United States ex rel. Ruscher v. Omnicare, Inc., Civ. Action No. 4:08-cv-3396
| Decision Date | 03 September 2015 |
| Docket Number | Civ. Action No. 4:08-cv-3396 |
| Parties | UNITED STATES OF AMERICA ex rel. Susan Ruscher, et al. Plaintiffs, v. OMNICARE, INC. et al Defendants. |
| Court | U.S. District Court — Southern District of Texas |
More than seven years after it was filed, this long-running qui tam case is approaching its trial date. Relator has alleged that Defendant Omnicare, Inc., and its subsidiaries (collectively, "Omnicare") engaged in a complex scheme to offer illegal remuneration to skilled nursing facilities (SNFs) in exchange for referrals to Omnicare's pharmacy business. After more than seven months of fact discovery and three more months of expert discovery, the parties have filed dispositive motions addressing every issue remaining in the case. This Order resolves the dispositive motions as well as the pending motions to strike and motions to exclude expert testimony.
For the reasons set out in this Order, Omnicare's Motion to Strike Relator's Supplemental Expert Reports (Doc. No. 365) is GRANTED in part and DENIED in part. Relator's Daubert Motion (Doc. No. 378) is DENIED. Omnicare's Daubert motions (Doc. Nos. 379, 381, 383) are GRANTED in part and DENIED in part. Omnicare's Motion for Summary Judgment (Doc. No. 385) is GRANTED and Relator's Motion for Partial Summary Judgment (Doc. No. 371) is DENIED. Relator's Motion to Strike Defendants' Summary Judgment Evidence is DENIED.
Defendant Omnicare is the nation's largest long-term care pharmacy (LTCP). LTCPs provide skilled nursing facilities (SNFs) and other long-term care institutions with prescription and non-prescription medications. Defs.' Ex. 2, Expert Report of Gregory K. Bell, Ph.D. (hereinafter "Bell Rep.") ¶ 11. In addition, Omnicare and other LTCPs provide their customers with services related to medication delivery, including the review of drug orders, coordination of documentation related to prescriptions, in-service training for nursing home staff, and drug regimen reviews. Id.
Often, Omnicare and a SNF chain will sign a preferred provider agreement that designates Omnicare as the pharmacy of choice for facilities in that chain. See, e.g., Defs.' Ex. 55 at 563. These preferred provider agreements set forth the contract pricing for pharmacy products and services, establish payment terms and billing processes, and provide mechanisms for resolving billing disputes. Id. at 665. Omnicare will then enter into separate agreements with each individual facility in the chain. Id. With some frequency, the Omnicare-SNF preferred provider agreements included a provision for a "prompt-pay discount" if the SNF paid its invoices to Omnicare within an agreed-upon time after the date of the invoice. See, e.g., Rel.'s Ex. 12 at 47-48.
Many of the SNF residents for whom Omnicare provides pharmaceuticals and pharmacy services are enrolled in Medicare Part A, Medicare Part D, and/or Medicaid. Through those programs, the government is responsible for reimbursing the SNFs and/or Omnicare for services provided to covered patients. The structures of these programs have some important differences.
Medicare Part A covers care for patients in a SNF for up to 100 days of a patient's stay. Bell Rep. ¶ 14. SNFs receive a predetermined daily rate for each day of care provided to a Part A patient, and the SNFs pay the LTCPs' bills directly from that per diem revenue. Defs.' Ex. 4, Expert Report of John MacDonald III (hereinafter "MacDonald Rep.") ¶ 16. SNFs receiving Part A payments file annual cost reports reflecting the expenses of their operations, including the costs of pharmacy products and services obtained from LTCPs for Part A patients. See Expert Report of David Bellamy (hereinafter "Bellamy Rep."), Doc. No. 379-1.
After a SNF resident has exhausted his 100-day Part A coverage, his pharmacy expenses may be covered by Medicare Part D, Medicaid, private insurance, or self-pay. Medicare Part D is administered by private plan sponsors. For SNF residents covered by Part D, the LTCP bills the private plan sponsor directly for pharmaceutical products and services provided to the patient. MacDonald Rep. ¶ 22. Likewise, for SNF residents covered by Medicaid, the LTCP bills the state Medicaid program directly. Id. The SNFs are not involved in the pharmacy billing for Part D and Medicaid patients.
The instant lawsuit concerns the relationships between Omnicare and eight SNF chains — Avamere, FSC, Five Star, Fundamental, Harborside, Life Care, Millennium, and Shoreline — during the period 2005 through 2008. For all or some of that period, Omnicare had preferred provider agreements with the eight chains. During that period, Omnicare had significant past-due Accounts Receivable (A/R) owing from some or all of the eight chains. The total past-due A/R related to all SNFs grew to approximately $300 million by the end of 2008. Rel.'s Mot. at 5.
