Kaiser Permanente kidney patients
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June 8, 2006
Medicare warns Kaiser on
kidney care
Coverage at S.F. center is at risk
unless compliance with federal rules is
proved.
By Dorsey Griffith
Sacramento Bee
The Medicare program has
threatened to halt coverage for all
end-stage kidney care at Kaiser
Permanente’s San Francisco
transplant center unless the health
plan can convince regulators it has
complied with federal regulations.
The Department of Health and Human
Services, which administers Medicare,
told Kaiser Foundation Health Plan
officials that they have until June 15 to
submit a corrective action plan or risk
losing coverage of kidney dialysis,
transplant and other renal failure
services.
“There are a lot of services someone
with kidney failure requires,” said Jeff
Flick, regional administrator for the
Centers for Medicare and Medicaid
Services. “Sometimes they include a
transplant. Otherwise, they need
dialysis or related care. The funding for
all of that would stop.”
If Kaiser fails to demonstrate that it has
fixed the problems, Medicare coverage
will end Aug. 12, a move that would
force more than 1,000 kidney patients
who get services at the San Francisco
facility to seek Medicare-covered
treatment elsewhere.
“Obviously, we take this matter very
seriously,” said Matthew Schiffgens,
Kaiser’s issues management director.
“We are going to take all necessary
corrective actions to ensure that the
San Francisco transplant program is in
compliance with Medicare regulations
and that we can continue to care for our
patients during this transition period.”
The notice does not affect Medicare
coverage of other Kaiser Permanente
care, or the kidney speciality care
offered at other Northern California
Kaiser Permanente facilities.
The Medicare letter, which arrived one
month after an unannounced, five-day
federal inspection of the program, is
the latest in a series of regulatory
actions taken in recent weeks in
response to administrative bungling of
Kaiser’s 2-year-old transplant program.
News reports in early May detailed the
health plan’s missteps in transferring
hundreds of members from university
medical center transplant waiting lists
to their own, newly developed program
in San Francisco.
As a result of a state order and several
lawsuits, Kaiser then opted to
indefinitely suspend operations and
transfer its patients back to the
university centers.
Kaiser officials have said the transplant
center will remain operational until all
of its patients have successfully been
transferred to one of the university
centers. Doctors there have continued
to see kidney disease patients and
have performed several transplants as
organs have become available.
Sharon Inokuchi, Medical Director
Kaiser Transplant Center Specifically,
Medicare cited three areas where the
Kaiser program is out of compliance:
“governing body and management,”
“patients rights and responsibilities”
and “director of a renal transplantation
center.”
Flick would not elaborate on the areas
of concern, but said the health plan
also received a 50-page report
detailing the federal government’s
correction demands.
Schiffgens, of Kaiser, said the
concerns stemmed from administrative
problems, as well as difficulties
communicating with patients.
Many patients reportedly sat in limbo
during the transition to Kaiser’s own
transplant program, losing precious
time on the transplant waiting list. The
state has since helped orchestrate
transfer of the same and additional
patients back to either UC Davis or
UCSF kidney transplant programs.
Asked what effect the loss of Medicare
coverage would have on the existing
program, Schiffgens declined to
speculate.
“We don’t anticipate anything but
coming into compliance with this,” he
said.
Medicare warns Kaiser on
kidney care
Coverage at S.F. center is at risk
unless compliance with federal rules is
proved.
By Dorsey Griffith
Sacramento Bee
The Medicare program has
threatened to halt coverage for all
end-stage kidney care at Kaiser
Permanente’s San Francisco
transplant center unless the health
plan can convince regulators it has
complied with federal regulations.
The Department of Health and Human
Services, which administers Medicare,
told Kaiser Foundation Health Plan
officials that they have until June 15 to
submit a corrective action plan or risk
losing coverage of kidney dialysis,
transplant and other renal failure
services.
“There are a lot of services someone
with kidney failure requires,” said Jeff
Flick, regional administrator for the
Centers for Medicare and Medicaid
Services. “Sometimes they include a
transplant. Otherwise, they need
dialysis or related care. The funding for
all of that would stop.”
If Kaiser fails to demonstrate that it has
fixed the problems, Medicare coverage
will end Aug. 12, a move that would
force more than 1,000 kidney patients
who get services at the San Francisco
facility to seek Medicare-covered
treatment elsewhere.
“Obviously, we take this matter very
seriously,” said Matthew Schiffgens,
Kaiser’s issues management director.
“We are going to take all necessary
corrective actions to ensure that the
San Francisco transplant program is in
compliance with Medicare regulations
and that we can continue to care for our
patients during this transition period.”
The notice does not affect Medicare
coverage of other Kaiser Permanente
care, or the kidney speciality care
offered at other Northern California
Kaiser Permanente facilities.
The Medicare letter, which arrived one
month after an unannounced, five-day
federal inspection of the program, is
the latest in a series of regulatory
actions taken in recent weeks in
response to administrative bungling of
Kaiser’s 2-year-old transplant program.
News reports in early May detailed the
health plan’s missteps in transferring
hundreds of members from university
medical center transplant waiting lists
to their own, newly developed program
in San Francisco.
As a result of a state order and several
lawsuits, Kaiser then opted to
indefinitely suspend operations and
transfer its patients back to the
university centers.
Kaiser officials have said the transplant
center will remain operational until all
of its patients have successfully been
transferred to one of the university
centers. Doctors there have continued
to see kidney disease patients and
have performed several transplants as
organs have become available.
Sharon Inokuchi, Medical Director
Kaiser Transplant Center Specifically,
Medicare cited three areas where the
Kaiser program is out of compliance:
“governing body and management,”
“patients rights and responsibilities”
and “director of a renal transplantation
center.”
Flick would not elaborate on the areas
of concern, but said the health plan
also received a 50-page report
detailing the federal government’s
correction demands.
Schiffgens, of Kaiser, said the
concerns stemmed from administrative
problems, as well as difficulties
communicating with patients.
Many patients reportedly sat in limbo
during the transition to Kaiser’s own
transplant program, losing precious
time on the transplant waiting list. The
state has since helped orchestrate
transfer of the same and additional
patients back to either UC Davis or
UCSF kidney transplant programs.
Asked what effect the loss of Medicare
coverage would have on the existing
program, Schiffgens declined to
speculate.
“We don’t anticipate anything but
coming into compliance with this,” he
said.
Kaiser's plan seems to be to
treat only the problems on its list,
and to deny or ignore all other
problems. But most of the
problems on the list are not
serious. So in most cases, you'd
do just as well to have no health
care at all. Of course, if you
have a serious problem, and
your symptoms are typical and
are on Kaiser's list, you can get
life-saving help.
treat only the problems on its list,
and to deny or ignore all other
problems. But most of the
problems on the list are not
serious. So in most cases, you'd
do just as well to have no health
care at all. Of course, if you
have a serious problem, and
your symptoms are typical and
are on Kaiser's list, you can get
life-saving help.
Kidney transplant program
violations lead to closure
Wikipedia
On May 3, 2006, the Los Angeles
Times published an investigative
report which showed
across-the-board
mismanagement in the KP-run
transplant program which
resulted in delays for patients
awaiting kidneys. According to
the report, Northern California
Kaiser performed 56
transplants in 2005 and twice
that many patients died
waiting for a kidney.
At other California transplant
centers, more than twice as
many people received
kidneys than died during the
same period.
The practice of delaying these
transplants resulted in
considerable savings for KP...
violations lead to closure
Wikipedia
On May 3, 2006, the Los Angeles
Times published an investigative
report which showed
across-the-board
mismanagement in the KP-run
transplant program which
resulted in delays for patients
awaiting kidneys. According to
the report, Northern California
Kaiser performed 56
transplants in 2005 and twice
that many patients died
waiting for a kidney.
At other California transplant
centers, more than twice as
many people received
kidneys than died during the
same period.
The practice of delaying these
transplants resulted in
considerable savings for KP...
Kaiser Put Kidney Patients
at Risk
By opening its own transplant
center in the Bay Area, the
HMO harmed recipients' odds
of obtaining organs, a Times
probe finds.
By Charles Ornstein and Tracy Weber
Los Angeles Times
May 3, 2006
In mid-2004, more than 1,500
Kaiser Permanente patients
awaiting kidney transplants in
Northern California got form letters
that forced them to change the
course of their treatment.
Kaiser would no longer pay for
transplants at outside hospitals,
even established programs with
thousands of successes. Instead,
adult patients would be transferred
to a new transplant center run by
Kaiser itself -- the first ever
opened by the nation's largest
HMO.
Within months after Kaiser's
kidney program in San Francisco
started up, its waiting list ranked
among the longest in the country.
No other center had ever put
together such a list so fast.
The patients didn't know it, but
their odds of getting a kidney had
plummeted.
Kaiser's massive rollout in
Northern California endangered
patients, forcing them into a
fledgling program unprepared to
handle the caseload, according to
a Times investigation based on
statistical analyses, confidential
documents and dozens of
interviews.
Hundreds of patients were stuck in
transplant limbo for months
because Kaiser failed to properly
handle paperwork. Meanwhile,
doctors attempting to build a
record of success shied away from
riskier organs and patients,
slowing the rate of transplants
performed.
National transplant regulators
apparently did not notice the
program's failures, though some
were obvious in the statistics the
regulators themselves posted on
the Internet.
at Risk
By opening its own transplant
center in the Bay Area, the
HMO harmed recipients' odds
of obtaining organs, a Times
probe finds.
By Charles Ornstein and Tracy Weber
Los Angeles Times
May 3, 2006
In mid-2004, more than 1,500
Kaiser Permanente patients
awaiting kidney transplants in
Northern California got form letters
that forced them to change the
course of their treatment.
Kaiser would no longer pay for
transplants at outside hospitals,
even established programs with
thousands of successes. Instead,
adult patients would be transferred
to a new transplant center run by
Kaiser itself -- the first ever
opened by the nation's largest
HMO.
Within months after Kaiser's
kidney program in San Francisco
started up, its waiting list ranked
among the longest in the country.
No other center had ever put
together such a list so fast.
The patients didn't know it, but
their odds of getting a kidney had
plummeted.
Kaiser's massive rollout in
Northern California endangered
patients, forcing them into a
fledgling program unprepared to
handle the caseload, according to
a Times investigation based on
statistical analyses, confidential
documents and dozens of
interviews.
Hundreds of patients were stuck in
transplant limbo for months
because Kaiser failed to properly
handle paperwork. Meanwhile,
doctors attempting to build a
record of success shied away from
riskier organs and patients,
slowing the rate of transplants
performed.
National transplant regulators
apparently did not notice the
program's failures, though some
were obvious in the statistics the
regulators themselves posted on
the Internet.
Kaiser Kidney Failure: News of alleged
mismanagement of transplant lists
Scandal hit Kaiser Permanente’s organ transplant
program when allegations of impropriety surfaced that
alleged mismanagement of transplant lists led to
significant health problems and possibly even deaths
of patients awaiting new kidneys. In 2004, the HMO
began a program that should have simplified the transplant
wait process for thousands of people throughout Northern
California, but instead of creating a single list of patients
based on their previous position, Kaiser Permanente
transferred their names to the bottom of the new list or erased
them from the list entirely. This egregious oversight put
deserving and critical transplant patients far out of the running
for the organs they so desperately needed.
The transplant program was so rife with mismanagement that
California HMO regulators had to step in and organize the
process. In fact, David Merlin, former head of Kaiser’s kidney
transplant unit, filed a wrongful discharge lawsuit against the
HMO after he repeatedly complained about the poor oversight
of the transplant program. According to Merlin, Kaiser’s
transplant program was “…so poorly organized and
unprofessionally managed that it failed to comply with state
and federal requirements and was compromising patient care,
leading to unnecessary suffering and possibly deaths."
This type of conduct and mismanagement would be
inexcusable even from a smaller medical organization, let
alone the largest HMO in the United States. Kaiser should
have ensured that every aspect of their new transplant
program worked properly before risking the lives of thousands
of people who clung to the hope that their advanced position
on the list could deliver them from a life of dialysis, pain, and
despair. Investigators are also looking into the manner Kaiser
failed to handle patient feedback, which could itself provoke a
new round of lawsuits.
mismanagement of transplant lists
Scandal hit Kaiser Permanente’s organ transplant
program when allegations of impropriety surfaced that
alleged mismanagement of transplant lists led to
significant health problems and possibly even deaths
of patients awaiting new kidneys. In 2004, the HMO
began a program that should have simplified the transplant
wait process for thousands of people throughout Northern
California, but instead of creating a single list of patients
based on their previous position, Kaiser Permanente
transferred their names to the bottom of the new list or erased
them from the list entirely. This egregious oversight put
deserving and critical transplant patients far out of the running
for the organs they so desperately needed.
The transplant program was so rife with mismanagement that
California HMO regulators had to step in and organize the
process. In fact, David Merlin, former head of Kaiser’s kidney
transplant unit, filed a wrongful discharge lawsuit against the
HMO after he repeatedly complained about the poor oversight
of the transplant program. According to Merlin, Kaiser’s
transplant program was “…so poorly organized and
unprofessionally managed that it failed to comply with state
and federal requirements and was compromising patient care,
leading to unnecessary suffering and possibly deaths."
This type of conduct and mismanagement would be
inexcusable even from a smaller medical organization, let
alone the largest HMO in the United States. Kaiser should
have ensured that every aspect of their new transplant
program worked properly before risking the lives of thousands
of people who clung to the hope that their advanced position
on the list could deliver them from a life of dialysis, pain, and
despair. Investigators are also looking into the manner Kaiser
failed to handle patient feedback, which could itself provoke a
new round of lawsuits.
Kaiser taps new boss for troubled kidney unit
San Francisco Business Times by Chris Rauber
June 15, 2006
Kaiser Permanente appointed a new administrative director Thursday to
head its troubled Northern California kidney transplant unit.
The San Francisco-based unit, in the process of being closed after intense
pressure from state and federal regulators, had been headed by Dr. Sharon
Inokuchi, M.D. Inokuchi was relieved of administrative responsibilities
several months ago.
Kaiser officials said June 15 that Linda Mann, RN, formerly the medical group
administrator at its Redwood City Medical Center, has headed the San
Francisco kidney transplant unit, at Kaiser's San Francisco Medical Center,
since June 12.
Inokuchi previously headed the unit as medical director and at times as
administrative director during the two-year period it was plagued by
botched paperwork, lengthy delays in matching patients with donors, and
other problems, according to insiders and regulators. Kaiser said in early
May it would close the program and transfer patients to waiting lists at other
facilities.
Inokuchi continues to work as a practicing nephrologist -- a kidney specialist -- at
the San Francisco medical center.
