United States ex rel. Bartlett v. Ashcroft

39 F.Supp.3d 656

UNITED STATES of America ex rel.; Thomas BARTLETT ; and Kimberly Gummo, Plaintiffs

v.Daniel ASHCROFT; Tri–County Imaging Associates, Inc.; Carlos A. Weigering; Ramesh Agarwal; Urmila Chopra, as Executrix of the Estate of Ramesh Chopra; and Raj Kansel, Defendants.

Civil Action No. 3:04–57.

United States District Court, W.D. Pennsylvania.

Filed Aug. 21, 2014.

Andrew M. Stone, Stone Law Firm, LLC, Paul E. Skirtich, United States Attorney's Office, Pittsburgh, PA, Gregory M. Simpson, Simpson Law Firm, Fayetteville, GA, for Plaintiffs.

Michael J. Parrish, Jr., Ronald P. Carnevali, Jr., Spence, Custer, Saylor, Wolfe & Rose, Johnstown, PA, for Defendants.

MEMORANDUM OPINION

KIM R. GIBSON, District Judge.

I. Introduction

This qui tam action is before the Court on cross motions for summary judgment. Plaintiff–Relators Thomas Bartlett and Kimberly Gummo (“Relators”) have alleged that various healthcare providers and related individuals were complicit in a scheme to defraud the United States through their submission of false claims and statements under Medicare and other federal healthcare programs. Relators move for partial summary judgment, asking the Court to find as a matter of law that Physician Defendants¹ made prohibited self-referrals, in violation of the Stark Act, and that Defendants² knowingly caused the submission of false claims to the United States, in violation of the False Claims Act. Defendants also move for summary judgment, asking the Court to find as a matter of law that Relators have no evidence of false claims. For the reasons set forth below, Relators' motion for partial summary judgment will be granted in part and denied in part. Defendants' motion for summary judgment will be denied.

II. Jurisdiction

The Court exercises subject matter jurisdiction under 31 U.S.C. § 3732(a) and 28 U.S.C. § 1331. Venue is appropriate under 31 U.S.C. § 3732(a) and 28 U.S.C. § 1391(b)(2) because the alleged acts occurred in this judicial district.

III. Background

A. Parties to the action

Plaintiff–Relators Thomas Bartlett and Kimberly Gummo are former employees of Tyrone Hospital. Between April 2000 and October 2003, Bartlett served as the Chief Executive Officer at Tyrone Hospital. (Sec. Am. Compl., ECF No. 77, ¶¶ 139, 157). Between September 2002 and July 2004, Gummo served as the Director of Human Resources at Tyrone Hospital. (Id. ¶¶ 161–65). Tyrone Hospital is a not-for-profit organization that provides in-patient and ancillary hospital services to residents of Blair County, Pennsylvania, and to residents of neighboring counties.³ (Id. ¶ 13).

The remaining Defendants in this action include Carlos A. Wiegering, M.D., Ramesh Agarwal, M.D., Raj Kansel, M.D., Ramesh Chopra, M.D., Dan Ashcroft, and Tri–County Imaging Associates, Inc. (“Tri–County”). The Physician Defendants—Wiegering, Agarwal, Kansel, and Chopra—were shareholders in Tri–County. (ECF No. 173 ¶¶ 20–23). Tri–County is a Pennsylvania corporation that identifies as being in the “equipment leasing” business. (Sec. Am. Compl. ¶ 16; ECF No. 173 ¶ 16). Between 1970 and 2002, Defendant Ashcroft served as the Chief Financial Officer at Tyrone Hospital. (Sec. Am. Compl. ¶ 17). Ashcroft was also a shareholder in Tri–County. (Id.; ECF No. 173 ¶ 17).

B. Factual allegations

Beginning in 1984, Bernard DiGiacobbe, M.D., now deceased, maintained an exclusive contractual arrangement with Tyrone Hospital to provide radiology services.⁴ (ECF No. 173 ¶ 86). According to Relators, Defendant Ashcroft, Dr. DiGiacobbe, and others realized that services for computerized tomography (CT scans )⁵ offered “enormous profit potential” and thus devised a plan for physicians to invest in a new CT scanning facility to be associated with Tyrone Hospital. (Sec. Am. Compl. ¶ 86–89). To this end, Tri–County was formed in 1987. (Id. ¶¶ 87–89).

Tri–County initially issued 25 shares of stock: 23 shares to physicians (including Dr. DiGiacobbe), one share to Defendant Ashcroft, and one share to another nonphysician. (Id. ¶ 90). The ownership structure changed over time, particularly in 1995, when many of the original investors divested themselves of their shares in Tri–County. Nevertheless, between 1995 and 2002, Physician Defendants and Defendant Ashcroft maintained significant ownership interests in Tri–County. (Id. ¶ 102).

