U.S. ex rel. Escobar v. Universal Health Servs., Inc. — Nov. 2016 (Summary)

FALSE CLAIMS ACT

U.S. ex rel. Escobar v. Universal Health Servs., Inc.
No. 14-1423 (1st Cir. Nov. 22, 2016)

The United States Circuit Court of Appeals for the First Circuit ruled, on remand from the United States Supreme Court, that relators in a False Claims Act (“FCA”) case against a mental health treatment facility had alleged sufficient facts to state a claim that the defendant had committed an FCA violation.

A young girl sought mental health treatment at the defendant’s facility in 2009.  She was prescribed medication that gave her seizures and eventually led to her death.  The defendant had, contrary to certifications of compliance with state and federal law, employed unlicensed and unsupervised personnel in the treatment of the decedent and others at the facility.  The unlicensed counselors had, in violation of Massachusetts’ Medicaid program, falsely represented their lack of appropriate credentials by using fraudulently-obtained National Practitioner Identification (“NPI”) numbers for use in submitting claims for reimbursement to the Massachusetts’ Medicaid program.

In prior proceedings, the Supreme Court had ruled that the implied false certification theory was a valid theory of liability under the FCA.  The Supreme Court had remanded the case to the Court of Appeals to determine whether the relators plead sufficient facts to meet the new materiality standard articulated by the Supreme Court.

The Court of Appeals ruled that the plaintiff had alleged sufficient facts to satisfy the materiality standard.  Responding to defendant’s argument that the state Medicaid agency paying the claims was aware of the allegations but paid the claims anyway, the court noted that there was no evidence in the plaintiff’s complaint to suggest that Medicaid agency had “actual knowledge” of the alleged violations.  The court reversed the district court’s grant of a motion to dismiss for the defendant and remanded the case for further proceedings.

Durbin v. Workers’ Comp. Appeal Bd. — Nov. 2016 (Summary)

HIPAA

Durbin v. Workers’ Comp. Appeal Bd.
No. 289 C.D. 2016 (Pa. Commw. Ct. Nov. 21, 2016)

The Commonwealth Court of Pennsylvania affirmed a workers’ compensation judge’s order granting a hospital employee’s claim for workers’ compensation benefits.

A hospital employee left work and was unable to return due to alleged psychological trauma caused by her coworkers’ use of the medical records database, in violation of HIPAA, to discover information about the employee’s husband’s medical condition.  After leaving work, the employee filed a claim for workers’ compensation benefits.  The employer failed to file a timely answer, leading the workers’ compensation judge to deem that the employer had admitted the employee’s claims.  The employer then appealed, questioning whether the employee’s disability was an ongoing issue that required a continuing grant of workers’ compensation benefits.

The employee offered testimony from her psychiatrist who stated that the employee was afraid to return to work, suffered from nightmares, and was diagnosed with post-traumatic stress disorder that resulted from “a major devastating emotional reaction and severe adjustment disorder with anxiety and depression.” The employee also sought therapy after discussing her concerns about her coworkers’ knowledge of her husband’s condition.  During her therapy sessions, she complained of panic attacks, difficulty sleeping, and crying.  The employer’s medical expert testified to the contrary, believing the employee showed no negative psychological signs, and even went on a vacation.  The employer’s medical expert determined that if the employee suffered a psychological disability, she has since recovered.

The workers’ compensation judge found the employer’s medical expert testimony more persuasive and issued an order granting the employee workers’ compensation benefits from her time of injury to her time of recovery, resulting in a termination of the employee’s continued workers’ compensation benefits.

Hatzell v. Health and Hosp. Corp. of Marion Cty. — Nov. 2016 (Summary)

EMTALA

Hatzell v. Health and Hosp. Corp. of Marion Cty.
No. 1:15-cv-00964-LJM-TAB (S.D. Ind. Nov. 18, 2016)

The United States District Court for the Southern District of Indiana granted a hospital’s motion for summary judgment against a patient’s claim brought under the Emergency Medical Treatment and Active Labor Act (“EMTALA”).

