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United States ex rel. Escobar v. Universal Health Servs., Inc.

United States Court of Appeals, First Circuit

March 17, 2015

UNITED STATES and COMMONWEALTH OF MASSACHUSETTS ex rel. JULIO ESCOBAR and CARMEN CORREA, Administratrix of the Estate of Yarushka Rivera, Plaintiffs, Appellants,

As Amended April 14, 2015.

Page 505

[Copyrighted Material Omitted]

Page 506


Matthew P. McCue, with whom Law Office of McCue was on brief, for appellants.

Mark W. Pearlstein, with whom Laura McLane, Evan D. Panich, and McDermott Will & Emery LLP were on brief, for appellee.

Robert Ross, with whom Steven Sharobem and Martha Coakley, Attorney General, were on brief, for Commonwealth of Massachusetts, amicus curiae.

Jennifer M. Verkamp and Morgan Verkamp LLC, on brief for Taxpayers Against Fraud Education Fund, amicus curiae.

Before Howard, Stahl, and Barron, Circuit Judges.


Page 507

STAHL, Circuit Judge.

The genesis of this False Claims Act case was the care of Relators' daughter at Arbour Counseling Services in Lawrence, Massachusetts. Relators alleged that

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their daughter -- who died of a seizure in 2009 -- was treated by various unlicensed and unsupervised staff, in violation of state regulations. The crux of their complaint is that Arbour's alleged noncompliance with sundry supervision and licensure requirements rendered its reimbursement claims submitted to the state Medicaid agency actionably false under both the federal and Massachusetts False Claims Acts.

The district court dismissed the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). With one limited exception, we reverse.

I. Facts & Background

A. Regulatory framework

Arbour Counseling Services (" Arbour" ), owned and operated by Defendant-Appellee Universal Health Services, Inc. (" UHS" ), is a provider of mental-health services in Lawrence, Massachusetts.[1] Arbour participates in the state Medicaid program, known as MassHealth, and bills MassHealth for services rendered to individuals insured by the program.

The state has promulgated regulations governing the MassHealth program. See generally 130 Mass. Code Regs. § § 401.401--650.035.[2] Chapter 429 in particular pertains to the provision of mental-health services at both " parent centers" and " satellite facilities" around the state.[3] In the regulations, a satellite facility, such as the Arbour clinic at issue in this case, is a " mental health center program at a different location from the parent center that operates under the license of and falls under the fiscal, administrative, and personnel management of the parent center." Id. § 429.402. Satellite facilities are classified as either " autonomous" or " dependent" ; autonomous facilities have " sufficient staff and services to substantially assume [their] own clinical management independent of the parent center," while dependent facilities operate " under the direct clinical management of the parent center." Id.

The regulations contemplate that mental health centers will employ qualified " core" staff members engaged in disciplines such as psychiatry, psychology, social work, and psychiatric nursing. See id. § 429.422 (setting forth staff composition requirements); id. § 429.424 (setting forth requisite staff qualifications). All staff must receive supervision within a formalized relationship, commensurate to the individual's skill and level of professional development. Id. § 429.438(E). Noncore counselors and unlicensed staff in particular " must be under the direct and continuous supervision of a fully qualified professional staff member trained in one of the core disciplines." Id. § 429.424(F).

Satellite programs are subject to additional regulations regarding staff supervision and integration with parent centers; MassHealth payment for rendered services is conditioned on the satellites' compliance with these provisions. Id. § 429.439. As Arbour's Lawrence clinic is a satellite of a parent center located in Malden, Relators' claims are largely premised

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on a failure to conform to the strictures of the satellite-specific regulation.

B. Facts relevant to Relators' claims against UHS

Relators' daughter, Yarushka Rivera[4] -- a teenage recipient of MassHealth benefits -- began seeing Arbour counselor Maria Pereyra in 2007 after experiencing behavioral problems at school. Pereyra, though on staff at Arbour, had no professional license to provide mental-health therapy. Relators met with Pereyra's supervisor, clinical director Edward Keohan, after Yarushka complained that she was not benefiting from counseling. During the ...

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