Blue Cross & Blue Shield of Georgia, Inc. v. Kell

• Decision Date: 11 July 1997
• Docket Number: No. A97A0258,A97A0258
• Citation: 227 Ga.App. 266,488 S.E.2d 735
• Court: Georgia Court of Appeals
• Parties: , 97 FCDR 2650 BLUE CROSS & BLUE SHIELD OF GEORGIA, INC. v. KELL et al.

Page 735

488 S.E.2d 735

227 Ga.App. 266, 97 FCDR 2650

BLUE CROSS & BLUE SHIELD OF GEORGIA, INC. v. KELL et al.

No. A97A0258.

Court of Appeals of Georgia.

July 11, 1997.

McKee & Barge, Patrick W. McKee, James R. Marshall, Atlanta, for appellant.

Alston & Bird, Rebecca M. Lamberth, Kristen E. Mersereau, Bernard Taylor, Michael P. Kenny, Atlanta, for appellees.

ANDREWS, Chief Judge.

Blue Cross & Blue Shield of Georgia, Inc. (Blue Cross) appeals from the trial court's grant of summary judgment to Dr. Kell ¹ on Blue Cross' counterclaim against Dr. Kell in his original suit seeking reimbursement of claims from Blue Cross for patients treated at his clinic, The Private Clinic.

Review of Proceedings

Kell initiated litigation against the State Merit System in October 1991, contending that he was owed $154,867 for medical services rendered to employees insured by it (Case No. D-93448). The State Merit System's insurance program is administered by Blue Cross.

In May 1992, Kell filed a separate suit against Blue Cross contending he was owed $43,158 for treatment of a specific patient ² which had been rendered pursuant to the Participating Physician Agreement into which he and Blue Cross had entered on March 7, 1988 (Case No. E-725). Blue Cross counterclaimed in this suit that "Kell made representations to BCBS concerning the nature of the services which were provided to this patient and the nature of the charges which were made to this patient and to BCBS which [he] knew to be false at the time ... made them and which were for the intent and purpose of deceiving BCBS and inducing BCBS to pay them. BCBS reasonably relied on these representations and suffered damage...." Additionally, Blue Cross contended that Kell's actions were in violation of the Georgia Fair Business Practices Act, OCGA § 10-1-390 et seq. While the two actions were consolidated, the summary judgment on the fraud counterclaim is specific to Case No. E-725.

Summary judgment was granted State Merit and Blue Cross on Kell's claims for payment, because the insurance plans and provider agreements allowed State Merit and Blue Cross, its administrator, sole discretion on coverage issues. That judgment was appealed to this Court and affirmed in Case No. A94A0988.

Fraud Claim

1. In reviewing grant or denial of summary judgment, this Court conducts a de novo review of the evidence. Goring v. Martinez, 224 Ga.App. 137, 138(2), 479 S.E.2d 432 (1996); Gaskins v. Hand, 219 Ga.App. 823, 466 S.E.2d 688 (1996). The grant of summary judgment will be affirmed on appeal if it is right for any reason. Deese v. Nationsbank of Ga., N.A., 222 Ga.App. 275, 277(1), 474 S.E.2d 18 (1996).

"To prevail at summary judgment under OCGA § 9-11-56, the moving party must demonstrate that there is no genuine issue of material fact and that the undisputed facts, viewed in the light most favorable to the nonmoving party, warrant judgment as a matter of law. OCGA § 9-11-56(c). A defendant may do this by showing the court that the documents, affidavits, depositions and other evidence in the record reveal that there is no evidence sufficient to create a jury issue on at least one essential element of plaintiff's case. If there is no evidence sufficient to create a genuine issue as to any essential element of plaintiff's claim, that claim tumbles like a house of cards. All of the other disputes of fact are rendered immaterial. [Cit.] A defendant who will not bear the burden of proof at trial need not affirmatively disprove the nonmoving party's case; instead, the burden on the moving party may be discharged by pointing out by reference to the affidavits, depositions and other documents in the record that there is an absence of evidence to support the nonmoving party's case. If the moving party discharges this burden, the nonmoving party cannot rest on its pleadings, but rather must point to specific evidence giving rise to a triable issue." (Emphasis in original.) Lau's Corp. v. Haskins, 261 Ga. 491, 405 S.E.2d 474 (1991).

