U.S. ex rel. Tahlor v. AHS Hosp. Corp. (Amended Opinion Summary)

QUI TAM/FALSE CLAIMS ACT

AMENDED OPINION (Correction of Clerical Errors in August 26, 2014 Additional Opinion)

U.S. ex rel. Tahlor v. AHS Hosp. Corp., Civ. No. 2:08-cv-02042 (WJM) (D. N.J. Sept. 10, 2014)

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ADDITIONAL OPINION

U.S. ex rel. Tahlor v. AHS Hosp. Corp., Civ. No. 2:08-cv-02042 (WJM) (D. N.J. Aug. 26, 2014)

The United States District Court for the District of New Jersey granted in part and denied in part motions to dismiss filed by multiple health care practitioners and providers accused of submitting false claims to Medicare. A physician advisor and nurse case manager, employees of one of the defendant hospitals, filed the lawsuit on behalf of the government.

Two separate alleged fraudulent schemes were in dispute. Under the first one, the health care providers allegedly billed Medicare for unnecessary inpatient hospital services. In particular, these providers billed for inpatient stays rather than “observation.” The second one involved allegations that patients were kept in the hospital for at least three days, so that Medicare would cover the patients’ post-hospital care at skilled nursing facilities.

The court dismissed certain claims that had been dealt with in a prior phase of the lawsuit. However, the court denied motions to dismiss the remaining claims, concluding that the relators had alleged sufficient facts for this portion of the lawsuit to proceed to discovery. The court also rejected the defendants’ argument that the statute of limitations precluded some claims from being litigated. The court held that an administrative order issued earlier in the case was sufficient to toll the statute of limitations. Finally, the court denied a motion to strike regarding certain allegations involving incorrect claims. The court stated that the allegations were not sufficiently immaterial or prejudicial to warrant striking them from the lawsuit.

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ORIGINAL OPINION

U.S. ex rel. Tahlor v. AHS Hosp. Corp., No. 2:08-cv-02042 (D. N.J. Oct. 31, 2013)

The U.S. District Court for the District of New Jersey granted in part and denied in part a hospital’s motion to dismiss the qui tam False Claims Act (“FCA”) claims brought by a  physician and a case manager (the “Relators”).  The Relators argued that the hospital was billing Medicare for expensive inpatient practices when it should have been billing for less expensive observation services. Months after the physician filed his original complaint in court, the hospital declined to renew his contract, which he alleged was in retaliation for his lawsuit. Before the physician’s appeal, the government intervened and entered into a partial settlement with the hospital and its parent corporation.

The district court dismissed the Relators’ improper billing claims based on the FCA’s “public disclosure bar.”  Although the information was kept secret for business purposes, the court held that audit communications by a recovery audit contractor were essentially a public disclosure of the fraudulent information. Further, the Relators were not an original source of the information, needed to overcome the public disclosure bar, because they did not have direct and independent knowledge of the Medicare billing. The court noted the settlement reached between the hospital and the government put the government on notice that improper billing was occurring.

The district court also held that the Relators did not have enough information to allege that the hospital was knowingly engaged in the fraudulent billing of Medicare.

 

U.S. ex rel. Tahlor v. AHS Hosp. Corp. (Additional Opinion Summary)

QUI TAM/FALSE CLAIMS ACT

ADDITIONAL OPINION

U.S. ex rel. Tahlor v. AHS Hosp. Corp., Civ. No. 2:08-cv-02042 (WJM) (D. N.J. Aug. 26, 2014)

The United States District Court for the District of New Jersey granted in part and denied in part motions to dismiss filed by multiple health care practitioners and providers accused of submitting false claims to Medicare. A physician advisor and nurse case manager, employees of one of the defendant hospitals, filed the lawsuit on behalf of the government.

