U.S. v. East Tex. Med. Center Reg. Healthcare

• Decision Date: 05 March 2003
• Docket Number: No. CIV.A.H-97-3310.,CIV.A.H-97-3310.
• Citation: 274 F.Supp.2d 824
• Parties: UNITED STATES of America ex rel. Sally A. REAGON, Plaintiffs, v. EAST TEXAS MEDICAL CENTER REGIONAL HEALTHCARE SYSTEM, et al., Defendants.
• Court: U.S. District Court — Southern District of Texas

274 F.Supp.2d 824

UNITED STATES of America ex rel. Sally A. REAGON, Plaintiffs, v. EAST TEXAS MEDICAL CENTER REGIONAL HEALTHCARE SYSTEM, et al., Defendants.

No. CIV.A.H-97-3310.

United States District Court, S.D. Texas, Houston Division.

March 5, 2003.

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Michael F. Hertz, Dept. of Justice, Washington, DC, Joe Mirsky, Jill 0. Venezia, Office of U.S. Attorney, Houston, TX, John Robert Craddock, Barnett & Craddock, Houston, TX, for plaintiffs.

Bruce W. Bowman, Jr., Godwin Gruber LLP, Robert M. Roller, Roller & Aliensworth, Austin, TX, for defendants.

ORDER ADOPTING MAGISTRATE JUDGE'S MEMORANDUM AND RECOMMENDATION and AMENDED MEMORANDUM AND RECOMMENDATION

GILMORE, District Judge.

This case is before the Court on the Plaintiff's Second Amended Complaint. The Defendants have filed a Motion to Dismiss (Instrument No. 139) and a Motion for Summary Judgment (Instrument No. 141) on the claims that have been raised by the Plaintiff. The Court has reviewed the Memorandum and Recommendation (Instrument No. 177) signed by Magistrate Judge Mary Milloy on December 20, 2002, regarding Instrument Nos. 139 and 141. Plaintiff timely filed objections (Instrument No. 177) to which the Defendant filed a response (Instrument No. 178).

The Court has also reviewed the Amended Memorandum and Recommendation (Instrument No. 180) signed by Magistrate Judge Mary Milloy on February 10, 2003, also regarding Instrument Nos. 139 and 141. Defendant timely filed objections (Instrument No. 181).

The Court has made a de novo review of the Magistrate Judge's recommended dispositions to which objections were raised, Rule 72(b), Fed.R.Civ.P.; 28 U.S.C. § 636(b)(1)(C); McLeod, Alexander, Powel & Apffel P.C. v. Quarles, 925 F.2d 853, 855 (5th Cir.1991), and after consideration of the applicable law, is of the opinion that said Memorandum and Recommendation should be adopted by this Court. Except for one new point, the Plaintiffs most recent objections to the Amended Memorandum and Recommendation repeat arguments that she already lodged against the original recommendation. (See Docket Entry # 177, # 178, # 181). Plaintiff's new argument is that the recommendation is faulty because it required her "to produce evidence of injury to the government in the CON process."* (Docket Entry # 181, ¶ 5). The Court would first note that this argument is raised out of time, because it addresses a section of the recommendation that was not amended in February. (See Docket Entry # 181, ¶ 5; Docket Entry # 180, pp. 51-52). Second, although Plaintiff is correct that an qui tam claimant need not show that the government suffered a financial injury from an alleged false claim, the Fifth Circuit does require a showing that the falsehood alleged was "material." U.S. v. Southland Mgmt. Corp., 288 F.3d 665, 675 (2002); U.S. ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 902 (5th Cir.1997). The magistrate included the referenced section to demonstrate that Plaintiff failed to make such a showing. Finally, Plaintiffs objection, even if valid, does not affect the recommendation's ultimate finding that Reagan has not raised a fact issue that she is the original source of any information underlying her claim.

The Court would note that the Plaintiff has slightly revised one of her previous arguments to present an alternative theory of recovery based upon whether Defendants' compliance with the state-mandated Certificate of Need was a pre-requisite to obtaining the government benefits. This question although not specifically addressed by the Defendants' motions also would not affect the recommendation's ultimate, finding.

It is therefore, ORDERED, ADJUDGED and DECREED that United States Magistrate Judge Milloy's Memorandum and Recommendation and the Amended Memorandum and Recommendation are hereby adopted by this Court.

The Clerk shall enter this Order and provide all parties with a true copy.

AMENDED MEMORANDUM AND RECOMMENDATION ON THE MOTION BY THE EAST TEXAS DEFENDANTS TO DISMISS FOR LACK OF JURISDICTION

Milloy, United States Magistrate Judge.

On December 20, 2002, this court recommended that Plaintiffs Second Amended Complaint be dismissed, with prejudice, because she cannot show the requisite standing to prosecute a suit under the False Claims Act. (Docket Entry # 177). Relator Sally A. Reagan ("Reagan," "Plaintiff") filed objections to that recommendation and Defendants East Texas Medical Center Regional Healthcare System,¹ East Texas Medical Center Regional Health Facilities,² and East Texas Medical Center (collectively "East Texas," "Defendants") have responded to them. (Docket Entry # 178, 179). In deference to Plaintiffs objections, the court considered anew the evidence Reagan submitted in her effort to defeat Defendants' motion for summary judgment. (Docket Entry # 150, 151, 173). That review of Plaintiffs submissions uncovered no reason to disturb the recommendation. But, in light of Plaintiffs arguments, it is best to clarify the findings and conclusions issued to date. In addition, because the jurisdictional issues raised by Defendants' motion to dismiss are "intertwined with the merits," it should be emphasized that this matter was reviewed under a Rule 56(c) summary judgment standard. See Clark v. Tarrant County, Tex., 798 F.2d 736, 741-42 (5th Cir.1986); Williamson v. Tucker, 645 F.2d 404, 415-16 (5th Cir.1981).

