Opinion
97 C 5353
May 21, 2001
MEMORANDUM OPINION AND ORDER
Relator Sam Kulumani ("Kulumani"), filed a Complaint against Blue Cross Blue Shield Association ("BCBSA") alleging, among other things, that BCBSA violated the False Claims Act ("FCA"), 31 U.S.C. § 3729 (a)(1) and (2) (Counts I and II). Kulumani brought this action on behalf of the United States pursuant to the qui tam provision of the FCA, 31 U.S.C. § 3730 (h). The United States declined to intervene in this action pursuant to 31 U.S.C. § 3730(b)(4)(B). BCBSA has moved to dismiss the Complaint pursuant to Fed.R.Civ.P. 12(b)(6). For the reasons set forth below, the Court grants BCBSA's moton to dismiss the Complaint.
Kulumani has voluntarily dismissed all of the other counts initially pled in the Complaint.
BACKGROUND
The Complaint alleges the following facts which, for the purposes of ruling on this motion, are taken as true. Hishon v. Kemp Spalding, 467 U.S. 69, 73 (1984). Kulumani was employed as an auditor and consultant on Medicare issues in BCBSA's Medicare Provider Payment Team ("MPPT"). BCBSA was under contract with the United States Health Care Finance Administration ("HCFA") to handle Medicare cost audits. All of the auditing work was subcontracted by BCBSA to various Blue Cross Plans ("BCPs") across the country. Medicare cost reports and reimbursement requests were submitted to the BCPs who audited the requests. The BCPs perform these audits in accordance with regulations issued by HCFA which govern which services qualify for Medicare payment. These regulations are occasionally supplemented by HCFA's own policy guidelines.
One such regulation and guideline pair governs the limited reimbursement available to Medicare providers for interest paid on loans made to obtain funding for equipment and facility purchases. Health Care Finance Administration, 42 C.F.R. § 413 (2000); HCFA Pub. 15-1, Sec.203 D. Medicare providers can only be reimbursed on such interest so long as the loan proceeds were applied to Medicare approved medical expenses. 42 C.F.R. § 413; Pub. 15-1, Sec.203 D. In 1992, Kulumani on behalf of BCBSA distributed an Administrative Bulletin, #AB 2246, regarding this regulation, to all of the BCPs contracted with BCBSA to perform Medicare audits.
After #AB 2246 had been distributed, the members of BCBSA's MPPT Education and Policy Departments attended a meeting in which the Director of the MPPT Education Department expressed his opinion that #AB 2246 would only confuse BCP's and that they would not follow Section 203 D. In July of 1994, Kulumani held a seminar at BCBSA regarding hospital borrowing regulations. Kulumani instructed the members of the Prime Contract Department and the Education Department that BCPs needed to be further instructed to follow the regulations and not to approve full payment for loans applied partially to non-Medicare expenses. At that meeting, the Directors of the Prime Contract and Education Departments expressed their belief that BCPs were not in the practice of following this regulation and that no additional advisories regarding this issue would be distributed to the BCPs. Kulumani raised these concerns with the Directors of these two departments in subsequent meetings. The Director of the Prime Contract Department remained firm in his refusal to have either of the Departments issue additional advisories to the BCPs regarding the regulations.
BCBSA's Complaint alleges violations of the False Claims Act, 31 U.S.C. § 3729 (a)(1) and (2). In response, BCBSA has filed the present motion seeking to dismiss the Complaint.
DISCUSSION
I. Standard for a Motion to Dismiss
When considering a motion to dismiss, a court must view the complaint's allegations in the light most favorable to the plaintiff, and all well-pleaded facts in the complaint must be accepted as true. Wilson v. Formigoni, 42 F.3d 1060, 1062 (7th Cir. 1994). Dismissal is proper only if it appears beyond a doubt that a plaintiff can prove no set of facts in support of a claim which would entitle it to relief. Conley v. Gibson 355 U.S. 41, 45-46 (1957). To withstand a motion to dismiss, a complaint must allege facts which sufficiently set forth the essential elements of the cause of action. Gray v. County of Dane, 854 F.2d 179, 182 (7th Cir. 1988). In evaluating a motion to dismiss, the Court need not "assign any weight to unsupported conclusions of law." Id.
