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United States ex rel. Bartlett v. Ashcroft

United States District Court, W.D. Pennsylvania

August 21, 2014

UNITED STATES OF AMERICA ex rel.; THOMAS BARTLETT; and KIMBERLY GUMMO, Plaintiffs,
v.
DANIEL ASHCROFT; TRI-COUNTY IMAGING ASSOCIATES, INC.; CARLOS A. WEIGERING; RAMESH AGARWAL; URMILA CHOPRA, as Executrix of the Estate of RAMESH CHOPRA; and RAJ KANSEL, Defendants

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[Copyrighted Material Omitted]

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For UNITED STATES OF AMERICA, ex rel., Plaintiff: Andrew M. Stone, LEAD ATTORNEY, Stone Law Firm, LLC, Pittsburgh, PA; Paul E. Skirtich, United States Attorney's Office, Pittsburgh, PA.

For THOMAS BARTLETT, KIMBERLY GUMMO, Plaintiffs: Andrew M. Stone, LEAD ATTORNEY, Stone Law Firm, LLC, Pittsburgh, PA; Gregory M. Simpson, LEAD ATTORNEY, Simpson Law Firm, Fayetteville, GA; Robert L. Eberhardt, United States Attorney's Office, Pittsburgh, PA.

For DANIEL ASHCROFT, TRI COUNTY IMAGING ASSOCIATES, INC., CARLOS A. WEIGERING, M.D., Defendants: Michael J. Parrish, Jr., Ronald P. Carnevali, Jr., LEAD ATTORNEYS, Spence, Custer, Saylor, Wolfe & Rose, Johnstown, PA.

For RAMESH AGARWAL, M.D., Defendant: Ronald P. Carnevali, Jr., Spence, Custer, Saylor, Wolfe & Rose, Johnstown, PA.

For URMILA CHOPRA, as Executrix of the Estate of RAMESH CHOPRA, RAJ KANSEL, M.D., Defendants: Ronald P. Carnevali, Jr., LEAD ATTORNEY, Spence, Custer, Saylor, Wolfe & Rose, Johnstown, PA.

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MEMORANDUM OPINION

KIM R. GIBSON, UNITED STATES DISTRICT JUDGE.

I. Introduction

This qui tam action is before the Court on cross motions for summary judgment. Plaintiff-Relators Thomas Bartlett and Kimberly Gummo (" Relators" ) have alleged that various healthcare providers and related individuals were complicit in a scheme to defraud the United States through their submission of false claims and statements under Medicare and other federal healthcare programs. Relators move for partial summary judgment, asking the Court to find as a matter of law that Physician Defendants[1] made prohibited self-referrals, in violation of the Stark Act, and that Defendants[2] knowingly caused the submission of false claims to the United States, in violation of the False Claims Act. Defendants also move for summary judgment, asking the Court to find as a matter of law that Relators have no evidence of false claims. For the reasons set forth below, Relators' motion for partial summary judgment will be granted in part and denied in part. Defendants' motion for summary judgment will be denied.

II. Jurisdiction

The Court exercises subject matter jurisdiction under 31 U.S.C. § 3732(a) and 28 U.S.C. § 1331. Venue is appropriate under 31 U.S.C. § 3732(a) and 28 U.S.C. § 1391(b)(2) because the alleged acts occurred in this judicial district.

III. Background

A. Parties to the action

Plaintiff-Relators Thomas Bartlett and Kimberly Gummo are former employees of Tyrone Hospital. Between April 2000 and October 2003, Bartlett served as the Chief Executive Officer at Tyrone Hospital. (Sec. Am. Compl., ECF No. 77, ¶ ¶ 139, 157). Between September 2002 and July 2004, Gummo served as the Director of Human Resources at Tyrone Hospital. ( Id. ¶ ¶ 161-65). Tyrone Hospital is a not-for-profit organization that provides in-patient and ancillary hospital services to residents of Blair County, Pennsylvania, and to residents of neighboring counties.[3] ( Id. ¶ 13).

The remaining Defendants in this action include Carlos A. Wiegering, M.D., Ramesh Agarwal, M.D., Raj Kansel, M.D., Ramesh Chopra, M.D., Dan Ashcroft, and Tri-County Imaging Associates, Inc. (" Tri-County" ). The Physician Defendants--Wiegering, Agarwal, Kansel, and Chopra--were shareholders in Tri-County. (ECF No. 173 ¶ ¶ 20-23). Tri-County is a Pennsylvania corporation that identifies as being in the " equipment leasing" business. (Sec. Am. Compl. ¶ 16; ECF No. 173 ¶ 16). Between 1970 and 2002, Defendant Ashcroft served as the Chief Financial Officer at Tyrone Hospital. (Sec. Am. Compl. ¶ 17). Ashcroft was also a shareholder in Tri-County. ( Id.; ECF No. 173 ¶ 17).

