*1 failure to deliver nor its information rect Ex REL. Thomas M. STATES UNITED an extraordi- constitutes on time
the notice SCHELL, Plaintiff-Appellant, justify inter- that would nary circumstance Board’s exer- court into the by this vention v. BIA’s Practice Id. The discretion.” cise of SYSTEM, HEALTH BATTLE CREEK “[pjostal emphasizes also Manual corporation, Michigan non-profit existing dead- delays not affect delivery do Defendant-Appellee. anticipate lines,” parties should through filing is made delay, “whether No. 04-1418. mail, any over- mail, priority first class Appeals, United States Court delivery ser- guaranteed other night or Sixth Circuit. Manual, Chapter BIA Practice
vice.” 3.1(b)(iv). May 2005. Argued:
Furthermore, routinely BIA issues Aug. and Filed: Decided BIA The appeal. for notices of receipts party may that a provides
Practice Manual information regarding call the BIA for filing has not receive if he or she appeal days. BIA Practice fifteen receipt within 3.1(d)(i). ac- Manual, Malak Chapter filing not receive a knowledged that he did the BIA to did not call receipt, yet he until filed that his notice had been verify years later. nearly two BIA is that the Malak contends While him duty upon imposing an additional notice be ensure the requiring he BIA, to acknowl- he fails received that a notice provide edge regulations BIA it. receives is filed when rule does not BIA’s adherence to that It obligation upon Malak. impose a new BIA to sum- for the was not erroneous untimely. appeal as marily dismiss Malak’s DENIED. for review is petition Malak’s
OPINION MOORE, Judge. Circuit (“Schell”) ap- Relator Thomas Schell peals from the court’s entry district in favor summary judgment of Defendant Appellee Creek Health System (“Battle Creek”) in the underlying False (“FCA”) qui tarn suit. Schell’s Claims Act central is that vio- allegation FCA, 3729-3733, by §§ lated the U.S.C. charging Medicare entire multi-dose vials of anesthetic medication when less than the full vial of medication was admin- patient. istered to a The district court below that Battle concluded summary judgment entitled to because Schell failed to demonstrate that Battle methodology in- resulted in payments creased Medicare. For below, reasons set forth we REVERSE entry summary judg- district court’s ment in favor of Battle Creek RE-
MAND proceedings. for further I. AND FACTUAL PROCEDURAL Hafeli,
ARGUED: Mark W. Beier How- HISTORY P.C., Hills, lett Michigan, Bloomfield Appellant. Gilchrist, Foster, Alan G. From 1991 to Schell was em- Swift, Smith, Hills, Farmington Collins & ployed by reg- Battle Creek as a certified Michigan, for Appellee. ON BRIEF: (“CRNA”). istered Bat- nurse/anesthetist Hafeli, P.C., Mark W. Beier Howlett tle Creek terminated Schell’s employment Hills, Michigan, Bloomfield Appellant. May part plan 1999 as of a replace Foster, Gilchrist, Swift, Alan G. Collins & independent CRNAs with contractors. Smith, Hills, Farmington Michigan, for March filed the instant FCA Appellee. qui tam suit against its Creek and owner, Mercy Health Services. In his COOK,
Before: MOORE and Circuit complaint, alleges that, his GWIN, during Judges; Judge.* District period of employment, Battle Creek com- MOORE, J., opinion delivered the of the mitted by charging fraud en- court, GWIN, D.J., joined. in which tire multi-dose vials of anesthesia medi- - COOK, 543), (pp. J. cation only portions delivered a when of the vials’ separate dissenting opinion. patients: contents were administered to * Gwin, Ohio, sitting by designation. Honorable S. James United States Judge District for the Northern District of billing practice would in fact result in- employment with Mr. During Schell’s Defendant, as before and after as well creased Medicare the Defendant had employment, his Both Creek. Schell and vials of med- ordering “multi-dose” been expert-witness reports commissioned ad- portion a small ication, administering of dressing prac- of Battle Creek’s impact *3 to vial an individ- each medication billing tice of multi-dose for entire vials of charging patient, ual and then anesthesia medication on made of the cost vial.... tient for the entire (expert-wit- by Medicare. J.A. at 519-24 vial would then opened The multi-dose by report prepared ness and affidavit Rob- portions of medi- kept, be and additional Creek); Battle ert R. Zielesch on behalf of cation in it be used additional (expert-witness