United States v. Se. Eye Specialists, PLLC, 17-cv-00689

CourtUnited States District Courts. 6th Circuit. United States District Court of Middle District of Tennessee
Writing for the CourtWAVERLY D. CRENSHAW, JR., CHIEF UNITED STATES DISTRICT JUDGE.
PartiesUNITED STATES OF AMERICA and the STATE OF TENNESSEE ex rel. GARY ODOM and ROSS LUMPKIN, Plaintiffs, v. SOUTHEAST EYE SPECIALISTS, PLLC, SOUTHEAST EYE SURGERY CENTER, LLC, EYE SURGERY CENTER OF CHATTANOOGA, LLC, DARYLF. MANN, and JOHN R. BIERLY, Defendants.
Decision Date05 November 2021
Docket Number17-cv-00689

UNITED STATES OF AMERICA and the STATE OF TENNESSEE ex rel. GARY ODOM and ROSS LUMPKIN, Plaintiffs,
v.

SOUTHEAST EYE SPECIALISTS, PLLC, SOUTHEAST EYE SURGERY CENTER, LLC, EYE SURGERY CENTER OF CHATTANOOGA, LLC, DARYLF.
MANN, and JOHN R. BIERLY, Defendants.

No. 17-cv-00689

United States District Court, M.D. Tennessee, Nashville Division

November 5, 2021


MEMORANDUM OPINION

WAVERLY D. CRENSHAW, JR., CHIEF UNITED STATES DISTRICT JUDGE.

It's been said that “the eyes are the window to one's soul.” When those panes become cloudy or hazy, cataract surgery may be the solution. This qui tam action is about the follow-up care to such surgery, and the parties' inability to see eye-to-eye on whether Defendants' allocation of that care is lawful.

Plaintiffs are Gary Odom, the Executive Director of the Tennessee Association of Optometric Physicians (“TAOP”), and Dr. Ross Lumpkin, an optometrist in Camden, Tennessee and past president of that association. In the First Amended Complaint, they sue five Defendants (collectively “SEES”): (1) SouthEast Eye Specialists, PLLC (“SEE”), a medical practice group employing 10 optometrists, and 11 ophthalmic surgeons who perform approximately 12, 000 cataract surgeries a year; two affiliated surgery centers (“SECS”), one in Knoxville (Southeast Eye Surgery Center, LLC), the other in Chattanooga, Tennessee (the Eye Surgery Center of

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Chattanooga, LLC); and the co-founders and top corporate officers of SEES, Dr. Darryl F. Mann, an optometrist, and Dr. John R. Bierly, an ophthalmic surgeon.

In Plaintiffs' view, Defendants have implemented a scheme - developed and directed by Drs. Mann and Bierly - to provide kickbacks to optometrists in order to induce them to refer their patients to Defendants' surgical centers, including patients covered by public health insurance programs such as Medicare, Medicaid, and TennCare. From Plaintiffs' perspective, the scheme violates the federal health care Anti-Kickback Statute, 42 U.S.C. 1320a-7b(b), and, in turn, the submission of claims for payment constitute fraud for purposes of both the federal False Claims Act (“FCA”), 31 U.S.C. 3728, et seq., and its state-law counterpart, the Tennessee Medicaid False Claims Act, Tenn. Code Ann. 71-5-181, et. seq.

SEES sees things differently. Defendants claim to use an entirely lawful, referral-based, comanagement business model. True, that model helps the bottom-line, but there is nothing unlawful about a business endeavoring to make and maximize profits. Nor have they committed any fraud. Accordingly, Defendants have filed Motions to Dismiss the Amended Complaint (Doc. Nos. 132, 138), as well as a Motion to Strike (Doc. No. 135).

I. Factual Background and Procedural Posture[1]

Unlike ophthalmologists, optometrists are not medical doctors. Rather, optometrists provide primary eye care. This generally includes eye exams, vision testing, prescribing corrective lenses when appropriate, and monitoring and managing eye disease. In the course of their practice,

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optometrists frequently discover cataracts, which is a clouding of the natural lens of an eye. Often upon that discovery, patients are referred to an ophthalmologist for surgery.

Cataract surgery is a relatively straightforward procedure, taking between 5 and 10 minutes per eye. During the surgery, the cloudy natural lense is replaced with an artificial one. The typical lens eliminates the haze, but does not correct underlying vision problems, such as an astigmatism or the need for reading glasses. Those problems, however, can be corrected with a premium lens that costs more.

Even though it has optometrists on staff, SouthEast Eye Specialists is a referral center and does not provide primary eye care. Instead, its cataract surgeons receive patients from outside optometrists or doctors on a referral basis.

Plaintiffs claim that SEES has devised a scheme that makes it lucrative and beneficial for optometrists to refer their patients exclusively to SEES for cataract surgery at one of its two surgical centers. SEES allegedly does so through a number of financial inducements.

