Opinion
Civil Action No. 1:20-cv-855
2020-08-06
VICTORIA TRANSCULTURAL CLINICAL CENTER, VTCC, LLC, Plaintiff, v. Karen KIMSEY, M.S.W, et al., Defendants.
Samuel Joseph Banks, Jennifer Ann Brust, Bean Kinney & Korman PC, Arlington, VA, for Plaintiff. Erin Rose McNeill, Office of the Attorney General, Richmond, VA, for Defendants.
Samuel Joseph Banks, Jennifer Ann Brust, Bean Kinney & Korman PC, Arlington, VA, for Plaintiff.
Erin Rose McNeill, Office of the Attorney General, Richmond, VA, for Defendants.
ORDER
T. S. Ellis, III, United States District Judge
This matter came before the Court on Plaintiff Victoria Transcultural Clinical Center, VTCC, LLC's ("VTCC") emergency motion for a preliminary injunction (the "Motion"). Defendants Karen M. Kimsey and the Virginia Department of Medical Assistance Services ("DMAS") filed an opposition to the Motion. A prompt evidentiary hearing was held on July 31, 2020 at which each party presented witness testimony and other evidence.
Although plaintiff titled the motion as one for a preliminary injunction, the motion was filed prior to service on defendants and more appropriately could have been titled as a motion for a temporary restraining order. In any event, notice was provided to defendants before the hearing was held, defendants appeared at the hearing, and testimony was presented by the parties. Thus, the matter is treated in all respects as a motion for a preliminary injunction.
The United States also filed a statement of interest addressing plaintiff's motion because this case is related to a case in which the United States is a party.
For the reasons stated from the bench at the conclusion of the July 31, 2020 evidentiary hearing and for the reasons stated below, VTCC has not established a likelihood of success on the merits of its claim for a declaratory judgment or its claim of a violation of 42 C.F.R. § 455.23. Accordingly, a preliminary injunction will not issue, and plaintiff's motion must be denied.
I.
VTCC is a Virginia limited liability company located in Fairfax County, Virginia that provides mental and behavioral health services. See Victoria Transcultural Clinical Center, VTCC, LLC v. Jennifer S. Lee, et al. , No. 20-cv-855, Complaint for Injunctive Relief, Dkt. 1 (E.D. Va.) ("Injunction Complaint"). VTCC focuses on providing culturally, religiously, and linguistically competent services to underserved racial and multicultural minorities in Northern Virginia. See id. ¶ 5. In this regard, VTCC alleges that it is a qualified provider of Medicaid services in Northern Virginia. See id.
Defendant DMAS is an agency of the Commonwealth of Virginia and is charged with administering the Virginia Medicaid Program. See id. ¶ 6. Kimsey is the Director of DMAS. See id.
On July 24, 2020, VTCC filed its complaint for injunctive relief. In the Injunction Complaint, VTCC asserts that, on July 8, 2020, VTCC received a letter dated July 2, 2020 from Magellan Health, Inc., (the "Magellan Letter"), DMAS's behavioral health administrator, informing VTCC that DMAS had suspended VTCC's ability to receive Medicaid payments. See Injunction Compl. ¶ 9. The Magellan Letter stated that the reason for the suspension of VTCC's Medicaid payments was the existence of a credible allegation of fraud. Id. ¶ 10. On July 22, 2020, VTCC filed an appeal of DMAS's decision. Id. ¶ 13. VTCC asserts that, although it has good cause to continue to receive its Medicaid payments under 42 C.F.R. § 455.23, an appeal will take too long, because, without emergency relief, VTCC will be forced out of business in the interim. Id. ¶ 14. In the Injunction Complaint, VTCC asserts that there are no current allegations of fraud by VTCC and that VTCC faces irreparable harm from DMAS's decision to suspend Medicaid payments. See Injunction Compl. ¶¶ 27-28. The Injunction Complaint further alleges that the FCA Complaint "falsely alleges fraud against VTCC." Id. ¶ 29. VTCC alleges that it serves "underserved, minority communities of lesser means" at rates that are well below what "market-priced treatment rates would be." Id. ¶ 36-37.
