Kane

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF FLORIDA

TAMPA DIVISION

KATHLEEN KANE,

Plaintiff-Relator,

v. Case No: 8:21-cv-1050-CEH-TGW

SELECT MEDICAL

CORPORATION, SELECT

PHYSICAL THERAPY HOLDINGS,

INC. and SELECT EMPLOYMENT

SERVICES, INC.,

Defendants.

___________________________________/

ORDER

This matter comes before the Court on Defendants’ Motion to Dismiss

Relator’s Third Amended Complaint (Doc. 116). In the motion, Defendants request

dismissal of the Third Amended Complaint with prejudice because it fails to allege

Relator’s False Claims Act claims with particularity as required by Rule 9(b).

Plaintiff/Relator Kathleen Kane responded in opposition (Doc. 119). The United

States filed a Statement of Interest Regarding Defendants’ Motion to Dismiss (Doc.

129), to which Defendants (Doc. 132) and Relator (Doc. 136) replied. The Court,

having considered the motion and being fully advised in the premises, will grant

Defendants’ motion, in part, to the extent that Counts IV, V, and VI of the Third

Amended Complaint will be dismissed with prejudice. Additionally, to the extent the

Third Amended Complaint seeks to sue Defendants on a nationwide basis, a

nationwide claim has not been adequately pleaded and is subject to dismissal.

Defendants’ Motion to Dismiss Relator’s Third Amended Complaint is otherwise

denied.

I. THE FALSE CLAIMS ACT

This is a False Claims Act or “qui tam” action. The False Claims Act (“FCA”)

allows a private party, referred to as a “relator,” to file an action on behalf of herself

and the United States against entities that have defrauded the government and to share

in any recovery if an action is successful. 31 U.S.C. §§ 3730(b), (d). “The FCA is

designed to protect the Government from fraud by imposing civil liability and penalties

upon those who seek federal funds under false pretenses.” United States ex rel. Lesinski

v. S. Fla. Water Mgmt. Dist., 739 F.3d 598, 600 (11th Cir. 2014).

II. BACKGROUND1

Plaintiff/Relator Kathleen Kane (“Relator” or “Kane”) sues Defendants, Select

Medical Corporation (“SMC”), Select Physical Therapy Holdings, Inc. (“SPTH”),

and Select Employment Services, Inc. (“SES”) (collectively “Defendants”), for alleged

fraud on the government in violation of the FCA, 31 U.S.C. §§ 3729–33. Doc. 111. In

a six-count Third Amended Complaint, Relator alleges Defendants engaged in an

1 The following statement of facts is derived from the Third Amended Complaint (Doc.

111), the allegations of which the Court must accept as true in ruling on the instant

Motion to Dismiss. Linder v. Portocarrero, 963 F.2d 332, 334 (11th Cir. 1992); Quality

Foods de Centro Am., S.A. v. Latin Am. Agribusiness Dev. Corp. S.A., 711 F.2d 989, 994

(11th Cir. 1983); see also Fed. R. Civ. P. 10(c) (“A copy of a written instrument that is an

exhibit to a pleading is a part of the pleading for all purposes.”).

“upcoding scheme” in violation of 31 U.S.C. § 3729(a)(1)(A) (Count I); § 3729(a)(1)(B)

(Count II); and § 3729(a)(1)(G) (Count III). Relator also alleges Defendants conducted

an “unskilled services scheme” in violation of § 3729(a)(1)(A) (Count IV); §

3729(a)(1)(B) (Count V); and § 3729(a)(1)(G) (Count VI). Id. The FCA prohibits the

submission of false or fraudulent claims and false statements in order to obtain or keep

federal money. Id. ¶ 33. In sum, Relator contends that Defendants represented to the

Government that they had provided more physical therapy services—in quantity and

quality—than they, in fact, provided, and as a result, the Government paid Defendants

higher amounts than they were owed.

Defendants move to dismiss the Third Amended Complaint with prejudice for

failing to allege her claims with particularity as required by Federal Rule of Civil

Procedure 9(b). Doc. 116. The United States declined to intervene. Doc. 26.

Relator is a licensed physical therapist and certified athletic trainer with over

thirty years of professional experience. Doc. 111 ¶ 2. She began working for Select

Physical Therapy on July 28, 2014, in Connecticut. Id. She relocated to Select Physical

Therapy’s Carrollwood Tampa location in August 2015 and worked there until she

resigned on September 3, 2020. Id. Prior to working with Defendants, Relator oversaw

billing operations and audit functions for 14 years with another company as its

Director of Physical Therapy. Id. ¶ 3. In that role, Relator received training and

practical experience on how Medicare bills are submitted electronically using codes.

Id.

Defendants are Delaware corporations who share common ownership,

financial control, headquarters location, management, and operational control. Id. ¶¶

5–9. Relator alleges that SMC, SPTH, and SES operate with a sufficient degree of

unity in the management of the Select Physical Therapy facilities in the metro-Tampa,

Florida, area to present themselves as a single company to third parties. Id. ¶ 10.

Defendants operated as a single or integrated employer. Id. ¶ 11. Alternatively, Relator

alleges Defendants operated as a joint employer or shared agency relationship. Id. ¶¶

12, 13.

Relator alleges that from 2016 to the present, Defendants knowingly submitted

false and/or fraudulent claims for physical therapy services provided to individuals

covered under Medicare and other Federally Funded Payors (“FFP”). Id. ¶ 43. Relator

directly observed the actual submission of claims and government payments in the

course of her normal duties working for Defendants. Id. ¶ 42. Relator alleges that

Defendants engaged in illegal practices under the FCA, including (1) fraudulently

upcoding for direct therapy (one-on-one) when group therapy was provided or by

overbilling for direct therapy; and (2) fraudulently billing for “unskilled” physical

therapy services not eligible to receive reimbursement. Id. ¶ 43.

