DEPARTMENT OF HEALTH AND HUMAN SERVICES
Departmental Appeals Board
Civil Remedies Division
DATE: February 5, 1990
Docket Nos. C-99 and C-100
In the Case of:
The Inspector General,
- v. -
Anesthesiologists Affiliated,
et al. (C-99)
and
James E. Sykes, D.O.
et al. (C-100)
Respondents.
DECISION OF ADMINISTRATIVE LAW JUDGE
Respondents requested hearings to contest the proposed imposition against them,
jointly and severally, of
civil monetary penalties and assessments, and also to contest the proposed imposition
against them of
exclusions from participation in Medicare and State health care programs. Based
on the law, regulations,
and evidence adduced at the consolidated hearing in these cases, I conclude
that Respondents presented or
caused to be presented 208 claims for items or services that they knew, had
reason to know, or should have
known were not provided as claimed.
I impose aggregate penalties of $208,000.00 and aggregate assessments of $50,000.00
against Respondents
for a total of $258,000.00, and I apportion each Respondent's maximum liability
based on my findings and
conclusions in this Decision. I also impose three year exclusions against all
Respondents from
participating in Medicare and Medicaid, with the exception of: Respondents James
A. Barnett, D.O.
(Respondent Barnett), James A. Barnett, D.O., P.C. (Respondent Barnett, P.C.)
Steven R. Quam, D.O.
(Respondent Quam), and Steven R. Quam, D.O., P.C. (Respondent Quam, P.C.), against
whom I impose
two year exclusions; and James E. Sykes, D.O. (Respondent Sykes), and James
E. Sykes, D.O., P.C.
(Respondent Sykes, P.C.), against whom I impose no exclusions.
BACKGROUND
On December 13, 1988, the Deputy Assistant Inspector General, Civil Administrative
Division, notified
Respondents that pursuant to authority delegated to her by the Secretary of
Health and Human Services
(the Secretary) and the Inspector General (the I.G.), she was proposing civil
monetary penalties and
assessments against them. She further notified Respondents that she was proposing
that they be excluded
from participating in the Title V, XVIII, XIX, and XX programs. Specifically,
she proposed that
Respondents jointly and severally be penalized $211,000.00 and assessed $203,036.00,
for a total of
$414,036.00. She proposed that each Respondent be excluded for a period of ten
years. She cited as legal
authority for the proposals the Civil Monetary Penalties Law, section 1128A
of the Social Security Act (the
Act), as implemented by 42 C.F.R. 1003.100 et seq.
The Deputy Inspector General premised the penalties, assessments, and exclusions
on allegations that
Respondents presented or caused to be presented to Blue Cross and Blue Shield
of Iowa (Blue Cross), the
Iowa carrier for the Medicare program, 211 claims requesting $101,518.00 for
Medicare reimbursement
for anesthesia services which Respondents knew, had reason to know, or should
have known were not
provided as claimed. She itemized each allegedly false claim as a separate count
on a schedule attached to
the notice letter.
The Deputy Inspector General alleged that, in 131 of the 211 claims at issue
(counts 1-120 and 201-211),
Respondents falsely represented or certified the identity and/or employment
status of the individual who
rendered anesthesia. She alleged that Respondents improperly specified the time
units for which
reimbursement was sought in these 131 claims. The Deputy Inspector General concluded
that, as a result
of these allegedly false representations, $6,875.92 in Medicare reimbursement
was improperly paid to
Respondents.
The Deputy Inspector General further alleged that, in the remaining 80 claims
at issue (counts 121-200),
Respondents falsely represented that services described as "pump monitoring"
had been rendered. She
alleged that, with respect to many of these claims, Respondents falsely stated
that a second physician acting
as an anesthesiologist was necessary and present to perform the "pump monitoring"
services. She asserted
that, as a consequence of these allegedly false representations, $16,414.40
in Medicare reimbursement was
improperly paid to Respondents.
Respondents were advised that the maximum penalty permitted by law for the
211 allegedly false claims
was $422,000.00 and that the maximum assessment was $203,036.00, for a total
maximum liability of
$625,036.00. The Deputy Inspector General advised Respondents that the penalties
and assessments she
was proposing were based on factors specified by regulations. These included:
1. the presence of allegedly aggravating circumstances, including the lengthy
period of
time during which false claims were allegedly submitted by Respondents, the
large number of allegedly
false claims, the large amount of reimbursement allegedly falsely claimed (over
$100,000.00), and the
pattern of allegedly false reimbursement claims;
2. Respondents' culpability, as evidenced by their allegedly false certifications
and
misrepresentations on claims, and Respondents' alleged reaffirmation of false
statements in response to
inquiries to them by the Iowa Medicare carrier;
3. the fact that, to the Deputy Inspector General's knowledge, Respondents
had not
committed prior offenses that would constitute aggravating circumstances;
4. Respondents' financial condition, which, according to the Deputy Inspector
General,
was not a mitigating factor because payment of the proposed penalties and assessments
by Respondents
would not jeopardize their ability to continue as health care providers; and
5. other factors which justice required the Deputy Inspector General to weigh,
including
Respondents' alleged failure to comply with Medicare and Medicaid reimbursement
requirements over an
extended period of time, and the allegedly significant unrecouped costs incurred
by the Department of
Health and Human Services in reviewing and investigating the services Respondents
asserted to have
rendered in bringing an administrative action against Respondents.
All of the Respondents timely requested a hearing. A joint hearing request
was filed on behalf of all
Respondents, except Respondents Sykes and Sykes, P.C. Respondents Sykes and
Sykes, P.C. filed a
separate joint hearing request. As a result, separate administrative hearing
dockets were created to hear the
request of all Respondents other than Respondents Sykes and Sykes, P.C. (Docket
No. C-99), and to hear
the request of Respondents Sykes and Sykes, P.C. (Docket No. C-100). However,
all of the parties
subsequently consented to a consolidated hearing of the cases.
In their hearing requests, Respondents denied the allegations made by the Deputy
Inspector General and
affirmatively asserted that for each of the 211 claims at issue, all services
billed for had been delivered and
all payments received were correct. Respondents, other than Respondents Sykes,
and Sykes, P.C., also
claimed that the I.G. had abused process when conducting his investigation of
them. In a prehearing brief,
Respondents amplified their defenses by asserting that they had "employed"
the individuals who assisted
them in rendering anesthesia in the claims listed in counts 1-120 and 200-211,
consonant with legal
requirements, and were thus entitled to reimbursement as claimed for these individuals'
services.
Respondents also asserted that, to the extent there were any false or inaccurate
statements on their claims,
these statements amounted to harmless error which would not justify imposition
of any penalties,
assessments, or exclusions against them.
I held a consolidated hearing in these cases in Des Moines, Iowa, from July
11 through July 19, 1989. At
the completion of the hearing, I issued a schedule for the parties to file posthearing
briefs and reply briefs.
All parties complied with this schedule. On December 5, 1989, after I ascertained
that Respondent Sykes
would not be filing a reply brief, I directed that the record in these cases
be closed.
