Opinion

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

wn ee KX

THE UNITED STATES OF AMERICA, et al., ex rel.

JOHN PEPE M.D., and RICHARD SHERMAN

M.D.,

Plaintiffs, MEMORANDUM & ORDER

-against- 14-cv-03505-LDH-ST

FRESENIUS MEDICAL CARE HOLDINGS,

FRESENIUS VASCULAR CARE, INC., and

GREG MILLER, M_D.,

Defendants.

wn ee KX

TISCIONE, United States Magistrate Judge:

John Pepe, M.D., and Richard Sherman, M.D., (“Relators”) brought this qui tam action

against Defendants Fresenius Medical Care Holdings, Fresenius Vascular Care, Inc., and Gregg

Miller, M.D. (“Defendants”), on behalf of the United States of America and the States of New

York, New Jersey, California, Colorado, Connecticut, Florida, Georgia, Illinois, Indiana,

Louisiana, Maryland, Michigan, Nevada, North Carolina, Rhode Island, Tennessee, Texas, and the

Commonwealths of Massachusetts and Virginia (the “States”), alleging claims under the False

Claims Act (“FCA”), 31 U.S.C. § 3729, et seq., analogous state laws (“State FCA laws”), and the

California Insurance Fraud Protection Act (“CIFPA”). The United States partially intervened as to

the federal FCA counts, pursuant to 31 U.S.C. § 3730. The States of New York, New Jersey, and

Georgia filed a consolidated complaint-in-intervention, and the California Department of

Insurance intervened on behalf of the State of California as to CIFPA claims. On October 31, 2024,

the District Court dismissed Relators’ non-intervened claims. On August 4, 2025, Relators filed

their Motion for Leave to Amend their Complaint (“Motion”). For the reasons discussed below,

this Court GRANTS the Motion.!

BACKGROUND?

Relator John Pepe, M.D., is a board-certified internist and kidney specialist, who works as

an attending physician at Richmond University Medical Center and Staten Island University

Hospital in New York. Relators’ Fourth Amended Complaint (“FAC”) 4 15, ECF No. 29. Relator

Richard Sherman, M.D., is a kidney specialist who serves as professor emeritus of medicine at

Rutgers University and Medical Director of Dialysis at the Robert Wood Johnson University

Hospital in New Jersey. /d. at § 16. Defendant Fresenius Vascular Care, Inc. (“FVC”) is one of the

largest clinic networks for interventional radiology in North America. /d. at J 26. In 2011, FVC’s

parent company, Fresenius Medical Care North America (““FMCNA”), acquired American Access

Care Holdings (“AAC”), a clinic network that included 28 freestanding outpatient centers

providing vascular access treatment to dialysis patients in New York and elsewhere in the United

States. /d. at 26, 28. Following the acquisition, AAC clinics were operationally integrated into

the FVC chain. /d. at § 29. According to its website, FVC operates 66 vascular access clinics in

approximately 25 states and Puerto Rico, including 12 in New York State and four in New Jersey.

Id. Approximately 76% of FMNCA’s patient base is covered through Medicare and Medicaid. /d.

4 108. Defendant Gregg Miller, M.D., has been FVC’s Vice President of Operations since 2015.

«T]he weight of authority in this Circuit . . . indicate that motions to amend are non-dispositive.” Getman y.

Vondracek, 731 F.Supp.3d 524, 528 (W.D.N.Y. 2024) (citations and quotations omitted); see Fielding v. Tollaksen, 510

F.3d 175, 178 (2d Cir. 2007) (“As a matter of case management, a district judge may refer nondispositive motions,

such as a motion to amend the complaint, to a magistrate judge for decision without the parties’ consent.”). “This

Court is of the view that a grant of a motion for leave to amend is nondispositive.” Partminer Info. Servs., Inc. v.