Direct physical therapy pertains to a physical therapist, or physical therapist

assistant working under the supervision of a physical therapist, working one-on-one

with a patient. Id. ¶ 88. These services are billed in fifteen-minute intervals (constituting

one unit) based on the number of times the service is provided, with a minimum length

of time for one unit being at least eight minutes of one-on-one contact between the

physical therapist and the patient. Id. ¶ 91. Alternatively, group therapy sessions—

which are billed and coded differently—occur when a physical therapist

simultaneously treats two or more patients, regardless of whether it is the same activity

and one-on-one contact is not required. Id. ¶ 92. Only one unit of group therapy may

be billed per patient regardless of the time spent providing group therapy. Id. ¶ 93. A

therapist may bill for both direct and group services provided to the same patient on

the same day provided: (1) CPT and CMS rules for direct and group therapy are

complied with; (2) group services are performed distinctly and independently from the

direct services; and (3) group services are billed using a -59 modifier. Id. ¶ 94.

CPT (“Current Procedural Terminology”) codes provide health professionals

with a uniform language for describing medical services. Doc. 116 at 8 n.1. CPT codes

97140, 97112, and 97530 are codes used for physical therapy services that require one-

on-one contact. Doc. 111 ¶ 90. CPT code 97150 applies to group therapy sessions. Id.

¶ 93. A therapist would use the -59 modifier to bill for both group therapy and

individual therapy CPT codes to distinguish that the two coded services represent

different sessions or separate encounters on the same day. Id. ¶ 95.

Relator alleges that Defendants engaged in a scheme of “upcoding” by routinely

submitting false claims for reimbursement to Medicare and other FFPs for direct

physical therapy services when group therapy was provided. Id. ¶¶ 96–97. Defendants

carried out this upcoding scheme by scheduling, encouraging, and incentivizing their

physical therapists to intentionally provide physical therapy to multiple patients at the

same time and then bill these services as direct, rather than group, therapy. Id. ¶¶ 98–

99. This practice caused Medicare and other FFPs to over-pay for direct services that

had not actually been performed. Id. ¶ 100.

Relator alleges Ms. Rita Booth, the Director of Defendants’ Carrollwood clinic,

routinely scheduled multiple patients with overlapping time slots and then billed only

for direct therapy or for both direct therapy and group therapy, despite treating

multiple patients at the same time. Id. ¶¶ 101–02. This resulted in Ms. Booth both

failing to bill group therapy at times and overbilling for direct therapy. Id. ¶ 103. By

way of example, on September 19, 2018, Ms. Booth billed Patients 14, 15, 16, 17, 18

and 19 for direct therapy services during the same units of time, meaning physical

therapy services were being provided simultaneously with other patients. Id. ¶ 104.

Relator alleges that similar fraudulent billing practices occurred on November 15, 2018

and November 19, 2018, in which Ms. Booth treated more than one patient at a time

but coded and billed the time for direct therapy. Id. This practice violates CMS

guidelines on Medicare billing which provides that a therapist cannot bill different

patients for therapy services requiring direct one-one-one contact in the same unit of

time. Id. ¶ 105. Relator alleges that these improper billing practices were the result of

Defendants’ systemic and continuing billing upcoding scheme. Id. ¶ 106.

Ms. Amy Shehadeh, a physical therapist at Defendants’ Carrollwood clinic,

also overbilled for direct services despite treating multiple patients at the same time.

Id. ¶ 107. For example, Ms. Shehadeh engaged in upcoding on November 8, 2019, and

August 18, 2020, when she billed two different patients on these dates for direct

therapy services during the same units of time. Id. Additionally, Mr. Cameron Moore,

an employee at Defendants’ Northdale and other clinics, overbilled for direct services

when treating two patients at the same time on June 24, 2020, and June 25, 2020. Id.

¶ 108. For each of the referenced examples of alleged upcoding, Relator attaches to

the complaint the “Daily Notes” signed by the physical therapist and identifying the

services performed for the respective patients on the above-referenced dates. See Doc.

110-1.

Relator alleges that Defendants submitted false claims to Medicare seeking

reimbursement for more direct physical therapy services than were actually provided,

in violation of Medicare reimbursement rules. Doc. 111 ¶ 112. Through her

experience, knowledge, training and access to Defendants’ electronic medical record

(“EMR”) system, Relator knows that each example cited above of fraudulent coding

and billing to Medicare was actually presented to Medicare for payment. Id. ¶ 113. By

way of example, Relator attaches a printout of the billing summary (“entitled Patient

Statement Inquiry”) for Patient 60, one of the patients treated by Ms. Booth on

November 15, 2018, and November 19, 2018. Id. ¶ 114; see also Doc. 110-2 at 8-13.

The Patient Statement Inquiry (“PS Inquiry”) lists CPT codes, descriptions, units

billed, and amounts Defendants charged to Medicare for Patient 60 from July 24, 2018

through July 15, 2019. Id. ¶ 115; see also Doc. 110-2 at 8–13. The billing summary also

details the dates and amounts Medicare paid, through payment processors like First

Coast Service Options, for the services charged by Defendants. Doc. 111 ¶ 116; see also

Doc. 110-2 at 10–11. The billing summary shows that on both November 15 and

November 19, 2018, Defendants charged Medicare for two units of direct therapy and

one unit of group therapy provided to Patient 60 on those dates. See Docs. 111 ¶ 117;

110-2 at 10; 110-1 at 31–33 and 64–66. Thus, Relator alleges the billing summary

shows, as to Patient 60, that Defendants fraudulently charged for direct therapy when

they should have only charged for group therapy under the Medicare rules since Ms.

Booth was treating Patient 60 in a single session simultaneously with other patients.