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B. Factual allegations

Beginning in 1984, Bernard DiGiacobbe, M.D., now deceased, maintained an exclusive contractual arrangement with Tyrone Hospital to provide radiology services.[4] (ECF No. 173 ¶ 86). According to Relators, Defendant Ashcroft, Dr. DiGiacobbe, and others realized that services for computerized tomography (CT scans)[5] offered " enormous profit potential" and thus devised a plan for physicians to invest in a new CT scanning facility to be associated with Tyrone Hospital. (Sec. Am. Compl. ¶ 86-89). To this end, Tri-County was formed in 1987. ( Id. ¶ ¶ 87-89).

Tri-County initially issued 25 shares of stock: 23 shares to physicians (including Dr. DiGiacobbe), one share to Defendant Ashcroft, and one share to another nonphysician. ( Id. ¶ 90). The ownership structure changed over time, particularly in 1995, when many of the original investors divested themselves of their shares in Tri-County. Nevertheless, between 1995 and 2002, Physician Defendants and Defendant Ashcroft maintained significant ownership interests in Tri-County. ( Id. ¶ 102).

Relators claim that, between 1995 and 2002, Defendants participated in a patient referral scheme to generate revenue for Tyrone Hospital and Tri-County. According to Relators, Physician Defendants referred more than 8,000 patients to Tyrone Hospital for inpatient services and other designated health services. ( Id. ¶ 104). In turn, Tyrone Hospital maintained a business arrangement with Tri-County and Dr. DiGiacobbe, for which Tyrone Hospital paid Tri-County $410 per CT scan. Specifically, Tyrone Hospital paid Dr. DiGiacobbe for each CT scan; these payments were placed in a Tri-County operating account for distribution to the Tri-County shareholders; and Dr. DiGiacobbe received a 15% collection fee. (ECF No. 251 ¶ 4; ECF No. 254 ¶ 4).

Based on this alleged " compensation arrangement" between Tyrone Hospital and Tri-County, and given Defendants' financial interests in Tri-County, Relators assert that Defendants violated federal law by making prohibited self-referrals to Tyrone Hospital. For purposes of Relators' motion for partial summary judgment, Relators assert that the undisputed evidence shows that Physician Defendants violated the Stark Act and that Defendants caused the submission of false claims to the United States, in violation of the False Claims Act. Defendants also move for summary judgment, asserting that there is no evidence of false claims being submitted. The motions are ripe for disposition.

IV. Standard of Review

Summary judgment should be granted only when " there is no genuine dispute as

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to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). Issues of fact are genuine " if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Material facts are those affecting the outcome of trial. Id. The court's role is " not to weigh the evidence or to determine the truth of the matter, but only to determine whether the evidence of record is such that a reasonable jury could return a verdict for the nonmoving party." Am. Eagle Outfitters v. Lyle & Scott Ltd., 584 F.3d 575, 581 (3d Cir. 2009). " In making this determination, 'a court must view the facts in the light most favorable to the nonmoving party and draw all inferences in that party's favor.'" Farrell v. Planters Lifesavers Co., 206 F.3d 271, 278 (3d Cir. 2000) (quotation omitted).

The moving party must initially demonstrate the absence of any genuine disputes of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the moving party meets this burden, the nonmoving party must go beyond the pleadings by using affidavits, depositions, admissions, or answers to interrogatories to show genuine issues of material fact for trial. Id. at 324. The nonmoving party cannot defeat a well-supported motion for summary judgment by reasserting unsupported factual allegations in the pleadings. Williams v. Borough of West Chester, 891 F.2d 458, 460 (3d Cir. 1989).

V. Underlying Law

Before addressing the merits of the parties' respective motions, the Court will briefly summarize the statutes implicated in this case: the Stark Act, the Anti-Kickback Statute, and the False Claims Act. The Court will then evaluate Relators' motion for partial summary judgment and Defendants' motion for summary judgment.