II. False Claims Act
In its present motion, BCBSA asserts that Kulumani's False Claims Act claims should be dismissed. To state a claim under the False Claims Act, Kulumani must allege the following:
1. that BCBSA presented, or caused another person to present, a claim for payment or approval to the United States;
2. that the claim presented was false or fraudulent;
3. that BCBSA knew the claim to be false;
4. that the United States suffered damages as a result of the false and fraudulent claim.See United States ex rel. Lamers v. City of Green Bay, 168 F.3d 1013, 1018 (7th Cir. 1999); Brooks v. U.S., 64 F.3d 251, 255 (7th Cir. 1995);United States v. ex rel. Fahner v. Alaska, 591 F. Supp. 794, 798 (N.D. Ill. 1984) Kulumani's Complaint falls short of sufficiently alleging these elements. Importantly, Kulumani has failed to allege facts which support the first element. It is clear from the Complaint that BCBSA, itself, did not submit any claims to the Government. The only relationship BCBSA had with Government is that it had contracted with the Government to audit claims submitted by Medicare providers. However, BCBSA did not perform any auditing functions. Instead, it subcontracted all of its auditing functions to numerous BCPs across the country. (Compl., ¶ 7) It is Kulumani's argument that BCBSA in some way caused the BCPs to cause the Medicare providers to submit false claims to the Government. His argument is that by failing to send the BCPs additional advisories regarding compliance with the loan reimbursement regulations (after previously having distributed one such advisory), BCBSA caused the BCPs to allow Medicare providers to submit to the Government claims which did not conform to the regulations and were therefore false or fraudulent.
For the purposes of the False Claims Act, a person is deemed to act with "knowledge" where:
1. the person has actual knowledge of the information's falsity;
2. the person acts with deliberate ignorance of the truth; or
3. the person acts with reckless disregard for the truth or falsity of the information.
Proof of specific intent is not required under the False Claims Act. 31 U.S.C. § 3729 (b).
Unfortunately, Kulumani's argument and the allegations in his Complaint do not comport with the requirements of the FCA. See Lamers, 168 F.3d at 1018 (holding no violation of the FCA where the plaintiff failed to show that the defendant knowingly made a false statement to the government). Kulumani's Complaint alleges that BCBSA provided to all the BCPs a copy of #AB 2246 regarding the loan reimbursement regulations. (Compl., ¶ 9) Furthermore, there is no allegation in the Complaint that BCBSA ever directed the BCPs to ignore the regulations or provided them with any conflicting information regarding the regulations. Certain Directors of BCBSA may have thought that #AB 2246 was confusing and that, as a result, BCPs may not follow them. This, however, is insufficient to support the claim that BCBSA presented or caused BCPs to present any false claims to the Government. Id. at 1018. Rather, any claims which BCPs presented to the Government were handled by the BCPs themselves. The only action BCBSA took which could be interpreted as "causing" the claims to be filed was when it provided the BCPs with #AB 2246, the Government's own Administrative Bulletin explaining the application of the loan reimbursement regulations. (Compl., ¶ 9) This is the only interaction between BCBSA and the BCPs alleged by Kulumani. Clearly, this Court cannot deem providing government bulletins regarding regulations as activity constituting "causing" the submission of false or fraudulent claims.
As to the second element, Kulumani has failed to allege any facts that show that false claims were actually submitted by the BCPs to the Government. Aside from legally conclusory language which we need not assume true for the purposes of a motion to dismiss, Gray, 854 F.2d at 182, Kulumani does not allege that the BCPs actually submitted claims which include interest on loan payments where the loan monies were not entirely used for Medicare purposes.
Since there are no allegations of false claims submitted through BCPs to the Government, there are, likewise, no facts to show knowledge of false claims on the part of BCBSA. The closest such assertion in the Complaint is that the Director of the MPPT Education Department stated that the BCPs were not applying regulation 203 D. This alone is simply insufficient to support a FCA claim. This is not an allegation that the providers ever actually filed any false or fraudulent claims regarding loan interest to the Government through the BCPs.
Finally, Kulumani has failed to specifically allege any damage to the Government, nor can any damage be reasonably implied into his pleading where he has not alleged any instances of false or fraudulent loan reimbursement claims or payouts. Accordingly, Kulumani's Complaint has not stated a claim for violation of the FCA.
Because Kulumani has failed to present a prima facie claim for violation of the FCA, this Court need not address the other grounds for BCBSA's motion to dismiss.
CONCLUSION
For the reasons set forth above, the Court grants BCBSA's motion to dismiss the Complaint.