United States District Court, D. Arizona
J. Scott, Plaintiff,
Arizona Center for Hematology and Oncology PLC, et al., Defendants.
G. Campbell United States District Judge.
J. Scott has filed a qui tam action against
Defendants Arizona Center for Hematology and Oncology PLC
(d/b/a Arizona Center for Cancer Care, “AZCCC”)
and Drs. Devinder Singh, Terry Lee, Daniel Reed, and
Christopher Biggs, alleging violations of the False Claims
Act (“FCA”), 31 U.S.C. § 3729 et seq. Doc.
47. Defendants have filed motions to dismiss the Second
Amended Complaint under Rule 12(b)(6). Docs. 54, 55, 56, 58.
The motions are fully briefed and oral argument will not aid
the Court's decision. Fed.R.Civ.P. 78(b); LRCiv 7.2(f).
For the reasons that follow, the Court will dismiss Counts
One, Two, and Three in part, and dismiss Count Four.
purposes of this motion, Relator's factual allegations
are accepted as true. Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009). AZCCC is a hematology and oncology practice
that was formed in 2008 when Drs. Singh, Lee, Reed, and Biggs
merged their practices. Doc. 47 ¶ 12. Dr. Singh is a
practicing physician who also serves as the owner and
president of AZCCC. Id. ¶ 14. He has
“final decision making authority at AZCCC and is
ultimately responsible for the fraudulent billing within the
AZCCC Radiation Oncology Department.” Id. Drs.
Lee, Reed, and Biggs are practicing physicians in and owners
of AZCCC's radiation oncology department. Id.
¶¶ 16, 18-19.
is AZCCC's radiation oncology billing manager.
Id. ¶ 11. Through his work in this position,
Relator discovered five schemes in which Defendants submitted
fraudulent claims for payment to Medicare, Medicaid, and
Tricare. Id. ¶¶ 2, 11, 20.
all Defendants falsely billed for intense physician
involvement in stereotactic body radiation therapy
(“SBRT”) (“Scheme One”). Id.
¶¶ 73-83. Medical practices and professionals use
Current Procedural Terminology (“CPT”) codes to
document their services for billing purposes. CPT code 77014
reflects a single SBRT treatment, which includes a
physician's brief guidance to an imaging technician.
Id. ¶¶ 76-83. When a physician personally
participates in the preparation and administration of the
entire SBRT treatment, a provider may simultaneously bill CPT
code 77290. Id. ¶¶ 73-77. This typically
happens on the first day of SBRT treatments that are
administered over multiple days. Id. ¶¶
82-83. Relator alleges that Defendants consistently failed to
do the work necessary to bill CPT code 77290. Id.
¶ 92. Relator offers billing records showing
approximately 4, 000 claims for payment in which Defendants
coded CPT codes 77014 and 77290 for every SBRT treatment.
Id. ¶¶ 99-109. Relator claims that AZCCC
fraudulently received about $2 million from this scheme
between January 2011 and June 2016. Id. ¶ 115.
all Defendants improperly billed for special procedures they
did not perform (“Scheme Two”). Id.
¶¶ 118-35. CPT code 77470 reflects the additional
physician work required for specialized and time-consuming
procedures. Id. ¶¶ 119. Billing this code
requires extra documentation. Id. ¶ 122.
Relator asserts that Defendants used this code for
unapproved, routine procedures and did so without the
necessary documentation. Id. ¶¶ 121-22. To
substantiate the lack of special circumstances justifying CPT
code 77470, Relator offers comparative billing data.
Id. ¶¶ 129-34. Centers for Medicare and
Medicaid Services (“CMS”) data reflect that the
average radiation oncologist in Arizona billed this code 47
times in 2014. Id. ¶ 129. But AZCCC's
billing data show that three Defendants billed this code with
disproportionate frequency in 2014: 133 times for Dr. Lee,
131 times for Dr. Biggs, and 105 times for Dr. Reed.
