United States ex rel. Gugenheim v. Meridian Senior Living, LLC

36 F.4th 173

UNITED STATES EX REL. Stephen GUGENHEIM; State of North Carolina ex rel. Stephen Gugenheim, Plaintiffs – Appellants,

v.MERIDIAN SENIOR LIVING, LLC ; Meridian Senior Living Services, LLC; Charles E. Trefzger, Jr.; WP-Albemarle Health Holdings, LLC; Burlington Al Holdings I, LLC ; Taylorsville House, LLC ; WP-Newland Health Holdings, LLC ; WP-Windsor Health Holdings, LLC; Leland House, LLC; WP-Yanceyville Health Holdings, LLC; Hickory Health Investors, LLC; WP-Hayesville Health Holdings, LLC; Chi Holdings, LLC; Danby House, LLC; WP-Winston Salem Health Holdings, LLC; Country Time Inn, LLC; WP-Gastonia Health Holdings, LLC; Gates House, LLC; Greensboro Al Holdings, LLC; Greensboro Opco Holdings, LLC; Greensboro Health Holdings, LLC; Fuquay-Varina Health Holdings, LLC; Haywood Health Holdings, LLC; Ahoskie House, LLC ; Skyland House, LLC; Clayton Health Holdings, LLC; Macon Health Holdings, LLC ; Mint Hill Health Holdings, LLC ; WP-Charlotte Health Holdings, LLC ; Charlotte Health Holdings, LLC; Mitchell House One, LLC ; West End Holdings, LLC; Castle Hayne Al Holdings, LLC; New Hanover House, LLC; RVHI, LLC; RV Assisted Living, LLC; Shi-Orange, LLC ; Grantsboro Opco Holdings, LLC; Burgaw Health Holdings; WP-Clinton Health Holdings, LLC; Rose Tara Holdings, LLC; WP-Brevard Health Holdings, LLC; Cary Health Holdings, LLC; WP-Wendell Health, LLC; WP-Raleigh Health, LLC; Zhi, LLC; Wilson House, LLC; WP-Burnsville Health Holdings, LLC; Affinity Living Group, LLC, Defendants – Appellees.

No. 20-1583

United States Court of Appeals, Fourth Circuit.

Argued: May 5, 2021

Decided: May 26, 2022

ARGUED: Mark Russell Sigmon, SIGMON LAW, PLLC, Raleigh, North Carolina, for Appellants. Jimmie Watkins Phillips, Jr., BROOKS PIERCE, LLP, Greensboro, North Carolina, for Appellees. ON BRIEF: Matthew E. Lee, Jeremy R. Williams, WHITFIELD BRYSON LLP, Raleigh, North Carolina; Clifford C. Marshall, Jr., MARSHALL, ROTH & GREGORY, PC, Asheville, North Carolina, for Appellants. Jennifer K. Van Zant, Donald J. O'Brien, III, Kimberly M. Marston, BROOKS PIERCE, LLP, Greensboro, North Carolina, for Appellees.

Before WILKINSON and RUSHING, Circuit Judges, and TRAXLER, Senior Circuit Judge.

Affirmed by published opinion. Judge Rushing wrote the majority opinion, in which Judge Wilkinson joined. Senior Judge Traxler wrote a dissenting opinion.

RUSHING, Circuit Judge:

Stephen Gugenheim, a North Carolina attorney, believes he uncovered fraud perpetrated by forty-five adult care homes upon the United States and the State of North Carolina. According to Gugenheim, Defendants violated a North Carolina Medicaid billing regulation, and did so knowingly, as evidenced by the clarity of the regulation and by the fact Defendants did not ask the regulators for advice. Because we conclude no reasonable juror could find Defendants acted with the requisite scienter on this evidence, we affirm the district court's decision granting Defendants summary judgment on Gugenheim's claims.

I.

A.

Medicaid is a "joint state-federal program in which healthcare providers serve poor or disabled patients and submit claims for government reimbursement." Universal Health Servs., Inc. v. United States ex rel. Escobar , 579 U.S. 176, 183, 136 S.Ct. 1989, 195 L.Ed.2d 348 (2016).

One type of expense eligible for reimbursement under North Carolina's Medicaid plan is personal care services (PCS), which assist disabled adults with the activities of daily living, whether they reside at home or in an adult care home. See generally Pashby v. Delia , 709 F.3d 307, 313–314 (4th Cir. 2013). The North Carolina Department of Health and Human Services, Division of Health Benefits (NC Medicaid) oversees the State's program.

Before 2013, the provision of in-home PCS was governed by North Carolina's Clinical Coverage Policy 3C. No parallel policy existed for PCS provided in adult care homes. In response to a federal mandate that eligibility requirements for PCS be comparable regardless of the setting in which services are delivered, North Carolina implemented its Clinical Coverage Policy 3L on January 1, 2013. Policy 3L consolidated PCS benefits into one program that governs both in-home providers and adult care homes.

