United States v. Berkeley Heartlab, Inc., Civil Action No. 9:14-cv-00230-RMG
| Decision Date | 29 June 2017 |
| Docket Number | C/w 9:11-cv-1593-RMG,Civil Action No. 9:14-cv-00230-RMG,C/w 9:15-cv-2458-RMG |
| Parties | United States of America, et al., Plaintiffs, ex rel. Scarlett Lutz, et al., Plaintiffs-Relators, v. Berkeley Heartlab, Inc., et al., Defendants. |
| Court | U.S. District Court — District of South Carolina |
This matter is before the Court on the United States' motion to exclude the opinions in Sections II and VI of Jessica Schmor's expert report proffered by BlueWave Healthcare Consultants, Inc., Floyd Calhoun Dent, III, and Robert Bradford Johnson (collectively, "the BlueWave Defendants"). (Dkt. Nos. 441, 441-1.) For the reasons set forth below, the motion to exclude is granted.
The Government has filed a complaint in intervention against the BlueWave Defendants and Latonya Mallory alleging violations of the Anti-Kickback Statute ("AKS"), 42 U.S.C. § 1320a-7b(b), and the False Claims Act ("FCA"), 42 U.S.C. § 3729(a). (Dkt. No. 75.) The alleged FCA violations arise from BlueWave's marketing of laboratory tests for two laboratory companies, Health Diagnostic Laboratory, Inc. ("HDL") and Singulex, Inc. ("Singulex"), between 2010 and 2014. The Government has alleged that Defendants violated the FCA when they engaged in multiple kickback schemes to induce physicians to refer blood samples to HDL and Singulex for large panels of blood tests, many of which were medically unnecessary. For example, the Government alleges that Defendants offered and facilitated the payment of processing and handling ("P&H") fees to physicians to induce referrals, in violation of the AKS and FCA.
Under Rules 104(a) and 702, "the trial judge must ensure that any and all scientific testimony or evidence admitted is not only relevant, but reliable." Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 589 (1993). The trial court must ensure that (1) "the testimony is the product of reliable principles and methods," (2) "the expert has reliably applied the principles and methods to the facts of the case," and (3) the "testimony is based on sufficient facts or data." Fed. R. Evid. 702(b), (c), (d). "This entails a preliminary assessment of whether the reasoning or methodology underlying the testimony is scientifically valid," Daubert, 509 U.S. at 592-93, and whether the expert has "faithfully appl[ied] the methodology to facts." Roche v. Lincoln Prop. Co., 175 F. App'x 597, 602 (4th Cir. 2006). To make this determination, Courts consider several factors, including "whether a theory or technique . . . can be (and has been) tested," "whether the theory or technique has been subjected to peer review and publication," the "known or potential rate of error," the "existence and maintenance of standards controlling the technique's operation," and whether the theory or technique has garnered "general acceptance." Daubert, 509 U.S. at 593-94; accord United States v. Hassan, 742 F.3d 104, 130 (4th Cir. 2014). However, these factors are neither definitive nor exhaustive, United States v. Fultz, 591 F. App'x 226, 227 (4th Cir. 2015), and "merely illustrate[] the types of factors that will bear on the inquiry." Hassan, 742 F.3d at 130.
Courts have also considered whether the "expert developed his opinions expressly for the purposes of testifying," Wehling v. Sandoz Pharms. Corp., 162 F.3d 1158 (4th Cir. 1998), or through "research they have conducted independent of the litigation," Daubert v. Merrell DowPharms., Inc., 43 F.3d 1311, 1317 (9th Cir. 1995) (on remand), and whether experts have "failed to meaningfully account for . . . literature at odds with their testimony." McEwen v. Balt. Wash. Med. Ctr. Inc., 404 F. App'x 789, 791 (4th Cir. 2010).
Rule 702 also requires courts "to verify that expert testimony is 'based on sufficient facts or data.'" EEOC v. Freeman, 778 F.3d 463, 472 (4th Cir. 2015) (quoting Fed. R. Evid. 702(b)). Thus, "trial judges may evaluate the data offered to support an expert's bottom-line opinions to determine if that data provides adequate support to mark the expert's testimony as reliable." Id. The court may exclude an opinion if "there is simply too great an analytical gap between the data and the opinion offered." Id. (internal citations and quotations omitted). "The proponent of the [expert] testimony must establish its admissibility by a preponderance of proof." Cooper v. Smith & Nephew, Inc., 259 F.3d 194, 199 (4th Cir. 2001).
