contends that the Parcon entities allegedly tried to swab and bill most of their home health populations. Compl. ¶¶ 91, 93, 102(l), 133(l). Likewise, there are no facts suggesting that Assurex could have known the tests were allegedly not medically necessary. See generally Compl. Noticeably absent from Relator’s allegations is any suggestion as to how Assurex should have known that patients allegedly were being misdiagnosed. See Compl. ¶¶ 91-94. There is no allegation that Assurex was involved in administering the tests, was told tests were being performed on individuals who did not need the service, or even that Assurex was informed about the total patient population for any of the referenced providers such that it should have recognized that all or nearly all of the patients were being screened (or even that scope of screening would not be warranted in connection with the patient population). Id. Without connecting allegations, Relator has not identified any false statement Assurex allegedly made or a fraudulent course of action in which Assurex participated and cannot possibly establish a “knowing” FCA violation, as he must. Second, Relator contends that unidentified Medicare guidelines were violated in connection with the buccal swabs. Specifically, he alleges without identifying any legal authority, that laymen cannot take DNA samples per Medicare guidelines, that Medicare requires an “Outer Envelope” to be sealed and other chain of custody guidelines that were not followed, and that Case 3:13-cv-00023-M Document 75 Filed 07/11/16 Page 16 of 21 PageID 542 ASSUREX’S MOTION TO DISMISS SECOND AMENDED COMPLAINT - PAGE 13 doctors had not pre-authorized the swabs to be taken. Compl. ¶¶ 92-94. Noticeably, Relator generally avers that these violate Medicare guidelines without either citing a single regulation or guideline or even alleging that Medicare would refuse reimbursement if the guideline was not met. Relator did not (and could not) cite to any guidelines supporting his allegations because Relator is wrong on the law: there is no Medicare regulation requiring buccal swabs (a cheek swab) to be administered by a licensed medical professional; indeed, in many instances, the patient performs the cheek swab herself. Again, these allegations do not outline a plausible claim under Iqbal and Twombly. Moreover, regardless of any citations Relator may offer in response, Relator fails to fulfill his Rule 9(b) obligations by alleging how Assurex knew (1) how the samples were taken; (2) that a doctor had not pre-authorized the collection of a sample; or (3) chain of custody guidelines were not followed. See generally Compl. Indeed the only specific allegation is that Relator himself failed to follow what he understood to be “protocol” per DNA and Medicare guidelines because he had envelopes full of saliva in his backpack over the weekend. Compl. ¶ 94. Even taking these allegations as true, Relator provides no link between his own failure to follow “protocol” and the submission by any entity of false claims. Relator, again, must allege sufficient facts to satisfy his burden that Assurex knowingly submitted or caused to be submitted a false claim. Liability under the FCA is premised entirely on false claims; merely alleging that a defendant violated some other statute (or in this case unidentified guideline) does not state a claim. U.S. ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 902 (5th Cir. 1997) (“[V]iolations of laws, rules, or regulations alone do not create a cause of action under the FCA.”). Plus, all of these alleged misbehaviors were performed not by Assurex, but by other entities, and there is no allegation Case 3:13-cv-00023-M Document 75 Filed 07/11/16 Page 17 of 21 PageID 543 ASSUREX’S MOTION TO DISMISS SECOND AMENDED COMPLAINT - PAGE 14 Assurex was informed about any issues, let alone submitted or caused to be submitted any false claims with the requisite scienter. See Compl. ¶¶ 91-94. Third, Relator alleges that Assurex delivering test results via a website resulted in false claims. As immediately above, Relator makes no allegation that Assurex was aware of this purportedly inappropriate use of the test results to avoid “duplicating tests.” Compl. ¶ 93. Moreover, Relator