United States District Court, E.D. Kentucky, Northern Division, Covington
UNITED STATES OF AMERICA, EX REL. KATHERINE DILLION PLAINTIFF
ST. ELIZABETH MEDIAL CENTER, INC. DEFENDANT
MEMORANDUM OPINION AND ORDER
William O. Bertelsman United States District Judge
a qui tam action brought pursuant to the False
Claims Act (“FCA”). 31 U.S.C. §§
3729-3730. On behalf of the United States, Katharine Dillon
(“Relator”) alleges that her former employer, St.
Elizabeth Medical Center, Inc. (“SEMC”),
systematically and willfully submitted thousands of false
claims to the United States government, seeking payment for
double billed and medically unnecessary hospital laboratory
matter now comes before the Court on SEMC's Motion to
Dismiss. (Doc. 21). Having previously heard the parties, the
Court now issues this Memorandum Opinion and Order.
Katharine Dillon was a Laboratory Systems Director with SEMC
from March 2011 through November 2013. (Doc. 33 at 7-8).
During that time, she allegedly observed various issues
relating to SEMC's billing practices, including
systematic double billing for troponin lab testing and
fraudulent upcoding of procedures. (Id. at 8). Dillon
reported her findings on the double billing for lab testing
in a memo to SEMC's upper management and compliance
committee and was allegedly met with “resistance and
obstruction.” (Id. at 8). She claims SEMC
never reported her findings of the double-billing to the
government. (Id. at 10). Dillon later discovered the
fraudulent upcoding procedures and, because she had
previously been met with resistance from management regarding
the double billing, she decided to initiate an internal
audit-called a “Rapid Improvement Event”-to
investigate the nature and scope of the alleged upcoding.
(Id. at 12-13). In January 2012, data compiled from
the Rapid Improvement Event allegedly confirmed Dillon's
suspicions of fraudulent upcoding that had been submitted to
Medicare and Medicaid, in violation of SEMC's provider
agreements. (Id. at 13-14).
November of 2013, Dillon left SEMC. (Id. at 8).
Dillon signed a separation agreement which released SEMC from
all future legal claims against it arising from Dillon's
employment. (Doc. 23-1 at 4). Specifically, the agreement
released SEMC “from any and all claims of whatever
nature, ” including claims arising “under any
federal law.” (Separation Agreement, Doc. 23-1 at 4).
It also included language stating Dillon “waives her
right to receive any monetary relief from any action brought
by her or on her behalf pursuant to the False Claims
Act.” (Id.)(emphasis added). At oral argument,
Dillon's counsel confirmed that his client received a
$29, 000 severance payment upon execution of this agreement.
little more than a year after leaving SEMC, on February 3,
2015, Dillon filed this action, seeking damages and a civil
penalty on behalf of the Government for SEMC's alleged
violations of the FCA, as well as damages for alleged
retaliation in response to her internal investigation. (Doc.
November 2, 2016, SEMC moved to dismiss. (Doc. 21). On
November 23, 2016, the United States filed a response to
SEMC's Motion to Dismiss, stating that the government
“has not intervened in this qui tam action,
[yet] remains the real party in interest and retains a stake
in ensuring that this matter does not compromise the claims
of the government.” (Doc. 25 at 1). On December 30,
2016, SEMC filed a response to the government's statement
of interest, attaching previously undisclosed refund letters
that were allegedly sent to various entities administering
the Medicare and Medicaid programs regarding the double
billing issue. (Doc. 37). Relator filed an objection to the
admissibility of the refund letters in consideration of
SEMC's Motion to Dismiss. (Doc. 39).
The Court will not include Defendant's Refund Letters
when considering this Motion.
addressing the merits of SEMC's Motion to Dismiss, the
Court must first establish the body of evidence it may
consider. In response to the Government's statement of
interest, SEMC attached refund letters it allegedly sent to
various entities administering the Medicare and Medicaid
programs. “In those letters, [SEMC] explained the
nature of the overbilling, how it was detected, and included
a reimbursement check for the amount of overbilling which
occurred during the period investigated.” (Def. Resp.
to Government's Statement of Interest, Doc. 37-1). SEMC
asserts that these letters are proof that SEMC “placed
the Government on notice of the troponin overbilling which is
now the subject of Relator's complaint.”
(Id. at 2). Dillon objects to these letters, arguing
they constitute new evidence outside the pleadings and should
not be used in deciding whether to grant SEMC's Motion to
be discussed, whether the government had knowledge of
allegedly fraudulent actions before the filing of this
qui tam action is crucial to deciding whether Dillon
is barred from pursuing this FCA case. SEMC's response to
the government's statement of interest is the first
instance in which these letters are referenced. More
importantly, SEMC made no mention in its Motion to Dismiss
that the government was ever put on notice of Dillon's
Court is constrained from admitting these letters for the
purpose of ruling on SEMC's Motion to Dismiss because
matters outside the pleadings are presented to and not
excluded by the court, the motion must be treated as one for
summary judgment under Rule 56. All parties must be given a
reasonable opportunity to present all the material that is
pertinent to the motion.
Fed. R. Civ. P. 12(d).
SEMC failed to include these letters and the assertion that
the government was put on notice of the alleged fraud in its
Motion to Dismiss. This denied Dillon and the government a
“reasonable opportunity to present additional material
and to request discovery.” Wysocki v. Int'l
Bus. Mach. Corp., 607 F.3d 1102, 1109 (6th Cir. 2010).
Thus, the Court will not convert SEMC's Motion to Dismiss
into a motion for summary judgment, and the letters will be
excluded from the Court's present analysis.
Court will therefore SUSTAIN
Dillon's objection to the admission of SEMC's refund
letters in considering this Motion to Dismiss.
The record is not clear on whether the government had enough
information to know the substance of Dillon's qui
tam action at the time Dillon signed her release of an
FCA claim, so a decision on whether this suit is barred is
not appropriate at this juncture.
November 12, 2013, Relator signed a separation agreement with
her erstwhile employer, Defendant SEMC, which included a
release “from any and all claims of whatever nature,
” including claims arising “under any federal
law.” (Separation Agreement, Doc. 23-1 at 4). The
release also includes the following language:
Associate agrees that she cannot waive her right to file a
charge with the Equal Employment opportunity Commission or
Department of Labor but should a charge be filed, [s]he
waives her right to receive any monetary relief from the
charge(s). Associate further waives her right to
receive any monetary relief from ...