The Court is mindful that the Daubert inquiry involves "two guiding, and sometimes competing, principles." Westberry v. Gislaved Gummi AB, 178 F.3d 257, 261 (4th Cir. 1999). "On the one hand, . . . Rule 702 was intended to liberalize the introduction of relevant expert evidence," id., and "the trial court's role as a gatekeeper is not intended to serve as a replacement for the adversary system." United States v. Stanley, 533 F. App'x 325, 327 (4th Cir. 2013) cert. denied, 134 S. Ct. 1002 (2014). On the other hand, "[b]ecause expert witnesses have the potential to be both powerful and quite misleading,' it is crucial that the district court conduct a careful analysis into the reliability of the expert's proposed opinion." United States v. Fultz, 591 F. App'x 226, 227 (4th Cir. 2015).
The United States has disclosed expert reports from Kathy McNamara, opining on the commercial reasonableness of Defendants' offering P&H fees to physicians and the fair market value of P&H fees, and Eric Hines, calculating the damages to the United States resulting fromthe alleged false claims. The BlueWave Defendants have proffered Jessica Schmor, a nurse and professional coder, to "examine [Hines's and McNamara's] implicit and explicit coding opinions." (Dkt. No. 473 at 1.) Schmor states that her expert opinion is limited to "coding, billing and reimbursement of the [Current Procedural Terminology] Code 99000 - handling and/or conveyance of specimen for transfer from the office to a laboratory." (Dkt. No. 441 at 3.) Specifically, she intends to testify as to the following four opinions:
(Dkt. No. 441-1 at 3.) Before the Court is the Government's motion to exclude Schmor's testimony. (Dkt. No. 441.) The BlueWave Defendants have filed a motion in opposition, and the Government has filed a reply. (Dkt. Nos. 473, 485.)
Medicare applies the Medicare Physician Fee Schedule ("MPFS") to determine reimbursement for physicians' services. The MPFS uses a standardized coding system called the Current Procedural Terminology ("CPT") that identifies each service and the appropriate reimbursement for that service. The CPT codes are published annually by the American Medical Association.
CPT Code 99000 is the code used by physicians to capture the processing and handling services completed by the physician's office to prepare a specimen for transport to a laboratory (i.e., centrifuging, separating serum, labeling specimens, packing specimens, or filling out forms). Code 99000 is an adjunct code, meaning that it cannot be reported independently butmust be reported in conjunction with a code for one of the basic services rendered to the patient. During the relevant period, 2009 through 2014, Code 99000 was "bundled" with the code for physician reimbursement for Evaluation and Management ("E&M") services. The E&M code covers the costs associated with a patient's visit to an office and evaluation by a physician.
For example, during an office visit with a patient, a physician may identify the need for a blood panel, collect a blood sample from the patient, and prepare that sample for transport to a laboratory. That physician would bill Medicare for reimbursement using the E&M code for an office visit. Although the physician would also record Code 99000 to account for the preparation of the blood sample, Medicare would not separately reimburse him for those P&H services because it considers the P&H costs to be "subsumed by the payment for the services to which they are incident,"1 in this case, the office visit during which the need for the blood panel was identified.
According to McNamara, the bundling of Code 99000 with the code for E&M services means that the "expenses (including practice overhead expenses) needed to provide P&H services are included within the MPFS calculation to determine payment for E/M services." (Dkt. No. 441-3 at 18.) In other words, because reimbursement for E&M services includes reimbursement for P&H services, it was not commercially reasonable for physicians involved with the defendants to get paid twice for the same P&H services: once as a bundled payment from Medicare or TRICARE under the E&M code and a second time as a P&H fee from HDL or Singulex.
In contrast2, the BlueWave Defendants seek to offer Schmor's opinion that "The non-payment of 99000 is a payment policy and the costs are not included in the evaluation and management fee setting." (Dkt. No. 441-1 at 3.) Schmor's point is simple: although Medicare has decided to bundle P&H services with E&M services, it is not necessarily true that a physician is "reimbursed" for the costs of P&H services under the E&M code because the E&M code does not necessarily cover the costs a physician incurs to provide P&H services. She explains:
The [Medicare] fee schedule is arrived at by using all physicians' charges and costs . . . . [T]o the extent that some physicians' offices are performing blood drawing and processing services, it would be included in their data to Medicare and used for evaluation of the calculation of the Medicare physician fee schedules. Given...
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