A Georgia district court allowed most of a qui tam case alleging violations of the False Claims Act, Anti-Kickback Act Statute, and Stark Law to proceed, partially denying summary judgment to the defendant. The defendant sought summary judgment on its affirmative advice of counsel defense, but the court found some factual dispute over whether the defendant had fully informed its counsel of the facts before the advice was provided. While the defendant could still assert the defense, the court concluded that more information was needed.
United States District Court for the Middle District of Georgia, Athens Division, No. 3:15-CV-122 (CDL); U.S. ex rel. Rebecca Hockaday v. Athens Orthopedic Clinic P.A., et al.
In Brief
A Georgia district court granted in part and denied in part the defendants’ motions for summary judgment in a lawsuit alleging violations of the False Claims Act, Anti-Kickback Statute, and Stark Law. The court split on the AKS claims, but allowed the Stark Law and FCA claims to proceed. Notably, the defendant sought to assert an affirmative advice of counsel defense. The court allowed this defense for some claims, but denied summary judgment, finding a factual dispute over whether the defendant had been forthcoming with the full facts when counsel provided its advice.
Background
Relator Rebecca Hockaday filed a qui tam suit alleging that her former employer, Athens Orthopedic Clinic P.A., submitted false claims for reimbursement to government healthcare programs and retaliated against her for raising her concerns. The relator and defendants filed competing motions for summary judgment.
Preliminary Matters
At the outset, the court addressed three preliminary matters. First, the defendants argued that Hockaday could not identify any claims and therefore could not establish her FCA claim. In response, the relator pointed to multiple charts showing various claims were submitted and paid. The court noted that the relator did not identify who created the charts, where the data came from, or what the data means. While that would be insufficient at trial, the court reasoned that the relator’s counsel would be able to provide the required context, given that there was no dispute that the defendant treated Medicare and Medicaid patients.
Next, the defendants challenged the relator’s case on the scienter element, arguing that they relied on the advice of outside counsel when deciding how to proceed with the relevant transactions. In response, the relator argued that the defendants should not be permitted to assert the advice-of-counsel defense, as this affirmative defense was not raised until two years into the discovery period. However, the court concluded that the relator was given the opportunity to explore this defense during counsel, and therefore would not be prejudiced by the late assertion.
Summary Judgment on the Anti-Kickback Statute Claims
Most of the relator’s claims were based on alleged violations of the Anti-Kickback Statute, which fell into two general categories: (1) remuneration in the form of compensation, bonuses, and buy-in packages to AOC physicians and physician assistants in exchange for referrals to AOC-affiliated surgery centers and ancillary services; and (2) remuneration in the form of payments and discounts to AOC and its physicians in exchange for referrals of products and services from other companies.
Generally, the relator alleged that physicians were allowed to buy into partnership with AOC based on the amount of referrals they would make to AOC and its affiliated surgery centers and ancillary services. However, the court found no evidence that the buy-in amount was determined by anticipated referrals or that the buy-ins were intended as remuneration in order to induce referrals.
The court allowed one related claim to proceed. The relator alleged that when AOC acquired an outside orthopedics practices, its doctors were allowed to join AOC without buying in, and were expected to bring 50-75 percent of their outpatient surgical cases to the defendants, which would be applied as their buy-in. The court held that a reasonable juror could conclude that this evidence establishes that the physicians were each given a valuable ownership interest in ASC in exchange for bringing at least half of their outpatient surgical cases to the defendant’s surgery center. The court found this type of remuneration well within the quid pro quo category forbidden by the AKS.
The relator also alleged the defendant paid bonuses to its partner physicians, non-partner employee physicians, and physician assistants in exchange for referrals. The court found the relator failed to support her claims regarding the partner physician bonuses, as various worksheets purportedly explaining the distribution of ancillary receipts were contradictory and contained discrepancies. The relator also failed to connect the dots between these documents and any compensation for referrals.
The court allowed the relator to proceed with claims involving the employee physician and physician assistant bonuses. The bonuses to these employees were based on total receipts, including any receipts for internal ancillary services to which employees referred patients, like durable medical equipment, physical therapy, and imaging. While there was no problem with bonuses paid based on work actually performed by these employees, the relator alleged that bonuses paid for receipts for ancillary services performed by others were improper. The court agreed, noting that it one thing to give a patient a prescription for an MRI or physical therapy, but something else entirely to tell the patient where to go for these services.
The relator also claimed that the surgery centers paid kickbacks to their physician owners in the form of distributions that were based on the number of referrals they made to the surgery centers, but the court found that profits were distributed based on membership percentages, not on the volume or value of referrals. The court also noted that many members of the surgery center LLCs perform no surgeries at the surgery centers, but they receive the same distributions as the members who do.