Doc. 111 ¶¶ 119, 120. The upcoded billing resulted in Defendants overcharging

Medicare. Id. ¶¶ 121, 122. The billing summary reflects that Medicare actually paid

the charges submitted, as well as other charges submitted on behalf of Patient 60 for

November 2018. Id. ¶¶ 123–28.

Regarding the alleged “unskilled services” theory, Relator alleges that Medicare

only covers “skilled” physical therapy services, which are those medically reasonable

and necessary, and which are performed or supervised by a qualified physical

therapist. Id. ¶ 132. Medicare does not cover “unskilled” physical therapy services. Id.

Physical therapy services are considered “unskilled” if the amount, frequency, and

duration of the services are not reasonable under accepted standards of medical

practice. Id. ¶ 133. Repetitive exercises are generally considered unskilled. Id.

Rehabilitation physical therapy services are considered unreasonable and unnecessary

if “an individual’s expected rehabilitation potential is insignificant in relation to the

extent and duration of therapy services required to achieve such potential.” Id. ¶ 117

(quoting Medicare Benefit Policy Manual, Chapter 15 § 220.2(C)).

Relator alleges that Defendants systematically billed Medicare for unskilled

physical therapy services that were ineligible for reimbursement because Defendants’

physical therapists at the Carrollwood clinic provided unreasonable services in terms

of amount, frequency, and duration to many patients without justification for why

these services were medically reasonable or necessary. Id. ¶¶ 135–36. Relator alleges

that she directly observed submission and payment of the claims in the normal course

of her duties working for Defendants. Id. ¶ 137. For example, Ms. Booth provided

rehabilitative therapy on an FFP-covered patient 139 times over the course of twenty

months. Id. ¶ 138. She attaches the treatment records in support. See Doc. 110-5.

Several other physical therapists employed by Defendants performed rehabilitative

therapy on a 94-year-old FFP-covered patient 161 times over the course of twenty-one

months. Doc. 111 ¶ 139; see also Doc. 110-6. Relator alleges that neither patient showed

justification for the significant length of this treatment, nor showed significant

progress, making their continued treatment unjustified. Doc. 111 ¶ 140. Relator asserts

that her education, knowledge, experience, training, personal observations and access

to Defendants’ EMR, coding, and billing system confirms that the unskilled services

scheme was rampant and the fraudulent charges were actually submitted to and paid

by Medicare. Id. ¶ 141.

Relator quotes from specific emails dating back to 2016 that include references

to performance incentives for employees to avoid “group” billing as evidence that

Defendants attempted to incentivize employees to upcode billings under the guise of

productivity improvement. Id. ¶¶ 142–44, 146–48. Defendants incentivized upcoding

by suggesting bonus payments for productivity. Id. ¶¶ 145–46.

On November 16, 2018, Relator informed Defendants’ Chief Compliance

Officer, Mr. Robert G. Breighner, Jr, of Ms. Booth’s fraudulent billing practices,

providing Mr. Breighner with approximately 185 examples of Ms. Booth’s

fraudulently submitted bills in less than two months. Id. ¶¶ 156–58. Afterwards,

Relator spoke with Ms. Cheryl Salerno of Mr. Breighner’s staff regarding concerns

Relator identified on several other occasions. Id. ¶ 159. Despite this, Ms. Booth was

only required to make addendums to the bills that Relator had sent to Mr. Breighner,

and Mr. Breighner did not conduct a full chart review of Ms. Booth’s activity months

after Relator’s initial report. Id. ¶¶ 164–65. Rather, billing corrections were only made

within the narrow timeframe Relator gave to Mr. Breighner. Id. ¶ 165.

Additionally, in March 2019, Relator informed Mr. Maduro, Defendants’

Market Manager, of Ms. Booth’s fraudulent billing practices who, in response, told

Relator to stop auditing patient documentation for whom she is not the treating

clinician. Id. ¶¶ 161–63. Ms. Booth confirmed this billing activity in a conversation in

which she stated, “this is how I was taught to bill” and that she “did not believe in

group billing.” Id. ¶ 166. Despite Relator’s notice of unlawful billing practices to

Defendants’ Compliance Officer and management, Defendants submitted these false

claims. Id. ¶ 168.

Relator alleges Defendants engaged in a nationwide scheme to defraud the

government through these billing practices given that she gave notice to Defendants

on a local, regional, and national basis. Id. ¶ 169.

Defendants expressly certified compliance with the FCA when they submitted

Medicare cost reports based on their claims to Medicare, as well as documents that

contain certifications of compliance to the government as a condition of receiving

Medicare reimbursements. Id. ¶¶ 171, 173, 176. As a result, Medicare paid Defendants

higher amounts than they were owed, causing damage to the Government Payors. Id.

¶¶ 182, 183.

III. LEGAL STANDARD

To survive a motion to dismiss under Rule 12(b)(6), a pleading must include a

“short and plain statement of the claim showing that the pleader is entitled to relief.”

Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009) (quoting Fed. R. Civ. P. 8(a)(2)). Labels,

conclusions and formulaic recitations of the elements of a cause of action are

insufficient. Id. (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)).

Furthermore, mere naked assertions are not enough. Id. A complaint must contain

sufficient factual matter, which, if accepted as true, would “state a claim to relief that

is plausible on its face.” Id. (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.” Id.

(citation omitted). The court, however, is not bound to accept as true a legal conclusion

stated as a “factual allegation” in the complaint. Id.

