Opinion
Civil Action No. 96-CV-4346.
April 29, 2004
MEMORANDUM ORDER
Presently before the Court is the Motion by Defendant North Penn Hospital for Summary Judgment, (Doc. No. 114), and the Motion to Dismiss Relator's January 21, 2003 Expert Witness Report Filed by Defendant North Penn Hospital, (Doc. No. 128). On March 31, 2003, we granted the Motion of Defendants Barry Wilderman, M.D., P.C., Barry Wilderman, M.D., Eric Gewertz, M.D., and Steven Palloni, M.D., to join the Motion of North Penn Hospital for Summary Judgment. (Doc. No. 125.) Defendants Barry Wilderman, M.D., P.C., Barry Wilderman, M.D., Eric Gewertz, M.D., and Steven Palloni, M.D., also move to join in North Penn's Motion to Dismiss Relator's January 21, 2003 Expert Witness Report, (Doc. No. 135), and we will grant that Motion. For the following reasons, we will grant in part, and deny in part, Defendants' Motion for Summary Judgment, and grant Defendants' Motion to Dismiss Relator's January 21, 2003 Expert Witness Report.
I. BACKGROUND
Relator Deborah Riva Magid, Ph.D., M.D., ("Relator") brings this qui tam action under the False Claims Act, 31 U.S.C. § 3729, et seq., on behalf of herself and the United States. Relator worked as an anesthesiologist for Defendant Barry Wilderman, M.D., P.C. ("Wilderman, P.C."), from July 11, 1994 through late May, 1996. (Doc. No. 114, Ex. B at 180.) At all times relevant to this case, Wilderman, P.C., was a corporation that was the sole provider of anesthesiarelated services for patients of Defendant North Penn Hospital ("North Penn"). Defendants Barry Wilderman, M.D. ("Barry Wilderman"), Eric Gewirtz, M.D., and Steven Palloni, M.D. (collectively, the "Wilderman Defendants") all worked with Relator as anesthesiologists for Wilderman, P.C.
A. Relator's Allegations
In December, 1995, Relator allegedly discovered that Defendants were submitting false claims to the United States for reimbursement from its Medicare program. (Compl. ¶ 3.) Relator discovered that an operating room record for a patient she tended to had been altered to reflect the providing of services that had not been provided. Upon inquiry to a certified registered nurse anesthetist with whom she worked, Relator was informed that Defendants routinely altered operating room records to falsely reflect the amount of services and/or time for which Defendants could bill Medicare. Relator reviewed records available to her and discovered that Defendants were submitting HCFA-1500 claim forms to Medicare that overstated the actual time that Relator performed and/or directed Medicare covered services. The same pattern of alteration appeared on patient records dating back to 1990. ( Id.)
HCFA-1500 forms are used by physicians to request reimbursement from Medicare for services.
After consulting her legal counsel, Relator informed Defendants by letter that she believed that they had violated the False Claims Act and urged them to take appropriate action. (Doc. No. 114, Ex. I.) Relator was not satisfied with Defendants' response and filed this qui tam action pursuant to 31 U.S.C. § 3730(b). In the Complaint, Relator alleges that the Wilderman Defendants engaged in a practice of submitting false claims for reimbursement from Medicare. Barry Wilderman, the controlling shareholder of Wilderman, P.C., also operates a billing service for the company. According to the Complaint, Barry Wilderman and his wife Elaine (who also works for the company) review medical records of patients and add a minimum of thirty-five minutes of "actual time" to each record. This enables Wilderman, P.C. to bill Medicare at least an additional $174 for each patient. (Compl. ¶ 5.) Relator alleges that Defendants Gewirtz and Palloni also make it their regular practice to increase the recorded actual time they spend with their patients by at least thirty-five minutes in order to increase the amount that they can bill Medicare. ( Id. ¶¶ 6-7.)
31 U.S.C. § 3730(b) provides in relevant part: "A person may bring a civil action for a violation of [the False Claims Act] for the person and for the United States Government."
The amount Medicare will reimburse an anesthesiologist is based in part on the amount of "actual time" an anesthesiologist or certified registered nurse anesthetist is present with the patient and anesthesia is being administered. Increasing the "actual time" in a record potentially increases the amount Medicare will reimburse the physician for anesthesia-related services. (Compl. ¶¶ 10-11.)
