Loyola Medical Center Wins Motion to Dismiss FCA Claims
Summary
The US District Court for the Western District of Texas granted Loyola University Medical Center's Motion to Dismiss, dismissing relator Patrek Chase's False Claims Act allegations for failure to state a claim upon which relief can be granted. Chase, who worked at Loyola from October 2020 to May 2022, alleged that Loyola double-billed Medicare by charging costs for pre-transplant services directly to Medicare and also including those costs on its cost report for reimbursement, and that Loyola included other improper and inflated costs on its Medicare cost report. Both the United States and the State of Texas declined to intervene in the action before the Court permitted the filing of the Second Amended Complaint.
Healthcare providers billing Medicare and Medicaid should ensure their cost reporting practices are adequately documented and defensible—double-billing through both direct claims and cost reports is a specific FCA theory that, if pleaded with representative examples of specific claims and corresponding cost report entries, can survive a motion to dismiss. The fact that both the federal government and State of Texas declined to intervene here is not protective of Loyola; rather, the dismissal rests on pleading insufficiency, meaning a properly-pled complaint on the same facts could proceed.
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What changed
The Court granted Loyola University Medical Center's Rule 12(b)(6) Motion to Dismiss, finding that the Second Amended Complaint failed to state a plausible FCA claim. Chase alleged four categories of violations: performing transplants on patients who should not have received them, double billing Medicare, maintaining false records, and related state law mirror causes. The Court determined these allegations were insufficient to survive the pleading standard required by Twombly and Iqbal. The government's decision not to intervene in the qui tam action is notable context, though the Court's ruling rests on the adequacy of the pleading itself.
Healthcare providers, transplant centers, and entities participating in federal healthcare programs should note that conclusory fraud allegations—even under the FCA's relator-friendly framework—must plead sufficient factual content to make claims plausible on their face. The standard under Federal Rules 8(a)(2) and 12(b)(6) requires more than general assertions of improper billing; specific false claim details, representative examples, or corresponding false records must be pled with factual specificity. Providers receiving qui tam subpoenas or complaints should monitor whether the government intervenes as an indicator of case strength.
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Jan. 13, 2026 Get Citation Alerts Download PDF Add Note
United States, ex rel; and State of Texas v. Parkland Health and Hospital System, Loyola University Medical Center, Southwest Transplant Alliance, LiveOnNY, New Jersey Sharing Network, United Network for Organ Sharing
District Court, W.D. Texas
- Citations: None known
- Docket Number: 5:23-cv-00381
Precedential Status: Unknown Status
Trial Court Document
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION
UNITED STATES, EX REL; AND
STATE OF TEXAS,
Plaintiffs,
PATREK CHASE,
Relator,
CASE NO. SA-23-CV-00381-JKP
v.
PARKLAND HEALTH AND
HOSPITAL SYSTEM, LOYOLA
UNIVERSITY MEDICAL CENTER,
SOUTHWEST TRANSPLANT
ALLIANCE, LIVEONNY, NEW
JERSEY SHARING NETWORK,
UNITED NETWORK FOR ORGAN
SHARING,
Defendants.
MEMORANDUM OPINION AND ORDER
Before the Court is Defendant Loyola University Medical Center’s (Loyola) Motion to
Dismiss for Failure to State a Claim. ECF Nos. 70,91. Plaintiff/Relator Patrek Chase responded.
ECF No. 82. Upon consideration, the Motion to Dismiss is GRANTED.
FACTUAL BACKGROUND
On March 28, 2023, Relator Patrek Chase filed this action in the name of the United
States and many individual states alleging violation of the False Claims Act (FCA).1 ECF No. 1.
1 “The FCA may be enforced not just through litigation brought by the Government itself, but also through civil qui
tam actions that are filed by private parties, called relators, in the name of the Government.” Kellogg Brown & Root
Servs., Inc. v. United States ex rel. Carter, 575 U.S. 650, 653 (2015)(quotations omitted).
In the Second Amended Complaint, Chase names as Defendants entities in the organ donation
and transplant system which include transplant centers, Organ Procurement Organizations
(OPOs), and the United Network for Organ Sharing (UNOS).2 ECF No. 37. In general terms,
Chase alleges these named Defendants fraudulently billed Medicare and Medicaid (Federal
Healthcare) in their role in the system-process of procuring and transplanting kidneys to patients
in need. Id. at par. 5.
Particular to the action against Loyola, which is a nonprofit hospital and organ transplant
center, Chase alleges that in this kidney-procurement system, transplant centers, mainly
hospitals, are responsible for performing the transplants, caring for the patients on the waiting
list, and choosing whether to accept organs for transplant. Id. at par. 4. Chase alleges Loyola
double billed Medicare, charging costs for pre-transplant services both directly to Medicare and
including the costs on Loyola’s cost report for reimbursement from Medicare. Chase also alleges
Loyola included other improper costs and inflated costs on Loyola’s cost report to Medicare. Id. at pars. 7,8,9.