Additionally, Federal Rule of Civil Procedure 9(b) places more stringent

pleading requirements on claims alleging fraud. Fed. R. Civ. P. 9(b). “[U]nder Rule

9(b) allegations of fraud must include facts as to time, place, and substance of the

defendant’s alleged fraud.” United States ex rel. Clausen v. Lab. Corp. of Am., Inc., 290

F.3d 1301, 1308 (11th Cir. 2002) (citation and internal quotations omitted). Plaintiffs

are thereby required to set forth “the details of the defendants’ allegedly fraudulent

acts, when they occurred, and who engaged in them.” Hopper v. Solvay Pharm., Inc.,

588 F.3d 1318, 1324 (11th Cir. 2009) (internal quotation marks omitted) (citing

Clausen, 290 F.3d at 1310). Failure to satisfy the particularity requirement under Rule

9(b) amounts to failure to state a claim under Rule 12(b)(6). See, e.g., Corsello v. Lincare,

Inc., 428 F.3d 1008, 1012 (11th Cir. 2005).

IV. DISCUSSION

A. Particularity Requirement under Rule 9(b)

In their motion to dismiss the Third Amended Complaint, Defendants argue that

Relator still fails to plead her claims with the particularity required under Federal Rule

of Civil Procedure 9(b). To state a claim in an action under the False Claims Act, Rule

8’s pleading standard is supplemented but not supplanted by Rule 9(b)’s pleading

requirements. See Clausen, 290 F.3d at 1309. In pertinent part, Rule 9(b) requires a

party alleging fraud to “state with particularity the circumstances constituting fraud,”

but scienter may be alleged generally. To satisfy this heightened-pleading standard in

an FCA action, the Relator must allege “facts as to time, place, and substance of the

defendant’s alleged fraud,” particularly, “the details of the defendants’ allegedly

fraudulent acts, when they occurred, and who engaged in them.” Id. at 1310 (quoting

Cooper v. Blue Cross & Blue Shield of Fla., 19 F.3d 562, 567–68 (11th Cir. 1994)) (internal

quotation marks omitted).

B. Upcoding Theory

1. Count I—Violation of 31 U.S.C. § 3729(a)(1)(A)

In Count I, Relator alleges Defendants engaged in an “upcoding scheme” in

violation of 31 U.S.C. § 3729(a)(1)(A) by presenting for payment to the Government

false or fraudulent claims for direct therapy services when group therapy services were

provided, which resulted in Medicare overpaying. In their motion to dismiss,

Defendants challenge the sufficiency of Relator’s presentment and falsity allegations

in Count I. Doc. 116 at 6–18. To state a § 3729(a)(1)(A) presentment claim in this

Circuit, “a complaint must allege (1) a false claim, (2) that the defendant presented, or

caused to be presented, for payment or approval, (3) with knowledge that the claim

was false.” United States ex rel. 84Partners, LLC v. Nuflo, Inc., 79 F.4th 1353, 1359 (11th

Cir. 2023) (citing United States ex rel. Phalp v. Lincare Holdings, Inc., 857 F.3d 1148, 1154

(11th Cir. 2017)).

Relator responds that she has adequately pleaded presentment with particularity

to overcome Defendants’ motion to dismiss. The most direct way to satisfy the

presentment requirement is “by identifying specific claims submitted to the

government: invoices, billing records, reimbursement forms.” Vargas v. Lincare, Inc.,

134 F.4th 1150, 1157 (11th Cir. 2025) (citing Hopper, 588 F.3d at 1326). The Eleventh

Circuit has held, however, that “Rule 9(b) does not always require documentary proof

at the pleading stage.” Vargas, 134 F.4th at 1157. The key is whether the allegations of

presentment include “sufficient indicia of reliability.” Id. (citing U.S. ex rel. Atkins v.

McInteer, 470 F.3d 1350, 1357–58 (11th Cir. 2006)). This determination depends on

context and is analyzed on a case-by-case basis. Vargas, 134 F.4th at 1157 (citing Atkins,

470 F.3d at 1358).

In Atkins, the Eleventh Circuit found that a relator psychiatrist’s allegations of

submissions of false claims fell short where the relator alleged he suspected his

employer of submitting false claims and identified patients and procedures he thought

should not be reimbursable, but he had no role in billing, no personal knowledge of

claims submitted, and the allegations rested on his own opinions and staff rumors.

Atkins, 470 F.3d at 1359.

In contrast, in U.S. ex rel. Walker v. R&F Properties of Lake County, Inc., 433 F.3d

1349 (11th Cir. 2005), the Eleventh Circuit found the allegations in a relator’s

complaint to be sufficiently reliable to overcome a motion to dismiss where relator

alleged that she was a nurse practitioner who worked for defendant, while employed

she never had her own billing code to use, she was instructed each day as to “which

doctor she would be billing under,” that her services were always billed “incident to

the service of a physician” and never as an independent service, and that she discussed

this practice with the office administrator who indicated they never billed nurse

practitioner or physician assistant services in another manner. Id. at 1360. Affirming

the district court’s denial of the motion to dismiss, the appellate court concluded that

these allegations were sufficient to explain why relator believed defendant submitted

false or fraudulent claims for services rendered by nurse practitioners and physician

assistants “incident to the service of a physician.” Id.

“At the motion-to-dismiss stage, we take the plaintiff’s well-pleaded allegations

as true . . . and draw all reasonable inferences in the relators’ favor.” Vargas, 134 F.4th

at 1159 (citing Iqbal, 556 U.S. at 678–79). “That does not change in FCA cases.” Id. at

1159. As the Vargas court explained, the “question is not whether the relators have

proved fraud; it is whether they have alleged it with particularity.” Id.

Here, Relator’s allegations in Count I provide sufficient indicia of reliability.