Id. ¶ 130. Relator claims that Defendants have
received about $2.43 million from this scheme. Id.
all Defendants filed claims for medically unnecessary
computerized tomography (“CT”) scans
(“Scheme Three”). Id. ¶¶
136-61. Physicians use CT scans to identify the precise
location of a tumor before the first phase of radiation
treatment targeting it. Id. ¶ 136. Because a
patient's internal anatomy might change during treatment
for some cancers, a second CT scan may be required before the
second phase of radiation. Id. ¶¶ 137,
140. But another CT scan is rarely required for the second
phase of radiation treatment for breast and prostate cancers.
Id. ¶¶ 138, 149. Anatomical changes in
breast and prostate cancer patients are rare. Id.
Relator asserts that an AZCCC office where Defendants
practice has nonetheless billed for second CT scans for 90%
of their prostate cancer patients and 75% of their breast
cancer patients. Id. ¶ 148. Relator also
alleges that AZCCC's treatment form automatically
requests a second CT scan for all cancer patients.
Id. ¶ 150. Relator identifies multiple examples
of allegedly unnecessary secondary CT scans ordered by Drs.
Lee, Reed, and Biggs. Id. ¶¶ 151-57.
Relator claims that Defendants have received about $1.48
million from this scheme. Id. ¶ 159.
all Defendants billed for inappropriate brachytherapy
treatments (“Scheme Four”). Id.
¶¶ 162-72. Multiple CPT codes reflect physician
management of brachytherapy treatment. Id. ¶
163. When the brachytherapy is multi-step or includes
external beam radiation, the provider can simultaneously bill
CPT code 77427. Id. ¶ 164. External beam
radiation may occur at most once in every five brachytherapy
treatments. Id. ¶ 162. Relator offers
approximately 1, 000 billing records reflecting the
simultaneous billing of CPT code 77427 for brachytherapy.
Id. ¶¶ 165-67. Relator alleges that
“all or virtually all” of those claims are
fraudulent, which resulted in approximately $135, 000 in
false payments. Id. ¶¶ 167, 172.
AZCCC improperly sent the same bills to both private and
federal insurance programs, creating overpayments that it has
not refunded to the United States (“Scheme
Five”). Id. ¶¶ 173-89. Relator also
alleges that overpayments accrued because insurers mistakenly
paid AZCCC twice. Id. ¶ 175. Relator alleges
that AZCCC has failed to meet Affordable Care Act deadlines
to refund these overpayments. Id. ¶¶
177-78. Relator offers four examples to substantiate this
allegation. Id. ¶¶ 183-88. Relator claims
that AZCCC has wrongfully kept about $1.94 million through
this scheme. Id. ¶ 189.
filed a qui tam action against Defendants on October
26, 2016. Doc. 1. The United States declined to intervene
(Doc. 8), and the Court unsealed the complaint on February 8,
2017 (Doc. 9). Relator remains employed by AZCCC, but the
Second Amended Complaint alleges he has suffered retaliatory
treatment because of his complaint. Doc. 47 ¶¶
successful motion to dismiss under Rule 12(b)(6) must show
either that the complaint lacks a cognizable legal theory or
fails to allege facts sufficient to support its theory.
Balistreri v. Pacifica Police Dep't, 901 F.2d
696, 699 (9th Cir. 1990). A complaint that sets forth a
cognizable legal theory will survive a motion to dismiss as
long as it contains “sufficient factual matter,
accepted as true, to ‘state a claim to relief that is
plausible on its face.'” Iqbal, 556 U.S.
at 678 (citing Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570 (2007)). A claim has facial plausibility when
“the plaintiff pleads factual content that allows the
court to draw the reasonable inference that the defendant is
liable for the misconduct alleged.” Iqbal, 556
U.S. at 678 (citing Twombly, 550 U.S. at 556).