As a convenience to the parties, any finding or conclusion that has been amended or supplemented is incorporated in the language of the previous recommendation and is set out in bold typeface to distinguish it from the original findings. It is RECOMMENDED that Plaintiffs Second Amended Complaint should be DISMISSED, with prejudice.

Background

From April 1991 to May 1992, Sally Reagan was the executive director of University Park Hospital ("University Park," "UPH"), a non-profit psychiatric hospital in Tyler, Texas.³ (Plaintiff's Second Amended Complaint ¶ 1, Docket Entry # 89). Plaintiff alleges that, at all relevant times, University Park "operated as the alter ego of the East Texas Defendants, non-profit corporations that provide health care services in eastern Texas.⁴ (Id. ¶¶ 4, 31). During Reagan's tenure at University Park, she reportedly discovered certain "financial irregularities" that she characterizes as "false reporting to the Medicare Program." (Affidavit of Sally A. Reagan, Sept. 14, 1998 ["First Reagan Aff."], p. 6, Docket Entry # 40; Second Reagan Aff., ¶ 26). Reagan contends that she was terminated from the hospital because she attempted to investigate these "irregularities." (First Reagan Aff., p. 6; Second Reagan Aff. ¶¶ 25, 26). Following her termination, Reagan contacted the Health Care . Financing Administration ("HCFA"),⁵ the federal agency which administers the Medicare program for the U.S. Department Health & Human Services ("DHHS"), and reported her suspicions that East Texas and University Park were engaged in Medicare fraud. (East Texas Defendants' Appendix (Supplemental) to Motion for Summary Judgment, Docket Entry # 171 ["Defendants' Third Appendix"], pp. 244-45, Letter from Diane Bomash, HCFA Technical Review Section, to Sally Reagan, Feb. 11, 1993 ["Bomash Letter"], at 1). Reagan also contacted Blue Cross and Blue Shield of Texas, Inc. ("Blue Cross"), the fiscal intermediary between HCFA and Medicare claimants in Texas.⁶ (Plaintiffs Second Amended Complaint ¶¶ 6, 40; Defendants' Third Appendix, pp. 73-75, Letter from Ed Lessard, Acting Regional Administrator, HCFA Region VI, to Senator Kay Bailey Hutchison, Apr. 23, 1997 ["Lessard Letter"], at 1; Defendants' Third Appendix, pp.26-72, Videotaped Oral Deposition of Freddie Kemp, Sept. 10, 2002 ["Kemp Depo."], pp. 11-12). In addition, Reagan filed a lawsuit, in a Texas state court, against University Park, East Texas Medical Center ("ET Medical Center"), and others. (Evidentiary Appendix to the East Texas Defendants' Motion for Summary Judgment and Motion to Dismiss for Lack of Jurisdiction, Docket Entry # 143 ["Defendants' First Appendix"],⁷ Ex. A: Plaintiffs First Amended Original Petition, Reagan v. University Park Hospital, No. 93-1034-C, ¶¶ 11-14 (241st Judicial Dist., Smith County, Tex., May 20, 1994) ["State Court Petition"]). In that lawsuit, Reagan alleged, among other things, that she was fired from University Park because she had refused "to become complicit in fraud and to aid and abet criminal conduct."⁸ (Id. ¶ 11-14). Later, Reagan alleged, specifically, that "she was fired because she refused to go along with [illegal] Medicare reporting." (Defendants' First Appendix, Ex. L): University Park Hospital's Motion for Summary Judgment, Reagan v. University Park Hospital, No. 93-1034-C, pp. 13, 15 (241st Judicial Dist., Smith County, Tex., Sept. 10, 1996) (citing Deposition of Sally Reagan, Vol. IV, Nov. 2, 1994, pp. 66, 71).

While the state lawsuit was pending, Plaintiff filed this federal suit, on behalf of the United States of America (the "government"), under the qui tam provision of the False Claims Act, 31 U.S.C. § 3729, et seq. (the "Act," the "FCA"). (Original Complaint, Docket Entry # 3; and see Defendants' First Appendix, Ex. E: Reagan v. University Park Hospital, No. 12-97-00351-C.V. (Tex.App. — Tyler 1999, writ denied) ["Reagan I"]). Although the government has been provided numerous opportunities to intervene in this action, it has chosen not to do so. (Docket Entry # 8).

The complicated procedural journey that Reagan's federal lawsuit has traveled is set out in a previous memorandum, entered on June 19, 2002. (Docket Entry # 146). It should be noted, however, that the current complaint is Plaintiffs third attempt to articulate claims against the East Texas Defendants. (See Docket Entry # 3, Docket Entry # 61, Docket Entry # 89). Plaintiffs First Amended...