Avnet, Inc., 7-cv-11482 (LMM), 2009 WL 111958, *1 (S.D.N.Y. Apr. 21, 2009). As such, should the Parties file any

objections, a review of this Report & Recommendation under the clearly erroneous standard is appropriate. See id.

2 In giving this background, the Court initially refers to the allegations contained in the Fourth Amended Complaint

before providing those new allegations in the Fifth Amended Complaint in order to more clearly spell out what

allegations are specifically being proposed in Relators’ Fifth Amended Complaint. See generally Fourth Amended

Compl., ECF No. 29; see also Fifth Amended Compl., ECF No. 146.

Id. § 31. Previously, Defendant Miller was FVC’s Chief Medical Officer, and prior to that, he

operated AAC of Brooklyn. After FMNCA’s 2011 acquisition of AAC, Defendant Miller was

appointed Chief Medical Officer of FVC. /d. § 131. Defendants own and operate several health

care facilities that perform, among other things, fistulagrams, angiograms, and angioplasties. /d.

at § 118. Fistulagrams are x-rays of fistula, angiograms are x-rays of blood vessels, and

angioplasties are the widening of blood vessels by inserting and inflating a small ballon. Jd. When

properly administered, these procedures can improve the efficacy of dialysis treatments. /d.

Medical staff monitor patients on dialysis to ensure that the treatment functions effectively. /d. at

4 119. Specifically, medical staff monitor blood flow, blood vessel pressure, and waste removal

measures, among other metrics. /d. If medical staff determine that a patient’s vascular access is so

compromised that it interferes with dialysis, the staff may refer that patient to one of Defendants’

clinics for a onetime procedure to restore sufficient vascular access. /d. at J 123. In Spring 2011,

Defendant Miller approached Relator Pepe in an unsuccessful attempt to purchase his dialysis

practice. /d. at § 129. During their discussions, Defendant Miller told Relator Pepe that if a dialysis

center were owned by AAC or its new parent, FMNCA, the company could self-refer patients from

its dialysis center to its vascular access clinics. /d. at § 130. Defendant Miller has made several

public presentations to physicians on behalf of Fresenius endorsing the use of surveillance

fistulagrams. /d. at § 131. For example, during one presentation, Defendant Miller represented that

patients should return for scheduled follow-up elective fistulagrams after access intervention. /d.

Defendant Miller also incorrectly stated that Medicare does not reimburse the dialysis center for

fistula monitoring. /d. During another presentation, Defendant Miller stated that follow-up

fistulagrams should be performed at intervals that are “ideally . . . just before” clinical measures

of dialysis function decline. /d. at 4133. However, Defendant Miller also stated that it is not

possible to predict when the dialysis treatments will become inefficient. /d. Beginning in at least

October 2011, through at least August 2020, Defendants regularly scheduled follow-up visits with

patients after they performed a referred procedure. /d. at 4 126— 127, 159. These follow-up visits,

which typically entailed a fistulagram and angioplasty, were entirely “self-referred,” that is,

scheduled without obtaining the required referral from the treating physician or requesting the

patient’s recent dialysis records. /d. 9 126-27, 146. Relators plead specific allegations as to six

individual Medicare patients—five who were treated in New York and one in New Jersey—each

of whose experiences with Defendants included a combination of the following features. See

generally id. at 4§ 163-243. First, to facilitate the self-referral, Defendants generated false patient

records that provided either no reason for the follow-up visits or an insufficient reason, such as to

monitor unspecified future problems. /d. at § 146. Defendants also falsified patient records to

indicate that future visits were referred by the treating physician who made the initial referral. /d.