“The plausibility standard is not akin to a
‘probability requirement, ' but it asks for more
than a sheer possibility that a defendant has acted
pleading must contain a “short and plain statement of
the claim showing that the pleader is entitled to
relief.” Fed.R.Civ.P. 8(a)(2). Rule 8 does not demand
detailed factual allegations, but “it demands more than
an unadorned, the defendant-unlawfully-harmed-me
accusation.” Iqbal, 556 U.S. at 678.
“Threadbare recitals of the elements of a cause of
action, supported by mere conclusory statements, do not
FCA claims involve allegations of fraud, they must also
comply with the heightened pleading requirements of Rule
9(b). Cafasso ex rel. United States v. Gen. Dynamics C4
Sys., Inc., 637 F.3d 1047, 1054-55 (9th Cir. 2011). That
rule requires a party alleging fraud to “state with
particularity the circumstances constituting fraud[.]”
Fed.R.Civ.P. 9(b). A “pleading must identify the who,
what, when, where, and how of the misconduct charged, as well
as what is false or misleading about the purportedly
fraudulent statement, and why it is false.”
Cafasso, 637 F.3d at 1055 (internal quotation marks
omitted). Rule 9(b) does not require more than general
allegations regarding malice, intent, knowledge, and other
conditions of a person's mind. Fed.R.Civ.P. 9(b).
9(b) serves dual purposes: (1) to give defendants fair notice
of the allegations of fraud, so that they have an opportunity
to rebut specific accusations; and (2) to deter the harm
caused by unsubstantiated fraud complaints. United States
v. United Healthcare Ins. Co., 848 F.3d 1161, 1180 (9th
Cir. 2016). As a result:
[M]ere conclusory allegations of fraud are insufficient.
Broad allegations that include no particularized supporting
detail do not suffice, but statements of the time, place and
nature of the alleged fraudulent activities are sufficient.
Because this standard does not require absolute particularity
or a recital of the evidence, a complaint need not allege a
precise time frame, describe in detail a single specific
transaction or identify the precise method used to carry out
the fraud. The complaint also need not identify
representative examples of false claims to support every
allegation. It is sufficient to allege particular details of
a scheme to submit false claims paired with reliable indicia
that lead to a strong inference that claims were actually
Id. (internal quotation marks and citations
AZCCC and Dr. Singh's Motion to Dismiss.
One alleges that all Defendants billed for services they
never provided in violation of 31 U.S.C. §
3729(a)(1)(A). Doc. 47 ¶¶ 261-83. To state a claim
under § 3729(a)(1)(A), Relator must allege: “(1) a
false or fraudulent claim (2) that was material to the
decision-making process (3) which defendant presented, or
caused to be presented, to the United States for payment or
approval (4) with knowledge that the claim was false or
fraudulent.” Hooper v. Lockheed Martin Corp.,
688 F.3d 1037, 1047-48 (9th Cir. 2012). Relator asserts that
Schemes One, Two, and Four each establish this violation.
See Doc. 47 ¶¶ 269-73. AZCCC and Dr. Singh
contend that Count One fails to comply with Rule 9(b)'s
heightened pleading standard. Doc. 54.
and Dr. Singh offer several reasons to dismiss Count One with
respect to Scheme One. Defendants first argue that the
complaint is irreconcilably inconsistent. Doc. 54 at 5.
Counts One and Two each address the services at issue in
Scheme One. Doc. 47 ¶¶ 269, 288. Yet Count One
alleges that these services were not provided, and Count Two
asserts that they were performed but medically unnecessary.
Id. Defendants argue that this internal
inconsistency renders the complaint implausible. Doc. 54 at
5. But Rule 8 allows pleading in the alternative even if the
claims are inconsistent. Fed.R.Civ.P. 8(d)(3). The cases
Defendants cite do not require otherwise. Rather, they reveal
that courts must evaluate the plausibility of a complaint in
light of all the facts and circumstances alleged.
