U.S. ex rel. Villafane v. Solinger, Civil Action No. 3:03-CV-519-H.

• Decision Date: 08 April 2008
• Docket Number: Civil Action No. 3:03-CV-519-H.
• Citation: 543 F.Supp.2d 678
• Parties: UNITED STATES of America, ex rel. Juan VILLAFANE, et al., Plaintiffs v. Robert E. SOLINGER, et al., Defendants.
• Court: U.S. District Court — Western District of Kentucky

543 F.Supp.2d 678

UNITED STATES of America, ex rel. Juan VILLAFANE, et al., Plaintiffs v. Robert E. SOLINGER, et al., Defendants.

Civil Action No. 3:03-CV-519-H.

United States District Court, W.D. Kentucky, at Louisville.

April 8, 2008.

COPYRIGHT MATERIAL OMITTED

John Robert Shelton, Joseph D. Satterley, Paul J. Kelley, Sales, Tillman, Wallbaum, Catlett & Satterly, PLLC, Louisville, KY, for Dr. Juan Villafane, Children's Heart Specialists, P.S.C.

Edward H. Stopher, Tiara B. Silverblatt, Boehl Stopher & Graves, Louisville, KY, for Robert E. Solinger, Allan H. Rees, Francisco Elbl, Pediatric Cardiology Associates, P.S.C.

Craig C. Dilger, Mark T. Hurst, Stoll Keenon Ogden PLLC, Louisville, KY, for Larry Cook, University of Louisville Medical School Fund, Inc., University of Louisville Research Foundation, Inc.

R. Gregg Hovious, Lynn K. Fieldhouse, Fultz, Maddox, Hovious & Dickens PLC, Louisville, KY, for Neonatal Associates P.S.C.

Kent Wicker, Reed Wicker PLLC, Louisville, KY, for Norton Hospital d/b/a Kosair-Childrens Hospitals.

MEMORANDUM OPINION

JOHN G. HEYBURN, II, Chief Judge.

Plaintiffs Juan Villafane and Children's Heart Specialists, P.S.C. have brought this action against Defendants Robert Solinger, Allan Rees, Francisco Elbl, Larry Cook, Pediatric Cardiology Associates, P.S.C, Neonatal Associates, P.S.C, Norton Hospitals, Inc. d/b/a Kosair Children's Hospital, the University of Louisville Medical School Fund, Inc., and the University of Louisville Research Foundation, Inc.¹ In Count I of their Complaint, Plaintiffs assert a qui tam action under the False Claims Act, 31 U.S.C. § 3729 (the "FCA"), alleging that Defendants were responsible for the submission of Medicaid reimbursement claims that falsely certified Defendants' compliance with applicable laws and regulations, namely the so-called Stark law, 42 U.S.C. § 1395nn.

Some time ago, the parties and the Court discussed Defendants' contention that they qualify for the Academic Medical Center ("AMC") exception to the Stark law and are therefore entitled to summary judgment on Plaintiffs' FCA allegation. The AMC exception to the Stark law is a complex and little discussed doctrine. To resolve this issue early in the litigation, the Court provided an opportunity for full discovery of the relevant evidence. The Court has now thoroughly acquainted itself with the AMC exception by conducting a lengthy hearing and by looking at the issues from every perspective. The Court has become convinced that Defendants meet both its particular criteria and its broader purpose. This memorandum discusses the Court's reasons for reaching this conclusion.

I.

One can find a full summary of the facts of this case in a previous opinion, U.S. v. Solinger, 457 F.Supp.2d 743, 747-49 (W.D.Ky.2006), making only a brief recapitulation necessary here.

Plaintiff Juan Villafane is a pediatric cardiologist and former University of Louisville Medical School professor who was also formerly a member of Pediatric Cardiology Associates, P.S.C, a private practice group composed of, among others, Defendants Robert Solinger, Allan Rees and Francisco Elbl, all of whom are also pediatric cardiologists and serve as members of the University of Louisville Medical School (the "Medical School") faculty. Villafane is currently practicing as a member of Children's Heart Specialists, P.S.C.

Defendant Larry Cook is currently the Executive Vice President for Health Affairs at the University of Louisville, and during the period relevant to this case he was a practicing neonatologist and member of Neonatal Associates, P.S.C. At that time he was also a member of the Medical School faculty, Chairman of the Medical School's Department of Pediatrics, Chief of Staff of Defendant Norton Hospitals, Inc. d/b/a Kosair Children's Hospital, and President of the University of Louisville Research Fund.

Defendant Norton Hospitals, Inc. d/b/a Kosair Children's Hospitals ("Kosair") is Kentucky's only free-standing, full-service pediatric hospital. Villafane, Solinger, Rees, and Elbl all practiced extensively at Kosair.

