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United States ex rel. Salters v. American Family Health Care Inc.

United States District Court, N.D. Alabama, Northeastern Division

April 18, 2017

UNITED STATES OF AMERICA, ex rel. ANITA C. SALTERS, Plaintiff,
v.
AMERICAN FAMILY CARE, INC., Defendant.

          MEMORANDUM OF OPINION

          L. Scott Coogler United States District Judge.

         I. Introduction

         Plaintiff/Relator Anita C. Salters (“Salters”) filed this action against her former employer American Family Care (“AFC”) alleging that AFC violated the False Claims Act (“FCA”), 31 U.S.C. § 3729, by submitting false claims to the Government, and that it engaged in physician referrals in violation of the Stark Law, 42 U.S.C. § 1395nn. She further alleges that she was unlawfully terminated in retaliation for reporting these potential violations to her superiors contrary to the FCA's anti-retaliation provision. 31 U.S.C. § 3730(h). Before the Court is defendant AFC's motion for partial summary judgment on the FCA claims (Doc. 101), which has been fully briefed and is ripe for review. For the reasons set out below, AFC's motion is due to be granted in part and denied in part.

         II. Background

         AFC operates sixty-eight walk-in medical clinics which provide primary, family, and urgent care. Throughout its clinics, AFC employs 165 physicians. Most of AFC's offices are open seven days a week, from 8:00 am to 6:00 pm. However, a few are open for longer hours, and the Huntsville clinic is only open five days a week. All full-time physicians execute a Medicare approved Reassignment of Benefits form, which assigns the physician's right to fees for services performed to AFC.

         AFC then submits “claims” or bills to Federal payors-such as Medicare, Medicaid, and Tricare-as a group practice, using Current Procedural Terminology (“CPT”) codes to identify services performed and International Certification of Diseases (“ICD”) codes to identify diagnoses made. CPT codes “describe medical services such as treatments, tests, and procedures, and are an accepted means of reporting such medical services to [G]overnment and health insurance programs.” U.S. ex rel. Sikkenga v. Regence Bluecross Blueshield of Utah, 472 F.3d 702, 708 n.9 (10th Cir. 2006). ICD codes “describe the diagnosis or medical condition for which medical services are rendered when Medicare claims are submitted to Medicare carriers.” Id. at 708 n.8. AFC estimates that it submits thousands of these claims to Federal payors every year, and understands that when claims are submitted to the Federal Government, AFC certifies that it is complying with applicable rules and regulations.

         AFC hired Salters as an audit supervisor in January 2007 and promoted her to director of the Claims Processing Center (“CPC”) in December 2007. (Salters Dep. at 14, Kerr Dep. at 103.) Her duties as director of the CPC included ensuring that the claims submitted were in compliance with all applicable regulations, collecting all sums due to AFC within a reasonable period of time, and supervising approximately twenty-five other employees in the CPC. (Salters Dep. at 190, Johansen Dep. at 37 & 72, Hawley Dec. ¶ 5.)

         a. Locum Tenens Physicians

         A locum tenens physician fills in when a physician is absent, and bills as if he were the regular physician. Medicare Claims Processing Manual (“MCPM”) Ch. 1 § 30.2.11. To supplement its physician employees, AFC uses locum tenens physicians, one of which was Dr. Charles Buckmaster (“Dr. Buckmaster”), who worked at AFC clinics between 2006 and 2011, substituting for several different providers at various AFC locations.

         b. Ear Popper

         The “Ear Popper” is a device that shoots air up through the nostril for the purpose of balancing inner ear pressure with outside pressure. AFC purchased sixteen Ear Poppers for its offices, and billed Federal payors for their usage according to the recommendations of the Ear Popper manufacturer-as is customary in the healthcare industry. (Salters Dep. at 75 & 77.) Salters herself visited the manufacturer's website, found CPT code 69401, and printed the article to show AFC management. (Id. at 73-74.) However, she testified that the day after she printed the article, she could no longer find it on the manufacturer's website. (Id.)