Chase filed this action on March 28, 2023. On June 20, 2025, the United States declined
to intervene in this action. ECF No. 25. On June 25, 2025, the State of Texas and all other
Plaintiff states declined to intervene in this action. ECF No. 27. This Court unsealed this action.
On August 1, 2025, this Court permitted Chase to file the live Second Amended Complaint. Due
to the age of the case at that time, this Court cautioned Chase no further amendments would be
allowed. ECF Nos. 33,37.
Chase worked at Loyola from October 2020 until May 2022. Parsing the allegations and
construing the Second Amended Complaint liberally, Chase contends Loyola committed the
2 Chase named numerous entities and persons in the original Complaint. However, the only remaining Defendants
are: LiveOnNY, New Jersey Sharing Network, Parkland Health and Hospital System, Southwest Transplant
Alliance, Loyola University Medical Center, and United Network for Organ Sharing.
following violations of the False Claims Act: (1) it engaged in “aggressive practices” by
providing organ transplants to “especially sick” patients or other patients who should not have
received them; (2) double billing or inflating its cost reports to Medicare; (3) maintaining false
records, and; (4) mirror causes of action under various state laws. ECF No. 37 pars. 7,8,9,136-
157. Loyola now files this Motion to Dismiss for Failure to State a Claim pursuant to Federal
Rule of Civil Procedure 12(b)(6).
LEGAL STANDARD
To provide opposing parties fair notice of the asserted cause of action and the grounds
upon which it rests, every pleading must contain a short and plain statement of the cause of
action which shows the pleader is entitled to relief. Fed. R. Civ. P. 8(a)(2); Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007). To satisfy this requirement, the Complaint must plead
“enough facts to state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 555 -
558, 570. “A claim has facial plausibility when the plaintiff pleads factual content that allows the
court to draw the reasonable inference that the defendant is liable for the misconduct
alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The focus is not on whether the plaintiff
will ultimately prevail, but whether that party should be permitted to present evidence to support
adequately asserted causes of action. Id.; Twombly, 550 U.S. at 563 n.8. Thus, to warrant
dismissal under Federal Rule 12(b)(6), a Complaint must, on its face, show a bar to relief or
demonstrate “beyond doubt that the plaintiff can prove no set of facts in support of his claim
which would entitle him to relief.” Fed. R. Civ. P. 12(b)(6); Clark v. Amoco Prod. Co., 794 F.2d
967, 970 (5th Cir. 1986). Dismissal “can be based either on a lack of a cognizable legal theory or
the absence of sufficient facts alleged under a cognizable legal theory.” Frith v. Guardian Life
Ins. Co., 9 F. Supp.2d 734, 737–38 (S.D.Tex. 1998). “Thus, the court should not dismiss the
claim unless the plaintiff would not be entitled to relief under any set of facts or any possible
theory that he could prove consistent with the allegations in the complaint.” Jones v. Greninger, 188 F.3d 322, 324 (5th Cir. 1999); Vander Zee v. Reno, 73 F.3d 1365, 1368 (5th Cir. 1996).
In assessing a Motion to Dismiss under Federal Rule 12(b)(6), the Court’s review is
limited to the Complaint and any documents attached to the Motion to Dismiss, which are also
referred to in the Complaint and central to the plaintiff’s claims. Brand Coupon Network, L.L.C.
v. Catalina Mktg. Corp., 748 F.3d 631, 635 (5th Cir. 2014). When reviewing the Complaint, the
“court accepts all well-pleaded facts as true, viewing them in the light most favorable to the
plaintiff.” Martin K. Eby Constr. Co. v. Dallas Area Rapid Transit, 369 F.3d 464, 467 (5th Cir.
2004)(quoting Jones, 188 F.3d at 324).
A complaint should only be dismissed under Federal Rule 12(b)(6) after affording every
opportunity for the plaintiff to state a claim upon which relief can be granted, unless it is clear
amendment would be futile. Foman v. Davis, 371 U.S. 178, 182 (1962); Hitt v. City of
Pasadena, 561 F.2d 606, 608–09 (5th Cir. 1977); DeLoach v. Woodley, 405 F.2d 496, 496-97 (5th Cir. 1968). Consequently, when it appears a more careful or detailed drafting might
overcome the deficiencies on which dismissal is sought, a Court must allow a plaintiff the
opportunity to amend the Complaint. Hitt, 561 F.2d at 608–09. A court may appropriately
dismiss an action with prejudice without giving an opportunity to amend if it finds that the
plaintiff alleged his best case or amendment would be futile. Foman, 371 U.S. at 182; DeLoach,
405 F.2d at 496–97.
DISCUSSION
Loyola contends this suit against it should be dismissed because Chase fails to allege any
plausible claim under the FCA and fails to plead any claim with sufficient particularity as
required by Federal Rule 9(b). Loyola contends Chase fails to allege the elements of scienter and
materiality, and if so construed, fails to allege these elements with sufficient particularity.
