MMM Healthcare, Inc. v. Santiago (In re Santiago)

563 B.R. 457

IN RE: Virgilio Cora SANTIAGO, Debtor.

MMM Healthcare, Inc. and PMC Medicare Choice, Inc., Plaintiffs/Counterclaim–defendants,

v.Virgilio Cora Santiago, Defendant/Counterclaimant.

CASE NO. 12–06348 (EAG)

ADVERSARY NO. 13–00151 (EAG)

United States Bankruptcy Court, D. Puerto Rico.

Signed January 5, 2017

Gustavo A. Chico–Barris, Camille N. Somoza, Ferraiuoli LLC, Sonia Colon Colon, San Juan, PR, for Plaintiffs/Counterclaim-defendants.

Damaris Quinones Vargas, Bufete Quinones Vargas & Asoc, Cabo Rojo, PR, for Defendant/Counterclaimant.

OPINION AND ORDER

Edward A. Godoy, U.S. Bankruptcy Judge

Pending before the court are cross motions for summary judgment filed by plaintiffs/counterclaim–defendants MMM Healthcare, Inc. ("MMM") and PMC Medicare Choice, Inc. ("PMC") and defendant /counterclaimant Dr. Virgilio Cora Santiago ("Dr. Cora"), the debtor in the underlying bankruptcy case. For the reasons stated below, plaintiffs' motion for summary judgment at docket number 107 is granted in part and denied in part, and Dr. Cora's motion for summary judgment at docket number 104 is denied.

I. JURISDICTION

This court has jurisdiction over the subject matter and the parties pursuant to 28 U.S.C. §§ 1334 and 157(a), Local Civil Rule 83K(a), and the General Order of Referral of Title 11 Proceedings to the United States Bankruptcy Court for the District of Puerto Rico, dated July 19, 1984 (Torruella, C.J.).¹ This is a core proceeding in accordance with 28 U.S.C. § 157(b).

II. PROCEDURAL HISTORY

On August 13, 2012, Dr. Cora filed a voluntary petition under chapter 13 of the Bankruptcy Code. (Bankr. Dkt. No. 1.) On January 30, 2013, sister companies MMM and PMC appeared in the case, filed an objection to confirmation of the chapter 13 plan, and requested that they be allowed to file a claim after the bar date. (Bankr. Dkt. Nos. 27, 28 & 31.) The following day, on January 31, 2013, the case was converted to chapter 7 on the debtor's request. (Bankr. Dkt. No. 34.) Subsequently, MMM and PMC filed a proof of claim, wholly secured in the amount of $213,298.00, corresponding to an audit of Dr. Cora's practice that found that he had been overpaid in that amount for services he provided from 2009 through 2011.² (Claims Register No. 4–1.)

On July 23, 2013, MMM and PMC filed an adversary complaint against Dr. Cora, seeking to have its claim deemed nondischargeable and objecting to discharge. (Adv. Dkt. No. 1.) On September 6, 2013, Dr. Cora filed an answer and counterclaim, bringing causes of action for breach of contract and violation of the automatic stay. (Adv. Dkt. No. 9.) MMM/PMC answered the counterclaim on October 14, 2013. (Adv. Dkt. No. 16.) After a referral to mediation did not prove fruitful (Adv. Dkt. Nos. 63, 67, 77 & 87), Dr. Cora filed a motion for summary judgment on October 14, 2015. (Adv. Dkt. No. 104.) MMM/PMC cross–moved for summary judgment the following day. (Adv. Dkt. Nos. 107, 108 & 109.) The parties filed their respective oppositions on December 4, 2015, and their replies on December 24, 2015. (Adv. Dkt. Nos. 123, 124, 125, 128 & 129.)

After several procedural delays, the matter was set for oral argument. (Adv. Dkt. No. 141.) At a hearing held June 23, 2016, arguments were heard and the parties were given an opportunity to supplement their motions to address several issues raised by the court. (Adv. Dkt. No. 144.) After the parties filed their supplemental briefs (Adv. Dkt. Nos. 152, 154 & 155), the matter was taken under advisement.

III. UNCONTESTED FACTS

The following facts are uncontested pursuant to Rule 56 and Local Civil Rule 56, made applicable to these proceedings through Bankruptcy Rule 7056 and Local Bankruptcy Rule 1001–1(b) and (d)³ :

Plaintiffs MMM and PMC are health maintenance organizations, or HMOs, that contracted with MSO of Puerto Rico, Inc. so that their health plan members could access the MSO provider and Medicare Advantage networks. (Adv. Dkt. No. 108 at p. 2; Adv. Dkt. No. 123 at p. 2; Adv. Dkt. No. 108–1.) On October 1, 2011, Dr. Cora, a general practitioner who maintained offices in Aguada, Puerto Rico, during the relevant period, executed a provider services agreement with MSO. (Adv. Dkt. No. 108 at p. 2; Adv. Dkt. No. 123 at p. 2; Adv. Dkt. No. 108–1.) The agreement was for a one–year initial term that automatically renewed on an annual basis unless terminated under the procedures set forth in the agreement. (Adv. Dkt. No. 108 at pp. 12–13; Adv. Dkt. No. 108–1 at p. 21.)