ISSUES
The issues in these cases are whether:
1. the Secretary lawfully delegated to the I.G. the authority to investigate
alleged violations of
section 1128A of the Act, to propose penalties, assessments, and exclusions
pursuant to that section, and to
represent the Secretary in hearings brought pursuant to that section;
2. Respondents presented or caused to be presented claims for items or services
which they knew,
had reason to know, or should have known were not provided as claimed, in violation
of section 1128A of
the Act;
3. the exclusion remedy is precluded in this case because imposition of exclusions
would
constitute an unlawful retroactive application of the Act to Respondents; and
4. penalties, assessments, and exclusions should be imposed against Respondents
and, if so, in
what amount and for what period of time.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
1. Respondents in this case are Anesthesiologists Affiliated (AA), G. Robert
Loerke, D.O., G. Robert
Loerke, D. O., P.C., James A. Barnett, D.O., James A. Barnett, D.O., P.C., Steven
R. Quam, D.O., Steven
R. Quam, D.O., P.C., James E. Sykes, D.O., James E. Sykes, D.O., P.C., John
P. McDonough, C.R.N.A.,
John P. McDonough, C.R.N.A., P.C., O. Rex Nelson, C.R.N.A. and O. Rex Nelson,
C.R.N.A., P.C. June
26, 1989 Stipulation in Docket No. C-99, number 12 (Stip. C-99 12); Stipulation
in Docket No. C-100,
number 6 (Stip. C-100 6).
2. Respondent AA is a partnership comprised of the individual Respondents. Stip. C-99 11; Stip. C-100 5
3. Respondents G. Robert Loerke, D.O. (Respondent Loerke), James A. Barnett,
D.O. (Respondent
Barnett), Steven R. Quam, D.O. (Respondent Quam), and James E. Sykes, D.O. (Respondent
Sykes), are
licensed doctors of osteopathy and practice medicine as anesthesologists. Stip.
C-99 14; Stip. C-100 9.
4. Respondents John P. McDonough, C.R.N.A. (Respondent McDonough), and O. Rex
Nelson, C.R.N.A.
(Respondent Nelson) are Certified Registered Nurse Anesthetists (CRNAs). Stip.
C-99 15; Stip. C-100 10.
5. Respondents G. Robert Loerke, D.O., P.C. (Respondent Loerke, P.C.), James
A. Barnett, D.O., P.C.
(Respondent Barnett, P.C.), Steven R. Quam, D.O., P.C. (Respondent Quam, P.C.),
James E. Sykes, D.O.,
P.C. (Respondent Sykes, P.C.), John P. McDonough, C.R.N.A., P.C. (Respondent
McDonough, P.C.), and
O. Rex Nelson, C.R.N.A., P.C. (Respondent Nelson, P.C.) are professional corporations
incorporated by
the individual Respondents.
Inspector General's Exhibit (I.G. Ex.) 221-1 - 221-6.
6. Respondent AA was formed in 1963. Stip. C-99 26.
7. Respondent Loerke was a partner in Respondent AA from the beginning of the
partnership in 1977 or
1978 through October 18, 1985. Transcript of July 11-19, 1989 hearing (Tr.)
at 976, 977, 1788-1790.
8. Respondent Barnett was a partner in Respondent AA from the beginning of
the partnership in 1977 or
1978 until his retirement on or about August 1, 1984. Tr. at 976, 977, 1789,
1790; Respondent's Exhibit
(R. Ex) 44/1.
9. Respondent Quam was a partner in Respondent AA from August 1, 1984 through
October 18, 1985.
Tr. at 1229, 1789.
10. Respondent Sykes was a partner in Respondent AA from September 1, 1985
through October 18,
1985. Tr. at 1789, 1790; R. Ex. 44/1.
11. Respondent McDonough was a partner in Respondent AA throughout the period
in which the claims at
issue in this case were presented. Tr. at 1788-1790.
12. Respondent Nelson was a partner in Respondent AA throughout the period
in which the claims at issue
in this case were presented. Tr. at 1788-1790.
13. During the period at issue in this case, some or all of the Respondents
provided anesthesia services at
Des Moines General Hospital (DMGH). Stip. C-99 27; Tr. at 1788-1790.
14. On December 13, 1988, the I.G. served notice on Respondents proposing a
penalty of $211,000.00, an
assessment of $203,000.00, and an exclusion of ten years. Notice.
15. The proposed penalty, assessment, and exclusion were based on allegations
that Respondents
presented or caused to be presented 211 claims for Medicare reimbursement for
items or services which
were not provided as claimed. Notice.
16. The Notice alleged that the claims for Medicare reimbursement were submitted
by Respondents in
violation of the Civil Monetary Penalties Law. See Social Security Act, section
1128(A).
17. The specific claims at issue in this case are itemized as counts 1-211
in a "schedule of false claims"
which is attached to the Notice letter. Notice.
18. The 211 claims at issue are reimbursement claims, under Part B of the Medicare
Program (Medicare
Part B), which Respondents presented or caused to be presented for items or
services they alleged to have
rendered at DMGH during the period December 10, 1982 through October 18, 1985.
Tr. at 10, 13; I.G. Ex
1-1 - 211-1.
19. The Act authorizes the Secretary to impose a civil monetary penalty and
an assessment against any
person who presents or causes to be presented, to an officer, employee or agent
of any State, a claim for
items or services under Title XIX (Medicaid) which that person knew or should
have known was not
provided as claimed.
Social Security Act, section 1128A(a)(i)(2).
20. Prior to December 1987, the Act provided for imposition of a penalty, asessment,
and exclusion
against a person who filed a claim for an item or service where that person
"knows or has reason to know"
that the item or service was not filed as claimed. Social Security Act, section
1128A(a)(i)(2).
21. Effective December 22, 1987, the phrase "should know" was substituted
for the phrase "has reason to
know." Pub. L. 100-203, section 4118(e) (1987).
22. Section 4118(e)(3) of this law provided that the language substition was
intended to apply
retroactively.
23. Medicare Part B is a voluntary insurance program to provide medical insurance
benefits for aged and
disabled individuals who elect to enroll in the program, to be financed from
premium payments by
enrollees together with contributions from funds appropriated by the federal
government. Social Security
Act, Sections 1831 et seq.
24. Medicare Part B covers services rendered by physicians which are reasonable
and necessary for the
diagnosis or treatment of illness or injury. Social Security Act, sections 1832(a)(1);
1862(a)(1)(A).
25. Medicare Part B covers services which are furnished as an incident to physicians'
professional services,
of kinds which are commonly furnished in physicians' offices, and are commonly
either rendered without
charge or included in the physicians' bills. Social Security Act, section 1861(s).
26. The Secretary of the Department of Health and Human Services (the Secretary)
is authorized to enter
into contracts with health care carriers, in order to efficiently provide for
the administration of health care
benefits under the Medicare program. Social Security Act, section 1842.
27. Carriers which contract to administer Medicare benefits are authorized
to make determinations of the
rates of reimbursement and amounts of payments required to be made to providers
of services. Social
Security Act, section 1842(a)(1)(A).
28. Carriers which contract to administer Medicare benefits are also authorized
to serve as a channel of
communication of information to providers relating to the administration of
the Medicare program. Social
Security Act, section 1842(a)(1)(B)(3).
29. Blue Cross and Blue Shield of Iowa (Blue Cross) has been the contracted
Medicare carrier for the
State of Iowa since at least 1972. I.G. Ex. 214-1 - 214-7; Tr. at 40.
30. Physicians in Iowa who render services to Medicare beneficiaries under
Medicare Part B and who seek
reimbursement from Medicare file their reimbursement claims with Blue Cross.
I.G. Ex. 214-2; Tr. at 40,
1116-1120.
