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United States v. Team Finance, L.L.C

United States District Court, E.D. Texas, Marshall Division

August 21, 2019

UNITED STATES OF AMERICA, CALEB HERNANDEZ & JASON WHALEY, RELATORS; ET AL.; Plaintiffs,
v.
TEAM FINANCE, L.L.C., TEAM HEALTH, INC., TEAM HEALTH HOLDINGS, INC., AMERITEAM SERVICES, L.L.C., Defendants.

          MEMORANDUM OPINION AND ORDER

          RODNEY GILSCRAP UNITED STATES DISTRICT JUDGE.

         Before 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 herein.

         I. BACKGROUND

         On 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).)[1] 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).)

         The 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 Finance, L.L.C.
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 TeamHealth system.
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).)

         II. DISCUSSION

         A. Venue Is Proper in this District

         Defendants 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.”).

         An 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; ...

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