offers no explanation of how avoiding duplicative testing could be fraudulent. Further, the use of the wRsebsite does not support a plausible claim that Assurex violated the FCA: USPHV’s alleged misuse of Assurex’s test reporting platform does not support a reasonable inference that Assurex knowingly caused a false claim to be submitted. The website-related allegations also fail to meet Rule 9(b)’s particularity requirements that would reveal details supporting the FCA claim. Finally, even if the Court were to credit these conclusory allegations, which it should not, Relator fails to demonstrate some causal connection between Assurex’s conduct and the presentment of a false claim. “Because the linchpin of an FCA claim is a false claim, the time, place and contents of the false representations, as well as the identity of the person making the misrepresentation and what that person obtained thereby must be stated in a complaint alleging violation of the FCA in order to satisfy Rule 9(b).” U.S. ex rel. Rafizadeh v. Cont’l Common, Inc., 553 F.3d 869, 873 (5th Cir. 2008) (internal quotation marks omitted). Parties that cannot allege the details of an actually submitted false claim may escape dismissal “by alleging particular details of a scheme to submit [or cause others to submit] false claims paired with reliable indicia that lead to a strong inference that false claims were actually submitted.” Colquitt, 864 F. Supp. 2d at 533 (quoting U.S. ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 190 (5th Cir. 2009)). As above, Relator, without offering the required who, when, or how, concludes Assurex “fraudulently billed Medicare Case 3:13-cv-00023-M Document 75 Filed 07/11/16 Page 18 of 21 PageID 544 ASSUREX’S MOTION TO DISMISS SECOND AMENDED COMPLAINT - PAGE 15 for these swabs knowing that in an overwhelmingly [sic] majority of the cases they were (a) not ordered by a doctor first, and (b) were not medically necessary in accordance with the Medicare guidelines and regulations set forth in detail above.” Compl. ¶ 93. Relator does not identify a single false claim made related to a buccal swab or test or reliable indicia that lead to a strong inference that false claims were actually submitted or offer details supporting his conclusions pleaded as facts that the providers must have submitted false claims to a government payer. See generally Compl. Relator does not allege that Assurex made any false statement to a federal payer or false certification, or even that compliance with the unidentified guidelines were a condition of payment or was material to the government’s decision to pay. See generally Compl.; see Wilkins v. United Health Grp., Inc., 659 F.3d 295, 309 (3d Cir. 2011). Also, Relator does not show how Assurex purportedly caused any false claim to be submitted. See generally Compl. Relators’ allegations of wrongful conduct, alone, are insufficient to sustain an FCA action because it is the submission of a false claim that is the sine qua non of an FCA violation. See, e.g., U.S. ex rel. Cafasso v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1055 (9th Cir. 2011) (“[T]he [FCA] attaches liability, not to the underlying fraudulent activity or to the government’s wrongful payment, but to the claim for payment.”) (citations and quotations omitted). This failure to connect the alleged wrongs to false claims is yet another fatal flaw in Relator’s third attempt to state a claim. As with his AKS theory, Relator’s other alleged frauds fall woefully short of meeting his pleading burden for any of the required elements to state a FCA claim. Accordingly, Relator’s FCA claim must be dismissed. Case 3:13-cv-00023-M Document 75 Filed 07/11/16 Page 19 of 21 PageID 545 ASSUREX’S MOTION TO DISMISS SECOND AMENDED COMPLAINT - PAGE 16 D. Relator’s Conspiracy Claims Against Assurex Must be Dismissed for Failing to Specifically Plead any Unlawful Agreement or Act in Furtherance of any Agreement Relator’s conspiracy allegations are fatally deficient because Relator can only offer a conclusive recitation of the elements that Assurex allegedly conspired or agreed with USPHV, Dallas Medical Center, AGood, and Essence in furtherance of some unknown and unidentified unlawful agreement. A prima