31. Anesthesia services rendered to Medicare beneficiaries under Medicare Part
B are covered and
reimbursed by Medicare as are all other physicians' professional services. Stip.
C-99 9; Tr. at 41.
32. Prior to October 1, 1983, Blue Cross reimbursed under Medicare Part B for
services rendered by
physicians' auxillary personnel, as services "incident to" services
rendered by physicians, only where the
personnel who rendered the services were employed by and working under the supervision
of the
physicians claiming reimbursement. I.G. Ex. 214-2/1.
33. This reimbursement policy applied to reimbursement claims made by anesthesiologists
for services
rendered by Certified Registered Nurse Anesthetists (CRNAs). I.G. Ex. 214-4;
Tr. at 63.
34. Prior to October 1, 1983, in order for an anesthesiologist in Iowa to be
entitled to reimbursement under
Medicare Part B for services rendered by a CRNA, the CRNA had to be the salaried
employee of the
anesthesiologist, and the anesthesiologist had to supervise the rendering of
the service for which
reimbursement was claimed. I.G. Ex. 214-1.
35. Prior to October 1, 1983, Blue Cross defined "supervision" to
mean direct, personal, and continuous
supervision. I.G. Ex. 214-1.
36. Prior to October 1, 1983, Blue Cross also defined "supervision"
to mean that the physician claiming
reimbursement would be present while services were rendered by his or her auxillary
staff. I.G. Ex. 214-6.
37. Blue Cross communicated these Medicare reimbursement policies to Iowa health
care providers,
including Respondents. I.G. Ex. 214-1 - 214-6; Tr. at 45.
38. Respondents were aware of these Medicare reimbursement policies. Tr. at 1817.
39. The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) directed the
Secretary to establish
regulatory criteria to distinguish reimbursement for professional medical services
personally rendered in
hospitals by physicians (which may be reimbursed under Medicare Part B) from
other professional services
rendered in hospitals (which may be reimbursed under other Medicare provisions).
Social Security Act,
section 1887(a)(1).
40. On March 2, 1983, the Secretary published new regulations pursuant to TEFRA.
48 Fed. Reg. 8902 et
seq., codified at 42 C.F.R. 405.550 et seq.
41. The new regulations became effective October 1, 1983. Stip. C-99 10.
42. The regulations contained specific provisions governing reimbursement for
anesthesia services. 42
C.F.R. 405.552, 405.553.
43. Effective October 1, 1983, anesthesia services rendered to a covered beneficiary
are reimbursable
under Medicare Part B, provided that the physician either performs the procedure
directly, without the
assistance of a CRNA, or directs no more than four anesthesia procedures concurrently
and does not
perform any other services while he or she is directing the concurrent procedures.
Additionally, for each
anesthesia service for which reimbursement is claimed, the physician must:
a. perform a pre-anesthetic examination and evaluation;
b. prescribe the anesthesia plan;
c. personally participate in the most demanding procedures in the anesthesia
plan, including
induction and emergence;
d. ensure that any procedures in the anesthesia plan that he or she does not
perform are performed
by a qualified individual;
e. monitor the course of anesthesia administration at frequent intervals; and
f. provide indicated postanesthesia care.
42 C.F.R. 405.552(a).
44. Anesthesiologists frequently claim reimbursement from Medicare for services
rendered to Medicare
beneficiaries by utilizing formulas, generally derived from documents prepared
by professional
associations ("relative value guides"), which combine procedure-specific
base value units with time units.
R. Ex. 2, 3; Tr. at 532-533, 657-658, 1436, 1607-1608; 48 Fed. Reg. 8929 (1983).
45. To determine a fee for a specific procedure by utilizing such a formula,
anesthesiologists identify the
appropriate base value for the procedure and add that to time units derived
from the actual time spent
performing the procedure. The sum is then multiplied by a conversion factor
to establish the fee. R. Ex. 2,
3; Tr. at 532-533, 657-658, 1436, 1607-1608; 48 Fed. Reg. 8929 (1983).
46. Where anesthesiologists base their charges on such formulas, Medicare carriers
use the same method
to determine reasonable charges for anesthesiology services. 48 Fed. Reg. 8929
(1983).
47. Effective October 1, 1983, Medicare allowed anesthesiologists to calculate
reimbursement claims for
their services and for the services of CRNAs employed and directed by them by
charging one time unit for
each 15 minute interval, or fraction thereof, of anesthesia time. 42 C.F.R.
405.553(b)(2).
48. Effective October 1, 1983, Medicare allowed anesthesiologists to calculate
reimbursement claims for
the services of CRNAs who were not employed by them, but which the anesthesiologists
directed, by
charging one time unit for each 30 minute interval, or fraction thereof, of
anesthesia time. 42 C.F.R.
405.553(c).
49. Effective October 1, 1983, the time for which anesthesiologists were permitted
to claim time units for
anesthesia services was defined to begin when the physician or CRNA began to
prepare the patient for
induction of anesthesia, and to end when the patient was safely placed under
post-operative supervision
and the physician or CRNA was no longer in attendance. 42 C.F.R. 553(b)(2),
(c).
50. Respondents became aware of the Medicare anesthesia reimbursement criteria
adopted pursuant to
TEFRA in May, 1984. Tr. 1124, 1223.
51. Respondents informed Blue Cross that the mailing address for Respondent
AA was that of their billing
clerk, Donna Elliot Henderson (then Donna Elliot). Tr. at 1116, 1123; R. Ex.
40; I.G. Ex. 1-1 - 211-1, 215.
52. Ms. Henderson received and maintained in her office a copy of the BC/BS
Medicare Manual; she also
received all Blue Cross communications for Respondents. Tr. at 1118, 1184-1185;
I.G. Ex 215.
53. When Ms. Henderson received a Medicare communication relating to reimbursement
for anesthesia,
she would make copies and make sure that each member of AA got a copy of the
communication. Tr. at
1119.
54. It was Ms. Henderson's responsibility to complete Medicare claim forms
on behalf of Respondents and
to submit them to Blue Cross. Tr. at 1118, 1120, 1184, 1683-1684.
55. All 211 Medicare claims at issue were presented by Ms. Henderson on Respondents'
behalf on "HCFA
1500" claim forms. Stip. C-99 16; I.G. Ex. 277.
56. By signing the "HCFA 1500" claim form, the provider attests that
the services were medically
indicated and necessary and were personally rendered by the provider or by the
provider's employee under
his personal supervision. I.G. Ex. 277.
57. Ms. Henderson prepared Medicare claims based on instructions she received
from Respondents. Tr. at
1125-1126, 1128-1129, 1132-1133, 1134, 1135-1138, 1139-1140, 1141-1142, 1149,
1153-1154, 1157,
1220, 1698-1700, 1706.
58. Respondents' practice in preparing Medicare billing instructions for Ms.
Henderson was to have the
anesthesiologist or CRNA primarily responsible for providing anesthesia in a
given case list the pertinent
billing information, including the specific procedures for which reimbursement
was claimed, the base
units, and the time units on a hospital "charge slip" (a copy of the
face sheet of the patient's medical
record). Tr. at 1698.
59. The billing instructions would then be brought to an office used by AA
at the hospital and, if the
services were not rendered by an AA partner, the sheet would be reviewed by
a partner who would
calculate the dollar amount of the claim and write that amount on the "charge
slip." Tr. at 1699-1700,
1796-1797.
