United States v. Medquest Assocs. Inc., 3:06-01169

CourtUnited States District Courts. 6th Circuit. United States District Court of Middle District of Tennessee
Writing for the CourtWILLIAM J. HAYNES
PartiesUNITED STATES OF AMERICA and the STATE OF TENNESSEE ex rel., KAREN J. HOBBS, Plaintiffs, v. MEDQUEST ASSOCIATES, INC., BIOIMAGING AT CHARLOTTE, INC., BIOIMAGING OF COOLSPRINGS, INC., and BIOIMAGING AT HARDING, INC., now known as BIOIMAGING AT EDMONDSON, Defendants.
Docket Number3:06-01169
Decision Date23 August 2011

UNITED STATES OF AMERICA and the STATE OF TENNESSEE ex rel., KAREN J. HOBBS, Plaintiffs,
v.
MEDQUEST ASSOCIATES, INC., BIOIMAGING AT CHARLOTTE, INC.,
BIOIMAGING OF COOLSPRINGS, INC., and BIOIMAGING AT HARDING, INC.,
now known as BIOIMAGING AT EDMONDSON, Defendants.

3:06-01169

UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF TENNESSEE NASHVILLE DIVISION

Dated: August 23, 2011


JUDGE HAYNES

MEMORANDUM

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TABLE OF CONTENTS

I. Procedural History...................................................................................1

II. Defendants' Motion to Dismiss and for Summary Judgment On Relator's Retaliation Claim....................................................................3

III. United States's and Defendants' Motions for Summary Judgment...........................6

A. Findings of Fact.................................................................................6
1. MedQuest.................................................................................6
2. The Medicare Enrollment Process...................................................10
3. MedQuest's Medicare Applications for the Nashville Area IDTFs............18
4. MedQuest's Nashville Area IDTFs' Performance.................................21
5. Expert Proof on Medicare Administrative Practices Approving Supervising Physicians.................................................................30
6. Damages Proof..........................................................................36
B. Conclusions of Law............................................................................37
1. The Necessity of a Statute or Regulation............................................44
2. The Governing Medicare Regulations and Rules..................................48
3. The FCA Violations....................................................................63
a. MedQuest's Nashville Area IDTFs' Testing..............................67
b. MedQuest's Medicare Billings with Dr. Witt's Billing Number........69
4. Damages and Penalties................................................................74

IV. Relief.................................................................................................77

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I. Procedural History

Plaintiff, Karen Hobbs, a former employee of MedQuest Associates, Inc. filed this action as Relator on behalf of the United States, under the False Claims Act, ("FCA"), 31 U.S.C. §§ 3729 through 3733 against the Defendants: MedQuest Associates, Inc., ("MedQuest"), Biolmaging at Charlotte, Inc., ("Charlotte Center"), Biolmaging of CoolSprings, Inc. ("CoolSprings Center") and Biolmaging at Harding, Inc. ("Harding Center"). On March 31, 2009, the Government notified the Court of its decision to intervene and filed its intervening complaint on May 22, 2009. (Docket Entry No. 49). In essence, the Relator's and United States's common claims are first that the Defendants unlawfully conducted diagnostic tests of Medicare beneficiaries at its Nashville area testing centers without the required and appropriate physician supervision and that MedQuest caused false claims to be submitted and paid by Medicare for such testing in violation of 31 U.S.C.§ 3729(a)(1). At its Charlotte center, the Relator and the United States also assert that MedQuest caused false claims to be submitted and paid by Medicare by using another Medicare vendor's billing number in violation of 31 U.S.C.§ 3729(a)(1). The Relator also asserts a FCA claim for retaliatory discharge after she complained about Defendants' testing practices. In addition to its FCA claims, the United States asserts common law claims for unjust enrichment, payment by mistake and recoupment.

In earlier proceedings, the Court denied the Defendants' motion to dismiss (Docket Entry No. 95) concluding that Medicare regulations on physician supervision of diagnostic tests are a condition of payment and that under the factual allegations and relevant Medicare regulations, the United States and the Relator stated claims for violations of the FCA. (Docket Entry No. 94, Memorandum at 15-19).

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Before the Court are the United States's motion for summary judgment (Docket Entry No. 127); the Defendants' motion for summary judgment on Relator's claims (Docket Entry No. 128); Defendants' motion to dismiss Relator's amended complaint (Docket Entry No. 148); and the Defendants' motion for summary judgment on the United States's claims. (Docket Entry No. 149).

