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United States v. Wagoner

United States District Court, N.D. Indiana

September 21, 2018

UNITED STATES OF AMERICA and THE STATE OF INDIANA, Plaintiffs,
v.
DON J. WAGONER, MARILYN L. WAGONER, WAGONER MEDICAL CENTER, L.L.C., WAGONER MEDICAL CENTER, P.C., and DON J. WAGONER, M.D. AND MARILYN L. WAGONER, M.D., P.C., Defendants.

          OPINION AND ORDER

          THERESA L. SPRINGMANN CHIEF JUDGE.

         On December 29, 2017, Plaintiffs United States of America and the State of Indiana (together, “Plaintiffs”) filed their Complaint [ECF No. 1 (Compl.)] against Defendants Don J. Wagoner, Marilyn L. Wagoner, Wagoner Medical Center, L.L.C., Wagoner Medical Center, P.C., and Don J. Wagoner, M.D. and Marilyn L. Wagoner, M.D., P.C. (together, “Defendants”). The Complaint alleges that the Defendants induced overpayments from the Indiana Medicaid Program by their false and fraudulent billings for medical services. The Complaint asserts claims for violations of the False Claims Act (“FCA”), 31 U.S.C. § 3729 et seq., and the Indiana Medicaid False Claims and Whistleblower Protection Act (“Indiana FCA”), Ind. Code § 5-11-5.7 et seq., as well as other statutory and common law claims.

         On January 22, 2018, the Defendants filed a motion to dismiss [ECF No. 9], seeking dismissal of the claims against them pursuant to Federal Rule of Civil Procedure 12(b)(6). Also on January 22, 2018, Defendants Marilyn L. Wagoner, Wagoner Medical Center, P.C., and Don J. Wagoner, M.D. and Marilyn L. Wagoner, M.D., P.C. filed a motion to dismiss [ECF No. 11] seeking dismissal of the claims against them pursuant to Rule 12(b)(6). The Plaintiffs filed a combined opposition brief [ECF No. 17 (Pls. Resp.)] in response to both motions to dismiss. The Defendants filed two separate reply briefs to the motions to dismiss [ECF Nos. 18, 19]. The motions are now briefed and ripe for review.

         BACKGROUND

         The Court draws the following facts from the Complaint. See Hallinan v. Fraternal Order of Police of Chi. Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009) (stating that “for purposes of the motion to dismiss we accept all factual allegations in the complaint and draw all reasonable inferences from those facts” in favor of the plaintiff).

         The United States of America brought this action on behalf of itself and the United States Department of Health and Human Services, which oversees the Medicaid Program. (Compl., ¶ 5.) Funding for Medicaid is shared between the federal government and those states, including Indiana, participating in the Medicaid Program. (Id.) The State of Indiana brought this action on behalf of itself and the Office of Medicaid Policy and Planning, which administers the Indiana Health Coverage Program (“IHCP” or “Indiana Medicaid”). (Id., ¶ 6.) Don J. Wagoner (“Don Wagoner”) is the owner of Wagoner Medical Center, L.L.C. (“WMC”), Wagoner Medical Center, P.C. (“Wagoner PC”), and Don J. Wagoner, M.D. and Marilyn L. Wagoner, M.D., P.C. (“Wagoner & Wagoner”) (together, “Entity Defendants”).[1] (Id., ¶ 7.) Marilyn L. Wagoner (“Marilyn”) is the spouse of Don Wagoner, the co-owner of Wagoner & Wagoner, and an executive of Wagoner PC. (Id., ¶ 8.) Marilyn and Don Wagoner practiced medicine through the Entity Defendants. (Id., ¶¶ 7, 8.) The Defendants were in the business of providing medical services to Medicaid recipients and receiving payment for these medical services from Indiana Medicaid. (Id., ¶ 39.)

         WMC was enrolled as a Medicaid provider and authorized biller with the Indiana Medicaid Program. (Id., ¶¶ 9, 38.) Under Indiana Code § 12-15-11-2, medical providers who wish to provide services to Medicaid patients must execute a Provider Agreement. (Id., ¶ 35.) Under the Provider Agreement, a provider, together with its authorized agents, employees, and contractors, are required to comply with all federal and State of Indiana statutes and regulations pertaining to Medicaid, the IHCP Provider Manual, and all bulletins and notices communicated to the provider. (Id., ¶ 36.) Pursuant to the Provider Agreement and the rules of the IHCP program, compliance with the Provider Agreement, IHCP Provider Manual, program bulletins, and notices are a condition of payment. (Id., ¶ 40.) Don Wagoner and WMC executed, and were obligated to comply with, IHCP Provider Agreements. (Id., ¶ 37.)

