U.S. v. Snider

Decision Date17 December 1985
Docket NumberNo. 84-1386,84-1386
Citation779 F.2d 1151
Parties, 12 Soc.Sec.Rep.Ser. 72 UNITED STATES of America, Plaintiff-Appellee, v. Dr. Ira L. SNIDER, D.O. and Tri-Therapy Associates, Inc., Defendants-Appellants.
CourtU.S. Court of Appeals — Sixth Circuit

Jon Feikens (argued), William McCandless, Dice, Sweeney, Sullivan, Feikens, Hurbis and Foster, Detroit, Mich., Sylvester Lukis, Cramer, Haber & Lukis, P.C., Sheree R. Kanner, Pierson, Ball & Dowd, Washington, D.C., Benton L. Becker (argued), Coral Gables, Fla., for defendants-appellants.

Leonard R. Gilman, U.S. Atty., Karl Overman (argued), Detroit, Mich., for plaintiff-appellee.

Before LIVELY, Chief Judge; WELLFORD, Circuit Judge and BROWN, Senior Circuit Judge.

LIVELY, Chief Judge.

This case involves reimbursement under Part B of the Medicare Act, 42 U.S.C. Secs. 1395 et seq., for physical therapy services provided to Medicare beneficiaries in ten nursing homes in the Detroit area. Dr. Ira L. Snider is an osteopathic physician who provided physical therapy services to nursing home patients through the vehicle of his wholly-owned corporation, Tri-Therapy Associates, Inc. Employees of Tri-Therapy actually administered the services to the patients. Dr. Snider billed the government for "physicians' services" and designated Tri-Therapy as payee for reimbursement. The government determined that neither Dr. Snider nor Tri-Therapy was eligible for reimbursement under Part B and sued to recoup payments in excess of $1,000,000. Following a trial the district court directed a verdict for the government and entered judgment in favor of the United States for $917,000.

An issue of first impression in this court is whether Rule 13(a) of the Federal Rules of Civil Procedure 1 requires a defendant sued only for declaratory and injunctive relief to file a counterclaim for money damages arising out of the same transaction that is the basis of the injunction claim where the district court advances the hearing on a motion for preliminary injunction and consolidates it with the trial on the merits pursuant to Rule 65(a)(2), Federal Rules of Civil Procedure. 2 Other issues will be identified in this opinion.

I.

On October 31, 1978 Dr. Snider and Tri-Therapy filed suit in the district court for an injunction to prevent the government from carrying out its intent to stop all payments on reimbursement claims by Dr. Snider under Part B of the Medicare Act. The complaint also sought a declaration that the threatened cutoff of payments was contrary to law. On November 1, 1978 the district court set a hearing for November 9 on the request for preliminary injunction and directed the government to file a response by November 6. On November 6 the government filed a motion to dismiss for lack of jurisdiction and for failure to state a claim upon which relief could be granted, with a memorandum in support of its motion to dismiss and in opposition to a preliminary injunction. On November 9 the court commenced a hearing at which it became clear that important issues involving the administration of the Medicare Act were involved and that it might be possible to decide the merits of the plaintiffs' claim at a fully developed hearing on the request for a preliminary injunction. Following the hearing on November 9 the court met in chambers with counsel where it was agreed that an order would be entered advancing the trial of the action on the merits and consolidating it with a hearing on the application for preliminary injunction. Since the attorneys indicated that time would be required to prepare for the hearing, it was agreed that the government would continue to process and pay Part B claims submitted by Dr. Snider with a portion of all payments received by him or Tri-Therapy to be deposited into the registry of the district court. The trial was postponed several times in order to permit the attorneys to prepare fully, but payments continued under the November 9 order. The final hearing date was set for January 22, 1979 and the attorneys entered into an extensive stipulation of facts which was filed with a large amount of documentary evidence.

On January 9, 1979 at the last conference prior to the trial, the government filed a motion for summary judgment and thereafter the plaintiffs filed a cross-motion for summary judgment. The government never filed an answer and a hearing was held pursuant to Rule 65 beginning January 22, 1979.

