United States ex rel. Quaresma v. Journey of Hope

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THE UNITED STATES OF AMERICA and THE STATE OF RHODE ISLAND ex rel. SARA QUARESMA and MICHAEL DELMONICO, Plaintiffs/Relators, v. THE JOURNEY TO HOPE, HEALTH AND HEALING, INC. and KENNETH L. RICHARDSON, JR., Individually and in his Official Capacity, Defendants.

C. A. No. 20-451-JJM-LDA

United States District Court, D. Rhode Island

March 29, 2024

MEMORANDUM AND ORDER

John J. McConnell, Jr., United States District Chief Judge

Before the Court are Defendant The Journey to Hope, Health and Healing, Inc. and Defendant Kenneth L. Richardson Jr.'s Motions to Dismiss under Fed.R.Civ.P. 12(b)(6). The United States and State of Rhode Island sued as intervenors under the False Claims Act (“FCA”) and Rhode Island False Claims Act (“RIFCA”), alleging a multi-year scheme to defraud the Government by submitting false claims for methadone treatment. ECF No. 11. Former employees Sara Quaresma and Michael DelMonico (“Relators”) sued for retaliation. ECF No. 20.

Defendants (collectively, “Journey to Hope”) argue that the Government is improperly using the FCA to punish regulatory violations. Journey to Hope moves to dismiss all claims under Fed.R.Civ.P. 12(b)(6) on the grounds that no false claims were submitted, and that the Complaint fails to meet the heightened pleading standard of Rule 9(b). Journey to Hope also moves to dismiss Counts V and VII of Relator's Amended Complaint on the grounds that reporting regulatory violations (unlike false billing) is not protected under the FCA.^[1]

For the reasons below, the Court DENIES Journey to Hope's Motions to Dismiss as to all Plaintiffs. ECF Nos. 21 and 26.

I. BACKGROUND^[2]

Journey to Hope is a company that provides substance use disorder treatment services at four clinic locations in Rhode Island. It is certified as an Opioid Treatment Program (“OTP”), enrolled as a Rhode Island Medicaid provider, and provides Medication Assisted Treatment (“MAT”) including methadone. ECF No. 11 at 11.

Providers in the Rhode Island Medicaid Program sign agreements that require them to follow all “applicable provisions of federal and state laws” and to “[refrain] from billing for services which are not documented.” Id. at 7. By submitting a claim, providers certify “that the goods or services listed were medically necessary . . . and actually rendered to the RI Medicaid beneficiary.” Id. at 8. Because Journey to Hope is certified as an OTP and a Medicaid provider, it must adhere to heightened standards. It is required to create an “individualized, person-centered treatment plan for each patient, both initially and annually,” conduct biannual review and revision of these plans, offer at least one hour of counseling per month (or every ninety days, if participating in group therapy),^[3] and maintain clinical caseloads that do not exceed an average staff to client ratio of 1:60. Id. at 8-10.

Plaintiffs allege that Journey to Hope took on so many patients that it was “impossible” to meet the standard of care required of OTP programs. Id. at 14. They allege that Journey to Hope routinely failed to update patient records, record treatment plans, or offer required counseling. Id. at 24. Journey to Hope was aware of its deficiencies and took steps to “fix” patient files to prepare for state audits to maintain its accreditation. Id. at 15. Supervisors told employees to backdate treatment plans and counseling records and threatened employees with termination if they failed to comply. Id. at 13-18. Despite these known and apparently far-reaching shortfalls, from 2015 to 2021 Journey to Hope continued to bundle all its services and bill Rhode Island Medicaid using a code available to certified OTP providers. Id. at 11-12.

Relators Sara Quaresma and Michael DelMonico were previously employed by Journey to Hope. ECF No. 20 at 15. Ms. Quaresma raised her concerns directly to Journey to Hope supervisors, providing them copies of the FCA with the relevant provisions highlighted. Id. at 29-30. She reported her concerns to the state through the “QA Hotline.” Id. at 31. After this, her supervisors asked increasingly pointed questions of Ms. Quaresma to determine whether she had reported Journey to Hope for fraudulent practices and accused her being a whistleblower. Id. at 32. Ms. Quaresma was the subject of repeated reprimands and disciplinary actions and reported the retaliatory treatment she endured to Journey to Hope's Compliance Officer. Id. at 33-35. Three months later, Journey to Hope's CEO Mr. Richardson told Ms. Quaresma to resign. She did so soon after. Id.

