United States of America v. Sutter Health

Background

Pseudonymous plaintiff Judy Jones, described as a physician, surgeon, and certified professional medical coder, sued under the federal False Claims Act and the California False Claims Act. The defendants were grouped as the Sutter Defendants—Sutter Health, Sutter Bay Medical Foundation, and Palo Alto Medical Foundation—the Doctor Defendants—Palo Alto Foundation Medical Group and Dr. Roy Hong—and unknown defendants.

Jones alleged that Dr. Hong, Sutter Health, and Palo Alto Medical Foundation falsely represented to her insurance carrier that she had breast cancer, and that breast-reconstruction procedures were improperly “upcoded” and “unbundled.” She further alleged that similar procedures were performed for patients covered by Medicare and Medi-Cal. The United States and California declined to intervene in the action.

The court had previously dismissed Jones’s First Amended Complaint under the False Claims Act’s public-disclosure bar but allowed amendment. The court warned that failure to correct the identified deficiencies could lead to dismissal with prejudice. Jones then filed a Second Amended Complaint.

Reasons for dismissal

The defendants moved to dismiss the Second Amended Complaint under Federal Rules of Civil Procedure 8(a) and 9(b). Rule 8(a) requires a complaint to provide a short and plain statement showing entitlement to relief. Rule 9(b) imposes a heightened requirement for fraud claims, requiring particular details about the alleged misconduct, including the who, what, when, where, and how.

The court found two independent grounds for dismissal. First, Jones did not oppose the Sutter Defendants’ motion at all and did not address either defendants’ arguments that the Second Amended Complaint failed to satisfy Rules 8(a) and 9(b). The court treated those arguments as conceded.

Second, the court held that the pleading independently failed under Rules 8(a) and 9(b). The complaint did not identify representative false claims submitted to Medicare or Medicaid or provide particular details, supported by reliable indicators, showing that false government claims were actually submitted. Allegations concerning Jones’s own surgery involved private insurance and did not adequately establish a scheme involving government claims. The court also found that the complaint made conclusory allegations about defendants’ knowledge and improperly grouped defendants together instead of identifying each defendant’s role in the alleged fraud.

Leave to amend and other motions

The court denied leave to amend. It concluded that amendment would be futile because Jones had already been warned about the pleading deficiencies and had not corrected them, that Jones may have acted in bad faith, that another amendment would prejudice defendants who had already litigated two motions to dismiss on the same issues, and that Jones had previously amended her complaint.

The court granted the defendants’ motions to dismiss the Second Amended Complaint with prejudice. It denied as moot Jones’s motion to proceed by pseudonym because the court was not ruling on its merits. The court separately granted Jones’s motion for leave to file under seal, while stating that it would reconsider the pseudonym issue under the required public-interest balancing test if it later reached that issue. Judge Lucy H. Koh entered the order.