report at 525-32 J.A. patient each for the patients, charging Bara prepared by affidavit Lawrence on This was done for all full of a vial. cost Creek); of behalf 533-77 from 1991 hospital pre- and affidavit (expert-witness report through 1999. Schell); pared by Jack Ahern on behalf of (Second (“J.A.”) 49-50 Appendix Joint report pre- at 895-97 (expert-witness ¶¶ 12-13). The Compl. Am. United States on pared Andrei M. Costantino behalf complaint with Schell’s but served Creek). of Battle After a to intervene. series of elected not their experts completed After the re- motions, granted court twice the district ports deposed, and were complaint an amended leave to file summary judgment moved for on the of all the dismissal claims ordered policy of grounds Mercy Health against Services. charging for multi-dose vials did not entire A held 16 status conference was Rule expenditures Medi- result increased 2002, a magistrate judge with October care because reimbursements for shortly case-management thereafter (not a cost outpatients calculated on were to produce order requiring granted charge) basis. The district court relating to its of anes- documents motion and ordered dis- Creek’s thesia was entered. A second medications ap- now missal of Schell’s suit. Schell Rule 16 conference was held in Jan- status peals.1 uary magistrate judge and the ruled allegations fraud that because Schell’s of ANALYSIS II.
primarily arose out of charging of policy adherence to a A. of Review Standard vials of anesthesia for entire multi-dose the district court’s medication, focus, We review de novo discovery at least should in favor summary judgment of of initially, grant such a question whether (''Schell”) respect mary judgment Creek with initially to Battle 1. Relator Thomas Schell, Defendant-Appellee alleged patients. to all three how- classes Creek”) ("Battle System engaged ever, Health appeals court's order the district billing practices respect with to fraudulent See outpatients. Pl.-Appel- to inpatients, inpatient patients: three classes ("The appeal is lant’s Br. Government's (i.e., inpatients whose treatment "outliers” applies ruling Judge as it to limited Bell's penses greatly lump the normal sum exceeded outpatients Appellee, Battle Creek Health paid providers based on an to health care appealing System. is not The Government outpatients. inpatient's diagnosis), and Joint inpatients Judge ruling of the Bell's as to (D. ("J.A.”) Appendix Ct. at 403-06 J. Summ. Hospital.”). 9-11). granted Op. at district court sum- Co., v. Ford fraudulent approval; Battle Creek. Himmel Motor claim or (6th Cir.2003). (2) makes, uses, knowingly 342 F.3d Sum or to be causes mary appropriate used, “if the judgment is made or a false record or statement depositions, answers to inter pleadings, get fraudulent claim or paid false or file, (7) on rogatories, together Government; and admissions approved ... by the or affidavits, any, if makes, uses, with the show that there knowingly or causes to be genuine as to material used, is no issue fact made or a false record or statement party and that moving conceal, avoid, entitled to or obligation decrease an judgment matter of law.” FED. R. as a pay money property transmit 56(c). Government”). considering P. CIV. However, we have summary judgment, Creek’s motion for we cautioned that: *4 light the view the evidence in most favor a liability merely does not arise because Schell, nonmoving able to party. the false is a statement included within Himmel, (citing 342 598 F.3d at Matsushi claim, but the claim be rather itself must ta Elec. Zenith Corp., Indus. Co. v. Radio false or A fraudulent. false statement 574, 587, 1348, 475 106 S.Ct. U.S. within a claim can serve to make (1986)). L.Ed.2d 538 the entire claim itself fraudulent if that statement material to or request the Liability B. the False Under Claims money demand or property. for Act Medshares, 400 F.3d 443. Liability under the FCA attaches Outpatient C. Medicare Reimburse- (1) presents “when a a claim person for System ment payment approval or or to decrease an (2) Government; obligation owed to the parties’ Based on our review of the ex- fraudulent; (3) pert-witness the claim is false or reports, appears and the person knowingly, parties the acted agreement defined as are in as to general the information, actual of the knowledge procedures is- Medicare-reimbursement ignorance with in