U.S. ex rel. Alderson v. Quorum Health Group, Inc.

• Decision Date: 08 November 2001
• Docket Number: No. 8:99-CV-413-T-23TGW.,8:99-CV-413-T-23TGW.
• Citation: 171 F.Supp.2d 1323
• Parties: UNITED STATES of America ex rel. James F. ALDERSON, Plaintiff, v. QUORUM HEALTH GROUP, INC., et al., Defendants.
• Court: U.S. District Court — Middle District of Florida

171 F.Supp.2d 1323

UNITED STATES of America ex rel. James F. ALDERSON, Plaintiff, v. QUORUM HEALTH GROUP, INC., et al., Defendants.

No. 8:99-CV-413-T-23TGW.

United States District Court, M.D. Florida, Tampa Division.

November 8, 2001.

Jay G. Trezevant, U.S. Attorney's Office, Tampa, FL, Joyce R. Branda, Arnold M. Auerhan, David M. Gossett, Michael F. Hertz, Marie V. O'Connell, U.S. Dept. of Justice, Civil Division, Washington, DC, W. Christian Hoyer, Judy Schropp Hoyer, Christopher C. Casper, James, Hoyer, Newcomer & Smiljanich, P.A., Tampa, FL, Peter W. Chatfield, Phillips & Cohen, Washington, DC, Steven L. Meagher, Phillips & Cohen, San Francisco, CA, for Plaintiff.

Benjamin H. Hill, III, Robert A. Shimberg, David L. Kian, Brett J. Preston, Gregory P. Brown, Hill, Ward & Henderson, P.A., Tampa, FL, William H. Barrett, Charles R. Work, Patrick K. O'Hara, Ankur J. Goel, John G. Horan, Stacey D. Rabbino, William D. Hagedorn, Monte Dube, McDermott, Will & Emery, Washington, DC, Steven A. Maddox, McDermott, Will & Emery, Menlo Park, CA, for Defendants.

ORDER

MERRYDAY, District Judge.

At the conclusion of Court-ordered mediation that persisted for nearly two years, the United States ("United States" or "government") and the relator, James F. Alderson ("Alderson"), settled this False Claims Act¹ ("FCA") action against Quorum Health Group, Inc. ("Quorum").² The settlement yielded both a recovery of $85,773,745.81 and implementation of a corporate integrity agreement between Quorum and the United States. The action was dismissed with prejudice on April 24, 2001 (Doc. 154). The Court retains jurisdiction to determine the amount of Alderson's statutory moiety, i.e., the relator's share of the settlement proceeds pursuant to 31 U.S.C. § 3730(d)(1).³

Following review of the parties' papers addressing the relator's proper share (Docs.156, 165, 166, 167), the Court held a two-day hearing during which Alderson and the United States presented both testimonial and documentary evidence and offered argument in support of their respective positions.⁴ Also, the Court received and reviewed post-hearing briefs (Docs.176, 177). Both the evidence from the hearing and the parties' papers address the percentage of the settlement proceeds to which Alderson is entitled under 31 U.S.C. § 3730(d)(1) and the settlement amount against which Alderson's percentage is applied.

I. The History of the Action

Application of the legal standard governing the relator's share (i.e., the extent of the relator's contribution to the prosecution of the action) necessitates a searching account of the history of this litigation.⁵

A. Alderson's Initial Investigation and Complaint

Alderson was employed as the Chief Financial Officer of North Valley Hospital in Whitefish, Montana, a job he held for approximately six and one-half years. In August, 1990, Quorum became the management company at North Valley Hospital. Shortly after Quorum assumed control, Clyde Eder, Quorum's district vice-president, informed Alderson of Quorum's policy concerning cost report preparation, which policy required the simultaneous preparation of both an "aggressive" report for submission to Medicare for cost reimbursement and a "reserve" report for submission to Quorum's auditors. Alderson, who was preparing the hospital's Medicare cost report for the fiscal year ending June 30, 1990, refused to prepare the two inconsistent reports. Alderson was summarily terminated four days later, September 9, 1990.

In May, 1991, Alderson filed a wrongful termination action against Quorum in Montana state court. During discovery in that suit, Alderson deposed certain Quorum officials, whose testimony suggested to Alderson improprieties in Quorum's cost reporting policies. Seizing this lead, Alderson pursued document discovery directed at Quorum's Medicare reimbursement cost reports. Quorum produced a representative sample of reports from nine hospitals located in several western states.⁶ Alderson engaged Nicolas Bourdeau ("Bourdeau") to analyze the reports. Bourdeau, whom Alderson had earlier retained for assistance in the wrongful termination suit, is a forensic accountant with Medicare reimbursement expertise. Bourdeau prepared a report on the Quorum Nine that indicated fraudulent cost reporting by Quorum.

