U.S. ex rel. Conner v. Salina Reg. Health

• Decision Date: 08 May 2006
• Docket Number: Civil Action No. 01-2269-CM.
• Parties: UNITED STATES of America, ex rel., Brian E. CONNER, M.D., et al., Plaintiffs, v. SALINA REGIONAL HEALTH CENTER, INC., Defendant.
• Court: U.S. District Court — District of Kansas

459 F.Supp.2d 1081

UNITED STATES of America, ex rel., Brian E. CONNER, M.D., et al., Plaintiffs, v. SALINA REGIONAL HEALTH CENTER, INC., Defendant.

Civil Action No. 01-2269-CM.

United States District Court, D. Kansas.

May 8, 2006.

Douglas L. Carter, Law Offices Of Douglas L. Carter, Michael W. Thompson, Mitchell, Kristl & Lieber, P.C, Kansas City, MO, Richard L. Schodorf, Office of United States Attorney, Wichita, KS, for Plaintiffs.

James D. Griffin, Lori J. Sellers, Stephen J. Torline, Blackwell Sanders Peper Martin LLP, Kansas City, MO, John W. Mize, Clark, Mize & Linville, Chtd., Salina, KS, Stephen E. Robison, Fleeson, Gooing, Coulson & Kitch, L.L.C, Wichita, KS, for Defendant.

MEMORANDUM AND ORDER

CARLOS MURGUIA, District Judge.

Plaintiff-Relators Brian E. Conner, M.D. and Brian E. Conner, M.D., Chartered (collectively "Conner"), bring this qui tam action alleging that defendant Salina Regional Health Center has repeatedly violated the False Claims Act, 31 U.S.C. §§ 3729 et seq. ("FCA"). Specifically, Conner alleges that each time defendant filed an annual Medicare cost report and certified that its services were in compliance with the laws and regulations governing healthcare services, defendant presented false claims to the government. According to Conner, defendant provided medical services that failed to meet the governing standards of care and solicited kickbacks from Conner, which meant that the reimbursement claims for those services were false. Conner also claims that defendant discharged him from its medical staff in retaliation for his complaints, and asserts three additional claims under state law regarding defendant's refusal to reappoint Conner to its medical staff.

Pending before the court are two motions: Defendant Salina Regional Health Center, Inc.'s Motion to Dismiss and for Summary Judgment (Doc. 73) and Defendant Salina Regional Health Center, Inc.'s Motion for Partial Summary Judgment (Doc. 71). For the following reasons, the court grants Doc. 73 in part and denies it in part, and denies Doc. 71 as moot.

I. STANDARDS OF REVIEW

Defendant moves to dismiss Conner's complaint for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, and moves for summary judgment pursuant to Rule 56. A Rule 12(b)(6) motion to dismiss will be granted only if it appears beyond a doubt that the plaintiff is unable to prove any set of facts entitling him to relief under his theory of recovery. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). "All well-pleaded facts, as distinguished from conclusory allegations, must be taken as true." Swanson v. Bixler, 750 F.2d 810, 813 (10th Cir.1984). The issue in reviewing the sufficiency of a complaint is not whether the plaintiff will prevail, but whether the plaintiff is entitled to offer evidence to support his claims. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974), overruled on other grounds by Harlow v. Fitzgerald, 457 U.S. 800, 102 S.Ct. 2727, 73 L.Ed.2d 396 (1982).

Summary judgment is appropriate if the moving party demonstrates that there is "no genuine issue as to any material fact" and that it is "entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). In applying this standard, the court views the evidence and all reasonable inferences therefrom in the light most favorable to the nonmoving party. Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)).

The parties have attached evidence to their pleadings regarding some issues, but not others. Accordingly, the court will apply both standards as appropriate in this case.

II. FACTUAL AND PROCEDURAL BACKGROUND¹

Brian E. Conner, M.D. is an ophthalmologist who maintained medical staff privileges with defendant until 1997. Brian E. Conner, M.D., Chartered, employs Conner and is the professional association through which he practices medicine. Defendant is a private hospital in Salina, Kansas, and has been accredited by the Joint Commission on Accreditation of Hospitals ("JCAHO") and the Healthcare Facilities Accreditation Program of the American Osteopathic Association ("HFAP") beginning in 1990 and during all times relevant to this case.

