Nevada Judge Dismisses FCA Complaint Against Hospitals As Related Entities Cannot Conspire

The District of Nevada on Tuesday dismissed a False Claims Act (FCA) complaint against a group of hospitals, finding that the relator’s case lacks the required specificity. The court did, however, grant the relator leave to amend some of his pleadings for the third time.

Physician Tali Arik, a former employee of the defendants’ hospital network, brought the qui tam suit against DVH Hospital Alliance LLC, Valley Health Systems LLC, Universal Health Services Inc., Vista Health Mirza, MD P.C., and physician Irfan Mirza, over allegations that the defendants operated a conspiratorial scheme to fraudulently bill federal health care programs for medically unnecessary services. The defendants moved to dismiss the case, claiming that Arik failed to meet the standard of particularity for the FCA and conspiracy allegations and, instead, that Arik simply disagreed with the hospitals’ “treatment plans, hospitalization decisions, and diagnoses.”

“I find that Arik’s claims for violations of the FCA are insufficiently pled because (1) he has failed to clarify whether and how fraudulent claims for reimbursement were submitted to the federal government and (2) some, though not all, of his disagreements with the hospital’s treatments fail to show fraudulent conduct,” Judge Jennifer Dorsey wrote. “I also find that he does not and cannot allege a conspiracy, given the unified corporate interests of the defendants.”

Judge Dorsey provided leave to amend the plaintiff’s first two claims for relief, disagreeing with the defendants’ argument that any amendments at all would be futile. The judge said Arik may be able to salvage his allegations if he states with more particularity on “whether and how” the defendants submitted false claims seeking federal reimbursement — not from private insurers, as he previously alleged — and if he further elucidates what was allegedly fraudulent about the hospitals’ conduct.

However, the relator’s claim that the hospitals acted conspiratorially fails on its face and must be denied leave to amend, according to the opinion. The nature of the defendants’ corporate relationship to one another — as subsidiaries, parent or sister companies, or agents — preclude the possibility of a conspiracy.

“This relationship renders these defendants subject to the intracorporate-conspiracy doctrine: there can be no meeting of the minds between distinct entities when the entities are not, in reality, distinct,” Judge Dorsey reasoned.

Jesse Sbaih & Associates, Morgan Verkamp LLC, and the United States Attorney’s Office represent relator Arik and the U.S. as intervenor. John Cotton & Associates, McDermott Will & Emery, and Sklar Williams PLLC represent the defendants.