The management of the transplant program "has been an area of improvement,"
said Matthew Schiffgens, a Kaiser spokesman. "Linda's being put in this position is
an acknowledgement that communications and administrative processes were an
area of improvement for us. (It's) an indication we've taken action to address that."
In her new role, Mann "will have accountability" for the operations of the
kidney program, officials said Thursday. In addition, she will participate in the
process of shifting patients from the internal program to UCSF Medical Center and
UC Davis Medical Center.
Mann has previous experience in leadership roles and in managing transplant
programs, according to Kaiser. In various roles at UC San Francisco, she was
responsible for managing its kidney transplant program.
Last week, the federal Centers for Medicare and Medicaid Services issued a
demand to Kaiser to fix serious problems at the unit or face a cutoff of funding for
transplants and other care provided to its end-stage kidney disease patients. CMS
Regional Administrator Jeff Flick, responsible for the regulatory agency's
operations in California, Arizona, Hawaii and Nevada, said one of the agency's
three major concerns was administration of the transplant unit and its director.
Kaiser originally had until June 15 to file a corrective action plan with CMS, but it
has received an extension until at least June 22, according to Kaiser.
"That's sort of a rolling deadline," said Schiffgens. "CMS wants the best correction
plan possible."
San Francisco Business Times by Chris Rauber
June 15, 2006
Kaiser Permanente appointed a new administrative director Thursday to
head its troubled Northern California kidney transplant unit.
The San Francisco-based unit, in the process of being closed after intense
pressure from state and federal regulators, had been headed by Dr. Sharon
Inokuchi, M.D. Inokuchi was relieved of administrative responsibilities
several months ago.
Kaiser officials said June 15 that Linda Mann, RN, formerly the medical group
administrator at its Redwood City Medical Center, has headed the San
Francisco kidney transplant unit, at Kaiser's San Francisco Medical Center,
since June 12.
Inokuchi previously headed the unit as medical director and at times as
administrative director during the two-year period it was plagued by
botched paperwork, lengthy delays in matching patients with donors, and
other problems, according to insiders and regulators. Kaiser said in early
May it would close the program and transfer patients to waiting lists at other
facilities.
Inokuchi continues to work as a practicing nephrologist -- a kidney specialist -- at
the San Francisco medical center.
The management of the transplant program "has been an area of improvement,"
said Matthew Schiffgens, a Kaiser spokesman. "Linda's being put in this position is
an acknowledgement that communications and administrative processes were an
area of improvement for us. (It's) an indication we've taken action to address that."
In her new role, Mann "will have accountability" for the operations of the
kidney program, officials said Thursday. In addition, she will participate in the
process of shifting patients from the internal program to UCSF Medical Center and
UC Davis Medical Center.
Mann has previous experience in leadership roles and in managing transplant
programs, according to Kaiser. In various roles at UC San Francisco, she was
responsible for managing its kidney transplant program.
Last week, the federal Centers for Medicare and Medicaid Services issued a
demand to Kaiser to fix serious problems at the unit or face a cutoff of funding for
transplants and other care provided to its end-stage kidney disease patients. CMS
Regional Administrator Jeff Flick, responsible for the regulatory agency's
operations in California, Arizona, Hawaii and Nevada, said one of the agency's
three major concerns was administration of the transplant unit and its director.
Kaiser originally had until June 15 to file a corrective action plan with CMS, but it
has received an extension until at least June 22, according to Kaiser.
"That's sort of a rolling deadline," said Schiffgens. "CMS wants the best correction
plan possible."
Was Inokuchi clueless? Or was she doing what
someone at Kaiser wanted regarding kidney
program?
By failing to obtain kidneys, Kaiser avoided the huge costs of
transplant operations and years of follow-up and medication.
That could be why Kaiser still employs her. Who made the
decision to shut down the UC Davis kidney transplant program?
Someone higher up than Inokuchi.
Inokuchi has a degree from Harvard. I don't think she was
clueless:
someone at Kaiser wanted regarding kidney
program?
By failing to obtain kidneys, Kaiser avoided the huge costs of
transplant operations and years of follow-up and medication.
That could be why Kaiser still employs her. Who made the
decision to shut down the UC Davis kidney transplant program?
Someone higher up than Inokuchi.
Inokuchi has a degree from Harvard. I don't think she was
clueless:
(from Kaiser website
March 2011)
Sharon Inokuchi,
MD
Specialty--Nephrology
South San Francisco
Medical Center
My Biography
Joined Kaiser Permanente:
2003
I joined Kaiser Permanente
after more than 10 years in
private practice, to join a
team with a real focus on
quality patient care. Kidney
disease is increasing in the
U.S. Slowly and quietly the
disease will progress,
damage tissues and if
unchecked, the failing
kidney will change life
dramatically. Unless
something changes, this
will happen to so many of
us. I believe that the
solution to this problem is
to try to prevent kidney
injury, discover problems
early, fix the things we can
and then protect the kidneys
from damage. This is the
right time and place to
make this happen.
Patients I see often come
thinking all is over and the
kidney is dead. For most,
there is hope. Changes in
medicines, diet and
behaviors can often slow
the process and protect the
kidneys. Doing this will also
improve health and help
control blood pressure and
sugars. I will work with
every patient to try to make
this happen. And I expect
my patients to learn and try.
We will work together. Our
goal is to make every life
worth living.
This is my life’s work. I love
to teach and working with
patients has been a joy.
In my leisure time, I enjoy
reading, needlework and
spending time with friends
and family. Taking walks
and using the treadmill lets
me eat an occasional donut
and helps to keep me fit.
Dr. Inokuchi's
Credentials
Medical school
Harvard
Residency UC San
Francisco Medical
Center
Fellowship UC San
Francisco Medical
Center
Fellowship
Veterans Affairs
Medical Center, San
Francisco, CA
Board certification
Internal Medicine,
American Board of
Internal Medicine
March 2011)
Sharon Inokuchi,
MD
Specialty--Nephrology
South San Francisco
Medical Center
My Biography
Joined Kaiser Permanente:
2003
I joined Kaiser Permanente
after more than 10 years in
private practice, to join a
team with a real focus on
quality patient care. Kidney
disease is increasing in the
U.S. Slowly and quietly the
disease will progress,
damage tissues and if
unchecked, the failing
kidney will change life
dramatically. Unless
something changes, this
will happen to so many of
us. I believe that the
solution to this problem is
to try to prevent kidney
injury, discover problems
early, fix the things we can
and then protect the kidneys
from damage. This is the
right time and place to
make this happen.
Patients I see often come
thinking all is over and the
kidney is dead. For most,
there is hope. Changes in
medicines, diet and
behaviors can often slow
the process and protect the
kidneys. Doing this will also
improve health and help
control blood pressure and
sugars. I will work with
every patient to try to make
this happen. And I expect
my patients to learn and try.
We will work together. Our
goal is to make every life
worth living.
This is my life’s work. I love
to teach and working with
patients has been a joy.
In my leisure time, I enjoy
reading, needlework and
spending time with friends
and family. Taking walks
and using the treadmill lets
me eat an occasional donut
and helps to keep me fit.
Dr. Inokuchi's
Credentials
Medical school
Harvard
Residency UC San
Francisco Medical
Center
Fellowship UC San
Francisco Medical
Center
Fellowship
Veterans Affairs
Medical Center, San
Francisco, CA
Board certification
Internal Medicine,
American Board of
Internal Medicine
Eisenberg & Gray Law Firm Files Class Action Suit
Against Kaiser Kidney Transplant Program
BUSINESS WIRE
June 5, 2006
A class action complaint was filed today in San Francisco
Superior Court against Kaiser, who closed their kidney
transplant program in San Francisco last month. The lawsuit
was filed by Irvine attorneys Eisenberg & Gray LLP, who are
also lead counsel in the transplant litigation against the UCI
Medical Center.
"It appears that Kaiser was more concerned about the bottom
line than the health of their member patients. They forced
their Northern California kidney transplant patients to leave
the University of California at San Francisco and University of
California at Davis and become patients at Kaiser's in-house
transplant facility in San Francisco. Kaiser did not want to
pay for ongoing kidney transplant medical care for
approximately 2,000 Northern California patients, so
they attempted to open their own facility but totally
failed in the process," said Irvine attorney Larry Eisenberg.
"This is an outrageous example of gross mismanagement at
the highest level. Kaiser interrupted ongoing transplant
medical care and rejected donor kidneys, which
caused patient deaths and severely compromised the
health of their members," said Eisenberg.
The lawsuit alleges negligence, fraud and misrepresentation
due to Kaiser's inability to properly administrate the San
Francisco Kidney Transplant Program. "It is clear that Kaiser
patients did not receive proper medical care and kidney
transplants were delayed. There was a complete lack of
oversight in the operation and administration of the Kaiser
program and the patients and their families paid the price,"
said Eisenberg.
Against Kaiser Kidney Transplant Program
BUSINESS WIRE
June 5, 2006
A class action complaint was filed today in San Francisco
Superior Court against Kaiser, who closed their kidney
transplant program in San Francisco last month. The lawsuit
was filed by Irvine attorneys Eisenberg & Gray LLP, who are
also lead counsel in the transplant litigation against the UCI
Medical Center.
"It appears that Kaiser was more concerned about the bottom
line than the health of their member patients. They forced
their Northern California kidney transplant patients to leave
the University of California at San Francisco and University of
California at Davis and become patients at Kaiser's in-house
transplant facility in San Francisco. Kaiser did not want to
pay for ongoing kidney transplant medical care for
approximately 2,000 Northern California patients, so
they attempted to open their own facility but totally
failed in the process," said Irvine attorney Larry Eisenberg.
"This is an outrageous example of gross mismanagement at
the highest level. Kaiser interrupted ongoing transplant
medical care and rejected donor kidneys, which
caused patient deaths and severely compromised the
health of their members," said Eisenberg.
The lawsuit alleges negligence, fraud and misrepresentation
due to Kaiser's inability to properly administrate the San
Francisco Kidney Transplant Program. "It is clear that Kaiser
patients did not receive proper medical care and kidney
transplants were delayed. There was a complete lack of
oversight in the operation and administration of the Kaiser
program and the patients and their families paid the price,"
said Eisenberg.
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
UNITED STATES OF AMERICA, et al.,
Plaintiffs,
v.
KAISER FOUNDATION HEALTH PLAN, INC.,
Defendant
.
Case No.12-cv-03896-WHO
ORDER GRANTING IN PART AND DENYING IN PART MOTIONS TO DISMISS
AND STRIKE
Re: Dkt. Nos. 18, 19
On August 21, 2013, the Court heard argument on defendant‟s Motion to Dismiss and Motion to
Strike. For the foregoing reasons, the Court GRANTS in part and DENIES in part both the Motion
to Dismiss and the Motion to Strike.
BACKGROUND
Plaintiff ProTransport-1, LLC filed this complaint on behalf of itself, the United
States, and the State of California against Kaiser Foundation Health Plan, Inc.
Plaintiff asserts causes of action for violations of the False Claims Act (“FCA,” 31
U.S.C. § 3729(a)(1)), violation sof the California False Claims Act (Cal. Govt. Code
§ 12651(a)), violation of California Health and Safety Code § 1278.5, violations
of California‟s Unfair Competition Law (“UCL,” Cal. Bus. & Prof. Code § 17200),
breach of the implied covenant of good faith and fair dealing, quantummeruit, and
unjust enrichment/restitution. Docket No. 1. All of the claims stem from
ProTransport‟s allegations that Kaiser refused to pay ProTransport for its services
transporting Kaiser patients with End Stage Renal Disease (ESRD) to and from
dialysis treatments and instead required ProTransport to seek reimbursement for
its services from Medi-Cal. Complaint ¶¶ 34-39.
ProTransport alleges that under the Medicare Act
and its implementing regulations, Kaiser was
required to pay ProTrans
port in the first instance, and that requiring plaintiff to seek reimbursement from
Medi-Cal was improper and a fraud.Id. ProTransport also alleges that after
its representatives complained to Kaiser about its practice, Kaiser retaliated
against ProTransport
by refusing to pay for any transports made by ProTransport and excluding
ProTransport from
bidding to provide future services to Kaiser.
Id
., ¶¶ 42
-
43, 46, 50
-
51.
In March 2013, the United
States and California declined to intervene in the action,
and the Court
onApril 2, 2013 ordered the Complaint served on Kaiser. Docket No. 23.
Kaiser now moves to dismiss the Complaint and strike allegedly immaterial and
improper
references from the same. In response to the motion to dismiss, plaintiff agreed
to dismiss seven
out of the ten claims, and opposes dismissal of only the claim under t
he federal False
Claims Act
(31 U.S.C. § 3729(a)(1)(D)), violation of the anti
-
retaliation provision of California Government
Code section 1278.5, and violation of the
UCL.
See
Docket No.29 (Notice of Voluntary Dismissal
of Claims); Plaintiff‟s Opposition at 1, 7.
1
LEGAL STANDARD
Under Federal Rule of Civil Procedure 12(b)(6), a district court must dismiss a
complaint
if it fails to state a claim upon which relief can be granted. To survive a Rule 12(b)
(6) motion to
dismiss, the plaintiff must allege “enough facts to state a claim
to relief that is plausible on its
face.”
See Bell Atl. Corp. v. Twombly
, 550 U.S. 544, 556 (2007). A claim is facially plausible
when the plaintiff pleads facts that “allow the court to draw the reasonable
inference that the
defendant is liable for the
misconduct alleged.”
See Ashcroft v. Iqbal
, 556 U.S. 662, 678 (2009)
(citation omitted). There must be “more than a sheer possibility that a defendant
has acted
unlawfully.”
Id.
While courts do not require “heightened fact pleading of specifics,” a pl
aintiff
must allege facts sufficient to “raise a right to relief above the speculative level.”
See Twombly
,
1
Plaintiff‟s Notice of Voluntary Dismissal indicates that it dismisses Claims 2
-
5 (the federal
False Claim Act claim under 31 U.S.C. § 3729(a)(1)(A) and the California False
Claim Act
claims) without prejudice subject to the consent of the Attorney Gener
al. Docket No. 29. The
Attorney General consented to the dismissal without prejudice on August 1, 2013.
Docket No. 31.
In its Opposition, plaintiff also agrees to dismiss without prejudice of its breach of
the implied
covenant, quantum meruit, and unju
st enrichment claims in order to exhaust Medicare‟s
administrative requirements. Oppo. at 7. Defendants do not object. The Court,
therefore,
DISMISSES WITHOUT PREJUDICE Claims 2
-
5 and 8
-
10 of the Complaint.
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United States District Court
Northern District
of California
550 U.S. at 555, 570.
In deciding whether the plaintiff has stated a claim upon which relief can be
granted, the
Court accepts the plaintiff‟s all
egations as true and draws all reasonable inferences in favor of the
plaintiff.