Conner claims that beginning no later than 1987, defendant has engaged in a pattern of healthcare practice, mismanagement and fraud that has systematically violated the conditions of participation and eligibility standards under the Medicare/Medicaid program. Conner claims that defendant has repeatedly violated the applicable healthcare regulations and statutes, but has sought reimbursement for its services and annually certified that it is in compliance with the regulations and statutes. A few of the ways that Conner claims defendant violated the regulations and statutes are: (1) by failing to provide adequate nurses and other personnel; (2) by failing to establish a quality assurance program that meets regulatory standards; (3) by failing to properly maintain medical records; and (4) by "dumping" patients without proper screening, evaluation, and treatment.² Despite these violations, Conner claims, each year, defendant filed a detailed cost report with the Centers for Medicare and Medicaid Services. In the cost report, one of defendant's officers or administrators expressly certified that "I am familiar with the laws and regulations regarding the provision of healthcare services and that the services identified in this cost report were provided in compliance with such laws and regulations."

The Secretary of Health and Human Services ("HHS") used the cost report as part of its procedure for determining amounts that should be paid under Medicare for defendant's services. See 42 U.S.C. § 1395g (requiring Secretary to periodically determine the amount to be paid). Not less than monthly, a fiscal intermediary under contract with HHS calculates and dispenses estimated periodic payments to hospitals. These interim payments are made "on an estimated basis prior to an audit which determines the precise amount of reimbursement due to the provider." In re TLC Hosps., Inc., 224 F.3d 1008, 1011 (9th Cir.2000). At the end of each reporting year, the fiscal intermediary conducts an audit, relying on the annual cost report. 42 C.F.R. § 405.1803(a). "The audit entails a reconciliation of the amount due to the provider under the Medicare statute with the amount of estimated interim payments dispensed for the same period. Thus, the audit reveals the precise amount of any overpayments or underpayments." TLC, 224 F.3d at 1012. The hospital must repay any overpayments. See 42 U.S.C. § 1395g(a); 42 C.F.R. § 405.1803(a).

On September 25, 1995, Conner's then-attorney, Tom Theis, contacted the Kansas Foundation for Medical Care, Inc. about the "broad spectrum of issues" that are the subject of this case. The Foundation, which is a private corporation, is the healthcare quality improvement organization for Kansas. It contracts with Medicare to do reviews on quality of care. Conner's complaints were forwarded to the Kansas Board of Nursing, and the Kansas Department of Health and Environment subsequently conducted a "risk management site review" on defendant. On April 18, 1996, the Department of Health and Environment sent defendant a letter in which it found defendant to be in "substantial compliance" with the Kansas state risk management laws and regulations.

On February 3, 1997, defendant denied Conner's application for reappointment to defendant's medical staff. Thereafter, Conner requested and received a due process hearing. The hearing officer recommended that Conner's application be denied, and Conner appealed the decision. Defendant's review panel affirmed the officer's recommendation.

On October 17, 1997, Conner filed a motion for temporary restraining order in the District Court of Saline County, Kansas to enjoin defendant from denying Conner's application for reappointment, which the court denied. On October 1, 1999, Conner filed an action in the United States District Court for the District of Kansas, claiming that defendant violated his due process rights under 42 U.S.C. § 1983. Conner also included supplemental claims for breach of contract, tortious interference, and injunctive relief. On September 21, 2000, this court dismissed Conner's § 1983 claim, and declined to exercise supplemental jurisdiction over the remaining claims. Conner then filed another state court action in Saline County on October 26, 2000, which included the identical breach of contract, tortious interference, and injunctive relief claims that Conner alleged in the § 1983 case.

On June 1, 2001, Conner filed this action in camera and under seal, alleging violations of the FCA. On February 12, 2004, Conner dismissed the second Saline County action without prejudice. On June 16, 2004, Conner filed his Third Amended Complaint in the instant case. In his Third Amended Complaint, Conner added the state law claims, which he previously had asserted in the § 1983 case and the second Saline County case. Conner served the Third Amended Complaint on counsel for defendant on September 21, 2004. The United States government has declined to intervene in this case.

III. DISCUSSION

A. Did Conner fail to plead fraud with particularity?

Defendant first claims that Conner's claims fail because Conner failed to plead fraud with particularity, as required by Fed.R.Civ.P. 9(b). The court has reviewed Conner's Fourth Amended Complaint, which spans seventy-five pages of text and 284 pages of exhibits. The court finds that it contains sufficient detail to allow defendant to prepare an adequate responsive pleading. See VNA Plus, Inc. v. Apria Healthcare Group, Inc., 29 F.Supp.2d 1253, 1263 (D.Kan.1998) (citations omitted). The court will not dismiss the complaint for failure to comply with Rule 9(b)...