Two separate alleged fraudulent schemes were in dispute. Under the first one, the health care providers allegedly billed Medicare for unnecessary inpatient hospital services. In particular, these providers billed for inpatient stays rather than “observation.” The second one involved allegations that patients were kept in the hospital for at least three days, so that Medicare would cover the patients’ post-hospital care at skilled nursing facilities.

The court dismissed certain claims that had been dealt with in a prior phase of the lawsuit. However, the court denied motions to dismiss the remaining claims, concluding that the relators had alleged sufficient facts for this portion of the lawsuit to proceed to discovery. The court also rejected the defendants’ argument that the statute of limitations precluded some claims from being litigated. The court held that an administrative order issued earlier in the case was sufficient to toll the statute of limitations. Finally, the court denied a motion to strike regarding certain allegations involving incorrect claims. The court stated that the allegations were not sufficiently immaterial or prejudicial to warrant striking them from the lawsuit.

AMENDED OPINION (Correction of Clerical Errors in August 26, 2014 Additional Opinion)

U.S. ex rel. Tahlor v. AHS Hosp. Corp., Civ. No. 2:08-cv-02042 (WJM) (D. N.J. Sept. 10, 2014)

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ORIGINAL OPINION

U.S. ex rel. Tahlor v. AHS Hosp. Corp., No. 2:08-cv-02042 (D. N.J. Oct. 31, 2013)

The U.S. District Court for the District of New Jersey granted in part and denied in part a hospital’s motion to dismiss the qui tam False Claims Act (“FCA”) claims brought by a  physician and a case manager (the “Relators”).  The Relators argued that the hospital was billing Medicare for expensive inpatient practices when it should have been billing for less expensive observation services. Months after the physician filed his original complaint in court, the hospital declined to renew his contract, which he alleged was in retaliation for his lawsuit. Before the physician’s appeal, the government intervened and entered into a partial settlement with the hospital and its parent corporation.

The district court dismissed the Relators’ improper billing claims based on the FCA’s “public disclosure bar.”  Although the information was kept secret for business purposes, the court held that audit communications by a recovery audit contractor were essentially a public disclosure of the fraudulent information. Further, the Relators were not an original source of the information, needed to overcome the public disclosure bar, because they did not have direct and independent knowledge of the Medicare billing. The court noted the settlement reached between the hospital and the government put the government on notice that improper billing was occurring.

The district court also held that the Relators did not have enough information to allege that the hospital was knowingly engaged in the fraudulent billing of Medicare.

 

Miss. State Bd. of Med. Licensure v. Harron (Summary)

PHYSICIAN LICENSURE

Miss. State Bd. of Med. Licensure v. Harron, No. 2013-SA-00654-COA (Miss. Ct. App. Sept. 16, 2014)

The Court of Appeals of Mississippi overturned a lower court’s decision and held that a physician was more than just an expert witness in silicosis litigation when he diagnosed potential plaintiffs with silicosis, thus he is subject to the Mississippi State Board of Medical Licensure. Plaintiff, a physician who was licensed to practice medicine in Mississippi, was employed to screen potential plaintiffs for asbestosis and silicosis-related diseases in preparation for multidistrict litigation that was held in Texas. The physician was listed as the diagnosing physician on 2,600 of the claims. He testified that he allowed medically untrained secretaries and typists to interpret his reports, insert a diagnosis, stamp his signature on the reports and send them out with no review by the physician.

During the ensuing litigation, the physician was dismissed as an expert witness and sanctioned by the court for his lack of quality controls that produced results that were “staggering, implausible, and not scientifically plausible.”

The Texas Medical Board instituted disciplinary proceedings against him as a result of these activities and he agreed to surrender his Texas license to practice medicine. The defendant, the Mississippi State Board of Medical Licensure, then investigated the physician, found that he engaged in unprofessional conduct in the Texas ligation that was likely to defraud or harm the public, and barred him from renewing his Mississippi medical license. The physician appealed, and the lower court found in favor of the Physician, holding that the Mississippi State Board of Medical Licensure did not have jurisdiction because the physician’s conduct occurred out of state and his conduct was in the capacity of an expert witness, not a practicing physician.

