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United States v. Anesthesia Services Associates, PLLC

United States District Court, M.D. Tennessee, Nashville Division

December 31, 2019

UNITED STATES OF AMERICA and THE STATE OF TENNESSEE ex rel. SUZANNE ALT et al., Plaintiffs,
v.
ANESTHESIA SERVICES ASSOCIATES, PLLC, d/b/a COMPREHENSIVE PAIN SPECIALISTS, et al., Defendants.

          MEMORANDUM

          ALETA A. TRAUGER, UNITED STATES DISTRICT JUDGE.

         The United States of America and the State of Tennessee (collectively, “the government” or “plaintiffs”) bring this action under the False Claims Act (“FCA”), 31 U.S.C. § 3729 et seq.; the Tennessee Medicaid False Claims Act (“TMFCA”), Tenn. Code Ann. §§ 71-5-182 to -185; the Federal Priority Statute, 31 U.S.C. § 3713; and common law theories of payment by mistake, unjust enrichment and fraud, against defendants Anesthesia Services Associates, PLLC d/b/a Comprehensive Pain Specialists (“CPS”), Peter B. Kroll, M.D., John Davis, Steven R. Dickerson, M.D., Gilberto A. Carrero, M.D., and Russell S. Smith, D.C. (See Consol. Compl. in Intervention, Doc. No. 65.) Now before the court is the Partial Motion to Dismiss the Consolidated Complaint in Intervention filed by defendant Peter Kroll, M.D. (Doc. No. 96.)

         Kroll seeks the partial dismissal of four of seven claims for relief asserted against him in the government's Consolidated Complaint. The plaintiffs filed a Joint Memorandum in Opposition to the Partial Motion to Dismiss (Doc. No. 113), and Kroll has filed a Reply (Doc. No. 116). For the reasons set forth herein, Kroll's motion will be denied.

         I. STATUTORY AND REGULATORY FRAMEWORK

         This case involves the defendants' submission of requests for reimbursement for medical services from a number of different federal and state health care programs (collectively, “Government Health Care Programs”), including Medicare, Medicaid/TennCare, TRICARE, and CHAMPVA/Choice. (Consol. Compl., Doc. No. 65 ¶ 3.) For purposes of the Motion to Dismiss, the parties focus primarily on the requirements of Medicare, so the court does as well.[1]

         As relevant here, Medicare is a federal health insurance program for the elderly and people with disabilities. See 42 U.S.C. § 1395c. Medicare Part B, which provides outpatient coverage for, among other things, diagnostic laboratory tests (see 42 C.F.R. § 410.32), only covers medical services that are “reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member.” 42 U.S.C. § 1395y(a)(1)(A). “[Laboratory t]ests that are performed in the absence of signs, symptoms, complaints, personal history of disease, or injury are not covered except when there is a statutory provision that explicitly covers tests for screening as described.” Medicare Claims Processing Manual: Chapter 16-Laboratory Services § 120.1, available at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/clm104C16.pdf (last visited December 17, 2019).

         Medicare establishes its national payment policy for covered items or services through national coverage determinations (“NCDs”), which are formal decisions by the Secretary of the Department of Health and Human Services (“HHS”) regarding whether, and under what circumstances, Medicare covers a particular item or service. See 42 U.S.C. § 1395ff(1); 42 C.F.R. § 405.1060(a). NCDs are binding on both Medicare contractors and administrative law judges, who preside over Medicare coverage appeals. See 42 U.S.C. § 1395ff(1)(A)(i); 42 C.F.R § 405.1060(a). Medicare Administrative Contractors (“MACs”) act as agents for the government in reviewing and paying claims submitted by health care providers. See 42 U.S.C. § 1395h; 42 C.F.R. §§ 421.3, 421.100. MACs process and pay Medicare claims within a specified jurisdiction on behalf of the Centers for Medicare and Medicaid Services (“CMS”) and have authority to issue local coverage determinations (“LCDs”) for that jurisdiction. See 42 U.S.C. § 1395ff(f)(2); see also Id. § 1395m-1(g) (noting that Medicare contractors may issue LCDs regarding clinical diagnostic laboratory tests under the same process). LCDs, like NCDs, govern Medicare coverage for a particular item or service. See Id. § 1395ff(f)(2)(b). In adjudicating coverage appeals, administrative law judges “give substantial deference” to local coverage determinations, but they are not bound by them. 42 C.F.R. § 405.1062.

