United States v. Procarent, Inc.

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UNITED STATES OF AMERICA, ex rel. THERESA DUNN, APRILL KESTERSON, AND ANGELA FOLTZ, Plaintiffs, v. PROCARENT, INC., Defendant.

Civil Action No. 3:11-CV-704-CHB

United States District Court, W.D. Kentucky, Louisville

March 7, 2024

MEMORANDUM OPINION AND ORDER

CLARIA HORN BOOM, UNITED STATES DISTRICT COURT JUDGE

This matter is before the Court on the Motion to Dismiss the Third Amended Complaint (“Motion to Dismiss”), [R 119], filed by Defendant Procarent, Inc. (“Procarent”). Relators Theresa Dunn, Aprill Kesterson, and Angela Foltz (the “Relators”) filed a response, [R. 122], and Procarent replied, [R. 123]. The matter is therefore fully briefed and ripe for review. For the reasons set forth herein, the Court will grant in part and deny in part Procarent's Motion to Dismiss, [R 119].

I. BACKGROUND

A. Factual Background

Defendant Procarent provides ambulance services to individuals in Louisville, Kentucky; Owensboro, Kentucky; Indianapolis, Indiana; and St. Louis, Missouri. [R. 117, ¶ 38 (Third Amended Complaint)]. Included in these services are nonemergency medical transports. Id. ¶ 39. Unlike emergency transports, which provide emergency transportation for individuals requiring immediate and serious medical attention, nonemergency transports provide scheduled transportation to individuals who are unable to travel by other methods of transportation, often because they are bed-confined and/or their medical condition requires transportation by ambulance. Id. ¶ 14; see also 42 C.F.R. § 410.40(e) (defining medical necessity).

As part of its business, Procarent submits to Medicare claims seeking reimbursement for its nonemergency ambulance transport services. [R. 117, ¶ 39]. To receive payment, Procarent must comply with Medicare's regulations. Id. ¶¶ 25-34; see also 42 C.F.R. § 410.40(e). Three regulations are relevant to this action. First, the transport itself must be “medically necessary,” which occurs when “the beneficiary is bed-confined, and . . . other methods of transportation are contraindicated; or, if his or her medical condition, regardless of bed confinement, is such that transportation by ambulance is medically required.” 42 C.F.R. § 410.40(e)(1). Second, the “level of service provided” by the transport must be “medically necessary.” Id. The level of service varies from basic life support (“BLS”) to advanced life support (“ALS”) and other specialized levels. Id. § 410.40(c). The third regulation applies to nonemergency, scheduled, repetitive ambulance services. Before furnishing such services, the ambulance provider must “obtain[] a physician certification statement dated no earlier than 60 days before the date the service is furnished.” Id. § 410.40(e)(2)(i). A physician certification statement (“PCS”) is “a statement signed and dated by the beneficiary's attending physician which certifies that medical necessity provisions of [§ 410.40(e)(1)] are met.” Id. § 410.40(a).

Before a claim can be billed to Medicare, Procarent's billing department must review the claim. The Relators describe this process as follows. First, for each ambulance transport or “run,” the paramedics complete a “run report,” which includes, among other things, the date of the transport, the run number, the relevant times and locations, and a description of the patient's condition at the time of the transport. [R. 117, ¶ 41]. The ambulance providers then submit the run reports to Procarent's billing department “to be billed.” Id. ¶ 42. Once the run report is submitted to the billing department, “the transports would go into a queue for the coder.” Id. ¶ 43. The coder then reviews the run report to determine if the transport was medically necessary and what level of service (BLS or ALS) was provided. Id. ¶ 44. For nonemergent, repetitive transports, the coder also considers whether a PCS form, signed by a physician prior to the transport, is on file. Id. ¶ 56. The coder then “code[s] the claim” so it may be submitted to either Medicare or a third-party payer. Id. ¶ 45.

Prior to early 2011, Procarent's billing software allowed each coder to submit the claim to either Medicare or a third-party payer. Id. ¶ 63. However, at the beginning of 2011, Procarent implemented Zoll's RescueNet dispatch and billing software. Id. ¶ 61. Under this new billing software, the runs would be coded by the coders, then sent to a queue to be billed by Relator Kesterson, the Billing Manager. Id. ¶ 62. To do so, Kesterson would upload all of the queued transports into a program called ZirMed, which would then process and submit the claims to either Medicare or a third-party payer based on the uploaded information. Id.