The trial court’s decision was reversed by the Mississippi Court of Appeals. The court of appeals held that the physician was more than just an expert witness for the potential plaintiffs; he was actually practicing medicine when he diagnosed them with silicosis. Therefore, the Mississippi State Board of Medical Licensure had proper jurisdiction. Furthermore, the court of appeals stated that the Mississippi State Board of Medical Licensure was correct when it found the physician had engaged in unprofessional behavior when he “recklessly” diagnosed patients with silicosis.

In re Guardianship of Tschumy (Summary)

CONSENT

In re Guardianship of Tschumy, No. A12-2179 (Minn. Sept. 17, 2014)

The Supreme Court of Minnesota affirmed the court of appeals’ ruling that a court ordered guardian may consent to the removal of a ward’s life support system when all interested parties agree that removal is in the ward’s best interest. The district court appointed a guardian to an incapacitated patient pursuant to a state statute. This appointment included “the power to give any necessary consent to enable the ward to receive necessary medical…care.” Subsequently, the patient suffered an “anoxic brain injury” in which the prognosis was “dire.” The patient’s treatment team was in unanimous agreement that he suffered irreversible brain damage and would not survive. The court appointed guardian petitioned the court to authorize the removal of life support to the patient. The district court held that the medical power granted to a guardian does not grant the guardian the unrestricted authority to direct the removal of life support. The guardian appealed, and the court of appeals stated that absent a limitation in the guardianship order, the medical consent power granted under the statute includes the power to authorize the removal of life support without further authorization from the court.

The Supreme Court of Minnesota affirmed the court of appeals holding. The Supreme Court explained that the guardian had the consent to authorize life-sustaining treatment, thus a reasonable interpretation of “consent” would include the authority to withdraw life-sustaining treatment. Moreover, absent any express language in the guardianship order, the guardian had the authority to remove the life-sustaining treatment without court approval when all interested parties agree that the removal is in the ward’s best interest. This is consistent with prior court decisions authorizing family members of incapacitated patients to make similar decisions.

Kazmi v. Dep’t of Fin. and Prof’l Regulation (Summary)

PHYSICIAN LICENSURE

Kazmi v. Dep’t of Fin. and Prof’l Regulation, No. 1-13-0959 (Ill. App. Ct. Sept. 10, 2014)

The Appellate Court of Illinois confirmed a decision by the Illinois Department of Financial and Professional Regulation (“Illinois Board of Medicine”) to revoke a physician’s license to practice medicine in the State of Illinois. In so doing, the Court of Appeals reversed the decision of a lower court, which had struck down the initial revocation by the Illinois Board of Medicine as overly harsh and limited the punishment to a suspension of the physician’s license for a minimum of nine months.

At trial, the physician admitted that he had made numerous misrepresentations on his application for an Illinois medical license. These misrepresentations included fabricated employment histories, omissions of various disciplinary and performance problems in past residencies, the failure to disclose a suspension for prescribing controlled substances for his wife, and residencies that he had never completed. The court also noted that the state of Ohio had barred this physician from ever obtaining a medical license because of similar problems.

Based upon these facts and circumstances, the court concluded that the physician’s misrepresentations had prevented the Illinois Board of Medicine from conducting any meaningful assessment of his fitness to practice medicine. The court explained that fraud had “tainted the process from the outset” and that any sanction short of revocation would permit the physician to keep a license he was never entitled to in the first place. Concluding that the Illinois Board of Medicine exercised its authority in an appropriate fashion, the court reversed the lower court’s decision and reinstated the original revocation of the physician’s license to practice medicine in Illinois.

