United States ex rel. Montcrieff v. Peripheral Vascular Assocs.

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UNITED STATES OF AMERICA, EX. REL.; TIFFANY MONTCRIEFF, RELATOR; ROBERTA A. MARTINEZ, RELATOR; AND ALICIA BURNETT, RELATOR, Plaintiffs v. PERIPHERAL VASCULAR ASSOCIATES, P.A., Defendant.

No. SA-17-CV-00317-XR

United States District Court, W.D. Texas, San Antonio Division

January 30, 2024

ORDER

XAVIER RODRIGUEZ, UNITED STATES DISTRICT JUDGE

On this date, the Court considered Defendant's (1) motion for finding of fact regarding an omitted element (ECF No. 232) (2) motion to reconsider partial summary judgment on scienter (ECF No. 234), and (3) motion for new trial (ECF No. 247) and the applicable responses (ECF Nos. 232, 242, 249), and replies (ECF Nos. 239, 243, 250) thereto.^[1] After careful consideration, Defendant's motions are DENIED.

BACKGROUND

This False Claims Act case arises out of the allegedly fraudulent billing practices of Defendant Peripheral Vascular Associates, P.A. (“PVA”), a healthcare provider. Relators filed this action in April 2017 under 31 U.S.C § 3730(b), which authorizes private persons to sue for violations of the False Claims Act, 31 U.S.C. §§ 3729 et seq. (“FCA”), on behalf of the United States Government. Relators alleged that PVA falsely billed Medicare for services it had not performed. See ECF No. 8.^[2] After a five-day trial held in February 2022, the jury agreed, awarding $2,728,199 in damages. ECF No. 201.

PVA is a full-service vascular surgery practice with multiple locations throughout San Antonio, Texas. ECF No. 123 at 2. Among other services, PVA performs vascular ultrasounds, which have two components relevant to this case: a technical component and a professional component. Id. In essence, the technical component is performing the ultrasound and the professional component is a physician analyzing the results. Id.

A healthcare provider can bill Medicare for both the technical and professional components of a vascular study using a “global” Current Procedural Terminology (“CPT”) Code. Id. at 4. When a provider bills for just one component of a study, it must use a two-character “modifier” that signifies that only one component has been performed. Id. As relevant here, a provider can append the “-TC” modifier when billing the technical component only, or the “-26” modifier to bill for the professional component only. Id.

PVA uses a program called Allscripts Clinical Module (“Allscripts CM”) as its electronic medical records system and a program called Allscripts Practice Management (“APM”) as its billing software. Id. at 5. A patient's medical record is contained in Allscripts CM. In 2014, PVA adopted an archiving and communications system called MedStreaming. Id. Every vascular study that PVA performs has a MedStreaming report. Id. In their pleadings, Relators alleged, inter alia, that, in 2012, PVA implemented a scheme of too-quick billing designed to increase revenue. Id. at 6. Specifically, PVA began billing Medicare for both the professional and technical component before the patient's status became “Final” in MedStreaming-before the PVA physician had reviewed and interpreted the study and signed the report. Id. Relators alleged three distinct tranches of claims: (1) the “Testing Only” tranche,^[3] (2) the “Double Billing” tranche,^[4] and (3) the “Wrong Provider” tranche.^[5] ECF No. 221 at 3-4.

In August 2020, the parties filed cross-motions for summary judgment. ECF Nos. 94, 95. On December 14, 2020, the Court issued an order resolving the parties' cross-motions for summary judgment. See United States ex rel. Montcrieff v. Peripheral Vascular Assocs., P.A., 507 F.Supp.3d 734, 759-60 (W.D. Tex. 2020). As is relevant here, the Court granted Relators' motion with respect to the falsity and scienter elements of their claims, concluding that the issues of materiality and damages would be tried to the jury. See id. at 773.

A five-day trial was held in February 2022. After the close of Relators' case and then again before submission to the jury, PVA moved for judgment as a matter of law, arguing that, among other things, Relators had not satisfied their burden of proof as to materiality or damages. See ECF Nos. 196, 197. The Court granted the motions in part, concluding that Relators had failed to offer evidence of materiality as to one subset of claims and had failed to present evidence of payments made by the Medicare Advantage and Tricare programs, which have their own rules for payment. Tr. at 660:1-4, 672:3-8.^[6] The motions were denied in all other respects. ECF No. 199.