Although Alderson, not himself an attorney, was represented by counsel in his wrongful termination action, he initially proceeded pro se in the FCA matter and drafted his own qui tam FCA complaint in late 1992. On January 5, 1993, Alderson filed a three-count qui tam complaint under seal in the United States District Court for the District of Montana. Shortly thereafter, Alderson served copies of his sealed complaint upon the Attorney General and the United States Attorney for the District of Montana in accordance with requirements of the FCA and the Federal Rules of Civil Procedure.

B. Government Intervention

After receiving Alderson's qui tam complaint, the United States investigated and evaluated his allegations to determine whether to intervene and assume the initiative in the litigation.⁷ Alderson's principal objective was to convince the United States to intervene.⁸

In May, 1993, four months after Alderson filed his complaint, Alderson and Marie O'Connell ("O'Connell"), the Department of Justice ("DOJ") attorney originally assigned to represent the United States, conferred by telephone. During the conference Alderson, still pro se, identified for O'Connell and other participating government personnel the categories of documents that the government should subpoena from Quorum to advance most effectively the government's investigation. Alderson's valuable experience obtaining and analyzing the Quorum Nine documents informed his recommendations to O'Connell and her colleagues. Following the conference call, in June, 1993, O'Connell began assembling a team of government lawyers and investigators with pertinent expertise. On June 21, 1993, the United States issued the first of a series of subpoenas. The first subpoena sought Quorum cost reports from 180 hospitals for six years. Additional subpoenas issued in August and November, 1993, as the United States expanded the investigation.

In August, 1993, Alderson and Bourdeau traveled, at Alderson's expense, to Washington, D.C., for meetings with O'Connell and other government personnel. Alderson and Bourdeau presented Bourdeau's Quorum Nine analysis, and the United States' lawyers and investigators queried them about the case. However, Alderson returned to Montana without receiving a definitive statement of the United States' position on his case.

At the end of 1993, Alderson engaged Stinson, Mag & Fizzell, a law firm with health care expertise, to represent him in the qui tam case. In December, 1993, Alderson, accompanied by counsel, again traveled to Washington, D.C., for an interview with DOJ. This meeting was followed in early 1994 by O'Connell's request that Alderson review some of the documents produced in response to the DOJ subpoenas. Alderson agreed and received eight boxes from DOJ containing cost reports from 197 hospitals for seven years. Alderson, working alone, analyzed the documents, which numbered more than 11,000.⁹ He prepared a spread sheet summary of relevant cost reserve information and culled a set of 2,500 documents that corroborated the specific reserve information in the spreadsheet.

Alderson completed his analysis in December, 1994, and Alderson's counsel submitted the work to DOJ in February, 1995. However, DOJ told Alderson's counsel that the material Alderson prepared was not copied and distributed to the government lawyers and investigators involved in the case because of demanding schedules. Alderson persisted and instructed his counsel to prepare copies for distribution. Alderson's counsel sent five sets of the spreadsheet and supporting documents to DOJ in March, 1995, and the material was distributed in the latter part of 1995.

During 1994 and 1995, both the United States and Alderson acquired expert assistance from accounting firms. Concurrent with Alderson's work on the eight boxes of documents from the DOJ subpoenas, the United States hired the accounting firms of Figliozzi & Company and Parrish, Moody & Fikes to assist in analyzing the subpoenaed documents and to review Alderson's and Bourdeau's work. At the same time, Alderson's counsel engaged the accounting firm of Heffler, Radetich & Saitta to review Bourdeau's work. Heffler, Radetich & Saitta also analyzed a sample of Alderson's work on the subpoenaed documents. The parties disagree somewhat about the amount of work performed by each accounting firm and the comparative contribution of each to the case. However, the accounting firms largely agreed on the salient analysis and confirmed the accounting irregularities that form the basis for the fraud claims asserted by Alderson and later by the United States.

In November, 1995, concerned that his case was languishing and that decisive government action concerning intervention was not forthcoming, Alderson engaged Phillips & Cohen, a law firm nationally prominent in FCA practice.¹⁰ On December 19, 1995, Steven Meagher ("Meagher") of Phillips & Cohen's San Francisco office, met in Washington, D.C., with O'Connell and her supervisor, Joyce Branda ("Branda"), to review Alderson's case. Branda and O'Connell, detailing the government's grave reservations about the case, asserted both that the legal basis for Alderson's fraud claims was questionable and that the value of the claim, which they estimated at approximately $10 million, was relatively low.

Notwithstanding the announced skepticism, the United States continued its commitment of significant resources to investigate the matter and obtained from Quorum additional documents, which were analyzed by the government's independent accounting firms, a statistician, and government attorneys and investigators. Unfortunately for Alderson, the...