As an example of the Wilderman Defendants' practice of adding actual time to records, Relator attaches to the Complaint the medical records of one of Barry Wilderman's patients. (Compl., Exs. A-1, A-2, A-3.) The first record shows that this patient arrived in the operating room for a surgical procedure at 9:55 a.m. ( Id. Ex. A-1.) The second record shows that the same patient was transported from her hospital room to the operating room on that day at 9:45 a.m. ( Id. Ex. A-2.) The third record is the "Anesthesia Record" for the patient, which was allegedly completed by Barry Wilderman. ( Id. Ex. A-3.) The "Anesthesia Record" states that the patient's anesthesia was ready on that day at 9:15 a.m., and that a number of medical services were administered to the patient at that time. ( Id.) According to Relator, the records show that someone, presumably Barry Wilderman, altered the records to increase the anesthesia actual time and record services that were never provided. ( Id. ¶ 15.) Relator attaches other records that she claims show that one of the Wilderman Defendants added thirty-five minutes of anesthesia actual time to another patient's record. ( Id. ¶ 16, Exs. B-1, B-2.) Relator claims that other records show that Palloni billed time in the operating room that exceeded the number of hours the operating room was in use. ( Id. Ex. E.)
Relator provides other examples of the Wilderman Defendants' alleged fraudulent billing practices. She alleges that Medicare does not require that the HCFA-1500 forms contain any supplemental documentation to show the services provided. ( Id. ¶ 14.) Thus, the Wilderman Defendants could bill Medicare for services that were never provided by merely listing them on the HCFA-1500 forms. Relator claims that the Wilderman Defendants' patients were often given drugs in connection with their treatment that affected the patients' sense of time and memory. Thus, the Widerman Defendants were able to falsify records to reflect services that were not provided, and characterize services that were provided as more difficult in order to increase the amount that Medicare would reimburse for such services. ( Id.)
Relator alleges that all of the HCFA-1500 forms were prepared under the direction of the Wilderman Defendants. ( Id. ¶ 18.) Relator learned from a former staff anesthesiologist that this fraudulent billing conduct was reported to North Penn's president Robert McKay in 1989, but that the hospital chose not to address the issue. ( Id. ¶ 20.)
Relator also alleges that North Penn submitted false claims for reimbursement from Medicare. She alleges that from 1990-1996 North Penn operated a pharmacy that provided the drugs that Wilderman, P.C. used. North Penn maintained records and billed Medicare for those drugs. Relator claims that North Penn was aware, through its inventory control system, of the exact number of anesthesia agents and other drugs used by Wilderman, P.C. However, North Penn routinely billed each patient the same amount — $238 — for drugs and anesthesia, regardless of the value of the medications actually given to the patients. Furthermore, many drugs were billed for twice, once by Wilderman, P.C., and a second time by the recovery room nurses, even though the same drug vial was being used. Relator claims that bills for other medical equipment and supplies were also submitted twice to Medicare. ( Id. ¶ 21.)
In the Complaint, Relator occasionally refers to Wilderman, P.C. as the "North Penn Hospital Department of Anesthesia." To avoid confusion, we will refer to it as Wilderman, P.C.
B. Prior Proceedings
Relator filed the Complaint on June 13, 1996. The United States declined to intervene in this case on January 22, 1997, (Doc. No. 3). On May 15, 1998, the Court denied North Penn's motion to dismiss (Doc. No. 13). On May 15, 1998, the Court entered a Scheduling Order requiring the parties to complete discovery by November 2, 1998. (Doc. No. 14.) The parties requested and the Court granted several extensions of the discovery deadline. On January 28, 2000, Relator submitted an expert witness report ("Relator's Expert Report") in support of her two experts, Antoinette Revel and Charles Lunden. Defendants moved to strike that report and to preclude Relator's experts from testifying on June 14, 2000. (Doc. Nos. 99, 100.) On October 24, 2000, the Court issued its final Scheduling Order. That Order required the parties to complete all expert discovery by December 29, 2000. Relator was also required to respond to the outstanding motions attacking her expert report and testimony by January 29, 2001.