60. Ms. Henderson would pick up the completed billing instructions and prepare
patient ledger cards and
Medicare claim forms based on the information contained in the billing instructions.
Tr. at 1225, 1698.
61. In preparing claims, if Ms. Henderson knew a particular code that Blue
Cross used to describe a
particular procedure, she would write that code in the "code box"
on the claim form for the procedure for
which reimbursement was claimed. Tr. at 1120.
62. If Ms. Henderson did not know the code, she would not write anything in
the "code box" on the claim
form. Tr. at 1120.
63. If Blue Cross later assigned a code to the procedure, Ms. Henderson would
thereafter use that code for
all subsequent claims for that procedure. Tr. at 1120.
64. If Blue Cross had questions about information in a claim, Ms. Henderson
would answer the questions
based on information contained in the patient ledger cards or, when the cards
did not contain the
information she needed, based on Respondents' answers to inquiries which she
would direct to them. I.G.
Ex. 217-1 through 217-9; Tr. 1138-1142.
65. The claims contained in counts 1, 11, 14-16, 21, 25-47, 49-54, 56-120,
201-204, 206, 207, 210, and
211 state that the anesthesia items or services for which reimbursement was
claimed were provided by an
anesthesiologist. I.G. Ex. 1-1 - 11-1, 14-1 - 16-1, 21-1, 25-1 - 47-1, 49-1
- 54-1, 56-1 - 120-1, 201-1 - 204-
1, 206-1, 207-1, 210-1, 211-1.
66. The claims contained in counts 48 and 55 imply that the anesthesia items
or services for which
reimbursement was claimed were provided by an anesthesiologist. I.G. Ex. 48-1,
55-1.
67. The anesthesia items or services for which reimbursement was claimed in
the claims contained in
counts 1, 11, 14-16, 21, 25-105, 107-120, 201-204, 206, and 210 were principally
provided by CRNAs and
not by anesthesiologists. Findings 68-80.
68. At DMGH, the operating room record is the document that would most reliably
identify the anesthesia
person who was principally responsible for administering anesthesia in a given
case. Tr. 613-616, 635,
748-749, 751-753, 765-768, 770-771, 1084-1085. I.G. Ex. 229, 234-2.
69. Operating room personnel at DMGH were instructed to record on the operating
room record the names
of all persons in attendance at any operation. Tr. at 610-613, 748-753.
70. Records prepared by operating room personnel were prepared contemporaneously
with surgery. Tr. at
610-615, 635-638.
71. The names of the individuals principally responsible for providing services
during surgery were
recorded on the operating room record. Tr. at 1057, 1071.
72. The name of the person who had primary responsibility for performing anesthesia
services during
surgery would be recorded first on the "Anesthetist" line of the operating
room record. Tr. at 1085.
73. Operating room records for procedures occurring prior to May 4, 1984, in
claims for anesthesia at
issue in these cases, with few exceptions, show only CRNAs as having provided
the anesthesia. I.G. Ex.
1-2 - 41-2.
74. Beginning May 4, 1984, most operating room records list the name of an
CRNA first on the
"Anesthetist" line, followed by the name of an anesthesiologist. I.G.
Ex. 42-2 - 209-2.
75. Operating room personnel were instructed to add the name of the anesthesiologist
to the operating
room record after the name of the CRNA who performed the anesthesia in order
to demonstrate that
supervision was being provided. Tr. at 617-620, 1060, 1076-1077.
76. Operating room personnel were instructed to add the name of an anesthesiologist,
regardless of
whether an anesthesiologist actually was present during surgery. Finding 75.
Tr. at 617-620, 1060.
77. Operating room records establish that the primary provider of anesthesia
items or services for which
reimbursement was claimed in the claims contained in counts 1, 11, 14-16, 21,
25-105, 107-120, 201-204,
and 206 was a CRNA. I.G. Ex. 1-2, 11-2, 14-2 - 16-2, 21-2, 25-2 - 105-2, 107-2
- 120-2, 201-2 - 204-2,
206-2.
78. The claim contained in count 210 is for emergency anesthesia services. I.G. Ex. 210-1.
79. The anesthesia items or services for which reimbursement was claimed in
the claim contained in count
210 were provided by a CRNA and not by an anesthesiologist. I.G. Ex. 210-2;
Tr. at 1635-1645.
80. Respondents' anesthesia records are not a reliable indicator of the personnel
who were primarily
responsible for providing anesthesia. Findings 81-83.
81. Names of anesthesia personnel were frequently added to anesthesia records
in the DMGH records
department days or longer after surgery took place. Tr. at 1800.
82. Anesthesia records were often signed or stamped in large groups. I.G. Ex. 277/3.
83. The anesthesiologist signing a particular anesthesia record may not have
participated in the case
documented by that record. I.G. 277/3.
84. The claims contained in counts 1, 11, 14-16, 21, 25-105, 107-120, 201-204,
206 and 210 are
reimbursement claims for items or services which were not provided as claimed.
Findings 65-83.
85. The I.G. failed to prove that the claims for items or services contained
in counts 106, 207, and 211
were not provided as claimed. Findings 86-89.
86. The operating room record which documents the anesthesia items or services
claimed in count 106
does not establish that a CRNA was the primary provider of anesthesia. I.G.
Ex. 106-2.
87. The operating room record which documents the anesthesia items or services
claimed in count 207 is
illegible and does not establish that a CRNA was the primary provider of anesthesia.
I.G. Ex. 207-2.
88. The claim contained in count 211 is not for anesthesia performed during surgery. I.G. Ex. 211-1.
89. Although treatment records, generated in the case for which count 211 claims
reimbursement for
anesthesia items or services do not specifically describe anesthesia services,
Respondent Quam credibly
testified that such items or services had been provided. Tr. at 1391-1395.
90. Claims in counts 2-10, 12, 13, 17-20, 22-24, 205, 208, and 209 represent
that anesthesia services were
provided by CRNAs employed by Respondent AA. I.G. Ex. 2-1 - 10-1, 12-1, 13-1,
17-1 - 20-1, 22-1 - 24-
1, 205-1, 208-1, and 209-1, 217-4, 217-6.
91. The claims contained in counts 2-10, 12, 13, 17-20, 22-24, 205, 208, and
209 are for items or services
which were not provided as claimed. Findings 92-116.
92. The items or services for which reimbursement was claimed for the claims
contained in counts 2-10,
12-13, 17-20, 22-24, 205, 208, and 209 were provided by CRNAs retained by Respondent
AA. I.G. 2-1
and 2 - 10-1 and 2, 12-1 and 2, 13-1 and 2, 17-1 and 2 - 20-1 and 2, 22-1 and
2 - 24-1 and 2, 205-1 and 2,
208-1 and 2, 209-1 and 2.
93. Under applicable Medicare regulations, a CRNA is "employed" by
an anesthesiologist for the purpose
of determining appropriate reimbursement for the CRNA's services, where the
anesthesiologist retains
substantial control over the details of the performance of the CRNA's work.
42 C.F.R. 405.553(b)(3).
94. Respondents retained minimal control over the performance of work by CRNAs
who were retained by
Respondent AA. Findings 95-99.
95. In at least some cases involving anesthesia provided by Respondents, CRNAs
provided anesthesia
without the presence of, or supervision by, an anesthesiologist. I.G. Ex. 221/1,
227/2.
