The district court denied the defendants’ motion to strike expert testimony and reports filed by the relators in a qui tam case alleging healthcare fraud. The defendants argued that the expert report relied on information that was not timely filed, but the court found the relators adhered to the discovery schedule the defendants proposed and that the defendants had the opportunity to address issues with the information put forth prior to the close of discovery. The court also found the testimony relevant and reliable, and explained that any dispute over the contents of the testimony went to the question of credibility, not admissibility, which the defendants could address during cross examination. Finally, the fact that the prognosis of some patients improved had no bearing on whether or not the defendants falsely certified the level of care they provided.
Defendants led by Golden Gate National Senior Care LLC moved to strike expert testimony and expert reports filed by the relators in a qui tam case alleging healthcare fraud, arguing that
Relators Ricia Johnson and Health Dimensions Rehabilitation Inc. alleged that Golden Gate National Senior Care LLC, GGNSC Holdings LLC, GGNSC Wayzata, LLC, and Aegis Therapies Inc. submitted false claims for payment in connection with their provision of physical and occupational therapy services to nursing home patients. The relators alleged both local and nationwide fraud schemes, which the court bifurcated into Phase I and Phase II. The latter involved the proceedings before the court here.
The defendants moved to strike the expert report of the relators’ expert, Mark Essling, and to exclude the testimony of the relators’ experts Essling and Elisa Bovee. The defendants argued the expert report: (1) relied on information that was not timely disclosed during fact discovery; and (2) identified damages not provided in the relators’ Rule 26 disclosures.
As a preliminary matter, the court noted that the parties stipulated to a discovery schedule and extensions, to which the relators adhered. In their motion, the defendants argued that the relators should have disclosed the specific alleged false claims cited in Essling’s report prior to the close of fact discovery. The defendants argued they could not have predicted which patients the relators relied upon for their claims and therefore could not have prepared their defense. The defendants argued they were prejudiced by the failure to disclose because they were unable to depose those with knowledge of the alleged false claims.
The defendants also argued the relators neglected to timely provide their damages computation and that Essling’s opinions are no substitute for compliance with Rule 26 requirements. The defendants asserted they did not have the opportunity to conduct fact discovery with respect to any of the alleged claims Essling identified.
In response, the relators argued they adhered to the schedule order. They also argued the defendants were not prejudiced because: (1) the sequencing for fact and expert discovery for the Phase II period was identical to the Phase I period so if the defendants wanted the schedule for Phase II to provide for the disclosure of expert opinions before the conclusion of fact discovery, they could have proposed this instead of the scheduling order they did propose, and with which the relators complied; (2) the defendants could have raised their concern at any of the numerous case management conferences over the last two years, including those where the pretrial schedule was explicitly addressed; and (3) the defendants have known all along the identity of the assistants with knowledge of the claims during the Phase II period and could have chosen to depose them prior to the Phase II discovery cut-off. The relators also argued that Essling’s opinions were timely disclosed and addressed issues that have been in the case since the outset.
The court agreed. Because Essling’s opinions were timely disclosed during the discovery process in a schedule the defendants agreed to and because his opinions addressed issues that have been in the case since the outset, the court found no basis to exclude his expert report on the basis of prejudice, “unfair surprise”, “trial by ambush”, or any other reason.
Next, the defendants moved to exclude the expert testimony of the relators’ experts, Essling and Bovee.
Essling is the CEO and General Counsel of relator Health Dimensions Rehabilitation, and is familiar with Medicare billing requirements and the types of files that nursing homes keep for patients receiving physical, occupational, or speech therapy that is paid for through Medicare. Based on his review of patient medical files produced by the defendants, Essling identified 805 claims where the defendants allegedly represented to Medicare that Medicare-eligible therapy was provided by one of seven therapy assistants who worked exclusively or primarily in the Wellness Center.
The defendants moved to exclude his testimony on the grounds that it is speculative, and his methodology is unreliable. Specifically, they argued that Essling’s opinions were based an inference he drew from an incomplete record, and that he disregarded undisputed evidence and therefore undercut the reliability of his own opinions that physical therapy assistants were unsupervised. The defendants asserted that Essling did not explain how he deterimined which files to review and made no attempt to determine whether the patient files he reviewed were relevant.
