United States ex rel. Fowler v. Evercare Hospice, Inc.

UNITED STATES OF AMERICA ex rel. TERRY LEE FOWLER and LYSSA TOWL, Plaintiff, v. EVERCARE HOSPICE, INC., n/k/a Optum Palliative and Hospice Care, a Delaware corporation,

OVATIONS, INC., a Delaware corporation, and OPTUMHEALTH HOLDINGS, LLC,

a Delaware limited liability corporation, Defendants.

UNITED STATES OF AMERICA ex rel. SHARLENE RICE, Plaintiff, v. EVERCARE HOSPICE, INC., Defendant.

Civil Action No. 11-cv-00642-PAB-NYW

Civil Action No. 14-cv-01647-PAB

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

September 21, 2015

Judge Philip A. Brimmer

ORDER

This matter is before the Court on the Motion to Dismiss the Government's Complaint in Intervention [Docket No. 67] filed by defendant Evercare Hospice, Inc. ("Evercare"), and the Motion to Dismiss Relators' Second Amended Qui Tam Complaint [Docket No. 101] filed by defendants Evercare, Ovations, Inc. ("Ovations"), andOptumHealth Holdings, LLC ("Optum"). The Court has jurisdiction pursuant to 28 U.S.C. § 1331.

I. BACKGROUND¹

This action arises under the False Claims Act ("FCA"), 31 U.S.C. § 3729 et seq. Relators initiated a qui tam action on March 15, 2011, alleging that defendants knowingly submitted, or caused to be submitted, claims for Medicare hospice benefits for patients who were ineligible for such benefits. See Docket No. 1. On August 25, 2014, the United States (the "government") partially intervened in this action. See Docket No. 34.

A. The Medicare Hospice Benefit

The Department of Health and Human Services reimburses hospice providers for services provided to eligible beneficiaries on a per diem basis. See 79 Fed. Reg. 26538, 26543 (May 8, 2014). The Centers for Medicare and Medicaid Services ("CMS") are the agencies within the Department of Health and Human Services charged with the administration of Medicare. See Sw. Pharm. Solutions, Inc. v. Ctrs. for Medicare and Medicaid Servs., 718 F.3d 436, 439 (5th Cir. 2013). The Medicare program is divided into four major components - Parts A, B, C, and D. Part A, the relevant part for this action, provides for hospital insurance services, including inpatienthospital services, post-hospital extended care services, home health services, and hospice care. 42 U.S.C. § 1395d(a).

The Medicare statute provides that "no payment may be made . . . for any expenses incurred for items or services- . . . in the case of hospice care, which are not reasonable and necessary for the palliation or management of terminal illness[.]" 42 U.S.C. § 1395y(a)(1)(C). To be eligible for the hospice care benefit (the "hospice benefit"), an individual's attending physician and the hospice program's medical director must certify that the patient is terminally ill "based on the physician's or medical director's clinical judgment regarding the normal course of the individual's illness." 42 U.S.C. § 1395f(a)(7). The statute defines "terminally ill" as "a medical prognosis that the individual's life expectancy is 6 months or less." 42 U.S.C. § 1395x(dd)(3)(A). By electing to receive hospice benefits under Medicare, a patient waives all rights to Medicare payments for curative treatment of the underlying terminal illness. 42 U.S.C. § 1395d(d)(2)(A)(ii)(I). After the initial certification for a patient, Medicare provides up to two 90-day benefit periods, followed by an unlimited number of 60-day benefit period extensions. 42 U.S.C. § 1395d(a)(4). At the end of each benefit period, the medical director or physician must recertify that, based on his or her clinical judgment, the patient remains terminally ill. 42 U.S.C. §§ 1395f(a)(7)(A)(i)-(ii).

While the Medicare statute requires only that a physician "certify in writing" a patient's terminally ill prognosis, accompanying regulations impose additional requirements. The regulations provide, in relevant part, that [t]he certification must conform to the following requirements:

(1) The certification must specify that the individual's prognosis is for a life expectancy of 6 months or less if the terminal illness runs its normal course.

(2) Clinical information and other documentation that support the medical prognosis must accompany the certification and must be filed in the medical record with the written certification as set forth in paragraph (d)(2) of this section. Initially, the clinical information may be provided verbally, and must be documented in the medical record and included as part of the hospice's eligibility assessment.

