United States ex rel. Fischer v. Cmty. Health Network, Inc.

UNITED STATES OF AMERICAand STATE OF INDIANA ex rel. Thomas P. Fischer, Plaintiffs, v. COMMUNITY HEALTH NETWORK, INC., et al., Defendants.

No. 1:14-cv-01215-RLY-DLP

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF INDIANA INDIANAPOLIS DIVISION

November 25, 2020

ORDER

This matter comes before the Court on Plaintiff-Relator's Motion for Leave to File Second Amended Complaint, Dkt. [108]. On March 17, 2020, Defendant Community Health Network, Inc.¹ filed a response in opposition. (Dkt. 115). On March 24, 2020, the United States of America and the State of Indiana filed Statements of Interest. (Dkts. 120, 121). On March 31, 2020, Plaintiff-Relator filed a reply in support of the Motion for Leave to Amend. (Dkt. 47). On April 14, 2020, with this Court's permission, Community Health Network filed a sur-reply in opposition to Plaintiff-Relator's request for leave. (Dkt. 129). The Motion is now fully briefed and ripe for decision. For the reasons discussed below, Plaintiff-Relator's Motion is GRANTED.

I. BACKGROUND

In October 2015, Community Health Network, Inc. ("CHN") recruited Plaintiff-Relator Thomas P. Fischer ("Relator") from his private practice to serve as CHN's Chief Financial Officer. (Dkt. 1 at 6). CHN is a non-profit health system located in Indianapolis, Indiana which includes hospitals, surgery centers, urgent care centers, and patient facilities. (Id. at 7). CHN employs over 350 physicians through subsidiaries and affiliates, primarily through its subsidiary Community Physician Network ("CPN"). (Id.).

In December 2012, CHN promoted Relator to serve as its Chief Operating Officer and Chief Financial Officer. (Id. at 6-7). In this dual role, Relator became aware of significant, unexpected monetary losses at CPN. (Id. at 45). As a result, he began asking CPN management for explanations regarding the losses and expressed concern that he believed the losses were directly tied to CHN paying physicians "commercially unreasonable rates." (Id. at 46). Starting in July 2013, Relator began requesting financial information regarding Visionary Enterprises, Inc. ("VEI")² surgery centers and continued expressing concern about excessive physician compensation to a number of individuals, including CHN senior management. (Id. at 47). On November 27, 2013, CHN terminated Relator from his positions. (Id. at 48).

On July 21, 2014, Relator, on behalf of the United States of America (the"Government") and the State of Indiana (the "State"), initiated this qui tam lawsuit pursuant to the False Claims Act ("FCA")³ against Defendants Community Health Network, Inc., Community Health Network Foundation Inc., Community Physicians of Indiana, Inc., VEI, Community Surgery Center-North, Community Surgery Center-South, Community Surgery Center-East, Community Surgery Center-Hamilton, Community Surgery Center-Kokomo, Community Surgery Center-Northwest, Hancock Surgery Center, Community Endoscopy Center, and Community Digestive Center (collectively, the "Community Defendants"). (Id. at 2). The original Complaint consists of two main parts.

First, Relator alleged that the Community Defendants knowingly defrauded the Government and State by engaging in a fraudulent scheme to pay physicians improper and excessive compensation to ensure that they referred patients, including Medicare and Medicaid patients, to CHN. (Id. at 4, 31-39). This fraudulent scheme, Relator alleged, violates the Stark Law,⁴ the Anti-Kickback Statute,⁵ and the FCA. (Id. at 25). Specifically, Relator asserted that Defendants paid kickbacks and illegal remunerations to induce physicians to refer patients to CHN, (Id. at 25), solicited and received kickbacks from Indianapolis nursing homefacilities in exchange for patient referrals, (Id. at 25-26), ensured the profitability of ambulatory surgical centers in which its physicians had ownership interests, (Id. at 29, 39), and provided lucrative medical directorships to referring physicians. (Id. at 43). Relator alleged that all claims submitted to Medicare, Medicaid, or a government funded healthcare program for services rendered pursuant to a referral from a physician who was paid an illegal remuneration are false claims that violate the FCA and Indiana FCA. (Id. at 4, 25-26).

Second, Relator alleged that CHN retaliated against him in violation of the applicable FCA and Indiana FCA anti-retaliation provisions. Relator alleged that he was discharged in retaliation for expressing concern to CHN leadership that operating losses and budget variances were a direct result of illegal activities related to physician compensation, referral patterns, and business practices. (Id. at 7, 46, 49). Relator's original complaint alleged eight counts for: (1) FCA violations; (2) Indiana FCA violations; (3) retaliation under the FCA; (4) retaliation under the Indiana FCA; (5) breach of contract; (6) breach of oral contract; (7) promissory estoppel; and (8) quantum meruit. (Id. at 51-58).