deliberate reckless dis sue this Under case. the Medicare falsity regard of the truth or of the program, infor Battle Creek reim- received mation.” United States ex rel. A + outpatients’ bursements for covered Homecare, penses First, Inc. v. Mgmt. phases. pa- Medshares in two after a (6th Inc., treated, Group, 400 F.3d tient Cir. had been Battle Creek would 2005) 3729(b)); § (citing 31 U.S.C. see 31 submit a claim for reimbursement to Medi- 3729(a) care, § (establishing shortly per U.S.C. a and thereafter Medicare subject liability payment son is under the would an interim FCA issue to Battle “(1) alia, she, years when he or inter knowingly During Creek. in issue this suit, presents, presented, or causes to be to an Medicare providers reimbursed for employee officer or outpatient United States expenses provid- based on the member of Government or a er’s cost” in furnishing Armed “reasonable such Forces of the United States a false or care.2 amount Because the Department Payment System Hospital of Health Outpatient and Hu- for Ser- vices, 18,434, 18,434, 18,436-38 replaced man Fed.Reg. Services Medicare's cost-based 7, 2000) payment system outpatients pro- (Apr. (providing with overview of current spective-payment system providers prospective-payment system which lump-sum payment payment system noting receive a based on a former cost-based diagnosis. Inspector system tient's prospective-payment See Office of had been General; Program; Prospective inpatients Medicare used since payments exceeding differed from the ceived interim the to- for a service in tal amount year, reimbursement for the actual cost incurred service, calculating the Battle remit the such Creek would excess to the providing required of a interim-payment government. Conversely, amount use if U.S. the inter- “cost-to-charge that would convert im payments ratio” received cost figures. into were less than the total amount Cost-to-charge ratios are determined year, for the was owed and costs on the total pay outstanding based balance.4 cost- year, thus entire Billing D. Method An- any given year ratio was to-charge Medications esthesia complete. until unknown Hence, interim calculating parties appear agree- While the to be Medicare, Battle Creek due from used ment as to the basic Medicare reimburse- year’s cost-to-charge calendar prior case, procedures ment at issue this treating particular its cost in to estimate parties disagree as sharply proper to the outpatient. of Battle characterization Creek’s method billing anesthesia medications and which could During phase, the second impact procedures these *5 the fiscal interme- years complete,3 take payments on Medicare’s to Battle Creek. acting on of Medicare diary behalf that, by for an charging contends cost report Battle Creek’s annual review entire vial anesthesia of medication when final and determine Battle Creek’s cost-to- only portion of the vial had been admin- charge year. ratio for that Because the istered, engaged by in fraud paid to Battle payments previously interim charging for medication it did had been calculated based on the Creek ratio, provide. Pl.-Appellant’s Br. at 10-11 prior year’s cost-to-charge inter- (“[W]hat happened at Battle Health im Battle Creek payments received Creek System going grocery to a overpayment underpay- reflect an was similar could buying eggs. you If Battle store and a dozen ment Medicare. Creek re- When witness, 1980s); (Ahem According expert Report also at 4. to Schell’s Jack see J.A. at 535 2) Ahern, (describing differences between cost-based outpatient cost-to- Battle Creek had system diagno- and reimbursement charge approximately in of 31.22% prospective payment system for in- 1996, sis-based 1994, 1995, in in 31.31% 29.25% patients). 1997, 1998, in and in 34.21% 30.07% 28.79% (Ahern Report Attach- in 1999. J.A. at 552 According 3. witness Battle that, 1). report ment also indicates Ahern's ("Zielesch”), Zielesch final Robert settlement despite cost-to- the fact that Creek’s reports often two of Battle Creek’s cost took 1999, charge ratio rose in 1996 and (Zielesch longer. years J.A. at 520 See outpatients for Creek's interim 2) Report (indicating program of notice due ceeded total amount from ("NPR”) 13, May date of 1997 reimbursement each 1994 and between 5, July report; cost NPR date of for 1991 (Ahem 3) (indicating Report 554 Attachment report; date 2000 for 1992 cost NPR of June repayments owed to Medi- 30, that Battle Creek report; 2000 for NPR date of 1993 cost $900,888 1994, $1,232,188 30, in report; equaling care September 1996 for 1994 NPR 1995, $203,082 1996, $1,907,055 30, September in of 1997 for cost in date 1995 18, 1997, 1998, $2,219,358 $1,656,842 report; September NPR date of 1998 for and 6, report; July 1999). cost date of 2000 1996 NPR report; May cost NPR date of for 1997 report; 1998 and NPR of 2001 for cost date September report). cost 2001 for 1999 540 separate up you including the carton found that there of and
