United States ex rel. Hobbs v. Medquest Assocs., Inc.

711 F.3d 707

UNITED STATES of America, ex rel.; Karen J. HOBBS, Plaintiffs–Appellees,State of Tennessee, ex rel., Plaintiff,

v.MEDQUEST ASSOCIATES, INC.; BioImaging at Charlotte, Inc.; BioImaging of Cool Springs, Inc.; BioImaging at Harding, Inc., nka BioImaging at Edmondson, Defendants–Appellants.

No. 11–6520.

United States Court of Appeals, Sixth Circuit.

Argued: Nov. 29, 2012.

Decided and Filed: April 1, 2013.

ARGUED:Jeffrey S. Bucholtz, King & Spalding LLP, Washington, D.C., for Appellants. Christine N. Kohl, United States Department of Justice, Washington, D.C., for Appellees. ON BRIEF:Jeffrey S. Bucholtz, Paul A. Mezzina, King & Spalding LLP, Washington, D.C., Britt King Latham, Bass, Berry & Sims, Nashville, Tennessee, Rebekah N. Plowman, Kristen Pollock McDonald, Nelson, Mullins, Riley & Scarborough, LLP, Atlanta, Georgia, for Appellants. Christine N. Kohl, Thomas M. Bondy, United States Department of Justice, Washington, D.C., for Appellees. Paul W. Kim, Ober Kaler Grimes & Shriver, Baltimore, Maryland, for Amicus Curiae.

Before: KEITH, CLAY, and ROGERS, Circuit Judges.

OPINION

ROGERS, Circuit Judge.

MedQuest Associates, Inc. and three of its subsidiaries (collectively “MedQuest”) appeal an $11,110,662.71 judgment against them for filing false claims for reimbursement under Medicare Part B in this False Claims Act (FCA) qui tam action. The claims fall into two categories: (1) claims that were false because MedQuest used physician supervisors who were not approved by the local Medicare carrier, and (2) claims that were false because they were submitted by an independent diagnostic testing facility (IDTF) that was not properly enrolled in the Medicare program and were filed using another physician's billing number.

The regulatory scheme does not support FCA liability for failure to comply with the supervising-physician regulations, and the district court's grant of summary judgment against MedQuest on this issue must be reversed. With respect to the second set of claims, MedQuest's failure to satisfy the enrollment regulations and its use of a billing number belonging to a physician's practice it controlled do not trigger the hefty fines and penalties created by the FCA. Summary judgment on this set of claims must also be reversed.

I.

MedQuest is a diagnostic testing company that operates more than ninety testing facilities in thirteen states. This case concerns its compliance with certain Medicare regulations in three of its Nashville, Tennessee-area facilities, known as the Charlotte Center, the Cool Springs Center, and the Harding Center.

In December 2006, Karen Hobbs, a former MedQuest employee, brought this qui tam suit against MedQuest alleging violations of the FCA. Over two years later, the United States intervened and took over the litigation of the suit. The suit alleged—and the district court held on summary judgment—that MedQuest violated the FCA in two significant respects: (1) in two testing facilities, MedQuest used supervising physicians who had not been approved by the Medicare program and the local Medicare carrier to supervise the range of tests offered at the sites, and (2) after acquiring the Charlotte Center, MedQuest failed to properly re-register the facility to reflect the change in ownership and enroll the facility in the Medicare program, instead using the former owner's payee ID number. United States ex rel. Hobbs v. MedQuest Assocs., Inc., 812 F.Supp.2d 821 (M.D.Tenn.2011). In this appeal, MedQuest argues that its violations, if any, run afoul of the conditions of participation in the Medicare program—not conditions of payment for tests and services. This is significant because only the latter may form the basis of an FCA action.

A. Regulatory Scheme

While the FCA provides the vehicle for suit, Medicare statutes and regulations define the requirements for Medicare claims and form the basis of much of the dispute in this case. Medicare Part B—the portion of the program that covers the costs of physician services, supplies, and tests—only covers tests that are “reasonable and necessary.” 42 U.S.C. § 1395x(s)(3) (2003); id.§ 1395y(a)(1)(A) (2003). For a diagnostic test to be “reasonable and necessary,” it “must be furnished under the appropriate level of supervision by a physician.” 42 C.F.R. § 410.32(b)(1) (2003). Medicare requires entities that seek reimbursement from the program to first enroll and gain approval from their local Medicare carrier. A carrier is the claims-processing and - regulating entity that contracts with the Centers for Medicare and Medicaid Services (CMS), the body created by the Department of Health and Human Services (HHS) to administer the Medicare program. In this case, CIGNA is the applicable carrier.