Hernandez v. Select Portfolio, Inc., No. CV 15-01896
MMM, 2015 WL 3914741, at *9-10 (C.D. Cal. June 25, 2015)
(where plaintiff alleged lender's violation of an
obligation that only applied if she had completed a loan
application, contradictory facts about whether she completed
the application rendered the complaint implausible);
Apple, Inc. v. Psystar Corp., 586 F.Supp.2d 1190,
1199-1200 (N.D. Cal. 2008) (considering contradictory market
definition with other factors to find a counterclaim
implausible). Relator's complaint clearly alleges that
the services were not provided. If Defendants can establish
that some or all of the services were provided, Relator
alleges that they were not necessary. See Doc. 60 at
9-10. This is a plausible alternative claim for relief.
and Dr. Singh argue that the complaint fails to identify the
specific fraudulent claims for which they are liable. Doc. 54
at 5-6. Relator counters that he need not identify
representative examples for each Defendant. Doc. 60 at 10.
The Court agrees with Relator. Rule 9(b) “does not
require absolute particularity.” United Healthcare
Ins. Co., 848 F.3d at 1180. The complaint need not
“describe in detail a single specific
transaction” or “identify representative examples
of false claims.” Id.
Singh contends that the complaint fails to identify any false
claim he submitted. Doc. 54 at 5-6. But the complaint alleges
that Dr. Singh has “final decision making authority at
AZCCC and is ultimately responsible for the fraudulent
billing within the AZCCC Radiation Oncology
Department.” Doc. 47 ¶ 14. This allegation is
sufficient to state a claim against Dr. Singh.
and Dr. Singh argue that Relator lacks the personal knowledge
to make these claims. Doc. 54 at 6. Personal knowledge may be
required for testimony under Federal Rule of Evidence 602,
but the Court is aware of no requirement that a plaintiff
have personal knowledge of all facts alleged in a complaint.
Plaintiffs can prove their claims through the testimony of
others and through evidence procured through discovery.
Defendants cite no controlling precedent that requires a
plaintiff to have personal knowledge of facts alleged in his
complaint. Doc. 54 at 6. What is more, Relator's position
as billing manager for the radiation oncology department
renders his allegations more than unwarranted speculation.
and Dr. Singh argue that the complaint is inadequate because
it fails to cite any “controlling rule, regulation, or
standard” that would make it improper to bill CPT code
77290. Doc. 54 at 7. But Relator does not allege some
regulatory infraction in the billings - he alleges that
Defendants billed for services they did not provide. No rule
or regulation is required to show that false billings are
fraudulent. The cases Defendants cite are not to the
contrary. See United States ex rel. Hanna v. City of
Chi., 834 F.3d 775, 779-80 (7th Cir. 2016) (where
complaint alleges false certification of compliance with
a regulation, failure to identify the regulation at
issue requires dismissal); United States ex rel. Polukoff
v. St. Mark's Hosp., No. 2:16-cv-00304-JNP-EJF, 2017
WL 237615, at *8 (D. Utah Jan. 19, 2017) (considering
complaint that alleged billing of unnecessary services, not
“phantom services that were never provided”);
United States ex rel. Modglin v. DJO Global Inc.,
114 F.Supp.3d 993, 1024 (C.D. Cal. 2015) (dismissing
allegations of knowingly failing to meet a
disclosure obligation where relator neither made specific
allegations of scienter nor identified “any Medicare
statute, regulation, NCD, LCD, or claim form” that
notified defendants of such an obligation); United States
v. Prabhu, 442 F.Supp.2d 1008, 1032 (D. Nev. 2006)
(applying summary judgment standard to alleged billing for
and Dr. Singh contend that the complaint fails to allege
facts sufficient to show that they acted with the requisite
scienter. Doc. 54 at 8. Defendants emphasize that
Relator's generalized allegation that he
“counseled” Defendants is insufficient.