This matter is related to an earlier-filed False Claims Act ("FCA") case, United States ex rel. Nguyen, et al. v. Virginia Transcultural Clinical Center, VTCC, LLC , No. 19-cv-68 (E.D. Va.) (the "FCA Case"). Although the FCA Case was originally filed by a relator, Van Nguyen who worked as a clinical social worker for VTCC, the United States and the Commonwealth of Virginia have elected, as the law provides, to intervene in the FCA Case. The FCA Complaint brings claims against VTCC under the FCA, the Virginia Fraud Against Tax Payers Act ("VFATA"), the Virginia Medicaid Fraud Statute, and the common law. See FCA Compl. at 1. The FCA Complaint alleges that: "From at least January, 2015 through at least December, 2018, VTCC engaged in a scheme to obtain health care benefit payments from the Virginia Medicaid Program to which it was not entitled ..." FCA Compl. ¶ 37. The FCA Complaint further alleges that at least five VTCC providers – including clinical supervisor Laura Buck-George, Qualified Mental Health Professional ("QMHP") Luisa Shires, QMHP Noraima Pimental, QMHP Ezperanza Pham, and VTCC Director of Operations and/or Outreach Yolanda Betancourt routinely billed for services not provided or overbilled for services that were provided.
VTCC alleges that in 2017 it "came across information that raised potential red flags related to services rendered in the recent past that had been billed under the Medicaid program." Id. ¶ 40. In this regard, VTCC further alleges that it took those red flags seriously and began to audit its billing records. Id. ¶ 41. VTC also alleges that VTCC "was never aware of any incorrect billing prior to the audit of its records" and that it "has worked in good faith to diligently uncover and correct any billings issues." Id. ¶¶ 51-52. VTCC alleges that the suspension of Medicaid payments is "highly destructive to VTCC's business and is detrimental to VTCC's clients' welfare and well-being." Id. ¶ 55.
VTCC's Injunction Complaint alleges three counts: (i) (1) a declaratory judgment count seeking a declaration that DMAS lacked the statutory authority to suspend VTCC's Medicaid payments and to reverse the suspension; (ii) a injunctive relief count enjoining the suspension of its Medicaid payments; and (iii) a due process claim asserted on behalf of VTCC's clients. Specifically, in Count 1, the declaratory judgment count, VTCC seeks an order declaring: (i) on July 2, 2020, DMAS lacked the statutory authority to issue a suspension of VTCC's Medicaid payments; (ii) the suspensions issued against VTCC are invalid; and (iii) the DMAS suspension must be reversed and VTCC's Medicaid payments reinstated. With respect to the injunction count, Count 2, VTCC seeks: (i) an order enjoining the suspension of VTCC's Medicaid payments and preserving the status quo as it existed before July 2, 2020; and (ii), in the event the suspension is not overturned, an order staying the suspension until patients secure alternative care. As to Count 3, the violation of due process alleged on behalf of VTCC clients, VTCC seeks the same relief as with Count 2. As the relief sought in these counts makes clear, the focus of the Injunction Complaint is on DMAS's decision to suspend Medicaid payments and whether there was a basis to do so.
On the same day that it filed the Injunction Complaint, VTCC filed an emergency motion for a preliminary injunction. In its Motion, VTCC argues that it faces imminent and irreparable harm from "DMAS' premature decision to suspend Medicaid payments for mental services" and that, if DMAS is not enjoined, VTCC will be forced to lay off employees and be unable to provide services to its at-risk clients. Mot. at 2. VTCC argues that it is likely to succeed on the merits of the FCA Case and the administrative appeal of DMAS's suspension of payments, because neither the United States nor DMAS can establish that VTCC had actual knowledge of improper billing. Id. at 7. VTCC further asserts that there is no credible allegation of fraud, because, despite having VTCC's billing records for months, DMAS did not suspend Medicaid payments to DMAS until the Commonwealth intervened in the FCA Case. Id. at 8. VTCC also argues that, pursuant to 42 C.F.R. § 455.23, there was good cause not to suspend VTCC's Medicaid payments, because VTCC's clients are part of an underserved class of minority beneficiaries. Id. at 10. Additionally, VTCC argues that its provision of services to underserved communities also weighs heavily in favor of an injunction being the public interest and a balance of the equities that tips in favor of an injunction.
