United States District Court, D. Massachusetts
UNITED STATES OF AMERICA ex rel. CHRISTINE MARTINO-FLEMING, Relator Plaintiffs,
SOUTH BAY MENTAL HEALTH CENTER, INC.; COMMUNITY INTERVENTION SERVICES, INC.; H.I.G. GROWTH PARTNERS, LLC; H.I.G. CAPITAL, LLC; PETER J. SCANLON; AND KEVIN P. SHEEHAN Defendants.
MEMORANDUM AND ORDER
Honorable Patti B. Saris, Chief U.S. District Judge.
Christine Martino-Fleming brings this action under the
federal False Claims Act (“FCA”), 31 U.S.C.
§ 3729 et seq., against South Bay Mental Health
Center, Inc. (“South Bay”), and its owners and
operators. She alleges that South Bay routinely submitted
bills for the mental-health services of unlicensed,
unqualified, and unsupervised employees to MassHealth, the
Massachusetts Medicaid program, and its contractors. The
Defendants are South Bay; H.I.G. Growth Partners, LLC
(“H.I.G. Growth”), and H.I.G. Capital, LLC
(“H.I.G. Capital”) (collectively, “H.I.G.
Defendants”); Community Intervention Services, Inc.
(“C.I.S.”); Peter J. Scanlon; and Kevin P.
Complaint asserts counts under both the FCA and its
Massachusetts counterpart. The Commonwealth subsequently
intervened and filed a 27-count Complaint-in-Intervention.
The United States elected not to intervene. Defendants have
filed motions to dismiss both complaints under Rule 12(b)(6)
and Rule 9(b) of the Federal Rules of Civil Procedure.
the Commonwealth has intervened, its
Complaint-in-Intervention supersedes the Relator's
Complaint with respect to the state-law claims. The motions
to dismiss regarding those claims are discussed in a separate
opinion, with which the Court assumes familiarity. This
memorandum addresses the Relator's three federal-law
counts that remain at issue: False Claims, 31 U.S.C. §
3729(a)(1)(A) (Count 1); False Statements Material to False
Claims, 31 U.S.C. § 3729(a)(1)(B) (Count 2); and Reverse
False Claims, 31 U.S.C. § 3729(a)(1)(G) (Count 3).
reasons stated below, the Court
DENIES the motions to dismiss
Counts 1 and 2, and ALLOWS the
motions to dismiss Count 3.
facts below are taken from the Relator's 250-paragraph
Second Amended Complaint (“SAC”). Many are
Massachusetts Medicaid program, known as MassHealth, covers
mental-health services. It is jointly financed by the federal
and state governments. The state has promulgated regulations
governing mental-health services provided by the MassHealth
program. See generally 130 Mass. Code Regs.
§§ 401.401-650.035. Among other things, MassHealth
regulations provide that unlicensed counselors must be under
the “direct and continuous supervision” of a
licensed psychiatrist, psychologist, independent clinical
social worker, or psychiatric nurse to provide mental health
services. Id. § 429.424.
MassHealth beneficiaries enroll in managed care plans such as
a Managed Care Organization (“MCO”) plan or a
Primary Care Clinician (“PCC”) plan. People not
enrolled in these plans receive mental-health services on a
fee-for-service basis. The MCOs contract with MassHealth, and
MassHealth pays for the services. The MCOs manage the
healthcare services and have their own authorization
requirements. Id. § 508.004(B)(3). The
Massachusetts Behavioral Health Program (“MBHP”)
administers and pays for mental-health services provided to
MassHealth members enrolled in a PCC plan and has its own
terms as well. See Id. § 450.124(A). MassHealth
pays MBHP and the MCOs a fixed monthly fee for each
Bay is a mental-health center that offers services to
patients throughout the Commonwealth in its 17 satellite
clinics. It is a for-profit corporation established under the
laws of Massachusetts. It was founded in 1986 by Defendant
Dr. Peter Scanlon, who was its sole officer and director, and
owned all outstanding capital stock until April 2012.
Bay employs therapists and other professionals who do not
meet the MassHealth licensing requirements or the
requirements of its contractors. Moreover, a vast majority of
unlicensed staff therapists at South Bay clinics had no
qualified supervisor, and many South Bay clinics did not have
qualified clinic directors. Despite these alleged violations
of state law and contractual requirements, South Bay was
reimbursed for services provided by unlicensed and improperly
supervised professionals. Claim submissions by these
unlicensed and improperly supervised professionals were false
and fraudulent, Relator alleges.
South Bay's Acquisition by Private Equity
April 2012, after conducting due diligence, H.I.G. Capital
and H.I.G. Growth purchased South Bay through C.I.S. H.I.G.
Capital is a Delaware limited liability company described as
a “leading global private equity investment firm with
$21 billion of equity capital under management.” H.I.G.
Growth, also a Delaware limited liability company, is a
capital-investment affiliate of H.I.G. Capital and is also a
multi-billion dollar private equity company. Sheehan, the
Chief Executive Officer (“CEO”) of C.I.S., had
over 30 years of behavioral health experience.
the acquisition, the officers and members of the Boards of
Directors of South Bay and C.I.S. Overlapped:
South Bay Position(s)
Chief Clinical Officer, Director (until 2012)
Managing Director of H.I.G. Growth; Senior Member
of H.I.G. Capital
Principal of H.I.G. Growth and H.I.G. Capital
Principal of H.I.G. Growth and H.I.G. Capital
April 2012 on, the Board members of C.I.S. were
“heavily involved in the operational decisions of South
Bay, including approving contracts, strategic planning,
budgeting, and earnings issues.”
Christine Martino-Fleming is a licensed mental-health
counselor. She was employed by South Bay from June 2008 until
September 2013. Thereafter, she worked for C.I.S. from
September 2013 to September 2014. Initially a Job Coach at
South Bay, she became the Coordinator of Staff Development
and Training, and was responsible for keeping track of
employee turnover. In this role, Martino-Fleming learned that
all South Bay clinics were not compliant with the
Massachusetts regulations for mental-health centers because
they had staff therapists who were unqualified, unlicensed,
and unsupervised. Between 2009 and 2015, over 60 percent of
regional directors, over 80 percent of clinical directors,
and over 75 percent of supervisors across all South
Bay facilities were not properly licensed according to
MassHealth regulations, and there was a “systemic
failure to hire qualified individuals.”
in 2012, Martino-Fleming informed Scanlon and Sheehan, as
well as other C.I.S. officers, that a significant percentage
of employees at South Bay “lacked the requisite
qualifications to see, diagnose or treat patients on their
own, ” and that supervisors were also unqualified in
violation of MassHealth regulations ...