Fraudulent Billing: Dr. Slagh's Battle for Transparency in Healthcare

In May of 2022, Dr. Darla Slagh joined Joseph House, Inc. as its clinical director. Joseph House is a nonprofit organization that provides services to homeless veterans, with a focus on mental health counseling. In her role, Dr. Slagh supervised counselors who billed Medicaid under her license due to their insufficient licensure. During her tenure, Dr. Slagh identified multiple instances of what she considered to be fraudulent Medicaid billing practices at Joseph House, ultimately leading to her reporting these issues.

First Allegation: Fraudulent Billing by a Counselor

Dr. Slagh alleged that counselor Jim Engelhardt billed Medicaid for sessions he did not conduct or over-reported session times. She reported her suspicions to Program Director Katie Waits, who dismissed the concerns as a misunderstanding of the billing system. Dr. Slagh later learned from patients that they were billed for sessions they claimed never happened. Despite patient complaints, Waits disregarded the allegations. Eventually, in July 2022, Joseph House confirmed Engelhardt’s fraudulent billing practices and terminated his employment. This initial discovery raised concerns for Dr. Slagh regarding Joseph House’s billing procedures and its internal oversight.

Second Allegation: Double-Billing for Urinalysis Services

Dr. Slagh identified a pattern of possible double-billing for urinalysis services. Providers reportedly entered each urinalysis service in the billing system, while a supervisor also billed these services monthly, suggesting a duplicative charge to Medicaid. Dr. Slagh reported the issue to Executive Director Alicia Patterson, who acknowledged the billing practice. However, when she followed up, the providers told her they were directed to deny previous billing entries. This discovery of possible double-billing further supported Dr. Slagh’s concerns over billing practices at Joseph House.

Third Allegation: Non-Compliance in Billing for Counseling Services

Dr. Slagh also reported that Program Director Waits, who provided counseling services, did not attend required weekly clinical meetings, a condition for Medicaid billing under Dr. Slagh’s license. Patterson responded that Waits was attending alternative meetings and claimed a waiver exempting her from standard requirements, though no such waiver was provided. Dr. Slagh questioned the legitimacy of billing Medicaid for Waits’s services without documented compliance with supervision requirements.

Termination and Alleged Retaliation

On August 31, 2022, Joseph House terminated Dr. Slagh, citing her failure to report Engelhardt’s suspected alcohol use at work and for allegedly disclosing information about Engelhardt’s fraudulent activities to other counselors. Dr. Slagh denied both accusations and alleged that her termination was in retaliation for her efforts to report fraudulent billing practices to Medicaid.

Following her termination, Dr. Slagh filed a retaliation claim under the False Claims Act (FCA) on November 23, 2022, arguing that her termination was a direct result of her efforts to report fraud within the organization. Joseph House subsequently filed a motion to dismiss, arguing that Dr. Slagh’s complaint did not establish grounds for relief under the FCA. The court reviewed the motion under Federal Rule of Civil Procedure 12(b)(6), assessing whether the allegations, if true, established a plausible claim for relief under the FCA.

Under the FCA’s retaliation provision, employees are protected from retaliation for lawful actions aimed at preventing fraud against the government. A successful retaliation claim requires showing engagement in protected activity, employer awareness of this activity, and a causal link between the activity and adverse employment action. Internal reporting is considered protected activity if it directly addresses concerns about fraudulent government billing practices.

Court’s Analysis of Protected Activity and Employer Notice

Joseph House argued that Dr. Slagh’s reporting duties were part of her job, requiring her to give explicit notice that her actions aimed to address potential FCA violations. However, the court found her reports of specific fraudulent billing practices—including Engelhardt’s activities and the double-billing for urinalysis services—sufficient to put Joseph House on notice of her intent to prevent violations of the FCA. 

The court clarified that reporting suspected Medicaid fraud within an organization can be deemed a protected activity under the FCA, especially where the employee’s actions aim to prevent fraudulent billing to the government.

Conclusion

The court denied Joseph House’s motion to dismiss, allowing Dr. Slagh’s retaliation claim to move forward. This ruling highlights the protections available under the FCA for employees who report potential fraud against government programs. Organizations should be mindful of these protections and the serious consequences of retaliatory actions against employees reporting suspected fraud.

For those facing similar challenges, Whitcomb, Selinsky PC offers expertise in handling medical malpractice claims. Proper legal guidance can help prevent negative outcomes and ensure adherence to both state and federal laws.