In support of its allegations, VTCC attached the affidavit of Ignacio Basauri, the Administrator of VTCC, which provides information regarding the services that VTCC provides as well as the effect that the suspension of payments will have on VTCC and its clients.
On July 30, 2020, DMAS filed its opposition to the Motion. DMAS emphasizes that VTCC admitted in the Injunction Complaint that (i) VTCC was aware of potential billing red flags as early as 2017 and (ii) through quality assurance procedures VTCC implemented in 2018 it was aware of issues with practitioner billing practices. Opp'n at 1. DMAS argues that VTCC has known since 2017 that it was improperly billing Medicaid and did not report those anomalies or refund overpayments. Applying Winter v. Natural Res. Def. Council , 555 U.S. 7, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008), DMAS correctly argues that the likelihood of success on the merits factor focuses in this case, not on the FCA Case, but on whether VTCC can prevail on its Injunction Complaint. To that end, DMAS argues that there is no likelihood of success in this case:
(i) Because there is indeed a credible allegation of fraud;
(ii) Because DMAS investigated the regulatory good cause exceptions listed in § 455.23 and determined that none of the exceptions applied; and
(iii) Because VTCC does not have standing to assert any claims on behalf of their clients.
Opp'n at 9-11. DMAS argues that the balance of the equities and the public interest weigh against an injunction, because Medicaid beneficiaries were provided with information about alternate providers and because Medicaid funds should go to those actually performing services. Id. at 14-15.
In support of its opposition brief, DMAS attaches the affidavit of Louis Elis, the Director of the Program Integrity Division of DMAS. Elie reports that his office received notice of an allegation of fraud in April 2020, but did not suspend Medicaid payments to VTCC because the law enforcement good cause exception applied. See Elie Aff. ¶ 5. In June 2020, DMAS began its investigation of the allegations of fraud and, after a review of documentary evidence, determined that the allegations were credible. Id. ¶ 8. His office then reached out to other division directors and outside contractors to inform them of the credible allegation of fraud and to ensure there would be no suspension in services to Medicaid recipients. Id. ¶ 13. Elie reported that his office determined that there was no applicable good cause exception because there are lots of alternative providers available who are able to cater to particular language and cultural needs. Id. ¶ 14.
The United States, as an interested party in this action, also filed a statement of interest in this case. The United States argued that whether VTCC is likely to succeed in the FCA case is not at issue in this litigation; rather, the issue in this litigation is the challenge to DMAS's suspension of payments. The United States further argued that VTCC's arguments with respect to the FCA Case were without merit.
The United States filed a statement of interest, because of the relationship between this case and the FCA Case. The United States did not, however, make the decision at issue in this case – namely, whether to suspend Medicaid payments to VTCC – and, thus, is not included as a party in this case.
On July 31, 2020, an evidentiary hearing was held on the Motion. VTCC argued that DMAS's suspension of payments was abrupt and unfounded and that it would lead to VTCC going out of business. VTCC further argued that DMAS's allegations that VTCC knew of the alleged fraud and that VTCC had refused to pay the money back were untrue. Basauri testified at the hearing that VTCC had refunded $63,000 in fraudulent billings to Medicaid related to billings by Buck-George. He further testified that VTCC attempted to return $58,000 associated with fraudulent billings by Shires, but that the money was not accepted. Basauri testified that he, and by extension VTCC, did not know of the alleged fraud by Shires or Buck-George while that fraud was ongoing and that, when he learned of the fraud, he began an extensive audit of VTCC billings to Medicaid. On cross-examination, Basauri stated that he did not inform the Commonwealth of the fraud within sixty days of learning of the allegation because he was conducting a full audit and that took more than a year to complete. Basauri also admitted that, in addition to Buck-George and Shires, three other persons have now been terminated for engaging in fraudulent billing practices in the last twelve months. On re-direct, Basauri explained that the new quality control software that VTCC uses cost $200,000 and is very effective.