See Usher v. City of Los Angeles
, 828 F.2d 556, 561 (9th Cir. 1987). However, the court
is not required to accept as true “allegations that are merely conclusory,
unwarranted
deductions of
fact, or unreasonable inferences.”
See In re Gilead Scis. Sec. Litig.
, 536 F.3d 1049, 1055 (9th Cir.
2008).
DISCUSSION
I.
MOTION TO DISMISS
A.
False Claims Act
Plaintiff‟s FCA claim is brought under 31 U.S.C. section 3729(a)(1)(D) which
provides
for
FCA liability when an entity or person “
has possession, custody, or control of property or money
used, or to be used, by the Government and knowingly delivers, or causes to be
delivered, less
tha
n all of that money or property.” In the Complaint, pl
aintiff alleges that Kaiser violated this
section of the FCA (“Reverse False Claims,” Complaint at 14) by receiving and
controlling money
of the federal government and knowingly failing to deliver less than the full sum of
that money
“for the benefit of it
s patients,” when it required ProTransport to seek payment from Medi
-
Cal.
Complaint, ¶ 54. That conduct, ProTransport alleges, amounted to false or
fraudulent claims
incurred by the United States.
Id
. ¶ 55. In its Opposition, plaintiff argues that its F
CA claim is a
“implied false certification” claim, which arises when an entity has “obligated itself
to complying
with a law, rule or regulation” and that obligation is implicated by submitting a claim
for payment.
Oppo. Br. at 11 (quoting
Ebeid v. Lungwi
tz
, 616 F.3d 993 (9th Cir.
2010)
).
1.
Subject Matter Jurisdiction and Administrative Exhaustion
As an initial matter, Kaiser argues that plaintiff‟s FCA claim is simply a disguised
attempt
to secure payment for its services, and as such, the case “arises unde
r” the Medicare Act and must
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of California
be dismissed for failure to exhaust Medicare‟s administrative procedures.
2
Do Sung Uhm v.
Humana, Inc
., 620
F.3d 1134, 1141 (9th Cir.
2010)
. ProTransport responds that this claim is not
one for reimbursement, but one to secur
e a recovery for the United States as a result of Kaiser‟s
false claims. ProTransport argues that FCA claims are not subject to the
administrative
exhaustion
.
As the Ninth Circuit has noted: “t
he Supreme Court has identified two
circumstances in
which a c
laim „arises under‟
t
he Medicare Act: (1) where the „
standing and the substantive basis
for the presentation of the claims
‟
is the Medicare Act
. . . and (2) where the claims are
„inextricably intertwined‟
with a claim for Medicare benefits
.”
Uhm
, 620
F.3d at 1141 (quoting
Heckler
,
466 U.S.
at
61
4
-
1
5
). The Ninth Circuit has also found another category of cases that
“arise under” the Act, “those cases that are “„
[c]leverly concealed claims for benefits.
‟””
Id
.
(quoting
Kaiser v. Blue Cross
, 347 F.3d 11
07
, 1112
(9th Cir. 2003)
).
In support of its argument that its FCA claim does not “arise under” the Medicare
Act,
plaintiff relies primarily on
United States v. Blue Cross & Blue Shield
(
In re ex rel Body
)
, 156
F.3d 1098 (11th Cir. 1998)
and
United States
v. Tenet Healthcare Corp
., 343 F. Supp. 2d 922, 928
(C.D. Cal. 2004). In
Body
, a former employ
ee of the defendant brought a F
C
A
action, asserting
that defendant had fraudulently submitted inflated claims for reimbursement under
Medicare. The
Court noted
that section 405(h) was intended to allow “the
administrative process the first
opportunity to resolve disputes over eligibility or the amount of benefits awarded
under the Act
”
and prevent “
beneficiaries and potential beneficiaries from evading administra
tive review by
creatively styling their benefits and eligibility claims as constitutional or statutory
challenges to
Medicare statutes and regulations
.”
Id
. at 1103
-
04. The Court distinguished the FCA claim at
issue there because actions “w
hich do not see
k payment from the government and could not be
2
Kaiser contends, and ProTransport does not
dispute, that under
42 U. S. C. § 405(h)
as made
applicable to the Medicare Act, claims for Medicare benefits or coverage for
services must be
pursued through all available administrative procedures before judicial review is
available.
See
e.g., Heckler
v. Ringer
, 466 U.S. 602, 615 (1984)
; 42 U.S.C. § 405(g). As applicable to Medical
Advantage Plans
–
the types of plans at issue in this case
–
disputes over coverage or for
reimbursement of services must be submitted through the administrative dispute
resolution
process.
See e.g
.,
42 CFR
§
422.560
(requiring MA organizations to institute grievance and
appeal procedures).
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of California
brought under section 405, are therefore not barred by subsection 405(h).
”
Id
. at 1104. The Court
concluded that because the standing and basis of the claim alleged was the FCA
and not the
Medicare Act
–
alt
hough the defendant‟s application of Medicare rules and regulations “clearly
would be determinative of whether false claims were, in fact, submitted”
–
and because the
plaintiff‟s suit could not go forward under the administrative review process, the
actio
n was not
barred by section 405(h).
Id
. at 1105
-
06.
In
Tenent
, the United States sued healthcare providers seeking reimbursement of monies
the government paid to the providers for Medicare services that were billed at
higher
-
rates than
appropriate. The C
ourt found that the government‟
s standing
was
rooted in the
“
False Claims Act
and similar common law doctrine, which also provide the substantive basis for relief
.”
Id
. at 927.
The Court concluded that:
[s]ince the Court is not faced with a claim for
reimbursement from a
dissatisfied provider that should be channeled through the
administrative process, this case does not „arise under‟ the Medicare
Act. [] Rather, because the government‟s action is predicated on the
submission of inaccurate and mislead
ing claims, the common law,
not the Medicare Act, provides both standing and the substantive
basis for the claim.”
Id
. at 928.
As in
Body
and
Tenent
, here the FCA and not the Medicare Act provide both standing and
the substantive basis for ProTransport‟s
claim. While Kaiser argues that ProTransport could seek
a determination of whether the transports at issue were covered by Medicare (and
should have
been paid for by Kaiser in the first instance) through the administrative claims
resolution
procedures,
3
Kaiser does
not
argue or explain how the FCA claim asserted on behalf of the United
3
Kaiser asks the Court to take judicial notice of an Office of Medicare Hearings and
Appeals
Notice of Decision: Lexxiom Medical Services, ALJ No. 1
-
1341807952. Reques
t for Judicial
Notice [Docket No. 18], Attachment 3. In that decision, an ALJ denied a request for
Medicare
Part B coverage for ambulance transportation services that were provided without
a written order
from the beneficiary‟s attending physician and wit
hout preapproval from the Plan. Plaintiff does
not oppose the Request for Judicial Notice. Pursuant to Rule 201, courts
may only take judicial
notice of
“
adjudicative facts
” that are “
not
subject to reasonable dispute.”
United States v. Ritchie
,
342 F.3
d 903, 908 (9th Cir. 2003). A court may also take
judicial notice
of some
public records,
including
records and reports of administrative bodies
.
Id
. at 909. The Court, therefore, grants the
request to take judicial notice of the Notice of Decision, but
not the conclusions of fact reached in
that decision.
Cf. Lee v. City of Los Angeles
, 250 F.3d 668, 690 (9th Cir. 2001) (courts can take
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Northern District
of California
States could be pursued through the administrative procedures.
Kaiser
relies on
Do Sung Uhm v. Humana, Inc
., 620 F.3d 1134 (9th Cir. 2010)
. In that
case the Ninth Circuit
determined that breach of contract and unjust enrichment claims based on a
plan‟s failure to provide prescription drug coverage despite plaintiffs‟ payment of
premiums
“arose under” the Medicare Act and were subject to administrative exhaustion.
The fact
that
plaintiffs were not seeking coverage under the plan or reimbursement of lost
benefits, but instead
seeking breach of contract and unjust enrichment damages, did not alter the Court
‟s conclusion
because “at bottom” the plaintiffs were complaining abou
t the denial of a benefit despite their
payment of premiums.
Id.
at 1142
-
43. The Court found that the breach of contract claim was
simply,
“
a back
door attempt to enforce the Act‟
s requirements an
d to secure a remedy for
Humana‟
s alle
ged failure to provid
e benefits.”
Id
. at 1143. Finally, the Court noted that plaintiffs
failed to allege any injury “that could not be remedied through the retroactive
payment of
Medicare drug benefits” and concluded that plaintiffs‟ “claim for benefits could
have been
remed
ied through the Act‟s administrative review process.”
Id
. at 1144.
Here, as noted above, ProTransport was actually paid for the services it contends
were
covered by Medicare, albeit by Medi
-
Cal. Therefore, payments to ProTransport for services
provided
in the past are not at issue. Nor are payments that might be made in the future, as
ProTransport was allegedly barred by Kaiser from bidding to provide future
services. Complaint,
¶¶ 50
-
51. Moreover, the nature of the claim at issue
–
False Claims Act
–
is fundamentally
different than the breach of contract and unjust enrichment claims at issue in
Uhm
. Here, there is
no indication that the claims asserted on behalf of the United States
–
return of monies paid as
premiums to Kaiser
–
could be addressed i
n the administrative process.
Defendant also relies on
Kaiser v. Blue Cross
, 347 F.3d 1107 (9th Cir.
2003). There,
plaintiffs brought claims alleging violations of various Medicare regulations, the
Administrative
Procedure Act and the Fifth Amendment
based
on
the Health Care Financing Agency
‟s
(now
known as Centers for Medicare and Medicaid Services, CMS) issuance of various
regulations and
judicial notice of other courts‟ decisions, but only for existence of the opinion and
not for truth of
the facts asse
rted in the opinion).
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their cessation of payments to plaintiffs‟ business. The Court found that these
claims “arose
under” the Medicar
e Act, despite the fact that plaintiff‟s sought damages beyond the
reimbursement
of
payments available under Medicare because plaintiffs‟ claims were
“inextricably intertwined” with the reimbursement claims of their former business.
The FAC
claim asserted
here stands on different footing because it does not seek recovery for
ProTransport‟s damages.
4
Kaiser also points out that unlike
Tenet
, here plaintiff is clearly a “dissatisfied” provider,
and that the Court in
Body
distinguished the FCA claims at issue there from “
veiled claims for
benefits by a disgruntled beneficiary that could have, and should have, been
pursued
administratively in the first instance
.” 156 F.3d at 1109. There is no dispute in this case that
Pro
Transport was a “provider” and is “disgruntled” by Kaiser‟s conduct. However,
under the
three claims left in the case, ProTransport is
not
seeking payment for its Medicare
-
related
transportation services. Indeed, in its Complaint, ProTransport alleges th
at it
was reimbursed
for
its transports by Medi
-
Cal (reimbursement it sought only under Kaiser‟s direction).
See
Complaint ¶¶ 6, 39 (noting “Medi
-
Cal approved for payment” ProTransport‟s claims for
transportation). Similarly, ProTransport is not arguing
that Kaiser‟s direction to seek payment
from Medi
-
Cal resulted in lower payments to ProTransport
–
a claim which would need to be
pursued through the administrative claims process. Instead, ProTransport is
asserting a claim on
behalf of the United States c
laiming Kaiser‟s conduct defrauded the government.
Similarly, the fact that the Medicare statute and regulations will need to be
interpreted to
determine whether Kaiser‟s conduct violated the FCA does not make this case
“inextricable
intertwined” with a
claim for reimbursement or for benefits.
But see
Kaiser v. Blue Cross
, 347
F.3d
at 1114. Indeed, as the Eleventh Circuit noted in
Body
, 156 F.3d at 1109, “subsection 405(h),
viewed within the context in which it was drafted and made applicable to Medica
re, simply seeks
4
In its breach of the implied covenant and quantum meruit claims
–
which are dismissed to allow
exhaustion of the claims in the administrative process
–
ProTransport claims that Kaiser has
refused to pay ProTransport “for the reason
able value of its services for these medical transports”
and ProTransport has “incurred loss of revenue and the costs expended in
transporting Kaiser‟s
patients” at the request of Kaiser. Complaint ¶¶ 102, 108, 109.
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Northern District
of California
to preserve the integrity of the administrative process Congress designed to deal
with challenges to
amounts determinations by dissatisfied beneficiaries, not to serve as a complete
preclusion of all
claims related to benefits determinatio
ns in general.”
Kaiser
asserted
d
uring oral argument that if this
Court allows ProTransport‟s FCA claim to
continue, it will open the “floodgates” for dissatisfied service providers to bring
claims in court
and avoid administrative exhaustion. However,
FCA claims can
only
be alleged based on a
particularized allegation
of fraud to the United States and
can only seek
recovery
on behalf of
the
United States; only
t
hat
narrow class of
plaintiffs
w
ill be able to proceed directly in federal cou
rt.
T
hose
who assert disguised claims for benefits or services
–
like ProTransport‟s breach of implied
covenant and
quantum meruit
claims
–
will have to exhaust
those claims
in the first instance.
In conclusion, t
he Court finds that plaintiff‟s FCA cau
se of action is not a “disguised”
claim for benefits nor it is “inextricably intertwined” with a claim for benefits and,
therefore, does
not “arise under” the Medicare Act.
2.
Failure to Satisfy Rule 9(b)
Kaiser also argues that plaintiff‟s FCA claim must be
dismissed because the Complaint
fails to plead the FCA claim with particularity under Federal Rule of Civil
Procedure 9(b). In
Opposition, plaintiff clarifies that its theory of FCA liability under section 3729(a)(1)
(D) is based
on an “implied false cert
ification.” Opposition Br. at 11. In the Ninth Circuit,
the four elements
of a false certification claim
are
:
“(1) a false statement or fraudulent course of conduct, (2) made
with scienter, (3) that was material, causing (4) the government to pay out mon
ey or forfeit
moneys due.”
U.S. ex rel Hendow v. Univ. of Phoenix
, 461 F.3d 1166, 1174 (9th Cir. 2006). A
theory
of implied false certification
is “„based on the notion that the act of submitting a claim for
reimbursement itself implies compliance with governing federal rules that are a
precondition to
payment.‟”
Ebeid v. Lungwitz
, 616 F.3d 993, 996 (9th Cir. 2010)
(quoting
U.S. ex rel. Mikes v
.
Straus
, 274 F.3d 687, 699 (2d Cir. 2001)
). As the Ninth Circuit explained in
Ebeid
:
Express certification simply means that the entity seeking payment
certifies compliance with a law, rule or regulation as part of the
process through which the claim for
payment is submitted. Implied
false certification occurs when an entity has previously undertaken
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to expressly comply with a law, rule, or regulation, and that
obligation is implicated by submitting a claim for payment even
though a certification of compl
iance is not required in the process of
submitting the claim.