Exeter Hosp. v. Kwiatkowski (Summary)

VICARIOUS LIABILITY

Exeter Hosp. v. Kwiatkowski, No. 14-cv-009-SM (D. N.H. Sept. 4, 2014)

A cardiac catheterization technician was employed at 19 hospitals in the span of nine years, and tested positive for hepatitis C. He often stole drugs from a hospital, used them, and refilled the depleted syringes with saline. The tainted needles were then used on patients, infecting at least 32 with hepatitis C. The hospital settled nearly all suits with affected patients. It then sought statutory contribution from the technician, an employment agency with which he had been affiliated, and the American Registry of Radiologic Technologists (“ARRT”). The employment agency and AART filed motions to dismiss the case, arguing that the hospital failed to allege sufficient facts to show that they had a duty of care of the hospital’s patients.

The court granted the motion to dismiss the employment agency, finding that the hospital had pled insufficient facts for a determination that the agency could have foreseen the criminal conduct that the technician would undertake while working for the hospital. The court denied ARRT’s motion to dismiss, finding that the hospital had alleged sufficient facts to suggest that ARRT had a broader range of duties and responsibilities as a certifying agency. As such, the agency likely had greater knowledge of the technician’s wrongful acts and could have investigated the incident or taken action to revoke the technician’s credentials.

Pinnacle Healthcare v. Sheets (Summary)

RESTRICTIVE COVENANTS

Pinnacle Healthcare v. Sheets, No. 37A04-1401-CT-39 (Ind. Ct. App. Sept. 10, 2014)

The Court of Appeals of Indiana ordered a trial court to hold a hearing on a hospital’s request for a preliminary injunction to require a formerly employed physician to comply with the terms of a noncompete agreement. The appellate court directed the trial court that noncompetition agreements with physicians in Indiana are not “per se unreasonable,” even if they deprive a community of important medical services or if they deny patients the opportunity to choose their own medical provider.

During the summer of 2011, the physician sold his practice to Pinnacle Healthcare (“Pinnacle”) and became one of its employed physicians. Under the terms of his employment agreement, he was prohibited from opening a competing medical practice within 25 miles of Pinnacle and was prohibited from soliciting other employees to leave Pinnacle and from making negative comments about Pinnacle.

In December 2013, the physician gave notice to Pinnacle that he was terminating the employment agreement due to Pinnacle’s alleged failure to pay him funds owed under their agreement. He opened a competing medical practice and began treating former patients at this new location. Pinnacle petitioned the trial court to enjoin the physician from engaging in these activities, but the circuit court refused, citing a shortage of physicians in the community. It concluded that this would be “too great a burden against the public interest.”

The Court of Appeals of Indiana reversed. It explained that noncompetition agreements with physicians are permissible under Indiana law even if they deprive a community of important medical services. Furthermore, it noted that the trial court did not adequately consider Pinnacle’s claims under the non-solicitation and non-disparagement clauses of the employment agreement. It reversed the trial court’s denial of the injunction and remanded with instructions for the trial court to reconsider all of Pinnacle’s allegations.

Chapman v. Lourdes Med. Ctr. of Burlington Cnty. (Summary)

DISCRIMINATION

Chapman v. Lourdes Med. Ctr. of Burlington Cnty., No. A-0120-12T1 (N.J. Super. Ct. App. Div. Sept. 10, 2014)

The Superior Court of New Jersey, Appellate Division affirmed a lower court’s dismissal of an obstetrician’s discrimination and tortious interference claims against a hospital, holding the hospital’s decision was based on sufficient reliable evidence.

Plaintiff, an obstetrician, had clinical privileges at the hospital. Over a seven-year period, he was involved in four medical malpractice suits. Two involved maternal deaths, two involved fetal deaths, and one also involved severe maternal injury. In one of the cases, the New Jersey Board of Medical Examiners found the obstetrician “grossly negligent” and issued a consent order reprimanding and fining him.