at 147. At the beginning of the visits, Defendants performed a cursory physical examination,

during which they would observe a purported vibratory sensation to justify immediately

performing an unnecessary procedure without conferring with the treating physician or referring

to clinical data from recent dialysis sessions. /d. at § 151. Defendants sometimes provided patients

with free transportation, usually in a limousine, and free meals upon arrival. /d. { 134. Defendants

also told patients that their dialysis treatment would not be successful if they did not return for the

follow-up visits. /d. § 141. In some cases, Defendants self-referred patients as many as ten times

over two years for unnecessary procedures. /d. at § 155

According to the FAC, and on information and belief, Defendants use uniform operational

and billing procedures across their nationwide network of vascular access centers. /d. at ¢ 162. The

average reimbursement for the types of vascular intervention procedures that Defendant performed

was approximately $2,500. /d. at § 273. Defendants electronically submitted claims to Medicare

Part B on CMS Form 1450 for payment each time a patient received services at an FVC clinic. /d.

at § 309. According to aggregated Medicare Part B payment data from 2012 through 2014, 28 of

the 42 physicians listed on Defendants’ website ranked in the top 30 total physicians for number

of services performed in their respective states and specialties. /d. at § 290. Ten of those physicians

were the largest single provider of Medicare services in their respective state and specialty. Jd. at

4 291. And 28 of the 38 FVC physicians for whom 2012 data was available ranked in the top 10%

for services per patient in their respective state and specialty. /d. at § 292. In 2013, FVC physicians

received over $82 million from Medicare Part B, and in 2014, $148 million. /d. § 293-94.

Relators filed their initial qui tam complaint under seal in June 2014. Original Compl., ECF

No. 1. The United States investigated the allegations over several years and Relators regularly

amended their pleadings. On July 12, 2022, the United States filed a partial complaint-in-

intervention, which brought federal FCA claims against Defendant FVC. U.S. Compl. in

Intervention, ECF No. 48. The United States filed an amended complaint-in-intervention on

August 2, 2022, which added Defendants Miller and American Access Care Physician, PPLC, a

professional corporation that Defendant Miller owns in part. U.S. Am. Compl. in Intervention,

ECF No. 63. Relators, in their Fourth Amended Complaint proceeded with federal FCA claims

against Defendants FVC and Miller for alleged false claims submitted outside of New York.

Relators also proceeded with remaining non-intervened state claims asserted against FVC and

Defendant Miller, which included 15 counts under State FCA Laws: California, Colorado,

Connecticut, Florida, Illinois, Indiana, Louisiana, Massachusetts, Michigan, Nevada, North

Carolina, Rhode Island, Tennessee, Texas, and Virginia. See id. On October 31, 2024, the District

Court dismissed Relators’ FAC pursuant to Defendants’ Motion to Dismiss for failure to satisfy

the pleading requirements of Fed. R. Civ. P. 12(b)(6) and 9(b).

On August 4, 2025, Relators filed their current Motion to Amend Complaint along with a

copy of their Fifth Amended Complaint (“SAC”). ECF 146. Relators claim their new allegations

sufficiently plead nationwide claims against Defendants. Specifically, the SAC newly alleges:

Five specific patient examples from New Jersey and Georgia □□□ 317-354)

involving unnecessary vascular access procedures performed at timed intervals that

were billed not only to those states’ Medicaid programs, as alleged in the States’

intervention complaint, but also to Medicare (allegations Defendants have already

answered); Two additional patient examples from Florida and New York showing

the same pattern of unnecessary procedures (ff 355-359); “Spike” charts analyzing

CMS reimbursement data from four representative FVC facilities (in FL, CA, IL

and NJ) to graphically illustrate how, from 2012-2023, FVC patients nationwide

were automatically scheduled for a 90-day follow-up visit during which

unnecessary vascular access procedures were performed and billed to Medicare

312-316); Detail concerning an FVC-generated list (that was attached to the U.S.

intervention complaint and will be an attachment to the SAC) showing over 42,000

FVC clinically-timed evaluations (“CTE”) performed over a five-year period

(2011-2016) at 46 different FVC facilities in eighteen different states, and that in

the overwhelming majority of cases “pulsatility” or some other “soft” sign was used

to justify a fistulagram and a subsequent angioplasty (§] 306-311); Examples of

Miller’s personal enforcement of the CTE protocol among FVC physicians in

Florida and Tennessee (f§ 386-391); and Detail regarding Defendants’ initial

adoption of the CTE strategy, their efforts at promoting it externally and to enforce

its adoption throughout the company, both within and outside of New York State

(49 23, 360-391).