Under both theories, “
[i]t is the false
certification of compliance which creates liability when certification
is a prerequisite to obtaining a government benefit.
”
Id
. at 998 (quoting
U.S. ex
rel. Hopper v. Anton
, 91 F.3d 1261
, 1266
(9th Cir.
1
996)
).
Under Federal Rule of Civil Procedure 9(b),
a party
must
“
state with particularity the
circumstances constituting fraud or mistake,
” including “
the who, what, when, where, and
how of
the misconduc
t charged.”
Vess v. Ciba
-
Geigy Corp. USA
, 317 F.3d 1097, 1106 (9th Cir. 2003)
(internal quotation marks omitted).
As applied here, “[t]o survive a Rule 9(b) motion to dismiss, a
complaint alleging implied false certification must plead with particularity
allegations that provide
a reasonable basis to infer that (1) the defendant explicitly undertook to comply
with a law, rule or
regulation that is implicated in submitting a claim for payment and that (2) claims
were submitted
(3) even though the defendant
was not in compliance with that law, rule or regulation.”
Ebeid
,
616 F.3d at 998.
The Court has reviewed the Complaint in detail and agrees with
Kaiser
that it fails to
adequately plead the remaining FCA claim. While the Complaint cites to various
statu
tes and
regulations to argue that Kaiser‟s Medical Advantage plan is required to provide
the same level of
coverage required under Medicare and that medically necessary transports are
covered by
Medicare,
see e.g
., Complaint ¶¶24
-
25, 27
-
29, the Complaint d
oes not identify which law, rule or
regulation Kaiser undertook to comply with that “is implicated in submitting a claim
for
payment.”
5
Moreover, the Complaint does not identify what “claims” Kaiser submitted that were
“impliedly” false. Plaintiff attemp
ts to rely on six representative examples of patients suffering
5
For example, in
U.S. ex. rel. Mikes
v. Straus
, 274 F.3d 687 (2d Cir. 2001)
, the Court held that
an implied false certification claim under the Medicare Act could be based on 42 U.
S.C. section
1395y(a)(1)(A), which prohibited payments for medical procedures not
“reasonably necessary,”
but no
t on 42 U.S.C. section 1320c
-
5(a), which mandated a qualitative standard of care. As the
Second Circuit explained, because section 1320c
-
5(a) established “
conditions of participation,
r
ather than prerequisites
to receiving reimbursement
” under the Medicar
e Act, it could not be a
basis for an implied false certification claim.
Id
. at 701
-
02. However, a claim could be based on
section 1395y(a)(1)(A) which contained
“
an
express condition of payment
–
that
is, „
no payment
may be made
‟
–
it explicitly links e
ach Medicare payment to the requirement that the particular
item or servic
e be „reasonable and necessary.‟”
Id
. at 700
; see
also Ebeid
,
616 F.3d
at 1
000
-
10001
(discussing the difference between statutes and regulations which contain a
“condition of
payment” as opposed to a “conditions of participation”).
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with ESRD who were transported by plaintiff but whose claims for transportation
were not paid by
Kaiser. Opp. Br. at 13. But these “claims” were submitted by ProTransport to
Kaiser, not clai
ms
for payment
submitted
by Kaiser
. Finally, it is unclear how this “implied false certification”
allegation fits within section
3729(a)(1)(D)
, which prohibits
a person or entity having custody of
the government‟s money or property from delivering “less
than all of that money or property.”
6
Simply put, ProTransport‟s Complaint does not sufficiently allege the “
who, what, when,
where, and how
” of the asserted implied false certification claim to allow Kaiser to defend.
Therefore, Kaiser‟s Motion to Dismi
ss is GRANTED with respect to ProTransport‟s FCA claim.
However, as it is not clear that ProTransport would not be able to adequately
allege a FCA claim,
the dismissal is WITH LEAVE TO AMEND. If ProTransport wishes to amend, it must
file an
amended compla
int within
t
wenty
(
2
0) days of the date of this Order.
B.
California Health & Safety Code § 1278.5
Kaiser also moves to dismiss ProTransport‟s claim under California Health and
Safety
Code section 1278.5, arguing that as a non
-
contracted transportation service
provider ProTransport
is not within the scope of the statute‟s protection. Section 1278.5(b)(1) provides
that “[n]o health
facility shall discriminate or retaliate, in any manner, against any patient,
employee, member of
the medical staff, or any other he
alth care worker of the health facility because that person has”
presented a grievance or complaint to the facility, an agency or any other
governmental entity.
ProTransport asserts that it is covered by the statute as “any other health care
worker” of
Kaiser,
and that as a “remedial statute” section 1278.5 should be broadly interpreted to
include entities
like ProTransport. Opp. Br. at 14
-
15. There are two problems with ProTransport‟s position.
6
In case plaintiff attempts to revert to its “reverse false claims” allegation raised in
the
Complaint, as
the Ninth Circuit explained in
Cafasso v. Gen. Dynamics C4 Sys
., 637 F.3d 1047
(9th Cir. 2011)
, allegations of “reverse false claims” require identification of a “false claim” or
“statement” made to avoid paying a debt or returning property to the United
States.
Id
. at 1056.
No such allegations have been made here.
Cf
.,
Cafasso
at 1056 (dismissing FCA claim because
“it does not allege that GDC4S falsely asserted an entitlement to obtain or retain
government
money or property. It does not allege that GDC
4S made a demand for payment, fraudulently used
a receipt, participated in an unauthorized purchase of government property, or
used a false record
or statement.”).
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First, ProTransport is not “any other health care worke
r” but an entity. There is no
evidence in either the statute itself or in its legislative history that the California
Legislature
intended to cover entities. All of the categories covered by the statute “
patient, employee, member
of the medical staff, or
any other health care worker
” are individuals, not entities. ProTransport
argues that where the legislature wanted to limit whistleblower protection to
specific individuals
or classes of individuals it did so. Opp. at 15 (citing Cal. Bus. & Prof. Code
2056
(providing
“protection against retaliation
for physicians
who advocate for medically appropriate health care”)
(emphasis added); Cal. Bus. & Prof. Code § 510 (providing “protection against
retaliation for
health care practitioners
who advocate for app
ropriate health care for their patients”) (emphasis
added)). But simply because the Legislature provided for whistleblower protection
for specific
categories of professionals within the Business and Professions Code
does not mean “entities” are
included
in the list of persons expressly protected from retaliation by health facilities in
section
1278.5.
7
Moreover, as Kaiser points out, the original statute covered only patients and
employees.
In 2007, the Legislature
–
recognizing a gap in coverage for phy
sicians and surgeons who are not
typically employees of a health care facility
–
amended the statute to “[a]dd[] physicians and
surgeons to employees of health facilities . . . that have „whistleblower protection. .
. .” Assemb.
Comm. on Appropriations, R
eport re A.B. 632, 2007
-
08 Reg. Session, at 1 (Apr. 24, 2007). The
Senate Report noted that
–
according to the legislation‟s sponsor
–
“any other health care worker
of the health facility” “
could be interpreted to include persons such as blood, organ, and
tissue
transporters, emergency medical technicians or paramedics, and physical
therapists.
By adding
the phrase
„other health care workers‟
in the protected class, therefore, these persons would enjoy
the whistleblower protections now enjoyed only by pat
ients and employees of the health facility.
”
S. Judiciary Comm., Report on A.B. 632, 2007
-
08 Reg. Sess.. at 6 (July 12, 2007). The legislative
history repeatedly refers to individuals
–
“people” and “these persons”
–
and there is no indication
7
Relatedly, Kaiser argues that because in other code sections the Legislature
explicitly
defined
“health care worker” to encompass only individuals, section 1278.5 should likewise
be limited,
even absent an express definition.
See
Brief at 20 (citing Cal. Labor Code § 6332(a)(1) and §
6403.5(e)). The Court does not find this argument persuas
ive or necessary to its conclusion.
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that the L
egislature intended entities to be covered.
Second, ProTransport ignores that only
a
“
health care worker
of the health facility
” is
covered. ProTransport does not work in or for Kaiser‟s various health care
facilities. Instead, it is
a non
-
contracted tra
nsportation service, transporting patients of various medical plans to various
medical facilities. There is no indication in the statute itself or its legislative history
that the
California Legislature intended to cover non
-
contracted entities such as P
roTransport under
section 1278.5.
8
ProTransport argues that if the Court finds that entities are not protected by
section 1278.5,
it will amend to add ProTransport‟s Chief Executive Officer, Mike Sechrist, as a
party. Opp. Br.
at n. 4. The Court finds th
at amendment would be futile because there no argument or evidence
presented that ProTransport‟s CEO is a “health care worker.” Moreover, as with
ProTransport
itself, there is no evidence that ProTransport‟s CEO is a health care worker “
of
” a Kaiser faci
lity.
For the foregoing reasons, the California Health and Safety Code section 1278.5
claim is
DISMISSED WITH PREDJUDICE.
C.
Unfair Competition Law
Kaiser moves to dismiss ProTransport‟s Unfair Competition Law Claims (“UCL,”
Cal.
Bus. & Prof. Code § 17200
et seq
.).
9
In the Complaint, ProTransport alleges that Kaiser‟s conduct
violated the “illegal prong” of the UCL based on ProTransport‟s allegations that
Kaiser violated
the FCA and California Health and Safety Code section 1278.5. Complaint, ¶ 91.
Howev
er, as
those allegations have been dismissed, so must plaintiff‟s “illegal” UCL allegations.
ProTransport also alleges that Kaiser‟s conduct is “unfair” under the UCL
because it
refused to pay for medically necessary transports. ProTransport contends th
at its unfairness
8
ProTransport also relies on a case where the Ninth Circuit held that a corporation
‟s experience
of discrimination brought th
at
corporation within the “prudential zone of interest protected under
[42 U.S.C.] § 1981.”
Thinket Ink Info. Res., Inc. v. Sun Microsystems, Inc.
, 36
8 F.3d 1053, 1060
(9th Cir.
2004)
. That case, however, bear
s
no relevance to determining the scope of section
1278.5 in light of
th
is
statute‟s words and legislative history.
9
The UCL “is written
in the disjunctive, it establishes three varieties of unfair competition
-
acts
or practices that are unlawful, or unfair, or fraudulent.”
Cel
-
Tech Communications, Inc. v. Los
Angeles Cellular Telephone C
o
., 20 Cal. 4th 163, 180 (1999).
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allegation is “tethered” to legislative policies against defrauding the government,
protecting
patients, protecting patients‟ advocates, and encouraging competitive bidding.
Complaint, ¶ 92.
In its opposition, ProTransport
explains
that
its “unfairness” claim is based on its allegations that
Kaiser retaliated against ProTransport
–
after ProTransport complained of inadequate patient care
and fraud
–
in that Kaiser refused to pay for any of plaintiff‟s transports (not just Medicare
transp
orts) and Kaiser refused to allow ProTransport to participate in its competitive
bidding
process. Opp. Br. at 16.
Kaiser argues the “unfairness” allegations are barred for two reasons. First,
Kaiser argues
ProTransport‟s consumer protection claims are p
reempted under the Medicare Statute. Br. at 21
-
22; Reply Br. at 13
-
14;
see also
42 U.S.C. § 1395w
-
26 (“The standards established under this part
[42 USCS §§ 1395w
-
21 et seq.] shall supersede any State law or regulation (other than State
licensing laws or
State laws relating to plan solvency) with respect to MA plans which are offered
by MA organizations under this part.”); 42 C.F.R. § 422.402(a)
(“The standards established under
this part supersede any State law or regulation (other than State licensing la
ws or State laws
relating to plan solvency) with respect to the MA plans that are offered by MA
organizations”).
However, the two cases Kaiser relies on
Do Sung Uhm v. Humana, Inc
., 620 F.3d 1134
and
Phillips v. Kaiser Found. Health Plan, Inc
., 2011 U.S.
Dist. LEXIS 80456 (N.D. Cal. July 25,
2011)
, do not support its argument here.
In
Do Sung Uhm v. Humana, Inc
.,
the Ninth Circuit held that plaintiffs‟ fraud and
consumer protection act claims
–
based on misrepresentations made by the defendant in marketi
ng
its plan
–
were preempted under the Medicare Act‟s explicit preemption provision. The Court
reached that conclusion because determining whether the marketing at issue was
fraudulent and
misleading would conflict with a specific “standard” requiring CMS
to approve plan marketing
materials and determine whether or not they were misleading.
Id
., 62
0 F.3d
at 1150
-
53. Here,
however, defendant has not identified any particular portion of the Medicare Act or
a standard
promulgated by CMS that would conflict with ProTransport‟s claim that Kaiser
retaliated against
it by refusing to pay for non
-
Medicare transpo
rts and by excluding it from bidding to provide
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services to Kaiser.
10
Similarly in
Phillips v. Kaiser Found. Health Plan, Inc
.,
the Court determined that that
plaintiff‟s claims were either (a) a disguised attempt to seek benefits, which were
subject to
exh
austion; or (2) a challenge to the defendant‟s marketing materials, which was
preempted under
the same specific standard identified in
Uhm
.
2011 U.S. Dist. LEXIS 80456
at *28
-
29. As noted
above Kaiser fails to identify any standard that could be implicate
d by determining whether it was
unfair of Kaiser to retaliate against ProTransport by failing to pay ProTransport for
non
-
Medicare
transports and excluding ProTransport from its bidding process.
Second, Kaiser argues that ProTransport fails to adequately
allege its UCL unfairness
claim under Rules 9(b) and 12(b)(6). Reply Br. at 14
-
15. However, “fraud” is not an element of
the
remaining
“retaliation” unfairness UCL claims, therefore, Rule 9(b) does not apply. As to
Rule 12(b)(6), the Court finds that Ka
iser has adequately alleged the basis for its assertion that
Kaiser unfairly retaliated against it as a result of ProTransport‟s complaints about
billing and
patient care.
As such, Kaiser‟s Motion to Dismiss the UCL claim is GRANTED in part and
DENIED in
part. ProTransport‟s “illegal” prong UCL claims are DISMISSED, however, with
leave to amend
if ProTransport amends its FCA claim.
II.
MOTION TO STRIKE
Kaiser moves to strike various portions of the Complaint which, it contends, contain
immaterial and scan
dalous allegations which will serve only to distract and waste resources.
Kaiser also moves to strike portions of ProTransport‟s requests for relief under its
UCL claims, as
the requests cover damages and other monies that are not available as restitution
under the UCL.
A.
Immaterial and Scandalous Material
Federal Rule of Civil Procedure 12(f) provides that a court “may strike from a
pleading an
10
The Court agr
ees with Kaiser, however, that to the extent ProTransport is complaining about
Kaiser‟s failure to pay for
Medicare
transports, those claims are subject to exhaustion and cannot
form the basis of the UCL unfairness claim.