She attaches a representative sample (patient notes and billing for Patient 60) showing

that claims were actually submitted to the government. Doc. 111 ¶¶ 101–106, 114–

117. She alleges the basis of her first-hand knowledge of and access to Defendants’

billing systems. Id. ¶¶ 113, 130. And she details her internal audits of Defendants’

billing practices. Id. ¶¶ 118-128. The billing entry for Patient 60 was retrieved from

Defendants’ EMR system that Relator had training on and that included billing and

claims information. The billing entry also showed Medicare paid Defendants for

physical therapy services provided to Patient 60. The representative claim included the

amounts charged, who submitted the claims, the dates of submission, the CPT codes

used and services Defendants charged for, the dates Medicare paid, the identity of the

payment processor who paid Defendants, and the break-down of the treatment that

Ms. Booth provided versus what was billed.2 Id. The Court may appropriately consider

2 Defendants submit that the PS Inquiries are not claims, bills, nor a remittance advice and

how discounts are applied to these charges is unknown. Doc. 116 at 12. Further, Defendants

the documents attached to the Third Amended Complaint. See Fed. R. Civ. P. 10(c)

(“A copy of a written instrument that is an exhibit to a pleading is a part of the pleading

for all purposes.”). Relator’s allegations and exhibits satisfy the who, what, where,

when, and how of fraudulent submissions, see Olhausen v. Arriva Med., LLC, 124 F.4th

851, 860 (11th Cir. 2024), to state with particularity a violation of § 3729(a)(1)(A).

Defendants additionally contend that Relator fails to allege falsity with

particularity. First, Defendants argue that because Relator fails to include the

corresponding PS Inquiries for the other patients (Patients 81 and 82) treated on the

same dates and times as Patient 60 that Relator is unable to establish the falsity of the

claims submitted on behalf of Patient 60. This argument is unavailing. Accepting

Relator’s allegations as true and drawing all reasonable inferences in her favor, see

Vargas, 134 F.4th at 1159, Defendants billed the Government for providing direct

therapy (i.e., one-on-one) services to Patient 60 when she was being treated

simultaneously with other patients (i.e., group therapy). Regardless of the CPT codes

and units listed on the PS Inquiries for Patients 81 and 82, Relator’s allegations

sufficiently allege the falsity of Patient 60’s bills.

Next, Defendants argue that the lack of PS Inquiries for Patients 81 and 82

deprive the Court of insight into any charge reversals which would undermine

contend that Relator self-created the summary therapy charts, and they contain

inconsistencies. Id. at 11-12. At this juncture, the Court accepts the well-pleaded allegations

as true, drawing all reasonable inferences in Relator’s favor. On the upcoding theory, Relator

has come forward with adequate factual allegations and exhibits to provide sufficient indicia

of reliability to support her FCA claims in Counts I, II, and III to survive the motion to

dismiss. These are arguments Defendants certainly can raise in defense of the claims.

Relator’s allegations of falsity and the claim that the Government overpaid. While that

may be the case, Defendants’ argument, which goes beyond the four corners of the

Third Amended Complaint, is more appropriately raised as a defense and does not

support dismissal at this juncture.

Defendants’ third argument similarly fails for arguing matters beyond the

complaint. Specifically, Defendants argue that Relator fails to account for alternative

explanations that would reflect lawful conduct in connection with the services

provided to patients 60, 80, and 81, such as a situation in which a physical therapy

assistant (PTA) provides the one-on-one care to a patient under the supervision of a

physical therapist who is providing one-on-one therapy at the same time to a different

patient. In support, Defendants contend that it was not until 2020 that Medicare

introduced the CQ modifiers to specifically identify services provided by PTAs, which

means services provided by a PTA would not appear on a PS Inquiry for dates of

service prior to 2020. Doc. 116 at 17 n.6. Defendants argue that the Court may infer

from the factual allegations obvious alternative explanations. But, as Relator argues,

whether a PTA helped Ms. Booth treat Patients 60, 80 and 81 without being referenced

in the medical notes is not necessarily an “obvious alternative explanation.” In any

event, Defendants’ argument is again more appropriate to raise as a defense on a more

fully developed record and not as a basis for dismissal.

2. Count II—Violation of 31 U.S.C. § 3729(a)(1)(B)

Count II seeks to hold Defendants liable for presenting to the Government false

records or statements with documented upcoding that are material to the alleged

fraudulent claims. See Doc. 111 ¶ 193. She alleges the false records or statements

submitted were material to Defendants’ claims for payment because Medicare would

not have paid the claims absent the records or statements. Id. ¶ 193 A party is liable

under § 3729(a)(1)(B) if it “knowingly makes, uses, or causes to be made or used, a

false record or statement material to a false or fraudulent claim.” 31 U.S.C. §

3729(a)(1)(B). Defendants move to dismiss Count II arguing Relator fails to identify

with particularity a single false claim for Patient 60 or any other patient; she fails to

identify or attach to her complaint a false certification by Defendants; and

certifications in a Provider Agreement to “comply with all federal laws” are

insufficient to establish a false certification. Defendants submit it is not surprising that

Relator fails to identify a single Medicare cost report because none of the clinics

identified are required to submit Medicare cost reports. Instead, Medicare reimburses

providers furnishing outpatient therapy services based on a physician fee schedule,

rather than a provider’s costs. Relator responds that “cost reports” are irrelevant

because any false certification by Defendants is sufficient to state a claim under §

3729(a)(1)(B) and she alleges these certifications.

To properly state a “make-or-use” claim under § 3729(a)(1)(B), a relator must

show that “(1) the defendant made (or caused to be made) a false statement, (2) the

defendant knew it to be false, and (3) the statement was material to a false claim.”

Phalp, 857 F.3d at 1154 (citing 31 U.S.C. § 3729(a)(1)(B)). Under the FCA, “the term

‘material’ means having a natural tendency to influence, or be capable of influencing,

the payment or receipt of money or property.” Universal Health Servs., Inc. v. United

States, 579 U.S. 176, 192–93 (2016) (citing 31 U.S.C. § 3729(b)(4)). In a claim brought

under subsection (a)(1)(B), the relator must plead that a false claim was actually

submitted to the government. See Olhausen, 124 F.4th at 863 (clarifying that the

presentment requirement is included in the Phalp court’s third element that the

“statement was material to a false claim”).