A. The Stark Act

Congress enacted Section 6204 of the Omnibus Reconciliation Act of 1989 (" Stark I" )[6] to curtail the increasing costs of healthcare resulting from abusive physician self-referrals. Am. Lithotripsy Soc. v. Thompson, 215 F.Supp.2d 23, 26 (D.D.C. 2002); U.S. ex rel. Kosenske v. Carlisle HMA, Inc., 554 F.3d 88, 95 (3d Cir. 2009) (" The 'oft-stated goal' of the [Stark] Act is 'to curb overutilization of services by physicians who could profit by referring patients to facilities in which they have a financial interest.'" ).[7] Stark I prohibits physicians from referring Medicare patients to clinical laboratories in which the physician has a financial interest, absent an exception. See Am. Lithotripsy Soc., 215 F.Supp.2d at 26. Congress enacted Section 13562 of the Omnibus Budget Reconciliation Act of 1993 (" Stark II" )[8] to expand the reach of Stark I. Specifically, Stark II prohibits physician self-referrals in twelve " designated health services" categories, including clinical laboratory services. Id.; see also 42 U.S.C. § 1395nn.

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Simply stated, the Stark Act prohibits physicians from making patient referrals for " designated health services," such as inpatient and outpatient hospital services, if the referring physician (or an immediate family member) has a " financial relationship" with the entity providing the services. 42 U.S.C. § 1395nn(a)(1)(A). The Act further proscribes a healthcare entity from presenting or causing to be presented a Medicare claim for services furnished pursuant to a prohibited self-referral. Id. § 1395nn(a)(1)(B); [9] see also U.S. ex rel. Schmidt v. Zimmer, Inc., 386 F.3d 235, 239 (3d Cir. 2004).

The Center for Medicare and Medicaid Services (CMS), previously known as the Health Care Financing Administration (HCFA), is the administrative agency primarily responsible for interpreting the Stark Act. 42 U.S.C. § § 1395nn(b)(4); see also Council for Urological Interests v. Sebelius, 946 F.Supp.2d 91, 95 (D.D.C. 2013). The first set of Stark regulations addressed Stark I and thus applied only to physician self-referrals for clinical laboratory services. 60 Fed. Reg. 41916 (Aug. 14, 1995). CMS then implemented Stark II regulations in three phases. Phase I final regulations were published in 2001, effective January 4, 2002. 66 Fed. Reg. 865 (Jan. 4, 2001). Phase II final regulations were published on March 26, 2004, effective July 26, 2004. 69 Fed. Reg. 16054 (Mar. 26, 2004). CMS published Phase III final regulations in September 2007, without a comment period, thereby bringing the rulemaking cycle to an end. 72 Fed. Reg. 51,012 (Sept. 5, 2007). The Stark regulations are codified at 42 C.F.R. pts. 411 and 424.

1. Definitions under the Act

The Stark Act defines " referral" as " the request or establishment of a plan of care by a physician which includes the provision of [] designated health service[s]." 42 U.S.C. § 1395nn(h)(5)(B). The Stark regulations broadly define " referral" as, among other things, " the request by a physician for, or ordering of, or the certifying or recertifying of the need for, any designated health service for which payment may be made under Medicare." 42 C.F.R. § 411.351.

The Stark Act defines prohibited financial relationships to include any compensation paid directly or indirectly to a referring physician. Specifically, a physician has a " financial relationship" with an entity if the physician has " an ownership or investment interest in the entity," or " a compensation arrangement" with it. 42 U.S.C. § 1395nn(a)(2). A " compensation arrangement" is defined as " any arrangement involving any remuneration between a physician . . . and an entity." 42 U.S.C. § 1395nn(h)(1)(A). The Stark regulations similarly define " compensation arrangement" as " any agreement involving remuneration, direct or indirect, between a physician . . . and an entity." 42 C.F.R. § 411.354(c) (emphasis added). " Remuneration" includes " any remuneration, directly or indirectly, overtly or covertly, in cash or in kind." 42 U.S.C. § 1395nn(h)(1)(B).

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Relevant here, the Stark regulations elaborate on the definition of a prohibited " indirect compensation arrangement." 42 C.F.R. § 411.354(c)(2).[10] Such an arrangement exists if:

(1) an " unbroken chain" of persons or entities have financial relationships linking the referring physician to the healthcare entity furnishing " designated health services" (the " DHS entity" );
(2) the compensation arrangement in the chain closest to the physician receives " aggregate compensation" that " varies with, or otherwise reflects, the volume or value of referrals" generated for the DHS entity; and
(3) the DHS entity has either " actual knowledge of," or acts in " reckless disregard or deliberate ignorance of," the fact that the aggregate compensation varies in this manner.