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insufficient defense or any redundant, immaterial, impertinent, or scandalous
matter.” Fed. R.
Civ. P. 12(f). T
he function of a motion to strike under Rule 12(f) is to avoid the expenditure of
time and money that must arise from litigating spurious issues by dispensing of
those issues before
trial.
See Fantasy, Inc. v. Fogerty
, 984 F.2d 1524, 1527 (9th Cir. 1993),
rev’d on other grounds
,
510 U.S. 517 (1994) (citation omitted). Motions to strike “are generally disfavored
because they
are often used as delaying tactics and because of the limited importance of
pleadings in federal
practice.”
Rosales v. Citibank
, 13
3 F. Supp. 2d 1177, 1180 (N.D. Cal. 2001). In most cases, a
motion to strike should not be granted unless “the matter to be stricken clearly
could have no
possible bearing on the subject of the litigation.”
Platte Anchor Bolt, Inc. v. IHI, Inc.
, 352 F.Su
pp.
2d 1048, 1057 (N.D. Cal. 2004).
The Court will address each portion of the Complaint Kaiser moves to strike in turn.
Paragraph 4, Page 2, Lines 22
-
23
: “If they do not receive this
treatment, they die within weeks.”
The Court DENIES the Motion to
Strike. This allegation is not immaterial or scandalous.
Paragraph 7, Page 3, Lines 13
-
17
: “What about the patients? These
patients, who could live for years with dialysis, die within weeks
without these transports. Of course, Kaiser welcomes these death
s
because these are the „expensive patients‟ who actually require care
and cost Kaiser money. When these patients die, Kaiser is left with a
„cheaper‟ patient population that costs Kaiser much less money.
With practices like these, it‟s no wonder how Kaise
r is making
billions in profits year
-
after
-
year.”
The Court GRANTS the Motion to Strike in part. References to Kaiser welcoming
deaths,
causing deaths or profiting from deaths
–
unsubstantiated by factual allegations
–
are immaterial
and scandalous and s
hould be stricken.
Paragraph 8, Page 3, Lines 18
-
25
: “Unfortunately, this is not the
first (or even the third) time Kaiser has been caught defrauding the
government. Indeed, in 2009, Kaiser was forced to settle two
separate False Claims matters resulting
from its Medicare and
Medicaid fraud for $5,580,000. Prior to those settlements, Kaiser
was forced to settle another False Claims action, in 2005, for
$1,900,000 due to its Medicare and Medicaid fraud. (Attached
hereto as Exhibit A are press releases rega
rding these settlements.)
However, in this case, the unlawful practices opposed by
ProTransport are far more egregious than those at issue in the prior
actions, and involve tens of millions of dollars if not substantially
more.”
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The Court DENIES the motio
n to strike. While of questionable relevance, the allegations
are not immaterial or impertinent.
Paragraph 41, Page 12, lines 16
-
19
: “Of course, Kaiser knows very
well that without dialysis these patients will die within weeks. That
is part of Kaiser‟s p
lan. Dialysis is expensive, so is transporting
patients to and from dialysis. By killing off these patients, Kaiser is
left with a much more profitable patient base, resulting in billions in
profits.”
The Court GRANTS the Motion to Strike in part. Refere
nces to Kaiser welcoming deaths,
causing deaths or profiting from deaths
–
unsubstantiated by factual allegations
–
are immaterial
and scandalous and should be stricken.
Paragraph 42, Page 12, Lines 23
-
26
: “... ProTransport does care
about these patients an
d could not leave them to die as Kaiser had
intended. Thus, ProTransport‟s action, at bottom, is about protecting
these vulnerable patients and ensuring that they are not continually
lied to by Kaiser who promises to comply with applicable law, yet
fails t
o provide these lifesaving transports for its patients.”
The Court
GRANTS the Motion to Strike in part. References to Kaiser welcoming deaths,
causing deaths or profiting from deaths
–
unsubstantiated by factual allegations
–
are immaterial
and
scandalous and should be stricken.
Paragraph 49, Page 13, Lines 26
-
27
: “... or these patients will die
–
yet Kaiser refuses to pay for these medically necessary transports.”
The Court DENIES the Motion to Strike. This allegation, when read in full, is not
immaterial or scandalous.
Paragraph 82, Page 18, lines 26
-
27 and page 19, lines 1
-
2
: “The
retaliatory actions taken by Kaiser against ProTransport, as alleged
herein, occurred within 120 days of ProTransport‟s complaints to
Kaiser regarding its illegal re
fusal to pay for its patients‟ transports
with the funds provided to Kaiser by Medicare and Kaiser‟s
insistence that ProTransport bills Medi
-
Cal for these federal
-
paid
-
for
services.”
The Court DENIES the Motion to Strike. These allegations are not immater
ial.
Paragraph 83, Page 19, lines 3
-
5
: “Accordingly; under Health &
Safety Code § 1278.5(d)(1), ProTransport is entitled to a rebuttable
presumption that the retaliatory actions taken against ProTransport
are attributable to its complaints regarding Kaise
r‟s illegal activity.”;
The Court DENIES the Motion to Strike. While no longer relevant to the case, in
light of
this claim‟s dismissal, the allegations are not immaterial.
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Paragraph 96, Page 21, lines 13
-
14
: “who then die within weeks
without dialysis.
”
The Court
GRANTS the Motion to Strike. References to Kaiser welcoming deaths,
causing deaths or profiting from deaths
–
unsubstantiated by factual allegations
–
are immaterial
and scandalous and should be stricken.
Exhibit A, in its entirety
.
The
Court DENIES the motion to strike. While of questionable relevance, the materials
in
Exhibit A are not immaterial or impertinent.
B.
References to Non
-
Restitutionary Damages
Kaiser moves to strike portions of paragraphs 94 and 95 regarding requested
remedie
s for
the alleged UCL violations on the grounds that the requested remedies fall outside
of restitution
allowed under the UCL. Specifically, Kaiser moves the strike:
Paragraph 94, Page 21, Lines 1
-
5
: “As a direct, foreseeable, and
proximate result of Kai
ser‟s unlawful business practices,
ProTransport has suffered and continues to suffer actual,
consequential, and incidental financial losses, including without
limitation, substantial loss of revenue and the costs expended in
transporting Kaiser‟s patients
at the request of Kaiser‟s doctors that
Kaiser has illegally refused to pay for.”
Paragraph 95, Page 21, Lines 6
-
8
: “Accordingly, pursuant to the
UCL, ProTransport is entitled to restitution of the amount expended
in transporting Kaiser‟s patients at the
request of Kaiser‟s doctors
that Kaiser has illegally refused to pay for.”
The Court GRANTS the Motion to Strike. The only form of monetary damages
authorized
by the UCL is restitution and the
“object of restitution is to restore the status quo by return
ing to
the plaintiff funds in which he or she has an ownership interest.”
Korea Supply Co. v. Lockheed
Martin Corp
., 29 Cal. 4th 1134, 1148
-
49 (2003)
. ProTransport opposes the Motion to Strike,
arguing that it is “essentially seeking payment of wages for
work it completed at the specific
direction of Kaiser‟s own physicians who requested the transport” and it is well
-
settled that
restitution under the UCL includes “lost wages.” Opp. Br. at 21. However, the
cases Kaiser relies
on
–
which recognize the ri
ghts of employees to unpaid but owed wages as “vested property
rights,”
see e.g., Montecino v. Spherion Corp
., 427 F. Supp. 2d 965 (C.D. Cal. 2006)
;
Hirel
Connectors, Inc. v. United States
, 2004 U.S. Dist. LEXIS 31036 (C.D. Cal. Jan. 23, 2004)
–
are
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not co
ntrolling here. The monies ProTransport seeks to recover are disputed
reimbursements,
which Kaiser is alleged to owe to a service provider. Those claimed damages are
in no way akin
to earned but unpaid wages of an employee.
CONCLUSION
Pursuant to the p
laintiff‟s request, and with the Attorney General‟s consent, plaintiff‟s
second through fifth and eight through tenth claims are DISMISSED WITHOUT
PREJUDICE.
Plaintiff‟s first claim
–
for violation of 31 U.S.C. section 3729(a)(1)(D) is DISMISSED WITH
LEAV
E TO AMEND
within twenty days of the date of this Order
. Plaintiff‟s sixth claim for
violation of California Health and Safety Code section 1278.5 is DISMISSED WITH
PREJUDICE. Plaintiff‟s UCL Claim is DISMISSED, in part, WITH LEAVE TO AMEND.
Defendant‟s Motion to Strike is DENIED in part and GRANT
ED in part.
IT IS SO ORDERED
.
Dated:
August 28, 2013
__
____________________________________
WILLIAM H. ORRICK
United States District Judge
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NORTHERN DISTRICT OF CALIFORNIA
UNITED STATES OF AMERICA, et al.,
Plaintiffs,
v.
KAISER FOUNDATION HEALTH PLAN, INC.,
Defendant
.
Case No.12-cv-03896-WHO
ORDER GRANTING IN PART AND DENYING IN PART MOTIONS TO DISMISS
AND STRIKE
Re: Dkt. Nos. 18, 19
On August 21, 2013, the Court heard argument on defendant‟s Motion to Dismiss and Motion to
Strike. For the foregoing reasons, the Court GRANTS in part and DENIES in part both the Motion
to Dismiss and the Motion to Strike.
BACKGROUND
Plaintiff ProTransport-1, LLC filed this complaint on behalf of itself, the United
States, and the State of California against Kaiser Foundation Health Plan, Inc.
Plaintiff asserts causes of action for violations of the False Claims Act (“FCA,” 31
U.S.C. § 3729(a)(1)), violation sof the California False Claims Act (Cal. Govt. Code
§ 12651(a)), violation of California Health and Safety Code § 1278.5, violations
of California‟s Unfair Competition Law (“UCL,” Cal. Bus. & Prof. Code § 17200),
breach of the implied covenant of good faith and fair dealing, quantummeruit, and
unjust enrichment/restitution. Docket No. 1. All of the claims stem from
ProTransport‟s allegations that Kaiser refused to pay ProTransport for its services
transporting Kaiser patients with End Stage Renal Disease (ESRD) to and from
dialysis treatments and instead required ProTransport to seek reimbursement for
its services from Medi-Cal. Complaint ¶¶ 34-39.
ProTransport alleges that under the Medicare Act
and its implementing regulations, Kaiser was
required to pay ProTrans
port in the first instance, and that requiring plaintiff to seek reimbursement from
Medi-Cal was improper and a fraud.Id. ProTransport also alleges that after
its representatives complained to Kaiser about its practice, Kaiser retaliated
against ProTransport
by refusing to pay for any transports made by ProTransport and excluding
ProTransport from
bidding to provide future services to Kaiser.
Id
., ¶¶ 42
-
43, 46, 50
-
51.
In March 2013, the United
States and California declined to intervene in the action,
and the Court
onApril 2, 2013 ordered the Complaint served on Kaiser. Docket No. 23.
Kaiser now moves to dismiss the Complaint and strike allegedly immaterial and
improper
references from the same. In response to the motion to dismiss, plaintiff agreed
to dismiss seven
out of the ten claims, and opposes dismissal of only the claim under t
he federal False
Claims Act
(31 U.S.C. § 3729(a)(1)(D)), violation of the anti
-
retaliation provision of California Government
Code section 1278.5, and violation of the
UCL.
See
Docket No.29 (Notice of Voluntary Dismissal
of Claims); Plaintiff‟s Opposition at 1, 7.
1
LEGAL STANDARD
Under Federal Rule of Civil Procedure 12(b)(6), a district court must dismiss a
complaint
if it fails to state a claim upon which relief can be granted. To survive a Rule 12(b)
(6) motion to
dismiss, the plaintiff must allege “enough facts to state a claim
to relief that is plausible on its
face.”
See Bell Atl. Corp. v. Twombly
, 550 U.S. 544, 556 (2007). A claim is facially plausible
when the plaintiff pleads facts that “allow the court to draw the reasonable
inference that the
defendant is liable for the
misconduct alleged.”
See Ashcroft v. Iqbal
, 556 U.S. 662, 678 (2009)
(citation omitted). There must be “more than a sheer possibility that a defendant
has acted
unlawfully.”
Id.
While courts do not require “heightened fact pleading of specifics,” a pl
aintiff
must allege facts sufficient to “raise a right to relief above the speculative level.”
See Twombly
,
1
Plaintiff‟s Notice of Voluntary Dismissal indicates that it dismisses Claims 2
-
5 (the federal
False Claim Act claim under 31 U.S.C. § 3729(a)(1)(A) and the California False
Claim Act
claims) without prejudice subject to the consent of the Attorney Gener
al. Docket No. 29. The
Attorney General consented to the dismissal without prejudice on August 1, 2013.
Docket No. 31.
In its Opposition, plaintiff also agrees to dismiss without prejudice of its breach of
the implied
covenant, quantum meruit, and unju
st enrichment claims in order to exhaust Medicare‟s
administrative requirements. Oppo. at 7. Defendants do not object. The Court,
therefore,
DISMISSES WITHOUT PREJUDICE Claims 2
-
5 and 8
-
10 of the Complaint.
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of California
550 U.S. at 555, 570.
In deciding whether the plaintiff has stated a claim upon which relief can be
granted, the
Court accepts the plaintiff‟s all
egations as true and draws all reasonable inferences in favor of the
plaintiff.
See Usher v. City of Los Angeles
, 828 F.2d 556, 561 (9th Cir. 1987). However, the court
is not required to accept as true “allegations that are merely conclusory,
unwarranted
deductions of
fact, or unreasonable inferences.”
See In re Gilead Scis. Sec. Litig.
, 536 F.3d 1049, 1055 (9th Cir.
2008).
DISCUSSION
I.
MOTION TO DISMISS
A.
False Claims Act
Plaintiff‟s FCA claim is brought under 31 U.S.C. section 3729(a)(1)(D) which
provides
for
FCA liability when an entity or person “
has possession, custody, or control of property or money
used, or to be used, by the Government and knowingly delivers, or causes to be
delivered, less
tha
n all of that money or property.” In the Complaint, pl
aintiff alleges that Kaiser violated this
section of the FCA (“Reverse False Claims,” Complaint at 14) by receiving and
controlling money
of the federal government and knowingly failing to deliver less than the full sum of
that money
“for the benefit of it
s patients,” when it required ProTransport to seek payment from Medi
-
Cal.
Complaint, ¶ 54. That conduct, ProTransport alleges, amounted to false or
fraudulent claims
incurred by the United States.
Id
. ¶ 55. In its Opposition, plaintiff argues that its F
CA claim is a
“implied false certification” claim, which arises when an entity has “obligated itself
to complying
with a law, rule or regulation” and that obligation is implicated by submitting a claim
for payment.