Id. The complaint also fails, Defendants argue, to
allege that any Defendant knowingly instructed him to bill
CPT code 77290 improperly. Id. Relator counters that
he need not allege knowledge with particularity. Doc. 60 at
13-15. The Court agrees. Rule 9(b) permits general
allegations with respect to “[m]alice, intent,
knowledge, and other conditions of a person's
mind.” Fed.R.Civ.P. 9(b). The complaint's general
allegations of scienter meet this standard. See Doc.
47 ¶¶ 24-45, 195-237.
and Dr. Singh offer two reasons to dismiss Count One with
respect to Scheme Two. Defendants argue that the complaint
fails to allege the absence of circumstances justifying the
use of CPT code 77470. Doc. 54 at 8-9. Relator counters that
the complaint pleads reliable indicia that give rise to an
inference of fraud. Doc. 60 at 15. The Court agrees with
Relator. The complaint need only “allege particular
details of a scheme to submit false claims paired with
reliable indicia that lead to a strong inference that claims
were actually submitted.” United Healthcare Ins.
Co., 848 F.3d at 1180. The complaint satisfies this
also contend that the complaint improperly groups all
Defendants together without explaining how each was involved
in the fraud. Doc. 54 at 9; see Swartz v. KPMG LLP,
476 F.3d 756, 765 (9th Cir. 2007) (“In the context of a
fraud suit involving multiple defendants, a plaintiff must,
at a minimum, identify the role of each defendant in the
alleged fraudulent scheme.” (internal quotation marks
omitted)). The Court does not agree. The complaint describes
the specialized circumstances in which CPT code 77470 is
appropriate. Doc. 47 ¶¶ 119, 122. It uses CMS
statistics to allege that the average radiation oncologist in
Arizona billed this CPT code just 47 times in 2014, while
Drs. Lee, Biggs, and Reed each billed the code more than 100
times that year. Id. ¶¶ 129-30. And it
alleges that Dr. Singh is the “final decision making
authority at AZCCC and is ultimately responsible for the
fraudulent billing within the AZCCC Radiation Oncology
Department.” Id. ¶ 14. These allegations
describe a fraudulent scheme, identify each Defendant's
role, and present sufficient indicia that false claims were
and Dr. Singh offer two reasons to dismiss Count One with
respect to Scheme Four. Defendants argue that the complaint
fails to allege that that they acted with the requisite
scienter. Doc. 54 at 10-11. As already noted, however, Rule
9(b) permits general allegations with respect to malice,
intent, knowledge, and other conditions of a person's
mind. Fed.R.Civ.P. 9(b).
also argue that the complaint fails to allege the absence of
circumstances justifying the use of CPT code 77427. Doc. 54
at 10. Defendants further assert that the complaint fails to
identify specific false claims. Doc. 54 at 10-11. Relator
counters that the complaint “identifies hundreds of
patients for whom Defendants inappropriately billed under CPT
[c]ode 77427.” Doc. 60 at 7.
Court agrees with Defendants. The complaint acknowledges that
billing CPT code 77427 is appropriate in certain
circumstances, such as when the brachytherapy is multi-step
or includes external beam radiation. Doc. 47 ¶ 164.
Relator alleges that Defendants “have consistently
billed for brachytherapy treatment management using CPT code
77427 over the years and have received reimbursement for the
same” (id. ¶ 165), and offers billing
records reflecting approximately 1, 000 instances in which
Defendants billed CPT code 77427 (id. ¶¶
166-67). But unlike Schemes One and Two, Relator does not put
this allegation in context. Relator does not allege that the
treatments at issue fell outside the circumstances where use
of CPT code 77427 is appropriate, and alleges nothing to show
that the billing volume or frequency represents an
abnormality. As a result, the Court cannot “infer more
than the mere possibility of misconduct.”
Iqbal, 556 U.S. at 679. The Court accordingly will
dismiss Count One against AZCCC and Dr. Singh insofar as it
relies on Scheme Four.
