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United States ex rel. Stipe v. Powell County Fiscal Court

United States District Court, E.D. Kentucky, Central Division, Lexington

June 21, 2018




         This matter is before the Court on Relator-Plaintiff Jessica Stipe's Motion to Join Party (DE 25) and Defendant Powell County Fiscal Court's Motion to Dismiss (DE 26) and Motion for Leave to File a Third Party Complaint (DE 29). For the reasons set forth below, the Court denies Stipe's motion to join, grants Defendant's motion to dismiss, and denies Defendant's motion to file a third party complaint as moot.

         I. Background

         This qui tarn action was first initiated by Relator Robert Justin Wickline on December 5, 2016. (Compl., DE 1.) In January 2017, Wickline filed his First Amended Complaint, which added Jessica Stipe as a Relator. (1st Am. Compl., DE 3.) In May 2017, the United States provided notice that it declined to intervene and, shortly thereafter, the Relators' First Amended Complaint was unsealed. On August 11, 2017, the Relators moved to file a Second Amended Complaint removing Wickline as a Relator, which the Court granted. (DE 10, 11.) The following factual background is drawn from Stipe's Second Amended Complaint. (2d Am. Compl, DE 12.)

         Stipe is a resident of Mount Sterling, Kentucky and was employed by Powell County Fiscal Court ("PCFC") as an emergency medical technician ("EMT"). PCFC is licensed to provide ambulance services to the citizens of Powell County, Kentucky. (2d Am. Compl. ¶ 2.) It is also a participating ambulance service provider in Medicare, which pays for federal reimbursement for medically necessary ambulance transportation. (2d Am. Compl. ¶¶ 9-12.)

         Stipe alleges that PCFC regularly transported patients by ambulance when such transportation was not medically necessary. As an example, she discusses patient V.H., who, over a two year period, received ambulance transportation to and from dialysis despite being capable of walking and not requiring oxygen therapy. (2d Am. Compl. ¶ 22.) She also asserts that, on at least thirty occasions, PCFC employees documented non-emergency dialysis transport as "ALS, Level 1, " a significantly higher billing rate than non-emergency services. She claims that ten patients had been transported for non-emergency reasons and documented as "bed confined, " despite not meeting Medicare's definition of the term, and that eight patients were routinely transported despite not meeting the medical necessity requirement. (2d Am. Compl. ¶¶ 23-24.) She also asserts that, after Menifee County posted a memorandum that certain patients residing at the Edgewood Nursing Home did not meet the medical necessity standard for transport, PCFC sent ambulances into Menifee County to provide services to those thirty-nine residents. (2d Am. Compl. ¶ 25.) In furtherance of this scheme, she claims that PCFC employees Director Nathan Hall and Assistant Director Arlen Rogers pressured subordinate employees, including herself, to falsify and change medical documentation and to use a pre-filled "Medical Necessity for Ambulance Transport" form so that PCFC could bill for non-emergency transportation. (2d Am. Compl. ¶¶ 27-31.)

         Stipe's second allegation is that PCFC billed Medicare for non-reimbursable ambulance transportation by employing an EMT whose certification had expired and a second employee, G.C., who was not eligible for EMT certification due to a felony diversion program sentence. (2d Am. Compl. ¶ 36-44.) She claims that these employees completed sixty-two and forty-seven ambulance "runs, " respectively, which were submitted fraudulently to Medicare for reimbursement. (2d Am. Compl. ¶¶ 40, 44.)

         Next, Stipe alleges that PCFC billed for non-reimbursable ambulance transportation during an approximately one-year period when it did not employ a medical director for ambulance services. She claims that the Kentucky Board of Emergency Medical Services advised PCFC, pursuant to federal and state regulations, to cease advanced life support transport until a medical director was supervising operations. Despite this warning, PCFC continued to bill for those services and receive governmental reimbursements. (2d Am. Compl. ¶¶ 52-56.)

         Finally, Stipe claims that she witnessed, on numerous occasions, PCFC employees provide advanced life support transport to patients when it was medically unnecessary and that sixty-five claims were fraudulently up-charged as a result. (2d Am. Compl. ¶¶ 62-64.)

         Stipe asserts two claims under the False Claims Act ("FCA"). 31 U.S.C. § 3729, et seq. Count I of the Second Amended Complaint asserts that PCFC knowingly presented, or caused to be presented, false or fraudulent claims for ambulance transport that were not reimbursable. (2d Am. Compl. ¶¶ 65-70); see 31 U.S.C. § 3729(a)(1)(A) (holding liable "any person who knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval"). Count II alleges that PCFC knowingly made, used, or caused to be made or used false records or statements, specifically reports, physician certification statements, and other requests for reimbursements, material to false or fraudulent claims. (2d Am. Compl. ¶¶ 71-76); see 31 U.S.C. § 3729(a)(1)(A) (holding liable "any person who knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim").

         II. Analysis

         There are three motions pending before the Court. First, Stipe has moved join Steven K. Hardy, a former employee of PCFC, as a relator pursuant to Fed.R.Civ.P. 20. (DE 25.) PCFC has moved to dismiss this action for failure to state a claim under Fed.R.Civ.P. 12(b)(1). (DE 26.) Lastly, PCFC has moved to file a third-party complaint to join Medical Claims Assistance, Inc. and Medical Transport Systems Consulting, LLC as third-party defendants, pursuant to Fed.R.Civ.P. 14(a). (DE 29). The time for responses and replies have run and these matters are now ripe for consideration.

         A. Stipe's motion to join Hardy as a relator

         Stipe seeks to join Steven Hardy as a relator in this action to replace Wickline, who removed himself as a relator after returning to work at PCFC. A person may be joined as a plaintiff in an action "if: (A) they assert any right to relief jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences; and (B) any question of law or fact common to all plaintiffs will arise in the action." Fed.R.Civ.P. 2O(a)(1)(A)-(B). PCFC objects to Hardy's joinder because he previously sued PCFC in Kentucky state court and, following settlement, dismissed that case with prejudice. Agreed Order of Dismissal, Hardy v. ...

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