United States ex rel. Forunatè v. Ndutime Youth & Family Servs.

UNITED STATES OF AMERICA, ex rel. SETHINA FORUNATÈ andMICHAEL HOCAKDAY,andCOMMONWEALTH OF VIRGINIA ex rel. SETHINA FORTUNATÈ andMICHAEL HOCKADAY, Plaintiffs, v. NDUTIME YOUTH & FAMILY SERVIES, INC., et al., Defendants.

Civil Action No. 3:16cv653

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA Richmond Division

September 11, 2020

MEMORANDUM OPINION

Plaintiffs Sethina Fortunatè and Michael Hockaday allege that their former employer, NDUTIME Youth and Family Services ("NDUTIME"), and Teshana D. Gipson, (collectively, "Defendants"), presented to the government false or fraudulent claims for payment.¹ (Fortunatè Compl., 3:16cv653, ECF No. 1; Hockaday Compl., 3:16cv767, ECF No. 5.) The United States and the Commonwealth of Virginia (collectively, the "Government") intervened in this qui tam action and filed a joint complaint in intervention.² (Joint Compl., ECF No. 25.) This mattercomes before the Court on three motions brought pursuant to Federal Rule of Civil Procedure 12(b)(6):³

(1) Defendants' Motion to Dismiss the Joint Complaint in Intervention (the "Motion to Dismiss Joint Complaint"), (ECF No. 51);

(2) Defendants' Motion to Dismiss Relator-Plaintiff Michael Hockaday's Complaint (the "Motion to Dismiss Hockaday Complaint"), (ECF No. 53);⁴ and,

(3) Defendants' Motion to Dismiss Relator-Plaintiff Sethina Fortunatè's Complaint (the "Motion to Dismiss Fortunatè Complaint"), (ECF No. 55).

The Government, Fortunatè, and Hockaday responded to each of the Motions to Dismiss, (ECF Nos. 57-59), and the Defendants replied, (ECF Nos. 60-62).

These matters are ripe for adjudication. The Court dispenses with oral argument because the materials before it adequately present the facts and legal contentions, and argument would not aid the decisional process. The Court exercises jurisdiction pursuant to 28 U.S.C. § 1331.⁵ For the reasons that follow, the Court will deny the Motion to Dismiss Joint Complaint, deny the Motion to Dismiss Fortunatè Complaint, and deny in part and grant in part the Motion to Dismiss Hockaday Complaint.

I. Factual and Procedural Background

The Government, Fortunatè, and Hockaday assert claims under the False Claims Act ("FCA"),⁶ Virginia Fraud Against Taxpayers Act ("VFATA"),⁷ and various state law theories of liability, alleging that Defendants presented fraudulent claims to the Government and retaliated against employees who expressed reservations about Defendants' billing practices.

This action proceeds with three Complaints and three corresponding Motions to Dismiss.⁸ Because the Joint Complaint in Intervention supersedes certain claims that the individual plaintiffs Sethina Fortunatè and Michael Hockaday alleged, the Court recounts the facts relevant to the Government's allegations in the Joint Complaint before turning to the claims raised by Fortunatè and Hockaday.⁹

A. Factual Background as to the Government's Claims Raised in the Joint Complaint in Intervention¹⁰

The Government alleges that from January 1, 2013 through June 30, 2017, Defendants submitted or caused to be submitted false and fraudulent claims to the Virginia Department of Medical Assistance Services ("DMAS"). (Joint Compl. ¶ 43, ECF No. 25.) The Government asserts that during this time, "Defendants knowingly billed DMAS for approximately one thousand six hundred and ninety-nine (1,699) claims for services for which they did not provide and/or did not support with legitimate documentation." (Id. ¶ 46.) The Government avers "[t]hese fraudulent claims represent approximately thirty percent (30%) of NDUTIME's paid medical crisis services claims during that time period." (Id.) The allegedly false or fraudulent claims are described in more detail below.

1. Virginia Medicaid Provider Requirements

The Virginia Medicaid Program is a jointly funded federal and state program that provides health care coverage to eligible individuals. (Joint Compl. ¶ 18 (citing 42 U.S.C. § 1396a(a)(10)(A)(i).) DMAS operates as the only state agency to supervise the Medicaid Program on a statewide basis and does so in accordance with the federal regulations set forth in 42 C.F.R. § 431.50. (Id. ¶ 20 (citing 12 Va. Admin. Code §§ 3-10-10, 3-10-30).)

"NDUTIME has been a Virginia Medicaid provider since approximately September 1, 2006." (Id. ¶ 25.) To enroll in the Virginia Medicaid Program, a provider such as NDUTIME must first execute an agreement with DMAS. (Id. ¶ 24.) That agreement directs the provider to "adhere to the policies and regulations contained in the manuals pertaining to the specific services provided, including documentation requirements, necessary qualifications for staff, and rules for billing." (Id.) A provider also "agrees to comply with all applicable state and federal laws." (Id.)