For the same reasons discussed in the section above regarding Count I, see

Section III(B)(1), the Court concludes that Relator has adequately alleged presentment

in Count II. Regarding Defendants’ certifications, Relator submits that she has alleged

the existence of Defendants’ false certifications in Defendants’ Medicare Provider

Application, contracts with HHS-CMS, its TRICARE/CHAMPUS “requests for

reimbursement,” cost reports, and annual attestations. Doc. 119 at 14 (citing Doc. 111

¶¶ 23-29, 171–178). She argues that a provider falsely certifying that it “would comply

with all Medicare laws and regulations” was enough to state a violation of §

3729(a)(1)(B). Doc. 119 at 15 (citing U.S. ex rel. Heesch v. Diagnostic Physicians Grp., P.C.,

No. CIV.A. 11-0364-KD-B, 2014 WL 2154241, at *9 (S.D. Ala. May 22, 2014)).

Further, she alleges that the certifications, which were false, were made to obtain

payments from the Government. Doc. 111 ¶¶ 176-178.

Defendants’ argument that Relator’s claim fails because Defendants do not

actually submit Medicare cost reports, and instead reimbursed based upon a physician

fee schedule, is unpersuasive as Defendants do not direct the Court to any authority

that Medicare cost reports are the only form of false record or statement to support a

claim under § 3729(a)(1)(B).

Courts in this Circuit have found that a provider certifying compliance with

Medicare laws and regulations was sufficient to allege an FCA violation. See, e.g.,

Heesch, supra; U.S. ex rel. Osheroff v. Tenet Healthcare Corp., No. 09-22253-CIV, 2013 WL

1289260, at *3 n.1 (S.D. Fla. Mar. 27, 2013) (finding “Medicare Provider Participation

Agreement and annual cost reports are enough to ground liability under the False

Claims Act”). Defendant, relying on a California case, argues that representations in

a Medicare Provider Agreement that a provider will comply with all federal laws are

too general to support a finding of a false certification. Doc. 116 at 20 (citing U.S. ex

rel. Gonzalez v. Planned Parenthood of L.A., No. 05cv-8818-AHM (FMOx), 2012 U.S.

Dist. LEXIS 88495 at *20–21 (C.D. Cal. Jun. 26, 2022)). Neither party directs the

Court to Eleventh Circuit precedent that squarely addresses the issue, and the Court

has found none. However, it is clear that “[t]he [FCA] does not create liability merely

for a health care provider’s disregard of Government regulations or improper internal

policies unless, as a result of such acts, the provider knowingly asks the Government

to pay amounts it does not owe.” Clausen, 290 F.3d at 1309. However, here, Relator

alleges Defendants made false certifications in their Medicare Provider Application,

contracts with HHS-CMS, TRICARE/ CHAMPUS “requests for reimbursement,”

cost reports, and annual attestations. She alleges with particularity the false claims

submitted based on the upcoding theory and that they were material to obtaining

reimbursement from the Government. In a light favorable to Relator, she adequately

alleges with particularity a claim for violation of § 3729(a)(1)(B).

3. Count III—Violation of 31 U.S.C. § 3729(a)(1)(G)

Count III asserts a claim against Defendants for their failure to report and return

overpayments to the Government in violation of § 3729(a)(1)(G). “This is known as

the ‘reverse false claim’ provision of the FCA because liability results from avoiding

the payment of money due to the government, as opposed to submitting to the

government a false claim.” U.S. ex rel. Matheny v. Medco Health Sols., Inc., 671 F.3d

1217, 1222 (11th Cir. 2012). Relevant to Relator’s claim in Count III, reverse false

claims liability attaches when a person “knowingly conceals or knowingly and

improperly avoids or decreases an obligation to pay or transmit money or property to

the Government[.]” 31 U.S.C. § 3729(a)(1)(G).

Defendants argue that Relator’s “reverse false claims” theory turns on whether

Defendant submitted false claims or records in the first instance. As an initial matter,

presentment of a false claim or statement is not at issue in a reverse false claims action.

See Matheny, 671 F.3d at 1224 n.12. But even still, the Court has concluded above that

Relator sufficiently identifies the submission of such false claims and statements with

particularity. Next, Defendants argue that Relator has not alleged facts to support the

inference that Defendant knowingly concealed an overpayment or improperly retained

money received from a false claim. Review of the Third Amended Complaint’s

allegations defeats Defendants’ argument. Relator alleges Defendants falsely certified

the accuracy of its fraudulent claims in its cost reports and annual attestations (Doc.

111 ¶¶ 23–29); she brought Ms. Booth’s fraudulent billing to the attention of the

Market Manager, Rudy Maduro (Doc. 111 ¶¶ 161–162); and rather than Defendants

conducting a full chart review of Booth’s activity or have Booth make an addendum

to all the billing entries, Relator was told to stop auditing other treating clinician’s

patient documentation. (Doc. 111 ¶¶ 163–165). Relator alleges that Defendants

submitted the false claims despite her providing Defendants with notice of the

unlawful billing practices (Doc. 111 ¶ 168). Finally, she alleges that in Defendants’

annual Medicare cost reports and attestations certifying compliance with Medicare

requirements, Defendants concealed and avoided their obligation to repay the

Government for the upcoded fraudulent charges. (Doc. 111 ¶ 198). Count III

adequately alleges a reverse false claim based upon the upcoding theory.

C. Unskilled Services Theory

In Counts IV, V, and VI, Relator sues Defendants based on a theory that

Defendants fraudulently billed the Government for unskilled services in which the

amount, frequency, or duration of treatment was unreasonable and therefore ineligible

for reimbursement. Under Medicare rules, “no payment may be made under part A or

part B for any expenses incurred for items or services . . . which . . . are not reasonable

and necessary for the diagnosis or treatment of illness or injury or to improve the

functioning of a malformed body member.” 42 U.S.C. § 1395y(a)(1)(A).

