United States ex rel. Pepe v. Fresenius Vascular Care, Inc.

• Docket Number: 14-CV-03505 (LDH) (ST)
• Decision Date: 30 August 2023
• Parties: THE UNITED STATES OF AMERICA, ex rel. JOHN PEPE M.D., and RICHARD SHERMAN M.D., Plaintiffs, v. FRESENIUS VASCULAR CARE, INC., d/b/a AZURA VASCULAR CARE, AMERICAN ACCESS CARE PHYSICIAN, PLLC, and GREGG MILLER, M.D., Defendants.
• Court: U.S. District Court — Eastern District of New York

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THE UNITED STATES OF AMERICA, ex rel. JOHN PEPE M.D., and RICHARD SHERMAN M.D., Plaintiffs, v. FRESENIUS VASCULAR CARE, INC., d/b/a AZURA VASCULAR CARE, AMERICAN ACCESS CARE PHYSICIAN, PLLC, and GREGG MILLER, M.D., Defendants.

No. 14-CV-03505 (LDH) (ST)

United States District Court, E.D. New York

August 30, 2023

REPORT AND RECOMMENDATION

STEVEN L. TISCIONE, UNITED STATES MAGISTRATE JUDGE

The United States (“Government”) filed a Complaint-in-Intervention against Defendant Fresenius Vascular Care, Inc. d/b/a Azura Vascular Care (“FVC”), alleging claims under the False Claims Act (“FCA”), 31 U.S.C. §§ 3729-33, and at common law. The Government subsequently filed an Amended Complaint-in-Intervention, which expressly identified Gregg Miller, M.D. (“Dr. Miller”) as a Defendant^[1] and added American Access Care Physician PLLC (“AACP PLLC”) as an additional Defendant, a company in which Defendant Dr. Miller is President.

In pre-motion letter briefing, FVC argued that the Government must seek leave to amend, and that leave should be denied based on alleged bad faith, prejudice and futility as to AACP PLLC. The Court rejected FVC's arguments based on bad faith and prejudice, and instructed the parties to brief the narrow question of futility in the instant Motion to Amend (“Motion”), specifically whether the Amended Complaint-in-Intervention's claims against AACP PLLC are timely and comport with Federal Rule of Civil Procedure (“Rule”) 9(b).

The Honorable LaShann DeArcy Hall referred the Government's Motion to the undersigned to issue a Report and Recommendation.

For the reasons set forth below, this Court respectfully recommends that the Government's Motion to Amend be GRANTED.

I. BACKGROUND

A. Factual Background

This case concerns a civil fraud action brought by the Government against FVC, AACP PLLC^[2], and Dr. Miller (collectively, “Defendants”) under the False Claims Act, 31 U.S.C. § 3729, et seq., and at common law. See Government's Amended Complaint-in-Intervention (“ACII”) at ¶ 1, ECF 63.

As an overview, the Government's ACII asserts that Fresenius Vascular Access Centers (“FVACs”) located in New York scheduled “clinically-time evaluations” (“CTEs”) during which interventionalists, including Defendant Dr. Miller, performed medically unnecessary vascular interventions- fistulagrams and angioplasties - on patients, most of whom were terminal because they were End Stage Renal Disease (“ESRD”) patients. Id. at ¶¶ 2-3, 5-6, 9-10, 15, 2930; Mot. at 2-3. Moreover, the ACII further alleges that CTE appointments were made without a referral from the patient's treating physician or dialysis center, in contravention of the requirements of Medicare and other federally-funded health care programs (“FHCPs”). Id. at ¶¶ 11-15, 41-58; Mot. at 3. Finally, the ACII asserts that patient records were falsified to reflect that the procedures were medically necessary and complied with the requirement for a referral from the patient's treating physician or dialysis clinic. Id. at ¶¶ 112-19; Mot. at 3.

As for AACP PLLC specifically, the ACII alleges that the AACP PLLC was an instrument of Defendant Dr. Miller, an alleged architect of the CTE scheme, who was one of AACP PLLC's owners in addition to being a high-ranking officer of FVC. Id. at ¶¶ 29-30. Furthermore, the AACP PLLC allegedly employed the interventionalists who performed the unnecessary procedures promoted by Dr. Miller and FVC, and also allegedly employed persons who falsified patient records. Id. at ¶ 30. Finally, the AACP PLLC allegedly submitted the false claims for payment for the medically unnecessary procedures to FHCPs. Id. at ¶ 30. A more specific breakdown of the parties and allegations is as follows:

1. The Parties

Plaintiff is the Government of the United States which brings this case on behalf of the Office of the Inspector General of the Department of Health and Human Services and the Centers for Medicare & Medicaid Services (“CMS”), which administers the Medicare and Medicaid programs at issue. Id. at ¶ 20. Additionally, the Relators, board-certified nephrologists Dr. John Pepe and Dr. Richard Sherman, are the original Plaintiffs to this action. Id. at ¶ 21.

Defendant FVC is headquartered in Berwyn, Pennsylvania. It was formed by and is a wholly owned business unit of Fresenius Medical Care Holdings, Inc. (“FMC”), a New York corporation that does business as “Fresenius Medical Care North America.” Id. at ¶ 22. From June 20, 2017, FVC has done business as Azura Vascular Care. Id. at ¶ 26.