The FCA imposes liability on any person who knowingly submits or causes to be
submitted a false claim for payment of government funds, knowingly makes or causes to be
made a false record or statement material to a false claim or conspires to commit any such
violation. 31 U.S.C. § 3729 (a)(1)(A)–(C). The FCA also imposes liability on any person who
knowingly makes or causes to be made a false record or statement material to an obligation to
transmit money to the government or knowingly conceals an obligation to transmit money to the
government (reverse FCA cause of action). Id. § 3729(a)(1)(G). Thus, the elements of liability
under the FCA are: “‘(1) there was a false statement or fraudulent course of conduct; (2) made or
carried out with the requisite scienter; (3) that was material; and (4) that caused the government
to pay out money or to forfeit moneys due….’” United States ex rel. Porter v. Magnolia Health
Plan, Inc., 810 F. App’x 237, 240 (5th Cir. 2020) (quoting Abbott v. BP Expl. & Prod., Inc., 851
F.3d 384, 387 (5th Cir. 2017)). Thus, a “false claim” in the FCA context consists of a demand for
money that induces the government to disburse funds or otherwise suffer immediate financial
detriment. See id. Legal Standard of Pleading in FCA Cases
A complaint filed under the FCA must meet the heightened pleading standard of Federal
Rule 9(b), which requires a relator to “state with particularity the circumstances constituting
fraud or mistake.” Fed. R. Civ. P. 9(b); U.S. ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 185 (5th Cir. 2009); United States ex rel. Integra Med Analytics, L.L.C., 816 Fed. App’x. 892, 896
(5th Cir. 2020). “What constitutes ‘particularity’ will necessarily differ with the facts of each
case, ‘at a minimum ‘Rule 9(b) requires the who, what, when, where, and how to be laid out.’”
Grubbs, 565 F.3d at 185; Bowles v. Mars, Inc., No. 4:14-CV-2258, 2015 WL 3629717, at *3
(S.D. Tex. June 10, 2015). This standard imposed in FCA cases ensures the complaint “provides
defendants with fair notice of the plaintiffs’ claims, protects defendants from harm to their
reputation and goodwill, reduces the number of strike suits, and prevents plaintiffs from filing
baseless claims then attempting to discover unknown wrongs.” Grubbs, 565 F.3d at 190.
To meet this pleading requirement, a relator’s complaint that does not allege the details of
an actually submitted false claim, may nevertheless survive by alleging particular details of a
scheme to submit false claims paired with reliable details that present a strong inference those
claims were actually submitted, such as dates and descriptions of recorded, but unprovided,
services and a description of the billing system that the records were likely entered into. Grubbs, 565 F.3d at 190-91. This pleading requirement may be imposed less stringently when the alleged
fraud occurred over an extended period and consists of numerous acts. United States ex rel.
Foster v. Bristol–Myers Squibb Co., 587 F.Supp.2d 805, 821 (E.D. Tex. 2008); U.S. ex rel.
Ruscher v. Omnicare, Inc., No. 4:08-CV-3396, 2014 WL 2618158, at *10 (S.D. Tex. June 12,
2014), on reconsideration in part, 2014 WL 4388726 (S.D. Tex. Sept. 5, 2014). However, even
under this “relaxed” standard, the plaintiff must adhere to the basic rule that the complaint must
include a sufficient factual basis to support the relator’s belief that a defendant engaged in a
fraudulent scheme. Ruscher, 2014 WL 2618158, at *11 (quoting Foster, 587 F.Supp.2d at 822).
Application
Because the Second Amended Complaint does not allege the details of any individual
false claim, but alleges fraud that occurred over an extended period of time and consists of
numerous acts, the Court analyzes Chase’s allegations under the Grubbs standard to determine if
Chase sufficiently alleges a scheme to submit false claims, paired with reliable details, to present
a strong inference those claims were actually submitted. This alleged scheme must include
details such as dates and descriptions of each of the six specified theories and/or a description of
the billing system that records of these improper charges were likely entered into. See Grubbs, 565 F.3d at 190-91.