The chair of the OB/GYN Department requested the hospital’s Medical Executive Committee (“MEC”) to investigate the obstetrician. The investigation committee recommended that the obstetrician enroll in a continuing education program that involved extensive training in complex care. The MEC rejected this recommendation and voted to revoke the obstetrician’s privileges. This decision was ultimately adopted by the hospital. The obstetrician brought suit, claiming race discrimination, tortious interference with prospective economic advantage, breach of implied contract, and civil conspiracy.

The court affirmed the lower court’s dismissal of all the claims. The court held that the hospital’s decision to revoke the obstetrician’s privileges was supported by sufficient reliable evidence and any other inference would be based on speculation. Furthermore, the court explained that the obstetrician was not treated differently than any other similarly situated individuals because the obstetrician was the only person involved in all four medical malpractice claims.

Loyd v. St. Joseph Mercy Oakland (Summary)

PEER REVIEW PRIVILEGE

Loyd v. St. Joseph Mercy Oakland, No. 13-2335 (6th Cir. Sept. 10, 2014)

The United States Court of Appeals for the Sixth Circuit affirmed a lower court’s dismissal of a security guard’s age, race, and sex discrimination claims against a hospital, holding that the hospital’s internal report on the security guard’s termination was protected by the peer review privilege and the security guard failed to show that she was discriminated against.

Plaintiff, a 52-year-old woman, was a security guard at the hospital. The security guard, already on final written warning for insubordination and leaving her post, was called to restrain an agitated and combative psychiatric patient. The security guard questioned the nurse’s orders and informed the patient that she was free to go. The patient became even more agitated and tried to remove her IV. Additional security guards were called, and the patient was properly restrained.

The hospital performed an internal investigation as part of its quality assurance review system. Upon the investigation’s conclusion, the hospital terminated the security guard. She then brought suit claiming age, race, and sex discrimination.

During discovery, the security guard attempted to compel the production of the quality assurance report. The hospital objected, claiming that it was protected by the peer review privilege.

The court held that the quality assurance report was protected by the peer review privilege because state courts have construed the privilege to encompass reports involving staff members who are not physicians or nurses. Next, the court affirmed the dismissal of the security guard’s race and sex discrimination claims because she had not proved she was treated differently or less favorably than similarly situated employees outside of the protected classes because she was replaced by a woman of the same race. Lastly, the court affirmed the dismissal of the security guard’s age discrimination claim because the hospital’s reason for terminating her was not pretextual.

Robinson v. CareAlliance Health Servs. (Summary)

AMERICANS WITH DISABILITIES ACT

Robinson v. CareAlliance Health Servs., Civil Action No. 2:13-cv-1916-RMG (D. S.C. Sept. 4, 2014)

The United States District Court for the District of South Carolina denied a hospital’s motion to dismiss an obstetrician’s disability discrimination claim, holding that a non-employee obstetrician with clinical privileges is not precluded from bringing a “reasonable accommodation” claim against a “place of public accommodation.”

Plaintiff, an obstetrician, was not able to stand for long periods of time due to a foot fracture stemming from diabetes. Therefore, he delivered babies while sitting on a rolling stool. After a complicated caesarian performed from the stool resulted in an infection to the patient, the hospital suggested the obstetrician take a medical leave of absence. After the leave of absence concluded, the obstetrician experienced difficulty getting his privileges reinstated.

The obstetrician sued, claiming the hospital had violated the Americans with Disabilities Act (“ADA”) by not providing him with a “reasonable accommodation” by allowing him to use a rolling stool and allowing nurses to carry babies for him. The hospital claimed that the obstetrician is precluded from such a claim because he was given privileges at the hospital and is not a member of the public seeking services at “a place of public accommodation.”

The court held that a non-employee obstetrician with hospital privileges is not precluded from bringing a “reasonable accommodation” claim against a “place of public accommodation.” The court relied on the United States Supreme Court’s broad interpretation of the ADA to include non-employees with privileges. The court recognized that other lower courts have used “clients or customers” to limit the ADA’s scope of who can assert a claim against “a place of public accommodation.” However, the court believed that the weight of authority allowed such a claim.