facie FCA conspiracy claim requires “(1) the existence of an unlawful agreement between defendants to get a false or fraudulent claim allowed or paid by [the Government] and (2) at least one act performed in furtherance of that agreement.” Grubbs, 565 F.3d at 193. The particularity requirements of Rule 9(b) apply to the FCA’s conspiracy provision with equal force as to its “presentment” and “record” provisions. Id. Relator makes “only conclusory allegations with regards to the claimed conspiracy, failing to plead any facts making plausible an unlawful agreement between the parties.” U.S. ex rel. Pervez v. Beth Israel Med. Ctr., 736 F. Supp. 2d 804, 815 (S.D.N.Y. 2010); see also U.S. ex rel. Dekort v. Integrated Coast Guard Sys., 705 F. Supp. 2d 519, 548 (N.D. Tex. 2010) (dismissing “conclusory pleading” of conspiracy claim that was “merely a formulaic recitation of the legal elements of conspiracy” and provided “no allegations regard an unlawful agreements among alleged coconspirators, nor allegations of any overt acts taken in furtherance of a conspiracy”); U.S. ex rel. Graves v. ITT Educ. Servs. Inc., 284 F. Supp. 2d 487, 509 (S.D. Tex. 2003) (dismissing conspiracy claim “because Relators have not alleged an unlawful agreement between the parties”), aff’d, 111 F. App’x 296 (5th Cir. 2004). Relator identifies the parties allegedly involved in the conspiracy and asserts conspiracies existed. See Compl. ¶¶ 143-148. However, the Court is not bound to accept as true these legal conclusions couched as factual allegations, meaning Relator has not sufficiently stated a plausible claim. See Colquitt, 864 F. Supp. 2d at 530. Moreover, Relator omits any other details, including the specific individuals who allegedly agreed to conspire, Case 3:13-cv-00023-M Document 75 Filed 07/11/16 Page 20 of 21 PageID 546 ASSUREX’S MOTION TO DISMISS SECOND AMENDED COMPLAINT - PAGE 17 when they agreed to conspire, the duration of the alleged conspiracy, the purported acts committed in furtherance of the alleged conspiracy, the specifics regarding the effectuation of any conspiracy, or any reliable indicia that leads to a strong inference that false claims were actually submitted - including even which entity allegedly submitted the false claims. See Compl. ¶¶ 143-148. Thus, Relator’s recitation of the elements of his claim does not satisfy Rule 9(b)’s pleading requirements. Accordingly, Relator’s conspiracy claims against Assurex should be dismissed for failure to state a claim under Rule 12(b)(6) because Relator’s allegations fail to meet the applicable Rule 8 and Rule 9(b) pleading requirements. IV. PRAYER FOR RELIEF For the foregoing reasons, Assurex respectfully requests that the Court grant its Motion to Dismiss and dismiss with prejudice all of Relator’s claims and request the Court award them any and other relief for which they are entitled. CERTIFICATE OF SERVICE On July 11, 2016, I electronically submitted the foregoing document with the clerk of court for the U.S. District Court, Northern District of Texas, using the electronic case filing system of the court. I hereby certify that I have served counsel of record in this action electronically or by another manner authorized by Federal Rule of Civil Procedure 5(b)(2). s/ Jared M. Slade Jared M. Slade Case 3:13-cv-00023-M Document 75 Filed 07/11/16 Page 21 of 21 PageID 547 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS DALLAS DIVISION UNITED STATES OF AMERICA, EX. REL. GORDON GRANT BACHMAN, RELATOR; Plaintiff, v. HEALTHCARE LIAISON PROFESSIONALS, INC., D/B/A US PHYSICIANHOME VISITS, ET AL; Defendants. § § § § § § § § § § § § Case No. 3:13-cv-0023-P JURY TRIAL DEMANDED [PROPOSED] ORDER GRANTING DEFENDANT ASSUREX HEALTH, INC.’S MOTION TO DISMISS SECOND AMENDED COMPLAINT On this day the Court considered Defendant Assurex Health, Inc.’s Motion to Dismiss Second Amended Complaint Pursuant to Federal Rules of Civil Procedure 9(b) and 12(b)(6) (the “Motion”). The COURT GRANTS the Motion and dismisses all of Relator’s claims asserted against Assurex Health, Inc. with prejudice. SIGNED this of , ________________________________ United States District Chief Judge Barbara Lynn Case 3:13-cv-00023-M Document 75-1 Filed 07/11/16 Page 1 of 1 PageID 548