96. Physicians who were partners in AA or retained by AA did not closely supervise
the rendering of
anesthesia services by CRNAs that AA retained. I.G. Ex. 223-1, 224, 225, 226,
227; Tr. at 1239-1244,
1250-1251.
97. Physicians who were partners in AA or retained by AA did not schedule the
work to be performed by
CRNAs. Tr. at 1242, 1704.
98. Respondent AA did not promulgate written work or performance standards
for the CRNAs it retained.
Tr. at 1791-1792.
99. CRNAs retained by AA were retained to perform the same anesthesia services
as were provided by
physicians. I.G. Ex. 22.
100. CRNAs retained by AA were extensively trained and highly skilled professionals.
R. Ex. 8; Tr. at
1662-1663; 1669-1671; 1675-1680.
101. Respondent AA retained the services of CRNAs to provide anesthesia at DMGH. Finding 102.
102. During the period December 10, 1982 through October 18, 1985, the following
CRNAs worked for
Respondent AA: Berg, Caputo, Franzen, Hunt, McDonough, Nelson, Nichols, and
Topp. I.G. Ex. 1-1 and
2 through 211-1 and 2.
103. Respondent AA entered into independent contractor agreements with some
of the CRNAs it retained.
I.G. Ex. 223-1, 223-3, 225, 280, 290; Tr. at 1689.
104. Respondent AA's independent contractor agreements with CRNAs expressly
provided that CRNAs
were not employees. I.G. Ex. 223-3, 280, 290.
105. CRNAs retained by Respondent AA considered themselves to be independent
contractors, not
employees. I.G. Ex. 223-1, 224, 225, 226.
106. Respondent AA had the same contractual and working relationship with all
of the CRNAs it retained
as with those who executed the independent contractor agreement. Tr. at 1692.
107. Under Iowa law, a CRNA may provide anesthesia services without supervision
by a physician. Tr. at
1680-1681.
108. Respondent AA did not issue federal W-2 forms for the CRNAs it retained. Tr. at 1791.
109. Respondent AA did not pay the professional dues or malpractice insurance
for the CRNAs it retained.
I.G. Ex. 223-3, 280, 290.
110. Respondent AA did not withhold federal income taxes for its CRNAs, and
did not make contributions
to Social Security on behalf of these CRNAs. Tr. at 915, 1790-1791.
111. Some of the CRNAs retained by Respondent AA were made partners in Respondent
AA. Tr. at
1682, 1686, 1789.
112. Respondent AA compensated its partner CRNAs based on a share of the profits.
IG. Ex. 222; Tr. at
1690, 1790.
113. The partner CRNAs shared in the expenses of the partnership. I.G. Ex. 222; Tr. at 1696.
114. Respondent AA did not prohibit its CRNAs from performing anesthesia services
for other providers
when not performing those services for Respondent AA. Tr. at 1616.
115. CRNAs retained by Respondent AA were not "employed" within the
meaning of relevant Medicare
reimbursement regulations. Findings 93-114.
116. Respondents' assertions caused Blue Cross to reimburse Respondents in
false claims contained in
counts 1-105, 107-206, and 208-210 as if services had been provided by anesthesiologists
or by CRNAs
employed by anesthesiologists. I.G. Ex. 237-1.
117. Respondents' false assertions in claims contained in counts 1-105, 107-206,
and 208-210 resulted in
substantial overpayments by Blue Cross to Respondents. Findings 90-116.
118. Claims contained in counts 121 through 200 are for items or services which
Respondents presented or
caused to be presented for anesthesia services in coronary artery bypass or
other cardiac surgery. Stip. C-
99 16, I.G. Ex. 121-1 - 200-2.
119. Items or services listed in counts 121-200 were not provided as claimed. Findings 120 - 147.
120. Respondents claimed reimbursement in the claims listed in counts 121-165,
167, and 174-200 for a
specific procedure, in addition to the base anesthesia charge, which they described
as "pump monitoring."
I.G. Ex. 121-1 - 165-1, 167-1, 174-1 - 200-1.
121. The inclusion of the term "pump monitoring" in claims would
lead a reasonable person to believe that
Respondents were claiming reimbursement, in addition to their base anesthesia
charge, for the monitoring
of a pump used during surgery, such as a heart-lung machine. Tr. at 430, 432-436.
122. Respondents did not monitor a heart lung machine or other similar pump
in surgeries for which they
presented or caused to be presented claims for "pump monitoring."
Tr. at 436-441, 1260-1261, 1300.
123. The term "pump monitoring" did not accurately describe any items
or services which Respondents
rendered. Tr. at 907, 1260-1261; See Tr. at 900-901.
124. In claims listed in counts 146-165 and 196-199, Respondents further described
the "pump
monitoring" service, for which they were claiming reimbursement, with the
code designation "K3798."
I.G. Ex. 146-1 - 165-1, 196-1 - 199-1.
125. The code designation "K3798" corresponds with a procedure code
designation which appears in the
Blue Cross Claims Coding Manual, used internally by Blue Cross to process claims.
Tr. at 98-99; I.G. Ex.
273.
126. The code designation "K3798" is described in the Blue Cross
Claims Coding Manual as "perfusion
technique performed in conjunction with open heart surgery." I.G. Ex. 273.
127. The inclusion of the code designation "K3798" in claims would
lead a reasonable person to believe
that Respondents were claiming reimbursement for perfusion services in addition
to their base anesthesia
charge. Tr. at 432-436.
128. Respondents did not render perfusion services in surgeries for which they
presented or caused to be
presented claims bearing the code designation "K3798." Tr. at 436-441,
1260-1261, 1300.
129. The code designation "K3798" did not accurately describe any
items or services which Respondents
rendered. Tr. at 907-908; See Tr. at 900-901.
130. Respondents claimed reimbursement in the claims listed in counts 166 and
168-173 for a specific
procedure, in addition to the base anesthesia charge, which they described as
"recording & monitoring of
intracardiac pressures heart lung machine EKG arterial & central venous
pressures cardiac output
measurements." I.G. Ex. 166-1, 168-1 - 173-1.
131. The procedure description "recording & monitoring of intracardiac
pressures heart lung machine
EKG arterial & central venous pressures cardiac output measurements"
did not accurately describe items or
services which Respondents rendered. Tr. at 901-902.
132. In the claims listed in counts 121, 167, and 174, Respondents represented
that two anesthesiologists
were "needed at all times" during the surgery to perform "pump
monitoring" and other procedures. I.G.
Ex. 121-1, 167-1, 174-1.
133. Two anesthesiologists were not present at all times to render items or
services for which Respondents
presented the claims listed in counts 121 and 167. I.G. Ex. 121-2, 167-2, 174-2.
Respondents represented in the claims listed in counts 166 and 172 that the
services of two
anesthesiologists were needed for "recording & monitoring of intracardiac
pressures heart lung machine
EKG arterial & central venous pressures cardiac output measurements."
I.G. Ex. 166-1, 172-1.
135. A second anesthesiologist did not perform the "recording & monitoring
of intracardiac pressures
heart lung machine EKG arterial & central venous pressures cardiac output
measurements" described in
counts 166 and 172. I.G. Ex. 166-2, 172-2.
136. Respondents represented in the claims listed in counts 167 through 171
that the services of two
anesthesiologists were "needed at all times" to perform "recording
& monitoring of intracardiac pressures
heart lung machine EKG arterial & central venous pressures cardiac output
measurements." I.G. Ex. 167-
1, 168-1, 169-1, 170-1, 171-1.