Plaintiffs' FCA allegation concerns the flow of money between Kosair and Defendant doctors. The Medical School requires all full-time faculty members to participate in a "Professional Practice Plan,"² an arrangement through which they pay a percentage of their private practice revenue to the University of Louisville Medical School Fund ("the Fund"). The Fund, in turn, channels those monies to the University of Louisville Research Foundation ("the Research Foundation"), which disburses the monies for, among other things, Medical School faculty salaries. The Research Foundation receives monies from other sources besides the Fund, including government contributions, donations, and grants, as well as contributions from hospitals such as Kosair. But since Defendant doctors' faculty salaries are paid out of a fund to which Kosair is a contributor, it is true that Kosair's contributions to the University of Louisville may ultimately reach Defendant doctors as part of their faculty salary payments, albeit indirectly.

Meanwhile Kosair, like other hospitals, seeks reimbursement from Medicaid³ for certain health care services Kosair provides to Medicaid-eligible patients. Often times, the services result from a referral by one of Defendant doctors. When requesting reimbursement for these services,⁴ Kosair must certify that it has complied with applicable laws and regulations. It is this certification which provides the grist of Plaintiffs' FCA allegation. Plaintiffs claim that by virtue of the flow of money between Kosair and Defendant doctors just noted, Kosair (and, to the extent they participate by causing the prohibited referrals and reimbursement requests, the other Defendants) is in violation of certain relevant statutory and regulatory requirements and, therefore, has falsely certified its compliance.

The Court first encountered the AMC exception to the Stark law in its last opinion. Solinger, 457 F.Supp.2d at 756-58. The Court found that the exception could be available to Defendants, despite Plaintiffs' argument that the alleged Stark law violations had occurred before the exception became effective. Id. at 756-57. However, the Court found "insufficient information to determine whether the relationship between the university meets the exception," and gave Defendants "an early opportunity" to show that it did, ordering discovery on the FCA allegation alone. Id. at 757-58.

Following the completion of discovery, Defendants filed the instant motion for summary judgment. Separately, Defendant Larry Cook moved for summary judgment on sovereign immunity grounds, and Defendants jointly moved to exclude the report and testimony of Dr. Richard F. Tompkins, an expert retained by Plaintiffs. Briefing on these motions was completed in December 2007, and the Court conducted a lengthy conference on January 24, 2008, at which the parties ably explicated their positions and greatly assisted the Court in clarifying the complex factual and legal issues before it.

II.

Count I of the complaint alleges that Defendants violated the FCA by making fraudulent claims for Medicaid reimbursement. The FCA is "designed to protect the Federal treasury," U.S. ex rel. Pogue v. Am. Healthcorp., Inc., 914 F.Supp. 1507, 1512 (M.D.Tenn.1996), and creates liability for anyone who:

(1) knowingly presents, or causes to be presented, to [the Government] ... a false or fraudulent claim for payment or approval;

(2) knowingly makes, uses or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government; [or]

(3) conspires to defraud the Government by getting a false or fraudulent claim allowed or paid.

31 U.S.C. § 3729(a). Under the FCA's qui tam provisions, private individuals on behalf of the United States may challenge government payments based upon claims that violate the FCA.⁵ 31 U.S.C. § 3730(b); see also Walburn v. Lockheed Martin Corp., 431 F.3d 966, 970 (6th Cir.2005) (noting that "the qui tam provisions seek to encourage whistleblowers to act as private attorneys-general in bringing suits for the common good," but only to the extent that "opportunistic plaintiffs" are also discouraged "from bringing parasitic lawsuits ... feed[ing] off a previous disclosure of fraud") (internal citations omitted). Though "the False Claims Act was not designed to reach every kind of fraud practiced on the Government," U.S. v. McNinch, 356 U.S. 595, 599, 78 S.Ct. 950, 2 L.Ed.2d 1001 (1958), and "claims for services rendered in violation of a statute do not necessarily constitute false or fraudulent claims under the FCA," U.S. ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 902 (5th Cir.1997) ("Thompson I"), the FCA certainly "was intended to govern ... fraudulent acts that cause the government to pay out sums of money to claimants it did not intend to benefit." Pogue, 914 F.Supp. at 1513.

FCA actions may be predicated upon a variety of underlying allegations. These include violations of the Stark law and the so-called Anti-Kickback law, 42 U.S.C. § 1320a-7b, both of which are designed to protect against fraudulent overutilization of government-reimbursed healthcare services. U.S. ex rel. Thompson v. Columbia/HCA Healthcare Corp., 20 F.Supp.2d 1017, 1047 (S.D.Tex.1998) ("Thompson II"); Pogue, 914 F.Supp. at 1513; see also Thompson I, 125 F.3d at 902. This is so even though neither the Stark law nor the Anti-Kickback law provides for a private right of enforcement. Solinger, 457 F.Supp.2d at 754 (citing West Allis Mem'l Hosp., Inc. v. Bowen, 852 F.2d 251, 255 (7th Cir.1988)).

Because Plaintiffs base their FCA claim upon a violation of this broad statutory scheme, the evolution of the relevant statutory and regulatory provisions is important to understand. Therefore, in Subsection A, the Court reviews the Anti-Kickback law before proceeding to the Stark law...