         In 2008, Blue Cross and Blue Shield of Alabama (“BCBS”) investigated AFC for billing the Ear Popper under code 69401-ear surgery eustachian tube inflation transnasal without catherization-and concluded that the device was experimental. As a result of this determination, BCBS decided that it would not pay for Ear Popper usage and required AFC to refund previous Ear Popper payments. AFC paid BCBS $28, 534.36 in refunds for the Ear Popper bills. However, the Government never questioned, investigated, or requested a refund based on AFC's billing of the Ear Popper under CPT code 69401. Despite a handwritten note on the refund request letter from BCBS that read “check with [Medicare], ” AFC never contacted the Government to inquire about the propriety of billing the Ear Popper under this code, and never refunded any Federal payor for Ear Popper payments received. After refunding BCBS on April 7, 2008, AFC continued to use the Ear Popper, but stopped billing all insurers for Ear Popper usage.

         c. Stark Law & Anti-Kickback Statute

         Dr. Ronald McCoy (“Dr. McCoy”) was an Otolaryngologist (ENT) who had offices in Bessemer and Birmingham. In January of 2000, Dr. McCoy entered into a written contract with AFC to see patients at AFC locations, as well as at his private practices. The contract provided for compensation based on a formula which paid him a percentage of the amount of revenue he generated. However, this formula did not include any collections from Medicare patients. Therefore, his pay did not reflect the volume of Medicare business that he generated. The rate of pay was commercially reasonable and consistent with what other physicians are paid in Alabama for services rendered to a group practice. Further, Dr. McCoy reassigned all the Medicare reimbursements from his work at AFC clinics to AFC.

         Dr. McCoy was never an employee of AFC, always performing services as an independent contractor and did not have ownership shares in AFC or the AFC lab. While working at AFC, he often referred patients for testing at the AFC lab. Generally, these patients were seen at AFC locations first, but AFC admits that on five occasions, Dr. McCoy sent Medicare patients to get blood allergy tests done at the AFC lab without first seeing the patients at an AFC clinic. However, AFC claims that these referrals were done without AFC's knowledge or approval. AFC billed Medicare for these five visits, but Medicare only paid for three of them. Two of these three patients were existing AFC patients at the time the tests were performed, though Dr. McCoy saw them in his private offices. AFC claims that the patient who was not an AFC patient when the blood test was performed did fill out new patient paperwork before the blood draw.

         Dr. McCoy also referred a Railroad Medicare patient-Wilma H.-to AFC for blood allergy testing without seeing her at an AFC facility. Medicare reimbursed AFC for this visit. However, prior to the blood draw, Wilma H. saw another AFC physician for dermatitis.

         III. Standard of Review

         Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A material fact is one that “might affect the outcome of the case.” Urquilla-Diaz v. Kaplan Univ., 780 F.3d 1039, 1049 (11th Cir. 2015). A dispute is genuine if “the record taken as a whole could lead a rational trier of fact to find for the nonmoving party.” Id. The trial judge should not weigh the evidence, but determine whether there are any genuine issues of fact that should be resolved at trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).

         In considering a motion for summary judgment, trial courts must give deference to the non-moving party by “considering all of the evidence and the inferences it may yield in the light most favorable to the nonmoving party.” McGee v. Sentinel Offender Servs., LLC, 719 F.3d 1236, 1242 (11th Cir. 2013) (citing Ellis v. England, 432 F.3d 1321, 1325 (11th Cir. 2005)). In making a motion for summary judgment, “the moving party has the burden of either negating an essential element of the nonmoving party's case or showing that there is no evidence to prove a fact necessary to the nonmoving party's case.” Id. Although the trial courts must use caution when granting motions for summary judgment, “[s]ummary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole.” Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986).

         IV. Discussion

         A. FCA Generally

         Salters claims that AFC violated the FCA in a number of different ways: 1) falsely certifying compliance with locum tenens regulations 2) failing to reimburse the Government for improper payments for the Ear Popper 3) submitting false claims for the Ear Popper 4) falsely certifying compliance with the Stark Law 5) falsely certifying compliance with the Anti Kickback Statute 6) submitting false claims containing an after-hours billing code 7) submitting false claims during the Global Surgery Period 8) by submitting false claims for level one office visits when patients came in solely for injections and 9) falsely submitting unbundled claims for venipunctures, injection administrations, vaccine administrations, and pulse oximetry.

         The FCA allows individuals to file qui tam actions and recover damages on behalf of the United States. U.S. ex rel. Clausen v. Lab. Corp. of Am., 290 F.3d 1301, 1307 (11th Cir. 2002). These actions may be filed against a person or entity that “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval; . . . [or] knowingly makes, uses or causes to be made or used, a false record or statement material to a false or fraudulent claim.” 31 U.S.C. § 3729(a)(1)(A) & (B). Healthcare providers can be found liable under the FCA for “the submission of a fraudulent claim to the Government, ” i.e. for submitting a claim that contains false information. Urquilla-Diaz, 780 F.3d at 1045.

