Labor & Employment Law Daily Wrap Up, WHISTLEBLOWERS—N.D. Ill.: Court denies hospice’s motion to dismiss false claims action, (Feb 5, 2025)

By Sara Cracau, J.D.

The relator plausibly asserted a retaliation claim under False Claims Act and related claims against the hospice that terminated her for opposing the hospice’s alleged fraudulent billing practices.

A federal district court in Illinois denied the motion to dismiss of a hospice in a false claims action finding that the medical director who was formerly employed by the hospice plausibly alleged that she engaged in protected conduct under the False Claims Act (FCA) and that she was terminated because of her protected conduct. Because the medical director received no prior notice as required under her employment agreement, she was entitled to damages equivalent to the lost wages and benefits that she would have received had she received the proper notice. She also plausibly alleged that she was entitled to damages equivalent to the lost wages and benefits during the applicable proper termination period under the Illinois Wage Payment and Collection Act (IWPCA). In addition, the court found that the medical director plausibly alleged a retaliation claim under the Illinois Whistleblower Act (IWA) and Illinois common law (Makela v. Apex Hospice and Palliative Care, Inc., No. 24 C 06920 (N.D. Ill. Jan. 30, 2025)).

The relator, formerly employed as the medical director of a hospice, initiated an action against the hospice arising from termination of her employment without any notice, alleging that she was terminated in retaliation for opposing the hospice’s efforts to submit fraudulent claims to Medicare for hospice services that were provided to patients who were not eligible for such services. She asserted several statutory and common law claims, including breach of contract, violation of the IWPCA, retaliation under the FCA, retaliation under the IWA and retaliatory discharge under Illinois common law. The hospice moved to dismiss all claims.

Retaliation under FCA. The court found that the former medical director plausibly alleged that she engaged in protected conduct under the FCA and that she was terminated because of her protected conduct. She engaged in conduct that she intended and reasonably expected to prevent a suspected FCA violation by repeatedly objecting to the hospice’s attempts to admit patients who were not eligible for hospice care under Medicare. Specifically, she carefully reviewed medical records to ensure that the hospice was not submitting claims for payment for those who were not eligible for hospice under Medicare. Furthermore, she refused to permit the hospice to bill for services if the patient was not eligible for hospice services under Medicare. She plausibly stated, and the hospice did not contest, that she engaged in the conduct based on a good faith belief that the hospice was attempting to submit fraudulent claims for payment to the federal government for services provided to ineligible patients. The facts allowed the inference that a reasonable employee in these circumstances might believe that the hospice was committing fraud against the government. The court rejected the hospice’s argument that the medical director did not meet Rule 9(b)’s heightened pleading requirement, noting that this standard does not apply to retaliation claims. The extremely close temporal proximity between the medical director’s protected activity and her termination, together with the hospice’s ambiguous contention that she was terminated because she was not a good fit with the hospice’s culture, reasonably permitted drawing an inference that she was terminated because she had engaged in protected activity.

Breach of contract. The medical director plausibly alleged that she performed her obligations under the employment agreement which included maintaining her status as a licensed physician in good standing and carefully reviewing patient medical records to confirm eligibility for hospice services under Medicare. She also plausibly alleged that the hospice breached the employment agreement by not providing her with the required notice. Lastly, she plausibly alleged that she suffered damages because of the alleged breach by claiming loss of wages and benefits. The employment agreement required providing the medical director with at least 30 days’ notice of termination or 90 days’ prior notice in case of termination without cause. Because she received no prior notice at all, she was entitled to damages equivalent to the lost wages and benefits that she would have received had she received the proper notice.

IWPCA. Because the court determined that the medical director plausibly stated a claim that the hospice breached the employment agreement by failing to provide her with proper notice of termination, she also plausibly alleged that she was entitled to damages equivalent to the lost wages and benefits during the applicable proper termination period.

Retaliation under IWA, common law. The court found that the medical director also plausibly alleged a retaliation claim under the IWA and Illinois common law. She alleged that the hospice terminated her because she refused to certify patients who were ineligible for hospice services under Medicare and in effect refused to allow the hospice to bill the federal government for hospice services provided to these ineligible patients in violation of federal law. Because the court concluded that, in the context of the medical director’s FCA claims, the suspicious timing of her termination and the ambiguous, pretextual reasons offered for her termination, reasonably permitted drawing an inference that the hospice terminated her for refusal to engage in activity that would violate federal law, namely the certification of patients who were ineligible for hospice care under Medicare. Similarly, because she pleaded facts which permitted drawing an inference of a causal relationship between the termination and the protected conduct, she plausibly asserted a retaliatory discharge claim under Illinoi common law.

The case is No. 24 C 06920.

Judge: Kendall, V.

Attorneys: David J. Fish (Workplace Law Partners, P.C.) for Janice Makela. Heather Renee Adams (Roetzel and Andress, LPA) for APEX Hospice and Palliative Care, Inc.

Companies: APEX Hospice and Palliative Care, Inc.

Cases: Whistleblowers Retaliation Discharge IllinoisNews