Corporate Counsel Daily, Court grants health care providers’ motion to dismiss false claims action, (Jun 25, 2025)

By Sara Cracau, J.D.

The complaint was a shotgun pleading that failed to allege fraud with sufficient particularity, but the relator was granted leave to amend.

A federal district court in Florida has granted the motion to dismiss of various physical therapy health care providers in a false claims action arising from alleged violations of the federal False Claims Act (FCA) for upcoding services and billing for physical therapy services which were not eligible for reimbursement, finding that the complaint was a shotgun pleading and failed to allege fraud with sufficient particularity even though it was sufficient to provide the necessary notice. The court determined that the presentment claim failed as the complaint lacked the required specific details but found that the relator’s complaints to management about improper billing were sufficient to establish that the health care providers acted knowingly, or at least, with deliberate disregard, sufficient to allege scienter. The court noted a false record, or statement requires allegations that a specific fraudulent claim was in fact submitted to the government and there were no such allegations here. The court likewise found that the relator’s claims fell short of the requirements to support a claim for fraudulently billing based on the unskilled services theory. Finally, the court dismissed the conspiracy claim because the elements are based on the underlying fraud and, as such, must be pleaded with particularity as required by Rule 9(b). However, the court granted the relator leave to amend her complaint one final time (Kane v. Select Medical Corp., No. 8:21-cv-1050-CEH-TGW (M.D. Fla. Jun. 20, 2025)).

Allegations. A licensed physical therapist and certified athletic trainer initiated a qui tam action against her former employer, a physical therapy provider pursuant to the FCA, contending that the providers submitted false claims and made false statements in connection with claims for physical therapy services provided to Medicare beneficiaries. More specifically, she contended that the providers upcoded direct (one-on-one therapy) when group therapy was provided or overbilled for direct therapy and fraudulently billed for “unskilled” physical therapy services which were not eligible for reimbursement. In addition, she contended that the providers scheduled physical therapists to provide services to multiple patients at once and then falsely billed services under CPT codes for one-on-one therapy, causing Medicare and other insurers to over-pay for direct services that were not actually provided. The relator’s second amended complaint asserted the following causes of action under the FCA: presentment of false claims for payment and conspiracy to violate the FCA. The government declined to intervene. The health care providers moved to dismiss the action, contending that the second amended complaint was a shotgun pleading and failed to allege the false claims with the required particularity.

Shotgun pleading. The court found that the relator’s allegations adequately alleged a theory of collective liability for purposes of providing the health care providers with notice but, nonetheless, suffered from shotgun pleading deficiencies because the complaint failed to separate into different counts each cause of action or claim for relief. The notice requirement was satisfied because the complaint attributed the same actions to multiple parties whom it alleged operated jointly.

Particularity requirement. The court determined that the presentment claim failed as the complaint lacked the required specific details but found that the relator’s complaints to management about improper billing were sufficient to establish that the health care providers acted knowingly, or at least, with deliberate disregard, sufficient to allege scienter. The relator relied on her own summaries of the therapy treatment that were allegedly provided by three clinicians and the CPT codes recorded in patient treatment notes. The patient notes which she attached did not contain any billing entries to identify the charged amount, payment amount, date of claim submission, or date of payment. Nor did she rely on personal knowledge for the information underlying her allegations. Furthermore, she did not allege that her responsibilities included billing. The court noted that, although proof of scienter was required to support ultimate liability, for purposes of Rule 9(b), it was sufficient to allege: “[m]alice, intent, knowledge, and other conditions of a person’s mind…generally.”

False record or statement. The court dismissed this claim as a false record or statement requires allegations that a specific fraudulent claim was in fact submitted to the government and there were no such allegations here. Furthermore, each of the separate causes of action should have been pleaded in separate counts.

Commercial insurers. The court dismissed the relator’s claims related to payments submitted to non-governmental insurers because the relator was not pursuing her claim based upon payments to non-governmental health insurers. Such payments are not governed by the FCA. The relator referenced these claims to demonstrate that the health care providers were charging for direct therapy when group therapy was being provided.

Unskilled services. The court found that the relator’s allegations fell short of the requirements to support a claim for fraudulently billing for physical therapy services that were not eligible for reimbursement based on the unskilled services theory as there must be sufficient factual allegations to show that an actual false claim for payment was submitted to the government for payment. It is not sufficient to assert that claims requesting illegal payments must have been submitted, were likely to have been submitted, or should have been submitted.

Conspiracy. The court dismissed the conspiracy claim because the elements of this cause of action are based on the underlying fraud and, as such, must be pleaded with particularity as required by Rule 9(b).

Leave to amend. The court granted the relator leave to amend as there was no evidence of repeated failure to cure deficiencies by previous amendments and no evidence of undue prejudice to the health care providers if the court granted leave to amend.

The case is No. 8:21-cv-1050-CEH-TGW.

Judge: Honeywell, C.

Attorneys: David Joseph Rodziewicz (Rodziewicz Law, P.L.) for Kathleen Kane. Arthur Lee Bentley, III (Bradley Arant Boult Cummings LLP) for Select Medical Corp.

Companies: Select Medical Corp.

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