Case 1:11-cv-00364-KD-B Document 180 Filed 04/11/14 Page 1 of 31IN THE UNITED STATES DISTRICT COURTFOR THE SOUTHERN DISTRICT OF ALABAMASOUTHERN DIVISIONUNITED STATES OF AMERICA,Ex rel. Christian M. Heesch,)))))))))))Plaintiff,vs.DIAGNOSTIC PHYSICIANS GROUP,P.C., et al.,Defendants.CIVIL ACTION NO. 11-000364-KD-BREPORT AND RECOMMENDATIONThisactionisbeforetheCourtonDefendantsIMC-Diagnostic and Medical Clinic, P.C., IMC-Northside Clinic, P.C.,Infirmary Medical Clinics, P.C., and Infirmary Health System,Inc.’s Motion to Dismiss (Doc. 59).briefedandhasbeenreferredThe motion has been fullytotheundersignedMagistrateJudge for entry of a Report and Recommendation pursuant to 28U.S.C.§636(b)(1)(B).Aftercarefulconsideration,theundersigned recommends that the motion be granted in part, anddenied in part.I.BackgroundThis action was originally filed by relator, Christian M.Heesch,againstPhysicianstheGroup,aboveP.C.namedbasedFalse Claims Act (“FCA”).onDefendantsallegedandDiagnosticviolationsoftheAfter investigation, the GovernmentCase 1:11-cv-00364-KD-B Document 180 Filed 04/11/14 Page 2 of 31announced on June 28, 2013, that it had elected to interveneas to certain claims made by the relator against Defendants.(Doc.28).OnAugust7,Complaint in Intervention.Governmentalleges2013,the(Doc. 30).thatDefendantGovernmentfileditsIn its Complaint, theInfirmaryHealthSystem(“Infirmary Systems”) is the largest non-governmental healthcare system in Alabama, and that in the late 1980s, it createdInfirmary Medical Clinic, P.C. (“IMC”) in order to acquirephysician practices and to establish new clinic subsidiaries,includingIMC-DiagnosticandMedicalClinic,P.C.(“IMC-Diagnostic”) and IMC-Northside Clinic, P.C. (“IMC-Northside”).(Id. at 3-4).AccordingDiagnosticandtotheGovernment,IMC-Northside,andIMCwithoverseestheapprovalIMCofInfirmary Systems and its Board of Directors, entered intocontractual agreements or physician service agreements withindividualphysiciansandphysiciangroupstoprovidephysicians (as independent contractors) to IMC-Northside andIMC-Diagnostic.(Id.).The Government contends that DPG, aprivate corporation owned and operated by physicians, is onesuch physician group with whom IMC contracted.TheGovernmentDiagnosticwerewhichsignedwasfurtherpartiesinto1997,aand2alleges(Id.).thatPhysicianprovidedDPGServicesthatDPGandIMC-AgreementanditsCase 1:11-cv-00364-KD-B Document 180 Filed 04/11/14 Page 3 of 31physicians would be responsible for all physician services atIMC-Diagnostic, that IMC-Diagnostic would be responsible foralloverhead,includingofficespaceandnon-physicianpersonnel, equipment and billing services, that DPG would bepaid a sum equal to a percent of collections received ascompensation for services rendered by DPG and its physicians,and that the parties would comply with all applicable laws andregulations, including the Ethics in Patient Referrals Act, asamended (the “Starks Act”).(Id. at 17-27).The Governmentcontends that between July 2005 through December 2011, IMCDiagnostic billed Medicare for testing and designated healthservicesthatwerereferredbyDPGphysicians,andoftenperformed by IMC-Diagnostic personnel on equipment owned byIMC-Diagnostic.The Government contends that the paymentsmade to DPG were in turn paid to the individual physicians andthus resulted in the DPG physicians receiving payment for thereferral of designated health services, some of which the DPGphysicians did not personally perform, in violation of theStark Law.(Id.).The Government also contends that beginning on April1, 2008, IMC-Northside entered a similar agreement with DPG,andthisarrangementlikewiseresultedinindividualDPGphysicians rendering service (as independent contractors) atIMC-Northsideandreceivingpayment3forthereferralofCase 1:11-cv-00364-KD-B Document 180 Filed 04/11/14 Page 4 of 31designatedhealthservices,someofwhichtheypersonally perform in violation of the Stark Law.didnot(Id.).The Government maintains that Defendants made thesepayments knowingly and in violation of the False Claim Act(“FCA”), and that the Defendants made the payments to keep DPGanditsphysiciansaffiliatedwithInfirmaryHealth,toprevent them from affiliating with competitors and to induceDPG physicians to refer federal healthcare business to IHSsubsidiariesIMC-DiagnosticandIMC-NorthsideandMobileInfirmary Medical Center (“Mobile Infirmary”) in violation ofthe Anti-Kickback Statute and the FCA.(Id.).As noted supra, the Government filed a complaint inintervention.In count one of the complaint, the Governmentalleges violations ofoftheFCA.Defendants31 U.S.C. § 3729 (a)(1) and (a)(1)(A)Specifically,knowinglythepresentedGovernmentorcausedcontendstobethatpresented,false and fraudulent claims for payment or approval to theUnitedStates,includingclaimsforreimbursementfordesignated health services that violated the Stark Law, aswellasfalseMedicare,KickbackforandservicesStatute.complaint,thefraudulentprovided(Id.Government§ 3729 (a)(1)(B).claimsatin33).allegesforreimbursementviolationIncountviolationsofthetwoof31byAnti-oftheU.S.C.Specifically, the Government contends that4Case 1:11-cv-00364-KD-B Document 180 Filed 04/11/14 Page 5 of 31DPG, IMC-Diagnostic and IMC-Northside knowingly made or causedto be made false certifications and representations on CMS8551, CMS-855B and CMS-88R forms for the purpose of gettingfalse or fraudulent claims paid and approved by the Unitedstates, and that said statements were material to the UnitedStates’ payment of the false claims.Incountthreeofthe(Id. at 33-34).complaint,theGovernmentalleges violations of 31 U.S.C. § 3729(a)(7) and (a)(1)(G) ofthe False Claims Act.Specifically, the Government allegesthat Defendants knowingly made and used or caused to be madefalse records or statements material to an obligation to payor transmit money to the United States or knowingly concealedor avoided an obligation to pay or transmit money to theUnited States.