Wheeler v. Acadia Healthcare Co.

1

LISA WHEELER, Plaintiff-Relator, v. ACADIA HEALTHCARE COMPANY, INC.; CRC HEALTH, LLC; and ATS OF NORTH CAROLINA, LLC doing business as Mountain Health Solutions Asheville doing business as Asheville Comprehensive Treatment Center doing business as Mountain Health Solutions North Wilkesboro doing business as North Wilkesboro Comprehensive Treatment Center Defendants.

No. 1:21-cv-00241-MR-WCM

United States District Court, W.D. North Carolina, Asheville Division

July 27, 2023

MEMORANDUM AND RECOMMENDATION

W Carleton Metcalf United States Magistrate Judge

This matter is before the Court on a Motion to Dismiss filed by Defendants Acadia Healthcare Company Inc. (“Acadia”), ATS of North Carolina LLC (“ATS”), and CRC Health LLC (“CRC”) (Doc. 43). The Motion has been referred to the undersigned pursuant to 28 U.S.C. § 636 for the entry of a recommendation.

I. Relevant Procedural Background

On September 10, 2021, Lisa Wheeler (“Relator”), on behalf of the United States of America and the State of North Carolina filed her original Complaint, under seal, naming Acadia, ATS, and CRC (collectively, “Defendants”). Doc. 2.

On June 2, 2022, the United States of America and the State of North Carolina (the “Governments”) filed a Notice of Election to Decline Intervention and Motion to Unseal Complaint. Doc. 17.

On June 7, 2022, the Governments' motion was granted, and Relator was directed to serve the complaint on Defendants within ninety days, in the event she elected to proceed with this action. Doc. 18.^[1]

On August 1, 2022, Relator filed an Amended Complaint. Doc. 26.

On September 16, 2022, Defendants filed the Motion to Dismiss with a supporting memorandum. Docs. 43, 43-1.

Relator has responded in opposition and Defendants have replied. Docs. 45, 47. A hearing on the Motion was conducted on June 14, 2023, following which the Motion was taken under advisement. This Memorandum now follows.

II. Relator's Allegations

Relator seeks to recover, on behalf of the Governments and pursuant to the False Claims Act, 31 U.S.C. § 3729, et seq. (the “FCA”) and the North Carolina False Claims Act, N.C. G.S. § 1-607, et seq. (the “NC FCA”), “losses from allegedly false claims submitted to Medicare, Medicaid, TRICARE, the Department of Veterans Affairs, the North Carolina Department of Health and Human Services (‘NC DHHS'), and other state and federal healthcare programs (collectively, ‘Government Healthcare Programs')” as a result of Defendants' fraudulent conduct. Doc. 26 at 1-2. Specifically, the Amended Complaint alleges as follows:

A. The Defendants

Acadia provides addiction treatment and behavioral healthcare services throughout the United States. Id. at ¶ 83. Approximately sixty-five percent (65%) of Acadia's annual revenue comes from Medicare and Medicaid. Id. at ¶ 99.

Relator alleges, upon information and belief, that CRC is a wholly owned subsidiary of Acadia which provides substance abuse treatment services for Acadia through CRC's subsidiary companies. Id. at ¶¶ 107, 108.^[2] ATS, in turn, is a subsidiary of both Acadia and CRC and operates substance abuse treatment facilities in North Carolina, including in Asheville and North Wilkesboro. Id. at ¶¶ 121, 122.

B. Payment for Medication-Assisted Treatment

One of the primary services offered by Defendants for the treatment of Opioid Use Disorder is “Medication-Assisted Treatment” (“MAT”), which involves the use of medications in combination with counseling and therapy. Id. at ¶¶ 13, 14, 173, 174. MAT may be provided in a “variety of settings,” including Office Based Opioid Treatment (“OBOT”) or an Opioid Treatment Program (“OTP”); however, the drug Methadone may be legally prescribed and dispensed only when MAT is used in the context of an OTP. Id. at ¶¶ 15-16, 183.

OTPs must be certified by the Substance Abuse and Mental Health Services Administration (“SAMHSA”), be properly accredited, and must comply with state and federal opioid treatment regulations. Id. at ¶¶ 19-21 (citing 42 C.F.R. §§ 8.12(f)(1), (f)(4), (f)(5) (regarding the provision of adequate and appropriate medical, counseling, and other treatment services); 42 C.F.R. § 8.12(g) (requiring adequate record keeping)). Relator alleges that counseling and therapy is “[o]ne of the most important aspects of OTP” and that the Government Healthcare Programs pay for substance abuse counseling and therapy in both individual and group settings. Id. at ¶¶ 22-23.

