United States District Court, E.D. Texas, Marshall Division
UNITED STATES OF AMERICA, CALEB HERNANDEZ & JASON WHALEY, RELATORS; ET AL.; Plaintiffs,
TEAM FINANCE, L.L.C., TEAM HEALTH, INC., TEAM HEALTH HOLDINGS, INC., AMERITEAM SERVICES, L.L.C., Defendants.
MEMORANDUM OPINION AND ORDER
GILSCRAP UNITED STATES DISTRICT JUDGE.
the Court is Defendants Team Health Holdings, Inc., Team
Finance, LLC, Team Health, Inc., and AmeriTeam Services,
LLC's Motion to Dismiss Relators' First Amended
Complaint Based on Improper Venue Pursuant to Fed.R.Civ.P.
12(b)(3), or in the Alternative, to Transfer Venue (the
“Motion”). (Dkt. No. 38.) The Court held an
evidentiary hearing on the Motion on July 24, 2019. (Dkt. No.
73.) Having considered the parties' briefing, the record
evidence, and the relevant authorities, the Court
DENIES the Motion for the reasons described
April 25, 2016, Relators Caleb S. Hernandez and Jason W.
Whaley (collectively, “Relators”) filed suit
against Defendants Team Health Holdings, Inc.
(“THHI”), Team Finance, LLC (“TF”),
and Team Health, Inc. (“THI”) under the qui
tam provisions of the Federal False Claims Act, 31 US.C.
§§3729 et seq. (“FCA”), and
analogous state statutes. (Dkt. No. 1
(complaint).) On June 28, 2018, the United States of
America and the Plaintiff state governments declined to
intervene. (Dkt. No. 20.) Relators subsequently amended the
Complaint on November 12, 2018 to add AmeriTeam Services, LLC
(“AmeriTeam”) as a defendant to the action. (Dkt.
No. 33 (First Amended Complaint).)
following introductory paragraphs from Relators' First
Amended Complaint succinctly summarize the respective parties
in this action as well as Relators' key allegations
against the Defendants:
1. TeamHealth is an emergency room management company that
operates hospital emergency departments across the nation.
TeamHealth provides staffing, operation, and billing services
to emergency departments as an outside contractor, promising
to increase efficiency and profitability in exchange for a
share of the emergency departments' earnings. TeamHealth
emergency departments frequently render healthcare services
to beneficiaries of public healthcare programs administered
by the Centers for Medicare and Medicaid Services
(“CMS”) and the Plaintiff States. This case is
about two fraudulent schemes (the “Schemes”) that
TeamHealth has used for years to obtain grossly overpaid
reimbursements from these public healthcare programs.
2. The first Scheme is the “Mid-Level
Scheme.” Under the Mid-Level Scheme,
TeamHealth overbills for services provided by
“mid-level” practitioners. The term
“mid-level” refers to non-physician healthcare
providers, such as Physician Assistants (“PAs”)
and Nurse Practitioners (“NPs”). Under CMS rules,
a mid-level's services are reimbursed at 85% of the
standard physician rate, while services rendered by a
physician are reimbursed at 100% of the standard physician
rate. . . .
3. . . . TeamHealth-through its billing policies, procedures,
and protocols (which include training and guidelines), and
through its coordinated operation and influence over its
subsidiaries and affiliated professional
entities-systematically submits claims for mid-level
services. . . triggering the 100% rate when in fact the 85%
rate applied. TeamHealth does this intentionally and has done
so for years.
. . . .
7. The second Scheme is the “Critical Care
Scheme.” This Scheme is a classic upcoding
scheme. Under the Critical Care Scheme, TeamHealth bills CMS
for “critical care”-the highest level of
emergency treatment-when in fact critical care services were
not rendered and/or were not medically necessary, thereby
submitting false claims through fraudulent billing.
. . . .
10. Relator CALEB S. HERNANDEZ, D.O., is a citizen of the
United States of America and is a resident of the State of
New York. . . . He brings this qui tam action based
upon direct and unique information he obtained during his
employment at the following hospital emergency departments
managed and/or operated by TeamHealth: the North Colorado
Medical Center in Greely, Colorado (from 2011 to 2015);
Sterling Regional Medical Center in Sterling, Colorado (from
2013 to 2015); and Juan Luis Phillipe Hospital in St. Croix,
United States Virgin Islands (in 2010). . . .
11. Relator JASON W. WHALEY, PA-C, is a citizen of the United
States of America and is a resident of the State of Colorado.
. . . He brings this qui tam action based upon
direct and unique information obtained during his employment
at the emergency department at North Colorado Medical Center,
located in Greeley, Colorado (from 2011 to 2013), which was
and is operated and/or managed by TeamHealth. . . .
12. Defendants are a system of affiliated entities operating
as and collectively referred to herein as
“TeamHealth.” TeamHealth is a national healthcare
practice management company that is one of the largest
suppliers of outsourced physician staffing and administrative
services to hospitals in the United States. TeamHealth
operates in at least forty-seven states and employs at least
13, 000 healthcare professionals.