42 C.F.R. § 411.354(c)(2).

2. Exceptions to liability

Notwithstanding its broad prohibition on self-referrals, a defendant can avoid liability under the Stark Act by establishing that an exception applies. U.S. ex rel. Kosenske v. Carlisle HMA, Inc., 554 F.3d 88, 95 (3d Cir. 2009) (" Once the plaintiff or the government has established proof of each element of a violation under the Act, the burden shifts to the defendant to establish that the conduct was protected by an exception." ) (citing United States v. Rogan, 459 F.Supp.2d 692, 716 (N.D.Ill. 2006), aff'd, 517 F.3d 449 (7th Cir. 2008)). For instance, the Stark regulations discuss an exception to ordinarily prohibited indirect compensation arrangements. The defendant must show:

(1) The compensation received by the referring physician . . . is fair market value for services and items actually provided and not determined in any manner that takes into account the value or volume of referrals or other business generated by the referring physician for the [DHS entity].
(2) The compensation arrangement . . . is set out in writing, signed by the parties, and specifies the services covered by the arrangement . . .
(3) The compensation arrangement does not violate the anti-kickback statute (section 1128B(b) of the Act), or any Federal or State law or regulation governing billing or claims submission.

42 C.F.R. § 411.357(p).

Aside from the exception for certain indirect compensation arrangements, the Stark Act includes other important exceptions to liability. See 42 U.S.C. § § 1395nn(c)--(e). The Stark regulations include additional regulatory exceptions and provide further guidance on the application of the statutory exceptions. 42 C.F.R. § 411.357. To the extent a Stark exception potentially applies here, the Court will reserve further analysis until later in this opinion.

B. The Anti-Kickback Statute

The Anti-Kickback Statute is another law aimed at preventing fraud in the context of federal healthcare programs. The Anti-Kickback Statute makes it unlawful to knowingly and willfully solicit or receive any remuneration for referrals of services covered by federally funded medical services:

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whoever knowingly and willfully solicits or receives any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind--
(A) in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal health care program, or
(B) in return for purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program,
shall be guilty of a felony and upon conviction thereof, shall be fined not more than $25,000 or imprisoned for not more than five years, or both.

42 U.S.C. § 1320a-7b(b); see U.S. ex rel. Singh v. Bradford Reg'l Med. Ctr., 752 F.Supp.2d 602, 640 (W.D. Pa. 2010). In addition to criminal penalties, a violation of the Anti-Kickback Statute can lead to " exclusion from participation in federal healthcare programs and, effective August 6, 1997, civil monetary penalties of $50,000 per violation and three times the amount of remuneration paid." United States v. Rogan, 459 F.Supp.2d 692, 714 (N.D.Ill. 2006) (citing 42 U.S.C. § 1320a-7(b)(7) and 42 U.S.C. § 1320a-7a(a)(7)).

As with violations of the Stark Act, a defendant can avoid liability under the Anti-Kickback Statute by demonstrating that either a statutory or regulatory exception applies. Rogan, 459 F.Supp.2d at 716 (citing United States v. Shaw, 106 F.Supp.2d 103, 122 (D. Mass. 2000)). These exceptions, also known as the " safe harbors," are provided by statute and in U.S. Department of Health and Human Services regulations found at 42 C.F.R. § 1001.952. The safe harbors encompass a number of payment practices--including contracts for office space, equipment, and personal services--and each exception has its own requirements. At minimum, the safe harbors generally require a business arrangement to: (1) be made in writing and signed by the parties; (2) cover all of the services or property exchanged between the parties; and (3) provide for payments that are consistent with fair market value in " arms-length transactions." See generally 42 C.F.R. § 1001.952(b)--(d).

C. The False Claims Act

The thrust of this qui tam action is that Defendants allegedly violated the False Claims Act, 31 U.S.C. § § 3729-3733 (the " FCA" ), by knowingly causing the submission of claims to Medicare in violation of the Stark Act and the Anti-Kickback Statute. " The FCA is a statutory scheme designed to discourage fraud against the United States." Mann v. Heckler & Koch Def., Inc., 630 F.3d 338, 342 (4th Cir. 2010). " Its roots lie in the rampant fraud perpetrated by contractors against the government during the Civil War, and it has served ever since as a safeguard against ...


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