137. Two anesthesiologists were not present at all times to render items or
services for which Respondents
presented the claims listed in counts 167 through 171. I.G. Ex. 167-2, 168-2,
169-2, 170-2, 171-2.
138. Respondents represented in the claims listed in counts 122-144 and 175-195
that "pump monitoring"
had been performed by a second anesthesiologist. I.G. Ex. 122-1 - 144-1, 175-1
- 195-1.
139. Two anesthesiologists were not present to render items or services for
which Respondents presented
the claims represented by counts 122-144 and 175-195. I.G. Ex. 122-2 - 144-2,
175-2 - 195-2.
140. Respondents represented in the claims listed in counts 136, 137, and 139
that Respondent Loerke,
along with another anesthesiologist, provided the items or services for which
reimbursement was claimed.
I.G. Ex. 136-1, 137-1, 139-1.
141. Respondent Loerke did not provide the items or services for which reimbursement
was claimed in the
claims listed in counts 136, 137, and 139. I.G. Ex. 136-2, 137-2, 139-2.
142. Respondents represented in the claim listed in count 138 that Respondent
Quam, along with another
anesthesiologist, provided the items or services for which reimbursement was
claimed. I.G. Ex. 138-1.
143. Respondent Quam did not provide the items or services for which reimbursement
was claimed in the
claim listed in count 138. I.G. Ex. 138-2.
144. Items or services for which Respondents claimed reimbursement in the claims
listed in counts 136-
139 were provided by an anesthesiologist and by a CRNA. I.G. Ex. 136-2 - 139-2.
145. Respondents certified in the claims listed in counts 142-144, 148-157,
194-195, and 198 that the
items or services for which reimbursement was claimed had been personally provided
by named
anesthesiologists. I.G. Ex. 142-1 - 144-1, 148-1 - 157-1, 194-1 - 195-1, 198-1.
146. For each of the claims listed in counts 142-144, 148-157, 194-195, and
198, one of the
anesthesiologists who Respondents certified as having personally performed the
items or services did not
perform any items or services for which reimbursement was claimed. I.G. Ex.
142-2 - 144-2, 148-2 - 157-
2, 194-2 - 195-2, 198-2.
147. For each of the claims listed in counts 142-144, 148-157, 194-195, and
198, the items or services
were performed either by one anesthesiologist, or by an anesthesiologist and
a CRNA. I.G. Ex. 142-2 -
144-2, 148-2 - 157-2, 194-2 - 195-2, 198-2.
148. Respondents did not prove that were entitled to be reimbursed for the
items or services for which they
were claiming reimbursement as "pump monitoring" or "recording
and monitoring of intracardiac pressures
heart lung maching EKG atrerial & central venous pressures cardiac output
measurements." Findings 149-
150.
149. Respondents did not prove that, in the claims contained in counts 121
through 200, they rendered
services in addition to anesthesia services for which they were entitled to
be reimbursed. See I.G. Ex. 121-
2 - 200-2.
150. Respondents did not prove that the monitoring and evaluating they performed
in the cases for which
they claimed reimbursement, in counts 121-200, consisted of anything other than
monitoring of essential
functions within the base units for anesthesia in the formula they used to claim
reimbursement. See R. Ex.
2/1 and Tr. at 1299.
151. Respondents' false assertions in claims contained in counts 121-200 caused
Blue Cross to reimburse
Respondents for perfusion services. I.G. Ex. 237-2.
152. Respondents' false assertions contained in counts 121-200 resulted in
substantial overpayments by
Blue Cross to Respondents. Findings 118-151.
153. A person "knows" that an item or service is not provided as
claimed within the meaning of the Act
when he or she knowingly presents or causes to be presented false claims.
154. A person has reason to know that an item or service is not provided as
claimed where he or she is a
provider of items or services and: (1) the provider had sufficient information
to place him, as a reasonable
medical provider, on notice that the claims presented were for services not
provided as claimed, or (2) there
were pre-existing duties which would require a provider to verify the truth,
accuracy, and completeness of
claims.
155. A person "should know" that an item or service is not provided
as claimed, within the meaning of the
Act, where: (1) that person has reason to know that items or services were not
provided as claimed; or (2)
is negligent in preparing and submitting, or in directing the preparing and
submitting of, claims.
156. Respondents knew that the items or services for which reimbursement was
claimed in the claims
contained in counts 1-120 and 201-210 were primarily provided by CRNAs and not
by anesthesiologists.
I.G. Ex. 1-2 - 120-2; 201-2 - 210-2.
157. Respondents directed their billing agent to state in claims contained
in counts 1, 6, 11, 14, 15, 16, 21,
25-47, 49-54, 56-105, 107-120, 201-206, and 210 that the items or services for
which reimbursement was
being claimed had been provided by an anesthesiologist. Tr. at 1127-1129, 1157-1159,
1167, 1171-1179.
158. Respondents knew that items or services in claims contained in counts
1, 6, 11, 14-16, 21, 25-47, 49-
54, 56-105, 107-120, 201-206, and 208-210 were not provided as claimed. Findings
156-157.
159. Respondents knew that two anesthesiologists were not present at all times
to provide the "pump
monitoring" services for which they were claiming reimbursement in the
claims listed in counts 121, 167,
and 174. I.G. Ex. 121-2, 167-2, 174-2.
160. Respondents knew that the services of two anesthesiologists were not needed
to perform "recording
& monitoring of intracardiac pressures heart lung machine EKG arterial &
central venous pressures cardiac
output measurements," as claimed in the claims listed in counts 166 and
172. I.G. Ex. 166-2, 172-2.
161. Respondents knew that the services of two anesthesiologists were not needed
at all times to perform
"recording & monitoring of intracardiac pressures heart lung machine
EKG arterial & central venous
pressures cardiac output measurements" as claimed in the claims listed
in counts 167-171. I.G. Ex. 167-2 -
171-2.
162. Respondents knew that a second anesthesiologist was not present during
surgery to perform "pump
monitoring" as claimed in the claims listed in counts 122-144 and 175-195.
I.G. Ex. 122-2 - 144-2, 175-2 -
195-2.
163. Respondents instructed their agent to state that two anesthesiologists
were needed to provide the
services for which reimbursement was claimed in the claims contained in counts
121-144, 166-172, and
175-195. Tr. at 1133, 1135-1136.
164. Respondents knew that claims for items or services contained in counts
121-144, 166-172, and 175-
195, which claimed that two anesthesiologists had provided the services, were
not provided as claimed.
Findings 164-165.
165. Respondents directed their billing agent to state, in claims contained
in counts 2, 3, 4, 5, 7-12, 13, 17-
20, 22-24, 205, and 208-209, that anesthesia services for which reimbursement
was claimed had been
provided by a CRNA who was employed by Respondent AA. I.G. Ex. 217-4, 217-6;
Tr. at 1127-1129,
1157-1159, 1167, 1171-1179.
166. Prior to May, 1984, Respondents knew that CRNAs must be employed and supervised
by them in
delivering anesthesia in order for Respondents to claim reimbursement from Medicare
for CRNAs'
services. I.G. Ex. 214-1 - 214-2, 214-4 - 214-6, 214-8; Tr. at 1817.
