Cypress Med. Ctr. Operating Co. v. Cigna Healthcare – March 2015 (Summary)

THIRD PARTY REIMBURSEMENT DISPUTES

Cypress Med. Ctr. Operating Co. v. Cigna Healthcare, No. 12-20695 (5th Cir. Mar. 10, 2015)

The U.S. Court of Appeals for the Fifth Circuit affirmed in part, vacated in part, and remanded a suit brought by a hospital against an insurance company for violations of the Employee Retirement Income Security Act (“ERISA”), the Texas Insurance Code, and the Racketeer Influenced and Corrupt Organizations Act (“RICO”).

The insurance company maintains a cost-sharing agreement, in which the insurance company covers 80% of a patient’s medical costs if the patient was treated by an in-network provider. When a patient is seen by an out-of-network provider, the insurance company covers only 60% of the medical costs, and the patient pays the remaining 40%. The hospital was opened and operated as an out-of-network provider after an unsuccessful attempt to negotiate with the insurance company. The hospital then implemented a “prompt pay discount” program, offering patients a discounted rate if they paid their medical costs within a short time. The hospital implemented this approach in order to achieve greater success in collecting patients’ medical bills. Though the hospital applied an extreme discount under this prompt pay program, the insurance company was still expected to pay 60% of the total medical bill before factoring in the discount. The insurance company would be charged 60% of the full amount, and then the remaining bill would be discounted and sent to the patient. After becoming aware of this, the insurance company began reimbursing the hospital at the same drastically reduced rates that were used under the prompt pay discount.

The hospital filed claims against the insurance company for violating ERISA and RICO, and the insurance company submitted a counterclaim arguing that the hospital had violated ERISA. The district court dismissed the hospital’s ERISA claims for lack of standing and determined that the insurance company’s ERISA claims were time-barred. The district court also dismissed the hospital’s claims for breach of contract.

The court of appeals found that the hospital did have standing to bring ERISA claims, holding that the patients of the hospital were injured by the insurance company’s actions, creating a concrete injury sufficient to create standing. The court vacated the district court’s judgment and remanded to allow the hospital’s claims of ERISA violation to be fully developed. In holding that the hospital had standing to bring ERISA claims, the court vacated the grant of summary judgment against the hospital and remanded for the district court to consider the hospital’s claims of preemption. The court determined that the district court was, however, correct in dismissing the hospital’s RICO claims. The court also affirmed the district court’s determination that the insurance company was barred from bringing ERISA claims by the two-year statute of limitations.

U.S. v. Universal Health Servs. Inc. – March 2015 (Summary)

FALSE CLAIMS ACT

U.S. v. Universal Health Servs. Inc., No. 14-1423 (1st Cir. Mar. 17, 2015)

The United States Court of Appeals for the First Circuit overturned a lower court’s dismissal of a False Claims Act (“FCA”) claim, holding that the relators adequately stated that a clinic fraudulently misrepresented its compliance with state regulations when it submitted claims for payment.

Relators’ daughter was sent to defendant, a mental health clinic, for therapy after experiencing behavioral problems at school. The daughter began therapy sessions with a counselor, who held no professional license. The daughter was transferred to a different counselor after the relators complained of her care. The second counselor was also unlicensed. Next, the daughter was transferred within the clinic to a therapist, who held herself out as a Ph.D. In actuality, the therapist trained at an unaccredited online school and had her application for a professional license rejected. Nonetheless, the therapist diagnosed the daughter with bipolar disorder.

After several months, the daughter’s school informed the relators that the daughter must see a psychiatrist if they wished for her to continue enrollment. The “therapist” referred the relators to a “psychiatrist” within the clinic. The “psychiatrist” prescribed the daughter medication for her bipolar disorder, which caused a fatal adverse reaction. Relators later found out the “psychiatrist” was actually only a nurse and not under the supervision of any clinic staff psychiatrists. Moreover, the only psychiatrist the clinic had on staff was not even board-certified.

Relators brought suit, claiming that the clinic violated the FCA when it received payments from the state despite the fact that it was in violation of 14 separate regulations promulgated by the state department of health. The lower court dismissed relators’ suit, holding that the regulations relators rely on were conditions of participation, not conditions of payment.