Mot. at 2-3.

LEGAL STANDARD

Courts should “freely give leave [to amend] when justice so requires.” Fed. R. Civ. P.

15(a)(2); Coniglio v. Cucuzza, 345 F.R.D. 372, 377 (E.D.N.Y. 2024) (citing Amaya v. Roadhouse

Brick Oven Pizza, Inc., 285 F.R.D. 251, 253 (E.D.N.Y. 2012) (holding that leave to amend is

entrusted to the court’s discretion)). Doing so “encourages courts to determine claims ‘on the

merits’ rather than disposing of claims or defenses based on ‘mere technicalities.”” Exec. Trim

Constr., Inc. v. Gross, 525 F. Supp. 3d 357, 366 (N.D.N.Y. 2021) (quoting Monahan v. N.Y.C. Dept

of Corr., 214 F.3d 275, 283 (2d Cir. 2000)).

Under Rule 15(a)(2) of the Federal Rules of Civil Procedure, after a party has amended

once as a matter of course, or after the window for amendments as a matter of course has closed

“a party may amend its pleading only with the opposing party’s written consent or the court’s

leave. The court should freely give leave when justice so requires.” Fed. R. Civ. P. 15(a)(2); see

also Williams v. Citigroup Inc., 659 F.3d 208, 212-13 (2d Cir. 2011); Thus, “Federal Rule of Civil

Procedure 15(a) dictates that motions to amend complaints be liberally granted absent a good

reason to the contrary ....” Assam v. Deer Park Spring Water, Inc., 163 F.R.D. 400, 404 (E.D.N.Y.

1995).

“[M]otions to amend should generally be denied in instances of futility, undue delay, bad

faith or dilatory motive, repeated failure to cure deficiencies by amendments previously allowed,

or undue prejudice to the non-moving party.” Burch v. Pioneer Credit Recovery, Inc., 551 F.3d

122, 126 (2d Cir. 2008) (citing Foman v. Davis, 371 U.S. 178, 182 (1962)); accord McCarthy v.

Dun & Bradstreet Corp., 482 F.3d 184, 200-01 (2d Cir. 2007). “The party opposing amendment

bears the burden of demonstrating good reason for denial.” Debrosse v. City of New York, 2016

WL 3647589, at *5 (E.D.N.Y. May 25, 2016) (citing Speedfit, LLC v. Woodway USA, Inc., 2015

WL 6143697, at *3 (E.D.N.Y. Oct. 19, 2015)), adopted by, 2016 WL 3647590 (E.D.N.Y. June 30,

2016).

“Mere delay ... absent a showing of bad faith or undue prejudice, does not provide a basis

for a district court to deny the right to amend.” *201 State Teachers Ret. Bd. v. Fluor Corp., 654

F.2d 843, 856 (2d Cir. 1981); Commander Oil Corp. v. Barlo Equip. Corp., 215 F.3d 321, 333 (2d

Cir. 2000) (affirming grant of motion to amend after seven-year delay, where defendant did not

show prejudice). “The concepts of delay and undue prejudice are interrelated—the longer the

period of unexplained delay, the less will be required of the non-moving party in terms of showing

prejudice.” Evans v. Syracuse City Sch. Dist., 704 F.2d 44, 47 (2d Cir. 1983).

“An amendment to a pleading will be futile if a proposed claim could not withstand a

motion to dismiss pursuant to Rule 12(b)(6).” Dougherty v. Town of N. Hempstead Bd. of Zoning

Appeals, 282 F.3d 83, 88 (2d Cir. 2002) (citation omitted). Following Bell Atlantic Corporation v.

Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009), when deciding a

motion to dismiss pursuant to Rule 12(b)(6), courts must consider whether the complaint

“contain[s] sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on

its face.’” Igbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). “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.” /d. Under this heightened

standard of pleading, “[a] pleading that offers ‘labels and conclusions’ or ‘a formulaic recitation

of the elements of a cause of action will not do.’” /d. (quoting Twombly, 550 U.S. at 555).

“In determining whether to grant leave to amend, the Court must accept the moving party’s

non-conclusory factual pleadings and draw all reasonable inferences in that party’s favor, ‘to

determine whether the allegations plausibly give rise to an entitlement to relief.’” Heinz-Wright v.

City of New York, 2016 WL 3627323, at *4 (E.D.N.Y. June 3, 2016) (quoting Panther Partners

Inc. v. Ikanos Commce’ns, Inc., 681 F.3d 114, 119 (2d Cir. 2012)), adopted by, 2016 WL 3620759

(E.D.N.Y. June 29, 2016); see also Konrad v. Epley, 2013 WL 6200009, at *20 (E.D.N.Y. July

31, 2013), adopted by, 2013 WL 6200009 (E.D.N.Y. Nov. 25, 2013). Whether to allow a party to

amend its complaint is left to the discretion of the Court. Ruffolo v. Oppenheimer & Co., 987 F.2d

129, 131 (2d Cir. 1993).

DISCUSSION

In the instant matter, Relators seek amendment of their Complaint to, among other things,

add additional factual allegations and plead their nationwide claims with greater particularity.

Defendants object to Relators’ Motion, arguing that amendment would unduly delay proceedings,

that Plaintiffs’ delay in amending is prejudicial, and that the proposed amendment is futile. See

generally Opp’n. For the sake of brevity, this Court will analyze undue delay and prejudice

together as those two concepts are interrelated. See Evans v. Syracuse City Sch. Dist., 704 F.2d 44,

47 (2d Cir. 1983).

I. Undue Delay and Prejudice

Ostensibly, it appears that Relators’ Amendment would unduly delay the proceedings given

that this would be Relators’ sixth Complaint over the twelve-year span of the case. However,

Relators’ prior amendments are of no import as the alleged purpose of those earlier amendments

was to “alert the government to the scope of Defendants’ fraud, [rather than] to respond to pleading

challenges” while the case was under seal. > Reply at 1. Furthermore, “[mJere delay ... absent a

showing of bad faith or undue prejudice, does not provide a basis for a district court to deny the

right to amend.” State Teachers Ret. Bd., 654 F.2d at 856 ; Commander Oil Corp., 215 F.3d at 333

(2d Cir. 2000) (affirming grant of motion to amend after seven-year delay, where defendant did

not show prejudice). “The concepts of delay and undue prejudice are interrelated—the longer the

period of unexplained delay, the less will be required of the non-moving party in terms of showing

prejudice.” Evans v. Syracuse City Sch. Dist., 704 F.2d 44, 47 (2d Cir. 1983).

3 Compare with U.S. ex rel. Polansky v. Pfizer, Inc., No. 04-cv-0704, 2009 WL 1456582, at *10 (E.D.N.Y. May 22,

2009) (“While [relator] has amended his complaint on three prior occasions, it was not in response to a

motion by [defendant]. Instead, it occurred during the period when the complaint was sealed while the

United States Attorney was making a judgment as to whether to intervene.”).

In the instant matter, Defendants contend that Relators delayed far too long in seeking

amendment as their current Motion comes more than seven months following the District Court’s

Dismissal Order rejecting all of Relators’ non-intervened claims. See Opp’n at 7. Relators contend

that they filed their Motion seven months following the dismissal order because they “worked

diligently to investigate and add over 90 paragraphs to their complaint to address the specific

deficiencies identified by the Court.” Mot. at 6; see also Reply at 4.

The Court does not find Relators’ delay to be of bad faith or unduly prejudicial. Typically,

in gauging prejudice, a major factor courts consider is whether amendment would require the

nonmoving party to “expend significant additional resources to conduct discovery.” Ruotolo v.

