United States ex rel. Donegan v. Anesthesia Assocs. of Kan. City, PC

• Decision Date: 12 August 2016
• Docket Number: No. 15-2420,15-2420
• Parties: United States ex rel. Linda Donegan, as Administrator of the Estate of John Timothy Donegan Relator-Appellant v. Anesthesia Associates of Kansas City, PC, Defendant-Appellee United States of America, Amicus Curiae
• Court: U.S. Court of Appeals — Eighth Circuit

833 F.3d 874

United States ex rel. Linda Donegan, as Administrator of the Estate of John Timothy Donegan Relator-Appellant

v. Anesthesia Associates of Kansas City, PC, Defendant-AppelleeUnited States of America, Amicus Curiae

No. 15-2420

United States Court of Appeals, Eighth Circuit.

Submitted: February 10, 2016

Filed: August 12, 2016

James B. Helmer, Jr., Helmer, Martins, Rice & Popham Co., L.P.A., Cincinnati, OH, argued (Robert M. Rice, Erin M. Campbell, Helmer, Martins, Rice & Popham Co., L.P.A., Cincinnati, OH, Michael F. Brady, Mark A. Kistler, Brady & Associates, Overland Park, KS, on the brief), for appellant.

Thomas B. Weaver, Armstrong Teasdale LLP, St. Louis, MO, argued (Casey O. Housley, Megan J. Ochs, Kevin W. Prewitt, Armstrong Teasdale LLP, Kansas City, MO, on the brief), for appellee.

Jeffrey E. Sandberg, U.S. Dept. of Justice, Civ. Div., Washington, DC, argued (Benjamin C. Mizer, Principal Deputy Asst. Atty. Gen., Michael S. Raab, Tara S. Morrissey, U.S. Dept. of Justice, Civ. Div., Washington, DC, Tammy Dickinson, U.S. Atty., Kansas City, MO, on the brief), for amicus curiae United States of America, in support of neither party.

Before RILEY, Chief Judge, LOKEN and BENTON, Circuit Judges.

LOKEN

, Circuit Judge.

John Timothy Donegan, a Certified Registered Nurse Anesthetist (“CRNA”), commenced this qui tam action under the False Claims Act (“FCA”), 31 U.S.C. § 3729

-33.¹ The FCA's qui tam provisions authorize relators—private citizens acting as whistleblowers—to sue on behalf of the United States to recover damages for the submission of materially false claims for government payments. See United States ex rel. Newell v. City of St. Paul, 728 F.3d 791, 794 (8th Cir. 2013), cert. denied, ––– U.S. ––––, 134 S.Ct. 1284, 188 L.Ed.2d 300 (2014). “The FCA attaches liability, not to the underlying fraudulent activity, but to the claim for payment.” United States ex rel. Onnen v. Sioux Falls Indep. Sch. Dist. No. 49 – 5, 688 F.3d 410, 414 (8th Cir. 2012) (quotation omitted).

Donegan alleged that his former employer, Anesthesia Associates of Kansas City, P.C. (“AAKC”), violated 31 U.S.C. § 3729(a)(1)(A) and (B)

by submitting claims for Medicare reimbursement of anesthesia services at the “Medical Direction” rate. The claims were knowingly false, Relator alleged, because AAKC anesthesiologists were not present in the operating room during patients' “emergence” from anesthesia, and therefore AAKC did not comply with the Medicare conditions of payment for submitting such claims. See42 C.F.R. § 415.110(a)(1)

. The United States declined to intervene. The district court² granted AAKC summary judgment, concluding that Relator failed to establish that AAKC knowingly submitted false claims; the court declined to consider a theory of liability not asserted in Relator's amended complaint. Relator appeals these rulings. We granted the United States leave to appear as amicus curiae supporting neither party. Reviewing the grant of summary judgment de novo , and the failure to consider an unpleaded theory for abuse of discretion, we affirm.

I. The “Emergence” Claim.

The Centers for Medicare and Medicaid Services (“CMS”), part of the Department of Health and Human Services, administers the Medicare and Medicaid programs. 42 U.S.C. §§ 1302

, 1395hh. In reimbursing anesthesiology services, CMS regulations distinguish between four levels of services provided by anesthesiologists and CRNAs: Personally Performed, Medical Direction, Medical Supervision, and Not Medically Directed. 42 C.F.R. §§ 414.46, 414.60. The Medical Direction category at issue in this case applies when an anesthesiologist directs a qualified individual such as a CRNA in up to four concurrent anesthesia cases. 42 C.F.R. § 414.46(d)(ii) ; 42 C.F.R. § 415.110(a). To obtain reimbursement for Medical Direction, the Medicare regulations require the anesthesiologist to complete seven steps:

(1) For each patient, the physician—

(i) Performs a pre-anesthetic examination and evaluation;

(ii) Prescribes the anesthesia plan;

(iii) Personally participates in the most demanding aspects of the anesthesia plan including, if applicable, induction and emergence;

(iv) Ensures that any procedures in the anesthesia plan that he or she does not perform are performed by a qualified individual as defined in operating instructions;

(v) Monitors the course of anesthesia administration

at frequent intervals;

(vi) Remains physically present and available for immediate diagnosis and treatment of emergencies; and

(vii) Provides indicated post-anesthesia care.