I. Causes of Action of Violation of False Claims Act
(1) Liability Theory of Engaging in “Aggressive Practices”
In the Second Amended Complaint, pertinent to this alleged theory of liability, Chase
alleges Loyola was “not running a safe transplant program.” ECF No. 37, par. 136. Chase
contends Loyola’s transplant program had a “specialty in particularly sick patients,” and for this
reason, Loyola listed these patients on the organ donor list as “status 1A,” which carries the
highest priority, and which allows Loyola to perform transplants more often than others and
obtain payment for doing so.” ECF No. 37, pars. 136-138. Chase alleges Loyola did not properly
screen and did not actually care if these patients’ lives would be saved by the donation. Instead,
Loyola focused on the billing and profitability of these patients. Id. Next, Chase alleges Loyola received reimbursement for patients’ discharge, even if the
reason for discharge was death. Further, if the patient was actually discharged and then had
complications because the transplant did not actually improve the patient’s condition, the patient
would return to Loyola for post-transplant complications. Loyola could then bill for these costly
complications upon return. Id. at par. 138. Chase alleges “[m]any of the patients died soon after
Loyola provided these improper transplants,” and this fraudulent conduct put at least two lives in
jeopardy: First, a patient who died from improper transplant; and second, a patient on the organ
donor waitlist who could have received a life-saving organ transplant had Loyola not improperly
transplanted the organ. Id. at par. 139. Chase alleges Loyola regularly ignored psychosocial “red
flags” raised by both social work and psychiatric teams in determining whether a patient was
ready for transplant. Loyola surgeons would regularly overrule the social workers and
psychiatric teams Id. at par. 140. As an example of such improper conduct, Loyola alleges:
a patient who had liver failure due to alcohol-related substance use disorder is
only eligible for a liver transplant if they could show a period of sobriety or if a
social work team believed the risk of recurrence is low…. In one instance, Loyola
transplanted a liver into a patient with alcoholic liver disease and unresolved
alcohol use problems. The patient did not get better and stayed in the hospital for
128 days. The patient was on Medicare, and all 128 days of the hospital stay were
paid for by Medicare. If Loyola had not done the transplant, the patient would not
have needed the 128-day hospital stay. Id. at pars. 141-42.
Chase asserts he discussed this patient’s extended hospital stay with Loyola’s Inpatient
Chief Medical Officer, Dr. Kevin Smith, who stated that “to increase transplant volume we need
to be willing to take risks.” Chase contends this statement shows definitively Loyola’s view that
patient risk was acceptable for Loyola to increase its transplant billings. Id. at par. 143.
a. Particular Details of the Alleged Scheme
The Court first analyzes Loyola’s arguments that pertain to elements one and four of
Chase’s FCA cause of action, that is whether Chase sufficiently plead: (1) Loyola made a false
statement or engaged in a fraudulent course of conduct, and (4) that caused the government to
pay out money.
Review of the Second Amended Complaint reveals Chase asserts several nonspecific
allegations that do not satisfy the pleading requirements of an FCA cause of action. These
include assertions that “multiple deaths” occurred in a particular timeframe; “[m]any … patients
died soon after Loyola provided [their] transplants;” and some “liver graft failures” occurred at
Loyola. These allegations describe Chase’s opinions of failures in Loyola’s system of choosing
patients for organ or tissue transfer but fail to describe fraud or plead a particular fraudulent
scheme. ECF No. 37 at pars. 136-144. For this reason, Chase fails to present a false claim in the
FCA context that consists of Loyola’s demand for money that induced Federal Healthcare to
improperly disburse funds or otherwise suffer immediate financial detriment. See U.S. ex rel.
Shupe, 759 F.3d at 385; United States ex rel. King, 232 F.R.D. at 572.
In addition, these allegations fail to provide sufficient particularity even under a relaxed
standard because Chase fails to identify a person involved in the alleged fraudulent scheme (the
“who”). The allegations lack necessary details regarding the “what” and “how” of the alleged
schemes, and instead, assert generalized, conclusory allegations. See Grubbs, 565 F.3d at 190;
see also U.S. ex rel. Nunnally v. W. Calcasieu Cameron Hosp., 519 F. App’x 890, 895 (5th Cir.
2013). Chase does not provide any “representative examples of specific fraudulent acts
conducted pursuant to” the schemes alleged. See U.S. ex rel. Bennett v. Medtronic, Inc., 747
F.Supp.2d 745, 768-69 (S.D. Tex. 2010) (quoting United States ex rel. Bledsoe v. Cmty. Health
Sys., Inc., 501 F.3d 493, 509–10 (6th Cir. 2007)). While these excerpts allege egregious and
potential fraudulent acts, Chase falls short in alleging specifically that Loyola did, in fact, bill
and receive money from Federal Healthcare that was in violation of the FCA, nor does Chase
describe how such fraudulent billing occurred.
Because Chase provides examples of egregious, overly aggressive procurement behavior,
only, but no description of specific persons involved and no description of any fraudulent billing
to Federal Healthcare, the excerpts pertaining to Loyola, individually and collectively, cannot
serve as basis for a violation of the FCA. Although Chase does not provide sufficient factual
details to describe any fraud or fraudulent scheme, the Court will analyze the second prong of the
test to determine sufficiency of pleading.
b. Reliable Indicia that Lead to a Strong Inference Loyola Improperly
Billed Federal Healthcare
For the second prong of the pleading requirements, Chase must allege reliable indicia that
lead to a strong inference Loyola improperly billed Medicaid. See Grubbs, 565 F.3d at 190.
While claims for medically unnecessary treatment are actionable under the FCA,
expressions of opinion or scientific judgments about which reasonable minds may differ are not.