In addition to the compensation-related claims, the relator alleged that the defendants obtained durable medical equipment and supplies for free or at deep discounts in exchange for recommending items to or purchasing items for Medicare and Medicaid patients. The defendants argued that they were entitled to negotiate discounts and that the relator failed to establish that any of the discounts induced physicians to purchase or recommend specific items. The court agreed that these claims lacked support and granted summary judgment in favor of the defendants. The court also granted summary judgment to the defendants on claims that they received “free” equipment with purchases, finding no evidence that the additional goods had any value outside of being used with the purchased items.
However, the court did find enough evidence to create a genuine fact dispute on one discount claim. The defendants sought a best possible price on metal implants for use in Medicare patients, because Medicare does not reimburse for the implants if the surgery is performed at a surgery center instead of a hospital. The supplier arranged for a bulk discount under which AOC ordered fifteen metal implants for use in Medicare patients, plus twenty-nine bioabsorbable implants. The 32 percent discount of the total purchase price covered the entire price of all the metal inserts, so the metal inserts intended for Medicare patients were “free.” The court concluded that a reasonable juror could conclude that the discount induced AOC to purchase the metal implants for use in Medicare patients and allowed this claim to proceed.
The relator also alleged that AOC entered int a series of agreements with third-party orthotics providers under which AOC referred 100 percent of its orthotics patients to the third-party orthotics provider during the agreement period, billed Medicare for the provider’s services and devices as if AOC had provided them, and kept a fixed percentage of the collected amount. The defendants did not clearly move for summary judgment on these claims and the court allowed them to proceed.
Next, the relator claimed that AOC entered into improper agreements with external radiology groups to interpret the results of all MRI and CT images taken on AOC’s imaging equipment. The court found that AOC paid North Metropolitan Radiology Associates a flat fee for each scan its radiologists interpreted, then billed Medicare “globally” for both the technical and professional components of the imaging instead of billing only for the technical component it actually completed and having North Metropolitan bill for its work. North Metropolitan accepted a lesser fee than it could have collected from the government in exchange for AOC’s stream of referrals. The court found a reasonable juror could concluded that AOC received additional compensation from the government when it collected for services it did not provide, in connection with its referrals to North Metropolitan and other providers.
Finally, the relator claimed that individual physician defendants entered or tried to enter into research, consulting, and other agreements with third-party companies under which the physicians were paid to purchase the third-party companies’ products for use in their patients. However, the court found the evidence of kickbacks scant. The court also found no evidence showing why the conduct of these physicians should be imputed to the defendants.
Summary Judgment Motion on the Stark Law Claims
Hockaday also alleged that the defendants violated the Stark Law when AOC’s physicians referred Medicare and Medicaid patients to AOC’s internal designated health services, which included imaging and physical therapy services and the provision of durable medical equipment. The defendant argued that the referrals were allowed because they fall within the “in-house ancillary services exception” to the Stark Law. AOC also argued that none of the physicians had a prohibited financial agreement that made their referrals improper because their compensation agreements are protected by the “bona-fide employee exception.”
Under the “in-office ancillary services exception,” the prohibition on referrals does not apply to physician referrals for ancillary services if the services are furnished personally by the referring physician, a physician who is a member of the same group practice as the referring physician, or an individual who is supervised by the referring physician or by another physician in a group practice. AOC argued this was the case, but the court found a factual dispute over this precluded summary judgment.
The court also found a factual dispute precluded summary judgment under the bona fide employee exception, because the parties disputed whether bonuses for employee physicians were based in part on the volume or value of their internal ancillary referrals. The court concluded that a reasonable juror could find that their compensation agreements are not excepted from the referral prohibition.
Summary Judgment on the FCA Claims
Hockaday also alleged that AOC submitted claims for reimbursement for viscosupplementation procedures to treat osteoarthritis. Specifically, she alleged that AOC knowingly purchased foreign or reimported medications that did not have the requisite FDA approval, used them in patients, and submitted claims to government healthcare programs for this treatment, certifying that the treatment was medically necessary.
According to the relator, AOC’s officers knew beginning in at least 2008 that there were legal risks associated with buying foreign or reimported viscosupplements, because it purchased the goods from a distributor that was not registered in the United States and that shipped its product from foreign countries. AOC had a second relationship with a distributor who purchased the medication on the international grey market and could not confirm the safe and appropriate storage of the products.
AOC moved for summary judgment, again arguing that it proceeded on advice from counsel. However, as before, the court found it disputed whether AOC disclosed all relevant facts to its attorney and relied in good faith on his advice.
AOC also moved for summary judgment on claims it violated the FCA when it submitted claims for DME without proper authorization; when it submitted claims for orthotics furnished by an unlicensed provider who billed under another physician’s national provider number; and when it back-billed for DME.
The relator alleged that AOC lacked a government-provided DMEPOS number for each location that dispensed DME. Each office that dispenses this equipment must have a DMEPOS number and can only bill the government for items issued on or after the date the number is issued. AOC acknowledged that it lacked separate DMEPOS numbers for each physical location, but eventually obtained them.