For organizations like MedQuest, the enrollment process begins with the submission of a CMS–855B Application (“Enrollment Application”). This particular application enables an entity to enroll as an Independent Diagnostic Testing Facility (IDTF). “An IDTF must have one or more supervising physicians who are responsible for” providing general supervision of procedures at the facility. 42 C.F.R. § 410.33(b)(1) (2003). For “procedure[s] requiring ... direct or personal supervision,” the “IDTF's supervising physician must personally furnish this level of supervision.” Id. § 410.33(b)(2) (2003). The Enrollment Application requires an IDTF to identify its “supervising physicians.” The form concludes with a certification that if the signor “become[s] aware that any information in this application is not true, correct or complete, [he] agree[s] to notify the Medicare program contractor of this fact immediately.” CMS regulations also require that CMS be notified of any addition, deletion, or change to the list of physicians. While the application requires that each physician attest that he or she is proficient in all tests to be supervised at the facility, CMS has interpreted this requirement to mandate only that, as a whole, the group of supervising physicians has the combined expertise to provide proficient supervision for all tests. “The basic requirement ... is that all the supervisory physician functions must be properly met at each location, regardless of the number of physicians involved.... The physicians used need only meet the proficiency standards for the tests they are supervising.”

In its own set of policies, called Local Medical Review Policies (LMRPs), CIGNA sets out specific qualifications required to perform and supervise individual procedures. For example, a certified radiologist must perform a CT scan with contrast under the “direct supervision” of a physician, who must also be a radiologist, or else provide evidence of medical education or certification “specific to the skills involved in performing that test.”

Once enrolled, the provider submits CMS–1500 forms to the carrier to obtain payment for services provided to Medicare patients. These forms reflect the treatment or services provided and identify the provider or supplier who provided them. Tests, supplies, and services are correlated to a series of unique numbers, called CPT codes, which quickly convey to the carrier what reimbursable expenses the provider has incurred. The CMS–1500 form requires the provider to “certify that the services listed above were medically indicated and necessary to the health of this patient and were personally furnished by me or my employee under my personal direction.”

B. MedQuest's Actions1. MedQuest used non-supervising physicians to directly supervise contrast tests.

In two of its facilities, the Harding Center and the Cool Springs Center, MedQuest listed board-certified radiologists (and, in one case, a non-radiologist who had been approved by CIGNA) on its CMS enrollment forms as the “supervising physicians” for the facility. These three physicians, Dr. Witt, Dr. Cooney, and Dr. Tan, were listed in the appropriate place on MedQuest's IDTF enrollment forms. In addition, MedQuest hired other physicians to provide patient services. However, Medicare regulations require that certain procedures be conducted under direct or personal supervision—namely, for purposes of this case, contrast MRI and CT scans. CMS requires that these scans be directly supervised by one of the IDTF's supervising physicians, and CIGNA imposes an additional requirement that the scans be approved by a specialist in radiology.

The Government alleges that the centers used physicians besides those approved by CIGNA to provide direct supervision for contrast procedures, some of whom did not specialize in radiology. MedQuest concedes that some of these procedures were not supervised by the approved physician personnel, although it maintains that all procedures received supervision by a physician, approved or otherwise. MedQuest also notes that its stated policy was to limit direct supervisory responsibility to those physicians listed on its enrollment forms, as memorialized in a 2003 memo to center managers stating, “[t]he supervising physician/s that I have listed on your Medicare application is the only physician/s you should use for contrast enhanced studies on Medicare patients ” (emphasis in original).

2. MedQuest purchased a physician's practice and operated it as an independent diagnostic testing facility, without registering as an IDTF, and instead used the former practice's billing number on claims forms.

In a third Nashville-area clinic, the Charlotte Center, MedQuest submitted claims for eighteen months using the billing number of Dr. William S. Witt. This pattern arose after MedQuest bought all of the shares in Dr. Witt's physician's practice and began operating the center as a MedQuest facility. According to Dr. Witt, his practice effectively ended at the time of the buyout. However, Dr. Witt continued to provide patient services at all three of the Nashville-area centers at issue in this case. MedQuest characterizes the resulting arrangement as one in...