42 C.F.R. § 415.110(a)(1)

. The anesthesiologist must document “in the patient's medical record” that each step was completed, “specifically documenting that he or she performed the pre-anesthetic exam and evaluation, provided the indicated post-anesthesia care, and was present during the most demanding procedures, including induction and emergence where applicable.” 42 C.F.R. § 415.110(b).

AAKC employed CRNA Donegan at Menorah Medical Center (“MMC”) in Overland Park, Kansas, from 2006 until January 2012. In MMC surgeries, the CRNA stays in the operating room with the patient throughout the procedure. The anesthesiologist concurrently directs or supervises anesthesia services in up to four operating rooms. MMC's practice is consistent with reimbursement for Medical Direction, provided its anesthesiologists comply with the required seven steps.

This appeal turns on compliance with “Step Three,” which requires that the anesthesiologist “[p]ersonally participates in the most demanding aspects of the anesthesia

plan including, if applicable, induction and emergence. 42 C.F.R. § 415.110(a)(1)(iii). At MMC, the anesthesiologist is present to insert the endotracheal tube

that will be used to administer general anesthesia (“induction”). After the surgery, the CRNA removes the tube (“extubation ”) and delivers the patient to the recovery room, called the Post-Anesthesia Care Unit (“PACU”), where the CRNA transfers patient care to a PACU nurse. The anesthesiologist may visit the patient after surgery in the operating room or during transfer to the PACU. But the record reflects that in many if not most cases, the AAKC anesthesiologist's post-surgery visit occurred while the patient was recovering in the PACU.

Donegan's detailed FCA Amended Complaint alleged that AAKC failed to comply with Step Three of the Medical Direction requirements because its anesthesiologists were “virtually never present with patients during ‘emergence,’ ” alleging that “the broadest definition of ‘emergence’ ” is that it ends when the patient is turned over to the PACU staff. Relator claimed that AAKC knowingly violated the FCA by seeking reimbursement at the Medical Direction rate despite its noncompliance with this regulatory requirement.

After extensive discovery, the parties filed cross motions for summary judgment. The district court granted AAKC summary judgment, concluding that Relator cannot establish that AAKC submitted knowingly false or fraudulent claims because (i) the term “emergence” in Step Three of the regulation has not been defined by CMS and is ambiguous; (ii) AAKC's definition of “emergence” as a process that includes the patient's recovery time in the PACU was objectively reasonable; and (iii) AAKC's reasonable interpretation of the ambiguous regulation “belies the scienter necessary to establish a claim of fraud under the FCA,” quoting United States ex rel. Ketroser v. Mayo Found., 729 F.3d 825, 832 (8th Cir. 2013)

. On appeal, Relator challenges all three components of the district court's analysis.

We review the grant of summary judgment in FCA cases de novo , evaluating “whether the record, viewed in a light most favorable to the non-moving party, shows that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law.” Schell v. Bluebird Media, LLC, 787 F.3d 1179, 1184 (8th Cir. 2015)

(quotation omitted). The issue is whether Relator submitted sufficient evidence that AAKC's alleged practice of billing at the Medical Direction rate when the anesthesiologist did not participate in emergence in the operating room “constituted the knowing submission of a false or fraudulent claim or statement within the meaning of 31 U.S.C. § 3729(a)(1)(A) or (B).” Ketroser, 729 F.3d at 829. The statute defines “knowing” as “actual knowledge” or acting “in deliberate ignorance [or] reckless disregard of the truth or falsity of the information.” 31 U.S.C. § 3729(b)(1)(A).

1. The brief of the United States as amicus curiae confirms what the district court observed: “CMS has not issued guidance on the meaning of” the term emergence in Step Three of the Medical Direction regulation, 42 C.F.R. § 415.110(a)(1)(iii)

. Nor has the term been defined by a controlling source, such as a Department of Health and Human Services national or binding local Coverage Determination, see 42 U.S.C. § 1395ff(c)(3)(B)(ii), or by the American Society of Anesthesiologists and the American Association of Nurse Anesthetists, professional bodies that establish anesthesia standards of care. See 72 Fed. Reg. 66,580, 66,885 (Nov. 27, 2007). On this record, given the term's obvious lack of a plain meaning, we agree with the district court that the regulation is ambiguous on this essential question.

2. Concerned by regulatory silence and the vagueness of the term, AAKC's Professional Practice Committee defined emergence in its 2001 Corporate Compliance Plan “to include the recovery room.” In discovery, medical experts for both parties agreed that “emergence” is a medical term that refers to a post-surgery recovery process that can extend into the recovery room. AAKC's expert Dr. Helgeson wrote, “It is generally understood by anesthesiologists and CRNAs that emergence from general anesthesia

is a process and has no discrete point in time.... Typically, there is no specific point in time where emergence is complete,” but it continues at least while the patient is ...