Relators claim that, between 1995 and 2002, Defendants participated in a patient referral scheme to generate revenue for Tyrone Hospital and Tri–County. According to Relators, Physician Defendants referred more than 8,000 patients to Tyrone Hospital for inpatient services and other designated health services. (Id. ¶ 104). In turn, Tyrone Hospital maintained a business arrangement with Tri–County and Dr. DiGiacobbe, for which Tyrone Hospital paid Tri–County $410 per CT scan. Specifically, Tyrone Hospital paid Dr. DiGiacobbe for each CT scan ; these payments were placed in a Tri–County operating account for distribution to the Tri–County shareholders; and Dr. DiGiacobbe received a 15% collection fee. (ECF No. 251 ¶ 4; ECF No. 254 ¶ 4).

Based on this alleged “compensation arrangement” between Tyrone Hospital and Tri–County, and given Defendants' financial interests in Tri–County, Relators assert that Defendants violated federal law by making prohibited self-referrals to Tyrone Hospital. For purposes of Relators' motion for partial summary judgment, Relators assert that the undisputed evidence shows that Physician Defendants violated the Stark Act and that Defendants caused the submission of false claims to the United States, in violation of the False Claims Act. Defendants also move for summary judgment, asserting that there is no evidence of false claims being submitted. The motions are ripe for disposition.

IV. Standard of Review

Summary judgment should be granted only when “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). Issues of fact are genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Material facts are those affecting the outcome of trial. Id. The court's role is “not to weigh the evidence or to determine the truth of the matter, but only to determine whether the evidence of record is such that a reasonable jury could return a verdict for the nonmoving party.” Am. Eagle Outfitters v. Lyle & Scott Ltd., 584 F.3d 575, 581 (3d Cir.2009). “In making this determination, ‘a court must view the facts in the light most favorable to the nonmoving party and draw all inferences in that party's favor.’ ” Farrell v. Planters Lifesavers Co., 206 F.3d 271, 278 (3d Cir.2000) (quotation omitted).

The moving party must initially demonstrate the absence of any genuine disputes of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the moving party meets this burden, the nonmoving party must go beyond the pleadings by using affidavits, depositions, admissions, or answers to interrogatories to show genuine issues of material fact for trial. Id. at 324, 106 S.Ct. 2548. The nonmoving party cannot defeat a well-supported motion for summary judgment by reasserting unsupported factual allegations in the pleadings. Williams v. Borough of West Chester, 891 F.2d 458, 460 (3d Cir.1989).

V. Underlying Law

Before addressing the merits of the parties' respective motions, the Court will briefly summarize the statutes implicated in this case: the Stark Act, the Anti–Kickback Statute, and the False Claims Act. The Court will then evaluate Relators' motion for partial summary judgment and Defendants' motion for summary judgment.

A. The Stark Act

Congress enacted Section 6204 of the Omnibus Reconciliation Act of 1989 (“Stark I”)⁶ to curtail the increasing costs of healthcare resulting from abusive physician self-referrals. Am. Lithotripsy Soc. v. Thompson, 215 F.Supp.2d 23, 26 (D.D.C.2002) ; U.S. ex rel. Kosenske v. Carlisle HMA, Inc., 554 F.3d 88, 95 (3d Cir.2009) (“The ‘oft-stated goal’ of the [Stark] Act is ‘to curb overutilization of services by physicians who could profit by referring patients to facilities in which they have a financial interest.’ ”).⁷ Stark I prohibits physicians from referring Medicare patients to clinical laboratories in which the physician has a financial interest, absent an exception. See Am. Lithotripsy Soc., 215 F.Supp.2d at 26. Congress enacted Section 13562 of the Omnibus Budget Reconciliation Act of 1993 (“Stark II”)⁸ to expand the reach of Stark I. Specifically, Stark II prohibits physician self-referrals in twelve “designated health services” categories, including clinical laboratory services. Id.; see also 42 U.S.C. § 1395nn.

Simply stated, the Stark Act prohibits physicians from making patient referrals for “designated health services,” such as inpatient and outpatient hospital services, if the referring physician (or an immediate family member) has a “financial relationship” with the entity providing the services. 42 U.S.C. § 1395nn(a)(1)(A). The Act further proscribes a healthcare entity from presenting or causing to be presented a Medicare claim for services furnished pursuant to a prohibited self-referral. Id. § 1395nn(a)(1)(B) ;⁹ see also U.S. ex rel. Schmidt v. Zimmer, Inc., 386 F.3d 235, 239 (3d Cir.2004).

The Center for Medicare and Medicaid Services (CMS), previously known as the Health Care Financing Administration (HCFA), is the administrative agency primarily responsible for interpreting the Stark Act. 42 U.S.C. §§ 1395nn(b)(4) ; see also Council for Urological Interests v. Sebelius, 946 F.Supp.2d 91, 95 (D.D.C.2013). The first set of Stark regulations addressed Stark I and thus applied only to physician self-referrals for clinical laboratory services. 60 Fed.Reg. 41916 (Aug. 14, 1995). CMS then implemented Stark II regulations in three phases. Phase I final regulations were published in ...