United States District Court, D. Massachusetts
MEMORANDUM AND ORDER
Talwani, United States District Judge
Government of Bermuda (“Bermuda”) brings a
federal claim under the Racketeer Influenced and Corrupt
Organizations Act (“RICO”), 18 U.S.C. § 1961
et seq., and state claims under Massachusetts General Laws c.
93A, § 11, and common law theories of conspiracy, fraud,
and unjust enrichment against Defendants Lahey Clinic, Inc.,
and Lahey Clinic Hospital, Inc. (collectively,
“Lahey”). Before the court is Lahey's
Motion to Dismiss the Plaintiff's Complaint Pursuant
to Fed.R.Civ.P. 12(b)(6) and 9(b) [#16]. For the reasons
set forth below, Lahey's motion is ALLOWED.
Standard of Review
motion under Rule 12(b)(6) of the Federal Rules of Civil
Procedure to dismiss a complaint for failure to state a claim
upon which relief can be granted is properly allowed when the
complaint does not contain “sufficient factual matter,
accepted as true, to ‘state a claim to relief that is
plausible on its face.'” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell
Atlantic Corp. v. Twombly, 550 U.S. 554, 570 (2007)).
Considering the complaint in the light most favorable to the
plaintiff, see Germanowski v. Harris, 854 F.3d 68,
71 (1st Cir. 2017), the court will “determine whether
the factual allegations are sufficient to support the
reasonable inference that the defendant is liable.”
Saldivar v. Racine, 818 F.3d 14, 18 (1st Cir. 2016)
(quoting Cardigan Mtn. Sch. v. N.H. Ins. Co., 787
F.3d 82, 84 (1st Cir. 2015)).
Allegations in the Complaint
case involves an alleged conspiracy between Lahey and Dr.
Ewart Brown (“Brown”). Brown is the former
Premier of Bermuda, a longstanding Member of Bermuda's
Parliament, and the owner of two private health clinics in
Bermuda. Compl. ¶ 8 [#1]. Bermuda alleges that Lahey
paid Brown bribes disguised as “consulting fees,
” gave him discounts on medical equipment and services,
and made political donations to his campaign, in return for
which Brown ensured Lahey: 1) “made millions of dollars
reading and interpreting medically unnecessary MRI and CT
scans performed at Brown's clinics”; 2)
“received preferential treatment when bidding on
healthcare contracts issued by the Bermudian
Government”; and 3) “obtained privileged access
to Bermudian patients that it could service at its facilities
in Massachusetts and in Bermuda.” Id. ¶
1; see also ¶¶ 9, 31, 45. The Complaint
describes these three distinct schemes are as follows.
“scanning scheme, ” Lahey and Brown allegedly
conspired to conduct medically unnecessary scans at
Brown's two on-island clinics (the “Brown
Clinics”) for profit. Pursuant to exclusive contracts
between Lahey and the Brown Clinics, Lahey interpreted
imaging results forwarded electronically from the Brown
Clinics in Bermuda to Lahey in Massachusetts and sent
electronic reports back to the Brown Clinics for a fee.
Compl. ¶¶ 70-71. Brown allegedly paid this fee out
of the money he received from insurers after submitting
claims for reimbursement. Id. ¶ 70. Lahey also
assisted with certain scans performed at the Brown Clinics
from its campus in Massachusetts “by giving specific
instructions on how to carry out the scan including where the
patient should be positioned.” Id. ¶ 82.
Brown allegedly induced patient referrals for diagnostic
scanning at the Brown Clinics “by offering paid
kickbacks, which he dubbed ‘commissions, ' ranging
from between 5% to 17.5% of reimbursements to local
physicians.” Id. ¶ 92.
direct result of this scheme, the Brown Clinics allegedly
conducted and Lahey interpreted “thousands of medically
unnecessary tests” at Bermuda's expense.
Id. ¶ 70. Bermuda paid Brown for these tests
when he submitted claims for reimbursement to Bermuda public
insurers; Brown in turn paid Lahey's fees.
