Bhambhani v. Innovative Health Sols.

RITU BHAMBHANI, M.D., et al., Plaintiffs, v. INNOVATIVE HEALTH SOLUTIONS, INC., et al., Defendants.

Civ. Action No. RDB-19-0355

United States District Court, D. Maryland

August 3, 2021

MEMORANDUM OPINION

Richard D. Bennett, United States District Judge

Plaintiffs Dr. Ritu Bhambhani (“Dr. Bhambhani”) and Dr Sudhir Rao (“Dr. Rao”) (collectively “Plaintiffs”), on behalf of themselves and others similarly situated, bring this putative class action lawsuit against Defendants Innovative Health Solutions, Inc. Innovative Healthcare Solutions, LLC, Acclivity Medical, LLC DragonSlayer Strategies LLC, Coleman Certified Medical Billing & Consultant, LLC, as well as Joy Long and Ryan Kuhlam in their individual capacities, alleging civil violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962(c) (Count One); conspiracy to commit civil violation of RICO, 18 U.S.C. § 1962(d) (Count Two); fraudulent misrepresentation (Count Three); intentional misrepresentation by concealment or non-disclosure (Count Four); and civil conspiracy (Count Five) against all Defendants. (Third Amended Complaint, ECF No. 97.)^[1]

Presently pending is a Motion to Dismiss filed by Defendant Ryan Kuhlman (“Kuhlman”), through which he seeks dismissal of all five counts filed against him. (ECF No. 102). The parties' submissions have been reviewed and no hearing is necessary. See Local Rule 105.6 (D. Md. 2021). For the reasons that follow, the Defendant's Motion (ECF No. 102) is DENIED. The Plaintiffs have sufficiently alleged Kuhlman's violation of the RICO statute, ^[2] and this Court therefore has personal jurisdiction over him with respect to all five counts. Furthermore, the Plaintiffs have satisfied the pleading standard of Rule 9(b) of the Federal Rules of Civil Procedure with respect to all five counts of the Third Amended Complaint. Counts Three, Four, and Five are not time barred, as the relation back doctrine applies.^[3]

BACKGROUND

When evaluating a motion to dismiss, this Court must “accept as true all well-pleaded facts in a complaint and construe them in the light most favorable to the plaintiff.” Wikimedia Found. v. Nat'l Sec. Agency, 857 F.3d 193, 208 (4th Cir. 2017) (citing SD3, LLC v. Black &amp Decker (U.S.) Inc., 801 F.3d 412, 422 (4th Cir. 2015)). Plaintiff Dr. Bhambhani is medical doctor practicing in Abingdon, Maryland and is board-certified in both Anesthesiology and Pain Medicine. (ECF No. 97 ¶ 16.) Dr. Rao is a medical doctor practicing primarily in Mount Airy, Maryland as well as other locations in Maryland, Virginia, and Pennsylvania. (Id. ¶ 17.) He is also board-certified in Anesthesiology and Pain Medicine. (Id.) Defendant IHS is an Indiana corporation alleged engaged in the marketing, selling, and distributing of a product known as the Neuro-Stim System (“Neuro-Stim”).

In 2014, Neuro-Stim was cleared by the Food and Drug Administration (“FDA”) for use in acupuncture. (Id. ¶ 2.) In the 510(k)-premarket clearance application^[4] submitted to the FDA, IHS specifically described the device as “an electro acupuncture device for use in the practice of acupuncture by qualified practitioners of acupuncture as determined by the states.” (Id. ¶ 2, Exh. 1.) However, IHS allegedly sold and marketed the device throughout the United States as a surgically implantable medical device. (Id. ¶ 3.)

According to the Plaintiffs, IHS sold, marketed, and distributed the Neuro-Stim in this manner through exclusive-rights sales-agent distributors (“Sales Agents”), including coDefendants Acclivity Medical, LLC (“Acclivity”) and Innovative Healthcare Solutions, LLC (“IHCS”). (Id. ¶ 3.) Acclivity was a Kentucky LLC, and prior to its dissolution in June of 2017, Acclivity was owned and controlled by its sole member, Defendant Kuhlman. (Id.) The Plaintiffs also allege that Kuhlman served IHS as its “National Director” and has been employed by IHS since January of 2013. (Id. ¶ 21.)

Dr. Bhambhani and Dr. Rao assert that IHS and its Sales Agents invested substantial sums in advertising and marketing the Neuro-Stim in a misleading manner throughout the United States, including on websites, at trade shows, in brochures, in newsletters, in video, on phone calls, in emails, and in on-site presentations at physician offices and ambulatory surgery centers. (Id.) For example, they allege that in a slide show used by ICHS in promoting the device to Dr. Bhambhani and other medical providers, ICHS explicitly referred to the Neuro-Stim as being “FDA-approved, ” claiming that it was the “first and only FDA approved electro-auricular, peripheral nerve stimulator currently on the market to treat acute and chronic pain.” (Id. ¶ 4. Exh. 2.) However, nowhere in the presentation did IHCS reference acupuncture or electroacupuncture. (Id.) Similarly, in a “[Frequently Asked Questions] Sheet for Clinicians” prepared by IHS and used by Acclivity and IHSC, the Neuro-Stim is referred to as “FDA cleared for targeting acute and chronic pain, ” but nowhere in the Frequently Asked Questions is the word acupuncture. (Id. ¶ 5, Exh. 3.)

