United States v. Anesthesia Servs. Assocs., PLLC

Decision Date31 December 2019
Docket NumberCase No. 3:16-cv-0549
CourtU.S. District Court — Middle District of Tennessee

Judge Aleta A. Trauger


The United States of America and the State of Tennessee (collectively, "the government" or "plaintiffs") bring this action under the False Claims Act ("FCA"), 31 U.S.C. § 3729 et seq.; the Tennessee Medicaid False Claims Act ( "TMFCA"), Tenn. Code Ann. §§ 71-5-182 to -185; the Federal Priority Statute, 31 U.S.C. § 3713; and common law theories of payment by mistake, unjust enrichment and fraud, against defendants Anesthesia Services Associates, PLLC d/b/a Comprehensive Pain Specialists ("CPS"), Peter B. Kroll, M.D., John Davis, Steven R. Dickerson, M.D., Gilberto A. Carrero, M.D., and Russell S. Smith, D.C. (See Consol. Compl. in Intervention, Doc. No. 65.) Now before the court is the Partial Motion to Dismiss the Consolidated Complaint in Intervention filed by defendant Peter Kroll, M.D. (Doc. No. 96.)

Kroll seeks the partial dismissal of four of seven claims for relief asserted against him in the government's Consolidated Complaint. The plaintiffs filed a Joint Memorandum in Opposition to the Partial Motion to Dismiss (Doc. No. 113), and Kroll has filed a Reply (Doc. No. 116). For the reasons set forth herein, Kroll's motion will be denied.


This case involves the defendants' submission of requests for reimbursement for medical services from a number of different federal and state health care programs (collectively, "Government Health Care Programs"), including Medicare, Medicaid/TennCare, TRICARE, and CHAMPVA/Choice. (Consol. Compl., Doc. No. 65 ¶ 3.) For purposes of the Motion to Dismiss, the parties focus primarily on the requirements of Medicare, so the court does as well.1

As relevant here, Medicare is a federal health insurance program for the elderly and people with disabilities. See 42 U.S.C. § 1395c. Medicare Part B, which provides outpatient coverage for, among other things, diagnostic laboratory tests (see 42 C.F.R. § 410.32), only covers medical services that are "reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member." 42 U.S.C. § 1395y(a)(1)(A). "[Laboratory t]ests that are performed in the absence of signs, symptoms, complaints, personalhistory of disease, or injury are not covered except when there is a statutory provision that explicitly covers tests for screening as described." Medicare Claims Processing Manual: Chapter 16—Laboratory Services § 120.1, available at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/clm104C16.pdf (last visited December 17, 2019).

Medicare establishes its national payment policy for covered items or services through national coverage determinations ("NCDs"), which are formal decisions by the Secretary of the Department of Health and Human Services ("HHS") regarding whether, and under what circumstances, Medicare covers a particular item or service. See 42 U.S.C. § 1395ff(1); 42 C.F.R. § 405.1060(a). NCDs are binding on both Medicare contractors and administrative law judges, who preside over Medicare coverage appeals. See 42 U.S.C. § 1395ff(1)(A)(i); 42 C.F.R § 405.1060(a). Medicare Administrative Contractors ("MACs") act as agents for the government in reviewing and paying claims submitted by health care providers. See 42 U.S.C. § 1395h; 42 C.F.R. §§ 421.3, 421.100. MACs process and pay Medicare claims within a specified jurisdiction on behalf of the Centers for Medicare and Medicaid Services ("CMS") and have authority to issue local coverage determinations ("LCDs") for that jurisdiction. See 42 U.S.C. § 1395ff(f)(2); see also id. § 1395m-1(g) (noting that Medicare contractors may issue LCDs regarding clinical diagnostic laboratory tests under the same process). LCDs, like NCDs, govern Medicare coverage for a particular item or service. See id. § 1395ff(f)(2)(b). In adjudicating coverage appeals, administrative law judges "give substantial deference" to local coverage determinations, but they are not bound by them. 42 C.F.R. § 405.1062.

An entity seeking reimbursement for services provided to Medicare patients must submit a CMS Form 1500, or its electronic equivalent, to the appropriate MAC. See United States ex rel. Hobbs v. MedQuest Assocs., 711 F.3d 707, 711 (6th Cir. 2013). "The[ CMS-1500] form[] reflect[s] the treatment or services provided and identif[ies] the [entity that] provided them. Tests, supplies, and services are correlated to a series of unique numbers, called CPT codes, which quickly convey to the [claims processor] what reimbursable expenses the [entity] has incurred." Id. The CMS Form 1500 requires the entity to certify that "the services on this form were medically necessary." Health Insurance Claim Form (Form 1500) at 2, available at https://www.cms.gov/Medicare/CMS-Forms/CMS-Forms/Downloads/CMS1500.pdf (last visited December 17, 2019).