For its part, DMAS argued that there is a credible allegation of fraud, supported by VTCC's own admissions, and that no good cause exceptions under § 455.23 apply. DMAS asserted that VTCC is not the only service provider for the communities and families that VTCC serves and that other service providers can comply with Medicaid's requirement that appropriate linguistic services be provided to all Medicaid recipients. DMAS further argued that, upon learning of the credible allegation of fraud, it was required to suspend Medicaid payments and that the good cause exceptions, even if they applied, are discretionary. DMAS then called Elie, the Director of the Program Integrity Division of DMAS, to testify. Elie credibly asserted that DMAS reviewed all of the VTCC documents, submitted by VTCC and as part of the FCA Case, and determined that there was a credible allegation of fraud. He stated that the matter was then referred to subject-matter experts within DMAS and other divisions to determine whether any of the good cause exceptions applied. Elie testified that none of the subject-matter experts raised concerns about suspension of payments or asserted that a good-cause exception applied. On cross-examination, Elie testified that the credible allegations of fraud went beyond the allegations related to Buck-George and Shires and that the money at issue was greater than the two payments that VTCC alleges that it attempted to make. On re-direct, Elie testified that clinicians at DMAS verified that there are additional service providers available to Medicaid recipients in the Northern Virginia area and that DMAS was aware of VTCC clients that had transitioned to other service providers.
II.
VTCC is seeking an injunction pursuant to Rule 65(a), Fed. R. Civ. P., which is an extraordinary remedy. The analysis here is governed by the Supreme Court's decision in Winter , which holds that the party seeking injunctive relief "must establish (1) that he is likely to succeed on the merits, (2) that he is likely to suffer irreparable harm in the absence of preliminary relief, (3) that the balance of the equities tips in his favor, and (4) that an injunction is in the public interest." Winter , 555 U.S. at 21, 129 S.Ct. 365. In applying the Winter framework, the Fourth Circuit, in Real Truth About Obama, Inc. v. Fed. Election Comm'n , 575 F.3d 342 (4th Cir. 2009), held that the " Winter requirement that the plaintiff clearly demonstrate that it will likely succeed on the merits is far stricter" than the prior Fourth Circuit standard. Real Truth About Obama , 575 F.3d at 347. Although analysis here need not go beyond likelihood of success on the merits, because VTCC cannot establish that it is likely to establish that DMAS acted inappropriately when it suspended Medicaid payments to VTCC, the Court will therefore review each of the Winter factors.
A.
To begin with, it is important to recognize the appropriate framework for determining the likelihood of success on the merits. The proper focus for this analysis is whether VTCC is likely to succeed in its pursuit of this case , i.e. in its suit to overturn the suspension of Medicaid payments, and not the FCA Case, which is not before the Court at this time. Accordingly, it is necessary to determine, on this record, whether there is a credible allegation of fraud to justify the suspension of Medicaid payments and whether any good-cause exception applies that necessitates such suspension not take place.
Here, VTCC admits that fraud took place. In the Injunction Complaint, VTCC concedes that, as early as 2017, there were red flags related to services rendered and that it then determined that billings existed. See Injunction Compl. ¶¶ 40-41, 44. Moreover, Basauri testified that five persons were fired by VTCC for fraudulent billing practices, including three within the last twelve months. Specifically, with respect to Buck-George and Shires, Basauri admitted that those providers billed Medicaid for services not provided. As DMAS correctly notes, allegations of fraud "are considered credible when they have indicia of reliability and the State Medicaid agency has reviewed all allegations, facts, and evidence carefully." 42 C.F.R. § 455.2. In this case, VTCC concedes that fraud existed and Elie credibly testified that DMAS carefully reviewed all of the materials related to the FCA Complaint and all of the documents provided by VTCC to the United States and the Commonwealth in response to subpoenas. Moreover, Basauri testified that the latest incidents of fraud were discovered within the last twelve months. Thus, it appears that on this record there is indeed a credible allegation of fraud sufficient to trigger the requirement to suspend Medicaid payments pursuant to § 455.23.
DMAS argues that, had VTCC acted to remedy the fraud it discovered earlier, it may not be facing the suspension of payments it seeks to overturn in this case. Here, VTCC concedes that it knew of possible fraud as early as 2017, but did not immediately notify DMAS because it wanted to conduct its own investigation. As the Fourth Circuit has held, however, an injunction is an "extraordinary" remedy and it is "not warranted where, as here, the moving parties have not shown that they availed themselves of opportunities to avoid the injuries of which they now complain." Di Biase v. SPX Corp. , 872 F.3d 224, 235 (4th Cir. 2017).