An adult, mentally handicapped patient was taken to a hospital’s emergency room with complaints of lethargy, constipation, stomach pain, and an inability to urinate.  The patient was examined, an x-ray of her abdomen was taken to assess constipation, and the resident physician ordered a urinalysis.  The patient was unable to urinate for the urinalysis, and her x-rays revealed that she was moderately constipated.  The resident physician told the patient’s mother that they could not find anything physically wrong with the patient, and he prescribed a laxative.  Though the resident physician knew a urinalysis would help determine whether a patient had a urinary tract infection or impaired kidney function, the urinalysis was not performed.

The next day, the patient was taken to the same hospital’s emergency room for a second time because she fell down the stairs and was unresponsive.  Upon arrival, the patient underwent several screening procedures to assess her injuries from the fall, including CT scans and x-rays.  Upon completion of the screenings, the resident physician available told the patient’s mother that the only thing they found wrong with the patient was a broken nose.  The patient’s mother told the physician that the patient still had not urinated and that her abdomen was noticeably distended, but the physician reiterated that they did not find anything physically wrong with the patient beyond her broken nose.  The physician did not order any testing for a urinary tract infection, nor did the physician ask for the patient’s comprehensive medical history as is customary when a patient with limited ability to communicate due to mental disability arrives at the emergency room.

Five days later, the patient still had not urinated and she became nonresponsive.  Her mother took her to a different hospital’s emergency department.  Upon arrival, lab tests and a urinalysis were immediately ordered and performed.  The patient’s health records indicated that she had previously suffered from urinary disorders, and her lab results were extremely and dangerously abnormal.  The patient was then diagnosed with acute renal failure and a urinary tract infection.  The patient suffered permanent physical and mental disabilities.

The patient’s estate filed an action against the first hospital, alleging that it violated EMTALA by failing to properly screen the patient for a urinary disorder.  The district court disagreed with the estate, and found their claim to be in line with a medical malpractice action, not an EMTALA violation.  On both occasions, the patient was screened and assessed in the emergency room based on the symptoms she presented.  EMTALA does not require a correct diagnosis, it only requires a proper screening.  A proper screening is based on whether the patient received the same type of screening that other patients presenting with the same symptoms would have received.  There is no evidence that the patient was treated differently than another patient in a similar circumstance.  Though the resident physicians could be alleged to have been negligent in not performing a urinalysis on both occasions, such negligence would not constitute a violation of EMTALA.

Morales v. Palomar Health — Nov. 2016 (Summary)

EMTALA

Morales v. Palomar Health
Case No.:  3:14-cv-0164-GPC-MDD (S.D. Cal. Nov. 17, 2016)

The United States District Court for the Southern District of California granted a children’s hospital’s partial motion for summary judgment against an infant’s representative who brought a claim of inadequate screening under the Emergency Medical Treatment and Active Labor Act (“EMTALA”).  The infant visited the children’s hospital for urgent care on four different occasions, which resulted in the physicians concluding that the one-year-old had either an early flu or an upper respiratory tract infection during the first visit, acute febrile illness during the second visit, and a number of differential diagnoses during the third visit.  After returning to the hospital two days later for a fourth visit and receiving a diagnosis of meningitis, the infant’s representative brought suit alleging that the hospital’s course of treatment was insufficient within the meaning of EMTALA.

The district court found that the infant’s representative failed his burden of rebutting the evidence offered by the hospital and also failed to produce any evidence that would support his contention that the hospital failed to provide an appropriate medical screening examination.  While the infant’s representative did offer expert testimony, the representative’s experts spoke exclusively in terms of prudent care and the standard of care, but the Ninth Circuit has already established that EMTALA does not establish a national standard of care and is not a federal medical malpractice cause of action.  Therefore, while pointing to the shortcomings of the hospital’s screening process may establish the hospital’s conduct fell below an operative standard of care, the court nevertheless found that this line of reasoning was not sufficient without additional evidence to demonstrate an EMTALA violation.  Accordingly, the district court granted the children’s hospital’s motion for partial summary judgment as to the representative’s EMTALA claim.