Discovery in this matter was completed by December 29, 2000. On March 29, 2002, Defendants' motion to strike portions of Relator's Expert Report was granted in part and denied in part. (Doc. No. 109.) On April 16, 2002, a Daubert hearing was held to assess the admissibility of the rest of Relator's Expert Report and the testimony of Relator's experts. Relator's experts claimed that by using a statistical analysis they could analyze a sample set of 200 out of the approximately 9,700 claims that the Wilderman Defendants submitted to Medicare and, after identifying the overcharges in that sample set, determine the total amount Medicare was overcharged. Relator's experts ultimately identified 198 instances On September 12, 2002, we concluded that the statistical analysis used in Relator's Expert Report was flawed. An Order was entered directing that Relator's experts could only testify as to the existence of overcharging in the claims they actually reviewed. (Doc. No. 113.)
On December 13, 2002, North Penn moved for summary judgment. Relator filed a brief in opposition to that motion on January 22, 2003. Attached to that brief were several exhibits, one of which was an affidavit from Lunden (the "Lunden Affidavit"). In its reply brief in support of its motion to dismiss, North Penn argued that the Lunden Affidavit was actually a revised expert report that was improper in part because it contravened this Court's Orders assessing the admissibility of Relator's Expert Report, and because it asserted a claim against North Penn that was not pled in the Complaint. (Doc. No. 120.) In her sur-reply brief, Relator did not address North Penn's argument that the Lunden Affidavit contravened this Court's prior Orders. In response to North Penn's argument that the Lunden Affidavit asserted a claim that was not pled in the Complaint, Relator stated simply: "Relator has, and is entitled to present to the jury, several theories of liability which may be supported by the evidence." (Doc. No. 124 at 6.)
After North Penn's motion for summary judgment was fully briefed, and after we granted the Wilderman Defendants' motion to join in that motion, North Penn moved to strike the Lunden Affidavit on several grounds. In this Memorandum, we will first address Defendants' motion to strike the Lunden Affidavit. We will then determine whether to grant summary judgment in favor of North Penn and/or the Wilderman Defendants.
II. DEFENDANTS' MOTION TO DISMISS THE LUNDEN AFFIDAVIT
North Penn moves to strike the Lunden Affidavit which Relator attached as an exhibit to its response to Defendants' motion for summary judgment. North Penn offers several reasons. First, North Penn argues that we must strike the Lunden Affidavit because it is really a revised expert report that was submitted after the deadline for submission of such reports set forth in this Court's Scheduling Order of December 29, 2000. North Penn also moves to strike the Lunden Affidavit on the grounds that it contravenes two Orders of this Court that previously assessed the admissibility of Relator's Expert Report, and because it asserts a claim that was not raised in the Complaint. Relator argues that the Lunden Affidavit does not offer an opinion, but "merely relates facts and presents documents which are records of and produced by North Penn Hospital." (Doc. No. 129 at 2.)
Lunden is a Certified Fraud Examiner ("CFE") and Certified Public Accountant ("CPA") who was retained by Relator and asked to perform "an analysis from the results of a review of medical records and billing information of the defendants in [this matter], and summarize the damages, if any, suffered by the United States of American in connection with the [D]efendants['] failure to comply with the billing requirements of Medicare." (Doc. No. 117, Ex. 8 ("Lunden Aff.") ¶ 1.) The Lunden Affidavit states that Lunden reviewed North Penn's Operating Room ("OR") logs and Post Anesthesia Care Unit ("PACU") logs, which show the amount of time patients were in the OR and when they were admitted into the PACU. ( Id. ¶ 3.) Lunden and Relator's other expert, Revel, used the logs to determine the end point of billing for anesthesia time. ( Id.) Lunden also reviewed deposition testimony that purportedly suggested that the OR logs were altered to allow an additional ten minutes of clean up time, and testimony that suggested that nurses did not accurately record the time patients entered the PACU. From the deposition testimony and logs, Lunden concluded that:
a. The measure of economic harm would have to be restated. The anticipated testimony that the 198 submitted claims shown to be false, resulting in a gross overpayment of $25,630 by the United Stated Government to Wilderman, M.D.P.C. is understated by the amount of time that was expanded [sic] for anesthesia billing related to the clean up time, because we based the audited stop time on the data in the PACU records, which may not have been accurate. This understatement of damages would average approximately 7% (based on the average understatement of .66 time units and an average of 9 units billed.) Accordingly, there would be in a gross overpayment of $27,424 by the United States Government to Wilderman, M.D.P.C. The United States Government would then stand to recover $1,072,272 to $2,062,272 for the 198 false claims arising from the provision of anesthesia services at North Penn Hospital.