The relator alleged that AOC locations dispensed items before they received the DMEPOS number and held invoices until it received approval, thus improperly back-billing the government for these goods. AOC argued that the relator provided no evidence of back-billing and the court agreed, granting summary judgment on this claim.
AOC also acknowledged that that before it obtained DMEPOS numbers for its satellite locations, it billed for DME as if it had been dispensed from the main office. The defendant argued that these were honest mistakes, but the court explained that Medicare and Medicaid participants must familiarize themselves with the legal requirements for reimbursement. The court concluded that a reasonable billing employee or compliance officer could read the regulation and determine that no satellite office was eligible for reimbursement without its own DMEPOS number—and that any claim for reimbursement without a valid DMEPOS number would thus be false. Accordingly, the court denied summary judgment on this claim.
The court also denied summary judgment on the claim that AOC falsely billed for product furnished by an unlicensed provider using another physician’s identifying number. The court also granted the relator summary judgment on the defendant’s advice of counsel defense, finding no evidence AOC inquired with counsel prior to working with this unlicensed individual.
The relator also alleged that AOC violated the “Anti-Markup Rule”, which regulates billing for diagnostic tests when unrelated entities provide the technical and interpretive components. AOC acknowledged that it completed only the technical component of some imaging and outsourced the professional interpretation component. AOC paid the external radiology group a flat fee for each scan it interpreted, then billed Medicare “globally” for both the technical and professional components.
CMS has cautioned that this kind of arrangement violates the Anti-Markup Rule. This kind of billing is allowed only when the technical and professional components are performed by one individual or by individuals employed by the same entity. The court denied summary judgment to the defendant and granted summary judgment to the relator on the advice of counsel defense.
Finally, the relator alleged that AOC fraudulently used certain billing modifiers to inflate their claims and that the level of services billed is not supported by appropriate documentation. AOC appeared to acknowledge that the relator’s expert witness created a genuine fact dispute, but argued that the court should exclude the testimony because it was not properly disclosed.
The court denied this motion. While the expert accidentally omitted some pages from one of her exhibits, this error was easily corrected. Further, other missing information about the claims reviewed by the witness was within the defendants’ possession. Finally, the court found the defendants did not actively follow-up on requests for information supporting the witness’ exhibits, despite the willingness of relator’s counsel to provide it.
Alternatively, AOC argued that the testimony was confusing and that the witness’ methodology might be unreliable. The court was not persuaded, finding the arguments generally reasserted complaints about the information allegedly missing from the witness’ exhibits.
Summary Judgment on the Retaliation Claim
Finally, Hockaday alleged that she was terminated from her position as chief operating officer after raising concerns about the issues described in her FCA claims. The relator alleged that after she brought up these issues, several physicians verbally berated her. However, the court found that Hockaday did not describe what she told these doctors or what happened during the alleged conduct. While one doctor allegedly threatened to fire her, Hockaday did not say when this happened or what the doctor wanted her to do.
The relator alleged that the retaliation escalated after she raised concerns about the hospital allowing physician assistants and nurse practitioners to input electronic signatures for physicians. Hockaday described several instances of verbal harassment. After the hospital CEO declined to address her concerns, Hockaday submitted her resignation. She alleged that she told the CEO that the hospital was in violation of the FCA, Stark Law, and Anti-Kickback Statute, and that she was considering filing a complaint.
Under her employment contract, Hockaday was required to give a 60-day advance written notice when quitting, which she did. However, a few days after she submitted her resignation letter, the CEO terminated her employment, explaining that the doctors decided to restrict her access to confidential files because they were worried about what she might report or take to use against them.
After her termination, Hockaday sought employment with other medical practice. However, despite some interest, potential employers lost interest after Hockaday provider her references, including AOC. The relator alleged that AOC continued retaliating against her by interfering with her future employment opportunities.
The court found that the verbal harassment described by the relator did not meet the standard for showing retaliation under the FCA. While Hockaday alleged the mistreatment began after she raised concerns about billing fraud, the unpleasant encounters with various physicians did not amount to an adverse employment action or constructive discharge. The court noted that employment laws do not mandate civility in the workplace, but prohibit material adversity. While the conduct the relator described might be considered unacceptable, the court concluded it did not rise to the level of retaliation.
However, the court denied summary judgment on the claim that AOC fired Hockaday prior to the conclusion of her 60-day notice period. The court noted the temporal proximity between the termination and Hockaday’s suggestion that she might file a complaint. The court found it unclear whether AOC paid Hockaday for the additional seven weeks left on her contract. If it did not, a reasonable jury could conclude that Hockaday was terminated for threatening to file an FCA complaint.
The court was less persuaded by the post-employment retaliation claim, finding no evidence AOC interfered with Hockaday’s job search. While the relator assumed AOC had given her a negative reference, she provided no evidence to support her assertion.