Next, the defendants argued that Essling’s testimony should be excluded because it did not relate to any rule or regulation and because it contradicted the methodology Essling used in Phase I. The defendants explained that in Phase I, Essling calculated the government’s alleged overpayments based on changes in a patient’s Resource Utilization Group level and the difference in reimbursement between RUG levels. However, in his Phase II calculations, Essling included the entire reimbursement amount. The defendants asserted that there was no legal support for including the entire reimbursement amount in the damages calculation.
Finally, they argued that Essling’s calculations did not accurately reflect how skilled nursing facilities are paid under Medicare Part A. Specifically, they asserted that Essling ignored the way days are covered by rate assessments and included payments for non-rehab RUG codes.
In response, the relators argued that Essling’s calculations were properly supported because they were based on assistants’ testimony and on the defendants’ own representations as to which assistants were assigned exclusively or primarily to the Wellness Center, where physical therapy was to be conducted. They also argued that while damages may not be based on speculation or guesswork, they may be based on a just and reasonable estimate of the damage based on relevant data. According to the relators, because the defendants left no paper trail as to exactly who performed what on whom in the Wellness Center during the relevant period, they bear the risk of uncertainty which their own wrongs have created. Therefore, the relators argued they were entitled to present Essling’s estimates as reasonably based on the available relevant evidence.
Finally, the relators argued that the defendants’ objection to Essling’s methodology was an improper attempt to limit damages recoverable under the False Claims Act and to retain a portion of their fraudulently obtained payment. Because the defendants falsely certified the amount of physical therapy services patients required and because they did not provide all these services, then by definition, the payment for that patient during the period when the prescribed services were not being provided constitutes the damage the government sustained.
First, the court rejected the defendants’ argument that Essling’s testimony was fundamentally unsupported, finding sufficient evidence in the record to support his findings and concluding they were neither speculative nor irrelevant. The Court also declined to exclude Essling’s testimony based on his methodology. The court found that his estimates were just and reasonable based on available relevant evidence, and that they sufficiently reflected a benefit-of-the-bargain theory of damages. The court also ruled that whether or not Essling performed alternative damage calculations during Phase I had no impact on the relevance or reliability of his Phase II methodology. Finally, the court explained that the factual basis of his opinion goes to the credibility of the testimony, not its admissibility. To the extent the defendants wished to dispute Essling’s findings, they would have the opportunity to do so during cross-examination.
Next, the court considered the testimony of expert witness Bovee, a veteran occupational therapist, director of rehabilitation therapy, Medicare appeals coordinator, and Medicare compliance consultant. In her initial expert report, Bovee described the landscape of Medicare, the specific Medicare requirements for the provisions of skilled therapy in skilled nursing facilities, and how the defendants violated those requirements.
The defendant moved to exclude her testimony on the grounds that it was irrelevant, speculative, and unreliable. First, they argued that Bovee reviewed medical records for 10 patients but did not express any opinion about them and did not conclude that any false claims were submitted during Phase II. They also argued that Bovee testified at length that the ten patients benefited from therapeutic exercise, which was necessary given their severe functional and health deficits, and therefore her testimony was irrelevant. They also argued that Bovee’s reasoning was not properly applied to the facts at issue because there is no evidence in the record to support her assumption that the activities in the Wellness Center during Phase II were consistent with what occurred during Phase I.
In response, the relators argued that Bovee’s testimony about the Medicare requirements for the provision of therapy in nursing homes during the Phase II period is relevant. They also argued that the fact that the condition of certain patients may have improved during their stay at Hillcrest does not mean that improvement was attributable to their visits to the Wellness Center, as opposed to the therapy they received elsewhere within the facility. Even if the improvement could be attributed to visits to the Wellness Center, the relators argued that it would not be relevant to whether the defendants submitted claims for therapy provided by those who were not supervised or not licensed to provide it, or whether the alleged therapy was in actuality an unskilled service. Finally, the relators argued that Bovee need not testify whether the defendants submitted false claims in order for her testimony to be relevant and of assistance to the jury.
The court found that Bovee’s opinions and testimony were neither irrelevant nor unreliable. Moreover, the court found ample factual basis to support Bovee’s assumption that the activities in the Wellness Center during Phase II were consistent with what occurred during Phase I. The court was further unpersuaded that Bovee’s testimony is irrelevant because the conditions of some patients improved during their stay at the Hillcrest facility.