2. In order to prevail on its fraud claim against Kell, Blue Cross was required to come forward with evidence to prove that: (1) Kell made a false representation; (2) he knew the representation was false when made; (3) the representation was made to induce Blue Cross to act or refrain from acting; (4) Blue Cross justifiably relied on the representation; and (5) damages. Fowler v. Overby, 223 Ga.App. 803, 478 S.E.2d 919 (1996); Watson v. Zurich-American Ins. Co., 221 Ga.App. 4, 5, 470 S.E.2d 684 (1996).

During discovery, Blue Cross specified additional acts which it contended constituted fraud, i.e., submitting claims for services not actually rendered or for services performed but not needed; submitting claims for "excessive amounts"; submitting claims for amounts in excess of amounts charged private non-insured patients for the same services; and intentionally prescribing methadone to patients with the intent of keeping them addicted to it with no intent to ever wean them from it.

Dr. Kell signed a Participating Physician Agreement with Blue Cross on March 7, 1988. Shortly thereafter, on May 4, 1988, he sent a four-page letter to the Medical Director of Blue Cross' claims department setting out his proposed treatment of Blue Cross subscribers for "extended and continuous physiological and psychological addiction to opiates (ICD-9-CM Code 304.1)" ³ with methadone. The letter explained his proposal for treatment and his contentions that this treatment would be more cost-effective for Blue Cross than other treatments. During this time, Dr. Kell was also discussing this reimbursement concept with Evans of Blue Cross. In addition to treating opiate addiction, the Private Clinic also treated patients for chronic pain and other illnesses.

Kell's proposal was sent to Dr. Thomas Hudson of Blue Cross Professional Affairs for review. In his July 13, 1988 internal memo to Evans, Dr. Hudson describes the potential various coverages available for such treatment, including that provided under nervous and mental benefits for the psychotherapy component, which would pay limited benefits. Laboratory testing and prescriptions for methadone "would be eligible for coverage as a legend drug under those contracts that have major medical and provide benefits for prescription drugs." This comported with Dr. Kell's understanding of how the claims should be processed and were being processed by other insurance companies.

Dr. Kell became convinced in late 1988 and thereafter that some patients suffering from opiate dependence could, in fact, be suffering from an endocrine deficiency, a physiological condition. He discussed this concept with an internist cardiologist patient of his who was being treated at The Private Clinic. Also, Dr. Kell became aware of ICD-9-DM code 259.8, endocrine disorders, which he believed "more accurately reflect[ed] the proper diagnosis of some of Private Clinic's patients."

By letter of November 24, 1988, to Woodbury, the Division Director of Health Services for State Merit, Dr. Kell explained his theory that opiate use could cause physical damage to a portion of the user's brain, making methadone treatment compensable under major medical.

In cases he deemed appropriate, Dr. Kell began substituting code 259.8 for code 304.1 on claim forms. In most if not all cases, code 259.8 was shown as the primary diagnosis, with code 304.1 as a secondary diagnosis. He advised Blue Cross representatives, by phone and letter, of his belief regarding this coding.

While Blue Cross' computers were programmed to recognize and process for payment under nervous and mental coverage code 304.1, opiate dependence, they were not programmed to recognize code 259.8, endocrine disorder, endorphin, for drug dependency, and claims from The Private Clinic so coded were routed by the computer for payment under major medical coverage, which paid 80% of the charges, more than coverage under nervous and mental.

Dr. Kell treated patients and was generally reimbursed by Blue Cross until 1990 when Blue Cross began to question some claims. Although inquiries by Kell and Kulas, his office administrator, concerning the holdup in the processing of these claims were met with the response that the claims were "in review," or required that additional supporting records be submitted, in reality, Blue Cross' fraud investigator, Galler, had begun an investigation of the claims.

Galler, a high school graduate with some college credits, began working for Blue Cross in October 1989, as a research and documentation specialist, who examined claims that processors felt might have something wrong. After graduating from high school in 1983, and prior to coming with Blue Cross, Galler had worked at Wendy's, Olan Mills, Crawford Long Hospital as a patient services representative, John Harland printers, Parole Consultant Services, a private investigation firm involved in post-conviction relief for prisoners, and Goldman Investigators, specializing in domestic cases. She apprenticed as a private investigator and obtained her license in 1988.

Galler was promoted from research and documentation specialist to an investigator with fraud investigations, a unit of the Blue Cross legal department, where she worked for Williams. In March 1990, she began working on Kell claims, although she was unable to remember why these claims attracted her attention initially. She worked on one claim for C.M. ⁴ which she recalled used the endocrine disorder as diagnosis with...