(Id. at 34).In count four of the complaint,the Government alleges that it is entitled to recover moniespaid by the United States to IMC-Diagnostic and IMC-Northisdeby mistake.According to the Government, it did not haveknowledge of material facts, namely that these Defendants wereseeking reimbursement for claims by DPG physicians who were ina financial relationship prohibited by the Stark Law and theAnti-Kickback Statute.The Government thus contends that IMC-Diagnostic, IMC-Northside, DPG and Infirmary Health are liableto make restitution to the United States for the amounts ofthe payments made in error to them by the United States. (Id.5Case 1:11-cv-00364-KD-B Document 180 Filed 04/11/14 Page 6 of 31at35).Incountfiveofthecomplaint,theGovernmentalleges that by directly or indirectly obtaining governmentfundstowhichtheywerenotentitled,Defendantswereunjustly enriched and are liable to account for and pay suchamounts or the proceeds therefrom to the United States.(Id.)Defendants Infirmary Health, IMC, IMC-Diagnostic andIMC-Northisde (“the Infirmary Defendants”)filed the instantmotion to dismiss and seek the dismissal of all claims againstthem.one(Docs. 59, 60, 77).throughassertedthree,factsAccording to Defendants, in countstheshowingGovernmentabasishasfornotsufficientlydirectorliability against either Infirmary Health or IMC.assertthatthereisnoallegationthateitherindirectDefendantsInfirmaryHealth or IMC submitted any claim or caused any claim to besubmitted to Medicare, and the fact that they are corporateaffiliatestoIMC-diagnosticandIMC-Northsideisnotasufficient basis upon which to maintain a claim against them.With respect to counts four and five, Defendants argue thatIMC is not mentioned in count four, and that in count five,the Government has simply lumped all the Defendants togetherwithout detailing any conduct of Infirmary Health and IMC fromwhich claims of payment by mistake or unjust enrichment canarise.(Id.).Government’sThecomplaintDefendantsdoesnot6evenalsoarguementionthatpiercingthetheCase 1:11-cv-00364-KD-B Document 180 Filed 04/11/14 Page 7 of 31corporateveilInfirmaryHealthGovernment’sofficers,asabasisofandIMC,andofsomeassertionexecutivesandliabilitythatwithinanyoverlappingemployeesrespectoftoevent,thebetweenthetheInfirmaryDefendants, and of alleged knowledge by Infirmary Health andIMCofthecompensated,mannerisnoteither Defendant.inwhichsufficientDPGtophysicianssustainwouldclaimsbeagainst(Id.).Defendants also contend, with respect to all of theInfirmary Defendants, that the Government has failed to allegefacts with the required particularity for counts I, II, andIII.countsSpecifically, Defendants assert that with respect tooneandtwo,theGovernmenthashadtwoyearstoinvestigate the claims but has nevertheless failed to providethe specific details of the who, what, where, when, and how ofthe actual submissions of the false claims.Defendants alsocontend that while the Government has provided some detailsfor a small sample of claims, no copies of an actual bill wereprovided, and no specific dates were alleged.regardstocountthree,theDefendants(Id.).contendthatIntheGovernment has failed to meet the pre or post FERA standardfor pleading a reverse false claim.Specifically, Defendantsargue that the Government has not made specific allegationsbut has instead made a conclusory allegation that Defendants7Case 1:11-cv-00364-KD-B Document 180 Filed 04/11/14 Page 8 of 31usedafalsedecreaseanGovernment.statementorrecordobligationtopay(Id.).toorDefendantsconcealtransmitfurtheroravoidmoneytothethatthecontendorGovernment did not cite the correct post FERA standard for areverse false claim and did not allege facts in support of itscontention that Defendants knowingly avoided or decreased anobligation to pay the Government.(Id.).Defendants assert that counts four and five are alsodue to be dismissed because the Government failed to specifywhether the claims are state common law claims or federalcommon law claims.(Id.).Additionally, Defendants arguethat the claims should be dismissed because they derive fromthe alleged violations set forth in counts one through three,and because no facts supporting counts one, two and three havebeensufficientlydismissedalongalleged,withcountscountsonefourandthroughfiveshouldthree.be(Id.).Defendants also assert that count five should be dismissedbecause it does not differentiate among the defendants, butinstead lumps them all together.TheGovernmenthasrespondedinoppositiontothemotion, and argues that in regards to each count, it has pleadwith sufficient particularity the necessary elements for acause of action and has stated claims upon which relief can begranted.