Oppo. Br. at 11 (quoting
Ebeid v. Lungwi
tz
, 616 F.3d 993 (9th Cir.
2010)
).
1.
Subject Matter Jurisdiction and Administrative Exhaustion
As an initial matter, Kaiser argues that plaintiff‟s FCA claim is simply a disguised
attempt
to secure payment for its services, and as such, the case “arises unde
r” the Medicare Act and must
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be dismissed for failure to exhaust Medicare‟s administrative procedures.
2
Do Sung Uhm v.
Humana, Inc
., 620
F.3d 1134, 1141 (9th Cir.
2010)
. ProTransport responds that this claim is not
one for reimbursement, but one to secur
e a recovery for the United States as a result of Kaiser‟s
false claims. ProTransport argues that FCA claims are not subject to the
administrative
exhaustion
.
As the Ninth Circuit has noted: “t
he Supreme Court has identified two
circumstances in
which a c
laim „arises under‟
t
he Medicare Act: (1) where the „
standing and the substantive basis
for the presentation of the claims
‟
is the Medicare Act
. . . and (2) where the claims are
„inextricably intertwined‟
with a claim for Medicare benefits
.”
Uhm
, 620
F.3d at 1141 (quoting
Heckler
,
466 U.S.
at
61
4
-
1
5
). The Ninth Circuit has also found another category of cases that
“arise under” the Act, “those cases that are “„
[c]leverly concealed claims for benefits.
‟””
Id
.
(quoting
Kaiser v. Blue Cross
, 347 F.3d 11
07
, 1112
(9th Cir. 2003)
).
In support of its argument that its FCA claim does not “arise under” the Medicare
Act,
plaintiff relies primarily on
United States v. Blue Cross & Blue Shield
(
In re ex rel Body
)
, 156
F.3d 1098 (11th Cir. 1998)
and
United States
v. Tenet Healthcare Corp
., 343 F. Supp. 2d 922, 928
(C.D. Cal. 2004). In
Body
, a former employ
ee of the defendant brought a F
C
A
action, asserting
that defendant had fraudulently submitted inflated claims for reimbursement under
Medicare. The
Court noted
that section 405(h) was intended to allow “the
administrative process the first
opportunity to resolve disputes over eligibility or the amount of benefits awarded
under the Act
”
and prevent “
beneficiaries and potential beneficiaries from evading administra
tive review by
creatively styling their benefits and eligibility claims as constitutional or statutory
challenges to
Medicare statutes and regulations
.”
Id
. at 1103
-
04. The Court distinguished the FCA claim at
issue there because actions “w
hich do not see
k payment from the government and could not be
2
Kaiser contends, and ProTransport does not
dispute, that under
42 U. S. C. § 405(h)
as made
applicable to the Medicare Act, claims for Medicare benefits or coverage for
services must be
pursued through all available administrative procedures before judicial review is
available.
See
e.g., Heckler
v. Ringer
, 466 U.S. 602, 615 (1984)
; 42 U.S.C. § 405(g). As applicable to Medical
Advantage Plans
–
the types of plans at issue in this case
–
disputes over coverage or for
reimbursement of services must be submitted through the administrative dispute
resolution
process.
See e.g
.,
42 CFR
§
422.560
(requiring MA organizations to institute grievance and
appeal procedures).
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Northern District
of California
brought under section 405, are therefore not barred by subsection 405(h).
”
Id
. at 1104. The Court
concluded that because the standing and basis of the claim alleged was the FCA
and not the
Medicare Act
–
alt
hough the defendant‟s application of Medicare rules and regulations “clearly
would be determinative of whether false claims were, in fact, submitted”
–
and because the
plaintiff‟s suit could not go forward under the administrative review process, the
actio
n was not
barred by section 405(h).
Id
. at 1105
-
06.
In
Tenent
, the United States sued healthcare providers seeking reimbursement of monies
the government paid to the providers for Medicare services that were billed at
higher
-
rates than
appropriate. The C
ourt found that the government‟
s standing
was
rooted in the
“
False Claims Act
and similar common law doctrine, which also provide the substantive basis for relief
.”
Id
. at 927.
The Court concluded that:
[s]ince the Court is not faced with a claim for
reimbursement from a
dissatisfied provider that should be channeled through the
administrative process, this case does not „arise under‟ the Medicare
Act. [] Rather, because the government‟s action is predicated on the
submission of inaccurate and mislead
ing claims, the common law,
not the Medicare Act, provides both standing and the substantive
basis for the claim.”
Id
. at 928.
As in
Body
and
Tenent
, here the FCA and not the Medicare Act provide both standing and
the substantive basis for ProTransport‟s
claim. While Kaiser argues that ProTransport could seek
a determination of whether the transports at issue were covered by Medicare (and
should have
been paid for by Kaiser in the first instance) through the administrative claims
resolution
procedures,
3
Kaiser does
not
argue or explain how the FCA claim asserted on behalf of the United
3
Kaiser asks the Court to take judicial notice of an Office of Medicare Hearings and
Appeals
Notice of Decision: Lexxiom Medical Services, ALJ No. 1
-
1341807952. Reques
t for Judicial
Notice [Docket No. 18], Attachment 3. In that decision, an ALJ denied a request for
Medicare
Part B coverage for ambulance transportation services that were provided without
a written order
from the beneficiary‟s attending physician and wit
hout preapproval from the Plan. Plaintiff does
not oppose the Request for Judicial Notice. Pursuant to Rule 201, courts
may only take judicial
notice of
“
adjudicative facts
” that are “
not
subject to reasonable dispute.”
United States v. Ritchie
,
342 F.3
d 903, 908 (9th Cir. 2003). A court may also take
judicial notice
of some
public records,
including
records and reports of administrative bodies
.
Id
. at 909. The Court, therefore, grants the
request to take judicial notice of the Notice of Decision, but
not the conclusions of fact reached in
that decision.
Cf. Lee v. City of Los Angeles
, 250 F.3d 668, 690 (9th Cir. 2001) (courts can take
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Northern District
of California
States could be pursued through the administrative procedures.
Kaiser
relies on
Do Sung Uhm v. Humana, Inc
., 620 F.3d 1134 (9th Cir. 2010)
. In that
case the Ninth Circuit
determined that breach of contract and unjust enrichment claims based on a
plan‟s failure to provide prescription drug coverage despite plaintiffs‟ payment of
premiums
“arose under” the Medicare Act and were subject to administrative exhaustion.
The fact
that
plaintiffs were not seeking coverage under the plan or reimbursement of lost
benefits, but instead
seeking breach of contract and unjust enrichment damages, did not alter the Court
‟s conclusion
because “at bottom” the plaintiffs were complaining abou
t the denial of a benefit despite their
payment of premiums.
Id.
at 1142
-
43. The Court found that the breach of contract claim was
simply,
“
a back
door attempt to enforce the Act‟
s requirements an
d to secure a remedy for
Humana‟
s alle
ged failure to provid
e benefits.”
Id
. at 1143. Finally, the Court noted that plaintiffs
failed to allege any injury “that could not be remedied through the retroactive
payment of
Medicare drug benefits” and concluded that plaintiffs‟ “claim for benefits could
have been
remed
ied through the Act‟s administrative review process.”
Id
. at 1144.
Here, as noted above, ProTransport was actually paid for the services it contends
were
covered by Medicare, albeit by Medi
-
Cal. Therefore, payments to ProTransport for services
provided
in the past are not at issue. Nor are payments that might be made in the future, as
ProTransport was allegedly barred by Kaiser from bidding to provide future
services. Complaint,
¶¶ 50
-
51. Moreover, the nature of the claim at issue
–
False Claims Act
–
is fundamentally
different than the breach of contract and unjust enrichment claims at issue in
Uhm
. Here, there is
no indication that the claims asserted on behalf of the United States
–
return of monies paid as
premiums to Kaiser
–
could be addressed i
n the administrative process.
Defendant also relies on
Kaiser v. Blue Cross
, 347 F.3d 1107 (9th Cir.
2003). There,
plaintiffs brought claims alleging violations of various Medicare regulations, the
Administrative
Procedure Act and the Fifth Amendment
based
on
the Health Care Financing Agency
‟s
(now
known as Centers for Medicare and Medicaid Services, CMS) issuance of various
regulations and
judicial notice of other courts‟ decisions, but only for existence of the opinion and
not for truth of
the facts asse
rted in the opinion).
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their cessation of payments to plaintiffs‟ business. The Court found that these
claims “arose
under” the Medicar
e Act, despite the fact that plaintiff‟s sought damages beyond the
reimbursement
of
payments available under Medicare because plaintiffs‟ claims were
“inextricably intertwined” with the reimbursement claims of their former business.
The FAC
claim asserted
here stands on different footing because it does not seek recovery for
ProTransport‟s damages.
4
Kaiser also points out that unlike
Tenet
, here plaintiff is clearly a “dissatisfied” provider,
and that the Court in
Body
distinguished the FCA claims at issue there from “
veiled claims for
benefits by a disgruntled beneficiary that could have, and should have, been
pursued
administratively in the first instance
.” 156 F.3d at 1109. There is no dispute in this case that
Pro
Transport was a “provider” and is “disgruntled” by Kaiser‟s conduct. However,
under the
three claims left in the case, ProTransport is
not
seeking payment for its Medicare
-
related
transportation services. Indeed, in its Complaint, ProTransport alleges th
at it
was reimbursed
for
its transports by Medi
-
Cal (reimbursement it sought only under Kaiser‟s direction).
See
Complaint ¶¶ 6, 39 (noting “Medi
-
Cal approved for payment” ProTransport‟s claims for
transportation). Similarly, ProTransport is not arguing
that Kaiser‟s direction to seek payment
from Medi
-
Cal resulted in lower payments to ProTransport
–
a claim which would need to be
pursued through the administrative claims process. Instead, ProTransport is
asserting a claim on
behalf of the United States c
laiming Kaiser‟s conduct defrauded the government.
Similarly, the fact that the Medicare statute and regulations will need to be
interpreted to
determine whether Kaiser‟s conduct violated the FCA does not make this case
“inextricable
intertwined” with a
claim for reimbursement or for benefits.
But see
Kaiser v. Blue Cross
, 347
F.3d
at 1114. Indeed, as the Eleventh Circuit noted in
Body
, 156 F.3d at 1109, “subsection 405(h),
viewed within the context in which it was drafted and made applicable to Medica
re, simply seeks
4
In its breach of the implied covenant and quantum meruit claims
–
which are dismissed to allow
exhaustion of the claims in the administrative process
–
ProTransport claims that Kaiser has
refused to pay ProTransport “for the reason
able value of its services for these medical transports”
and ProTransport has “incurred loss of revenue and the costs expended in
transporting Kaiser‟s
patients” at the request of Kaiser. Complaint ¶¶ 102, 108, 109.
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Northern District
of California
to preserve the integrity of the administrative process Congress designed to deal
with challenges to
amounts determinations by dissatisfied beneficiaries, not to serve as a complete
preclusion of all
claims related to benefits determinatio
ns in general.”
Kaiser
asserted
d
uring oral argument that if this
Court allows ProTransport‟s FCA claim to
continue, it will open the “floodgates” for dissatisfied service providers to bring
claims in court
and avoid administrative exhaustion. However,
FCA claims can
only
be alleged based on a
particularized allegation
of fraud to the United States and
can only seek
recovery
on behalf of
the
United States; only
t
hat
narrow class of
plaintiffs
w
ill be able to proceed directly in federal cou
rt.
T
hose
who assert disguised claims for benefits or services
–
like ProTransport‟s breach of implied
covenant and
quantum meruit
claims
–
will have to exhaust
those claims
in the first instance.
In conclusion, t
he Court finds that plaintiff‟s FCA cau
se of action is not a “disguised”
claim for benefits nor it is “inextricably intertwined” with a claim for benefits and,
therefore, does
not “arise under” the Medicare Act.
2.
Failure to Satisfy Rule 9(b)
Kaiser also argues that plaintiff‟s FCA claim must be
dismissed because the Complaint
fails to plead the FCA claim with particularity under Federal Rule of Civil
Procedure 9(b). In
Opposition, plaintiff clarifies that its theory of FCA liability under section 3729(a)(1)
(D) is based
on an “implied false cert
ification.” Opposition Br. at 11. In the Ninth Circuit,
the four elements
of a false certification claim
are
:
“(1) a false statement or fraudulent course of conduct, (2) made
with scienter, (3) that was material, causing (4) the government to pay out mon
ey or forfeit
moneys due.”
U.S. ex rel Hendow v. Univ. of Phoenix
, 461 F.3d 1166, 1174 (9th Cir. 2006). A
theory
of implied false certification
is “„based on the notion that the act of submitting a claim for
reimbursement itself implies compliance with governing federal rules that are a
precondition to
payment.‟”
Ebeid v. Lungwitz
, 616 F.3d 993, 996 (9th Cir. 2010)
(quoting
U.S. ex rel. Mikes v
.
Straus
, 274 F.3d 687, 699 (2d Cir. 2001)
). As the Ninth Circuit explained in
Ebeid
:
Express certification simply means that the entity seeking payment
certifies compliance with a law, rule or regulation as part of the
process through which the claim for
payment is submitted. Implied
false certification occurs when an entity has previously undertaken
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to expressly comply with a law, rule, or regulation, and that
obligation is implicated by submitting a claim for payment even
though a certification of compl
iance is not required in the process of
submitting the claim.
Under both theories, “
[i]t is the false
certification of compliance which creates liability when certification
is a prerequisite to obtaining a government benefit.
”
Id
. at 998 (quoting
U.S. ex
rel. Hopper v. Anton
, 91 F.3d 1261
, 1266
(9th Cir.
1
996)
).
Under Federal Rule of Civil Procedure 9(b),
a party
must
“
state with particularity the
circumstances constituting fraud or mistake,
” including “
the who, what, when, where, and
how of
the misconduc
t charged.”
Vess v. Ciba
-
Geigy Corp. USA
, 317 F.3d 1097, 1106 (9th Cir. 2003)
(internal quotation marks omitted).
As applied here, “[t]o survive a Rule 9(b) motion to dismiss, a
complaint alleging implied false certification must plead with particularity
allegations that provide
a reasonable basis to infer that (1) the defendant explicitly undertook to comply
with a law, rule or
regulation that is implicated in submitting a claim for payment and that (2) claims
were submitted
(3) even though the defendant
was not in compliance with that law, rule or regulation.”
Ebeid
,
616 F.3d at 998.
The Court has reviewed the Complaint in detail and agrees with
Kaiser
that it fails to
adequately plead the remaining FCA claim. While the Complaint cites to various
statu
tes and
regulations to argue that Kaiser‟s Medical Advantage plan is required to provide
the same level of
coverage required under Medicare and that medically necessary transports are
covered by
Medicare,
see e.g
., Complaint ¶¶24
-
25, 27
-
29, the Complaint d
oes not identify which law, rule or
regulation Kaiser undertook to comply with that “is implicated in submitting a claim
for
payment.”
