Buncombe Cnty., N.C. v. Team Health Holdings, Inc.

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BUNCOMBE COUNTY, NORTH CAROLINA, Plaintiff, v. TEAM HEALTH HOLDINGS, INC., et al., Defendants.

No. 3:22-CV-00420-DCLC-DCP

United States District Court, E.D. Tennessee, Knoxville Division

January 17, 2024

MEMORANDUM OPINION AND ORDER

CLIFTON L. CORKER, UNITED STATES DISTRICT JUDGE

This matter is before the Court on Defendants Team Health Holdings, Inc.'s (“Team Health Holdings”) Ameriteam Services, LLC's (“Ameriteam”), and HCFS Health Care Financial Services, LLC's (“HCFS”) Motion to Dismiss [Doc. 34], Motion to Strike [Doc. 37], and Motion to Stay Discovery [Doc. 40]. Plaintiff Buncombe County, North Carolina (“Buncombe County” or “the County”) responded [Docs 44, 45, 46] and Defendants replied [Docs. 47, 48, 49]. These motions are now ripe for disposition. For the reasons below Defendants' motions [Docs. 34, 37, 40] are DENIED.

I. FACTUAL BACKGROUND

Team Health Holdings is the parent company of several entities, including Ameriteam and HCFS, comprising what Buncombe County refers to as the “TeamHealth organization” [Doc. 30, ¶¶ 18-20]. The organization provides emergency department “staffing and administrative services through a network of subsidiaries, affiliates, and nominally independent entities and contractors” that the County calls the “TeamHealth System” [Doc. 30, ¶ 25]. It is “one of the largest [emergency department] staffing, billing, and collections companies in the United State” [Doc. 30, ¶ 30]. And it achieved its nationwide prominence by acquiring health care provider groups that staff hospital-based emergency departments [Id.]. This includes two entities that provide staffing services to hospitals in western North Carolina: Emergency Coverage Corporation (“ECC”) and Southeastern Emergency Physicians, LLC (“SEP”) [Doc. 30, ¶¶ 1, 21-22, 69].

Buncombe County is the administrator, funder, and sponsor of the Buncombe County Government Group Health Plan, through which the County provides health insurance to its employees [Doc. 30, ¶ 1]. The County outsources claims administration services to Blue Cross Blue Shield of North Carolina (“Blue Cross”) [Doc. 30, ¶ 17]. Because emergency services billing companies and providers do not typically submit medical records with their claims, third-party administrators like Blue Cross use an automated claims process [See Doc. 30, ¶¶ 36, 60]. Under this system, the provider submits a Centers for Medicare & Medicaid Services (“CMS”) Form 1500 with a billing code corresponding to the service provided and attests to the accuracy of the claims information; and the payor, relying on the attestation, pays the claim [See Doc. 30, ¶¶ 32 n.10, 34, 36, 60, 66].

Relevant here are the American Medical Association's (“AMA”) Current Procedural Terminology (“CPT”) codes for emergency department services [Doc. 30, ¶ 1 & n.1]: codes 99281 through 99285 [Id., ¶ 13]. The applicable code is determined by reference to the AMA's guidelines for Evaluation and Management (E/M) Services [Doc. 30, ¶ 3]. Per the guidelines, each code represents a level of medical decision making, beginning with straightforward, to low, then moderate, and finally ending at high [AMA CPT Evaluation and Management (E/M) Code and Guideline Changes, pgs. 3, 6, available at https://www.ama-assn.org/system/files/2023-e-m- descriptors-guidelines.pdf (last visited September 26, 2023)].^[1] Which level applies depends on three elements: (1) the number and complexity of problems addressed by the provider; (2) the amount and/or complexity of the data the provider needs to review and analyze; and (3) the risk of complications and/or morbidity or mortality of patient management [Id., pgs. 6-7]. And the guidelines provide instruction on how to evaluate each element and determine the appropriate level of medical decision making [Id., pgs. 8-13]. Generally, CPT code 99285 “is reserved for relatively rare cases in which the patient is at imminent risk of death or loss of psychological function” and “is appropriate only when extreme circumstances require the most urgent and extensive treatment” [Doc. 30, ¶ 91].

Buncombe County analyzed hundreds of CMS Form 1500s submitted by the TeamHealth organization, the results of which showed that the organization submitted claims under CPT code 99285 63% of the time in 2019 and 60% of the time in 2021 [Doc. 30, ¶¶ 78, 84, 88]. By contrast, providers unaffiliated with the organization submitted claims under CPT code 99285 40% of the time in 2019 and 39% of the time in 2021 [Doc. 30, ¶¶ 80, 84, 88]. And the County plotted the distribution of CPT codes the organization submitted for emergency department services in 2021 with the resulting graph skewed heavily towards higher-level codes [Doc. 30, ¶¶ 86-87, 90]. The County contends that the distribution of codes should instead follow a bell-shaped curve [Doc. 30, ¶ 85 (citing Hospital Outpatient Prospective Payment System and 2007 CY Payment Rates, 71 Fed.Reg. 67960, 68126 (Nov. 24, 2006)].