Based on the remaining claims, the jury found that PVA had submitted 7,380 false claims, causing $2,728,199 in damages to the Government. ECF No. 201. Following the verdict, PVA renewed those portions of its previous motions for judgment as a matter of law that were denied by the Court under Federal Rule of Civil Procedure 50(b). ECF No. 208. On January 9, 2023, the Court issued a 32-page order denying in part and granting in part PVA's renewed motion. United States ex rel. Montcrieff v. Peripheral Vascular Assocs., P.A., 649 F.Supp.3d 404 (W.D. Tex. 2023).^[7] In relevant part, the Court held that the jury's finding as to materiality was supported by ample evidence at trial. Id. at 414-20. With respect to damages, however, the Court concluded that proper measure of harm to the Government was not the full value of the claim as the jury found, but the interest accrued in the time between the date Government paid the false claims and the date that the claim was determined to be false. Id. at 420-23. At the Court's direction, id. at 428, the parties subsequently filed joint advisories with proposed models for evaluating damages. See ECF Nos. 222, 230.^[8]

Thereafter, PVA filed three additional post-trial motions requesting (1) a finding of fact regarding an allegedly omitted element of Relators' claim-whether PVA's knew that its billing practices were material to the Government's payment decision, ECF No. 232; (2) reconsideration of the Court's order granting partial summary judgment on scienter-specifically whether the summary judgment record supports pre-2017 knowledge of PVA's scheme, ECF No. 234; and (3) a new trial to reassess alleged factual issues regarding damages, scienter, and the appropriate number of false claims, ECF No. 247. Relators oppose each motion. The Court addresses each motion in turn.

DISCUSSION

I. The Supreme Court's decision in SuperValu has no bearing on this case.

Because all three of PVA's motions draw on misinterpretations of the Supreme Court's recent decision in United States ex rel. Schutte v. SuperValu Inc. (“SuperValu”), 598 U.S. 739, 743 (2023), the Court will briefly address the scope and impact of that ruling on the FCA landscape at the outset.

FCA liability requires the Government or relators to establish (1) a false statement or fraudulent course of conduct by the defendant; (2) made or carried out with the requisite scienter; (3) that was material; and (4) that caused the government to pay out money or to forfeit moneys due (i.e., that involved a claim). United States ex rel. Longhi v. United States, 575 F.3d 458, 467 (5th Cir. 2009).

The Supreme Court's decision in SuperValu focused on the scienter element-specifically, “[w]hether and when a defendant's contemporaneous subjective understanding or beliefs about the lawfulness of its conduct are relevant to whether it ‘knowingly' violated the False Claims Act.” See Petition for a Writ of Certiorari at 3, SuperValu, 143 S.Ct. 644 (No. 21-1326). The FCA's scienter requirement defines “knowing” and “knowingly” to mean that a person has “actual knowledge of the information,” “acts in deliberate ignorance of the truth or falsity of the information,” or “acts in reckless disregard of the truth or falsity of the information.” 31 U.S.C. § 3729(b)(1)(A).

The SuperValu Court addressed the Seventh Circuit's extension to FCA cases of the Supreme Court's decision in Safeco Ins. Co. of America v. Burr, 551 U.S. 47 (2007)-a case interpreting the term “willfully” under the Fair Credit Reporting Act. SuperValu, 598 U.S. at 748. In relevant part, the Seventh Circuit read Safeco to require a two-step scienter inquiry in FCA cases. Id. Under step one of this framework, a court would “ask whether a defendant's acts were consistent with any objectively reasonable interpretation of the relevant law that had not been ruled out by definitive legal authority or guidance.” Step one, however, ignored whether the defendant believed that interpretation at the time of its claims. Id. If a defendant's act was not consistent with any objectively reasonable interpretation, then a court would proceed to step two. Id. Only under step two would a court then consider a defendant's subjective thoughts. Id. Put simply, the Seventh Circuit's framework required that a defendant's acts be objectively unreasonable before moving to any consideration of whether the defendant knowingly submitted a false claim. Id.

SuperValu rejected the Seventh Circuit's two-step framework. To begin, the Seventh Circuit's approach allowed post-hoc reasonable interpretations of the applicable law to provide a safe harbor for defendants who submitted claims with knowledge of their falsity. Id. This framework incorrectly shifted the focus of the scienter inquiry in FCA cases-what matters is “what the defendant thought when submitting the false claim-not what the defendant may have thought after submitting it.” Id. at 752 (emphasis in original). In rejecting the Seventh Circuit's approach, SuperValu expounded a common-sense rule-what matters is a defendant's knowledge and subjective beliefs when it submits the claim, not what an objectively reasonable person thought upon submitting a claim or what a defendant may have thought in retrospect. Id. at 750.

But SuperV...