U.S. ex rel. Riley v. St. Luke’s Episcopal Hosp., 355 F.3d 370, 376 (5th Cir. 2004). Clinical
judgment may not be deemed false, for purposes of the False Claims Act, when there is only a
reasonable disagreement between medical experts as to the accuracy of that conclusion, with no
other evidence to prove the falsity of the assessment. Id.; see also United States v. AseraCare,
Inc., 938 F.3d 1278, 1281 (11th Cir. 2019). Further, “the False Claims Act should not be used to
call into question a health care provider’s judgment regarding a specific course of treatment.”
U.S. ex rel. Phillips v. Permian Residential Care Ctr., 386 F.Supp.2d 879, 884 (W.D. Tex.
2005); United States v. Vista Hospice Care, Inc., No. 07-cv-604, 2016 WL 3449833, at *17
(N.D. Tex. June 20, 2016).
The excerpts of allegations pertinent to Loyola do not allege any details of a fraudulent
scheme under which Loyola made a false statement or engaged in a fraudulent course of conduct
that caused Federal Healthcare to improperly pay out money. The cited allegations pertain to
Chase’s opinions that Loyola engaged in egregious behavior of offering transplants to only
especially sick patients or to patients who were not in need. Taken as true, these allegations
amount to improper behavior and improper and unsafe transplant practices; however, Chase does
not allege any conduct that amounts to fraudulent conduct, nor does Chase provide explanation
how this described improper conduct constitutes fraud upon Federal Healthcare or caused
Federal Healthcare to improperly pay out money.
Chase provides no description of any fraudulent billing system, relying upon implication
only that the alleged improper behavior and unsafe practices resulted in fraudulent billing to
Federal Healthcare. This implication cannot satisfy Chase’s pleading requirement under Federal
Rule 9(b). See Grubbs, 565 F.3d at 191. For this reason, even if Chase had pleaded particular
details of the alleged scheme, Chase does not provide the “reliable indicia” needed to satisfy the
requirements of Federal Rule 9(b).
With these pleading deficiencies, the Court finds Chase fails to satisfy the pleading
requirements of Federal Rule 9(b) to assert a violation of the FCA against Loyola based upon an
alleged scheme of engaging in improper “aggressive practices” of providing kidney transplants
or based upon treatment of only “particularly sick patients.” With these deficiencies, Chase fails
to allege sufficient detail of elements (1) and (4) of the cause of action of violation of the FCA
based upon this theory of liability. For this reason, the Court will not analyze whether Chase
satisfies the pleading requirement of elements (2), scienter, and (3), materiality, based upon this
theory of liability.
For these reasons, this theory of liability for violation of the FCA will be dismissed.
(2) Liability Theory of Submitting “Double Billing”
Again, the Court will begin by analyzing whether Chase sufficiently plead elements (1)
and (4) of this theory of violation: (1) Loyola made a false statement or engaged in a fraudulent
course of conduct, and (4) that caused the government to pay out money.
In the Second Amended Complaint, pertinent to this alleged theory of liability, Chase
alleges: Loyola engaged in “double billing” to get “reimbursement from Medicare twice for the
same costs” and Loyola “inflated its cost report” by inflating time studies to “charge more staff
time to Medicare.” ECF No. 37, pars. 150-151.
a. Particular Details of the Alleged Scheme
To support these allegations of “double billing,” Chase references and paraphrases a
report from Transplant Solutions, a consultant Loyola hired to “review [its] transplant program
and financial operations in December 2021.” ECF No. 37, pars. 152. Chase alleges Transplant
Solutions discovered and reported “‘patients have been and are being billed for [certain]
services,’” but “‘costs reported on the Medicare Cost Report show little [of these] costs.’” Id. at
par. 153. Chase further paraphrases the Transplant Solutions Report as concluding “‘patients are
billed for their deductible and coinsurance for … these costs’” when the costs “should go on the
cost report. Id. at par. 155. “Transplant Solutions specifically noted, ‘this is inappropriate, and
these documents need to be modified.’” Id. Chase asserts “[i]n response to a separate Quality
Assessment report from CareDx — which identified significant gaps in Quality and Patient
Safety — Ryan Mayhew, the Regional Physician Quality Officer for Loyola, wrote, ‘we
essentially don’t have a functioning quality program in the transplant realm and it’s a major
vulnerability.’” Id. at par. 156.
Pertinent to the allegation of inflated costs, Chase alleges the Transplant Solutions Report
noted certain “cost centers raised questions.” Id. at par. 154. Going further, Chase alleges these
questions were: (a) “Nurse Administration is allocated based on RN FTEs [full time employees]
and is only allocated to Liver Acquisition. The Department has costs that should be allocated to
all of the OACC [organ acquisition cost center] departments;” (b) “Clinical Pastoral Education
[the primary method of training hospice chaplains] is based on Time Spent and is only allocated
to Lung Acquisition. If the process is part of the Live Donor evaluation process or the pre-
transplant evaluation process, it may be allowable. However, it is questionable;” and; (c)
“Pharmacy Residency Program is based on Program FTE’s and is allocated to Heart and Lung
acquisition only. Please review for appropriateness.” Id. Upon review, the Court finds this quoted and paraphrased language does not suggest or
support Chase’s allegations of double-billing, but only reports that Loyola billed patients’
insurance, rather than putting these costs on its cost reports to Medicaid. Id. at pars. 153-155.