The Plaintiffs allege that as a means of enticing Dr. Bhambhani, Dr. Rao, and other medical providers to purchase the Neuro-Stim and implement it into their clinical practices, the Defendants promoted the billing of the device using a specific set of codes used to report implantable nerve stimulators. (Id. ¶ 7.) This set of codes provided for between $4, 800.00 and $11, 400.00 per patient in reimbursement from payers for a procedure to implant the device. (Id.) IHS and its Sales Agents allegedly employed the services of independent coding consultants (“Coding Agents”), including but not limited to co-Defendant DragonSlayer Strategies LLC. (Id. ¶ 8.)

Dr. Rao was initially solicited to purchase the Neuro-Stim by Acclivity on or about September 15, 2015. (Id. ¶ 53.) That day she received an email from Matthew Miller, whose email signature identified him as a “Distributor/Principal of Acclivity.” (Id.) Attached to the email was a document entitled “ASC BILLING POST OP PAIN MANAGEMENT.” (Id. ¶ 53; Exh. 14.) That document provided coding and reimbursement advice consistent with the slide show provided to Dr. Bhambhani by IHCS and the overall alleged coding scheme. (Id. ¶ 53; Exh. 14.) Dr. Rao alleged asked Miller to provide information on the Neuro-Stim to one of his staff members, Ginny Goldbach (“Goldbach”). (Id. ¶ 54.) In response to this request, Miller forwarded Goldbach an email with several attachments, including the FAQ Sheet for Clinicians prepared by IHS, a document titled “[Neuro-Stim System]-Science Overview, ” and a brochure. (Id. ¶ 54; Exhs. 3, 15, 16.) None of these documents stated that the Neuro-Stim was FDA-clear as an electroacupuncture device. (Id. ¶ 54.) Consistent with instructions from IHS President Brian Carrico, none of the materials provided even used the word “acupuncture.” (Id. ¶¶ 29, 54.)

An hour after forwarding these documents, Miller also forwarded Goldbach an email from Defendant Kuhlman, attaching several “exemplar” Explanation of Benefits (“EOB”) statements. (Id. ¶ 55; Exh. 17.) The attached EOBs provided by Kuhlman showed payments to other medical providers from a variety of insurance companies and other third-party payers, including Medicare, for bills submitted under the codes allegedly improperly promoted by the Defendants as a part of the Neuro-Stim coding scheme. (Id. ¶ 55.) The email forwarded by Miller from Kuhlman was originally sent to Miller on September 20, 2015. (Id. at Exh. 17.) The subject line of the email was “EOB's, ” and the text of the email read, “See attached.” (Id.) The email is included in the Plaintiffs' list of “Chronological List of Communications Evidencing Wire Fraud.” (Id. at Exh. 20.) In his email to Goldbach, Miller identified how the EOBs demonstrated how Dr. Rao should code for the devices in order to receive large reimbursements. (Id. ¶ 55.)

Overall, the Plaintiffs allege that these exchanges between Miller, Kuhlman, Dr. Rao, and Goldbach demonstrated that “from the start, the promise of extraordinary reimbursement was the foundation of Acclivity's (on behalf of and as directed by IHS) pitch to Dr. Rao and his staff. (Id. ¶ 57.) Miller continued to advise Dr. Rao and his staff to use specific codes to bill for the device throughout 2015 and 2016. (Id. ¶¶ 58-59.) In all, between September 2015 and October 2016, Dr. Rao purchased 90 Neuro-Stims for a total of $45, 194.00 paid directly to Acclivity. (Id. ¶ 61.) Acclivity shipped hundreds of the Neuro-Stim devices to the Plaintiffs and others in Maryland from the address 456 Glengarry Way, Covington, KY 41011. (Id. at Exh. 10.)

The Plaintiffs allege that Kuhlman is personally responsible for misrepresentations made to the Plaintiffs and others as a Sales Agent for IHS promoting the Neuro-Stim. (Id. ¶ 21.) They allege that Acclivity, Kuhlman, and Miller were each members of the “NSS Enterprise.” (Id. ¶ 69.) “Kulhman and Miller were officers and/or executives with Acclivity, tasked with marketing and selling the [Neuro-Stim”] in defined geographic areas using the [Neuro-Stim System] Sales Materials or modified versions thereof.” (Id. ¶ 71(h).) Acclivity and other Sales Agents processed orders made by accounts, took payments from ordering medical providers, and then remitted payment to IHS who in turn would fulfill each order. (Id. ¶ 71(m).)

On February 6, 2019, Dr. Bhambhani filed suit against Defendant Innovative Health Solutions, Inc. (“IHS”) and Acclivity Medical, LLC (“Acclivity”) alleging fraudulent misrepresentation, intentional misrepresentation by concealment or non-disclosure, negligent misrepresentation, and negligence and seeking declaratory judgment that the Defendants knew or should have known of...