(Doc. 70).8Case 1:11-cv-00364-KD-B Document 180 Filed 04/11/14 Page 9 of 31II.Legal StandardsA. Motions to DismissInfailureconsideringatoclaim,stateaRule12(b)(6)themotioncourttoacceptsdismissthefornon-movingparty’s factual allegations as true. Erickson v. Pardus, 551U.S. 89, 127 S. Ct. 2197, 2200, 167 L. Ed. 2d 1081 (2007).Moreover, the rules of pleading require only that a complaintcontain “a short and plain statement of the claim showing thatthe pleader is entitled to relief.”Fed. R. Civ. P. 8(a)(2).In Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937, 1949, 173L. Ed. 2d 868 (2009), the Supreme Court explained that while acomplaint attacked by a Rule 12(b)(6) motion need not containdetailed factual allegations in order to withstand attack, thecomplaint must however contain “more than an unadorned, thedefendant-unlawfully-harmed-me accusation.”at 1949.Iqbal, 129 S. Ct.A complaint must state a plausible claim for relief,and “[a] claim has facial plausibility when the plaintiff pleadsfactual content that allows the court to draw the reasonableinferencethatthealleged.”Id.Thedefendantmereisliablepossibilityforthethemisconductdefendantactedunlawfully is insufficient to survive a motion to dismiss. Id.The well-pled allegations must nudge the claim “across the linefrom conceivable to plausible.”Bell Atl. Corp. v. Twombly, 550U.S. 544, 570, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007).9Case 1:11-cv-00364-KD-B Document 180 Filed 04/11/14 Page 10 of 31B.TheThe Stark AmendmentStarkAmendmenttotheMedicareAct,42U.S.C.§1395nn, “was enacted to address overutilization of services byphysicianswhostoodtoprofitfromreferringpatientstofacilities or entities in which they had a financial interest.”United States ex rel. Schubert v. All Children’s Health System,2013 U.S. Dist. LEXIS 163075, 2013 WL 6054803, *4 (M.D. Fla.November 15, 2013 (quotingU.S. ex rel. Drakeford v. TuomeyHealthcareF.Sys.,Inc.,6753d394,(4th397Cir.2012).“Generally, the Stark Amendment prohibits a physician who has a‘financial relationship’ with an entity-such as a hospital-frommakinga‘referral’tothathospitalforthefurnishingofcertain ‘designated health services’ for which payment may bemadebyUnderthetheUnitedStarkrelationship”orunderAmendment,atheMedicarephysicianhasaprogram.”“aId.financialwith an entity if the physician has “an ownershipinvestmentarrangement”Statesinterestwithit.in42theentity”U.S.C.§or“a1395nn(a)(2).compensationTheterm“compensation” includes any remuneration, “directly, indirectly,overtly or covertly, in cash or in kind.” Drakeford, 675 F. 3d.at 398; 42 U.S.C. § 1395nn(h)(1)(B).C. The False Claims ActThe False Claims Act (FCA) imposes liability on any personwho (1) knowingly presents, or causes to be presented, a false10Case 1:11-cv-00364-KD-B Document 180 Filed 04/11/14 Page 11 of 31or fraudulent claim for payment or approval or (2) knowinglymakes, uses or causes to be made or used, a false record orstatement material to a false or fraudulent claim.3729(a)(1)(A)-(B).31 U.S. C. §The FCA further imposes liability on “anyperson who. . .knowingly makes, uses, or causes to be made orused, a false record or statement material to an obligation topayortransmitmoneyorpropertytotheGovernment,orknowingly conceals or knowingly improperly avoids or decreasesanobligationGovernment.”topayortransmitmoneyorpropertytothe31 U.S.C. § 3729 (a)(1)(G).D. Fed. R. Civ. P. Rule 9(b)Claims of fraud brought pursuant to the FCA must complywith the particularized pleading requirements of Fed. R. Civ. P.9(b).U.S. ex rel. Clausen v. Lab. Corp. of Am., 290 F. 3d.1301, 1308-09 (11th Cir. 2002).To state a claim under the FalseClaims Act that complies with Rule 9(b), “the complaint mustallege ‘facts as to time, place and substance of the defendant’salleged fraud” [and] “the details of the defendants’ allegedlyfraudulent acts, when they occurred, and who engaged in them.’”Corsello v. Lindcare, Inc., 428 F. 3d 1008, 1012 (llth Cir.2005)(quotation omitted); see also U.S. ex rel. Cooper v. BlueCross & Blue Shield of Fla., Inc., 19 F. 3d 562, 567-68 (llthCir.1994).Failuretosatisfydismissal of a complaint.11Rule9(b)isagroundforCase 1:11-cv-00364-KD-B Document 180 Filed 04/11/14 Page 12 of 31III. AnalysisA. Count OneAs noted supra, the Infirmary Defendants contend that theGovernment has failed to proffer sufficient allegations tyingInfirmary Health and IMC to any of the alleged wrongful acts.They further contend that the Government has not alleged factswiththeparticularityrequiredbyRule9(b)tosupportliability against the Infirmary Defendants with respect to theclaims raised in counts I, II, and III.Turning first to Countone, the Government alleges that Defendants presented or causedto be presented false claims for payment or approval to theUnited States, including claims for reimbursement of designatedhealth services that violated the Stark Law, as well as falseandfraudulentclaimsforreimbursementbyMedicare,forservices provided in violation of the Anti-Kickback Statute.1The Courts have made clear with regards to an FCA cause ofaction, Rule 9(b) requires a plaintiff to not only provide