167. Beginning in May, 1984, Respondents knew that CRNAs must be employed by
them in order for
Respondents to claim reimbursement from Medicare for CRNAs' services based on
15 minute time units.
I.G. Ex. 214-9; Tr. at 1122, 1740-1743; 42 C.F.R. 405.552-553.
168. Beginning in May, 1984, Respondents knew that CRNAs must comply with regulatory
requirements
in order for Respondents to claim reimbursement from Medicare for CRNAs' services.
I.G. Ex. 214-9; Tr.
at 1122, 1740-1743; 42 C.F.R. 405.552-553.
169. Beginning in May, 1984, Respondents knew that Blue Cross defined "employment"
of CRNAs to
mean that the employer issues W-2 forms to CRNAs working for him. I.G. Ex. 214-9;
Tr. at 1122, 1740-
1743.
170. Both prior and subsequent to May, 1984, Respondents knew that agreements
entered into between
Respondent AA and CRNAs specifically characterized the relationship with the
CRNAs as an
"independent contractor" relationship and specifically disavowed that
an employment relationship existed.
I.G. Ex. 223-3, 225, 280, 290. Findings 103-115.
171. Both prior and subsequent to May, 1984, Respondents were aware of the
terms and conditions
pursuant to which Respondent AA had contracted with CRNAs. I.G. Ex. 223-3, 225,
280, 290; Findings
103-115.
172. Both prior and subsequent to May, 1984, Respondents knew that Respondent
AA did not issue W-2
forms to CRNAs with whom it had contracted. Tr. at 1791; Finding 108.
173. Both prior and subsequent to May, 1984, Respondents knew that Respondent
AA had not withheld
federal income taxes for the CRNAs with whom it contracted. Tr. at 915, 1790-1791;
Finding 110.
174. Respondents knew that Blue Cross had directed inquiries to them concerning
the employment status
of CRNAs with whom Respondent AA had contracted. I.G. Ex. 217-4, 217-6.
175. Respondents answered these without asking Blue Cross for guidance as to
what what Blue Cross
meant by the term "employed." I.G. Ex. 217-4; 217-6.
176. Respondents instead simply informed Blue Cross that the CRNAs were employed
by them. I.G. Ex.
217-4, 217-6.
177. Respondents did not know whether the CRNAs with whom Respondent AA had
contracted were
"employed," within the meaning of relevant Medicare reimbursement
criteria. See I.G. Ex. 214-9.
178. Respondents' knowledge of Medicare reimbursement criteria, coupled with
their knowledge of
Respondent AA's relationship with the CRNAs with whom it had contracted and
their knowledge that Blue
Cross had made inquiries concerning the employment status of those CRNAs, placed
Respondents under a
duty to learn whether the CRNAs were "employed," within the meaning
of Medicare reimbursement
requirements, before Respondents claimed reimbursement from Medicare for CRNAs'
services as if they
were employed. Findings 38, 43, 50, 94-114, 174.
179. Respondents failed to make reasonable investigation to determine whether
the CRNAs with whom
Respondent AA had contracted were "employed" within the meaning of
Medicare reimbursement
requirements, before Respondents claimed reimbursement from Medicare for CRNAs'
services as if they
were employed. Findings 174-177.
180. Respondents had reason to know that items or services in claims contained
in counts 2-5, 7-13, 17-20,
22-24, 205, and 208-209 were not provided as claimed. Findings 165-179.
181. Respondents knew that the phrase "recording & monitoring of intracardiac
pressures heart lung
machine EKG arterial & central venous pressures cardiac output measurements,"
which they used to
describe items or services for which they were claiming reimbursement from Medicare
in the claims listed
in counts 166 and 168-173, did not accurately describe services for which they
were claiming
reimbursement. Tr. at 901-903.
182. Respondents directed their billing agent to present claims for "recording
& monitoring of intracardiac
pressures heart lung machine EKG arterial & central venous pressures cardiac
output measurements" in the
claims contained in counts 166 and 168-173. Tr. at 1133.
183. Respondents knew that items or services in claims contained in counts
166 and 168-173 were not
provided as claimed. Findings 181-182.
184. Respondents knew that the term "pump monitoring," which they
used to describe items or services
for which they were claiming reimbursement from Medicare in the claims listed
in counts 121-165, 167,
and 174-200, did not accurately describe services for which they were claiming
reimbursement. Tr. at
1299-1300; Findings 122-123.
185. Respondents provided their billing agent with information which led her
to claim reimbursement on
Respondents' behalf in the claims listed in counts 121-165, 167, and 174-200.
Tr. at 1134.
186. Respondents' knowledge that they were providing their billing agent with
inaccurate descriptions of
services for which they were claiming reimbursement placed them under a duty
to assure that their agent
did not place these inaccurate descriptions on the claims which she prepared
on Respondents' behalf.
Findings 184-185.
187. Respondents had reason to know that items or services in the claims listed
in counts 121-165, 167,
and 174-200 were not provided as claimed. Findings 184-186.
188. Respondents did not know what meaning Blue Cross ascribed to the code
designation "K3798,"
which Respondents' agent used on the "pump monitoring" claims contained
in counts 146-165 and 196-
199. Tr. at 1137.
189. Respondents' agent knew that Blue Cross used the code designation "K3798"
to identify a procedure
for which it was authorizing reimbursement. Tr. at 1137.
190. Respondents did not know that their agent included the code designation
"K3798" to reimburse
claims for "pump monitoring" in the claims contained in counts 146-165
and 196-199. Tr. at 1137.
191. Respondents' knowledge that the "pump monitoring" terminology
they were providing to their agent
was false placed them under the duty to prevent ancillary falsehoods from being
made on their behalf by
their agent. Findings 184.
192. Respondents had reason to know that claims containing the code designation
"K3798" were for items
or services that were not provided as claimed.
193. Respondents should have known that the items or services for which they
claimed reimbursement in
counts 1-105, 107-206, 208-210 were not provided as claimed.
194. The Act provides for the imposition of a penalty of up to $2,OOO.OO for
each item or service falsely
claimed and an assessment of up to twice the amount claimed for each item or
service falsely claimed.
Social Security Act section 1128A(a).
195. The Act and regulations directs the Secretary or his or her delegate,
in determining the amount or
scope of any penalty or assessment imposed, to take into account both aggravating
and mitigating factors.
Social Security Act, Section 1128A(d). 42 C.F.R. 1003.106.
196. Factors which may be considered as aggravating or mitigating include:
the nature of the claims and
the circumstances under which they were presented; the degree of culpability,
history of prior offenses,
and financial condition of the person presenting the claims; and such other
matters as justice may require.
Social Security Act, Section 1128A(d). 42 CFR 1003.106.
197. The Act has been interpreted to permit the imposition of a penalty and
assessment which exceeds the
amount actually reimbursed to a respondent for items or services not provided
as claimed.
198. If there are substantial or several aggravating circumstances, the aggregate
amount of the penalty and
assessment should be set at an amount sufficiently close to, or at, the maximum
permitted by law, so as to
reflect that fact. 42 C.F.R. 1003.106 (c)(2).
199. Neither the law or regulations provide for the maximum exclusion which
may be imposed. However,
the regulations provide that the length of the exclusion should be determined
by the same criteria as
employed to determine the appropriate amount of the penalty and assessment.