Each of the Relators was employed by Procarent and was involved “in some way” with these billing procedures, and specifically, “with billing Medicare for nonemergency ambulance transports.” [R. 117, ¶ 47]. Relator Kesterson, for example, was the Billing Manager, as noted above. Id. ¶ 49. She was hired in 2010, “at a time when Procarent had a significant backlog of billing work.” Id. ¶ 56. In her role as Billing Manager, Kesterson was responsible for overseeing staff in the billing department, and her job duties included hiring, firing, training, and disciplining staff. Id. ¶ 50. Kesterson “was also responsible for claim submission to Medicare and other third-party payers” as well as “operational issues, documentation concerns, [and] PCS issues,” among other things. Id. Kesterson was “further responsible for outstanding accounts receivable for ambulance runs, meaning ambulance transports that took place but the claim had not been paid.” Id. ¶ 51.

Shortly after being hired into this position, Kesterson developed concerns about Procarent's billing procedures. She “learned that most if not all the coders she oversaw had no formal training on billing ambulance runs, including repetitive transports.” Id. ¶ 52. Kesterson also learned that Procarent had “never created any type of procedure manual for coders to use as guidance when assessing whether an ambulance transport should be billed.” Id. ¶ 54. Kesterson also discovered that “Procarent had a long-standing practice of not collecting [PCS forms] prior to transporting patients,” as a result of the ambulance sites failing to obtain the form prior to the ambulance run. Id. ¶¶ 57-58. Thus, the billing department staff would be responsible for obtaining the post-transport PCS forms. Id. ¶ 59. Kesterson initially believed this practice was acceptable, so long as the PCS form was obtained within sixty days of the transport. Id. ¶ 60; see also 42 C.F.R. § 410.40(e)(2)(i) (explaining that the ambulance provider must “obtain[] a physician certification statement dated no earlier than 60 days before the date the service is furnished”).

At the beginning of 2011, Relator Dunn was hired by Procarent as a temporary employee doing coding. Id. ¶ 64. At the time, “Procarent had no formal training process.” Id. ¶ 65. Instead, Dunn was instructed to use the ambulance run sheets associated with a transport to determine if transportation had been medically necessary. Id. ¶ 65. If she determined that a transport was medically necessary, she would enter the corresponding billing code into the billing software and release the claim to be billed. Id. ¶ 67. At that point, the claim sat in a queue, waiting to be billed by the Billing Manager, Kesterson. Id. ¶ 62. Kesterson would eventually upload the claims in the queue into the ZirMed program, as noted above, which would then “process and submit the claims based on the information uploaded.” Id.

In March 2011, Kesterson attended a seminar on billing ambulance transports to Medicare. Id. ¶ 69. Through this training, she “learned that Procarent was improperly billing Medicare for repetitive transports by submitting claims when the company had not obtained a PCS prior to transport, or the PCS was invalid because it did not comply with Medicare's regulatory requirements.” Id. ¶ 70. Kesterson “further learned that transports she thought to be medically necessary were actually not because patients could travel by means other than ambulance.” Id. The Relators allege that, despite these deficiencies, “Procarent submitted these claims to Medicare for reimbursement.” Id. ¶ 71.

In April 2011, Dunn was promoted to Billing Supervisor. Id. ¶ 72. Later that month, Procarent sent Dunn to be trained as a Certified Ambulance Coder. Id. ¶ 76. That training focused on “ambulance billing, coding ambulance runs, and compliance requirements for billing ambulance runs to Medicare.” Id. ¶ 77.

At some point in April 2011, Dunn and Kesterson identified approximately 2,700 transports that could not be billed to Medicare because the PCS forms for these transports were either missing or were otherwise invalid for various reasons (e.g., missing a physician's signature or failing to state that the patient was bed-confined). Id. ¶¶ 80-81. The Relators allege that some of these forms were also fraudulently altered or contained fraudulent signatures. Id. ¶ 81. Dunn and Kesterson also discovered that some of the ambulance run sheets failed to indicate that an ambulance transport was medically necessary. Id. ¶ 85. Dunn and Kesterson discovered these various deficiencies when they reviewed the transports' supporting documentation (PCS forms and run reports) in the RescueNet program. Id. ¶¶ 83-84. These 2,700 transports totaled around $1,300,000 that could not be billed to Medicare. Id. ¶ 82.

After discovering the 2,700 unbillable claims, Dunn and Kesterson began reviewing earlier claims that had been billed to Medicare “in order to see how far back this practice went.” Id. ¶ 86. The pair discovered “prior excessive and fraudulent billing to Medicare dating back almost ten years.” Id. ¶ 87. This...