Langston v. Milton S. Hershey Med. Ctr. — Nov. 2016 (Summary)

CIVIL RIGHTS

Langston v. Milton S. Hershey Med. Ctr.
Case No. 1:15-CV-2027 (M.D. Pa. Nov. 16, 2016)

The United States District Court for the Middle District of Pennsylvania denied a former patient’s motion for reconsideration following dismissal of her civil rights claim against a hospital.  The former patient attempted to add allegations to her complaint to clearly state a relationship between the state University of Pennsylvania and Hershey Medical Center, but the court found the allegations insufficient to show that “state action” existed as needed to state a section 1983 claim.  The court concluded that because the second complaint did not sufficiently allege state action by the hospital or the treating physician, its dismissal was proper, and accordingly denied the former patient’s motion for reconsideration.

Gillispie v. Regionalcare Hosp. Partners, Inc. — Nov. 2016 (Summary)

EMTALA

Gillispie v. Regionalcare Hosp. Partners, Inc.
Civil Action No. 13-1534 (W.D. Pa. Nov. 14, 2016)

The United States District Court for the Western District of Pennsylvania ruled in favor of a hospital’s motion for summary judgment following allegations of a retaliatory employment action in violation of the anti-discrimination provisions of the Emergency Medical Treatment and Active Labor Act (“EMTALA”).

The court noted that an EMTALA retaliation claim requires a “report” to a government agency.  The plaintiff claimed that she opposed, on two separate occasions, the hospital’s decision to not officially report the occurrence of a suspected EMTALA violation.  The plaintiff, however, did not submit a “report” to any governmental or regulatory agency in accordance with EMTALA.  The fact that she disagreed with the hospital’s reporting decision was, alone, insufficient to invoke the anti-retaliation protections under EMTALA.  The court, therefore, granted the motion for summary judgment in favor of the defendant hospital.

Centinela Freeman Emergency Med. Assocs. v. Health Net of Cal., Inc. — Nov. 2016 (Summary)

HEALTH PLANS

Centinela Freeman Emergency Med. Assocs. v. Health Net of Cal., Inc.
No. S218497 (Cal. Nov. 14, 2016)

The Supreme Court of California affirmed the Court of Appeal’s order holding that a health care service plan may be liable to noncontracting emergency service providers for negligently delegating its financial responsibility to an individual practice association (“IPA”) or other contracting medical provider group that it knew or should have known would not be able to pay for emergency service and care provided to the health plan’s enrollees.

Two health care service plans delegated their emergency services financial responsibility to contracting medical providers.  Their contracting medical providers were three IPAs.  After the IPAs contracted with the health care service plans, they failed to comply with multiple state financial solvency requirements, resulting in their failure to reimburse noncontracting service providers for the emergency care that they provided to enrollees of the health care service plans.  The providers brought a claim against the health care service plans alleging that they knew or should have known that the IPAs were insolvent, that they lacked any reasonable expectation that the IPAs would reimburse the providers, and that they should be held responsible for the reimbursements.  To the contrary, the plans believed once they delegated their financial duty to the IPAs, they owed no further duty of care to the providers.

Health care service plans are governed by the Knox-Keene Health Care Service Plan Act of 1975.  The Act expressly allows contracts in which health care service plans delegate to the plans’ contracting medical providers the plans’ financial responsibility to reimburse emergency service providers’ claims.  Under this delegation, noncontracted emergency service providers are entitled to reimbursement at the reasonable and customary rate for the emergency services they perform.  Allowing delegation also carries the risk that the provider group, or IPA, will become insolvent.  Solvency regulations provide that every plan must have adequate procedures in place to ensure that it undertakes appropriate review of its financial status and appropriate action in the event of any notification of deficiency.  The solvency regulations do not prevent a health care service plan from terminating its risk arrangement contract if the provider group is fiscally unsound.  Under both the Act and the regulations, providers play no role, and must continue to provide services regardless of the arrangements, but neither the Act nor the regulations preclude the existence of a duty to pay the providers regardless.

The court used the six-factor test laid out in Biakanja to determine that the plans owed a duty to the providers to reimburse their claims if the IPAs to which they delegated their financial responsibility became insolvent.  They held that the health care service plans owe a duty of care to noncontracting emergency service providers when they enter their initial delegation contracts with IPAs.  They further held that a health care service plan’s duty to reassume the financial responsibility it has delegated to a contracting medical provider group is triggered by the plan’s receipt of information through which the plan becomes aware or should become aware that there can be no reasonable expectation that its delegate will be able to reimburse covered claims from noncontracting emergency service providers.  By imposing a continuing duty of care on health care service plans, future economic harm to noncontracting emergency service providers can be prevented.