Under the agreement and in compliance with federal law regarding the Medicare Advantage program, Dr. Cora was required to maintain detailed records substantiating the services provided to plaintiffs' health plan members, and was subject to audit. (Adv. Dkt. No. 108 at pp. 4–5; Adv. Dkt. No. 123 at p. 2; Adv. Dkt. No. 108–1 at pp. 14–16.) If MSO determined that Dr. Cora had been compensated for services that were not covered due to insufficient or missing documentation, or that he had been compensated in error for services that were not rendered or were not reasonable, then it retained the right to recover any overpayment from Dr. Cora or to offset the amount due against future payments. Id. As part of the contract, Dr. Cora warranted that he was "in compliance with all applicable local, state and federal laws and regulations relating to the provision of medical services." (Adv. Dkt. No. 108 at p. 2; Adv. Dkt. No. 123 at p. 2; Adv. Dkt. No. 108–1.)

On February 3, 2012, Dr. Cora was informed that a representative of MMM/PMC would be visiting his office on February 13, 2012, to review a sample of his patient medical records as part of a comprehensive claims review and audit process. (Adv. Dkt. No. 108 at pp. 6–7; Adv. Dkt. No. 123 at p. 3; Adv. Dkt. No. 108–2 at p. 20.) On the day of the audit, Dr. Cora's secretary, who handled the office billing and coded the medical records, certified on his behalf that the medical records his office provided to the auditors "were complete and contained all the information related to the patient medical services at [Dr. Cora's] office." (Adv. Dkt. No. 104 at p. 5; Adv. Dkt. No. 125 at pp. 6–7; Adv. Dkt. No. 104–12 at pp. 50–52; Adv. Dkt. No. 104–13 at pp. 8–9; Adv. Dkt. No. 108 at p. 11; Adv. Dkt. No. 123 at p. 10; Adv. Dkt. No. 108–2 at pp. 35–36.) Dr. Cora's secretary also certified that he did not possess a drug storage license. (Adv. Dkt. No. 108 at p. 11; Dkt. No. 123 at p. 10; Adv. Dkt. No. 108–2 at pp. 35–36.) At some point after the initial visit, the auditors requested, and Dr. Cora provided, additional medical records for some beneficiaries. (Adv. Dkt. No. 125 at p. 15; Adv. Dkt. No. 104–12 at pp. 77–79.) In order to conducts its review, the auditors selected a sample of 65 beneficiaries (encompassing 4,559 services) for which MMM/PMC compensated Dr. Cora between 2009 to 2011, examining the progress notes in the medical files to determine if the services billed were reasonable and necessary, and that all other contractual requirements for MMM/PMC Medicare Advantage coverage and Medicare Advantage regulation had been met. (Adv. Dkt. No. 108 at p. 7; Adv. Dkt. No. 123 at pp. 3–4; Adv. Dkt. No.108–2 at pp. 21–24.) The sample results were then extrapolated to calculate the total amount of any over or underpayment. Id.

By letter dated April 25, 2012, MMM/PMC informed Dr. Cora of their determination that he had been overpaid in the total amount of $213,298.00 for services rendered from 2009 through 2011, broken down between the following billing codes: (1) $68,675.00 for inappropriate, unsupported, and/or undocumented use of modifier 25; (2) $13,465.00 for unsupported or undocumented services using codes HCPCS J1020, HCPCS J1040, CPT 20610, and HCPCS J7321; and (3) $136,396.00 for failure to comply with regulations regarding the use of the medication hyalgan.⁴ Id. The audit found that 67% of the sampled services complied with the pertinent regulations. Id.

Modifier 25 is "used to report a significant, separately identifiable evaluation and management service performed by the same physician on the day of a procedure ... above and beyond the usual preoperative and postoperative care associated with the procedure or service that was performed." Id. HCPCS J1020 and HCPCS J1040 refer to different dosages of of methylprednisolone acetate injections. Id. CPT 20610 and HCPCS J7321, which together denote viscosupplementation therapy, are used where a patient's knee is injected with hyaluronan (or a derivative), hyalgan or supartz as a treatment of osteoarthritis. Id.

With regard to the use of hyalgan (HCPCS J7321), the audit results letter stated that on March 15, 2012, MMM/PMC requested from Dr. Cora a copy of his drug storage license from the Puerto Rico Department of Health and documentation regarding his acquisition of hyalgan during the relevant period. Id.; see Adv. Dkt. No. 138–3. Per the letter, Puerto Rico law requires a drug storage license to store and administer medications to patients in an office setting. Based on Dr. Cora's response that he had not obtained the drug storage license, and due to a failure to submit evidence documenting his acquisition of hyalgan (which Dr. Cora claimed was lost in an office burglary), the audit determined that Dr. Cora had been overpaid an estimated amount of $136,396.00 with regard to this billing code. (Adv. Dkt. No.108–2 at pp. 21–24.)

The audit letter concluded by stating "If you believe that recoupment should not be put into effect, please submit a statement within 15 days of the date of this letter to the above address with a complete explanation of the reasons why you feel this action should not be taken. You may also request a meeting with us during the 15 days [sic] period to answer any concerns and submit additional evidence you may have." (Adv. Dkt. No. 104 at p. 5; Adv. Dkt. No. 125 at p. 8; Adv. Dkt. No. 108–2 at p. 24.)

Similarly, according to MMM/PMC's audit process manual, a provider may challenge the audit results in writing within 30 ...