VTCC raises two challenges to the existence of a credible allegation of fraud: (i) that DMAS did not suspend Medicaid payments when it first learned of the FCA Case, see Motion at 8; and (ii) that VTCC has put new quality control measures in place that address concerns regarding fraud. VTCC's first argument is not persuasive, because, as Elie testified at the hearing, DMAS did not suspend Medicaid payments to VTCC in April 2020 at the request of the Medicaid Fraud Control Unit ("MFCU") and based on the law enforcement exception in § 455.23(e)(1). Elie testified that Medicaid payments to VTCC were not suspended in April so as to not jeopardize the investigation being conducted by the MFCU and the United States in the FCA Case. He further testified that, once the MFCU's investigation concluded, DMAS conducted its own investigation before suspending Medicaid payments to VTCC. Thus, DMAS's delay in suspending payments does not undermine the credible allegation of fraud.
VTCC also argues that there is no credible allegation of fraud because DMAS cannot impute fraud by VTCC's employees to VTCC. This is an argument better made in the FCA Case, however. Section 455.23 requires suspension of payments to a provider if there is a credible allegation of fraud "against an individual or entity. " 42 C.F.R. § 455.23. Furthermore, there are allegations that Basauri and VTCC were aware of the fraudulent billing practices taking place and that, even if they were not originally aware, once Basauri and VTCC became aware they did not do enough to prevent the fraud or to refund the fraudulent payments.
Similarly, the VTCC argument that VTCC has put in place more quality control measures since its discovery of the fraud does not erase or undermine the existence of the credible allegation of fraud sufficient to trigger the suspension of Medicaid payments pursuant to § 455.23. Importantly, even with those quality control measures in place Basauri testified that three people had been fired for committing fraud within the last twelve months. Moreover, on cross examination, Basauri admitted that the quality control measures, such as geolocation monitoring, do not apply to all of the therapies offered by VTCC, and for which VTCC seeks Medicaid reimbursement, and are not effective for the kind of telehealth appointments that VTCC offered during the COVID-19 pandemic. Moreover, VTCC does not point to any case or statute that suggests that a credible allegation of fraud does not require suspension of Medicaid payments when the provider engages in remedial measures. Accordingly, on this record, there is a credible allegation of fraud.
Pursuant to 42 C.F.R. § 455.23, where, as here, there is a credible allegation of fraud, DMAS is required to suspend Medicaid payments, unless one of the regulatory good cause exceptions is found to exist. See 42 C.F.R. § 455.23 ("The State Medicaid agency must suspend all Medicaid payments ... unless ..." (emphasis added)). DMAS correctly notes that whether a good cause exception justifies not suspending payments is left to the discretion of the state. See 42 C.F.R. § 455.23(e) ("A State may find that good cause exists not to suspend payments ...." (emphasis added)). Here, Elie testified that DMAS examined whether any good cause exceptions may apply. Originally, DMAS determined that § 455.23(e)(1), namely the law enforcement exception, justified not suspending Medicaid payments to VTCC. Elie testified that, at the conclusion of the MFCU investigation, DMAS again investigated whether any regulatory good cause exceptions applied and determined that none of the exceptions did apply. VTCC argues that DMAS should have utilized good cause exception (e)(4), namely that "[b]eneficiary access to items or services would be jeopardized by payment suspension." Motion at 9. VTCC asserts that its clients are part of an underserved class of minorities and that they will be unlikely to find new providers. Id. at 10-11. Again, Elie credibly testified that DMAS had determined that other appropriate providers were available in the Northern Virginia area, including providers capable of providing appropriate linguistic and cultural services, and that some of VTCC's clients had already commenced transitioning to other providers. Other than Basauri's testimony regarding the class of clients served by VTCC, VTCC presented no evidence about the availability of other providers or about what renders VTCC's services unique. Accordingly, on this record, DMAS appropriately exercised its discretion to determine that no good cause exception applied.