         The Defendants had a routine practice of requiring patients seeking a prescription for opioid pills or other pain medicine to submit a urine sample for qualitative testing for the presence or absence of nine or more drugs and drug classes. (Id., ¶ 53.) One type of qualitative urine drug test kit, known as a multiplexed screening kit, is designed to use a single urine sample to test for multiple drugs or drug classes of abused drugs in the patient's system. (Id., ¶ 46.) In contrast, quantitative testing determines the quantity of the particular drug or drug class in the urine sample, often using chromatographic equipment. (Id., ¶¶ 43-44.) The Defendants never possessed or used chromatography equipment to analyze urine samples. (Id., ¶ 44.)

         Health care providers enrolled in Indiana Medicaid submit claims to the program for reimbursement electronically using a set of codes that identify the services performed for covered individuals. (Id., ¶ 41.) The codes for medical services and procedures are written by the American Medical Association (“AMA”) and published annually in books entitled Current Procedure Terminology, Professional Edition (“CPT”). (Id.) The abbreviation CPT is used within the healthcare field to both refer to the published CPT book and the individual five digit codes contained within the book. (Id.) In December 2010, all enrolled Indiana Medicaid providers, including the Defendants, received IHCP Bulletin BT201062 announcing a new CPT Code 80104, “drug screen, qualitative; multiple drug classes other than chromatographic procedure.” (Id., ¶ 51.) The 2011 CPT book explained, beneath the language for CPT Code 80101, “[f]or qualitative analysis by multiplexed screening kit for multiple drugs or drug classes, use 80104.” (Id.) The effective date for the new billing rules requiring Indiana Medicaid providers to use CPT code 80104 was January 1, 2011. (Id., ¶ 54.)

         Indiana Medicaid rules allow an enrolled provider to add an additional code, the “91 modifier, ” to a CPT code to indicate that subsequent identical services were rendered to the same patient on the same day for legitimate treatment purposes. (Id., ¶ 49.) For example, when submitting a claim for payment using the 91 modifier, the enrolled provider certifies that the same patient returned to the office later the same day and provided a new urine sample, and the enrolled provider analyzed the additional urine sample for drugs or drug classes. (Id.) The 91 modifier is not appropriate for testing using a single urine sample when the patient only comes in once during a particular day, even if the urine sample is used for qualitative analysis of multiple drugs or drug classes using a multiplexed screening kit. (Id., ¶ 50.) In March 2009, all enrolled Indiana Medicaid providers, including Don Wagoner and WMC, received IHCP Bulletin BT200907, which explained the 91 modifier billing rules. (Id.) They also received reminders of the 91 modifier billing rules in IHCP bulletins in February 2011 and June 2011. (Id.) Additional AMA sources were available to the Defendants with explanations of the 91 modifier billing rules. (Id.)

         From January 1, 2011, through January 13, 2013, Don Wagoner and WMC performed all of its urine drug screen tests qualitatively using a single urine sample on a multiplexed screening kit. (Id., ¶ 51.) The coding rules required WMC to bill CPT Code 80104 only once, without any modifier, for each patient each day the patient provided a single urine sample that was qualitatively analyzed using a multiplexed screening kit. (Id.) In January 2011, the Defendants continued to use CPT Code 80101 at least nine times when billing Indiana Medicaid for testing a single urine sample from a single patient on a single day using a multiplexed screening kit. (Id., ¶ 55.) In or around January 2011, Indiana Medicaid routinely denied all but one claim of the Defendants' urine drug test claims using CPT code 80101 each time the Defendants billed CPT Code 80101 more than one time for the same patient on the same day. (Id., ¶ 56.) WMC's billing manager, Sandy Thompson (“Thompson”), told Don Wagoner about the Indiana Medicaid claims denials. (Id., ¶ 57.) At Don Wagoner's direction, Thompson contacted Indiana Medicaid to ask why the claims were denied. (Id., ¶¶ 57, 58.) Thompson told Don Wagoner that Indiana Medicaid denied the claims based on new billing rules requiring providers to bill urine drug screen test for the same patient on the same day only once. (Id., ¶ 58.)