[b]. The measure of economic harm attributed to the anesthesiologists would also be attribute to the Hospital, pursuant to 31 U.S.C. § 3729 et. seq., if the fact finder determines that the Hospital altered the OR logs and PACU logs in an attempt to cover up the inappropriate billing practices.
These paragraphs were not numbered sequentially in the Lunden Affidavit.
We conclude that these paragraphs must be stricken from the Lunden Affidavit because they violate this Court's previous Orders addressing Relator's proposed expert testimony. In our Order dated March 29, 2002, we struck those portions of Relator's Expert Report that asserted that North Penn was liable under the False Claims Act because it altered the OR logs to allow an additional ten minutes of clean up time. (Doc. No. 109.) We came to that conclusion because Lunden "testified that he did not know what Medicare was billed for such clean up time and that the alteration of the [OR] logs did not affect his calculation of damages." ( Id.) Thus, the portion of the Lunden Affidavit that states that North Penn overcharged Medicare based on alteration of the OR logs violates our Order and must be stricken. We also stated in the March 29, 2002 Order that "Defendants argue that no Medicare regulation was violated by such conduct because North Penn Hospital does not report time on any Medicare bill but instead gets paid on a `bundled' basis for all services rendered to one hospital stay. Plaintiff does not respond to this argument directly, but merely states that there is nothing prejudicial, confusing or misleading about the testimony. Plaintiff fails to explain, however, why such testimony is relevant." ( Id.) Thus, the portion of the Lunden Affidavit that states that North Penn overcharged Medicare by failing to record accurate times on the PACU logs also violates our March 29, 2002 Order. Finally, in our March 29, 2002 Order we struck portions of Relator's Expert Report that stated legal conclusions. That portion of the Lunden Affidavit that concludes that North Penn is liable for overcharging by the Wilderman Defendants violates our Order. All of these portions of the Lunden Affidavit must therefore be stricken.
Lunden also claims to have examined records produced by North Penn and concluded that North Penn was responsible for documenting whether patients needed Pseudocholinesterase ("PCHE") lab tests. (Lunden Aff. ¶ 4.) PCHE lab tests determine whether a patient may have an adverse reaction to anesthesia. Lunden claims to have discovered forty instances where North Penn billed patients for PCHE lab tests but failed to document the need for such tests as required by Medicare:
4. My examination of the records produced by [D]efendants found the hospital was responsible for documenting the need for Pseudocholinesterase lab tests ("PCHE"). In addition, there were 40 instances where the hospital's files did not contain sufficient documentation for PCHE tests administered by the hospital, to warrant reimbursement, pursuant to Medicare regulations, for which the hospital received reimbursement from Medicare. The hospital received approximately $400 for these tests that did not comply with Medicare documentation regulations. The United States Government would therefor[e] stand to recover $201,200 to $401,200 for the 40 false claims arising from the provision of PCHE lab tests at North Penn Hospital. An example of one of those lab tests and the corresponding medical records is appended hereto.
( Id.)
North Penn argues that this paragraph should be stricken and Relator should not be permitted to assert a claim based on the PCHE lab tests because Relator failed to plead that claim in the Complaint. We need not decide whether to strike paragraph 4, however, because as described in Part V of this Memorandum, we conclude that North Penn is entitled to summary judgment on Relator's claims based on the PCHE lab tests. We would reach this same conclusion whether or not paragraph four of the Lunden Affidavit is in evidence.
III. LEGAL STANDARD
We apply the familiar standard applicable to the consideration of a motion for summary judgement. Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c). In considering a motion for summary judgment, "a court does not resolve factual disputes or make credibility determinations, and must view facts and inferences in the light most favorable to the party opposing the motion." Siegel Transfer, Inc. v. Carrier Express, Inc., 54 F.3d 1125, 1127 (3d Cir. 1995). The moving party bears the burden of proving that no genuine issue of material fact is in dispute. Adickes v. S.H. Kress Co., 398 U.S. 144, 157 (1970). Once the moving party has carried its initial burden, the non-moving party "may not rest upon the mere allegations or denials of his pleading, but his response . . . must set forth specific facts showing that there is a genuine issue for trial." FED. R. CIV. P. 56(e).
