Labor & Employment Law Daily Wrap Up, WHISTLEBLOWERS—D.D.C.: Court dismisses whistleblower’s complaint due to insufficient factual detail, (Apr 9, 2025)

By Elena Eyber, J.D.

Despite rejecting a public disclosure defense, the court concluded that the whistleblower’s False Claims Act lawsuit over alleged fraudulent billing and staffing practices failed to cite sufficient detail.

The federal district court in the District of Columbia granted BHG Holdings, LLC’s motion to dismiss a case brought under the False Claims Act (FCA) by the relator against BHG. The relator alleged that BHG fraudulently billed Medicare and Medicaid for medically unnecessary urine drug tests (UDTs) and employed unlicensed counselors in violation of federal and state health care laws. Although the court found that these claims were not barred by the FCA’s public disclosure rule, the court ultimately dismissed the case because the complaint failed to meet the pleading standards for plausibility and specificity in fraud allegations (U.S. ex rel. Shannon v. BHG Holdings, LLC, No. 22-cv-00354 (TSC) (D.D.C. Mar. 31, 2025)).

Alleged schemes. The relator, a former director at BHG’s clinics in Washington, D.C. and Virginia, alleged two fraudulent schemes: first, that BHG routinely ordered and billed for excessive and medically unnecessary UDTs without individualized physician determinations; and second, that BHG employed unlicensed counselors to deliver substance abuse treatment services in Virginia, in violation of licensure laws. The relator also claimed that staff were pressured to enroll patients in care coordination services regardless of medical need. The complaint included internal emails and communications showing that BHG management was aware of these issues.

The court declined to dismiss the claims based on the public disclosure bar, rejecting BHG’s argument that similar allegations had already been made public in an unrelated DOJ case. The court emphasized that general disclosures about industry-wide misconduct do not preclude claims against specific entities like BHG unless those entities were clearly identified in prior disclosures. Since BHG had not been named or implicated in those earlier materials, the relator’s case could proceed on that basis.

Insufficient detail. However, despite overcoming the public disclosure hurdle, the court ultimately dismissed the relator’s claims due to insufficient factual detail. For the UDT scheme, the court found the complaint lacked patient-specific examples, data, or explanations of why tests were medically unnecessary. Regarding the unlicensed counselor scheme, while the relator named people and communications, she failed to show that the counselors’ licensure status was material to payment decisions, especially since Virginia law allows supervised practice. Consequently, the court found the relator’s allegations did not adequately establish falsity or materiality under the FCA, leading to the dismissal of the complaint.

The case is No. 22-cv-00354 (TSC).

Judge: Chutkan, T.

Attorneys: Gregory M. Utter (Callow & Utter Law Group) for Prechelle Shannon. Kathleen McDermott (McDermott Law) for BHG Holdings, LLC d/b/a Behavioral Health Group.

Companies: BHG Holdings, LLC; Behavioral Health Group

Cases: Whistleblowers Procedure DistrictofColumbiaNews