The FCA specifically provides for civil liability and damages for, inter alia, knowingly presenting, or causing to be presented, false or fraudulent claims for payment to the United States and for knowingly making or using false records or statements material to false or fraudulent claims paid by the United States. 31 U.S.C. §§ 3729(a)(1), (2). The Tennessee Medicaid False Claims Act effectively mirrors the language of the FCA, providing civil liability and damages for false claims for payment under the state Medicaid program (TennCare). Tenn. Code Ann. § 71-5-182(a)(1).


The first qui tam complaint against CPS alleging violations of the FCA was filed under seal in this court on March 9, 2016, entitled United States ex rel. Alt v. Anesthesia Services Associates, PLLC, No. 3:16-cv-00549. (Doc. No. 1.) Five other qui tam actions were brought against CPS and other defendants, alleging additional FCA violations, all of which were filed in, or transferred to, this district. In response to the qui tam complaints, the United States and Tennessee conducted an investigation into CPS and its medical providers. The court granted an unopposed motion to consolidate five of the actions on April 15, 2019; the sixth was voluntarilydismissed. (Doc. No. 42.) On April 22, 2019, the United States and the State of Tennessee filed notices of their intent to intervene in part and to decline to intervene in part in the consolidated action. They filed their Consolidated Complaint on July 22, 2019. (Doc. No. 65.)

The Consolidated Complaint alleges that CPS, a Tennessee professional limited liability company with its principal place of business in Franklin, Tennessee, began operations in 2000. Although the initial focus of the practice was anesthesia, by 2011, it was operating over sixty pain management clinics across twelve states and employed approximately 250 health care providers, who saw approximately 48,000 patients per month. The principal physician-owners of CPS were defendants Dickerson, Carrero, and Kroll ("Owners"). (Id. ¶ 23.)

Kroll is a medical doctor certified in anesthesiology and pain medicine. He took an ownership interest in CPS and began treating patients at CPS in August 2006. He served on the Board of Directors at all relevant times, was Chairman and President of the Board beginning on September 30, 2015, and served as Chief Medical Director from January 2016 until the company ceased operating. (Id. ¶ 27.) In his managerial role, Kroll was responsible for developing and approving CPS's policies. (Id. ¶¶ 127, 132, 140, 158, 169, 335.) The company's Chief Executive Officer, defendant Davis, had the authority to oversee the day-to-day operations of the company from May 2011 until June 2, 2017. (Id. ¶ 25.) In July 2018, CPS began dissolution proceedings and sold off its assets. It is no longer in business. (Id. ¶ 23.)

CPS began operating its own testing facility in July 2012 and its own pharmacy in September 2013. (Doc. No. 65 ¶¶ 82, 83.) In 2015, CPS opened a larger test facility in Brentwood, Tennessee, that focused on urine drug screening (or testing) ("UDS" or "UDT"), pharmacogenetic testing, and hormone panels, among other laboratory tests. (Doc. No. 65 ¶ 87.)

While CPS was in operation, Kroll and the other Owners submitted requests for reimbursement for medical services from the Government Health Care Programs. (Id. ¶ 3.) Beginning in 2011 through the dissolution of the company, Kroll and other CPS providers submitted thousands of claims for medical tests that, according to the government, were medically unnecessary, including UDT, specimen validity testing (defined as "analy[sis of] a urine specimen to ensure that it is consistent with normal human urine and has not been adulterated or tampered with" (id. ¶ 118), and psychological testing. Kroll and other CPS providers also billed for acupuncture, a non-covered service, and then refused to refund the overpayment even after CPS brought this improper billing to their attention. (Id. ¶¶ 3, 4, 6, 10.) The government also alleges that Kroll submitted over 2,500 claims to Medicare, for which CPS was paid almost $350,000, falsely claiming that he was the "Rendering Provider" when, in fact, he was out of the country on vacation. (Id. ¶ 11.)

As it expanded and hired new personnel, CPS entered into a variety of compensation packages with its physicians. Typically, physicians received between fifty and sixty percent of their net revenues, with bonuses based on contributions to a pool of revenue for self-referrals for UDT, genetic and other blood testing, DME, and iPad psychiatric tests. (Id. ¶ 90.) The Owners, including Kroll, were compensated at 100 percent of their net revenues plus a percentage from the pool of ancillary services revenues to which CPS...

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