City of New York, 514 F.3d 184, 192 (2d Cir.2008). Here, formal discovery has yet to commence.

Furthermore, Relators do not seek to add additional claims nor parties as the proposed amendment

only seeks to add new factual allegations that serve to bolster their preexisting claims. See State

Farm Mut. Auto. Ins. Co. v. CPT Med. Servs., P.C., 246 F.R.D. 143, 148-49 (E.D.N.Y. 2007)

(‘Prejudice is generally found where ... the amendment brings entirely new and separate claims,

adds new parties or at least entails more than an alternate claim or a change in the allegations of a

complaint.”).

Additionally, Defendants are misguided in their contention that the District Court

“implicitly denied leave to further amend” in the October 31, 2024, Dismissal Order. Opp’n at 9-

10. The District Court in that order did not explicitly state that Relators were denied leave nor did

the District Court grant dismissal with prejudice. The District Court granted dismissal under Fed.

R. Civ. P. 9(b), and “Complaints dismissed under Rule 9(b) are ‘almost always’ dismissed with

leave to amend. Luce v. Edelstein, 802 F.2d 49, 56 (2d Cir. 1986) (citing 2A J. Moore & J. Lucas,

Moore's Federal Practice, § 9.03 at 9-34 (2d ed. 1986) and Yoder v. Orthomolecular Nutrition

10

Institute, Inc., 751 F.2d 555, 562 (2d Cir.1985)). In cases where such leave has not been granted,

plaintiffs have usually already had one opportunity to plead fraud with greater specificity. See, e.g.,

Armstrong v. McAlpin, 699 F.2d 79, 93-94 (2d Cir.1983); Decker v. Massey-Ferguson, Ltd., 681

F.2d 111, 115 (2d Cir.1982); Denny v. Barber, 576 F.2d at 470-71. Even if the District Court did

deny Relators leave to amend, the Second Circuit has held that dismissal under Rule 9(b) of

complaints without granting leave to amend constitutes abuse of discretion. Luce, 802 F.2d at 56-

57; Foman v. Davis, 371 U.S. 178, 182 (1962). Therefore, the Court does not find Plaintiffs’ delay

in seeking amendment to be of bad faith or unduly prejudicial.

Il. Futility

Defendants contend that Relators’ Fifth Amended Complaint fails to state federal and state

FCA claims with the requisite particularity prescribed under Fed. R. Civ. P. 9(b). See Opp’n at 20-

25. Defendants, as the party opposing the amendment, bear the burden of proving futility. Ramirez

v. Canty. of Nassau, 345 F.R.D. 397, 404 (E.D.N.Y. 2024). “To overcome objections of futility, the

moving party must merely show that it has ‘at least colorable grounds for relief.’” Copantitla v.

Fiskardo Estiatorio, Inc., 9-cv-1608 (RJH) (JFC), 2010 WL 1327921, at *3 (S.D.N.Y. Apr. 5,

2010) (citing Ryder Energy Distrib. Corp. v. Merrill Lynch Commodities Inc., 748 F.2d 774, 783

(2d Cir.1984)). An amendment is futile if “the proposed claim could not withstand a Fed. R. Civ.

P. 12(b)(6) motion to dismiss.” Salazar v. Brown Realty Assocs., L.L.C., 796 F. Supp. 2d 378, 383

(E.D.N.Y. 2011). To survive such a motion, a complaint must contain sufficient facts that, when

accepted as true, state “a claim to relief that is plausible on its face.” Aschroft v. Iqbal, 556 U.S.

662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially

plausible when the factual allegations allow “the court to draw the reasonable inference that the

defendant is liable for the misconduct alleged.” Jd. The court must accept the material facts

alleged in the amended complaint as true and draw all reasonable inferences in the plaintiff’s favor.