To determine eligibility for PCS under Policy 3L, the Division of Medical Assistance (DMA), through a contractor, conducts annual assessments of potential beneficiaries by evaluating tasks with which they need assistance, their required assistance level, and the number of days per week they need that assistance. It then rates potential beneficiaries' capacity to perform each so-called "activity of daily living"—bathing, dressing, mobility, toileting, and eating—on a scale from "0 – Totally able" to "4 – Cannot do at all (full dependence)." J.A. 5812–5813. Each activity encompasses subtasks that compose the category; for example, a beneficiary who needs assistance with bathing might need help only with certain tasks within that category, such as "[n]ail care" or "[s]hampoo/hair care." J.A. 5414.

After the assessment is performed and the eligibility requirements satisfied, a beneficiary's monthly authorized PCS hours are calculated using an algorithm based on Policy 3L's service level determination chart. The chart identifies the authorized PCS hours for each activity of daily living depending on whether the beneficiary needs limited assistance (defined as "able to self-perform more than 50 percent of activity"), requires extensive assistance (defined as "able to self-perform less than 50 percent of activity"), or displays full dependence (defined as "unable to perform any of the activity and ... totally dependent on another to perform all of the activity"). J.A. 5813, 5837. For example, the chart provides that 35 minutes per day are authorized for a beneficiary who requires limited assistance with bathing, 50 minutes per day for a beneficiary who needs extensive assistance with bathing, and 60 minutes per day for bathing a beneficiary who is fully dependent. Additional time is authorized for medication assistance and exacerbating conditions. Policy 3L originally capped authorized PCS hours at 80 hours per month. But as of October 2013, beneficiaries who require increased supervision, such as those with a memory impairment, can receive up to 50 additional PCS hours per month, referred to as "safeguard hours."

Once a beneficiary is approved for a certain number of PCS hours per month, the provider develops a service plan designed to show a typical week of aide service. The service plan includes each activity of daily living with which the beneficiary needs assistance, the beneficiary's assistance level, subtasks within each activity category, and the required frequency of performance. Providers use the QiRePort template provided by the State, which divides the beneficiary's monthly authorized hours equally into hours per week and day to display the average hours per day based on the monthly PCS authorization.

"Unlike [for] in-home providers, where visits need to be scheduled," QiRePort assumes that adult care homes "have the responsibility to provide aide services, 24/7," therefore the daily target hours will fully account for the monthly PCS authorization. J.A. 5671. The template then displays the individual aide tasks required for the beneficiary, and the adult care home identifies which days of the week those tasks will be performed.

Policy 3L requires PCS providers to document the performance of all PCS tasks listed in a beneficiary's service plan at the indicated frequency. Documentation must include the date of service, the tasks performed, and the name of the aide providing the service. If a scheduled task is not performed for any reason, that deviation must also be documented. It is undisputed, however, that a provider need not document the time spent on each task.

Attachment A to Policy 3L addresses claims and billing. It instructs providers to comply with the "NCTracks Provider Claims and Billing Assistance Guide , Medicaid bulletins, fee schedules, DMA's clinical coverage policies and any other relevant documents for specific coverage and reimbursement for Medicaid and NCHC." J.A. 5839. Under the heading "Billing Units," Attachment A advises providers to "report the appropriate code(s) used which determines the billing unit(s)." J.A. 5840; see J.A. 5839 (explaining that a billing code "accurately and completely describes the procedure, product or service provided"). It also carries forward two statements from Policy 3C, which had applied only to in-home PCS providers: "1 unit of service = 15 minutes" and "PCS follows wage and hour requirements for rounding billing units (7/8 rule)." J.A. 5840. Policy 3L does not retain Policy 3C's section describing "[w]hat [m]ay be [b]illed," which authorized in-home PCS providers to bill for time spent in the beneficiary's home "providing the tasks during the times specified" in the service plan, nor does it include any comparable guidance. J.A. 729.

B.

Defendants are forty-five North Carolina adult care homes; Affinity Living Group LLC, which manages those homes; and Charles E. Trefzger, Jr., Affinity's CEO. Defendants' facilities specialize in providing around-the-clock care to high-needs elderly individuals. Many of Defendants' residents suffer from cognitive or memory impairments and so reside in special care units with greater security and supervision. The vast majority of those residents rarely leave Affinity's facilities other than for doctor's visits or scheduled appointments. Even while outside the facilities, those residents commonly need assistance from a facility employee with tasks like walking from the vehicle to the doctor's office, toileting, eating, or general supervision "to ensure the resident[s] [do] not become disoriented and harm themselves." J.A. 6260.

Many of the residents of Defendants' facilities receive Medicaid benefits. Defendants' employees document in a computerized log the PCS tasks they perform for each...