         B. Use of Locum Tenens Physicians

         In her complaint, Salters alleges that AFC violated the FCA by allowing new physicians to work in its clinics as locum tenens physicians for months while their paperwork was being completed. (Doc. 1 at 23.) The complaint specifically alleges that Dr. Steven Hefter (“Dr. Hefter”), Dr. Eugene Evans (“Dr. Evans”), Dr. Buckmaster, and Dr. Syed Hasan (“Hasan”) were regularly used as locum tenens physicians in violation of the FCA. (Id.) She also claims that “[AFC] is improperly billing for these long term Locum Tenens physicians under provider numbers for physicians who were not present in the facility.” (Id. at 24.) In its motion for summary judgment, AFC argued that claims for Dr. Hasan, Dr. Buckmaster, and Dr. Evans were properly billed.

         In her response to AFC's motion for summary judgment, Salters addressed her claims for improper billing based only on Dr. Buckmaster's locum tenens work. (Doc. 105 at 17-22.) Salters failed to mention Dr. Hasan, Dr. Hefter, or Dr. Evans in her response to summary judgment, and “grounds alleged in the complaint but not relied upon in summary judgment are deemed abandoned.” Resolution Trust Corp. v. Dunmar Corp., 43 F.3d 587, 599 (11th Cir. 1995). Therefore, Salters's claims against AFC for improper billing based on Dr. Hasan's, Dr. Hefter, and Dr. Evans's locum tenens work are deemed abandoned.

         The only locum tenens claim that remains in this action is Salters's claim based on AFC's billing for Dr. Buckmaster's work. In her opposition to AFC's motion for summary judgment, Salters argues that AFC violated the FCA by falsely certifying compliance with the MCPM's requirements for locum tenens doctors. Liability under the FCA can arise from “a ‘false certification theory, '” when a provider “falsely certif[ies] . . . that it will comply with [F]ederal law and regulations.” Urquilla-Diaz, 780 F.3d at 1045. In order to prove FCA liability under a false certification theory, a relator must show “‘(1) a false statement or fraudulent course of conduct, (2) made with scienter, (3) that was material, causing (4) the [G]overnment to pay out money or forfeit moneys due.'” Id. at 1052 (quoting U.S. ex rel. Hendow v. Univ. of Phx., 461 F.3d 1166, 1174 (9th Cir. 2006)). However, “‘[m]ere regulatory violations do not give rise to a viable FCA action, '” because “‘[i]t is the false certification of compliance which creates liability.'” Id. (quoting Hendow, 461 F.3d at 1171). The Eleventh Circuit explained that “[l]iability under the [FCA] arises from submission of a fraudulent claim to the [G]overnment, not the disregard of [G]overnment regulations or failure to maintain proper internal policies.” Corsello v. Lincare, Inc., 428 F.3d 1008, 1012 (11th Cir. 2005). A relator must therefore prove that the “false statement” was a prerequisite and a material cause of the Government's decision to pay the provider's claim. Id.

         The MCPM contains the following conditions for billing a locum tenens physician:

1) “[t]he regular physician is unavailable, ” 2) “[t]he Medicare beneficiary has arranged or seeks to receive the visit services from the regular physician, ” 3) “[t]he regular physician pays the locum tenens for his/her services on a per diem or similar fee-for-time basis, ” 4) the substitute physician does not provide the visit services to Medicare patients over a continuous period of longer than 60 days, ” and 5) “[t]he regular physician identifies the services as substitute physician services . . . by entering . . . code modifier Q6 . . . after the procedure code.”

         MCPM Ch. 1 § 30.2.11. In her response to summary judgment, Salters alleges that AFC violated these requirements by improperly paying Dr. Buckmaster based on productivity and failing to use the required Q6 code modifier when billing Medicare for his work. (Doc. 105 at 20-21.) She does not allege that Dr. Buckmaster worked more than the maximum sixty continuous days.