II. STANDARD OF REVIEW

To survive a 12(b)(6) challenge, a complaint must contain facts sufficient to support a claim of relief that is “plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). The Court must “accept as true all well-pleaded facts” and disregard all “conclusory legal allegations.” Gargano v. Liberty Inti Underwriters, Inc., 572 F.3d. 45, 48 (1st Cir. 2009); Morales-Cruz v. Univ, of Puerto Rico, 676 F.3d 220, 224 (1st Cir. 2012). It must draw on its “judicial experience and common sense” to determine whether the claim is plausible, that is, whether the “factual content. . . allows the court to draw a reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009).

Claims brought under the FCA and RIFCA are also subject to a heightened pleading standard under Fed.R.Civ.P. 9(b). U.S. ex rel. Karvelas v. Melrose-Wakefield Hosp., 360 F.3d 220, 228 (1st Cir. 2004). Because a false claim is the “the sine qua non of a False Claims Act violation,” the Complaint must provide the “time, place, and content” of allegedly false representations, such as the content of the claims, the amount of money charged, specific goods or services that were billed to the Government, the individuals involved in the billing, and the time between the alleged fraud and the submission of claims. Id. at 225, 232-33 (citation and internal quotation marks omitted). There is “no checklist of mandatory requirements,” (see id.), but a sufficient pleading under Rule 9(b) must “provide at least some identifying content” to apprise Defendants of the acts that form the basis for the claim. United States ex rel. Carbon v. Care New Eng. Health Sys., 567 F.Supp.3d 355, 359 (D.R.I. 2021).

III. DISCUSSION

The Government has brought two causes of action under the FCA: a presentment claim, and a false records claim. 31 U.S.C. § 3729(a)(1)(A)-(B).^[4] To survive a 12(b)(6) motion, the Government must plausibly allege that Journey to Hope knowingly presented a false claim for payment (presentment), or that it knowingly made a false record or statement that was material to a false claim (false records). These are similar causes of action and are treated the same, except that one involves a claim, and the other involves a record. United States v. Omnicare, Inc., No. 1:15-CV- 4179 (CM), 2021 WL 1063784, at *8 (S.D.N.Y. Mar. 19, 2021).

For liability to attach, the Government must prove that (1) there was a claim for payment (or record supporting such a claim),^- (2) that was false or fraudulent,^- and (3) the claim was submitted with knowledge of its truth or falsity. United States ex rel. Berkley v. Ocean State, LLC, No. CV 20-538-JJM-PAS, 2023 WL 3203641, at *2 (D.R.I. May 2, 2023) (citing Karvelas, 360 F.3d at 225). Additionally, the claim or record must be material. US. ex rel. Loughren v. Unum Grp., 613 F.3d 300, 307 (1st Cir. 2010). “Knowingly” means having actual knowledge or acting in “deliberate ignorance” or “reckless disregard” of the truth or falsity of the information but requires “no proof of specific intent to defraud.” 31 U.S.C § 3729(b)(1). “Material” means having “a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property.” Id. § 3729(b)(4).

A. False Claims Act (ECF No. 11 Counts I-IV)

1. Elements of a False Claim

To state the obvious, liability only attaches under the FCA if the claims were “false.” Karvelas, 360 F.3d at 232. “Without We presentment of [a false or fraudulent] claim, while the practices of an entity that provides services to the Government may be unwise or improper, there is simply no actionable damage to the public fisc as required under the False Claims Act.” Id. (citing U.S. ex rel. Clausen v. Lab'y Corp, of Am., 290 F.3d 1301, 1311 (11th Cir. 2002)). The First Circuit takes “a broad view” of what may constitute a false claim or statement to avoid improperly foreclosing FCA liability and has rejected frameworks that turn on legal versus factual falsity. U.S. ex rel. Jones v. Brigham & Women's Hosp., 678 F.3d 72, 85 (1^st Cir. 2012) (citation omitted). Liability is constrained by “strict enforcement of the Act's materiality and scienter requirements” rather than a sharp definition of falsity. Id. at 85-86 (citing U.S. ex rel. Hutcheson v. Blackstone Med., Inc., 647 F.3d 377, 38788 (1st Cir. 2011)) (internal quotation marks omitted).

Because the parties analyze falsity according to two different legal theories (factually false and legally false)-and because Journey to Hope relies on the Supreme Court's holding in Universal Health Servs., Inc. v. United States, 579 U.S. 176, 190 (2016) (“Escobar II) which develops the legally false theory-the Court will briefly discuss these theories, recognizing that the First Circuit does not follow this approach. Under either method, the Court finds that Plaintiffs have plausibly alleged a false claim, that the misrepresentations were material, and that Defendants knew that the underlying regulatory violations were material to payment.

a) Falsity

i Factually False

A factually false claim is “untrue on its face.” United States v. Kellogg Brown & Root Servs Inc., 800...