See also Border Area Mental Health Servs., Inc. v. Squier , 2013 WL 12140453, at *2 (D.N.M. July 25, 2013) (noting that "good cause is determined "at the discretion" of the state agency).
In sum, on this record, VTCC has failed to establish a likelihood of success on the merits because there is a credible allegation of fraud committed by VTCC, for as Basauri admitted in his testimony that Medicaid was fraudulently billed by at least two VTCC providers, and because DMAS was justified in exercising its discretion to decline to apply § 455.23(e)'s good cause exceptions. Accordingly, VTCC's Motion must be denied.
VTCC's Injunction Complaint also contains a claim of violation of due process on behalf of VTCC's clients. As an initial matter, the Motion does not appear to assert that an injunction is necessary to protect the clients' rights and this count was not referenced in the Motion or at argument. Moreover, it is unclear on what basis VTCC has standing to asserts its clients' rights, especially where it is VTCC's alleged bad acts that has caused the clients to lose VTCC's services. Finally, there is no evidence that the clients will be without access to a suitable provider. As Elie testified at the hearing, DMAS determined that other Medicaid providers were available and that those providers would provide linguistically and culturally appropriate services.
B.
VTCC argues that it will be irreparably harmed if Medicaid payments are not restarted and that it will go out of business in a matter of days. At the hearing, Basauri testified that many of VTCC's employees have already been laid off because of the lack of Medicaid payments. His affidavit also makes clear the financial hardship that VTCC is experiencing and the likelihood that VTCC will go out of business. DMAS points out that VTCC could have avoided these hardships if VTCC had acted diligently in 2017, when it first learned of "red flags" pointing to fraud. Opp'n at 12 (citing Di Biase , 872 F.3d at 235 ). While it is clear that VTCC will suffer irreparable harm if Medicaid payments are not restored, VTCC's failure to act diligently causes this element to lose some of its weight. Accordingly, while this factor does weigh in favor of VTCC, it does not do so strongly.
C.
VTCC argues that the balance of the equities tip in its favor because suspending payments to VTCC "seriously harms VTCC's clients." Motion at 11. Elie testified, however, that DMAS's subject matter experts determined that there were other service providers available to VTCC's clients and those same experts informed Elie that several clients had commenced transitioning to other providers. As DMAS correctly notes, VTCC's arguments ignore DMAS's credible allegations of fraudulent billing and the equities associated with preventing that fraud. The balance of the equities favors DMAS because: (i) DMAS followed federal regulations regarding the suspension of Medicaid payments in the face of a credible allegation of fraud; (ii) DMAS found that other Medicaid providers are available to serve this community and that VTCC clients had commenced transitioning to other providers; (iii) DMAS has an interest in ensuring that Medicaid payments go to providers who are actually providing services rather than billing for services never performed; and (iv) DMAS has an interest in preventing fraud. Accordingly, the balance of the equities factor weighs against issuing an emergency injunction and against VTCC.
D.
For similar reasons, the issuance of an emergency injunction is not in the public interest. VTCC argues that the public has an interest in ensuring that providers, like VTCC, "who cater to marginalized, underserved segments of our society, remain in business." Motion at 12. Yet, the public's interest in ensuring that services are available to the Medicaid recipients who utilize VTCC can be adequately met by other service providers, as Elie testified. The public has no interest in specifically ensuring that VTCC, which engaged in fraudulent billing, survives as an entity. Here, the overarching public interest is to ensure that Medicaid payments are made for services actually provided, and that interest would not be served by the issuance of an injunction in this case. As another district court analyzing a factually similar case held: "The public deserves the utmost diligence in the protection of its financial resources." Lehigh Valley Comty. Mental Health Servs. Ctrs., Inc. v. Pa. Dep't of Human Servs. , 2015 WL 6447171, at *4 (E.D. Pa. Oct. 26, 2015). Accordingly, this factor also weighs against issuing an injunction.
* * *
Three of the four Winter factors weigh against granting an injunction, including the most important factor – likelihood of success on the merits. Thus, VTCC's motion for a preliminary injunction must be denied.
III.
For the reasons stated above and for the reasons stated at the July 31, 2020 hearing,
It is hereby ORDERED that VTCC's emergency motion for a preliminary injunction (Dkt. 2) is DENIED.