the“who, what, where, when and how of improper practices” but alsothe “who, what, where, when, and how of fraudulent submissions1The False Claims Act subjects to civil liability “any personwho. . .knowingly presents, or causes to be presented, a falseor fraudulent claim for payment or approval.”31 U.S.C. §3729(a)(1)(A).12Case 1:11-cv-00364-KD-B Document 180 Filed 04/11/14 Page 13 of 31to the Government.”1014(11thCir.Corsello v. Lincare, Inc., 428 F. 3d 1108,2005)(percuriam)(internalquotationmarksomitted); see also Matheny v. Medco Health Solutions, Inc., 671F.3d1217,1222(11thCir.2012)(“[t]heparticularityrequirement of Rule 9(b) is satisfied if the complaint alleges‘factsasallegedtofraud,time,place,specificallyandthesubstanceofthedefendant’sdetailsofthedefendants’allegedly fraudulent acts, when they occurred, and who engagedin them.”)(quoting Hopper v. Solvay Pharmaceuticals, Inc., 588F.3d 1318, 1324 (11th Cir. 2009)).The undersigned finds that the Government’s allegations incounts one and two satisfy Rule 9(b)’s pleading requirementswith respect to Defendants IMC-Diagnostic and IM-Northside.Incount one of the complaint, the Government alleges the who namely IMC-Diagnostic, IMC-Northside and DPG; the what - falseclaims for payment or approval to the United States includingclaims for reimbursement of DPG for designated health servicesthat DPG physicians referred but did not perform in violation ofthe Stark Law and the Anti-Kickback statute; the when - IMCDiagnostic submitted said false claims between July 2005 andDecember 2011, while IMC-Northside submitted said false claimsbetween April 2008 and 2011; the where - IMC-Diagnostic operatesacliniclocatedonSpringHillAvenueinMobile,andIMC-Northside operates a clinic located in Saraland, Alabama; and13Case 1:11-cv-00364-KD-B Document 180 Filed 04/11/14 Page 14 of 31the how - IMC-Diagnostic and IMC-Northside had agreements withDPG whereby DPG physicians provided medical services to IMCDiagnostic and IMC-Northside, and they also had an arrangementthrough which DPG physicians referred patients to IMC-NorthsideandIMC-Diagnosticservices;forvariousIMC-NorthsideandtestsIMC-DNCanddesignatedbilledMedicarehealthforthetesting and designated health services, some of which was notperformed by DPG physicians but was instead performed by IMCDiagnosticNorthsidereferrals,employeesandonIMC-DiagnosticIMC-DiagnosticandDPGinturnpaidequipment;DPGforcompensatedthephysicians for said referrals.yet,theIMC-physicianindividualDPG(Id. at 17-33).In its complaint, the Government offers as an example offalse claims submitted to Medicare by IMC-Northside and IMCDiagnostic,asetofnuclearheartimagingteststhatwerereferred on June 23, 2009 by a DPG physician who was assigned toIMC-Northside.AccordingtotheGovernment,thetestswereperformed at IMC-Diagnostic, but IMC-Northside billed Medicarefor the technical component of the tests, while IMC-Diagnosticbilledtests.MedicarefortheprofessionalcomponentofthesameThe Government contends that none of the DPG physiciansat IMC-Northside were cardiologists, and IMC-Northside did nothave the equipment necessary to perform the nuclear cardiologyimaging tests.(Doc. 30 at 23).14Case 1:11-cv-00364-KD-B Document 180 Filed 04/11/14 Page 15 of 31Inaddition,alongwithitscomplaint,theGovernmentattached a listing of over fifty DPG physicians who allegedlyparticipated in the improper financial arrangement through whichtheyreceivedimpropercompensationreferrals to IMC-Diagnostic and/orEx.1).Thelistingincludesfortheabove-describedIMC-Northside. (Doc. 30-1,thenameofeachreferringphysician and the starting and ending dates of their referrals.Additionally,Government’sExhibit2,complaint,whichincludesisalsoexamplesattachedoftoallegedthefalseclaims submitted to Medicare by IMC-Diagnostic between 2005 and2011.(Doc. 30-2, Ex. 2).The listing includes the providername, the claim number, the date of the claim, the specificprocedure for which reimbursement was sought, a description ofthe procedure, the place of service, the amount paid for theservice, and the name of the referring physician.Basedupontheabove,theundersigned(Id.)findsthattheGovernment has plead facts with particularity against DefendantsIMC-NorthsideandIMC-Diagnosticsoasrequirements of Rule 9(b) for count one.tosatisfytheSpecifically, theGovernment has alleged how, when, and where these Defendantswere knowingly involved in an arrangement whereby IMC-Northside(during the 2008 through 2011 time frame) and IMC-Diagnostic(during the 2005 through 2011 time frame) received referralsfrom DPG physicians for designated health services and in turn15Case 1:11-cv-00364-KD-B Document 180 Filed 04/11/14 Page 16 of 31submitted claims to the Government for said services, and thencompensated the individual DPG physicians, through DPG, for thereferrals in violation of the Stark Law and the Anti-Kickbackstatute.Theseallegations,ifproven,willestablishaviolation of the FCA.The undersigned finds that the same does not hold true withrespecttotheHealth and IMC.createdIMCGovernment’sassertionsregardingInfirmaryThe Government alleges that Infirmary Healthinordertoestablishnewclinicsubsidiariesincluding IMC-Diagnostic and IMC Northside, that IMC owns