5
Moreover, the Complaint does not identify what “claims” Kaiser submitted that were
“impliedly” false. Plaintiff attemp
ts to rely on six representative examples of patients suffering
5
For example, in
U.S. ex. rel. Mikes
v. Straus
, 274 F.3d 687 (2d Cir. 2001)
, the Court held that
an implied false certification claim under the Medicare Act could be based on 42 U.
S.C. section
1395y(a)(1)(A), which prohibited payments for medical procedures not
“reasonably necessary,”
but no
t on 42 U.S.C. section 1320c
-
5(a), which mandated a qualitative standard of care. As the
Second Circuit explained, because section 1320c
-
5(a) established “
conditions of participation,
r
ather than prerequisites
to receiving reimbursement
” under the Medicar
e Act, it could not be a
basis for an implied false certification claim.
Id
. at 701
-
02. However, a claim could be based on
section 1395y(a)(1)(A) which contained
“
an
express condition of payment
–
that
is, „
no payment
may be made
‟
–
it explicitly links e
ach Medicare payment to the requirement that the particular
item or servic
e be „reasonable and necessary.‟”
Id
. at 700
; see
also Ebeid
,
616 F.3d
at 1
000
-
10001
(discussing the difference between statutes and regulations which contain a
“condition of
payment” as opposed to a “conditions of participation”).
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with ESRD who were transported by plaintiff but whose claims for transportation
were not paid by
Kaiser. Opp. Br. at 13. But these “claims” were submitted by ProTransport to
Kaiser, not clai
ms
for payment
submitted
by Kaiser
. Finally, it is unclear how this “implied false certification”
allegation fits within section
3729(a)(1)(D)
, which prohibits
a person or entity having custody of
the government‟s money or property from delivering “less
than all of that money or property.”
6
Simply put, ProTransport‟s Complaint does not sufficiently allege the “
who, what, when,
where, and how
” of the asserted implied false certification claim to allow Kaiser to defend.
Therefore, Kaiser‟s Motion to Dismi
ss is GRANTED with respect to ProTransport‟s FCA claim.
However, as it is not clear that ProTransport would not be able to adequately
allege a FCA claim,
the dismissal is WITH LEAVE TO AMEND. If ProTransport wishes to amend, it must
file an
amended compla
int within
t
wenty
(
2
0) days of the date of this Order.
B.
California Health & Safety Code § 1278.5
Kaiser also moves to dismiss ProTransport‟s claim under California Health and
Safety
Code section 1278.5, arguing that as a non
-
contracted transportation service
provider ProTransport
is not within the scope of the statute‟s protection. Section 1278.5(b)(1) provides
that “[n]o health
facility shall discriminate or retaliate, in any manner, against any patient,
employee, member of
the medical staff, or any other he
alth care worker of the health facility because that person has”
presented a grievance or complaint to the facility, an agency or any other
governmental entity.
ProTransport asserts that it is covered by the statute as “any other health care
worker” of
Kaiser,
and that as a “remedial statute” section 1278.5 should be broadly interpreted to
include entities
like ProTransport. Opp. Br. at 14
-
15. There are two problems with ProTransport‟s position.
6
In case plaintiff attempts to revert to its “reverse false claims” allegation raised in
the
Complaint, as
the Ninth Circuit explained in
Cafasso v. Gen. Dynamics C4 Sys
., 637 F.3d 1047
(9th Cir. 2011)
, allegations of “reverse false claims” require identification of a “false claim” or
“statement” made to avoid paying a debt or returning property to the United
States.
Id
. at 1056.
No such allegations have been made here.
Cf
.,
Cafasso
at 1056 (dismissing FCA claim because
“it does not allege that GDC4S falsely asserted an entitlement to obtain or retain
government
money or property. It does not allege that GDC
4S made a demand for payment, fraudulently used
a receipt, participated in an unauthorized purchase of government property, or
used a false record
or statement.”).
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First, ProTransport is not “any other health care worke
r” but an entity. There is no
evidence in either the statute itself or in its legislative history that the California
Legislature
intended to cover entities. All of the categories covered by the statute “
patient, employee, member
of the medical staff, or
any other health care worker
” are individuals, not entities. ProTransport
argues that where the legislature wanted to limit whistleblower protection to
specific individuals
or classes of individuals it did so. Opp. at 15 (citing Cal. Bus. & Prof. Code
2056
(providing
“protection against retaliation
for physicians
who advocate for medically appropriate health care”)
(emphasis added); Cal. Bus. & Prof. Code § 510 (providing “protection against
retaliation for
health care practitioners
who advocate for app
ropriate health care for their patients”) (emphasis
added)). But simply because the Legislature provided for whistleblower protection
for specific
categories of professionals within the Business and Professions Code
does not mean “entities” are
included
in the list of persons expressly protected from retaliation by health facilities in
section
1278.5.
7
Moreover, as Kaiser points out, the original statute covered only patients and
employees.
In 2007, the Legislature
–
recognizing a gap in coverage for phy
sicians and surgeons who are not
typically employees of a health care facility
–
amended the statute to “[a]dd[] physicians and
surgeons to employees of health facilities . . . that have „whistleblower protection. .
. .” Assemb.
Comm. on Appropriations, R
eport re A.B. 632, 2007
-
08 Reg. Session, at 1 (Apr. 24, 2007). The
Senate Report noted that
–
according to the legislation‟s sponsor
–
“any other health care worker
of the health facility” “
could be interpreted to include persons such as blood, organ, and
tissue
transporters, emergency medical technicians or paramedics, and physical
therapists.
By adding
the phrase
„other health care workers‟
in the protected class, therefore, these persons would enjoy
the whistleblower protections now enjoyed only by pat
ients and employees of the health facility.
”
S. Judiciary Comm., Report on A.B. 632, 2007
-
08 Reg. Sess.. at 6 (July 12, 2007). The legislative
history repeatedly refers to individuals
–
“people” and “these persons”
–
and there is no indication
7
Relatedly, Kaiser argues that because in other code sections the Legislature
explicitly
defined
“health care worker” to encompass only individuals, section 1278.5 should likewise
be limited,
even absent an express definition.
See
Brief at 20 (citing Cal. Labor Code § 6332(a)(1) and §
6403.5(e)). The Court does not find this argument persuas
ive or necessary to its conclusion.
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that the L
egislature intended entities to be covered.
Second, ProTransport ignores that only
a
“
health care worker
of the health facility
” is
covered. ProTransport does not work in or for Kaiser‟s various health care
facilities. Instead, it is
a non
-
contracted tra
nsportation service, transporting patients of various medical plans to various
medical facilities. There is no indication in the statute itself or its legislative history
that the
California Legislature intended to cover non
-
contracted entities such as P
roTransport under
section 1278.5.
8
ProTransport argues that if the Court finds that entities are not protected by
section 1278.5,
it will amend to add ProTransport‟s Chief Executive Officer, Mike Sechrist, as a
party. Opp. Br.
at n. 4. The Court finds th
at amendment would be futile because there no argument or evidence
presented that ProTransport‟s CEO is a “health care worker.” Moreover, as with
ProTransport
itself, there is no evidence that ProTransport‟s CEO is a health care worker “
of
” a Kaiser faci
lity.
For the foregoing reasons, the California Health and Safety Code section 1278.5
claim is
DISMISSED WITH PREDJUDICE.
C.
Unfair Competition Law
Kaiser moves to dismiss ProTransport‟s Unfair Competition Law Claims (“UCL,”
Cal.
Bus. & Prof. Code § 17200
et seq
.).
9
In the Complaint, ProTransport alleges that Kaiser‟s conduct
violated the “illegal prong” of the UCL based on ProTransport‟s allegations that
Kaiser violated
the FCA and California Health and Safety Code section 1278.5. Complaint, ¶ 91.
Howev
er, as
those allegations have been dismissed, so must plaintiff‟s “illegal” UCL allegations.
ProTransport also alleges that Kaiser‟s conduct is “unfair” under the UCL
because it
refused to pay for medically necessary transports. ProTransport contends th
at its unfairness
8
ProTransport also relies on a case where the Ninth Circuit held that a corporation
‟s experience
of discrimination brought th
at
corporation within the “prudential zone of interest protected under
[42 U.S.C.] § 1981.”
Thinket Ink Info. Res., Inc. v. Sun Microsystems, Inc.
, 36
8 F.3d 1053, 1060
(9th Cir.
2004)
. That case, however, bear
s
no relevance to determining the scope of section
1278.5 in light of
th
is
statute‟s words and legislative history.
9
The UCL “is written
in the disjunctive, it establishes three varieties of unfair competition
-
acts
or practices that are unlawful, or unfair, or fraudulent.”
Cel
-
Tech Communications, Inc. v. Los
Angeles Cellular Telephone C
o
., 20 Cal. 4th 163, 180 (1999).
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allegation is “tethered” to legislative policies against defrauding the government,
protecting
patients, protecting patients‟ advocates, and encouraging competitive bidding.
Complaint, ¶ 92.
In its opposition, ProTransport
explains
that
its “unfairness” claim is based on its allegations that
Kaiser retaliated against ProTransport
–
after ProTransport complained of inadequate patient care
and fraud
–
in that Kaiser refused to pay for any of plaintiff‟s transports (not just Medicare
transp
orts) and Kaiser refused to allow ProTransport to participate in its competitive
bidding
process. Opp. Br. at 16.
Kaiser argues the “unfairness” allegations are barred for two reasons. First,
Kaiser argues
ProTransport‟s consumer protection claims are p
reempted under the Medicare Statute. Br. at 21
-
22; Reply Br. at 13
-
14;
see also
42 U.S.C. § 1395w
-
26 (“The standards established under this part
[42 USCS §§ 1395w
-
21 et seq.] shall supersede any State law or regulation (other than State
licensing laws or
State laws relating to plan solvency) with respect to MA plans which are offered
by MA organizations under this part.”); 42 C.F.R. § 422.402(a)
(“The standards established under
this part supersede any State law or regulation (other than State licensing la
ws or State laws
relating to plan solvency) with respect to the MA plans that are offered by MA
organizations”).
However, the two cases Kaiser relies on
Do Sung Uhm v. Humana, Inc
., 620 F.3d 1134
and
Phillips v. Kaiser Found. Health Plan, Inc
., 2011 U.S.
Dist. LEXIS 80456 (N.D. Cal. July 25,
2011)
, do not support its argument here.
In
Do Sung Uhm v. Humana, Inc
.,
the Ninth Circuit held that plaintiffs‟ fraud and
consumer protection act claims
–
based on misrepresentations made by the defendant in marketi
ng
its plan
–
were preempted under the Medicare Act‟s explicit preemption provision. The Court
reached that conclusion because determining whether the marketing at issue was
fraudulent and
misleading would conflict with a specific “standard” requiring CMS
to approve plan marketing
materials and determine whether or not they were misleading.
Id
., 62
0 F.3d
at 1150
-
53. Here,
however, defendant has not identified any particular portion of the Medicare Act or
a standard
promulgated by CMS that would conflict with ProTransport‟s claim that Kaiser
retaliated against
it by refusing to pay for non
-
Medicare transpo
rts and by excluding it from bidding to provide
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services to Kaiser.
10
Similarly in
Phillips v. Kaiser Found. Health Plan, Inc
.,
the Court determined that that
plaintiff‟s claims were either (a) a disguised attempt to seek benefits, which were
subject to
exh
austion; or (2) a challenge to the defendant‟s marketing materials, which was
preempted under
the same specific standard identified in
Uhm
.
2011 U.S. Dist. LEXIS 80456
at *28
-
29. As noted
above Kaiser fails to identify any standard that could be implicate
d by determining whether it was
unfair of Kaiser to retaliate against ProTransport by failing to pay ProTransport for
non
-
Medicare
transports and excluding ProTransport from its bidding process.
Second, Kaiser argues that ProTransport fails to adequately
allege its UCL unfairness
claim under Rules 9(b) and 12(b)(6). Reply Br. at 14
-
15. However, “fraud” is not an element of
the
remaining
“retaliation” unfairness UCL claims, therefore, Rule 9(b) does not apply. As to
Rule 12(b)(6), the Court finds that Ka
iser has adequately alleged the basis for its assertion that
Kaiser unfairly retaliated against it as a result of ProTransport‟s complaints about
billing and
patient care.
As such, Kaiser‟s Motion to Dismiss the UCL claim is GRANTED in part and
DENIED in
part. ProTransport‟s “illegal” prong UCL claims are DISMISSED, however, with
leave to amend
if ProTransport amends its FCA claim.
II.
MOTION TO STRIKE
Kaiser moves to strike various portions of the Complaint which, it contends, contain
immaterial and scan
dalous allegations which will serve only to distract and waste resources.
Kaiser also moves to strike portions of ProTransport‟s requests for relief under its
UCL claims, as
the requests cover damages and other monies that are not available as restitution
under the UCL.
A.
Immaterial and Scandalous Material
Federal Rule of Civil Procedure 12(f) provides that a court “may strike from a
pleading an
10
The Court agr
ees with Kaiser, however, that to the extent ProTransport is complaining about
Kaiser‟s failure to pay for
Medicare
transports, those claims are subject to exhaustion and cannot
form the basis of the UCL unfairness claim.
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insufficient defense or any redundant, immaterial, impertinent, or scandalous
matter.” Fed. R.
Civ. P. 12(f). T
he function of a motion to strike under Rule 12(f) is to avoid the expenditure of
time and money that must arise from litigating spurious issues by dispensing of
those issues before
trial.
See Fantasy, Inc. v. Fogerty
, 984 F.2d 1524, 1527 (9th Cir. 1993),
rev’d on other grounds
,
510 U.S. 517 (1994) (citation omitted). Motions to strike “are generally disfavored
because they
are often used as delaying tactics and because of the limited importance of
pleadings in federal
practice.”
Rosales v. Citibank
, 13
3 F. Supp. 2d 1177, 1180 (N.D. Cal. 2001). In most cases, a
motion to strike should not be granted unless “the matter to be stricken clearly
could have no
possible bearing on the subject of the litigation.”
Platte Anchor Bolt, Inc. v. IHI, Inc.
, 352 F.Su
pp.
2d 1048, 1057 (N.D. Cal. 2004).
The Court will address each portion of the Complaint Kaiser moves to strike in turn.
Paragraph 4, Page 2, Lines 22
-
23
: “If they do not receive this
treatment, they die within weeks.”
The Court DENIES the Motion to
Strike. This allegation is not immaterial or scandalous.