42 C.F.R. § 418.22(b).

B. Alleged False Claims

1. The Government's Claims against Evercare

Evercare provides hospice care to Medicare participants. Docket No. 46 at 6, ¶ 10. At times relevant to this action, Evercare operated for-profit hospice programs in 13 states: Alabama, Arizona, California, Colorado, Georgia, Illinois, Ohio, Maryland, Massachusetts, Missouri, Pennsylvania, Texas, and Virginia. Id. at 5, ¶ 8. From at least January 1, 2007, Evercare has received hundreds of millions of dollars from Medicare for hospice benefits, including $91.5 million for hospice patients who received hospice care for longer than one year. Docket No. 46 at 34, ¶ 162.

The government alleges that Evercare violated the FCA by presenting or causing to be presented claims for hospice care for individuals for whom Evercare knew that its medical records did not support a prognosis of terminal illness. Docket No. 46 at 17-18, ¶ 67. According to the government, Evercare pressured its employees, including its physician Medical Directors, to meet patient "census" targets without regard to whether patients were eligible for hospice benefits. Id. at 20, ¶ 73. These census targets werehanded down by Evercare's corporate office, id. ¶ 74, and Evercare's director of finance and one Regional Director acknowledged that the census targets were unrealistic. Id. at 20-21, ¶ 78. Despite the acknowledged unrealistic census targets, Evercare's leadership pressured site leaders to meet them in a "hostile, aggressive, and intimidating" manner. Id. at 21, ¶ 79.

In addition to pressuring employees to meet census goals, Evercare incentivized employees to admit patients into hospice care. Docket No. 46 at 21, ¶ 80. Evercare employees were paid bonuses for each patient admitted into hospice care, id. ¶ 81, and clinical staff were paid additional compensation if their sites met Evercare's census targets. Id. ¶ 82. Evercare's policy of pressuring and incentivizing employees to admit patients resulted in multiple complaints that management was pressuring employees to admit and retain inappropriate patients. Id. at 22, ¶ 86. At one point, Beth Imlay, a Regional Director, stated that Evercare hospice should operate like a funnel: "easy to access end-of-life care (wide at the top) and hard to get out of (narrow end of funnel at the bottom)." Id. ¶ 87.

Evercare's general patient admission policy was as follows: when a patient was referred to an Evercare hospice, a nurse evaluated the patient to determine whether or not to admit him or her. Docket No. 46 at 22, ¶¶ 88(a)-(b). The nurse then orally communicated his or her findings to the Medical Director on duty, who issued a verbal order to admit the patient. Id. ¶ 88(c). Shortly after the order to admit the patient, a medical director (sometimes, but not always the same director who admitted the patient) signed the required certification of terminal illness. Id. at 23, ¶ 88(d). Thus,both the medical director who issued the order to admit a patient and (if different) the medical director who signed the certification of terminal illness often did so without seeing the patient and without evaluating medical records. Id. at 25-26, ¶¶ 108-111.

Evercare's nurses, often the only clinical staff to meet with patients, were crucial to Evercare's process of admitting patients into hospice care and certifying patients' terminally ill prognoses. Docket No. 46 at 23, ¶ 90. Yet many of these nurses were hired with little or no prior hospice experience. Id. ¶ 91. Notably, Evercare's proportion of patients with Alzheimer's, dementia, and debility was higher than the national average for hospices due to Evercare's heavy reliance on referrals from nursing homes. See id. at 19, ¶¶ 71-72. But Evercare did not provide its staff with comprehensive training on identification of hospice-eligible patients with conditions such as Alzheimer's disease, dementia, and debility, and the clinical progression of those illnesses. Id. at 23, ¶ 92. What training Evercare did provide focused on the process of entering information into patients' electronic medical records rather than identifying terminally ill patients. Id. at 24, ¶ 96. As a result, Evercare's physicians observed that nurses were not adequately trained to assess hospice eligibility. Id. ¶ 99. One medical director in Massachusetts stated that, when she joined Evercare, the "majority" of patients seen by the nurse who was responsible for training other new nurses were not eligible for hospice care. Id. ¶ 100.

Evercare also allegedly implemented an asymmetric process for reviewing the admission decisions of clinical staff. While decisions to admit a patient were "seldom, if ever, questioned," decisions that a patient was not terminally ill were "subject to intensescrutiny." Docket No. 46 at 25, ¶ 102. Most Evercare locations had a policy that employees could not deny admission without the approval of the site manager. Id. ¶ 103. Thus, when a nurse made a decision that a patient was not terminally ill, Evercare often sent a second nurse to admit the patient before a physician was called for an opinion about the patient's eligibility. Id. ¶¶ 104-05. This practice occurred more frequently when patient census was low. Id. ¶ 106.

Evercare's recertification decisions (that is, decisions to certify that a patient was eligible for additional benefit periods) were made at interdisciplinary group meetings. Docket No. 46 at 26, ¶ 113. At those meetings, each patient was discussed and a medical director would thereafter sign a certification of...