United States ex rel. Kathleen v. Cmty. Health Sys., Inc.

Decision Date25 January 2022
Docket NumberNo. 20-5460,No. 20-5463, No. 20-5637,Nos. 20-5462/20-5469,20-5460,s. 20-5462/20-5469,20-5463
Citation24 F.4th 1024
Parties UNITED STATES of America EX REL. Kathleen A BRYANT, Relator-Appellant, v. COMMUNITY HEALTH SYSTEMS, INC.; Heritage Medical Center, Defendants-Appellees. United States of America ex rel. James Doghramji, Sheree Cook, and Rachel Bryant, Relators-Appellants, v. Community Health Systems, Inc. et al., Defendants-Appellees. United States of America ex rel. Nancy Reuille, Relator-Appellant, v. Community Health Systems Professional Services Corporation et al., Defendants-Appellees. United States of America ex rel. Amy Cook-Reska, Relator-Appellant, v. Community Health Systems, Inc. et al., Defendants-Appellees.
CourtU.S. Court of Appeals — Sixth Circuit

ARGUED: David W. Garrison, BARRETT JOHNSTON MARTIN & GARRISON, LLC, Nashville, Tennessee, for Appellants James Doghramji, Sheree Cook, and Rachel Bryant. Patrick J. O'Connell, LAW OFFICES OF PATRICK J. O'CONNELL PLLC, Austin, Texas, for Appellants Nancy Reuille and Amy Cook-Reska. Michael L. Waldman, ROBBINS, RUSSELL, ENGLERT, ORSECK, UNTEREINER, & SAUBER LLP, Washington, D.C., for Appellees Community Health Systems, Inc. et al. ON BRIEF: David W. Garrison, Seth M. Hyatt, BARRETT JOHNSTON MARTIN & GARRISON, LLC, Nashville, Tennessee, Daniel Berger, GRANT & EISENHOFER P.A., New York, New York, for Appellants James Doghramji, Sheree Cook, and Rachel Bryant. Patrick J. O'Connell, LAW OFFICES OF PATRICK J. O'CONNELL PLLC, Austin, Texas, for Appellants Nancy Reuille and Amy Cook-Reska. Michael L. Waldman, D. Hunter Smith, ROBBINS, RUSSELL, ENGLERT, ORSECK, UNTEREINER, & SAUBER LLP, Washington, D.C., William M. Outhier, RILEY, WARNOCK & JACOBSON, PLC, Nashville, Tennessee, for Appellees Community Health Systems, Inc. et al. Mitchell R. Kreindler, KREINDLER & ASSOCIATES, Houston, Texas, for Appellant Kathleen Bryant.

Before: MOORE, CLAY, and GIBBONS, Circuit Judges.

OPINION

KAREN NELSON MOORE, Circuit Judge.

Various relators in these consolidated cases sued Community Health Systems ("CHS") and others, alleging that CHS submitted fraudulent claims for medically unnecessary hospital admissions to federal public-health insurance programs, such as Medicaid and Medicare. Relators’ counsel performed thousands of hours work in assisting the government with the investigation. Seven years ago, the relators, the government, and CHS entered into a settlement agreement, disposing of the underlying claims in the cases. The settlement agreement left undecided the allocation of attorney fees under the relevant provision of the False Claims Act ("FCA"), 31 U.S.C. § 3730(d). After settling with all the relators, CHS now claims that the relators are not entitled to attorney fees because the FCA's first-to-file rule and public-disclosure bar precluded their claims. The district court agreed with CHS.

We hold that CHS cannot now rely on these separate provisions of the FCA as a last-ditch effort to deny attorney fees to the relators. After the global settlement reached pursuant to a collaborative process between the government and relators’ counsel, we see no reason to apply the first-to-file and public-disclosure rules. We REVERSE the district court's judgment and REMAND with instructions to the district court to determine an award of reasonable attorney fees to relators’ counsel.

I. BACKGROUND

Our previous opinion provides a background of the relevant proceedings. United States ex rel. Doghramji v. Cmty. Health Sys., Inc. , 666 F. App'x 410 (6th Cir. 2016). We highlight in greater detail the facts relevant to this appeal.

A. Overview of allegations against CHS

Federal public-health insurance programs, such as Medicare, reimburse hospitals for treating patients covered by those programs. See, e.g. , R. 1 (Case No. 3:11-cv-00442) (Doghramji Compl. ¶ 96) (Page ID #38); R. 2 (Case No. 3:14-cv-02160) (Cook-Reska Compl. ¶ 32) (Page ID #11). Hospitals receive different rates of reimbursement from federal programs depending on whether a patient receives inpatient or outpatient care. R. 1 (Case No. 3:11-cv-00442) (Doghramji Compl. ¶ 100) (Page ID #39). For example, if a hospital admits to the hospital a patient who enters through the emergency room, that patient receives inpatient care. Id. ¶ 97 (Page ID #38). If, however, a patient enters the emergency room, is treated, and is subsequently discharged, that patient has received outpatient care. Treating a patient in a hospital and monitoring the patient for a short period of time also qualifies as outpatient care. Id. ¶ 99 (Page ID #39).