Paragraph 7, Page 3, Lines 13
-
17
: “What about the patients? These
patients, who could live for years with dialysis, die within weeks
without these transports. Of course, Kaiser welcomes these death
s
because these are the „expensive patients‟ who actually require care
and cost Kaiser money. When these patients die, Kaiser is left with a
„cheaper‟ patient population that costs Kaiser much less money.
With practices like these, it‟s no wonder how Kaise
r is making
billions in profits year
-
after
-
year.”
The Court GRANTS the Motion to Strike in part. References to Kaiser welcoming
deaths,
causing deaths or profiting from deaths
–
unsubstantiated by factual allegations
–
are immaterial
and scandalous and s
hould be stricken.
Paragraph 8, Page 3, Lines 18
-
25
: “Unfortunately, this is not the
first (or even the third) time Kaiser has been caught defrauding the
government. Indeed, in 2009, Kaiser was forced to settle two
separate False Claims matters resulting
from its Medicare and
Medicaid fraud for $5,580,000. Prior to those settlements, Kaiser
was forced to settle another False Claims action, in 2005, for
$1,900,000 due to its Medicare and Medicaid fraud. (Attached
hereto as Exhibit A are press releases rega
rding these settlements.)
However, in this case, the unlawful practices opposed by
ProTransport are far more egregious than those at issue in the prior
actions, and involve tens of millions of dollars if not substantially
more.”
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The Court DENIES the motio
n to strike. While of questionable relevance, the allegations
are not immaterial or impertinent.
Paragraph 41, Page 12, lines 16
-
19
: “Of course, Kaiser knows very
well that without dialysis these patients will die within weeks. That
is part of Kaiser‟s p
lan. Dialysis is expensive, so is transporting
patients to and from dialysis. By killing off these patients, Kaiser is
left with a much more profitable patient base, resulting in billions in
profits.”
The Court GRANTS the Motion to Strike in part. Refere
nces to Kaiser welcoming deaths,
causing deaths or profiting from deaths
–
unsubstantiated by factual allegations
–
are immaterial
and scandalous and should be stricken.
Paragraph 42, Page 12, Lines 23
-
26
: “... ProTransport does care
about these patients an
d could not leave them to die as Kaiser had
intended. Thus, ProTransport‟s action, at bottom, is about protecting
these vulnerable patients and ensuring that they are not continually
lied to by Kaiser who promises to comply with applicable law, yet
fails t
o provide these lifesaving transports for its patients.”
The Court
GRANTS the Motion to Strike in part. References to Kaiser welcoming deaths,
causing deaths or profiting from deaths
–
unsubstantiated by factual allegations
–
are immaterial
and
scandalous and should be stricken.
Paragraph 49, Page 13, Lines 26
-
27
: “... or these patients will die
–
yet Kaiser refuses to pay for these medically necessary transports.”
The Court DENIES the Motion to Strike. This allegation, when read in full, is not
immaterial or scandalous.
Paragraph 82, Page 18, lines 26
-
27 and page 19, lines 1
-
2
: “The
retaliatory actions taken by Kaiser against ProTransport, as alleged
herein, occurred within 120 days of ProTransport‟s complaints to
Kaiser regarding its illegal re
fusal to pay for its patients‟ transports
with the funds provided to Kaiser by Medicare and Kaiser‟s
insistence that ProTransport bills Medi
-
Cal for these federal
-
paid
-
for
services.”
The Court DENIES the Motion to Strike. These allegations are not immater
ial.
Paragraph 83, Page 19, lines 3
-
5
: “Accordingly; under Health &
Safety Code § 1278.5(d)(1), ProTransport is entitled to a rebuttable
presumption that the retaliatory actions taken against ProTransport
are attributable to its complaints regarding Kaise
r‟s illegal activity.”;
The Court DENIES the Motion to Strike. While no longer relevant to the case, in
light of
this claim‟s dismissal, the allegations are not immaterial.
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Paragraph 96, Page 21, lines 13
-
14
: “who then die within weeks
without dialysis.
”
The Court
GRANTS the Motion to Strike. References to Kaiser welcoming deaths,
causing deaths or profiting from deaths
–
unsubstantiated by factual allegations
–
are immaterial
and scandalous and should be stricken.
Exhibit A, in its entirety
.
The
Court DENIES the motion to strike. While of questionable relevance, the materials
in
Exhibit A are not immaterial or impertinent.
B.
References to Non
-
Restitutionary Damages
Kaiser moves to strike portions of paragraphs 94 and 95 regarding requested
remedie
s for
the alleged UCL violations on the grounds that the requested remedies fall outside
of restitution
allowed under the UCL. Specifically, Kaiser moves the strike:
Paragraph 94, Page 21, Lines 1
-
5
: “As a direct, foreseeable, and
proximate result of Kai
ser‟s unlawful business practices,
ProTransport has suffered and continues to suffer actual,
consequential, and incidental financial losses, including without
limitation, substantial loss of revenue and the costs expended in
transporting Kaiser‟s patients
at the request of Kaiser‟s doctors that
Kaiser has illegally refused to pay for.”
Paragraph 95, Page 21, Lines 6
-
8
: “Accordingly, pursuant to the
UCL, ProTransport is entitled to restitution of the amount expended
in transporting Kaiser‟s patients at the
request of Kaiser‟s doctors
that Kaiser has illegally refused to pay for.”
The Court GRANTS the Motion to Strike. The only form of monetary damages
authorized
by the UCL is restitution and the
“object of restitution is to restore the status quo by return
ing to
the plaintiff funds in which he or she has an ownership interest.”
Korea Supply Co. v. Lockheed
Martin Corp
., 29 Cal. 4th 1134, 1148
-
49 (2003)
. ProTransport opposes the Motion to Strike,
arguing that it is “essentially seeking payment of wages for
work it completed at the specific
direction of Kaiser‟s own physicians who requested the transport” and it is well
-
settled that
restitution under the UCL includes “lost wages.” Opp. Br. at 21. However, the
cases Kaiser relies
on
–
which recognize the ri
ghts of employees to unpaid but owed wages as “vested property
rights,”
see e.g., Montecino v. Spherion Corp
., 427 F. Supp. 2d 965 (C.D. Cal. 2006)
;
Hirel
Connectors, Inc. v. United States
, 2004 U.S. Dist. LEXIS 31036 (C.D. Cal. Jan. 23, 2004)
–
are
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not co
ntrolling here. The monies ProTransport seeks to recover are disputed
reimbursements,
which Kaiser is alleged to owe to a service provider. Those claimed damages are
in no way akin
to earned but unpaid wages of an employee.
CONCLUSION
Pursuant to the p
laintiff‟s request, and with the Attorney General‟s consent, plaintiff‟s
second through fifth and eight through tenth claims are DISMISSED WITHOUT
PREJUDICE.
Plaintiff‟s first claim
–
for violation of 31 U.S.C. section 3729(a)(1)(D) is DISMISSED WITH
LEAV
E TO AMEND
within twenty days of the date of this Order
. Plaintiff‟s sixth claim for
violation of California Health and Safety Code section 1278.5 is DISMISSED WITH
PREJUDICE. Plaintiff‟s UCL Claim is DISMISSED, in part, WITH LEAVE TO AMEND.
Defendant‟s Motion to Strike is DENIED in part and GRANT
ED in part.
IT IS SO ORDERED
.
Dated:
August 28, 2013
__
____________________________________
WILLIAM H. ORRICK
United States District Judge
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Courthouse News Service
November 19, 2014
Kaiser Ignored
Kidney Cyst,
Woman Claims
By BARBARA WALLACE
ELLICOTT CITY, Md.
(CN) - Kaiser ignored a
kidney cyst that turned
out to be cancer, a
woman claims in the
Circuit Court for Howard
County.
Loistene Lassiter sued
Kaiser Foundation
Health Plan of the
Mid-Atlantic States, Inc.,
seeking $5 million plus
interest, costs, attorney's
fees and a jury trial.
According to the
lawsuit, Lassiter had a CT
scan of her abdomen and
pelvis on Jan. 10, 2008.
The written report of her
scan stated,
"Subcentimeter
hyperdense lesion
involving the mid left
kidney may represent a
hyperdense cyst, or other
etiology. Suggest
correlation with
sonography of the kidneys
or consider follow-up with
CT in three months to
assess for stability or
change," according to the
complaint.
But the next day,
Lassiter's doctor
"informed Ms. Lassiter in
a letter that her most
recent CT revealed no
acute findings," the
complaint states. The
suggested follow-up
sonography or CT scan
did not happen, it says.
Over the next three
years, as Lassiter had a
variety of routine medical
appointments for various
conditions and
procedures, "nothing
was ever said of the
hyperdense lesion on
her left kidney nor did
any follow-up occur
concerning it," the
complaint states.
"On Jan. 11, 2011,
Ms. Lassiter reported to
her doctor that she was
experiencing lower back
pain covering a period of
three (3) weeks. She
stated that the pain had
expanded to the lower
right side, below her
stomach. She also
indicated that heat and
cold packs, Epsom salt
soaks, and medication
like Advil had not
resolved the pain. She
also mentioned that
upon urinating, she
experienced a burning
sensation and noticed
some blood," it
continues. (Parentheses
in complaint.)
Her doctor suggested
a kidney stone or
infection, according to
the complaint. However,
after a variety of tests
over the next month,
Lassiter was told she
had a kidney mass,
much larger than
originally seen in 2008,
"suspicious for neoplasm
(i.e. new and abnormal
growth, such as a
tumor). What had been a
millimeter in size (and not
monitored by Ms.
Lassiter's doctors) had
now grown to
centimeters, i.e., it grew
from .02 inches to 1.5
inches," the complaint
states. (Parentheses in
complaint.)
Lassiter says she told
her doctor she was upset
by the lack of monitoring
and discussion about the
cyst and options for
treating it. "Her doctor
informed her that she
never had conversations
with her about the cyst
because she did not
know about it until
recently! The doctor said
that 'zillions of people
have small cysts on their
kidneys - it is incredibly
common and not typically
worrisome,'" the
complaint states.
"Ms. Lassiter
underwent major surgery
to remove a part of her
left kidney in June 2011.
The pre and post
operation pain, stress,
and anguish were
significant," the
complaint states.
"Sharing the news with
her family produced
more mental anguish
than Ms. Lassiter ever
experienced in her life.
The questions, fears,
anxiety, etc., were
overwhelming," it
continues. Lassiter says
she missed substantial
time from her work, her
vacation plans were
disrupted and she had to
give up competitive
tennis.
"The strain on
relationships was also
palpable. Her husband
was gravely concerned
and questioned the
doctor about numerous
things. Sex was not
occurring, and this
lifestyle change was one
of many endured due to
Ms. Lassiter's medical
condition," the complaint
continues.
Even now, Lassiter
says, "she experiences
anguish about her
current and future health
condition, and she must
have follow-up medical
attention for the rest of
her life! Every pain or
discomfort causes
thoughts about cancer
returning, more surgery,
other organs being
cancerous, dying from
cancer, etc."
Loistene Lassiter is
represented by Rickey
Nelson Jones of
Baltimore.
Courthouse News Service
November 19, 2014
Kaiser Ignored
Kidney Cyst,
Woman Claims
By BARBARA WALLACE
ELLICOTT CITY, Md.
(CN) - Kaiser ignored a
kidney cyst that turned
out to be cancer, a
woman claims in the
Circuit Court for Howard
County.
Loistene Lassiter sued
Kaiser Foundation
Health Plan of the
Mid-Atlantic States, Inc.,
seeking $5 million plus
interest, costs, attorney's
fees and a jury trial.
According to the
lawsuit, Lassiter had a CT
scan of her abdomen and
pelvis on Jan. 10, 2008.
The written report of her
scan stated,
"Subcentimeter
hyperdense lesion
involving the mid left
kidney may represent a
hyperdense cyst, or other
etiology. Suggest
correlation with
sonography of the kidneys
or consider follow-up with
CT in three months to
assess for stability or
change," according to the
complaint.
But the next day,
Lassiter's doctor
"informed Ms. Lassiter in
a letter that her most
recent CT revealed no
acute findings," the
complaint states. The
suggested follow-up
sonography or CT scan
did not happen, it says.
Over the next three
years, as Lassiter had a
variety of routine medical
appointments for various
conditions and
procedures, "nothing
was ever said of the
hyperdense lesion on
her left kidney nor did
any follow-up occur
concerning it," the
complaint states.
"On Jan. 11, 2011,
Ms. Lassiter reported to
her doctor that she was
experiencing lower back
pain covering a period of
three (3) weeks. She
stated that the pain had
expanded to the lower
right side, below her
stomach. She also
indicated that heat and
cold packs, Epsom salt
soaks, and medication
like Advil had not
resolved the pain. She
also mentioned that
upon urinating, she
experienced a burning
sensation and noticed
some blood," it
continues. (Parentheses
in complaint.)
Her doctor suggested
a kidney stone or
infection, according to
the complaint. However,
after a variety of tests
over the next month,
Lassiter was told she
had a kidney mass,
much larger than
originally seen in 2008,
"suspicious for neoplasm
(i.e. new and abnormal
growth, such as a
tumor). What had been a
millimeter in size (and not
monitored by Ms.
Lassiter's doctors) had
now grown to
centimeters, i.e., it grew
from .02 inches to 1.5
inches," the complaint
states. (Parentheses in
complaint.)
Lassiter says she told
her doctor she was upset
by the lack of monitoring
and discussion about the
cyst and options for
treating it. "Her doctor
informed her that she
never had conversations
with her about the cyst
because she did not
know about it until
recently! The doctor said
that 'zillions of people
have small cysts on their
kidneys - it is incredibly
common and not typically
worrisome,'" the
complaint states.
"Ms. Lassiter
underwent major surgery
to remove a part of her
left kidney in June 2011.
The pre and post
operation pain, stress,
and anguish were
significant," the
complaint states.
"Sharing the news with
her family produced
more mental anguish
than Ms. Lassiter ever
experienced in her life.
The questions, fears,
anxiety, etc., were
overwhelming," it
continues. Lassiter says
she missed substantial
time from her work, her
vacation plans were
disrupted and she had to
give up competitive
tennis.
"The strain on
relationships was also
palpable. Her husband
was gravely concerned
and questioned the
doctor about numerous
things. Sex was not
occurring, and this
lifestyle change was one
of many endured due to
Ms. Lassiter's medical
condition," the complaint
continues.
Even now, Lassiter
says, "she experiences
anguish about her
current and future health
condition, and she must
have follow-up medical
attention for the rest of
her life! Every pain or
discomfort causes
thoughts about cancer
returning, more surgery,
other organs being
cancerous, dying from
cancer, etc."
Loistene Lassiter is
represented by Rickey
Nelson Jones of
Baltimore.