In their motion to dismiss, Defendants contend that Relator’s “unskilled

services” theory hinges on claims Defendants submitted for unskilled services

performed on two patients insured by Medicare Advantage Organizations (MAO).

Defendants first argue that Relator waived any claims submitted to MAOs. This

argument, which is based on Relator’s representations in her response to the motion

to dismiss the Second Amended Complaint, is without merit. Relator responds that

her reference (in response to the motion to dismiss the Second Amended Complaint)

to not alleging MAO fraud related only to her upcoding allegations. She never limited

her “unskilled services” allegations in this manner. Regardless, the Third Amended

Complaint is the operative complaint and the fact that MAO-insured patients may not

have been the subject of the Second Amended Complaint is irrelevant on the instant

motion.

Defendants next argue that Relator’s “unskilled services” claims implicate only

MAO payors and are not actionable under the FCA on the facts alleged. In response

to Defendants’ motion, the Government filed a Statement of Interest. Doc. 129. In

explaining the role of MAOs, the Government states:

Under Medicare Advantage, the Centers for Medicare &

Medicaid Services (“CMS”) contracts with private

insurance carriers—called Medicare Advantage

Organizations, or MAOs—to provide Medicare

beneficiaries with coverage for the types of medical services

they would otherwise receive under the traditional

Medicare program. See Cares Cmty. Health v. U.S. Dep’t of

Health & Hum. Servs., 944 F.3d 950, 953 (D.C. Cir. 2019);

see generally 42 U.S.C. §§ 1395w-21 to -28. Eligible

individuals can opt out of Traditional Medicare (Parts A &

B) and enroll in Medicare Advantage (Part C) plans offered

by MAOs. The Medicare Advantage Organizations

administer the federal Medicare benefits for beneficiaries

enrolled in their plan in return for payments from CMS,

which are disbursed on a monthly, capitated (per

beneficiary, not per service) basis. See 42 U.S.C. § 1395w-

23. With certain defined exceptions, Medicare Advantage

plans must provide the same coverage as traditional

Medicare. 42 C.F.R. § 422.101(a) (requiring that Medicare

Advantage plans “[p]rovide coverage of … all services that

are covered by Part A and Part B of Medicare”).

Doc. 129 at 3–4. While not taking a position on the overall merit of Defendants’

motion, the Government takes issue with any suggestion by Defendants that Relator’s

unskilled services claims are not actionable under the FCA because MAOs are private

non-governmental health insurance companies, not federal payors. Id. at 4–5. In

response, Defendants contend they never made the argument that claims submitted by

a provider to an MAO cannot give rise to FCA liability. Rather, Defendants argue that

Relator failed to adequately plead facts to support her unskilled services counts.

Indeed, the term “claim” is defined broadly enough under the FCA to include

requests or demands for payment “made to a contractor, grantee, or other recipient, if

the money or property is to be spent or used on the Government’s behalf or to advance

a Government program or interest,” 31 U.S.C. § 3729(b)(2)(A)(ii), which would

certainly include MAOs. In their motion, Defendants argue, however, that Relator

fails to allege facts to show any purported false diagnosis submitted had an impact on

CMS’s determination of the monthly capitated premium payments. The United States

addresses this issue in its Statement of Interest explaining that “[u]nder Medicare’s

payment structure, CMS makes capitated payments to MAOs, which in turn disburse

payments to medical providers and other downstream entities such as Defendants.

Thus, Defendants could be liable if their false statements were material to the payment

or receipt of either (1) CMS’s capitated payments to the MAOs, or (2) the payment by

the MAOs to Defendants for services provided to Medicare beneficiaries.” Doc. 129

at 10. The Relator does not directly address the issue, instead responding only that the

two MAO examples provided did not limit her unskilled services theory to only MAO

patients. As the Government points out, payment by the MAOs to Defendants for

services would suffice if Relator’s allegations regarding such payments satisfy Rule

9(b). Regardless of whether her unskilled services theory is alleged as to the two MAO

patients or others, the allegations fall short for the reasons discussed below.

As Defendants argue in their motion to dismiss, Relator has not alleged with

requisite particularity the presentment of a claim or knowing retention of an

overpayment, to support her claims under §§ 3729(a)(1)(A), 3729(a)(1)(B), and

3729(a)(1)(G) based on an “unskilled services” theory. The Court previously dismissed

Relator’s FCA claims based on the unskilled services theory for failing to sufficiently

allege with particularity factual allegations to support an actual false claim submitted

to the government for payment. Doc. 107 at 18–19. While the Third Amended

Complaint has corrected some of the deficiencies in her claims by attaching treatment

notes for two exemplar patients, Relator still fails to provide any details regarding the

actual presentment of the claims for payment. This failure is fatal to her unskilled

services claims under §§ 3729(a)(1)(A) and 3729(a)(1)(B).

As Relator is aware, the presentment of a claim is the sine qua non of a False

Claims Act violation. Clausen, 290 F.3d at 1311. Yet, she does not allege any specific

billing information, or even provide summaries such as the PS Inquiries she submits

in support of her upcoding claims. In short, her allegations of presentment fall short of

providing the indicia of reliability that this Circuit requires to overcome a motion to

dismiss.3 Relator argues that she has alleged her personal knowledge of Defendants’

EMR, coding, and billing. But, unlike with the upcoding counts, Relator’s unskilled

services counts do not take that necessary next step of alleging sufficient factual

allegations to show specific claims were actually presented to and paid by the

government.4 Accordingly, her claims in Counts IV and V fail.