As required by the FCA statutory provisions, Relator filed the original Complaint under seal. See 31 U.S.C. § 3730(b)(2). The original Complaint remained under seal while the Government and State investigated Relator's allegations to determine the appropriateness of intervention. On October 15, 2015, Relator filed a First Amended Complaint under seal. (Dkt. 32).

Relator's allegations in the original Complaint and the First Amended Complaint are nearly identical, except that Relator provided greater factual detail regarding nursing home kickbacks in exchange for patient referrals, (see Dkt. 32 at 50-51), and added a ninth count for blacklisting asserting that CHN knowingly provided false information to Relator's prospective employers after his termination. (See Dkt. 32 at 59-60, 63-64, 68-69).

On August 7, 2019, the Government filed a Notice of Election to Intervene in Part and Decline to Intervene in Part. (Dkt. 86). The Government opted to intervene "in that part of the action which alleged that [D]efendant Community Health Network, Inc. violated the FCA by submitting claims to Medicare that were referred by physicians with whom [it] had employment relationships that violated the Stark Law." (Dkt. 86 at 1). The Government declined to intervene with respect to the remaining allegations and requested that this Court unseal the Complaint. (Id). In its Notice, the Government did not explicitly indicate whether its decision to intervene was based on the original Complaint or the First Amended Complaint, but a subsequently filed Statement by the Government refers to the First Amended Complaint as the operative Complaint in this matter.⁶ The Court agrees.

On December 23, 2019, this Court granted the Government's request to unseal the Complaint and ordered that it serve its own complaint on Defendant CHN within 120 days. (Dkt. 93 at 1). This Court further ordered that the seal belifted on all matters occurring in the action after the date of the order. (Id. at 2). That same date, December 23, 2019, this Court granted the State's Notice of Election to Decline Intervention. (Dkt. 94).⁷ On January 6, 2020, the Government filed its Complaint in Intervention. (Dkt. 96).

The Government's Complaint in Intervention focuses on false claims arising from the performance of health services by physicians with compensation arrangements with CHN that exceeded fair market value or considered the volume or value of their referrals to CHN, thereby violating the Stark Law. (Id. at 3). These physicians allegedly referred patients to CHN for health services, and, in turn, CHN submitted these false claims to Medicare knowing that they were not eligible for payment, in violation of the FCA. (Id. at 3-4).

On March 3, 2020, Relator filed the present Motion for Leave to File Second Amended Complaint. (Dkt. 108). Initially, Relator asserted that an amendment to its First Amended Complaint was necessary to address issues raised by the Government in its Complaint in Intervention and add new claims and Defendants based on evidence developed over the course of the Government's four-year investigation. (Id. at 2). On March 17, 2020, CHN filed a response in opposition, arguing that the Court should deny the Relator's request for leave to amend the complaint. (Dkt. 115). On March 24, 2020, the Government and the State each filed a Statement of Interest. (Dkts. 120, 121). On March 31, 2020, Relator filed a reply, in which he does not argue that the amendment adds claims, but asserts that theamendment adds a new Defendant, renames Defendants, and adds evidence and details to the fraudulent scheme outlined in the First Amended Complaint. (Dkt. 124 at 2). On April 14, 2020, with this Court's permission, CHN filed a sur-reply in opposition to Relator's request for leave to amend. (Dkt. 129).

CHN opposes Relator's Motion for Leave to Amend for two main reasons: (1) the proposed amendments are futile; and (2) the Relator unduly delayed in filing the proposed second amended complaint. (Dkt. 115 at 2-3).

II. LEGAL STANDARD

After the opportunity to amend the pleadings as a matter of course has passed, a party may amend a complaint only with the consent of the opposing party or leave of the court. Fed. R. Civ. P. 15(a). Leave to amend should be "freely given when justice so requires" absent considerations such as "undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, and futility of amendment." Fed. R. Civ. P. 15(a)(2); Foman v. Davis, 371 U.S. 178, 182 (1962).

An amendment is futile if the amended pleading would not survive a motion to dismiss. McCoy v. Iberdrola Renewables, Inc., 760 F.3d 674, 685 (7th Cir. 2014). To survive a motion to dismiss, the amended complaint must "contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Id. at 685 (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678...