Buncombe County also had a certified medical coding expert review the medical record chart for five patient encounters to determine whether the claim was accurately coded by the TeamHealth organization [Doc. 30, ¶¶ 3, 102]. The expert concluded that in each of the five claims analyzed the CPT code used was higher than the service provided warranted [See Doc. 30, ¶ 107]. According to the expert, the following were incorrectly coded: (1) a patient with intermittent palpitations, in no obvious distress, and who was deemed stable and discharged home, was coded at the highest level, 99285, when it should have been 99284; (2) a patient with shortness of breath and asthma who was alert and in no acute distress, was coded at 99285 when it should have been 99284; (3) a patient with abdominal pain and urinary frequency issues and who was prescribed an anti-inflammatory for “mild to moderate pain” and antibiotics, was coded at 99285 when it should have been 99284; (4) a patient with chronic thrombocytopenia who was discharged without additional “workup” was coded at 99284 when it should have been 99282; and (5) a patient with chest pain that was discharged after an unremarkable “work-up,” was coded at 99285 when it should have been 99284 [Doc. 30, ¶¶ 107.a-107.e]. In each instance, the County paid between 1.5 to 2.5 times more than it would have had the claim been accurately coded [Id.].

Buncombe County alleges that the lop-sided distribution of claims with higher-level CPT codes and the expert's opinion are indicative of an ongoing fraudulent overbilling scheme the TeamHealth organization has been engaged in since at least 2017 [Doc. 30, ¶¶ 14, 85, 87, 92, 10107]. The County alleges that the TeamHealth organization's practice of overbilling is further evidenced by the allegations in two other lawsuits against Defendants: Celtic Ins. Co. v. Team Health Holdings, Inc., et al., No. 3:20-CV-00523, and United Healthcare Servs., Inc., et al. v. Team Health Holdings, Inc., et al., No. 3:21-CV-00364^[2] [Doc. 30, ¶¶ 10, 79, 82-83, 93-96]. The County alleges that the plaintiff in Celtic Ins. Co. indicated that: (1) expert analysis of 29 charts dated between 2015 and 2018 reflected a 62% rate of overbilling; and (2) “nearly two-thirds” of 10,000 bills from 2019 to 2020 reflected overbilling [Doc. 30, ¶ 94]. And the County alleges that the plaintiff in United Healthcare Servs., Inc. alleged a 75% rate of overbilling based on a review of 47,000 charts. [Doc. 30, ¶ 95]. The County also alleges that two self-identified TeamHealth organization employees posted workplace reviews on Indeed.com asserting that the organization's coding practices cheat the system to bill as high as possible [See Doc. 30, ¶¶ 97-98].

Buncombe County contends that the TeamHealth organization actively conceals the overbilling scheme through its business model and structure [See Doc. 30, ¶ 4]. Team Health Holdings and Ameriteam issue policies which govern all entities within the organization [Doc. 30, ¶¶ 18-19]. HCFS provides billing, coding, and collection services to providers affiliated with the TeamHealth System consistent with those policies [See Doc. 30, ¶¶ 20, 47, 55]. Team Health Holdings creates or acquires medical provider groups through subsidiary entities, which contract with HCFS for its services [Doc. 30, ¶¶ 24, 30-32, 40, 43-44, 46, 61-62]. The provider groups then contract with hospitals to staff their emergency departments, requiring that they be the exclusive provider of services at that location [See Doc. 30, ¶¶ 73-74]. After a patient encounter with a provider affiliated with one of those groups, HCFS receives the medical record, assigns a CPT code, and submits the claim to the appropriate payor using the National Provider Identifier (“NPI”) of the group [Doc. 30, ¶¶ 48-49, 55; see also id., ¶¶ 21, 37]. The subsequent payment is then remitted to the TeamHealth organization, as the physicians are paid at a fixed rate [Doc. 30, ¶ 35]. The payor therefore overpays based on CPT code information ostensibly submitted by an independent medical provider unaware that the claims were all prepared by (and consistent with the policies of) the TeamHealth organization [See Doc. 30, ¶¶ 6, 8, 46].

II. PROCEDURAL BACKGROUND

Buncombe County initiated this action against Defendants [Docs. 1, 30]. The County asserts claims for: (1) civil violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962(c) [Doc. 30, ¶¶ 125-63]; (2) conspiracy to violate RICO, 18 U.S.C. § 1962(d) [Id., ¶¶ 164-72]; (3) common law unjust enrichment [Id., ¶¶ 173-84]; and (4) declaratory relief pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201 [Id., ¶¶ 185-92]. The County also seeks to bring these claims as the representative of three proposed classes:

Unjust

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