U.S. ex rel. Fisher v. IASIS Healthcare LLC — Nov. 2016 (Summary)

FALSE CLAIMS ACT AND ANTI-KICKBACK STATUTE

U.S. ex rel. Fisher v. IASIS Healthcare LLC
No. CV-15-00872-PHX-JJT (D. Ariz. Nov. 9, 2016)

The U.S. District Court for the District of Arizona granted in part and denied in part defendants’ motion to dismiss potential Anti-Kickback Statute (“AKS”) and False Claims Act (“FCA”) violations allegedly perpetrated by the defendant by offering preferential payments for services, failing to perform mandated medical necessity and utilization reviews, and improperly credentialing providers.

The lawsuit’s bringers, called “relators,” claimed that the defendant hospital management company and its wholly-owned subsidiary, a managed care organization (“MCO”), submitted claims with “reckless disregard or willful indifference as to whether or not the care was medically necessary” and also created preferential programs where providers routinely bypassed authorization processes that were designed to verify the medical necessity of services before providers rendered care.  The preferential programs stratified providers into “Gold” or “Platinum” status, which conferred the privilege of bypassing standard prior authorization review and other processes.  This, relators argued, led the defendants to approve claims without evaluating them for “necessity, consistency, or prior authorization requirements,” all of which the defendants implicitly certified compliance with when submitting claims.  The relators also asserted that the utilization and appeal processes did not take into account medical necessity or cost effectiveness, and that providers in the MCO network were improperly credentialed or not credentialed at all.  The court held that the relators’ claims, because of the specific examples and details they provided about the alleged fraud, survived a motion to dismiss as to the FCA claims.

The defendants asserted, and the court agreed, that the relators failed to demonstrate how remuneration to providers was based on referrals in violation of the federal AKS.  The defendant, as an MCO, received capitation payments rather than payments based on the volume of patients referred.  Defendants thus argued that they could not be found liable under the AKS, which prohibits claims that offer payment for “recommending purchasing, leasing, or ordering any good, facility, service, or item.”  The relators alleged that the MCO permitted more treatment to be performed than was necessary, which would affect how future capitation payments were made.  The court disagreed, opining that it was “speculative” as to whether this increased treatment would result in increased governmental costs.  The court also dismissed as “speculative” the allegation that the defendant’s preferential programs exposed it to risk for loss that the government would insure if it exceeded six percent.  Finally, the court also considered the relators’ claims that the defendants conspired to commit fraud.  The court held that the relators’ failure to adduce evidence tending to suggest an explicit, conspiratorial agreement among the defendants required dismissal of those claims.

The relators alleged corollary violations of the federal FCA under both the express and implied false certification theories.  The court determined that the waivers of prior authorization and utilization review, the deficient credentialing processes, the appeal practices that did not account for medical necessity or cost effectiveness, the lack of written policies, procedures, and processes, and the preferential status programs for providers all constituted infractions upon which FCA liability could attach.

The defendant reported patient encounter data as part of its regular compliance certification process to CMS.  The court found that while the encounter data was not, itself, a “claim” for purposes of the FCA, its eventual use in determining future capitation payments to the defendant was sufficient to survive the defendants’ motion to dismiss.  The court concluded that the encounter data required the defendants to aver compliance with a myriad of federal laws, regulations, and policies; the failure to thoroughly examine the medical necessity of services rendered under the claims and, as such, their submission to the government therefore constituted an express false certification violation of the FCA.  The court also determined that the defendants’ waiver of prior authorization for their preferred status providers while simultaneously attesting to the accuracy of their encounter data also amounted to an implied false certification violation of the FCA.

Following the mandates of the Escobar Supreme Court case, the court also examined the materiality of the allegations.  Because the defendant MCO had obligations to “recommend, direct, coordinate, and organize the furnishing of services to [its] enrollees[,]” the court held that the failure to comply constituted grounds upon which the government could have refused payment if it had been aware of such noncompliance; this is an essential element in the materiality determination.  The court ultimately held that the certifications of compliance were material to the defendants’ ability to receive payment from the government.  As such, the court denied the defendants’ motion to dismiss the FCA claims with respect to materiality.