andoperatesIMC-DiagnosticandIMC-Northside,andthatwiththeapproval of Infirmary Systems and its Board of Directors, IMCenteredintocontractualagreementsorphysicianserviceagreements with individual physicians and physician groups toserve as physicians (on an independent contractor basis) forIMC-Diagnostic and IMC-Northside.While the Government maintains that Infirmary Health, IMC,IMC-Diagnostic and IMC-Northside are interrelated, and that theyshare many of the same officers, executives and employees, someof whom had knowledge of the improper arrangement between IMCDiagnostic,IMC-NorthsideandDPGwhichresultedinthepresentment of false claims to Medicare for designated healthservices referred by DPG physicians, and the payment to theindividual DPG physicians for the above-referenced referrals,16Case 1:11-cv-00364-KD-B Document 180 Filed 04/11/14 Page 17 of 31“these generalized allegations do no more than to formulaicallyrecite the action’s elements without adequately connecting theparent or [related entities] to the records and statements ofthe subsidiaries.”United States v. Universal Health Servs.,2010 U.S. Dist. LEXIS 116432, *6, 2010 WL 4323082, *2 (W.D. Va.Oct. 31, 2010)(citing Twombly, 550 U.S. at 555).In order toproperly assert that the parent or related entities activelyengagedinafalseclaimviolation,theGovernmentmustplausibly allege “some degree of participation by the parent inthe claims process.”Id. (quoting United States ex rel. Hockettv. Columbia/HCA Healthcare Corp., 498 F. Supp. 2d 25, 59-60(D.D.C. 2007).InUniversalHealthServs.,Inc.,thecourtheldthatpiercing the corporate veil based on alleged violations of theFCA requires an examination under federal law of 1) whethertherewasseparatesuchaunitypersonalitiesofofinteresttheandparentownershipandthethatsubsidiarythenolonger existed; and 2) whether respecting the corporate formwould produce an inequitable result.Id., 2010 U.S. Dist. LEXIS116432 at *9, 2010 WL 432308 at *3.The Court further observedthattheGovernment’sallegationssuggestingsomeoverlapbetween the activities and affairs of the defendant entities washardlyunusualroutinelyinrefusethetocorporatepiercethe17structure,corporateandthatveil“courtsbasedonCase 1:11-cv-00364-KD-B Document 180 Filed 04/11/14 Page 18 of 31allegations limited to the existence of shared office space oroverlappingmanagement,allegationsthatonecompanyisthewholly-owned subsidiary of another, or that companies are to be‘considered as a whole.’” Id., 2010 U.S. Dist. LEXIS at *10,2010 WL 432308 at *4.See also United States ex rel. ReidLawson v. Aegis Therapies, Inc., 2013 U.S. Dist. LEXIS 154899,*12,2013WL5816501,*5(S.D.Ga.2013)(“BecausetheGovernment fail[ed] to assert facts sufficient to show plausibleliability under the FCA based on Corporate Defendants’ abuse oftheircorporateforms,theComplaintisinsufficientlypleaded.”).The undersigned finds that while the Government has allegedthat Infirmary Health established IMC, that IMC established IMCDiagnostic and IMC-Northside, that there is overlap among theofficers, executives and employees of the Infirmary Defendants,and that some of the shared leadership knew of the improperarrangement with DPG and the presentment of the false claims,these general assertions does not support a claim for vicariousliability against Infirmary Health and IMC because “knowledge[of violations] does not equate to causing the false claims andsubmission of false records.”Universal Health Services, 2010U.S. Dist. LEXIS 116432 at *13, 2010 WL 432308 at *4.theGovernmenthasfailedtoplausiblypleadthatBecauseInfirmaryHealth and IMC presented or caused to be presented false claims,18Case 1:11-cv-00364-KD-B Document 180 Filed 04/11/14 Page 19 of 31and have further failed to put forth facts suggesting that therewas such a unity of interest and ownership between the InfirmaryDefendants that separate personalities of the entities no longerexist, or that respecting the distinct corporate forms wouldproduce an inequitable result, the Government’s claims againstInfirmary Health and IMC in count one of the complaint are dueto be dismissed.B. Count TwoTurningtocounttwo,theGovernmentallegesthattheDefendants made, used, and caused to be made or used, falserecordsorstatements,representationsmadenamelyandthecausedtofalsebecertificationsmadebyDPG,andIMC-Diagnostic and IMC-Northside on the CMS-8551, CMS-855B and CMS855R forms, in order to get false or fraudulent claims paid andapproved by the Government, that the false certifications andrepresentations were material to the Government’s payment of thefalse claims, and that the records and statements were made withactual knowledge of their falsity or with reckless disregard ordeliberate ignorance of whether or not they were false.3729(a)(1)(B)oftheFalseClaimsActsubjectstoSectioncivilliability “any person who. . .knowingly makes, uses or causes tobe made or used, a false record or statement material to a falseor fraudulent claim.” 