         After learning of the reason for the claims denials, the Defendants allegedly devised a scheme to be paid nine or more times for each drug screen test using a single urine sample from a single patient on a single day with a multiplexed screening kit. (Id., ¶ 59.) WMC's billing department employees typed in Indiana Medicaid claims based on the notations on the superbill provided to them by physicians and physician's assistants, including Marilyn, at WMC. (Id.) At Don Wagoner's direction, WMC's office manager Michelle Wagoner programmed the billing department's computer so that it would automatically populate nine claims for CPT Code 80101, with a 91 modifier after each claim, each time a billing employee typed CPT Code 80101 once. (Id.) Thereafter, at Don Wagoner's direction, WMC's billing staff routinely billed CPT Code 80101 with a 91 modifier at least nine times every time WMC tested a single urine sample for a single patient visit on a single day using a multiplexed screening kit. (Id.) By routinely using the 91 modifier in this fashion, the Defendants were falsely certifying to Indiana Medicaid that each of the patients had come into WMC's office at least nine times on a single day and provided nine separate urine samples that WMC's laboratory had then separately tested. (Id.)

         WMC's policy regarding urine drug screen tests was a frequent topic of conversation at monthly staff meetings attended by Thompson, WMC's office manager, billing department employees, and occasionally, Don Wagoner. (Id., ¶ 60.) During periodic meetings of physicians and physician's assistants at WMC, revenue generated from insurance billings, including Indiana Medicaid, for urine drug screen tests was discussed at least once. (Id., ¶ 61.) Marilyn and Don Wagoner routinely attended those meetings. (Id.) After Thompson discerned that the Defendants continued to bill Indiana Medicaid nine or more times for a single urine sample for the same patient on the same day, she spoke with Don Wagoner and recommended that the Defendants repay Indiana Medicaid. (Id., ¶ 62.) Don Wagoner refused and told Thompson that the Defendants would not issue any refunds to Indiana Medicaid. (Id.)

         The Defendants' allegedly false and fraudulent claims to Indiana Medicaid were for services rendered between January 1, 2011, and January 13, 2013, and resulted in approximately 6, 433 claims that induced Indiana Medicaid to overpay the Defendants approximately $1.1 million. (Id., ¶ 63, Exs. 1A-1E.).) These claims were allegedly presented, or caused to be presented, with actual knowledge of their falsity, or with reckless disregard or deliberate ignorance of whether or not they were false. (Id., ¶¶ 68, 74, 103, 109.) Among other false records or statements, the Defendants allegedly: (1) drafted superbills and other documents instructing WMC's employees to make entries into the Defendants' computer that caused the submission of false claims to Indiana Medicaid; and (2) for each patient, used or caused to be used nine or more claims for a single urine drug test using a multiplexed screening kit, thereby falsely certifying that they separately analyzed nine or more urine samples for each patient. (Id., ¶¶ 72, 107.) The Complaint asserts twelve claims against the Defendants for: violations of the FCA, 31 U.S.C. §§ 3729(a)(1)(A), (B), (G); conspiracy to violate the FCA, 31 U.S.C. § 3729(a)(1)(C); payment by mistake; unjust enrichment; violations of the Indiana FCA, Ind. Code §§ 5-11-5.7-2(a)(1), (2), (6); conspiracy to violate the Indiana FCA, Ind. Code § 5-11-5.7-2(a)(7); improper receipt of Medicaid payments, Ind. Code § 12-15-23-8; and relief under the Indiana Crime Victims Relief Act, Ind. Code §34-24-3-1.

         STANDARD OF REVIEW

         A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency of the complaint and not the merits of the suit. Gibson v. City of Chi., 910 F.2d 1510, 1520 (7th Cir. 1990). The court presumes all well-pleaded allegations to be true, views them in the light most favorable to the plaintiff, and accepts as true all reasonable inferences to be drawn from the allegations. Whirlpool Fin. Corp. v. GN Holdings, Inc., 67 F.3d 605, 608 (7th Cir. 1995). A complaint must contain sufficient factual matter to “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the plaintiff pleads factual content ...


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