The court overruled the lower court, holding that the court’s distinction was incorrect because relators’ claims dealt with conditions of payment. One of these conditions for payment, under the state department of health regulations, is to ensure appropriate supervision. Here, relators alleged that counselors, the therapist, and the psychiatrist did not receive proper supervision from the clinic. Additionally, relators alleged that the clinic failed to maintain a properly licensed psychiatrist on staff, which is a material condition to receive payment under the state department of health regulations.

Cooper v. Pottstown Hosp. Co. – March 2015 (Summary)

FRAUD AND ABUSE

Cooper v. Pottstown Hosp. Co., Civil Action No. 13-01137 (E.D. Pa. Mar. 13, 2015)

The United States District Court for the Eastern District of Pennsylvania dismissed an Anti-Kickback Statute violation claim brought by a surgeon against a hospital, holding that the surgeon was trying to manufacture an Anti-Kickback Statute violation.

While employed as an independent contractor at the hospital, the surgeon entered into a contract to provide on-call services at the hospital. Subsequently, the surgeon obtained a financial interest in a competing surgical facility. The hospital terminated the surgeon’s on-call contract after he refused the hospital’s requests for him to divest his interest in the facility. Soon after, the hospital entered into another on-call contract with the surgeon that allowed him to retain his financial interest in the surgical facility, as long as he did not gain employment with another hospital within 30 miles. That same month, the hospital terminated the surgeon’s employment contract due to his financial interest in the competing surgical facility. The surgeon secured new employment at another hospital within the 30-mile radius, so the hospital terminated his second on-call contract. The surgeon brought suit, claiming that the hospital’s on-call contracts were covert ways of inducing exclusive referrals to the hospital, in violation of the Anti-Kickback Statute.

The court dismissed the surgeon’s claims, stating that the surgeon failed to plead facts to show that the hospital’s on-call contracts were not just business arrangements, but instead were intended to induce referrals. The surgeon’s compensation was never in exchange for the referral of patients to the hospital or above fair market value. Furthermore, the second on-call contract allowed him to retain his financial stake in the competing surgical facility, which is inconsistent with the surgeon’s theory that the hospital intended to induce the surgeon to refer patients to it exclusively.

In re Karakashian – March 2015 (Summary)

MISREPRESENTATIONS

Chaganti v. Mo. Bd. of Registration for the Healing Arts, WD 77746 (Mo. Ct. App. Mar. 10, 2015)

In re Karakashian, Docket No. BDS 8660-07 (N.J. Super. Ct. App. Div. Mar. 16, 2015)

These two cases involve judicial review of disciplinary actions taken by state medical boards against physicians. In Chaganti, the Missouri Board of Registration for the Healing Arts took disciplinary action against a physician who had omitted prior hospital affiliations on an application for staff privileges. In Karakashian, the New Jersey State Board of Medical Examiners took action against a physician for failing to disclose the existence of a pending investigation against his practice on an application for staff privileges.

In Chaganti, the hospital revoked the physician’s privileges after discovering that he had failed to list his affiliations with three other hospitals on a reapplication for active staff privileges.   Upon learning of this, the Missouri Board of Healing Arts conducted a hearing on the matter. The Missouri Board concluded that although the physician had not intentionally failed to update his information, he had acted in a manner that constituted “unprofessional conduct.” Reviewing this decision on appeal, the Missouri Court of Appeals reversed, holding that the Board had no lawful basis to assert a disciplinary action for unprofessional conduct in the matter. The court emphasized that the definition of “unprofessional conduct” was “somewhat circular” and that the physician had not received adequate notice that he could be disciplined for this omission.

In Karakashian, the New Jersey Attorney General was conducting an investigation of the physician over alleged acts of negligence and violation of professional standards. While his case was under review by the Office of Administrative Law, the physician applied for renewal of staff privileges at a hospital. He failed to disclose the existence of the investigation on this renewal application. The New Jersey Board of Medical Examiners ultimately concluded that the physician had made false and deceptive statements and suspended him for two years and assessed civil penalties and costs. Reviewing this decision on appeal, the New Jersey Superior Court affirmed the Board’s ruling. The court agreed with the Board’s reasoning that discipline was required under these circumstances in order to ensure that physicians act in a trustworthy fashion with patients and hospitals.