On February 8, 1979 the district court entered summary judgment in favor of the government and filed an opinion. In the opinion the district court outlined the provisions of the Medicare Act involved in the case and found that the physical therapy services did not qualify under Part B as "physicians' services." The district court noted that a doctor may bill Medicare for his own personal services on a "reasonable fee basis" but physical therapy services furnished by a qualifying clinic must be billed on a "cost reimbursement" basis. Tri-Therapy was not a qualifying clinic, and Dr. Snider sought payment on a reasonable fee basis. Tri-Therapy was eligible to receive Medicare payments only as the designated payee for services performed by Dr. Snider. The district court found that Dr. Snider did not render "physicians' services" to the nursing home patients because he did not participate either by providing services himself or directly supervising employees of Tri-Therapy as they administered physical therapy to the patients. Based on these conclusions the district court denied the application for a preliminary injunction. The concluding paragraph of the district court's opinion stated:

It should be further noted that nothing herein is directed toward the issue of payments previously made to Dr. Snider since that issue was not raised by the parties and was not before the court.

On appeal this court affirmed the judgment of the district court in an unpublished opinion entered on April 9, 1981 "on the basis of the opinion by Judge Guy."

II.

The present action was begun on June 18, 1982, and was assigned to Judge Guy. In its complaint the government sought to recover payments made to Tri-Therapy as designated payee of Dr. Snider from January 1, 1977 through January 31, 1980 in the amount of $1,104,951. Dr. Snider and Tri-Therapy filed a motion to dismiss on the basis of Rule 13(a), Fed.R.Civ.P., contending that the claim asserted in the present action was required to be presented as a compulsory counterclaim in the 1978 lawsuit between the parties. The district court heard arguments on this issue and ruled that the compulsory counterclaim requirement did not apply and that the present action was not barred for failure to assert the claim in the earlier suit.

The district court gave two reasons for this conclusion. In the first place, the court questioned whether Rule 13(a) should apply to an action for injunction where the parties and the court agree that time is of the essence and a trial on the merits is advanced and consolidated with a hearing on an application for preliminary injunction. The court stated that including the claim for recoupment of past payments in that proceeding would have delayed consideration of the injunction issue and considerably expanded the scope of the trial. The district court stated that it was the intention of the parties and its intention that the issues upon which the injunction question depended be decided without reference to any past payments to Dr. Snider or Tri-Therapy under the Medicare Act. As a second and more technical basis for the ruling, the district court pointed out that Rule 13(a) provides that the compulsory counterclaim requirement comes into effect "at the time of serving the pleading." The motion to dismiss filed and served by the government in the first action was not a "pleading" within the definition of Rule 7(a), Fed.R.Civ.P., and the government filed no pleading within that definition prior to trial of the case on its merits. The district court stated that the order of January 9, 1979 setting the matter for trial pursuant to Rule 65 was understood by the court and counsel to limit the trial to issues directly presented in the request for a preliminary injunction. Thus, the government was never required to file a pleading in which it would have been appropriate to include a counterclaim for past payments to Dr. Snider or Tri-Therapy.

Following this ruling the government filed a motion for summary judgment, contending that the only issue controlling its right to recover past payments had been decided in its favor in the earlier litigation. Thus, it argued for the application of collateral estoppel. The district court reviewed the proceedings in the first case and noted that the question there was whether the physical therapy services for which the government was being billed were performed by an employee of Dr. Snider under his direct supervision and incident to his professional services to the patient since it was uncontradicted that Dr. Snider himself provided no such services directly to patients. The district court concluded that in denying relief to Dr. Snider in the injunction action it had necessarily answered this question in the negative and, further, that determination of Dr. Snider's liability in the second case turned entirely on the same question. Since the court had previously ruled in an action involving the same parties that Dr. Snider had not performed "physicians' services" which would have entitled him to reimbursement under Part B, it followed that he had collected the payments unlawfully and was required to return them. Thus, the district court granted partial summary judgment on the issue of liability.

At the same hearing the district court granted summary judgment on several affirmative defenses relied upon by Dr. Snider and Tri-Therapy, including their claim that they were entitled to retain the reimbursement payments...

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