opened two $535.25 mL, egg yet you charges mg/10 for Midazolam 10 two one inside and dozen.”)- charges mg/20 200 separate Propofol for the full been mL, Creek, charge mg/2 2 hand, on and for Midazolam the other contends that it two); a quantity listing mL with of J.A. at adopted charg- of simply flat-fee method (Patient D listing itemized 189 statement anesthesia and that it ing for medications and in- pharmacy charges total of no representations $210.75 made to Medicare as to separate charges two cluding drug par- $12.50 amount of to a administered (Patient mL); 1% 20 Lidocaine J.A. at 194 patient. ticular D form listing pharmacy UB-92 total After reviewing the record before (Patient $207.75); of E charges J.A. at 254 us, genuine are we conclude that there pharmacy statement listing itemized total of material fact regarding issues charges including sepa- of and two $311.50 billing practices entry prevent mL); charges Propofol mg/20 rate 200 summary judgment this time. A (Patient 256 E listing J.A. at UB-92 form assumption pervading central discov charge $311.50); pharmacy 279 ery process summary judg and the instant (Patient F listing itemized total statement proceeding ment has been pharmacy charges including $292.00 followed a consistent uniform separate charges two for Midazolam $20.75 policy medications. anesthesia mL, two mg/2 separate charges $48.00 Def.-Appellee’s (“Simply See Br. at 12 stat mL, for Propofol mg/20 sepa- two ed, there is no deviation whatsoever in charges Succinylcholine rate $20.75 from patient one to the next or mL); (Patient mg/10 J.A. at F UB-92 from time period one to the next.... The listing form total pharmacy *6 way could possible charges impact $284.50). Thus, we there conclude that is Medicare reimbursement for a genuine issue of material fact with re- in charges would be wide [sic] variations spect how Battle Creek billed Medicare (Bara service.”); for same J.A. at 1288 for anesthesia medications that would 41) (“[A]ll Dep. assumptions at my entry of summary make in favor judgment my upon all of evaluation was based Creek improper of Battle at this time. structure.”). charge However, uniform note that Battle has ar We Creek sample patient-billing records and UB gued summary that judgment proper is ap 92 forms Medicare-reimbursement because false it statements or errors pended to Schell’s second amended com made with to its charges anes provide plaint some that indication Specif thesia medications are immaterial. may Creek fact not have followed a that, ically, Battle Creek has asserted be uniform, flat-fee charging method of cause the final amount reimbursed anesthesia Specifically, medications. Medicare is determined on based for several records costs, any overstated suggest payment that some requests for through would be corrected the cost-to- submitted to Medicare Creek conclude, adjustment. charge-ratio We multiple charges reflected the same however, that such an argument lacks anesthesia single medication rather than a merit. (Patient charge. flat-fee B See J.A. at 128 form listing charge First, matter, UB-92 pharmacy legal as if $535.25); (Patient at B itemized is found to have made false statements statement listing pharmacy charges total during interim-payment Second, matter, as a technical that returned phase, the fact final cost-to-charge after Creek’s reliance any overpayments report of the cost would settlement an accurate conversion mechanism is as liability. from FCA that the question insulate called into the extent decision, we con Medshares our recent suggests before us that Battle evidence conduct “false statements or cluded that may not have a uniform followed to the false or fraudulent be material must patients. in how it its procedure person civilly liable under hold claim to Bara, As Lawrence one of Battle Creek’s FCA,” a false 400 F.3d and that witnesses, explained, the conclusion “ if material it a ‘natural is has statement charging for vials of entire multi-dose influence, capable tendency [is] in- anesthesia medication does not cause the decision of the decision- influencing, hinges upon creased costs to Medicare ” making body to which it was addressed.’ charging each of its States, Neder v. (quoting Id. at 445 United in the same manner. See J.A. at tients 1, 16, 1827, 144 L.Ed.2d 119 S.Ct. 527 U.S. 10) (Bara Dep. (“[CJharges are (1999)) (alteration quota and internal more than a on the Medi- nothing statistic Medshares) (ex marks omitted tion as report. They long care cost do not—as tendency “stan plaining that natural charge it’s a uniform structure —and that’s plain consistent dard is more with primarily what the auditors are concerned statute, lia meaning of the which attaches charge is that it’s uniform struc- a false or fraud bility upon presentment of (Bara 53) (“If ture.”); Dep. J.A. at 1295 claim, than on rather actual ulent structure, charge everybody a uniform it’s claim”). In “natural ten applying the amount, getting charged that same so Medshares, rejected we dency” test ratio.”); cost-to-charge in the therefore it’s it agency’s argument home health (Bara (“As 54) Dep. at 1296 far as if liability under should be relieved civil structure, it charge not a uniform there’s the fiscal expected the FCA because if cost-to-charge ratio. And affects and to intermediary to conduct an audit auditor, intermediary you you were home any pension expenses the disallow a look at at a mini- take that and in error. See agency health claimed every- those gross up mum so (“A knowingly party id. at 447 cannot file a body charge had a uniform structure *7 the assumption claim on the that false report.”). patient- the cost Because intermediary correctly will calculate fiscal billing provide records submitted Schell in process. value the review Such that did not indication Battle Creek some calcu would shift burden of cost result flat fee uniformly charge all its provider inter lation from to the fiscal medications, con- anesthesia we cannot mediary encourage filing of false of on the basis the evidence current- clude claims, directly at odds with which issue ly genuine us there is no before FCA.”) (citation omit goal stated of prac- Battle as to whether Creek’s ted). the case at Applying Medshares to in to Medi- tices resulted increased costs bar, that if made conclude Battle Creek we care. during to Medicare false statements interim-payment phase, Payments E. Bad Debt liability immune would not be from FCA mo- Battle opposing In his brief Creek’s it reimbursed Medicare simply because summary assert- judgment, after tion for any overpayments final settlement that, increasing payments to addition report. the cost ed Creek, I outpatient-reim- overpay respectful- standard care to by Medicare for claims, ly allegedly dissent. bursement billing practices could also re- fraudulent parties’ experts both acknowledged, As payments by sult in increased bad-debt Medicare reimburses Battle Creek based court Medicare.5 The district below re- costs, on the hospital’s its to claim, jected explaining Schell’s bad-debt (J.A. 686.) 519, 529, patients. at And opinion expert does not ad- that “Schell’s Medicare audits Battle Creek’s cost re- of bad debt dress the issue ports that, the end of each so as identify any facts which Schell has failed admitted, expert “at the Creek’s issue material fact genuine create a as day,” end of the Medicare will not overpay (D. at 407 to this Ct. Summ. issue.” (J.A. 734.) patients’ anesthetics. 13). However, two of Op. J. But Plaintiff contends that Battle witnesses, expert Lawrence Bara despite Creek violated the FCA these au- Zielesch, did discuss and Robert bad-debt dits, because Medicare made excessive in- payments depositions, their during and the terim payments reimbursement to Battle financial-analysis portion report pre- occurred, Creek before the audits essen- witness, pared by Schell’s Jack tially giving interest-free Ahern, does indicate fails, however, argument loans. This be- payments received bad-debt cause Schell offers no evidence that Battle 1996, 1997, 1998, from materially Creek submitted false claims (Ahern 566, 569, Medicare. 12, 15, 21). Report Attachments Be- cause questions the fact exist with observes, As majority charg- to Battle Creek’s method of payments based its interim to Battle ing likely for anesthesia medications are “cost-to-charge Creek on a ratio.” This have bearing question some ratio was determined comparing costs whether is liable for submit- patient prior year. calendar ting false claims to Medicare for Thus, bad-debt if in example, Year One Battle payments, we conclude the district Creek’s actual costs were 30% of the court should reconsider issue of bad- amount charged patients, then Medicare payments debt on remand. would base its interim in Year