IV. RELATOR'S CLAIMS AGAINST THE WILDERMAN DEFENDANTS
Defendants argue that they are entitled to summary judgment with respect to Relator's claims that the Wilderman Defendants overcharged Medicare because Relator and her experts never reviewed the HCFA-1500 forms that the Wilderman Defendants submitted to Medicare for reimbursement. Instead, Relator's experts determined that the Wilderman Defendants submitted false claims to Medicare by examining the Explanation of Medicare Benefits forms ("EOMBs") that the Wilderman Defendants received back from Medicare after they had submitted claims for reimbursement. EOMBs are provided by Medicare to doctors when the doctors receive reimbursement from Medicare. Revel, one of Relator's experts, explained during her deposition that she could determine whether the Wilderman Defendants submitted false claims to Medicare by examining the EOMBs. (Doc. No. 122, Ex. 1 at 170.) Revel determined the amount Medicare paid the Wilderman Defendants from the EOMBs (the "Allowed Amount"). ( Id.) Revel then calculated what Medicare should have paid the doctors by examining the OR logs (the "Audited Amount"). ( Id. at 173.) When the Allowed Amount exceeded the Audited Amount Revel concluded that the Wilderman Defendants had overcharged Medicare and calculated the overcharged amount. ( See Report on Review of Medical Records and Damages Report Filed Under Seal ("Relator's Expert Report") Ex. B.)
Defendants claim that the Court excluded Relator's Expert Report from evidence in its September 12, 2002 Order. The Order states that Relator's Expert Report is excluded. It also states that Relator's experts could testify with respect to the claims that they reviewed. Reading the Memorandum and Order together, it is clear that we only excluded those portions of Relator's Expert Report that attempted to project from a sample set of claims the total number and amount of false claims that the Wilderman Defendants submitted. Those portions of Relator's Expert Report that addressed the sample set, i.e., the claims that Relator's experts actually reviewed, are admissible.
Defendants argue that examining the EOMBs is not a reliable way to determine whether or not the Wilderman Defendants submitted false claims to Medicare. The parties agree that the Wilderman Defendants submitted HCFA-1500 forms — not EOMBs — to Medicare in order to receive reimbursement. According to Defendants, when Medicare receives HCFA-1500 forms, those forms are either scanned into the Medicare computer system, or the information in those forms is key punched into the system. Thus, Defendants argue, the information in the EOMBs only reflects the data entered into the Medicare computer system, not the information actually submitted by the Wilderman Defendants. Defendants argue that there could have been errors in transferring the data from the HCFA-1500 forms into the Medicare computer system. If so, then the data in the EOMBs — the data that Relator's experts actually reviewed — would not accurately reflect the claims submitted by the Wilderman Defendants to Medicare. Furthermore, Defendants claim that there is no way to determine from an EOMB which doctor actually submitted the HCFA-1500 form that corresponds to it. Defendants claim that while the submitting doctor is listed on the HCFA-1500 form, Medicare does not transfer this information into its computer system and therefore it is not reflected in the EOMBs.
While Defendants may appropriately raise this issue at trial, Defendants have failed to meet the burden of demonstrating that no genuine issue of material fact exists. While Defendants believe that the EOMBs could have different information than the HCFA-1500 forms that were submitted by the Wilderman Defendants to Medicare, Revel testified that in her twenty-six years of experience, such errors occurred only "occasionally." (Doc. No. 124, Ex. 2 at 35.) She also testified that if errors occurred, the doctor would have the error corrected. ( Id.) We are satisfied at this juncture that a genuine issue of material fact exists as to whether the data in the HCFA-1500 forms is the same as the data in the corresponding EOMBs.