The language Chase paraphrases from the Transplant Solutions Report does not provide support
for an alleged fraudulent billing scheme, but instead, appears to show Loyola is not billing
Federal Healthcare, when it should be, or is just not billing correctly. The excerpts from the
Transplant Solutions Report pertaining to Chase’s allegations of inflated costs only amount to
Transplant Solutions’s findings that some costs were allocated too narrowly, that is, to only one
specific department, rather than allocated more broadly, or were just misallocated. Therefore,
these findings do not support an allegation of “double billing.”
Thus, taking Chase’s allegations as true and his recitations of the Transplant Solutions
Report as accurate and true, these excerpts do not satisfy Chase’s pleading requirement to show
Loyola committed fraud on Federal Healthcare by submitting improper charges or by inducing it
to improperly pay out money. Instead, these excerpts from the Transplant Solutions Report could
only possibly demonstrate Loyola submitted charges for transplants for recovery under a
patient’s insurance rather than recovery through cost reports. Even accepting this as true, this
Transplant Solutions Report and Chase’s allegations lack any reference to fraud and fail to
describe how the relied-upon behavior constituted fraud.
These allegations describe Chase’s opinions of Loyola’s improper billing practices or
Chase’s disagreement with Loyola’s doctors’ judgment or treatment but fail to describe fraud or
plead a particular fraudulent scheme. These allegations are not based upon Chase’s personal
knowledge of any fraud he accuses Loyola of committing, but instead, rest entirely on an
investigative report from a company hired by Loyola or his personal opinion. For these reasons,
Chase fails to present a false claim in the FCA context that consists of Loyola’s demand for
money that induced Federal Healthcare to improperly disburse funds or otherwise suffer
immediate financial detriment. See U.S. ex rel. Shupe, 759 F.3d at 385; United States ex rel.
King, 232 F.R.D. at 572.
In addition, these allegations fail to provide sufficient particularity even under a relaxed
standard because Chase fails to identify a person involved in the alleged fraudulent scheme (the
“who”). The allegations lack necessary details regarding the “what” and “how” of the alleged
schemes, and instead, assert generalized, conclusory allegations. U.S. ex rel. Nunnally, 519
F.App’x at 895. Chase does not provide any “representative examples of specific fraudulent acts
conducted pursuant to” the schemes alleged. Accepting these excerpts as true, while they may
allege egregious and potential fraudulent acts, Chase falls short in alleging specifically that
Loyola did, in fact, bill and receive money from Federal Healthcare that was in violation of the
FCA, and fail to describe how such fraudulent billing occurred.
Because the Transplant Solutions Report and Chase’s allegations could describe improper
billing practices, only, and provide no description of specific persons involved and no
description of how any fraudulent billing to Federal Healthcare occurred, these allegations
pertaining to Loyola, individually and collectively, cannot serve as basis for a violation of the
FCA. See Grubbs, 565 F.3d at 190-191. Although Chase does not provide sufficient factual
details to describe any fraud or fraudulent scheme, the Court will analyze the second prong of the
test to determine sufficiency of pleading.
b. “Reliable Indicia” of a Fraudulent Scheme
Chase’s allegations of double billing fail to plead “reliable indicia” of a fraudulent
scheme or that support an allegation that Loyola submitted fraudulent claims to Federal
Healthcare. Chase’s allegations and the Transplant Solutions Report provide no details or facts
that would amount to a fraudulent scheme unless Loyola fraudulently submitted bills to Federal
Healthcare for reimbursement. Chase relies solely upon inference and conjecture to support an
implication that Loyola did fraudulently bill Federal Healthcare. Chase does not identify any
specific false claim for payment that Loyola submitted to Federal Healthcare pertaining to any of
these cited incidents. Inference and implication cannot satisfy the pleading requirements of
Federal Rule 9(b), and these allegations are too nebulous and unsupported by specific factual
detail to support a claim of FCA violation based upon this theory of liability. See Grubbs, 565
F.3d at 190. Because Chase’s pleading lacks both particular details and reliable indicia, Chase
fails to plead anything that provides a strong inference that Loyola violated the FCA.
For these reasons, these allegations, individually and collectively, cannot serve as basis
for a violation of the FCA. With this deficiency, Chase fails to allege sufficient detail to support
elements (1) and (4) of the cause of action of violation of the FCA based upon this theory of
liability. For this reason, the Court will not analyze whether Chase satisfies the pleading
requirement of elements (2), scienter, and (3), materiality, based upon the theory of an alleged
scheme of improper incurrence or submission of excessive costs to Federal Healthcare for
reimbursement.