         AFC argues that Salters cannot raise arguments that AFC improperly paid Dr. Buckmaster based on productivity in her response to summary judgment, because she did not raise these arguments in her complaint. The Eleventh Circuit held that “[a] plaintiff may not amend her complaint through argument in a brief opposing summary judgment.” Gilmour v. Gates, McDonald & Co., 382 F.3d 1312, 1315 (11th Cir. 2004). Here, Salters attempts to raise new facts and a new theory of liability in her response to summary judgment. However, though Salters was entitled to raise these facts after learning about them in discovery, “the proper procedure for plaintiffs to assert a new claim is to amend the complaint in accordance with Fed.R.Civ.P.15(a).” Id. In her complaint, Salters did not mention that AFC improperly paid Dr. Buckmaster based on productivity. She will not be allowed to raise a new theory of liability at this stage of proceedings. See Merle Wood & Assocs., Inc. v. Trinity Yachts, LLC, 714 F.3d 1234 (11th Cir. 2013); GeorgiaCarry.Org, Inc. v. Georgia, 687 F.3d 1244, 1258 n.27 (11th Cir. 2012).

         However, Salters's claims based on the Q6 modifier is not a new claim, because in her complaint, Salters alleges that “[AFC] is improperly billing for these long term Locum Tenens physicians under provider numbers for [other] physicians.” By allegedly failing to append the Q6 modifier, Salters was billing for its locum tenens providers using the numbers of other physicians, with no designation to show that the claims related to a different doctor. As evidence of this failure to append the Q6 modifier, Salters provided her expert report, which includes a finding that “[o]f the . . . lines reflecting Dr. Buckmaster's direct involvement in providing care, . . . 76% were presented for payment without the Q6 modifier.” (Doc. 116 at Ex. O pg. 20.) Though it asserts that it followed the proper billing procedures for locum tenens physicians, AFC did not provide evidence that it did append the Q6 modifier. Therefore, viewing the facts in the light most favorable to the non-movant, there is a material issue of fact as to whether AFC properly billed for its locum tenens physicians.

         However, in order to make out a claim under a false certification theory, Salters must show that AFC's mispayment and misbilling was a material fact in the Government's decision to pay out AFC's claim for work done by Dr. Buckmaster. Proving materiality is a high burden for the relator, because “[a] misrepresentation cannot be deemed material merely because the Government designates compliance with a . . . requirement as a condition of payment.” Universal Health Servs., Inc. v. U.S. ex rel. Escobar, ___ U.S. ___, 136 S.Ct. 1989, 2003 (2016). A “minor or insubstantial” violation is also not material, and “it is [not] sufficient for a finding of materiality that the Government would have the option to decline to pay if it knew of the defendant's noncompliance.” Id. A plaintiff can prove materiality by providing “evidence that the defendant knows that the Government consistently refuses to pay claims in . . . cases based on noncompliance with the . . . requirement.” Id. Conversely, “if the Government regularly pays a particular type of claim in full despite actual knowledge that certain requirements were violated . . . that is strong evidence that the requirements are not material.” Id. at 2003-04.

         As evidence of materiality, Salters provides the opinion of her expert, who states that “[f]ailure to append the modifier Q6 may result in improper payments or allegations of false claims, particularly when a provider fails to comply with all of the provisions associated with proper locum tenens arrangements.” (Doc. 116 at Ex. O pg. 10.) However, AFC provides a declaration from Susan Garrison, a certified medical coder, which states that “[t]he failure to use a Q6 modifier on a locum tenens claim does not affect the amount Medicare will pay on a claim, ” and that “[it] is a technical billing error, which is not material to Medicare's decision to pay the claim provided the other locum tenens payment rules are being followed.” (Garrison Dec. at ¶ 9.) Viewing the evidence in the light most favorable to the non-movant, Salters has provided sufficient proof of materiality.

         Lastly, Salters must show that AFC made these alleged false statements with scienter. In order to show the requisite scienter, Salters must provide evidence that AFC acted with “actual knowledge of the information; . . . deliberate ignorance of the truth or falsity of the information; or . . . reckless disregard of the truth or falsity of the information.” 31 U.S.C. § 3729 (b)(1)(A). Salters claims that because AFC often scheduled Dr. Buckmaster for “very close to the 60-day limit before taking him off of locum tenens duty, ” AFC must have known that it had to comply with the locum tenens rules. (Doc. 105 at 20.) She also provides deposition testimony from AFC president Randy Johansen (“Johansen”) that AFC management reviewed the locum tenens requirements for each of its insurance providers. (Johansen Dep. at 255.) Therefore, viewing the evidence in light most favorable to the non-movant, there is a material issue of fact as to whether AFC knowingly falsely certified compliance with applicable rules. Summary judgment as to this claim is due to be denied.

         C. Billing for Ear Popper

         1. ...


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