Federal health-insurance programs reimburse hospitals at much higher rates for inpatient care than for outpatient care. Id. ¶ 100 (Page ID #39). Under these programs’ regulations, however, reimbursement is proper only for treatment that is "reasonable and necessary for the diagnosis or treatment of illness or injury." See, e.g. , 42 U.S.C. § 1395y(a)(1)(A). The plaintiffs in these actions (called "relators" in FCA cases) all alleged that CHS-owned hospitals admitted patients to inpatient care for medically unnecessary reasons and billed these federal health-insurance programs for inpatient services that should have been characterized as outpatient services. R.1-3 (Case No. 3:15-cv-00110) (Reuille Compl. ¶ 10) (Page ID #18–20); R. 2 (Cook-Reska Compl. ¶ 103) (Case No. 3:14-cv-02160) (Page ID #37–42); R. 115-5 (Case No. 3:11-cv-00442) (Plantz Compl. ¶ 193) (Page ID #1559); R. 1 (Case No. 3:14-cv-02195) (Bryant Compl. ¶ 2, 4) (Page ID #1–2); R. 1 (Case No. 3:11-cv-00442) (Doghramji Compl. ¶ 3) (Page ID #14). Because these actions constituted submissions of false claims to the Government, they violated the FCA. 31 U.S.C. § 3729(a)(1)(A).

On January 7, 2009, Nancy Reuille, a Case Management Supervisor at CHS-owned Lutheran Hospital, was the first in time to file her complaint against Lutheran and Community Health Systems Professional Services, a subsidiary of CHS. R. 1-3 (Case No. 3:15-cv-00110) (Reuille Compl. ¶ 9) (Page ID #17). Relator Amy Cook-Reska followed, filing a complaint against CHS and CHS-owned Laredo Medical Center on May 22, 2009. R. 2 (Case No. 3:14-cv-02160) (Page ID #1). Both Reuille and Cook-Reska alleged that hospital personnel were fraudulently billing for long post-outpatient-surgery observation periods that did not correspond with the actual observation time and designating short hospital stays as "inpatient" stays contrary to Medicare criteria. R. 1-3 (Case No. 3:15-cv-00110) (Reuille Compl. ¶ 10, 12) (Page ID #20–21); R. 2 ( Case No. 3:14-cv-02160) (Cook-Reska Compl. ¶ 103) (Page ID #37–42). Apparently, Reuille and Cook-Reska were catching a glimpse of a larger problem. On February 11, 2010, Dr. Scott Plantz filed a complaint against CHS and over 100 of its subsidiary hospitals, alleging largely the same conduct. R. 115-5 (Case No. 3:11-cv-00442) (Plantz Compl.) (Page ID #1528–31). Relator Kathleen Bryant filed a similar complaint against CHS-owned Heritage Medical Center in July 2010. R. 1 (Case No. 3:14-cv-02195) (Bryant Compl.) (Page ID #1). Finally, a group of relators (the Doghramji relators) filed another FCA lawsuit against CHS and over 100 of its subsidiary hospitals in May 2011. R. 1 (Case No. 3:11-cv-00442) (Doghramji Compl.) (Page ID #1–5).1

B. The government investigation and settlement negotiations

In early 2011, the government informed the first four relators—Reuille, Cook-Reska, Plantz, and Bryant—that their claims had "triggered a nationwide investigation on the part of the U.S." Cmty. Health Sys. , 666 F. App'x at 411. "The Government encouraged these relators ‘to work together on the cases and share any proceeds that might result.’ " Id. Following the government's encouragement, the relators entered into a sharing agreement in April 2011. Id .

In February 2011, the Doghramji relators met with the U.S. Department of Justice and disclosed the result of an almost year-long investigation into CHS. Id. at 411–12. After the meeting, the Doghramji relators filed their FCA suit against CHS. The government then asked the Doghramji relators to "actively participate in its investigation" and partially unsealed the first four relator complaints to assist the Doghramji relators in their investigation. Id. at 412. For the next several years, all the relators worked together to assist the government in its prosecution of the claims against CHS:

Counsel for relators thereafter engaged in a "collaborative effort" involving "bi-monthly calls with the Government." "The Government lawyers mapped out the investigation and assigned work to all relators’ counsel in an organized manner," with "the majority of the assignments [being] made without regard to the individual complaint." At the Government's request, from 2011 to 2014 the [ Doghramji ] Relators’ counsel organized and analyzed thousands of documents produced by CHS, drafted letters and memoranda related to these documents, created lists of witnesses, drafted outlines for questioning witnesses, and conducted extensive legal and factual research. All told, they calculated their work on the case at nearly 7,000 billable hours.

Id.

In the spring of 2014, the Doghramji relators joined the original relators’ sharing agreement. Id. Because the government had learned through preliminary settlement negotiations that CHS would require that all seven qui tam complaints be dismissed with prejudice, the Doghramji relators entered into the agreement upon the government's encouragement. Id. ; R. 89 (Case No. 3:11-cv-00442) (Buschner Decl. ¶ 15) (Page ID #921).

In July 2014, the government intervened in each of the relators’ actions, and on August 4, 2014, the government filed notices of settlement in each case. Cmty. Health Sys. , 666 F. App'x at 412. The global settlement agreement between the government, CHS, and all seven relators recited that CHS-owned hospitals submitted claims for "Medically Unnecessary Emergency Department Admissions" that ...

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