Two on the same ratio. III. CONCLUSION system, Under this does not matter to above, For set the reasons forth we hospitals Medicare if “overcharge” pa- REVERSE the district court’s order tients for anesthetic. Medicare is under- judgment granting summary favor of standably whether, here, indifferent to as REMAND Creek and for further hospitals charge patients for an entire bot- *8 proceedings opinion. consistent this tle of each anesthetic for dose adminis- tered. All that matters is whether Battle
COOK, Judge, dissenting. Circuit uses the same methods from is, year I that the billing prac- Because conclude to whether only it in- —that did challenged tices here not cause charges proportionate Medi- creases its to its though Simply put, outpatient may hospital procedures even an the follows certain but is Medicare, co-payment be covered the still still unable to the collect from the pay portion of outpatient, must his or her medical Medicare will reimburse the hos- (referred expenses "co-payment”). pital as a portion to If for a of this "bad debt.” Creek), that Medicare owed such the cost-charge ratio remains the costs—so day.” the end of the money “at underpay- Creek does, then over- If it same. if, But unlikely. ment Medicare agree majority opinion appears The One, Battle Creek in Year example, analysis, but nonetheless with much of this anesthetic only for the charged grant court’s of sum- the district reverses consumed, in Year Two but actually they so, doing it relies on mary judgment. an entire bottle charged patients that has never made: argument Schell received, then the drastic every dose may not have had consistent cost-to-charge ratio ivould in the change time billing practices during the relevant and Battle overpay, Medicare cause suggests record evidence period, because the FCA. might violate may have submitted Medi- however, reflecting “multiple Here, payment requests the record shows care anesthesia medi- billing practices remained for the same charge.” time flat-fee single the relevant rather than a throughout cation consistent Indeed, alleges the complaint nothing supports in the record Schell’s But period. occurred, if it dis- overcharged practice, “all that this view that Battle Creek un- cost-to-charge Again, “from 1991 ratio. same manner torted the tients” (J.A. 50.) And Schell evidence shows that disputed record through 1999.” consistent expert’s cost-to-charge ratio remained challenge Battle Creek’s not does cost-to-charge years. alleged ratio Thus through conclusion may including those through patients, the 1990s and barely changed cessive cites, immaterial. underpay majority are caused Medicare have even 1343-1344.) (J.A. at Battle Creek. appreciate fails to how Mr. Schell testimony expert’s works, why to his points ratio cost-to-charge Schell pay- interim made excessive his that Medicare One can understand causes no fraud. through 1999 as evidence multiple pa- seeing ments from indignant reaction (Schell Br. at damages. of anes- government for the same bottle tients 29.) essentially admitted indeed, may But this have thetic — conclude, based overcharged patients. that he could wrongfully him, however, that Battle Creek Act, proscribes before information False Claims cost-charge claims to the fed- distorted of false presentation increas- charge no disproportionate presents through government eral —and is, were overpayments occurred here. es—that that this evidence govern- against fraud product of affirm the district I therefore would 769-71.) (J.A. at ment. court. lack points to Battle Creek’s also to Medicare of reimbursement government auditing as evidence
after 37.) (Schell To the con- Br. at damages. however, only emphasizes this trary, damages instead, did not suffer — pay- in its interim underpaid *9 (when considers one ments to Battle Creek anesthetics, costs also other but CORP., Debtor. reimburses In re: CORNING for which DOW