Consequently, this theory of liability for violation of the FCA will be dismissed.
(3) Liability Theory of Maintaining False Records
Again, the Court will analyze whether Chase sufficiently plead elements (1) and (4) of
this theory of violation: (1) Loyola made a false statement or engaged in a fraudulent course of
conduct, and (4) that caused the government to pay out money.
In the Second Amended Complaint, pertinent to this alleged theory of liability, Chase
alleges: Loyola violated § 3729(a)(1)(B), which imposes liability on one who “knowingly makes,
uses, or causes to be made or used, a false record or statement material to a false or fraudulent
claim.”
The elements of a false-record claim under § 3729(a)(1)(B) largely track those of a
presentment claim under § 3729(a)(1)(A). See United States ex rel King v. Solvay Pharm., Inc., 871 F.3d 318, 324 (5th Cir. 2017). “To allege falsity under § 3729(a)(1)(B), the relator must
allege ‘the recording of a false record’ that is material to a claim for payment.” U.S. ex rel.
Hueseman v. Professional Compounding Ctrs. of Am., Inc., 664 F.Supp.3d 722, 742 (W.D. Tex.
2023). The false statement need not be made to the Government, so long as the defendant knew
it would be material to a payment by the Government. See id. (citing Allison Engine Co. v.
United States ex rel. Sanders, 553 U.S. 662, 671–72 (2008). To support this theory of liability,
Chase alleges:
Loyola kept three sets of books to hide this fraud. First, Loyola kept the real data
on organ donation failure rates in CareDX and used this data for internal reports.
Second, Loyola kept even more details in an Excel file. The Chief of Abdominal
Transplant Surgeon, Dr. Luis Fernandez, instructed the Quality Manager,
Deborah Parilla, to create a separate dashboard that both she and [Chase] were
told explicitly “not to share with anyone externally.” 146. But Loyola had
different data on organ donation failure rates in their Electronic Medical Record
(EMR), Epic. The Epic data showed either fake or less detailed information that
hid the true high rate of organ donation failure at Loyola. 147. For example, if
Loyola did a failed transplant where the patient died in the operating room, the
internal records would call it a graft failure and transplant related death. However,
Loyola did not record this as an official transplant death in Epic, claiming the
transplant “technically never worked or achieved anastomosis.” This allowed
Loyola to report data outside of Loyola that hid the true problems with Loyola’s
transplant program. 148. Loyola’s internal Surgical Morbidity and Mortality
Cases tracker recorded any complication or death related to transplants. These
included post-surgical infections, returns to the operating room post-procedure
during the same hospital admission, graft failure, and death. For the period March
1, 2022 to April 17, 2022, a period of 48 days, Loyola recorded 60 separate
incidents. Surgeon Raquel Garcia-Roca was involved in 33 separate incidents.
Surgeon David Lee was involved in 23 separate incidents. 149. Relator Chase
raised his concerns with the number of transplant patient deaths in the OR with
Loyola’s Vice President of Finance, Manmeet Taneja. Taneja responded that
“deaths still count as discharges” implying that Loyola’s interests were still met as
Loyola still received payment if the patient died.
ECF No. 37, pars.145-149.
a. Particular Details of the Alleged Scheme
Upon review, the Court finds this quoted and paraphrased language does not suggest or
support any finding of fraud upon Federal Healthcare. Chase’s quoted allegations imply only
nefarious behavior of “maintaining false records.” However, even accepting these allegations as
true and even presuming this behavior was improper, Chase does not allege these behaviors
amounted to fraud upon Federal Healthcare. Chase does not allege Loyola actually submitted
specific fraudulent requests for payment to Federal Healthcare, but instead, merely implies
Loyola submitted false records.
Thus, taking Chase’s allegations as true, these allegations do not satisfy Chase’s pleading
requirement to present details of acts by Loyola that constituted fraud on Federal Healthcare by
submitting improper charges or by inducing it to improperly pay out money. Even accepting
these allegations as true, Chase’s allegations lack any reference to fraud and fail to describe how
the relied-upon behavior constituted fraud. These allegations describe Chase’s opinions of
Loyola’s improper record keeping but fail to describe Chase’s personal knowledge of any fraud
he accuses Loyola of committing. For these reasons, Chase fails to present a false claim in the
FCA context that consists of Loyola’s demand for money that induced Federal Healthcare to
improperly disburse funds or otherwise suffer immediate financial detriment. See U.S. ex rel.
Shupe, 759 F.3d at 385; United States ex rel. King, 232 F.R.D. at 572.
In addition, these allegations fail to provide sufficient particularity even under a relaxed
standard because Chase fails to identify a person involved in the alleged fraudulent scheme (the
“who”). The allegations lack necessary details regarding the “what” and “how” of the alleged
schemes, and instead, assert generalized, conclusory allegations. U.S. ex rel. Nunnally, 519 F.