13. Defendant, TEAM HEALTH HOLDINGS, INC., is a corporation
that is organized under the laws of Delaware and has its
principal place of business in Knoxville, Tennessee. Team
Health Holdings, Inc. was acquired in 2017 in a $6.1 Billion
take-private deal. Team Health Holdings, Inc. professes to be
a holding company that conducts no operations, with no
employees. Further, Team Health Holdings, Inc. claims its
only material asset(s) to be its membership interests in Team
14. Defendant, TEAM FINANCE, L.L.C. is a subsidiary of Team
Health Holdings, Inc. that is organized under the laws of
Delaware. Because Team Finance, L.L.C. takes the citizenship
of its member, Team Health Holdings, Inc., it is likewise a
citizen of the States of Delaware and Tennessee.
15. Defendant, TEAM HEALTH, INC., is a subsidiary of
Defendant Team Health Holdings, Inc., and does business under
the name of “TEAMHEALTH.” Team Health, Inc. is a
Delaware corporation with its principle place of business at
265 Brookview Centre Way, Suite 400, Knoxville, Tennessee.
Although-as of October of 2014-it has claimed to be a holding
company that conducts no operations and has no employees,
Team Health, Inc., alone or through its subsidiaries, has
carried out operations and employed employees within the
16. Defendant, AMERITEAM SERVICES, L.L.C., is [a] Tennessee
Limited Liability Company and is an administrative and
support services subsidiary of Defendant Team Health
Holdings, Inc., which employs officers and other TeamHealth
affiliated representatives, including those who are members
of the referenced departments, committees and
TeamHealth's purported [FCA] Compliance Advisory Group.
Its principal place of business and mailing address is 265
BROOKVIEW CENTRE WAY, STE 400 KNOXVILLE, TN 37919-4052
USA-the same address as the other TeamHealth defendants. It
does business under the name of “TEAMHEALTH.” It
was created in Tennessee in October 2014 and reportedly has
one member, Tennessee Parent, Inc., which Blackstone created
to facilitate the take-private deal.
(Dkt. No. 33 ¶¶ 1-16 (emphasis in original).)
Venue Is Proper in this District
move to dismiss Relators' First Amended Complaint for
improper venue under Federal Rule of Civil Procedure
12(b)(3). (Dkt. No. 38.) In resolving a motion to dismiss for
improper venue, the Court may consider both the complaint and
evidence outside the complaint. See Trois v. Apple Tree
Auction Ctr., Inc., 882 F.3d 485, 493 (5th Cir. 2018)
(“[T]he court is permitted to look at evidence in the
record beyond simply those facts alleged in the complaint and
its proper attachments.”) (quoting Ambraco, Inc. v.
Bossclip B.V., 570 F.3d 233, 237 (5th Cir. 2009));
Kranos IP Corp. v. Riddell, Inc., No. 2:17-cv-00443,
2017 WL 3704762, at *2 (E.D. Tex. Aug. 28, 2017); see
also 14D Wright & Miller, Federal Practice &
Procedure § 3826 (4th ed. 2017). The Court must accept
all well-pleaded and uncontroverted facts as true and resolve
any factual conflicts in the plaintiff's favor. See
Trois, 882 F.3d at 492-93; but see U.S. ex rel.
Riley v. St. Luke's Episcopal Hosp., 355 F.3d 370,
377 (5th Cir. 2004) (“If such an allegation is
contradicted by the contents of an exhibit attached to the
pleading, then indeed the exhibit and not the allegation
controls.”). “Once a defendant raises improper
venue by motion, ‘the burden of sustaining venue will
be on [the] Plaintiff.'” Rex Real Estate I,
L.P. v. Rex Real Easter Exchange, Inc., No.
4:18-cv-00371, 2019 WL 2524830, at *1 (E.D. Tex. June 19,
2019) (internal citation omitted); see also Gutierrez v.
Drill Cuttings Disposal Co., L.L.C., 319 F.Supp.3d 856,
861 (W.D. Tex. 2018) (“Once challenged, the burden of
sustaining venue lies with the plaintiff.”).
action under the FCA “may be brought in any judicial
district in which the defendant or, in the case of multiple
defendants, any one defendant can be found, resides,
transacts business, or in which any act proscribed by section
3729 occurred.” 31 U.S.C. § 3732(a); see
also 28 U.S.C. § 1391(a)(1) (“Except as
otherwise provided by law, this section shall govern the
venue of all civil actions brought in the district courts of
the United States.”) (emphasis added); United
States ex rel Cook-Reska v. Cmty. Health Sys, Inc., No.
H-09-1565, 2014 WL 5500710, at *4 (S.D. Tex. Oct. 30, 2014)
(identifying 31 U.S.C. § 3732(a) as the venue provision
for the FCA). Relators allege that venue is proper because
“(a) Defendants transact business here; (b) acts
proscribed by the FCA occurred here; and/or (c) Defendants
reside here.” (Dkt. No. 53 at 1.) Relators rely on,
inter alia, the following factual allegations to
support each of these contentions:
• “TeamHealth is an emergency room management
company that operates hospital emergency departments across
the nation. . . . TeamHealth emergency departments frequently
render healthcare services to beneficiaries of public
healthcare programs administered by the Centers for Medicare
and Medicaid Services (‘CMS') and the Plaintiff
States.” (Dkt. No. 33 ¶ 1.)
• “Specifically, during the relevant time period,
TeamHealth has transacted business with and/or on behalf of
at least the following hospital emergency departments located
within the Eastern District of Texas: (1) the Christus St.
Mary Hospital in Port Arthur, Texas; (2) the Longview
Regional Hospital in Longview, Texas; ...