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In a split decision, the 8th U.S. Circuit Court of Appeals recently held that a health care company did not wrongfully terminate a compliance officer for complaining about the company’s alleged plan to skirt Medicare regulations. The Monday decision in Mahony v. Universal Pediatric Services Inc. affirmed a summary judgment ruling by Judge James E. Gritzner of the Southern District of Iowa that dispensed with Julie Mahony’s wrongful termination claims. Mahony sued her former employer, Universal Pediatric Services, which operates home health agency offices; S. Tucker Anderson, the company’s president and chief executive officer; and Connie Freeman, the company’s principal owner. Universal Pediatrics’ offices are certified as approved Medicare providers by the Centers for Medicare & Medicaid Services (CMS). Mahony, who was hired as vice president of nursing at Universal Pediatric in 2006, was responsible for “ensuring compliance with federal and state Medicare and Medicaid requirements,” according to the 8th Circuit ruling. In 2007, Universal Pediatric decided to open an office in Sheldon, Iowa. According to court papers, Anderson instructed Mahony “in late 2007 and early 2008″ to seek CMS provider approval for Sheldon as a new, stand-alone office, which is a more involved process than branch office approval. From March through May 2008, Mahoney focused on compliance deficiencies in the Newton, Iowa, office following a state agency notice. In early June, Mahony learned that phone, fax, and Internet connections had been installed in the Sheldon office and one employee was working out of that office. Mahoney and Anderson had a heated argument after she told him the Sheldon office couldn’t open before the company finished the CMS approval process. Anderson then directed the employee working at the Sheldon office to work from home. On June 9 of that year, Mahoney filed a grievance with Universal Pediatrics’ human resources manager asserting that permitting an employee to work from the Sheldon office “is a violation of the Conditions of Participation of the CMS program.” She also complained about Anderson’s “harassing conduct” on June 5. Universal Pediatric investigated Mahony’s grievance with the help of outside counsel and terminated her employment on June 13. In August 2008, Mahony sued the defendants in Iowa state court, alleging an illegal termination in violation of the federal False Claims Act and Iowa’s public policy. Her case also included a promissory estoppel claim. Later that month, the defendants removed the case to federal court. In January 2010, Gritzner ruled in favor of the defendants on their motion for summary judgment. Mahoney only appealed the summary judgment ruling on her Iowa public policy claim. She argued that Universal Pediatric violated Iowa state law by terminating her for objecting to the company’s plan to submit false claims for Medicaid reimbursement from a nonapproved CMS office. Judge James Loken wrote the majority opinion. Eastern District of Arkansas District Judge D.P. Marshall Jr., who heard the case by designation, joined him. Judge Kermit Bye dissented. Loken wrote that the principal flaw in Mahony’s claim “is that no false reimbursement claim was submitted and no acts of fraud occurred.” He agreed with Mahony that “Iowa law protects employees who refuse to participate in unlawful activity, even if the unlawful activity did not in fact occur … . But here, Mahony was not asked to participate in unlawful activity, and her speculation that [Universal Pediatric] was planning to break the law is contrary to undisputed fact.” In his dissent, Bye wrote that “a reasonable jury could resolve the wrongful discharge claim in [Mahony's] favor.” He found that, because the majority’s conclusion is not the only one supported by the facts, summary judgment is not appropriate. Specifically, he found that “the facts are not undisputed and the remedial measures taken by [Universal Pediatric] … do not necessitate the conclusion as to having no plan or intention to proceed with filing false claims for services rendered from the Sheldon office.” “I would conclude Mahony has presented a claim for wrongful discharge based on a public policy Iowa is willing to recognize, the public policy would be undermined if Mahony was terminated for engaging in conduct protected by that public policy, and Mahony has established genuine issues of material fact as to whether she engaged in a protected activity and whether that was the basis for her discharge,” Bye wrote. The defendants’ lawyer, Kelsey Knowles, a partner at Belin McCormick in Des Moines, Iowa, said her clients are pleased with the result.”We think the majority opinion got it right in terms of the factual record presented and Iowa law on wrongful termination in violation of public policy,” Knowles said. Mahony’s lawyer, Paige Fiedler of Urbandale, Iowa’s Fielder & Timmer said she was disappointed by the court’s decision. “We’re weighing our options now to decide whether to petition for rehearing en banc,” Fielder said.

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