         An entity seeking reimbursement for services provided to Medicare patients must submit a CMS Form 1500, or its electronic equivalent, to the appropriate MAC. See United States ex rel. Hobbs v. MedQuest Assocs., 711 F.3d 707, 711 (6th Cir. 2013). “The[ CMS-1500] form[] reflect[s] the treatment or services provided and identif[ies] the [entity that] provided them. Tests, supplies, and services are correlated to a series of unique numbers, called CPT codes, which quickly convey to the [claims processor] what reimbursable expenses the [entity] has incurred.” Id. The CMS Form 1500 requires the entity to certify that “the services on this form were medically necessary.” Health Insurance Claim Form (Form 1500) at 2, available at https://www.cms.gov/Medicare/CMS-Forms/CMS-Forms/Downloads/CMS1500.pdf (last visited December 17, 2019).

         The FCA specifically provides for civil liability and damages for, inter alia, knowingly presenting, or causing to be presented, false or fraudulent claims for payment to the United States and for knowingly making or using false records or statements material to false or fraudulent claims paid by the United States. 31 U.S.C. §§ 3729(a)(1), (2). The Tennessee Medicaid False Claims Act effectively mirrors the language of the FCA, providing civil liability and damages for false claims for payment under the state Medicaid program (TennCare). Tenn. Code Ann. § 71-5-182(a)(1).

         II. FACTUAL AND PROCEDURAL BACKGROUND[2]

         The first qui tam complaint against CPS alleging violations of the FCA was filed under seal in this court on March 9, 2016, entitled United States ex rel. Alt v. Anesthesia Services Associates, PLLC, No. 3:16-cv-00549. (Doc. No. 1.) Five other qui tam actions were brought against CPS and other defendants, alleging additional FCA violations, all of which were filed in, or transferred to, this district. In response to the qui tam complaints, the United States and Tennessee conducted an investigation into CPS and its medical providers. The court granted an unopposed motion to consolidate five of the actions on April 15, 2019; the sixth was voluntarily dismissed. (Doc. No. 42.) On April 22, 2019, the United States and the State of Tennessee filed notices of their intent to intervene in part and to decline to intervene in part in the consolidated action. They filed their Consolidated Complaint on July 22, 2019. (Doc. No. 65.)

         The Consolidated Complaint alleges that CPS, a Tennessee professional limited liability company with its principal place of business in Franklin, Tennessee, began operations in 2000. Although the initial focus of the practice was anesthesia, by 2011, it was operating over sixty pain management clinics across twelve states and employed approximately 250 health care providers, who saw approximately 48, 000 patients per month. The principal physician-owners of CPS were defendants Dickerson, Carrero, and Kroll (“Owners”). (Id. ¶ 23.)

         Kroll is a medical doctor certified in anesthesiology and pain medicine. He took an ownership interest in CPS and began treating patients at CPS in August 2006. He served on the Board of Directors at all relevant times, was Chairman and President of the Board beginning on September 30, 2015, and served as Chief Medical Director from January 2016 until the company ceased operating. (Id. ¶ 27.) In his managerial role, Kroll was responsible for developing and approving CPS's policies. (Id. ¶¶ 127, 132, 140, 158, 169, 335.) The company's Chief Executive Officer, defendant Davis, had the authority to oversee the day-to-day operations of the company from May 2011 until June 2, 2017. (Id. ¶ 25.) In July 2018, CPS began dissolution proceedings and sold off its assets. It is no longer in business. (Id. ¶ 23.)