Crestview Hosp. Corp., Inc. v. Coastal Anesthesia, P.A. — Nov. 2016 (Summary)

DISRUPTIVE PHYSICIAN; DEFAMATION

Crestview Hosp. Corp., Inc. v. Coastal Anesthesia, P.A.
No. 1D15-4392 (Fla. Dist. Ct. App. Nov. 9, 2016)

The District Court of Appeal of Florida reversed the trial court’s decision, holding that a hospital was not liable for defamation against an anesthesiologist following his forced resignation.

An anesthesiologist, contracted by a company to work for a hospital, eventually resigned after the hospital CEO contacted the company and informed it that the hospital no longer wanted the anesthesiologist working for the hospital.  The physician allegedly cursed at nurses and hospital staff, and unnecessarily delayed the surgery of an elderly patient.  The hospital did not investigate the complaints or initiate a disciplinary or review process under the hospital bylaws or code of conduct.  The hospital immediately complained to the company which then set out to terminate the anesthesiologist.  The anesthesiologist ultimately resigned in lieu of termination.

The anesthesiologist filed suit alleging several claims.  His claim of defamation against both the hospital and the hospital CEO was the only one remaining at trial.  The anesthesiologist claimed the CEO’s claims against him were false and the hospital’s failure to investigate the claims amounted to the anesthesiologist being singled out and intentionally, maliciously defamed.

As described by the court, there is a general presumption that someone who broadcasts a false statement that harms another person’s reputation can be held liable for defamation, but that presumption does not apply when parties have a mutual interest in evaluating a person’s work.  When the CEO of the hospital contacted the company, he was evaluating the work and behavior of the anesthesiologist within the services he contracted with the company to receive.  By the court, under those circumstances, there is a presumption of good faith, even when the comments are critical.

In order to succeed on his defamation claim, and strip the hospital of its privilege of evaluation, the anesthesiologist had to prove express malice, or improper motives on behalf of the hospital and the hospital CEO.  The court ruled that the trial court erred in instructing the jury to decide the question of whether the hospital and the hospital CEO acted simply with improper motives, which resulted in the hospital losing its privilege of evaluation.  The jury should have been instructed that it had to find that the hospital or the hospital CEO acted with the primary motive of gratifying ill will, hostility, and their desire to harm the plaintiff.  Further, the jury stated that it found the defendants to have been motivated solely for the purpose of unreasonable financial gain.  The trial court erred in its jury instruction, and that error could not be found to be harmless given the jury’s verdict based upon a reason that did not meet the legal requirement.

U.S. ex rel. Schaefer v. Family Med. Ctrs. of S.C., LLC — Nov. 2016 (Summary)

STARK LAW AND FALSE CLAIMS ACT

U.S. ex rel. Schaefer v. Family Med. Ctrs. of S.C., LLC
C/A No. 3:14-382-MBS (D.S.C. Nov. 8, 2016)

The U.S. District Court for the District of South Carolina, Columbia Division, denied a medical center’s motion to dismiss the United States claims that it and certain employed physicians operated in violation of the Stark Law and the False Claims Act (“FCA”).

The United States filed a complaint alleging that the medical center had employment arrangements with physicians that included compensation directly attributable to the volume or value of the employed physicians’ referrals in violation of the Stark Law and reimbursement based on referrals and unnecessary tests in violation of the FCA.  The U.S. also claimed that in order to maximize revenue, the medical center devised a variety of schemes including, among other things, referencing improper Current Procedural Terminology (“CPT”) codes and ordering unnecessary laboratory tests.  The medical center moved to dismiss the United States’ claims.  In order to survive the motion to dismiss, the U.S. had to allege sufficient facts to support its claims for relief.

The court found that the U.S. had alleged sufficient facts to support both its Stark and FCA claims.  The U.S. argued that the alleged improper billing structure spanned over ten years, allowing the medical center to be reimbursed for millions of dollars.  The U.S. argued that between 2008 and 2015, the medical center was paid over $4 million for unnecessary lipid tests; over $1.6 million for unnecessary chemistry panel tests; over $500,000 for unnecessary hepatic function tests; and over $1 million for unnecessary thyroid panel tests.