Two alleges that all Defendants filed false claims for
medically unnecessary services in violation of §
3729(a)(1)(A). Doc. 47 ¶¶ 284-302. Relator asserts
that Schemes One, Two, and Three each establish this
violation. See Id. AZCCC and Dr. Singh generally
argue that Relator fails to show he has the expertise to
assert that certain services were medically unnecessary. Doc.
54 at 11. They also argue that he has no personal knowledge
that they rendered unnecessary services. Id. As
discussed above, however, there is no requirement that
Plaintiff have personal knowledge of allegations in his
complaint. Similarly, there is no requirement that he be an
expert in the area. The Court must accept his factual
allegations as true for purposes of this motion.
and Dr. Singh offer three reasons to dismiss Count Two with
respect to Scheme One. Defendants first argue that the
complaint is irreconcilably inconsistent. Doc. 54 at 11. As
already noted, the rules of civil procedure permit
and Dr. Singh next argue that the complaint is inadequate
because it fails to cite any controlling regulation that
would make these services unnecessary. Doc. 54 at 11-12.
Defendants also argue that Relator has failed to show that
his opinion on medical necessity controls. Id. The
Court does not agree. Relator's description of Scheme One
adequately explains the circumstances in which billing CPT
code 77290 would be medically unnecessary (Doc. 47
¶¶ 73-83), and the Court must take these
allegations as true. Iqbal, 556 U.S. at 678.
and Dr. Singh also contend that the complaint fails to allege
circumstances showing that they billed CPT code 77290
improperly. Doc. 54 at 12. But the complaint explains that
billing CPT code 77290 for each SBRT treatment for every
patient is unnecessary. Doc. 47 ¶¶ 73-83. And it
presents approximately 4, 000 billing records in which
Defendants billed CPT code 77290 for each SBRT treatment.
Id. ¶¶ 99-109. This is sufficient to
allege the absence of medical necessity.
and Dr. Singh offer two reasons to dismiss Count Two with
respect to Scheme Two. They first argue that Relator fails to
identify a single instance of billing CPT code 77470 for
medically unnecessary services. Doc. 54 at 12. But as noted
above, Rule 9(b) does not require that Relator detail
specific transactions or identify precise methods used to
carry out the fraud. United Healthcare Ins. Co., 848
F.3d at 1180. The complaint need only “allege
particular details of a scheme to submit false claims paired
with reliable indicia that lead to a strong inference that
claims were actually submitted.” Id. For
reasons already explained, the complaint meets this standard.
and Dr. Singh argue that the allegations are irreconcilably
inconsistent. Doc. 54 at 12-13. Again, however, alternative
pleading is allowed.
and Dr. Singh offer several reasons to dismiss Count Two with
respect to Scheme Three. Defendants first contend that the
complaint fails to identify any controlling authority that
would make follow-up CT scans unnecessary. Doc. 54 at 13. To
the extent an email from Dr. Tannehill says otherwise,
Defendants argue, it does not render an opinion on the
medical necessity of any specific procedure. Id. The
Court is not aware, however, of any requirement that a
complaint identify controlling authority. The complaint
describes with particularity the circumstances in which a
follow-up CT scan would be medically unnecessary. Doc. 47
¶¶ 137-40. The Court must credit these allegations
as true. Iqbal, 556 U.S. at 678.
and Dr. Singh argue that the complaint fails to specify any
particular physician who billed for an unnecessary CT scan.
Doc. 54 at 13. Nor does it show the absence of circumstances
justifying a second CT scan. Id. at 13-14. But Rule
9(b) only requires a description of the scheme with reliable
indicia that false claims were actually submitted. United
Healthcare Ins. Co., 848 F.3d at 1180. The complaint
meets this standard. It alleges that a second CT scan is
rarely required for the second phase of radiation treatment
for prostate and breast cancers. Doc. 47 ¶¶ 138,
149. Yet physicians at a particular office within AZCCC's
practice, including Defendants, allegedly billed for a second
CT scan for 90% of their prostate cancer patients and 75% of
their breast cancer patients. Id. ¶ 148.
Relator further asserts that ...