We are also not persuaded by Defendants' argument that there is no way to determine from an EOMB which doctor actually submitted the HCFA-1500 form that corresponds to the EOMB. Defendants made this argument in their response brief to Relator's sur-reply brief. (Doc. No. 127 at 3.) They did not however, submit any evidence in support of their argument. For example, they did not attach an EOMB to their brief even though by doing so they presumably could have shown whether the EOMB shows which doctor submitted the claim. On the other hand, Revel apparently was able to determine by reviewing the EOMBs and OR logs which doctor submitted the claim that corresponds to the EOMB. In Relator's Expert Report, Revel attached a chart listing each alleged false claim that the Wilderman Defendants submitted and the doctor who apparently submitted that claim. (Relator's Expert Report, Ex. B.) Because Defendants submitted no evidence to show that EOMBs do not list the doctor who submitted the claim that corresponds to the EOMB, we conclude that Defendants have not met their burden of showing that no genuine issue of fact exists. Accordingly, we will deny Defendants motion for summary judgment insofar as it seeks to absolve the Wilderman Defendants of liability for violation of the False Claims Act.
V. RELATOR'S CLAIMS AGAINST NORTH PENN
We need not discuss Relator's claim that North Penn billed each of its patients the same amount for drugs and anesthesia, regardless of the value of the medications that were actually given to the patients, or Relator's claim that North Penn double billed Medicare for certain drugs, medical equipment, and supplies. ( See Compl. ¶ 21.) In its briefs, North Penn noted that Relator did not present any evidence in support of these claims, and Relator did not dispute that contention. We conclude that Relator has apparently abandoned these claims, and we will grant North Penn's motion for summary judgment with respect to them.
A. Relator's Claims Based on the PCHE Lab Tests
Relator claims that North Penn is liable for violations of the False Claims Act because it billed Medicare for PCHE lab tests but did not sufficiently document whether or not those tests were medically necessary. Attached to the Lunden Affidavit is a chart that purportedly lists patients of North Penn who were given PCHE lab tests and the amounts that Medicare reimbursed North Penn for those tests. According to Lunden, North Penn's records for those patients did not contain sufficient documentation to warrant reimbursement under Medicare's regulations. Relator also filed under seal the medical records for these patients. Those records include a billing sheet for each patient that lists the services North Penn provided to that patient. Included among the listed services are various notations of lab work. Relator did not, however, submit the UB92 claim forms that North Penn submitted to Medicare for reimbursement for the services it provided those patients. Relator does not claim that she or her experts ever reviewed these forms. (Doc. No. 114, Ex. B at 555-56.)
In contrast to HCFA-1500 forms, UB92 claim forms are used by hospitals to request reimbursement from Medicare for services.
North Penn moves for summary judgment of this claim on several grounds. We will address only one. North Penn submitted an expert report that describes the procedures hospitals use to bill Medicare for services they provide to patients. (Doc. No. 98 (the "Himmelreich and Rook Report").) According to the Himmelriech and Rook Report, Medicare has developed a payment system for hospital inpatients that corresponds to the reason the patient was admitted to the hospital. This payment system is called Diagnosis Related Groups ("DRGs"). (Himmelreich and Rook Report at 10.) DRGs are used by Medicare to pay hospitals a set amount based on the principal reason the patient is admitted, without regard to the specific services the hospital provides that patient. ( Id. at 11.) These payments are the same for patients with the same diagnosis, even though the specifics of the care the hospital provides those patients may differ. Medicare has also developed a payment system for hospital outpatients where a "facility fee" is determined for each hospital by considering the costs of the services provided and the charges for those services. Medicare's "facility fee" payment schedule includes all the related services a hospital will provide a patient (including, among others, diagnostic services, laboratory services, and X-ray services), and is paid on a service-by-service basis as a "bundled" payment. As with Medicare's payment schedule for inpatients, "[s]pecific services may be identified by the hospital in its billing process . . . but those individual services do not affect the payments made by Medicare to hospitals for outpatient service." ( Id. at 11.) In sum, the Himmelreich and Rook Report states that even though North Penn may have listed the PCHE lab tests it performed in its bills to Medicare, Medicare did not specifically reimburse North Penn for those tests.