         CPS began operating its own testing facility in July 2012 and its own pharmacy in September 2013. (Doc. No. 65 ¶¶ 82, 83.) In 2015, CPS opened a larger test facility in Brentwood, Tennessee, that focused on urine drug screening (or testing) (“UDS” or “UDT”), pharmacogenetic testing, and hormone panels, among other laboratory tests. (Doc. No. 65 ¶ 87.)

         While CPS was in operation, Kroll and the other Owners submitted requests for reimbursement for medical services from the Government Health Care Programs. (Id. ¶ 3.) Beginning in 2011 through the dissolution of the company, Kroll and other CPS providers submitted thousands of claims for medical tests that, according to the government, were medically unnecessary, including UDT, specimen validity testing (defined as “analy[sis of] a urine specimen to ensure that it is consistent with normal human urine and has not been adulterated or tampered with” (id. ¶ 118), and psychological testing. Kroll and other CPS providers also billed for acupuncture, a non-covered service, and then refused to refund the overpayment even after CPS brought this improper billing to their attention. (Id. ¶¶ 3, 4, 6, 10.) The government also alleges that Kroll submitted over 2, 500 claims to Medicare, for which CPS was paid almost $350, 000, falsely claiming that he was the “Rendering Provider” when, in fact, he was out of the country on vacation. (Id. ¶ 11.)

         As it expanded and hired new personnel, CPS entered into a variety of compensation packages with its physicians. Typically, physicians received between fifty and sixty percent of their net revenues, with bonuses based on contributions to a pool of revenue for self-referrals for UDT, genetic and other blood testing, DME, and iPad psychiatric tests. (Id. ¶ 90.) The Owners, including Kroll, were compensated at 100 percent of their net revenues plus a percentage from the pool of ancillary services revenues to which CPS providers contributed. (Id. ¶ 92.)

         As a matter of policy, CPS “ensured that its providers ordered at least six urine tests on every patient, pharmacogenetic blood tests, Health and Wellness panels, and iPad tests purportedly to measure depression and suicidal thoughts, and ancillary services whenever possible.” (Id. ¶ 95.) The crux of the Consolidated Complaint is that CPS defrauded the Government Health Care Programs through billing for non-reimbursable and/or medically unnecessary UDT, blood testing for genetic risk factors, and psychological testing using iPads. (Id. ¶ 97.)

         Urine Drug Testing

         The government concedes that urine drug testing is a necessary and appropriate tool, under certain circumstances, for monitoring the treatment of pain patients, specifically to verify whether pain patients, especially those taking opioid medications, are compliant with their prescriptions and are not taking other drugs that could interfere with their treatment or pose a risk of overdose. (Doc. No. 65 ¶ 98-99.) When UDT is medically necessary, the Government Health Care Programs provide reimbursement for it. The government asserts, however, that the defendants misused UDT as a means to “bilk the United States and Tennessee out of millions of dollars.” (Id. ¶ 99.)

         The government alleges that it is common practice in the medical community to first order a “qualitative test” of urine to detect the presence or absence of a wide spectrum of drugs or drug metabolites. Qualitative testing does not measure the concentration of any particular drug. (Id. ¶ 100.) For patients deemed at high risk for the potential to abuse drugs, or if the provider suspects that a patient may have drugs in his system, the medical community recommends on-site, or point of care (“POC”), testing to obtain immediate results of qualitative testing. POC testing is reimbursed at a lower rate than off-site testing. (Id. ¶ 101.)

         Depending upon the results of the qualitative testing, it may be medically appropriate to perform a “quantitative” drug test to determine the concentration of a specific drug (or drugs) in the patient's system. The purpose of quantitative testing is to confirm any unexpected positive results from the qualitative testing and to determine how much of a specific substance is in the patient's system. Unlike a qualitative test, which can test for a broad spectrum of substances in the sample at once, quantitative testing requires a separate test for each specific drug the concentration of which is sought. The testing equipment is more sophisticated, and the tests cost more and are reimbursed at a higher rate than qualitative testing. (Id. ¶ 102.)