App’x at 895. Chase does not provide any representative examples of specific fraudulent acts
conducted pursuant to the schemes alleged. While these excerpts allege egregious and potential
fraudulent acts, Chase falls short in alleging specifically that Loyola did, in fact, bill and receive
money from Federal Healthcare that was in violation of the FCA, nor does Chase describe how
such fraudulent billing occurred. Chase does not identify any statute, regulation, or other source
of law that Loyola violated.
Although Chase does not provide sufficient factual details to describe any fraud or
fraudulent scheme, the Court will analyze the second prong of the test to determine sufficiency
of pleading.
b. Reliable Indicia of a Fraudulent Scheme
Chase’s allegations of false record-keeping fail to plead “reliable indicia” of a fraudulent
scheme or that support an allegation that Loyola submitted fraudulent claims to Federal
Healthcare. Chase’s allegations provide no detail or facts that would amount to a fraudulent
scheme unless Loyola fraudulently submitted false records to Federal Healthcare to induce
improper reimbursement. Chase relies solely upon inference and conjecture to support an
implication that Loyola fraudulently submitted false records to Federal Healthcare. Chase does
not identify any specific incident of submission of a false record to induce improper payment.
This implication cannot satisfy the pleading requirements of Federal Rule 9(b), and these
allegations are too nebulous and unsupported by specific factual detail to support a claim of FCA
violation based upon this theory of liability. See Grubbs, 565 F.3d at 190. Because Chase’s
pleading lacks both particular details and reliable indicia, Chase fails to plead anything that
provides a strong inference that Loyola violated the FCA..
For these reasons, these allegations, individually and collectively, cannot serve as basis
for a violation of the FCA. With this deficiency, Chase fails to allege sufficient detail to support
elements (1) and (4) of the cause of action of violation of the FCA based upon this theory of
liability. For this reason, the Court will not analyze whether Chase satisfies the pleading
requirement of elements (2), scienter, and (3), materiality, based upon the theory of an alleged
scheme of improper incurrence or submission of excessive costs to Federal Healthcare for
reimbursement.
Consequently, this theory of liability for violation of the FCA will be dismissed.
II. Cause of Action of Reverse False Claims Act Violation
The Complaint contains a “Reverse False Claims” cause of action pursuant to 31 U.S.C.
§ 3729 (a)(G).
However, Chase does not address nor allege any facts pertaining to this theory of liability
or any actual element of this statutory violation. Chase does not provide any factual basis
pertaining to this provision of the FCA. In his Response to the Motion to Dismiss, Chase
withdraws the causes of action of reverse false claims in violation of § 3729(a)(1)(G).
For these reasons, any theory of liability based upon an improper reverse False Claims
Act violation against Loyola will be dismissed.
III. Cause of Action of Violations of State Law
In the Second Amended Complaint, Chase asserts state law causes of action that mirror
the alleged violations of the federal FCA.
These state law theories of liability are subject to the pleading requirements of Federal
Rule 9(b), and therefore, fail for the same reasons Chase’s theories of liability for violation of the
federal FCA fail. See U.S. ex rel. Foster, 587 F.Supp.2d at 827. Further, because this Court will
dismiss all of Chase’s theories of liability under the FCA, it will exercise its discretion to refrain
from exercising any supplemental jurisdiction over a state cause of action. See Heggemeier v.
Caldwell Cnty., Tex., 826 F.3d 861, 872 (5th Cir. 2016)(per curiam); Brookshire Bros. Holding,
Inc. v. Dayco Prods., Inc., 554 F.3d 595, 602 (5th Cir. 2009).
For these reasons, any theory of liability based upon a violation of state law against
Loyola will be dismissed.
Amendment of Second Amended Complaint
Prior to dismissal of a Complaint, a court must “freely give leave [to amend the
pleadings] when justice so requires.” Fed. R. Civ. P. 15(a)(2). However, leave to amend is within
the sound discretion of the court and can be appropriately denied when “it is clear that the
defects [of a complaint] are incurable.” Great Plains Tr. Co. v. Morgan Stanley Dean Witter &
Co., 313 F.3d 305, 329 (5th Cir. 2002).
This Court provided Chase a final opportunity to cure all pleading defects prior to
submission of this Motion to Dismiss. In response to the Court’s admonition that Chase had one
final opportunity to amend the Complaint, he submitted the live Second Amended Complaint.
Based upon this procedural posture and the Court’s admonition, the Court finds Chase was
provided ample opportunity to satisfy Federal Rule 15.
CONCLUSION
For the reasons stated, Loyola’s Motion to Dismiss for Failure to State a Claim pursuant
to Federal Rule 12(b)(6) is GRANTED.
It is so ORDERED.
SIGNED this 13th day of January, 2026.
C\
y
ALDEN : VXALLANV\
JASON PULLIA
NITED STATES DISTRICT JUDGE
19
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