FMC is and was a wholly owned subsidiary of German company Fresenius Medical Care AG & Co. KGaA (“Fresenius AG”). Id. at ¶ 23. The ACII provides that FMC represents that it is the world's largest provider of dialysis products and services. Id.

The ACII further alleges that “FVC formed a Medical Advisory Board (‘MAB'), led by its Chief Medical Officer, Defendant Miller” and that “MAB members were chosen jointly by Miller and FVC's President.” Id. at ¶ 27. Moreover, the ACII alleges that “[t]he MAB had six subcommittees whose members included FVC's president, Defendant Miller and other FVC leadership, and certain FVAC interventionalists.” Id. at ¶ 28.

Defendant Gregg Miller, M.D. noted above is “a member of FVC's ‘Senior Leadership.' ” Id. at ¶ 29. “He is the Vice President of Operations of FVC and has been in that role since at least October 2015. Previously, he was the FVC's Chief Medical Officer. He is a member of FVC's MAB and a member of all MAB's six subcommittees. Miller is an interventional nephrologist who practiced at the FVAC in Brooklyn.” Id. Notably, “[d]uring the relevant period, he performed fistulagrams and angioplasties on ESRD patients.” Id.

Finally, for AACP PLLC, the ACII alleges that “American Access Care Physician, PLLC (‘AACP PLLC') is a physician-owned New York professional limited liability company.” Id. at ¶ 30. As mentioned above, “it [allegedly] employed interventionalists who performed the vascular access services at issue in this case.” Id. “AACP PLLC submitted claims to Medicare, Medicaid, TRICARE and FEHBP (the ‘Federal Healthcare Programs') for these services.” Id. “At all relevant times, Defendant Miller had an ownership interest in AACP PLLC. Miller is also the President of AACP PLLC.” Id. Finally, “FVC [allegedly] provided administrative and support services to the FVACs and paid for all costs expenses associated with the operation of the FVACs. AACP PLLC reimbursed FVC for these costs from monies received from Federal Healthcare Programs.” Id. at ¶ 31.

2. Defendants' Alleged Fraudulent Scheme

The Government details Defendants' alleged fraudulent scheme (the “CTE Scheme”) as follows in ACII ¶ 15:

• After an initial referral to an FVAC from a patient's treating nephrologist or dialysis clinic, the FVACs routinely scheduled follow-up appointments or so-called “clinically timed evaluations” (“CTEs”) without a further referral from a medical official.

• Prior to a CTE appointment, FVACs did not request any information concerning a patient's recent dialysis treatment from that patient's treating nephrologist or the dialysis clinic that was administering dialysis. In many cases, the records documenting administration of dialysis at the patient's clinic in the days before a CTE demonstrated with quantifiable, objective measures that the patient was dialyzed without any issues.

• Nonetheless, the FVACs brought patients in for a CTE, during which patients received a precursory physical exam. Significantly, the FVAC then recorded a pretextual indication to justify subjecting the patient to a fistulagram, which was followed by an angioplasty, for which the FVAC exaggerated the amount of vascular narrowing or stenosis.

• To ensure robust revenues, Defendants essentially enrolled ESRD patients into a course of CTEs. Upon discharge, the FVACs would schedule additional “follow-up” visits. Critically, the FVACs planned to perform vascular interventions at each CTE. Indeed, FVACs frequently gave patients written instructions that included not only the date of the next CTE but directions not to eat or drink for four hours prior to the appointment time, thus assuming that surgery would be necessary. The potentially harmful fistulagrams and angioplasties-which should not be presumptively considered routine-became routine for these ESRD patients.

The Government alleges “[t]he FVACs at issue performed thousands of angioplasties on ESRD patients that were not medically necessary, in furtherance of Defendants' CTE Scheme.” Id. at ¶ 16. FVC allegedly “had full knowledge that the procedures were not necessary” and that “Defendants nonetheless took advantage of patients to promote its own financial gain. This conduct came at a cost to patients.” Id. at ¶¶ 16-17. Defendants allegedly also knew that the interventions carried serious medical risks. Id. at ¶ 18.^[3]

B. Procedural History

On June 4, 2014, Relators Drs. John Pepe and Richard Sherman (“Relators”) filed their initial qui tam Complaint. See ECF 1.^[4] The Relators amended their Complaint on February 6, 2015, December 7, 2016, October 26, 2017, and on August 7, 2020, respectively. See ECF 14, 19, 22^[5] and 29.^[6] On April 18, 2022, the Government partially intervened in this action. See ECF 42. On May 9, 2022, the Court unsealed the Relators' Fourth Amended Complaint and directed the Government to file its Complaint-in-Intervention (“CII”) by July 8, 2022. See ECF 44.

Based upon the Court's Order dated July 7, 2022, the Government filed its CII on July 12, 2022. See ECF 45 and related Order dated July 7, 2022, and ECF 48. On August 2 2022, the Government filed its Amended Complaint-in-Intervention (“ACII”), see ECF 63, and a pre-motion conference letter. See ECF 64. On August 9,...