11

Pikington N. Am., Inc., 2021 WL 4991422, at *5 (“As is the case when considering a motion to

dismiss under Rule 12(b)(6), the Court is required to ‘accept the facts alleged by the party seeking

to amend as true and construe them in the light most favorable to that party.’” (citing Aetna Cas.

& Sur. Co. v. Aniero Concrete Co., 404 F.3d 566, 604 (2d Cir. 2005)).

Here, Defendants first claim that the example patient allegations in the Fifth Amended

Complaint (ff 317-54) are too “sparse and vague to support an inference of fraud” in the referenced

states, let alone nationwide. Opp’n at 21 (citing U.S. ex rel. Suarez v. AbbVie, 503 F. Supp. 3d □□□□

730-31 (N.D. Ill. 2020)). Defendants further allege that over thirty paragraphs regarding three

additional example patient allegations were copied and pasted from the States’ Consolidated

complaints-in-intervention that Relators sought to “repurpose in support of a nationwide federal

FCA claim.” Opp’n at 21. However, upon inspection of these allegations in the SAC, along with

particularized examples provided of patients from those states, the Court finds that Relators

sufficiently state a claim that Defendant facilities plausibly submitted false Medicare Claims. SAC

at J] 317-54. Furthermore, as Relators duly pointed out, Defendants did not seek to dismiss these

same allegations when filing their Answer to the States’ Intervention Complaint. Reply at 7.

Second, Defendants allege that 386-91 of the SAC constitute “vague allegations” regarding

“disagreements” between two physicians and Dr. Miller and are insufficient to state an FCA claim.

Opp’n at 22. However, to label the allegations in these paragraphs as mere “disagreements”

between physicians 1s a mischaracterization. These paragraphs allege that Defendant Doctor Miller

was pressuring physicians to perform unnecessary procedures on patients, with the SAC even

alleging that Defendant Miller asked one of physicians “[h]ow can you expect to make money if

you are sending 80% of the patients home?” SAC at § 389. Third, Defendants allege that the “spike

charts” provided in § 315 of the SAC are, among other allegations, indecipherable, and that such

12

“generalized” and “aggregate data” regarding the quantity and frequency of visits cannot support

an FCA claim. Opp’n at 22-23. While such an assertion on its own is ostensibly convincing, it

mischaracterizes Relators’ reasoning in incorporating these spike charts in their SAC. Relators

incorporate these charts simply to demonstrate that Defendants perform interventional procedures

on timed schedules rather than in response to individualized needs, which is a central issue in this

case. Reply at 8. Fourth, Defendants take issue with the CTE chart provided as “Exhibit 2” to the

SAC, alleging, similarly to their last point, that such a chart provides no basis to infer fraud. Opp’n

at 23. However, it appears that Relators provided this exhibit to support their assertion that “[o]ver

72%, a suspiciously high percentage, of the procedure entries provide ‘pulsatility’ or other

subjective indicators as the justification for sedating the patient and performing an invasive

fistulagram.” 5AC at 9308. Fifth, Defendants take issue with the SAC’s inclusion of Dr. Miller’s

professional activities and titles, namely that of “Authorized Official” and how that title relates to

the fraud alleged. Opp’n at 23-24. The Court finds that the SAC alleges that as an “Authorized

Official” under 42 C.F.R. § 424.502, Defendant Miller had a duty to ensure that “the organization

[FVC] fully abide[s] by the statutes, regulations, and program instructions of the Medicare

program.” SAC 9393; see also Reply at 9. Thus, the Court does not find any of these new

allegations to be futile.

Lastly, Defendants claim that when the District Court dismissed Relators’ non-intervened

claims, the FCA public disclosure bar precluded Relators from using public information to revive

their case, particularly that information contained in the U.S. and States’ complaints-in-

intervention. Opp’n at 24. Defendants are correct in their contention that the FCA requires courts

to “dismiss an action or claim... if substantially the same allegations or transactions as alleged in

the action or claim were publicly disclosed.” 31 U.S.C.A. § 3730(e)(4)(A). A relator's allegations

13

are deemed “substantially the same” as public allegations if they would expose the same “essential

elements” as the publicly aired fraud. See U.S. ex rel. Kester v. Novartis Pharms. Corp., 43

F.Supp.3d 332, 346 (S.D.N.Y.2014); see also U.S. ex rel. Kreindler & Kreindler v. United Techs.