31 U.S.C. § 3729(a)(1)(B).This section“does not demand proof that the defendant presented or caused to19Case 1:11-cv-00364-KD-B Document 180 Filed 04/11/14 Page 20 of 31bepresentedafalseclaimtothegovernmentorthatthedefendant’s false record or statement itself was ever submittedto the Government.”Hopper, 588 F. 3d at 1327.OnMay20,2009, the FCA was amended by the Fraud Enforcement and RecoveryAct (“FERA”).United States ex rel. Willis v. Angels of HopeHospice, Inc., 2014 U.S. Dist. LEXIS 20959 (M.D. Ga. Feb. 20,2014).bytheThe amendment deleted the “to get” and “paid or approvedgovernment”requirement.requirementsandaddedthematerialityId., 2014 U.S. Dist. LEXIS 20959 at *34 n.11, 2014WL 684657 at *11 n.11.The Court in Willis noted that “theaddition of the materiality requirement does not appear to haveany impact on this Section because the Supreme Court held underthe pre-FERA version that ‘a plaintiff asserting a § 3729(a)(2)claim must prove that the defendant intended that the falserecord or statement be material to the Government’s decision topay or approve the false claim.’”Id. (quoting Allison EngineCo. v. U.S. ex rel. Sanders, 553 U.S. 662, 665, 128 S. Ct. 2123,170 L. Ed. 2d 1030 (2008)).In this action, the Government asserts that Defendants knewthat compliance with the Stark law and Anti-Kickback Statute wasa condition for payment by Medicare, that IMC-Diagnostic andIMC-Northside certified that they would comply with all Medicarelaws and regulations, including the Stark Law and Anti-KickbackStatute on Form CMS-88, that Infirmary Health20knew that theCase 1:11-cv-00364-KD-B Document 180 Filed 04/11/14 Page 21 of 31compensationarrangementswithDPGphysiciansmustsatisfyaStark Law exception, and not violate the Anti-Kickback Statute,that Defendants knowingly made the false certifications for thepurpose of getting false or fraudulent claims paid, and that thefalse certifications were material to the United States’ paymentof the false claims.IMC-DiagnosticsufficientlyThe undersigned finds that with respect toandpledcertificationsIMC-Northside,withthatthesufficientweremadeparticularitybyGovernment,andhavetheIMC-DiagnosticNorthside for the purpose of getting falsetheGovernmentsubmittedhasfalseandIMC-claims approved bydetailedinformationregarding the Medicare payments that were improperly paid as aresultoftheimproperreferralandcompensationarrangementwith DPG and the false certifications made by IMC-Diagnostic andIMC-Northside. These allegations, if proven, will establish thatIMC-Diagnostic and IMC-Northside violated section 3729(a)(1)(B)of the FCA.With respect to Infirmary Health and IMC, the undersignedfindsthathereagain,theUnitedStateshasnotplausiblyalleged some degree of participation by Infirmary Health and IMCin the submission of false certifications by IMC-Diagnostic andIMC-Northside.Asnotedsupra,asidefromallegingthattheInfirmary Defendants have overlapping officers, executives andemployees, the Government has not proffered facts sufficient to21Case 1:11-cv-00364-KD-B Document 180 Filed 04/11/14 Page 22 of 31makeaparticularizedshowingthatInfirmaryHealthandIMCparticipated in the submission of the false certifications byIMC-Diagnostic and IMC-Northside.Additionally, the Governmenthas not put forth facts suggesting that there was such a unityof interest and ownership between the Infirmary Defendants thatseparate personalities of the entities no longer exist, or thatrespectinginequitablethedistinctresult.corporateThus,theformswouldGovernment’sproduceclaimsanagainstInfirmary Health and IMC in count two of the complaint are dueto be dismissed.C. Count ThreeIn count three of its complaint, the Government allegesthat Defendants made and used or caused to be made or used falserecordsortransmitstatementsmoneytomaterialtheUnitedtoanStatesobligationortoknowinglypayorconcealed,avoided or decreased an obligation to pay or transmit money totheUnitedStates.(Doc.30at34).Thefalseclaimsactimposes liability on “any person who. . .knowingly makes, usesorcausestobemadeorused,afalserecordorstatementmaterial to an obligation to pay or transmit money or propertytotheGovernment,orknowinglyconcealsorknowinglyandimproperly avoids or decreases an obligation to pay or transmitmoneyorproperty3729(a)(1)(G).totheGovernment.”31U.S.C.§“This is known as the ‘reverse false claim’22Case 1:11-cv-00364-KD-B Document 180 Filed 04/11/14 Page 23 of 31provision of the FCA because liability results from avoiding thepayment of money due to the government, as opposed to submittingto the government a false claim.”Matheny, 671 F. 3d at 1222;Willis, 2014 U.S. Dist. LEXIS 20959 at *37.addedtotheindividualFalsewhoClaimsmakesaActinmaterial1986This provision was“toprovidemisrepresentationthattoanavoidpaying money owed to the Government would be equally liableunder the Act as if he had submitted a false claim to receivemoney.”United States ex rel. Cullins v. Astra, Inc., 2010 U.S.Dist. LEXIS 13469 at *15-16, 2010 WL 625279, *5 (S.D. Fla. Feb.17, 2010) (quoting S. Rep. No. 99-345, at 18; 1986 U.S.C.C.A.N.at 5283).Inthistypeclaim,“‘thedefendant’sactiondoesnotresult in improper payment by the government to the defendant,butinsteadresultsinpayment is obligated.’”nopaymenttothegovernmentwhenaHoyte v. American Nat’l Red Cross, 518F.3d 61, 63 n.1 (D.C. Cir. 2008)(quoting United States ex rel.Bain v. Georgia Gulf Corp., 386 F. 3d 648, 553 (5th Cir. 2004);see also United States ex rel. Thomas v. Siemens AG, 708 F.Supp. 2d 505, 514 (E.D. Pa. 2010) (the purpose of the provisionwas not to provide a redundant