Although presentment is not required for a reverse false claim under §

3729(a)(1)(G), Count VI fares no better because it too fails to satisfy the particularity

requirements of Rule 9(b). As previously stated, to satisfy this heightened-pleading

standard in an FCA action, a relator must allege “facts as to time, place, and substance

of the defendant’s alleged fraud,” particularly, “the details of the defendants’ allegedly

3 Defendants also argue Relator’s claims are insufficient to allege “falsity” because it is only

Relator’s subjective opinion, without more, that unreasonable services were provided to the

two patients. Doc. 116 at 26. For example, for the elderly patient who received 161 physical

therapy sessions in 21 months, that would equate to less than 2 visits per week. Defendants

argue that it is pure speculation that such course of treatment is per se unreasonable.

Additionally, Defendants argue Relator’s allegations ignore that CMS expressly recognizes

the availability of Medicare coverage for “skilled therapy services related to a reasonable and

necessary maintenance program,” such as when the goal is to “maintain functional status or

to prevent or slow further deterioration in function.” Doc. 116 at 26 (citing Medicare benefits

Policy Manual, Chapter 15, § 220.2(D)). Citing United States v. AseraCare, Inc., 938 F.3d 1278,

1296–97 (11th Cir. 2019), Defendants argue that a “claim cannot be ‘false’—and thus cannot

trigger FCA liability—if the underlying clinical judgment does not reflect an objective

falsehood.” The AseraCare case involved the Medicare statute pertaining to hospice treatment,

which is not at issue here, and Aseracare was before the court on summary judgment. Thus,

even if the unskilled services claims survived, Defendants’ falsity arguments would be more

appropriately raised on summary judgment.

4 For example, in support of her upcoding counts, Relator alleges that specific fraudulent

charges were presented to and paid by the government, and she attaches billing information.

See Doc. 111 ¶ 82; Doc. 110-2. Although the PS Inquiries are not claims or bills, they did

provide, along with her factual allegations, sufficient indicia of reliability. No comparable

allegations, PS Inquiries, or similar documentation was provided as to the unskilled services

counts.

fraudulent acts, when they occurred, and who engaged in them.” Clausen, 290 F.3d at

1310. Review of the allegations of Count VI reveals Relator fails to plead with the

particularity as required by Rule 9(b) that Defendants knowingly concealed an

overpayment or improperly retained money received from a false claim as it relates to

her unskilled services theory. Defendants’ motion to dismiss as to Counts IV, V, and

VI is due to be granted.

D. Nationwide Claim

Defendants request dismissal under Rule 9(b) of a nationwide scheme.

Specifically, Defendants posit that although Relator only alleges improper claims

associated with one clinic in Tampa, she includes allegations that she gave notice to

Defendants “on a local, regional, and national basis.” Defendants argue the factual

allegations do not exist to support a nationwide scheme and her fleeting attempt to

expand the scope of the Third Amended Complaint into a national case does not

withstand minimal scrutiny.

In response, Relator claims she has adequately pleaded a nationwide scheme

based on her detailed allegations and she submits that Defendants’ motion is a dubious

attempt to limit her discovery.

The motion before the Court is a motion to dismiss and is not a motion related

to the scope of discovery. The Court did not and does not read the Third Amended

Complaint to raise a “nationwide” case involving Defendants’ 1900 clinics spanning

39 states. The allegations of the Third Amended Complaint brought by a former

employee of one of Defendants’ Tampa area clinics5 and asserting specific allegations

only as to the clinics in the metro-Tampa area does not plead FCA claims against all

of Defendants’ clinics across the nation. The specific allegations related to an upcoding

scheme that the Court found to be pleaded with particularity pertain only to the Tampa

area clinics. Thus, to the extent that Relator intended the Third Amended Complaint

to state FCA claims nationwide, the allegations fail under Rule 9(b). While Relator

alleges her personal knowledge of Defendants’ systems and processes based on her

training, experience and interaction with other employees and management, there are

no allegations about how the other clinics outside the Tampa area are run or managed.

The Third Amended Complaint is void of any specific factual allegations about any

other clinic outside Tampa, their patients, their billing, or their medical records. In

sum, the Third Amended Complaint clearly only addresses the Tampa area clinics.

Relator cannot amend her complaint by way of her response to the motion to dismiss.

And, as Relator has now had four opportunities to plead her claims, no further

amendment will be permitted. However, to the extent that nationwide claims were

intended to be a part of the Third Amended Complaint, such claims are dismissed

without prejudice.6

Accordingly, it is

5 Relator’s allegations reflect she worked for approximately a year from July 2014 until August

2015 for one of Defendants’ clinics in Cromwell, Connecticut (Doc. 111 ¶ 2). However, that

was over ten years ago and none of her factual allegations in the Third Amended Complaint

discussing patients, their treatment, or the submission and payment of claims reference the

Connecticut clinic or any other clinic outside the Tampa, Florida, area.

6 This Order makes no ruling regarding the scope of discovery.

ORDERED:

1. Defendants’ Motion to Dismiss Relator’s Third Amended Complaint

(Doc. 116) is granted in part and denied in part.

2. Counts IV, V, and VI of the Third Amended Complaint are dismissed

with prejudice. To the extent that Relator intended to allege “nationwide” claims

against Defendants related to clinics outside the metro-Tampa, Florida, area, such

claims are dismissed without prejudice, without leave to amend in this case. In all

other respects, the motion is denied.

3. Within 14 days, Defendants shall file an Answer to Counts I, II, and HI

of the Third Amended Complaint.

4. The stay of discovery is lifted. Within 14 days, the parties shall confer

and file an amended case management report. Upon receipt of the amended proposed

deadlines, the Court will issue an Amended Case Management and Scheduling Order.

DONE AND ORDERED in Tampa, Florida on March 23, 2026.

Chak ine CowWards- Mone A pl well

Charlene Edwards Honeywell

United States District Judge

Copies to:

Counsel of Record

Unrepresented Parties, if any

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