1. By Medicare

An OTP may submit a bill for a “bundled payment,” rather than billing for individual services. Id. at ¶ 249. To do so, the OTP must furnish at least one “Opioid Use Disorder” treatment service. Id. at ¶¶ 250-251 (citing 42 C.F.R. § 410.67(b)(i)-(v)). These treatment services include medication and “individual and group therapy....” Id. at ¶ 250 (citing 42 C.F.R. § 410.67(b)(iv)); see also Id. at ¶ 244. Additionally, 42 C.F.R § 410.67(d)(2) outlines two types of bundled payments - payments based on weeks where a patient received medication and payments based on weeks where a patient did not receive medication. Id. at ¶ 252. Relator alleges that Defendants bill Medicare for OTP services using bundled billing codes. Id. at ¶ 261.

2. By Other Payors

Relator alleges that Defendants also bill the other Government Healthcare Programs for OTP services. See Id. at ¶¶ 292-305, 363-372 (generally outlining North Carolina's participation in Medicaid and that Defendants submitted claims for individuals who were eligible for both Medicare and Medicaid); ¶¶ 306-320, 373-379 (generally outlining the TRICARE medical benefits program available to active service members and others and alleging that Defendants “submit bills” to TRICARE); ¶¶ 321-330, 380-386 (generally outlining “Veterans Affairs Treatment of Opioid Use Disorder” and alleging that Defendants submit bills to the VA); ¶¶ 331-346, 387-393 (generally outlining grant funding provided through the 21^st Century Cures Act used to reimburse OTP services provided to individuals without private insurance or Medicaid and alleging that Defendants have submitted bills for services provided to patients who have received Cures Act grants).

C. Defendants' “Prior Fraud”

In April of 2014, the Department of Justice announced a settlement of FCA claims against CRC's predecessor, CRC Health Corp, related to allegations that it “knowingly submitted false claims by providing substandard treatment to adult and adolescent Medicaid patients suffering from alcohol and drug addiction at its facility in Burns, Tenn.” Id. at ¶¶ 398-402.^[3]

In May of 2019, the Department of Justice announced another settlement with CRC relating to the practice by Acadia's “treatment centers” of seeking reimbursement for moderate and high complexity laboratory drug testing which “they were not certified to perform, and did not, in fact, perform.” Id. at ¶ 407. As part of the 2019 settlement, Acadia and CRC entered into a Corporate Integrity Agreement (“CIA”) with the Office of Inspector General of the United States Department of Health and Human Services (“HHS-OIG” or “OIG”) to ensure compliance with Federal health care program requirements. See Id. at ¶¶ 408-421.^[4]

The CIA, required, among other things, that CRC provide training to CRC's medical staff regarding CIA requirements and federal healthcare program requirements, and that CRC develop a “disclosure program” to enable individuals to report potential violations of “criminal, civil, or administrative law.” Id. at ¶¶ 424, 429; see also Id. at ¶¶ 430-434 (regarding disclosure program). If, “after a reasonable opportunity to conduct an appropriate review or investigation of the allegations,” Defendants determined that there had been a “Reportable Event,” the CIA required Defendants to notify HHS-OIG. Id. at ¶ 435-437. The CIA defined a “Reportable Event” to include “(a) a substantial overpayment; [and] (b) a matter that a reasonable person would consider a probable violation of criminal, civil, or administrative laws applicable to any Federal health care program for which penalties or exclusion may be authorized....” Id. at ¶ 436. In addition to any remedies independently available under Federal or State law, the CIA provided for stipulated monetary penalties in the event of a breach. Id. at ¶¶ 441, 445. D. Defendants' North Carolina Facilities

Relator is a Physician Assistant and the former Assistant Medical Director of Defendants' “Asheville facility.” Id. at ¶ 39. While Relator was employed there, her job “was to handle physical assessments of patients and prescribe appropriate doses” of certain medications. Id. at ¶ 464. She was employed at the Asheville facility from January 2014 through December 2021. Id. at ¶¶ 77-80.

The Asheville facility provides behavioral health services through an OTP to patients, and “[t]herapy and/or counseling are integral parts of every patient's treatment plan.” Id. at ¶¶ 465-467. “Upon information and belief, established patients are supposed to receive counseling at least once per month at Defendants' clinics” and new patients are supposed to be seen twice a month for counseling. Id. at ¶¶ 480-481.

Since at least September 2020, “Defendants' clinic” in Asheville has been copying and reusing “pre-prepared” group therapy notes to falsely reflect group therapy sessions that never occurred. Id. at ¶¶ 24-32, 508-510; see also Id. at ¶¶ 484-489 (alleging various types of group therapy sessions never occurred, and that Relator's patients “told her that the Asheville facility was not providing group therapy”); ¶¶ 496-498 (regarding a group therapy session recorded on September 3, 2020 that did not actually occur); ¶¶ 501-506 (alleging that a March 3, 2021 group therapy note used the same language as the September 3, 2020 note and that the ...