United States ex rel. Martino-Fleming v. S. Bay Mental Health Ctrs.

540 F.Supp.3d 103

UNITED STATES of America EX REL. Christine MARTINO-FLEMING, Relator and Commonwealth of Massachusetts ex rel. Christine Martino-Fleming, Relator

v.SOUTH BAY MENTAL HEALTH CENTERS, Community Intervention Services, Inc., H.I.G. Growth Partners, LLC, H.I.G. Capital, LLC, Peter J. Scanlon, and Kevin P. Sheehan, Defendants.

Civil Action No. 15-cv-13065-PBS

United States District Court, D. Massachusetts.

Filed May 19, 2021

Gregg D. Shapiro, Jessica J. Weber, Kriss Basil, United States Attorney's Office, Boston, MA, for United States of America.

Gregory H. Matthews, Kevin K. Lownds, Nita K. Klunder, Robyn P. Dollar, Office of the Attorney General Commonwealth of Massachusetts, Boston, MA, for State of Massachusetts.

Andrea L. Fitzgerald, Pro Hac Vice, Christopher S. Hamilton, Pro Hac Vice, Ray T. Khirallah, Jr., Pro Hac Vice, Hamilton Wingo, LLP, Caitlyn E. Silhan, Pro Hac Vice, Charles S. Siegel, Pro Hac Vice, Taryn Ourso, Pro Hac Vice, Waters & Kraus, LLP, Dallas, TX, Jeffrey A. Newman, Law Office of Jeffrey A. Newman & Associates, Marbehead, MA, for Christine Martino-Fleming.

Mara Theophila, Pro Hac Vice, Laura McLane, Mark W. Pearlstein, Shamis N. Beckley, McDermott, Will & Emery LLP, Boston, MA, for Defendants South Bay Mental Health Centers, Community Intervention Services, Inc., H.I.G. Growth Partners, H.I.G. Capital, LLC.

Michael J. Connolly, Tara A. Singh, Kelley A. Jordan-Price, Laura B. Angelini, Hinckley, Allen and Snyder, LLP, Boston, MA, for Defendant Peter J. Scanlon.

Anne E. Railton, Pro Hac Vice, Goodwin Procter LLP, New York, NY, Joseph F. Savage, Jr., Timothy Kistner, Tucker David DeVoe, Yvonne W. Chan, Goodwin Procter, LLP, Boston, MA, for Defendant Kevin P. Sheehan.

Mara Theophila, Pro Hac Vice, Laura McLane, Shamis N. Beckley, McDermott, Will & Emery LLP, Boston, MA, for Defendant Community Intervention Services Holdings, Inc.

MEMORANDUM AND ORDER

Saris, D.J.

INTRODUCTION

This qui tam case involves allegations of false claims for reimbursement for services provided by unlicensed and improperly supervised social workers and counselors at South Bay Mental Health Center, Inc. ("South Bay"). The Commonwealth of Massachusetts and Relator Christine Martino-Fleming bring this action against South Bay; Community Intervention Services; Community Intervention Services Holdings, Inc.¹ (collectively "C.I.S."); H.I.G. Growth Partners, LLC; H.I.G. Capital, LLC (collectively "H.I.G."); Dr. Peter Scanlon ("Scanlon"); and Kevin P. Sheehan ("Sheehan"). The Plaintiffs specifically allege that the Defendants caused South Bay to submit false claims for reimbursement to the Massachusetts Medicaid agency in violation of the federal False Claims Act, 31 U.S.C. §§ 3729 et seq., and the Massachusetts False Claims Act, Mass. Gen. Laws ch. 12, §§ 5 et seq. The parties have filed cross-motions for summary judgment.

The Plaintiffs seek partial summary judgment with respect to the falsity and materiality elements of their "false-presentment" claims under the federal and state False Claims Acts against all Defendants. They further seek summary judgment with respect to some of the affirmative defenses.

The Defendants seek summary judgment on all claims on multiple grounds. The cross-cutting dispute applicable to all Defendants is whether the submitted claims are false under the state regulations and whether any violations are material. The Defendants also argue that no reasonable juror could find scienter or causation. Finally, they seek summary judgment on the Plaintiffs’ unjust enrichment claims against H.I.G., Scanlon, and Sheehan.²

After the hearing and review of the extensive briefing, the Court ALLOWS in part and DENIES in part the Plaintiffs’ partial motion for summary judgment (Dkt. 276) and ALLOWS in part and DENIES in part the Defendants’ cross-motions (Dkt. 281; Dkt. 284; Dkt. 289).

BACKGROUND

Except where noted, the following facts are undisputed.

I. South Bay

South Bay, a for-profit mental health center, was founded by Scanlon, a licensed psychologist, in 1986. South Bay operates at least 17 facilities in Massachusetts.³ It is composed of one parent facility in Brockton, Massachusetts, as well as several satellite programs.