Id. Bermuda alleges Lahey “must have
known” these tests were unnecessary “for several
years, ” due to the fact that Bermuda was conducting
scans “at a rate disproportionate to like
nations.” Id. ¶ 81.
Complaint alleges a secondary effect of the scanning scheme,
namely that “MRI and CT scanning on the island
increased exponentially, ” causing Bermudian insurance
rates to increase. Id. ¶ 70. In Bermuda,
insurers are required to provide each insured a minimum
package of medical benefits called Standard Health Benefits.
Id. ¶ 83. The government subsidizes payment of
Standard Health Benefit “claims” for certain
Bermudians. Id. ¶ 84. Each year, the Ministry
of Health, Seniors and Environment determines a Standard
Premium Rate for the Standard Health Benefits based on the
claims experience of all insured participants. Id.
¶ 85. The Complaint alleges that “[i]n part as a
result of [the scanning scheme] . . . the Standard Premium
Rate for the Standard Health Benefits package provided to
each Bermudian citizen more than doubled between Fiscal Year
2007 ($140.92) and Fiscal Year 2016 ($338.07).”
Id. ¶ 86. Insured Bermudians paid higher
premiums, and Bermuda provided higher subsidies. Id.
¶ 85. Brown allegedly influenced this increase further
by “constantly appl[ying] pressure to government
officials to increase remuneration for tests undertaken by
the Brown Clinics and read by Lahey, notwithstanding their
already high price tag.” Id. ¶ 90.
second alleged scheme, Lahey secured several lucrative
subcontracts over other healthcare service providers as a
result of its relationship with Brown. The Complaint
describes subcontracts for two specific projects.
first project was a $13.5 million, five-year contract to
develop a long-term healthcare strategy for the island and
“revamp” Bermuda's state-run hospital, King
Edward Memorial Hospital (“KEMH”). Brown
allegedly “used his role as Premier” to
facilitate a meeting between Lahey and the Bermuda Minister
of Health to discuss Lahey's involvement in the
“new” hospital. Compl. ¶ 50. Brown then
secured the KEMH contract for a U.S.-based healthcare
management and consulting company known as Kurron Shares of
America, Inc. (“Kurron America”). Brown allegedly
controlled Kurron America through his relationship with its
owner, a former business associate, and used this control to
facilitate a subcontract on the project with Lahey.
second project involved an annual $1.3 million contract with
a separate company, Kurron Bermuda, to develop
“FutureCare, ” a Bermudian public insurance plan
for citizens over 65. Id. ¶ 59. Brown allegedly
used his “influence and connections to ensure that
Lahey was favored over other potential U.S. healthcare
providers, including Johns Hopkins, for lucrative contracts
relating to ‘FutureCare.'”
Preferred Provider Scheme
third scheme, Bermuda public insurers made Lahey a
“preferred provider” of medically necessary
services not available in Bermuda, allegedly due to
“Lahey's continued payments to and exploitation of
Brown.” Compl. ¶ 63. Lahey is one medical service
provider in a “network” of preferred providers.
Id. ¶ 64. As a result, Lahey treats
“[h]undreds of Bermudians” who travel to Lahey in
Massachusetts each year for treatment, id., and it
also “services Bermudians remotely from its campus in
Massachusetts, ” id. ¶ 66. Bermuda's
Health Insurance Plan, a basic government-funded health plan
for persons of all ages, paid 60% of usual and customary
charges for medically necessary services by in-network
providers such as Lahey, and 50% for out-of-network
providers. Id. ¶ 64. FutureCare paid 75% of
these services for in-network providers, and 65% for
out-of-network providers. Id. Bermuda alleges that
between 2010 and 2016, Bermuda's Health Insurance Plan
and FutureCare paid Lahey over $10 million for services Lahey
performed at its facilities in Massachusetts as a preferred
provider, id. ¶ 59, and the Bermudian