These cases illustrate how courts in different states can resolve similar cases in different ways. Here, the Missouri Court of Appeals held that the Board could not assert a disciplinary action over the physician’s omission of other hospital affiliations. In contrast, the New Jersey Superior Court upheld the Board’s disciplinary action over a physician’s omission of a pending investigation.

Chaganti v. Mo. Bd. of Registration for the Healing Arts – March 2015 (Summary)

MISREPRESENTATIONS

Chaganti v. Mo. Bd. of Registration for the Healing Arts, WD 77746 (Mo. Ct. App. Mar. 10, 2015)

In re Karakashian, Docket No. BDS 8660-07 (N.J. Super. Ct. App. Div. Mar. 16, 2015)

These two cases involve judicial review of disciplinary actions taken by state medical boards against physicians.  In Chaganti, the Missouri Board of Registration for the Healing Arts took disciplinary action against a physician who had omitted prior hospital affiliations on an application for staff privileges. In Karakashian, the New Jersey State Board of Medical Examiners took action against a physician for failing to disclose the existence of a pending investigation against his practice on an application for staff privileges.

In Chaganti, the hospital revoked the physician’s privileges after discovering that he had failed to list his affiliations with three other hospitals on a reapplication for active staff privileges.   Upon learning of this, the Missouri Board of Healing Arts conducted a hearing on the matter. The Missouri Board concluded that although the physician had not intentionally failed to update his information, he had acted in a manner that constituted “unprofessional conduct.” Reviewing this decision on appeal, the Missouri Court of Appeals reversed, holding that the Board had no lawful basis to assert a disciplinary action for unprofessional conduct in the matter. The court emphasized that the definition of “unprofessional conduct” was “somewhat circular” and that the physician had not received adequate notice that he could be disciplined for this omission.

In Karakashian, the New Jersey Attorney General was conducting an investigation of the physician over alleged acts of negligence and violation of professional standards. While his case was under review by the Office of Administrative Law, the physician applied for renewal of staff privileges at a hospital. He failed to disclose the existence of the investigation on this renewal application. The New Jersey Board of Medical Examiners ultimately concluded that the physician had made false and deceptive statements and suspended him for two years and assessed civil penalties and costs. Reviewing this decision on appeal, the New Jersey Superior Court affirmed the Board’s ruling. The court agreed with the Board’s reasoning that discipline was required under these circumstances in order to ensure that physicians act in a trustworthy fashion with patients and hospitals.

These cases illustrate how courts in different states can resolve similar cases in different ways. Here, the Missouri Court of Appeals held that the Board could not assert a disciplinary action over the physician’s omission of other hospital affiliations. In contrast, the New Jersey Superior Court upheld the Board’s disciplinary action over a physician’s omission of a pending investigation.

Winger v. Meade Dist. Hosp. – March 2015 (Summary)

TERMINATION OF TEMPORARY PRIVILEGES

Winger v. Meade Dist. Hosp., Case No. 13-1428-JTM (D. Kan. Mar. 9, 2015)

The United States District Court for the District of Kansas granted a hospital’s motion for summary judgment against a due process claim filed by a former employee. The former employee, a physician, sued the hospital after it terminated his employment.

At issue in the case was whether or not the termination deprived the physician of his due process rights. The hospital argued that the physician had explicitly received “limited temporary privileges” and had no rights to any particular procedures under either his employment agreement or the bylaws. Furthermore, the hospital explained that it terminated the physician after receiving reports that he deviated from the standard of care.

The court agreed with the hospital. It focused on the fact that the physician had agreed to receive only temporary privileges, and noted that the bylaws recognize that certain staff members hold “temporary” status and can be terminated without a hearing or appeal. In addition, it recognized that the physician had been under review for providing substandard care to two patients and that he had declined to participate in the hospital’s third party peer review process. Moreover, the physician had instead sent confidential patient information, without authorization, to another doctor for review.