basis to state a false statementclaimundersubsection(a)).Toestablishareversefalseclaim, the plaintiff must prove “1) a false record or statement;(2)thedefendant’sknowledgeof23thefalsity;(3)thattheCase 1:11-cv-00364-KD-B Document 180 Filed 04/11/14 Page 24 of 31defendantmade,usedorcausestobemadeorusedafalsestatement or record; (4) for the purpose to conceal, avoid, ordecrease an obligation to pay money to the government; and (5)the materiality of the misrepresentation.”Matheny, 671 F.3d at1222.The undersigned finds that the Government has failed tosufficientlyGovernmentpleadaasserts,reverseinafalseconclusoryclaim.Asfashion,thatpled,theDefendantsmade and used or caused to be made or used false records orstatements material to an obligation to pay or transmit money tothe United States or knowingly concealed, avoided or decreasedan obligation to pay or transmit money to the United States.Asbest the undersigned can discern, the Government is contendingthatDefendantsfraudulentlybilledtheGovernmentfordesignated health services that were improperly referred by theDPG physicians, and that the regulations implementing the StarkLawrequiresthat“[a]ndesignatedhealthprohibitedreferraltimely basis. . .”servicemustentitythatthatwasrefundcollectsperformedallcollectedpaymentforapursuanttoaamountsona42 C.F.R. § 411.353(d).” (Doc. 30 at 7).As a preliminary matter, the Government has not identifiedthespecificfalsestatementorrecordthatwasmadetoknowingly conceal or decrease an obligation to pay or transmitmoney to the Government.Moreover, the Government’s complaint24Case 1:11-cv-00364-KD-B Document 180 Filed 04/11/14 Page 25 of 31doesnotcontainanyfactualassertionssubmitted false statements in order toobligation to the Government.thatDefendantsconceal or avoid anTo the contrary, the Governmentcontends that Defendants engaged in the improper referral schemein order to get the Government to pay over money to which theDefendants were not entitled, and to induce DPG physicians tomakereferralsInfirmarytoHealthIMC-Diagnostic,subsidiaries,andfrom affiliating with competitors.simplyalleged,withoutanyIMC-NorthsidetopreventandDPGrelatedphysiciansBecause the Government hasspecificfactualsupport,thatDefendants violated this section of the Act, it has failed tomeet Rule 9(b)’s pleading requirements and has failed to putDefendantsonnoticeastothesubstanceofthisclaim.Accordingly, Defendants’ motion to dismiss this claim is due tobe granted.D. Counts Four and FiveDefendantsalsoseekthedismissalofthecountfour(mistaken payment) and count five (unjust enrichment) of theGovernment’s complaint.As noted supra, Defendants argue thatthe Government failed to specify whether the claims are statecommon law claims or federal common law claims.Additionally,Defendants argue that the claims should be dismissed due to thefact that they derive from the alleged violations set forth incounts one through three, and because the Government has not25Case 1:11-cv-00364-KD-B Document 180 Filed 04/11/14 Page 26 of 31sufficiently alleged those claims, counts four and five shouldbe dismissed along with the first three counts.Defendants alsoassert that count five should be dismissed because it does notdifferentiate among the defendants, but instead lumps them alltogether.The Government’s rights arising under a nationwide federalprogram such as Medicare are governed by federal law, not statelaw. United States ex rel. Baklid-Kunz v. Halifax Hosp. Med.Ctr., 2012 U.S. Dist. LEXIS 36304, *17, 2012 WL 921147, *6 (M.D.Fla. March 19, 2012).A claim for payment by mistake of factallows the Government to “‘recover funds which its agents havewrongfully, erroneously, or illegally paid.’”United States v.Fadul, 2013 U.S. Dist. LEXIS 27909, *39 (quoting United Statesv. Medica-Rents Co., 285 F. Supp. 2d 742, 776 (N.D. Tex. 2003)).The claim is “available to the United States and is independentof statute.”United States v. Mead, 426 F.2d 118, 124 (9th Cir.1970)); see also United States v. Lahey Clinic Hosp., Inc., 399F.3d1,16n.16(1stCir.2005)(explainingthattheGovernment’s “power to collect money wrongfully paid” is part oftheUnitedStates’marks omitted).“inherentauthority”)(internalquotationClaims for unjust enrichment and payment undermistake of fact are essentially duplicative of each other. 22SeeIn a False Claim Act case, the government may generally pleadtheories in the alternative, even if different claims seek26Case 1:11-cv-00364-KD-B Document 180 Filed 04/11/14 Page 27 of 31Ellipso, Inc. v. Mann, 460 F. Supp. 2d 99, 104-05 (D.D.C. 2006)(setting forth elements of unjust enrichment); United States v.Bouchey, 860 F. Supp. 890, 894 (D.D.C. 1994) (same); Mead, 426F.2d at 124 (setting forth elements of payment under mistake offact); LTV Educ. Sys., Inc. v. Bell, 862 F.2d 1168, 1175 (5thCir. 1989) (same).Where it seeks to recover payments made as a result offalse claims, the Government must show that it “made . . .payments under an erroneous belief which was material to thedecision to pay.”falsityisdoctrine.”notaMead, 426 F.2d at 124.requisiteforrecoveryId., 426 F.2d at 125 n. 6.