Relator does not directly respond to this argument. While Lunden does list various PCHE lab tests that Lunden claims were not supported by sufficient documentation, and the amounts Medicare purportedly reimbursed North Penn for those tests, Lunden does not explain how North Penn could have overcharged Medicare for those tests given the payment schedule outlined in the Himmelreich and Rook Report. Once the moving party has carried its initial burden of showing that no genuine issue of material fact exists, the non-moving party "must set forth specific facts showing that there is a genuine issue for trial." FED. R. CIV. P. 56(e). Relator has not set forth any specific facts showing that North Penn overcharged Medicare for the PCHE lab tests. The Lunden Affidavit merely sets forth Lunden's conclusion that North Penn was reimbursed for the purportedly unnecessary PCHE lab tests. However, Lunden's conclusion is unsupported by any facts. Importantly, Relator and Lunden do not dispute North Penn's explanation of how Medicare reimburses North Penn for medical services. That explanation demonstrates that North Penn could not have knowingly presented false or fraudulent claims to Medicare by performing unnecessary PCHE lab tests and therefore that it did not violate the False Claims Act. See Hutchins v. Wilentz, Goldman Spencer, 253 F.3d 176, 184 (3d Cir. 2001) ("[O]nly those actions by the claimant which have the purpose and effect of causing the United States to pay out money it is not obligated to pay, or those actions which intentionally deprive the United States of money it is lawfully due, are properly considered `claims' within the meaning of the FCA.") (quoting Costner v. URS Consultants, Inc., 153 F.3d 667, 677 (8th Cir. 1998)). In addition, Relator did not submit the UB92s or any other evidence that might have shown that Medicare reimbursed North Penn for PCHE lab tests. While Relator stated that she intended to introduce the UB92s at trial, her burden here is to show that a genuine issue of material facts exists. She has not met her burden. Accordingly, we will grant North Penn's motion for summary judgment with respect to Relator's claims based on the PCHE lab tests.
B. Relator's Claims Based on an Agency/Conspiracy Theory
Relator claims that North Penn is liable for the fraudulent billing practices of the Wilderman Defendants because the Wilderman Defendants were the "agent independent contractors" of North Penn. Many courts have applied agency principals to suits under the False Claims Act. See, e.g., United States v. O'Connell, 890 F.2d 563, 567-69 (1st Cir. 1989) (holding corporation liable under the False Claims Act for the acts of its agent); United States v. Incorporated Village of Island Park, 888 F. Supp. 419, 437-39 (E.D.N.Y. 1995) (same). The Third Circuit discussed when a principal is liable for the acts of its agent independent contractors under federal law in AT T Co. v. Winback Conserve Program, Inc., 42 F.3d 1421 (3d Cir. 1994). In Winback, a seller of telecommunications brought suit under the Lanham Act against defendants for the alleged acts of unfair competition by the defendants' sales representatives. The Third Circuit concluded that the defendants' sales representatives were independent contractors, but remanded to the district court to determine whether the representatives were agent or non-agent independent contractors, because a principal is only liable for the acts of its agent independent contractors. In its opinion, the court discussed when a principal is liable for the acts of its agent independent contractors:
We hold, then, that when a principal authorizes its independent contractor agent to conduct and conclude a transaction with third parties on the principal's own behalf, and the principal benefits financially from the contracts, the principal will be liable . . . based on the agents' foreseeable . . . actions upon which it would be reasonable for the third party to rely, provided the third party has no notice that the representations are unauthorized.Winback, 42 F.3d at 1438. Thus, under Winback, five requirements must be met before a principal will be held liable for the acts of its agent independent contractor: (1) the principal must authorize the agent independent contractor to conduct and conclude a transaction with a third party on the principal's behalf; (2) the principal must benefit financially from that conduct; (3) the agent independent contractor's act must be foreseeable; (4) it must be reasonable for the third party to rely on those acts; and (5) the third party must have no notice that the third party's representations are unauthorized. ( Id.) We conclude that North Penn is not liable for the alleged false claims submitted by the Wilderman Defendants because the first two requirements in Winback are not met.