One method is to provide optometrists with freebies. This includes free continuing education that all Tennessee optometrists are required to complete each year. It also includes free dinners and drinks, lunches for the optometrist and his or her staff, baseball games, golf outings, and other events. Those with high referral rates may even be selected to sit on SEES' advisory board. In contrast, those that fall short of the expected number of referrals are taken off the mailing lists for SEES' events.

Another financial inducement SEES employs is through its “co-management model.” Under that model, the ophthalmologist that performs the cataract surgery receives 80% of the fee, while the referring optometrist who does the follow-up care receives 20%. Plaintiffs acknowledge that such

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a model - properly employed and implemented - can be beneficial to patients because the surgery is an outpatient procedure and follow-up care is required. Thus, by way of example, if the surgery center is some distance from the patient's home, it is more convenient for the patient to seek followup care (the day after surgery, again 3-4 days later, and then a few weeks later) at the local optometrist, rather than returning to the surgery center. Plaintiffs insist that SEES corrupts this model because the patient really has no choice as to where he or she will receive cataract surgery if the local optometrist has an arrangement with SEES. That surgery will more than likely occur at a facility owned and operated by SEES, making patient choice illusory.

A third financial inducement relates to up-selling. An optometrist who convinces his or her patient to request premium lenses that correct vision instead of the standard clear lens, receives a bonus from SEES of $150, or more, per lens. For Medicaid and TennCare patients, this results in a significant out-of-pocket cost because those programs do not cover premium lenses. Indeed, one such premium lens costs the patient an additional $1, 695 per eye, a different premium lens offered by SEES costs almost $3, 000 per eye. The referring optometrist receives $150 per eye for a patient's purchase of the former, and $300 per eye for purchase of the latter. And, even it the patient declines the premium lens, the referring optometrist still wins because he or she will likely be the prescriber of corrective lenses the patient may need and will reap the profits associated therewith.

Sometime around 2010, Plaintiffs learned that SEES and other cataract surgery practices were promoting and hosting more and more seminars and free dinners. They also noticed a significant decline in the number of optometrist who attended TAOP education seminars. Their curiosity piqued, Plaintiffs began reading promotional materials for these events, and discussed the matter with other practitioners.

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In 2016, Dr. Lumpkin attended a SEES continuing medical education seminar and heard and saw SEES' pitch promoting co-management as a revenue opportunity for optometrists. Likewise, Dr. Lumpkin heard similar sales presentation at a SEES seminar he attended.

On April 7, 2017, Plaintiffs (as Relators in the name of the United States) filed a Complaint alleging that the three corporate Defendants had “defrauded-and continue to defraud-Medicare and Medicaid of tens of millions of dollars” through a kick-back scheme involving the referral from optometrists. (Doc. No. 1 at 2). In keeping with the qui tam provisions of the FCA, the Complaint was filed under seal to allow the Government to decide whether it desired to intervene.

At the Government's request, the initial 60-day sealing period was extended again and again. After six such extensions, the United States and the State of Tennessee were given until August 9, 2019, within which to notify the Court as to whether they desired to intervene. (Doc. No. 40 at 1). On that deadline the United States and Tennessee filed a Joint Notice stating that they were not intervening “at this time” because they had not completed their investigation, even though 28 months had passed since the filing of the Complaint. (Doc. No. 43). The Complaint was then unsealed and Defendants moved to dismiss.

On February 10, 2020, the United States filed a “Motion to Intervene, Add Two Defendants, and Stay the Suit for 90 Days.” (Doc. No. 65). The State of Tennessee joined in on that request two weeks later. (Doc. No. 72). These filings were made when briefing on the Motion to Dismiss was almost completed, some six months after the Court's deadline for intervention, and almost three years after the original Complaint was filed. The Motions to Intervene were denied by the Court because neither the United States nor the State of Tennessee established good cause for the delay. (Doc. No. 104).

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The Government appealed the denial of the request to intervene, but voluntarily dismissed that appeal weeks later. (Doc. No. 124). On May 6, 2021, Plaintiffs filed the operative First Amended Complaint adding 60 paragraphs of factual allegations, and the two individual Defendants (Drs. Mann and Bierly).

II. APPLICATION OF LAW

As noted, there are two Motions to Dismiss, one filed by the individual Defendants (Doc. No.138), and the other filed by the corporate Defendants. (Doc. No. 132). There is also a Motion to Strike filed by the corporate Defendants. (Doc. No. 135). Although there is considerable overlap amongst the motions, the Court begins with the motion to strike because it could be potentially dispositive as to all Defendants were it to be granted.

A. SEES' Motion to Strike (Doc. No. 135)

The SEES Defendants move to strike paragraphs in the Amended Complaint that “could only have come from the U.S. Department of Justice (‘DOJ'), which must have provided Relators with confidential business records and...

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