The court ruled that the physician failed to show any deprivation of due process. It granted summary judgment to the hospital.

Tinal v. Norton Healthcare, Inc. – May 2014 (Summary)

Patient Safety and Quality Improvement Act of 2005 (“PSQIA”)

Tinal v. Norton Healthcare, Inc., Civil Action No. 3:11-CV-295-S (W.D. Ky. May 7, 2014)

The Tinal opinion, one of the first to interpret the PSQIA, involved a discovery dispute in a lawsuit brought by a pharmacist alleging that the defendant health system unlawfully terminated her employment in violation of the Americans with Disabilities Act. The health system contended that the pharmacist was terminated because she made a series of errors in dispensing medications.   Because the plaintiff had to prove she was treated differently than other similarly-situated employees, she sought root cause analyses and records involving errors of other pharmacists as well as her own in order to show disparate treatment.

Norton refused to produce the requested documents, claiming that they were privileged as “patient safety work product” under the PSQIA. A magistrate judge ordered Norton to produce a privilege log listing each of the documents that it was withholding along with a general description of the contents of the privileged documents. Norton produced a privilege log listing 84 documents. Seventy-seven of the documents were listed as medication event reports. The form on which the reports were submitted was described but the content of each individual report was not. The description included the following sentence: “The unique information with each report is not generally described within this privilege log because the factual relevancy of the event is not an element for the Patient Safety Work Product privilege.”

The plaintiff claimed that the patient safety work product privilege does not apply to her employment discrimination case given the legislative history of the PSQIA and the well-established policy in favor of complete discovery in federal civil rights and discrimination cases.

Norton argued that so long as it processed the information at issue as part of a patient safety evaluation system (“PSES”) for report to a patient safety organization (“PSO”), and the information itself falls within the designation of patient safety work product it is confidential and absolutely protected. Norton further argued that because the language of the PSQIA is plain and unambiguous, there was no reason, and would be improper, for the court to construe its meaning by examining the common law meaning of its terms or referring to the PSQIA’s legislative history.

The court acknowledged that the impetus behind the PSQIA was to limit medical malpractice exposure of health care providers and there is no indication in the legislative history of the Act that Congress had in mind the possibility that the patient safety work product privilege would ever be asserted in the context of a federal civil rights action. Nonetheless, the court held that the documents at issue were privileged under the plain language of the statute.

 

Landrum v. Delta Reg’l Med. Ctr. – March 2015 (Summary)

AMERICANS WITH DISABILITIES ACT

Landrum v. Delta Reg’l Med. Ctr., Civil Action No. 4:13-cv-180-JMV (N.D. Miss. Mar. 6, 2015)

The U.S. District Court for the Northern District of Mississippi granted summary judgment in favor of a medical center, dismissing a former employee’s allegations that the medical center retaliated against him, in violation of the ADA, for complaining about the treatment of mentally disabled patients. In his lawsuit, the employee claimed that he had reported concerns that mentally ill patients were being inadequately supervised and requested a reasonable accommodation to provide a safe environment for them. He further alleged that he was terminated as a result, in violation of the Americans with Disabilities Act (“ADA”). The medical center sought summary judgment, arguing that the ADA does not protect employees from retaliation when they raise concerns about the treatment of non-employees. In the end, the court held that the issue is whether the employee engaged in activity protected under the ADA and, therefore, was protected under the Act. In this case, the issue was whether the employee was protected under the ADA for complaining to a hospital that its supervision/treatment of mentally ill patients should be different that that dictated by the hospital’s current protocols. Quoting the United States Court of Appeal’s decision in Frielich v. Upper Chesapeake Health Inc., the court noted that “[e]very disagreement over the adequacy of hospital expenditures or the provision of patient care is not an ADA issue. If it were, courts would be drawn into medical resource disputes quite beyond their expertise and hospital personnel would be diverted by litigation from their primary task of providing medical attention to those in their charge.” Finally, the court concluded: “this court does not overlook the importance of maintaining adequate levels of patient care, but it is not the role of a federal court under the ADA to umpire disagreements between a hospital and staff over what constitutes the most appropriate manner of patient care.”