Relator claims that the North Penn should be liable for the alleged false claims submitted by the Wilderman Defendants for a number of reasons. First, Relator points to the contracts between North Penn and the Wilderman Defendants. Among other things, those contracts established a long-term relationship between North Penn and the Wilderman Defendants. They specified the number of anesthesiologists that the Wilderman Defendants would provide to North Penn. (Doc. No. 114, Ex. A at 3.) They provided that North Penn "shall exercise the same degree and control and supervision over [the Wilderman Defendants] . . . as it does over other members of . . . [North Penn's] professional staff." ( Id. at 7-8.) The Wilderman Defendants agreed to provided anesthesia-related services only at North Penn. ( Id. at 13.) The Wilderman Defendants were also required to conduct medical audits and maintain their records in accordance with North Penn's regulations. ( Id. at 15-16.) Finally, the Wilderman Defendants would bill patients for their services directly, but agreed to give North Penn a schedule of their charges and notify North Penn of any changes in those charges. ( Id. at 9-10.)
Relator also points to evidence that McKay, North Penn's president, was informed that there were problems with the way the Wilderman Defendants were billing for anesthesia services. (Doc. No. 117, Ex. 1 at 30-32.) McKay's response was to retain the American Medico-Legal Foundation to conduct a review of anesthesia services that were provided at North Penn. ( Id. Ex. 2.) According to Relator, after this review, North Penn made several changes to its contracts with the Wilderman Defendants. Those changes were allegedly designed to lessen North Penn's oversight of the Wilderman Defendants and therefore absolve it of any liability in connection with the Wilderman Defendants' anesthesia billing.
Even accepting all of this evidence, we are compelled to conclude that North Penn is not liable for the alleged false claims submitted by the Wilderman Defendants. It is undisputed that the Wilderman Defendants billed Medicare for their services directly using HCFA-1500 forms, and that Medicare reimbursed the Wilderman Defendants — not North Penn — for those services. Accordingly, it makes no sense to suggest that North Penn authorized the Wilderman Defendants to bill Medicare on North Penn's behalf. Moreover, it is clear that even if the Wilderman Defendants overcharged Medicare for services, those acts did not benefit North Penn financially. Thus, we conclude that the first two requirements in Winback are not met. Accordingly, North Penn is not liable for the acts of the Wilderman Defendants under principals of agency law.
Relator also argues that North Penn is liable for the acts of the Wilderman Defendants because both conspired to submit false claims to Medicare. Extensive discussion of this claim is unnecessary. Relator never alleged in the Complaint that North Penn was liable under the False Claims Act for conspiring with the Wilderman Defendants. This is reason enough to dismiss Relator's conspiracy claim. Moreover, Relator has presented no evidence of a conspiracy. Relator claims that North Penn's nurses were instructed to accept the time recorded by the anesthesiologists as the time a patient entered the PACU. According to Relator, this is evidence that North Penn conspired with the Wilderman Defendants to falsify the actual time patients spent in the PACU. However, the nurse in question simply testified that it was her practice to accept the time recorded by the anesthesiologists, not that she was instructed to do so. (Doc. No. 117, Ex. 7 at 29-30.) In addition, Relator argues that "[t]he jury may conclude, after viewing demeanor evidence, there exists a ruse, created by McKay and Wilderman . . . to submit . . . false claims to the government. . . ." (Doc. No. 124 at 7.) Such speculation is not sufficient to show a genuine issue of material fact. Accordingly we conclude that North Penn is not liable for the acts of the Wilderman Defendants under a conspiracy theory.
An appropriate Order follows.
ORDER
AND NOW, this 29th day of April, 2004, upon consideration of the Motion by Defendant North Penn Hospital for Summary Judgment, (Doc. No. 114), the Motion to Dismiss Relator's January 21, 2003 Expert Witness Report Filed by Defendant North Penn Hospital, (Doc. No. 128), and Defendants Barry Wilderman, M.D., P.C., Barry Wilderman, M.D., Eric Gewertz, M.D., and Steven Palloni, M.D., (the "Wilderman Defendants") Motion to Join North Penn's Motion to Dismiss Relator's January 21, 2003 Expert Witness Report, (Doc. No. 135), and all papers filed in support thereof and opposition thereto, it is ORDERED that:
1. The Wilderman Defendants' Motion to Join North Penn's Motion to Dismiss Relator's January 21, 2003 Expert Witness Report is GRANTED.
2. Defendants' Motion to Dismiss Relator's January 21, 2003 Expert Witness Report is GRANTED.
3. Defendants' Motion for Summary Judgment is GRANTED as to North Penn.
4. Defendants' Motion for Summary Judgment is DENIED as to the Wilderman Defendants.
IT IS SO ORDERED.