         The Consolidated Complaint alleges that (unspecified) Medicare rules limit quantitative testing, “in most cases, ” to situations in which qualitative testing has already been performed and the results indicate that quantitative testing for specific substances is needed. Thus, the Government Health Care Programs generally require providers to make the decision to conduct quantitative testing on a case-by-case basis. (Id. ¶¶ 103, 104.) Many MACs expressly “require providers to assess patient risk on an individualized basis to determine the appropriate frequency of testing” and, for quantitative testing, which substances to test for. (Id. ¶ 105.)

         From 2011 to February 25, 2018, Cahaba Government Benefit Administrators, LLC (“Cahaba”) was the MAC that administered Medicare Part B claims in Tennessee. Cahaba issued a local coverage determination (“LCD”) in October 2015, entitled “Pathology and Laboratory: Qualitative Drug Testing, ” which stated that qualitative testing “may be followed by confirmation with a second method, only if there is a positive or negative finding inconsistent with the setting of a symptomatic patient.” (Id. ¶ 107 (quoting LCD L34501).) Cahaba further notified providers that “[r]outine ‘per visit' drug testing in chronic pain patients is noncovered, ” meaning, according to the government, that providers are not authorized to use a standing order that authorizes the same set of tests for every patient. (Id.)

         In June 2015, Cahaba notified providers that LCD L35920, entitled “Pathology and Laboratory: Quantitative Drug Testing, ” would go into effect on October 1, 2015. This LCD expressly stated:

[P]hysician-directed definitive profile testing is reasonable and necessary when ordered for a particular patient based upon historical use and community trends. However, the same physician-defined profile is not reasonable and necessary for every patient in a physician's practice. Definitive UDT orders should be individualized based on clinical history and risk assessment, and must be documented in the medical record. Some labs offer comprehensive definitive drug testing panel (“CDDP”) of 40 or more drugs. It is not reasonable and necessary to bill individual billing codes for this comprehensive testing.
. . . .
Routine standing orders for all patients in a physician's practice are not reasonable and necessary. Physician-defined standing orders for pre-determined drug panels according to specific patient profiles for a limited sequential period may be reasonable and necessary and must be documented in the patient's medical record.”

(Id. ¶¶ 108-09.)

         In addition, Cahaba defined “[s]pecimen validity testing, including, but not limited to, pH, specific gravity, oxidants, creatinine, ” as a non-covered service. (Id. ¶ 110.) As indicated above, specimen validity testing essentially tests whether a urine sample is actually a valid sample. (See supra, page 6, citing Doc. No. 65 ¶ 118.) HHS has indicated that, “when used for the purpose of determining whether a specimen is adulterated, ” specimen validity testing is “not being used to manage a beneficiary's specific medical problem” and, therefore, is not covered by Medicare. (Doc. No. 65 ¶ 118 (quoting Medicare Improperly Paid Providers for Specimen Validity Tests Billed in Combination with Urine Drug Tests, HHS-OIG Pub. A-09-16-02034, February 2018).)

         Beginning in 2011, well before Cahaba issued the LCDs regarding UDT in 2015, the Owners increased the amount of UDT being performed on their patients in order to obtain more money from the Government Health Care Programs. Specifically, in September 2011, John Davis notified PhyData, CPS's third-party billing company at the time, by email that it should “bill as 12 units every time” for UDTs on the Owners' patients, including Kroll's. (Id. ¶¶ 121-22.) The Owners were aware of this policy, because they were copied on the email, which was referenced as “VERY URGENT: UDS 80101.” (Id. ¶ 122.)