Corp., 985 F.2d 1148, 1159 (2d Cir.1993). Here, there is no dispute among parties that Relators’

allegations in their 5AC are substantially similar to those located in the U.S. and States’

complaints-in-intervention. See Reply at 9 (“Relators incorporated certain allegations from the

governments’ complaints”). However, what both parties failed to discuss is that Relators may be

excepted by this public disclosure bar if they qualify as an “original source” under 31 U.S.C.A. §

3730(e)(4)(B).4 An “original source” must have direct and independent knowledge of the

information incorporated in any amended complaint. Rockwell Intern. Corp. v. United States, 549

U.S. 457, 473 (2007). In other words, the “core information” on which the qui tam complaint is

based cannot come from a third party. United States v. New York Med. Coll., 252 F.23d 118, 121

(2d Cir.2001) (per curiam); see also Ping Chen ex rel. U.S. v. EMSL Analytical, Inc., 966 F.Supp.2d

282, 300 (S.D.N.Y.2013). Ultimately, the “public disclosure requirement was ‘designed to preclude

qui tam suits based on information that would have been equally available to strangers to the fraud

transaction had they chosen to look for it.’”” U.S. ex rel. Feldman v. Van Gorp., 674 F.Supp.2d 475,

482 (S.D.N.Y.2009). Here, although some of the information contained in the 5AC appears to

come directly from the U.S. and States’ complaints-in-intervention, Relators possessed direct and

independent knowledge of the allegations in the intervenor complaints. As alleged in the SAC:

The allegations in this Complaint are based upon information and documents

Relators learned and discovered first-hand during the course of performing their

professional responsibilities, from their personal interactions with Defendants’

4 Original source “means an individual who either (i) prior to a public disclosure under subsection (e)(4)(a), has

voluntarily disclosed to the Government the information on which allegations or transactions in a claim are based, or

(2)° who has knowledge that is independent of and materially adds to the publicly disclosed allegations or

transactions, and who has voluntarily provided the information to the Government before filing an action under this

section.” 31 U.S.C.A. § 3730(e)(4)(B).

14

facilities, and from their discussions with individual patients who were and remain

subjected to Defendants’ fraudulent scheme. The allegations are also based upon

ongoing investigations that Relators and Relators’ counsel undertook during the

course of this litigation including, but not limited to, interviews with potential

witnesses, analysis/monitoring peer reviewed clinical studies, review of defendant

Miller’s professional history and present activities, review of updated professional

guidelines, review of documents discussing serial interventions on ESRD patients,

and extensive analyses of CMS data generated through at least 2023.

SAC 917. The Court in United States ex rel. Kolchinsky v. Moody's Corp. found relator to be an

“original source” as he possessed direct and independent knowledge from his time working with

Defendant and his previous attempts to raise concerns regarding Defendant’s fraud. 162 F. Supp.

3d 186, 194 (S.D.N.Y. 2016). Here, Relators, like the relator in Kolchinsky, possessed direct and

independent knowledge from, among other things, their personal interactions with Defendants.

Therefore, the Court finds Relators were an “original source” for the alleged fraud and reject

Defendants’ public disclosure bar argument.

Therefore, the Court does not find Relators’ proposed amendment to be futile.

CONCLUSION

For the foregoing reasons, this Court GRANTS Relators’ Motion for Leave to Amend their

Complaint (“Motion”).

SO ORDERED.

/S

Steven Tiscione

United States Magistrate Judge

Eastern District of New York

Dated: Central Islip, New York

March 31, 2026

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