Most South Bay clients are members of the Massachusetts state Medicaid program, MassHealth. Payment for services received by MassHealth members comes from a variety of sources. MassHealth directly reimburses South Bay for the cost of some MassHealth members’ services. Other members receive coverage through the Massachusetts Behavioral Health Partnership (MBHP), which contracts with MassHealth to provide managed care services. The remaining MassHealth members’ care is administered by managed care organizations (MCOs) that contract with MassHealth. MassHealth is ultimately responsible for payment for all services that its members receive, whether the coverage is administered by the agency or through MBHP or the MCOs.

II. South Bay's Ownership and Leadership

H.I.G. Capital is a private equity firm, and H.I.G. Growth Partners is a subsidiary of H.I.G. Capital. C.I.S., in turn, was formed and incorporated by H.I.G. Growth Partners, H.I.G. Capital, and Sheehan. H.I.G. Growth Partners was the majority shareholder of C.I.S. Holdings, which indirectly owns C.I.S. During the time in question, most seats of the C.I.S. Board of Directors were held by employees of H.I.G., including Board members Nicholas Scola, Steven Loose, and Eric Tencer. The remaining two seats were held by Sheehan and Scanlon.

Scanlon acted as South Bay's sole officer and director until 2012, when C.I.S. and C.I.S. Holdings purchased South Bay from him. After the sale, Scanlon became the Chief Clinical Officer of C.I.S. and joined the C.I.S. Board of Directors. Sheehan was the Chief Executive Officer of South Bay and C.I.S. from April 2012 to November 2016, after which time he remained on the Board of Directors of C.I.S. Mike Pelletier became the president and Chief Operating Officer of South Bay in 2014.

III. Due Diligence Surrounding the Acquisition

At the beginning of 2012, prior to the acquisition of South Bay, a third-party clinical expert conducted a due-diligence report on the mental health center, which was sent to H.I.G. and Sheehan. The report concluded that "[n]o serious survey compliance issues, complaints or patient incidents were identified." Dkt. 201-27 at 7. However, the report also highlighted "[e]xamples of documentation issues" and "poor quality of supervision" in its findings. Id. at 3. It also recommended further training in the areas of "clinical documentation of patient assessments and treatment" and "clinical supervision." Id. A Stock Purchase Agreement provided by Scanlon as part of the sale of South Bay stated that neither South Bay nor its officers, managers, personnel, or health care providers were in violation of any health care laws.

South Bay's Director of Outpatient Mental Health, Jennifer Gearhart, recalled having discussions with Scanlon about supervision at South Bay during the due-diligence period. Gearhart testified that, after the acquisition, "the pressure to grow was like astronomical compared to what it had been." Dkt. 295-28 at 8. She explained, specifically, that she had observed that South Bay needed more licensed supervisors, noting that "[i]t was really volume and, you know, as you increase volume, you need to increase the number of supervisors that you're having that are licensed." Id. at 5–6.

IV. Concerns about Supervision and Hiring Practices at South Bay

The Relator, Christine Martino-Fleming, was employed by South Bay from June 2008 to September 2013, after which she was transferred to C.I.S. She was the Coordinator of Staff Training and Development at South Bay and at C.I.S., a position that required her to visit South Bay facilities to train staff. In doing so, she claimed to have observed that South Bay was providing inadequate supervision to some of its clinicians.

The Relator asserts that she voiced her concerns about supervision and hiring practices at South Bay to Scanlon, Sheehan, and others in early 2012. She specifically asserts that she raised questions about unlicensed individuals receiving supervision from unlicensed clinicians, a practice which she believed to be in violation of the MassHealth regulations. For instance, the Relator asserts that she and Scanlon had "at least four or five conversations that were really substantive about" supervision issues at South Bay and that she told Scanlon that South Bay was acting "against regulations." Dkt. 321-2 at 40. The Relator described Scanlon's response to her concerns as apathetic, explaining that Scanlon "often did not respond verbally, and he would just go on to a different topic or just not answer my question or concern." Dkt. 321-2 at 41. She also recalled frequently talking to Sheehan on the phone and in-person about her concerns regarding unlicensed supervision at South Bay. She further claims that she discussed the issue with Sara Hart, South Bay's Compliance Officer.

The Defendants dispute that the Relator ever voiced concerns about South Bay's compliance with the MassHealth regulations to Scanlon, Sheehan, or anyone else.

At the same time, the Relator also claims to have observed that South Bay hired clinicians who did not have what she considered mental health counseling degrees. These clinicians instead had degrees in fields such as school counseling, forensic psychology, and pastoral counseling. The Relator asserts that she raised concerns about these clinicians’ qualifications with Scanlon. The Defendants once again, however, dispute that the Relator voiced concerns about regulatory noncompliance with Scanlon.

Other former employees also testified that they had discussed supervision issues with South Bay leadership. Gearhart, for instance, stated that she had brought up concerns about "how South Bay was going to ensure compliance with supervision requirements" with Kevin Sheehan at least 10 times from 2012 to 20...