         In addition, by opening its own testing facility in 2012, CPS was able to recover even more revenue relating to testing. (Id. ¶¶ 123-24.) Beginning no later than October 2013, CPS required its providers to send urine samples for qualitative testing under HCPCS code G0431, which carried a reimbursement rate of $100, rather than the $19.84 that would have been applicable if the testing had been done on-site.

         CPS developed, and Kroll approved, Urine Drug Screening Guidelines in March 2014, which were distributed to CPS providers. Under these Guidelines, all new patients were to be tested, and established patients receiving narcotics would be tested at least six times per year, more if the circumstances warranted. (Doc. No. 65 ¶¶ 126-27.) Following issuance of this guideline, CPS had weekly conference calls with providers to ensure that they were ordering and billing for the full panel of UDT, including specimen validity testing. (Id. ¶ 129.)

         In October 2014, at Davis's direction and with Kroll's approval, CPS emailed providers notifying them that they would be required to sign a form for a standing order on UDT that would be done at CPS's off-site lab in Franklin, Tennessee. (Id. ¶ 132.) Kroll and Dickerson executed the standing order. (Id. ¶ 134.)

         The training manual for CPS's electronic medical record system, eClinical Works, which was made available to CPS providers in or about April 2015, contained a template for ordering UDT, which required providers to order both qualitative and quantitative drug screens. CPS also required providers to order UDT for established patients every two months, regardless of whether there was an individualized need for testing that frequently. (Doc. No. 65 ¶ 135.) Notably, according to the Consolidated Complaint, CPS required providers to order quantitative testing from the outset, before they obtained results from the qualitative testing. If the drug screen was negative, there was no medical necessity for quantitative testing. (Id. ¶ 137.)

         Even though the results from the UDT would often not be available for seven to ten days, CPS providers would frequently prescribe pain medication, including opioids, without having the results and, moreover, would frequently not review or consider the results, when they became available, in making prescribing decisions. Thus, for example, providers would continue to prescribe opioid pain medication for patients who tested negative for opioids, which should have given rise to questions about whether the patients were giving away or selling their pain medication. (Id. ¶¶ 138-39.) In addition, pursuant to CPS policies approved by Kroll, even where POC testing was considered medically necessary, CPS locations lacked the equipment necessary to perform it. (Id. ¶ 140.)

         The Consolidated Complaint alleges, in sum, that CPS should not have utilized a standing order for UDT, because it did not allow for an individualized determination of patient-specific risk and medical necessity, did not comply with the requirements of “various MACs, ” and resulted in medically unnecessary and duplicative testing. (Id. ¶¶ 144-47.)

         In July 2014, based on the sheer number of UDTs ordered by CPS, CMS, through AdvanceMed, a Zone Program Integrity Contractor (“ZPIC”), began performing an audit covering claims from January 1, 2012 through May 31, 2014. Thus, when CPS issued its formal standing order in October 2014, it was already on CMS's radar screen for overutilization of UDT. While its policies were under scrutiny, CPS's Compliance Department issued revised Urine Drug Screening Guidelines, effective September 1, 2015, which Kroll approved. These Guidelines noted that it was not appropriate to order UDT on every patient at every visit and that a risk assessment was required to establish medical necessity. A revised policy issued in March 2016, approved by Kroll, purported to provide risk stratification but still required even low risk patients to receive a full set of UDT at least once per year. (Doc. No. 65 ¶ 166.) Moreover, despite these policies and additional training provided to CPS's providers, there was little reduction in the number of UDTs ordered, particularly by providers in certain East Tennessee clinics, as a result of which CPS determined that each provider should receive individual training with Kroll personally.

         One of the providers, Nurse Practitioner Anita Bayles, failed to change her practices of over-ordering UDT; she was also noted to be seeing more patients than was appropriate and over-prescribing opioids. The Compliance Committee, including Kroll, voted unanimously to terminate Bayles in September 2016. At a telephone conference call involving members of the compliance committee, Davis, and Bayles' supervising physician, Davis made the decision to keep Bayles on staff ...


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