In its motion for summary judgment, the United States contends, in essence, that the undisputed facts establish that the Defendants submitted claims for payment to Medicare for diagnostic tests of Medicare beneficiaries conducted at its Nashville area facilities without the required physician supervision and by physicians who were not approved by Medicare's designated carrier. The United States also contends that the undisputed facts are that from January, 2004 to July 1, 2005, MedQuest used a physician's Medicare billing number for its Medicare billings for tests of Medicare beneficiaries at its Charlotte facility.

In their motions for summary judgment and motion to dismiss and in their response to the United States's motion, the Defendants argue first that the Relator's retaliation claim lacks factual bases and is time barred. As to the United States's claims, Defendants contend, in sum: (1) that the FCA claims fail as a matter of law, for lack of proof of a violation of a federal statute or regulation; (2) that the cited Medicare regulations do not require a board certified radiologist as a supervising physician at its Nashville area centers; (3) that any physician can supervise the diagnostic tests at issue; (4) that other Medicare carriers permit any physician to supervise these diagnostic tests; (5) that Medicare regulations and expert testimony support the allowance of any physician, as defined by the Medicare Act, to supervise these tests; and (6) that for the times at issue, the Charlotte center was a physician's office rendering appropriate the billings with Dr.

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Witt's Medicare number. For these reasons, Defendants assert the Government and Relator cannot prove any FCA violation.

In their responses, the United States contends that its FCA claims are supported by undisputed facts that establish violations of controlling Medicare regulations. The Relator asserts that the Defendants' motion to dismiss that is supported by evidentiary materials, is a motion for summary judgment. Relator argues that material factual disputes exist on the merits of Relator's retaliation claim under the FCA as well as the nature of her employment relationship with MedQuest to bar summary judgment on Defendants' statute of limitations defense. In a supplemental submission, Relator argues additional precedent supports the timeliness of her FCA retaliation claim.

II. Defendants' Motion to Dismiss and for Summary Judgment
On Relator's Retaliation Claim

MedQuest hired Relator in December, 2002 as a lead technologist and later, promoted her to chief technologist. MedQuest's November, 2002 offer of employment included a "Termination" provision that "MedQuest is an at will employer, which means that either you or MedQuest may terminate the employment agreement at any time with or without notice or cause." (Docket Entry No. 148-3 at 2) (emphasis added). According to this offer, Relator's "signature on this letter indicates [Relator's] acknowledgment and acceptance of these as the full and complete terms of our employment offer." Id. Relator signed the November, 2002 offer letter on November 27, 2002. Id. at 3.

MedQuest also provided Relator its employee handbook that has an "Acknowledgment and Disclaimer of Employment Contract," to be signed by its employees. This disclaimer also

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provides that "either the employee or the Company1 may terminate the employment relationship at will, -with or without cause or advance notice, at any time." (Docket Entry No. 148-4 at 1) (emphasis added). This disclaimer also reads in relevant part, that MedQuest's employee handbook does not create "an employment contract, a right of employment, or any other type of contract" and that "the Company . . . reserves the right to change, revise, add, or delete policies and guidelines without notice when such action is deemed necessary by the Company." Id.

As relevant to these motions, during the course of her employment, Relator was informed and informed her supervisors as well as MedQuest's higher management that MedQuest's Nashville area centers were conducting diagnostic tests using contrast without trained physicians approved by Medicare and in some instances by the centers' staff members who are not physicians. (Docket Entry No. 166-1, Hobbs affidavit). Although Relator received some favorable assessments of her work, (Docket Entry No. 166-11), there were complaints about Relator's work. (Docket Entry No. 130-20). On October 26, 2004, after an action plan deadline (Docket Entry No. 130-3), Ruth Giorgtio, Relator's supervisor, terminated Relator for "Poor job performance conduct." (Docket Entry No. 148-5).

A defendant can file a motion to dismiss based upon statute of limitation defense. Jones v. Brock, 549 U.S. 199, 215 (2007) ("If the allegations . . . show that relief is barred by the applicable statute of limitations, the complaint is subject to dismissal for failure to state a claim") (emphasis added). Yet, the Court agrees...

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