The parties dispute the reason for the growth in Omnicare's accounts receivable. Relator contends that Omnicare had an intentional scheme to avoid collecting on SNF Part A debt inorder to maintain its preferred provider relationships with the SNFs and to continue servicing the SNFs' Part D and Medicaid patients. Omnicare, on the other hand, contends that the mounting A/R was largely a result of errors in its billing processes, audits, and disputes with SNFs about pricing, and the SNFs' delays in paying their bills. The Court discusses the evidence supporting these contentions in its discussion of the parties' motions for summary judgment, below.
Relator Susan Ruscher worked in Omnicare's collections department from July 2005 until she was terminated in August 2008. While at Omnicare, she worked on collecting Omnicare's past-due A/R from the company's SNF clients. At the time of her termination, she took a variety of documents from Omnicare and provided them to her lawyers in connection with this lawsuit. Relator obtained other documents from her Omnicare co-workers, Cathy Brumleve and Kevin Stallo, that were used in the preparation of this suit. Omnicare has alleged various tort claims against Relator related to the taking of these documents.
Relator filed her original complaint in this action in November 2008 and filed her First Amended Complaint a month later. (Doc. Nos. 1, 5.) Relator filed a Second Amended Complaint in September 2009. (Doc. No. 13.) After a two-year investigation, the Government notified the Court in December 2012 that it would not intervene at that time. (Doc. No. 45.) The Court permitted Relator to file a Third Amended Complaint in August 2013, but ruled that she could not rely on documents subpoenaed from Omnicare by the Government. (See Minute Entry, Aug. 29, 2013.) Omnicare and its former CEO, Joel Gemunder, moved to dismiss the Third Amended Complaint in November 2013. (Doc. Nos. 120, 126.) In June 2014, the motions were granted as to Mr. Gemunder and granted in part and denied in part as to Omnicare. (Doc. No. 147.) Theparties engaged in discovery throughout the remainder of 2014 and into 2015. Omnicare filed an Amended Answer alleging counterclaims against Relator in December 2014. (Doc. No. 214.) Relator filed a Fourth Amended Complaint in May 2015. (Doc. No. 360.) The instant motions were filed on or before the motions deadline of June 12, 2015, and trial is set for October 5, 2015.
This motion concerns the timing of Relator's supplemental expert disclosures, which requires some understanding of past disputes over scheduling in this years-long case. Discovery has been contentious throughout, and the deadlines for both expert and fact discovery were extended earlier this year. The final discovery deadlines were as follows:
Fact discovery March 5, 2015
Relator's expert witnesses March 13, 2015
Defendants' expert witnesses April 23, 2015
Expert discovery complete May 12, 2015
See Minute Entry (Feb. 5, 2015). Separately, the parties agreed that Defendants would provide an expert report on their counterclaims on or before April 23, 2015, and Relator would have until May 22, 2015 to serve an expert report on the counterclaims. See E-mail correspondence between Ashley Hardin and Chelsea Dal Corso, Defs.' Ex. 1. Any related depositions would be scheduled on or before June 5, 2015. Id.
On May 22, 2015, Relator served on Defendants two additional expert reports from previously-disclosed experts, David Grabowski and E. Venson Wallin. (Doc. Nos. 388-3, 388-4.) Mr. Wallin's report is styled as a "Response Report," while Dr. Grabowski's report is titled a"Rebuttal Report." The parties agree that these additional reports do not address Omnicare's counterclaims, but instead respond to the opinions offered by Defendants' experts.
Omnicare has now moved to strike the May 22 reports on the grounds that they were impermissible "sur-rebuttal" reports not contemplated by the scheduling order or the parties' agreement on expert discovery regarding the counterclaims. (Doc. No. 365.)
Omnicare argues that the rebuttal reports should be stricken because they were filed after the close of expert discovery on May 12, 2015. By the explicit terms of the scheduling order, taken alone, the May 22 reports were untimely and are subject to being stricken. In her response, Relator offers two routes through which the Court could find that the additional reports were timely.
Relator suggests that, because the Court's scheduling order did not specifically name a date for her to provide rebuttal evidence related to Defendants' experts, the Federal Rules of Civil Procedure fill the gap. Rule 26 allows a party to make expert disclosures "intended solely to contradict or rebut evidence on the same subject matter...
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...intended to induce them. Inducement of referrals also "need not be the sole reason for the payment." U.S. ex rel. Ruscher v. Omnicare , 2015 WL 5178074, at *13 (S.D. Tex. Sept. 3, 2015). "The presence of a legitimate business purpose for the arrangement or a fair market value payment will n......