NDUTIME bills DMAS for "Community Mental Health Rehabilitative Services." (Id. ¶ 11.) As a Community Mental Health Rehabilitative Services provider, NDUTIME must "document services through daily progress notes and times spent in the delivery of services." (Id. ¶ 27.) (citation omitted). In accordance with the Community Mental Health Rehabilitative Services Provider Manual (the "Manual"), "[p]rogress notes must include individual specific documentation that contains the unique differences particular to the recipient's circumstances, treatment, and progress." (Id. ¶ 28.) (citation omitted). The Manual requires providers and their staff to sign and contemporaneously date the progress notes. (Id. ¶ 28.) The progress notes "must corroborate the time spent and specifically document the service the provider rendered to support each of the units the provider billed." (Id. ¶ 29.) While providers must retain billing documentation for five years, such as progress notes, DMAS does not require providers to submit progress notes when submitting each claim. (Id. ¶ 30.)

2. The Joint Complaint Describes Four Types of Mental Health Rehabilitative Services Relevant to the Alleged False or Fraudulent Claims

As a Community Mental Health Rehabilitative Services Provider, NDUTIME: (1) conducts service specific provider intakes; and provides (2) crisis intervention services;

(3) crisis stabilization services; and, (4) therapeutic day treatment services. (Id. ¶¶ 25-26, 33.) The Court addresses these four different services.

Regarding service specific provider intakes, Virginia Medicaid regulations require licensed mental health professionals, licensed mental health professional types, or a certified pre-screener to conduct a service specific provider intake in a face-to-face setting. (Id. ¶ 36.) The service specific provider intake gathers pertinent information about an individual, demonstrates the recipient's medical need, and defines the treatment plan. (Id. ¶¶ 37-38.)

Regarding crisis intervention services, "DMAS designed [these] services to provide immediate mental health care, available twenty-four (24) hours a day, seven (7) days per week, to assist recipients experiencing acute psychiatric dysfunctions that require immediate clinical attention." (Id. ¶ 39.) Crisis intervention services may include "office visits, home visits, preadmission screenings, telephone contacts, and other recipient-related activities needed to prevent the recipient from being hospitalized." (Id.) One billing unit of crisis intervention services equals fifteen minutes. (Id.)

In contrast to intervention services, "DMAS designed [crisis stabilization] services to stabilize the recipient and strengthen the recipient's current living situation so that the recipient remains in the community during and beyond the crisis period." (Id. ¶ 40.) Crisis stabilization services "provide temporary, intensive services that avert emergency, psychiatric hospitalization, or institutional placement of recipients who are experiencing serious psychiatric or behavioral problems that jeopardize their current community living situation." (Id.) One billing unit of crisis stabilization services equals one hour. (Id.)

Regarding therapeutic day treatment services, such services are designed "to assist youth and adolescents who are at risk of being removed from their homes due to mental health,behavioral, or emotional issues resulting in significant functional impairment in major life activities." (Id. ¶ 42.) Therapeutic day treatment providers must bill such services in units. (Id.) Providers must bill one unit for 2 to 2.99 hours of therapeutic day treatment services rendered, two units for 3 to 4.99 hours of services rendered, and three units for more than five hours of services rendered. (Id.)

3. In 2015, Virginia Revised its Medicaid Regulations Concerning Virginia Medicaid Mental Health Rehabilitative Services Providers and Limited the Individuals Authorized to Provide Certain Services

In 2015, DMAS implemented changes to the Community Mental Health Rehabilitative Services Provider rules and regulations. (Id. ¶ 33.) Before January 30, 2015, DMAS allowed qualified mental health professionals who did not hold licenses to conduct service specific provider intakes and to provide crisis intervention services. (Id.) On January 30, 2015, DMAS changed its regulations to require that licensed mental health professionals and licensed mental heath professional types provide crisis intervention services. (Id.) Ten weeks later, on March 16, 2015, DMAS reiterated these changes to Community Mental Health Rehabilitative Services providers through a "Medicaid Memo." (Id.) Roughly three months later, on June 29, 2015, DMAS issued updated provider manual chapters that reflected the regulatory changes. (Id. ¶ 36 n.4)

The Government avers that Defendants had knowledge of these regulatory changes before they took effect on January 30, 2015, but Defendants did not comply with the regulations. (Id. ¶ 34.) On January 29, 2015, the day before the regulatory changes became effective, NDUTIME's Clinical Director, Chatrice Thorne, commented on the Virginia Regulatory Town Hall website about the proposed rule change, which addressed changes...