 

Simpson v. Beaver Dam Cmty. Hosps. – March 2015 (Summary)

RACIAL DISCRIMINATION

Simpson v. Beaver Dam Cmty. Hosps., No. 14-2269 (7th Cir. Mar. 11, 2015)

The United States Court of Appeals for the Seventh Circuit affirmed summary judgment in favor of a hospital that was sued for racial discrimination by a physician who withdrew his application for medical staff appointment after being informed by the Chief of Staff that there were a number of red flags related to his application and, if the application were denied, he would be reported to the National Practitioner Data Bank.

In the lower court’s decision, Simpson v. Beaver Dam Cmty. Hosp., Inc., No. 13-cv-40-bbc (W.D. Wis. May 9, 2014), the U.S. District Court for the Western District of Wisconsin discussed the physician’s allegations of racial discrimination prior to granting summary judgment to the hospital. Specifically, in 2010, the physician, who was African-American, was offered employment in a clinic affiliated with the hospital, dependent on his attainment and maintenance of medical staff membership and clinical privileges. During the credentialing process, several “red flags” arose regarding the physician’s application, including his need to take an oral exam to obtain a medical license in the state of Wisconsin, a negative reference describing his disruptive behavior, two medical malpractice claims which were filed when the physician was not insured, and a probationary period during his residency. Following a “heads-up” call from the Chief of Staff, to prevent a report to the National Practitioner Data Bank in the event his application were to be denied, the physician withdrew his application.

Thereafter, the physician sued the hospital, claiming that he was discriminated against because of his race. In ruling on the hospital’s motion for summary judgment, the court determined that the hospital’s concerns regarding the “red flags” were not unreasonable. For example, the oral exam was a deviation from the normal licensure process and, as such, without evidence pointing toward a lack of sincerity, the hospital was well within its right to consider it. Further, it was reasonable for the hospital to rely on the negative reference. Similarly, the hospital was under no obligation to comply with the physician’s request not to contact a former employer who the physician assumed gave the negative reference. The court also held that the hospital’s employment offers to three Caucasians after the physician withdrew his application could not support the physician’s claims. None of the Caucasian physicians’ applications contained problems similar to the physician’s application. As a result, the physician failed to show that the hired physicians were similarly situated.Top of Form

On appeal, the Seventh Circuit upheld the grant of summary judgment in favor of the hospital. Notably, the court found the Chief of Staff’s heads-up call to constitute an adverse employment action, stating that the Chief’s “warning indicated that it would be futile for Simpson to maintain his application. The writing was on the wall.” Nevertheless, the court held that Dr. Simpson could not maintain a case of racial discrimination because he offered no direct evidence of racial discrimination. The court emphasized that comments by the Chief of Staff wishing Dr. Simpson good luck in finding a future opportunity that is a “better fit” are not expressly or impliedly discriminatory. Further, the hospital had legitimate, nondiscriminatory concerns about the physician’s application and those concerns were not refuted by the physician.

 

U.S. ex rel. Gravett v. Methodist Med. Ctr. of Ill. – March 2015 (Summary)

QUI TAM – FALSE CLAIMS ACT, ORIGINAL SOURCE

U.S. ex rel. Gravett v. Methodist Med. Ctr. of Ill., Case No. 12-1008 (C.D. Ill. Mar. 4, 2015)

The United States District Court for the Central District of Illinois dismissed a False Claims Act lawsuit brought by an ED physician against the hospital where he used to work, holding that, with respect to the patients treated after the physician stopped working at the hospital, the physician could not establish that he had any direct, independent knowledge of the patients and their treatments. In fact, the court held, the physician was not the original source of information on which the claims were based. Instead, the physician had gathered the information supporting those claims from the U.S. Attorney’s Office (to whom the information had been disclosed by the hospital during prior investigations).

With respect to false claims alleged to have been made with respect to patients treated while the physician was working at the hospital, the court held that the physician failed to plead sufficient particularity. Specifically, the court noted that the physician merely speculated that, after using a software program to upcode the services actually provided by physicians, the hospital caused false claims to be submitted for Medicare reimbursement. The failure to provide specific information concerning at least one false claim actually submitted to the government was deemed fatal to the physician’s claims.