United States ex rel. Conroy v. Select Medical Corp.
211 F. Supp. 3d 1132
| S.D. Ind. | 2016Background
- Relators (three former Select-Evansville employees) filed a qui tam FCA action alleging Select Medical, Select-Evansville, Select-Employment, and Dr. Richard Sloan ran corporate policies to manipulate LTCH patient stays and DRG coding to maximize Medicare payments (schemes: extending stays, premature discharges, interrupted-stay manipulations, and up-coding).
- Relators allege internal complaints and reported concerns beginning as early as 2007–2011; two Relators claim constructive discharge, one was terminated after raising concerns.
- Government declined to intervene in June 2015; defendants moved to dismiss under Rules 12(b)(1), 12(b)(6), and 9(b).
- Defendants argued dismissal on public-disclosure grounds, failure to plead fraud with particularity, lack of objectively false clinical determinations, and failure to state retaliation claims; Dr. Sloan also sought dismissal of individual FCA retaliation claims.
- The court analyzed the amended 2010 public-disclosure bar, the original-source exception, whether the amendment is jurisdictional, and the constitutionality of the government’s ability to oppose dismissal (the so‑called "government veto").
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Effect of 2010 amendment to FCA public‑disclosure bar (jurisdictional or merits) | Relators & gov't: amendment removed jurisdictional language; public‑disclosure is a merits dismissal (12(b)(6)) and gov't may veto dismissal | Select: bar remains jurisdictional; gov't veto violates separation of powers/nondelegation/due process | Court: amendment rendered bar non‑jurisdictional; public‑disclosure is for Rule 12(b)(6); gov't opposition (veto) is constitutional and ends inquiry for post‑amendment claims |
| Whether Relators' allegations were "publicly disclosed" / original source for pre‑March 23, 2010 conduct | Relators: their lengthy, local, first‑hand knowledge materially adds to prior public disclosures (NYT, Senate press release, prior Ohio qui tam) | Select: prior NYT, Senate, and Ohio qui tam disclosures contained substantially similar allegations; Relators are not original sources | Court: Relators’ allegations were substantially similar to public disclosures and did not materially add to them; therefore court lacks jurisdiction over claims based on pre‑March 23, 2010 conduct |
| Sufficiency under Rule 9(b) of FCA fraud claims (who/what/when/where/how) | Relators: provide representative examples (Patients B, C, etc.), corporate policies, training, motives to infer false Medicare claims | Select & Sloan: Plaintiffs fail to plead particulars for specific false claims, lack who/when/connection for some schemes (esp. interrupted stays, premature discharge) | Court: Rule 9(b) satisfied for some schemes (extending stays to avoid short‑stay outlier and up‑coding); insufficient for interrupted‑stay manipulation and premature‑discharge schemes—those portions of Count I dismissed |
| Retaliation claims (FCA § 3730(h) and Indiana statutes) and individual liability of Dr. Sloan | Relators: internal reporting and complaints constitute protected conduct and gave supervisors notice; seek relief under FCA and Indiana whistleblower statutes | Defendants: Relators failed to plead required elements as to state statutes; Dr. Sloan not an “employer” subject to individual liability under § 3730(h) | Court: Federal FCA retaliation claims survive as pleaded; Dr. Sloan not liable individually under § 3730(h) (dismissed as to him); Indiana FCA and Medicaid FCA retaliation counts dismissed for failure to plead state‑law fraud/notice facts |
Key Cases Cited
- Rockwell Int’l Corp. v. United States, 549 U.S. 457 (Sup. Ct. 2007) (pre‑2010 public‑disclosure bar construed as jurisdictional)
- Cause of Action v. Chi. Transit Auth., 815 F.3d 267 (7th Cir. 2016) (Seventh Circuit three‑step public‑disclosure/original‑source framework)
- Absher v. Momence Meadows Nursing Ctr., Inc., 764 F.3d 699 (7th Cir. 2014) (noting doubt about post‑amendment jurisdictional effect)
- Leveski v. ITT Educ. Servs., Inc., 719 F.3d 818 (7th Cir. 2013) (distinguishing cases where relator’s allegations materially add to public disclosures)
- Presser v. Acacia Mental Health Clinic, LLC, 836 F.3d 770 (7th Cir. 2016) (Rule 9(b) in FCA cases: pleading need not include invoices if facts permit reliable inference that false claims were submitted)
- Lusby v. Rolls‑Royce Corp., 570 F.3d 849 (7th Cir. 2009) (FCA pleading: relator need not produce claim forms at pleading stage)