“[K]nowledge ofunderthemistakeAccordingly, even wherethe Government cannot establish that a defendant acted knowinglyfor purposes of the False Claims Act, the Government may beentitled to recovery under the alternative theory of payment bymistake of fact.See, e.g., id. at 121, 124 (although theGovernmenttofailedestablishthatthedefendantactedknowingly in submitting false claims that “overstated his actualcharges,”itwasstillentitledtoreimbursementoftheovercharges pursuant to its claim for payment by mistake ofrelief for the same injury, so long as there is ultimately onlyone recovery. See United States v. United Technologies Corp.,255 F. Supp. 2d 779, 785 (S.D. Ohio 2003) (common law and FCAclaims may proceed together because, while the Government “willnot be allowed to recover twice, [it] may defer its election ofremedy until trial on the merits").27Case 1:11-cv-00364-KD-B Document 180 Filed 04/11/14 Page 28 of 31fact); cf. United States v. Khan, 2009 U.S. Dist. LEXIS 68546,*15 n.4, 2009 WL 2461031, *5 n.4 (E.D. Mich. 2009) (enteringsummary judgment on the Government’s payment by mistake claim asan alternative holding in the event that amounts awarded underthe False Claims Act were subsequently found to beunsustainable”);LEXIS23892,(observingUnited2008thatWLtheStatesv.802367,atGovernmentBellecci,*4-5couldn.10be“legally2008U.S.Dist.(E.D.Cal.2008)entitledtosummaryjudgment on its claim for payment by mistake of fact even whereithadimplicitly“retract[ed]”itsallegationsthatthedefendant was intentionally deceptive in submitting claims tothe Government).In this action, the Government has alleged that it paidIMC-DiagnostichealthservicesandIMC-NorthsiderenderedbyforDPGclaimsphysiciansforwhodesignatedwereinafinancial relationship prohibited by the Stark Law and/or theAnti-Kickback statute without knowledge of material facts, andunder the mistaken belief that IMC-Diagnostic and IMC-Northsidewere entitled to receive payments when in fact they were not.TheGovernmentalsocontendsthatitsmistakenbeliefwasmaterial to the decision to pay IMC-Diagnostic and IMC-Northsidefor such claims, and that IMC-Diagnostic, IMC-Northside, DPG andInfirmary Health are liable for restitution to the United Statesfor the amounts paid in error.The Government further contends28Case 1:11-cv-00364-KD-B Document 180 Filed 04/11/14 Page 29 of 31that the Defendants have been unjustly enriched by directly orindirectlyobtainingentitled.governmentfundstowhichtheyarenotIn support of its claims, the Government has providedspecific information detailing the DPG physicians who allegedlyprovided allegedly prohibited referrals to IMC-Diagnostic andIMC-Northside, as well as examples of specific false claims thatIMC-Diagnostic and IMC-Northisde submitted to Medicare, receivedpaymentfor,designatedregardingandinhealththeturnservice.allegedpaidDPGTheexamplesprovider,theforitsreferralcontainreferringofainformationphysician,theclaim date of service, the place of service and the amount paidby the Government on each listed claim.(Docs. 30-1, 30-2).TheasundersignedGovernment,arefindsthatsufficientthesetofacts,stateaallegedplausiblebytheclaimforpayment by mistake and unjust enrichment against IMC-Diagnosticand IMC-Northside.As noted supra, while the Government assertsthat the Infirmary Defendants are interrelated and share many ofthe same officers, executives and employees, the Government hasnot proffered facts sufficient to make a particularized showingthat Infirmary Health and IMC participated in the submission ofthe false statements or records upon which the Government reliedto issue the payments at issue, or that either Infirmary Systemor IMC was directly or indirectly enriched by said payments.Accordingly, the Government has not stated a plausible claim for29Case 1:11-cv-00364-KD-B Document 180 Filed 04/11/14 Page 30 of 31paymentbymistakeandunjustenrichmentagainstInfirmaryHealth or IMC.IV.ConclusionFor the reasons set forth above, the undersigned recommendsthat Defendants’ Motion to Dismiss be granted in part, and deniedin part, as follows:1). The motion should be granted with respect to all claimsagainstDefendantsIMCandInfirmaryHealth(ascontainedincounts 1-5);2).The motion should be granted with respect to count threeagainst Defendants IMC-Diagnostic and IMC-Northside; and3).The motion should be denied with respect to all of theremainingclaimsagainstIMC-DiagnosticandIMC-Northside(ascontained in counts 1, 2, 4, and 5).Notice of Right to File ObjectionsA copy of this report and recommendation shall be served onall parties in the manner provided by law.Any party who objectsto this recommendation or anything in it must, within fourteen(14) days of the date of service of this document, file specificwritten objections with the Clerk of this Court. See 28 U.S.C. §636(b)(1); Fed. R. Civ. P. 72(b); S.D. ALA. L. R. 72.4.In orderto be specific, an objection must identify the specific findingor recommendation to which objection is made, state the basis for30Case 1:11-cv-00364-KD-B Document 180 Filed 04/11/14 Page 31 of 31the objection, and specify the place in the Magistrate Judge’sreport and recommendation where the disputed determination isfound.refersAn objection that merely incorporates by reference ortothebriefingbeforetheMagistrateJudgeisnotspecific.DONE this 11th day of April, 2014./s/ SONJA F. BIVINSUNITED STATES MAGISTRATE JUDGE31