42 C.F.R. 1003.107.
200. In proceedings brought pursuant to the Act, the I.G. has the burden of
proving, by a preponderance of
the evidence, that a respondent presented, or caused to be presented, claims
for items or services which the
respondent knew or should have known were not provided as claimed. 42 C.F.R.
1003.114(a).
201. In proceedings brought pursuant to the Act, the I.G. has the burden of
proving the existence of any
aggravating factors. 42 C.F.R. 1003.1149(a).
202. In proceedings brought pursuant to the Act, a respondent has the burden
of proving the existence of
any mitigating factors. 42 C.F.R. 1003.114(c).
203. Respondents presented, or caused to be presented, claims over a lengthy
period of time, nearly three
years, for items or services which were not provided as claimed. Findings 18,
84, 91, and 119.
204. Respondents presented, or caused to be presented, a substantial number
of claims for items or
services, 211 in all, which were not provided as claimed. Findings 18, 84, 91,
119.
205. The total dollar value of Respondent's claims for reimbursement in the
208 false claims was nearly
$100,000 I.G. Ex. 237-1; 237-2.
206. The items or services not provided as claimed comprised only a portion
of the total $100,000 and did
not exceed $25,000.
207. It is a mitigating circumstance that a substantial portion of the total
dollar value of the $100,000 in
claims for reimbursement were provided as claimed.
208. The items or services not provided as claimed were part of a pattern of
false claims presented by
Respondents. Findings 84, 91, 119, 156-162, 164-193.
209. The pattern of false claims by Respondents extended to Medicaid claims,
which are not specifically
the subject of the I.G.'s Notice letter, in which the Respondents routinely
billed for CRNAs' services as if
the CRNAs were employees of the anesthesiologists or as if anesthesiologists
rendered the services. I.G.
Ex. 265-272, Tr. 480-482, 489.
210. The fact that the claims at issue are part of a wider pattern of false
claims is an additional aggravating
factor.
211. The most serious aggravating factor is Respondents indifference to the
truthfulness of their claims.
Findings 174-177, 212-217.
212. Blue Cross frequently communicated with Respondents concerning their obligations
as providers.
I.G. Ex. 214-1 - 214-9.
213. Blue Cross made specific inquiries to Respondents concerning specific
aspects of their claims. I.G.
Ex. 217-1 - 217-9.
214. Respondents answered these inquiries without regard to the truthfulness
of their responses or the
reimbursement criteria which had been communicated to them. I.G. Ex. 214-1 -
214-9.
215. In using the language "pump monitoring" and "recording
and monitoring of intracardiac pressures
heart lung machine EKG arterial & central venous pressures cardiac output
measurements," Respondents
were not attempting to accurately state services which they were performing
in addition to anesthesia, but
rather were devising a formula by which they could convince Blue Cross to reimburse
them above the base
anesthesia charge. See Tr. at 901-902.
216. The practice of seeking reimbursements for "pump monitoring"
and "recording and monitoring of
intracardiac pressures heart lung machine EKG arterial & central venous
pressures cardiac output
measurements," continued until the perfusionist at DMGH complained to Respondents
about having
difficulty obtaining reimbursement from Medicare. Tr. at 432-434, 953-954.
217. Respondents informed Blue Cross that CRNAs were their employees because
it was in their financial
interest to do so. Tr., at 1742, 1817.
218. When Respondents thought it was in their financial interest, they informed
Blue Cross that CRNAs
were independent contractors, even though they had informed Blue Cross that
they were their employees.
I.G. Ex. 3-1 - 10-1, 12-1, 13-1, 17-1 - 24-1, 216-1.
219. The government incurred substantial costs in investigating, prosecuting, and trying these cases.
220. Respondents did not prove that the imposition against them of penalties
in the amount of $208,000.00
and assessments in the amount of $50,000.00 would jeopardize their ability to
continue as health care
providers.
221. Respondents did not prove that misrepresentations contained in the 211
false claims were harmless
error.
222. Penalties totalling $208,000.00 and assessments totalling $50,000.00,
for a total of $258,000.00, are
appropriate in this case.
223. Respondents AA, Loerke, Loerke, P.C., Nelson, Nelson, P.C., McDonough,
and McDonough, P.C.,
are jointly and severally liable for penalties of $208,000 and assessments of
$50,000.00, for a total of
$258,000.
224. Respondents Barnett and Barnett, P.C. are jointly and severally liable
for penalties not to exceed
$118,857.00 and assessments not to exceed $28,571.00, for a total not to exceed
$147,428.
225. Respondents Quam and Quam, P.C. are jointly and severally liable for penalties
not to exceed
$83,200.00 and assessments not to exceed $20,000.00, for a total not to exceed
$103,200.
226. Respondents Sykes and Sykes, P.C. are jointly and severally liable for
penalties not to exceed
$11,866.00 and assessments not to exceed $2,857.00, for a total not to exceed
$14,723.
227. The aggregate dollar amount of penalties that the I.G. may collect from
Respondents shall not exceed
$208,000.00.
228. The aggregate dollar amount of assessments that the I.G. may collect from
Respondents shall not
exceed $50,000.00.
229. An exclusion against Respondents AA, Loerke, Loerke, P.C., Nelson, Nelson,
P.C., McDonough, and
McDonough, P.C. from participating in Medicare and State health care programs
for a period of three years
is appropriate in these cases.
230. An exclusion against Respondents Barnett, Barnett, P.C., Quam, and Quam,
P.C. from participating
in Medicare and State health care programs for a period of two years is appropriate
in these cases.
ANALYSIS
1. I do not have authority to decide whether the Secretary lawfully delegated
to the I.G. the duty
to investigate alleged violations of section 1128A of the Social Security Act,
to propose penalties,
assessments, and exclusions pursuant to that section, and to represent the Secretary
in hearings brought
pursuant to that section.
Respondents contend that the Secretary's delegation of authority to the I.G.
to conduct investigations
pursuant to the Act, to propose penalties, assessments, and exclusions, and
to represent the Secretary in
hearings on such proposals is unlawful. They argue that the complaint and the
proceedings against
Respondents must, therefore, be dismissed.
Respondents assert that the Inspector General Act of 1978, Appendix 3 to 5
U.S.C. 9(a)(1)(F), provides
that "program operating responsibilities" shall not be transferred
by the respective agencies governed by
the Act to their inspectors general. They contend that the delegation from the
Secretary to the I.G. pursuant
to section 1128A empowers the I.G. to conduct "regulatory investigations,"
and they argue that such
"regulatory investigations," including the investigation which led
to issuance of the Deputy Inspector
General's notice to Respondents, are "program operating responsibilities."
Based on this analysis, they
assert that the Secretary's delegation to the I.G. and any actions undertaken
pursuant to that delegation are
unlawful.
The I.G. argues that I am not empowered to make determinations regarding the
propriety of the Secretary's
delegations of authority under section 1128A. According to the I.G., the regulations
implementing the Act
define the scope and extent of administrative law judges' authority to conduct
hearings pursuant to the Act,
and these regulations do not authorize administrative law judges to make decisions
concerning the
propriety of the Secretary's delegations of authority.
The I.G. further contends that the regulations explicitly describe authorities
vested by the Secretary in the
I.G., and also prohibit administrative law judges from deciding the validity
of these regulations. Therefore,
according to the I.G., a decision by me concerning the lawfulness of the Secretary's
delegations would be a
decision concerning the validity of the regulations and would contravene the
regulatory scope of my
authority.
The I.G. argues, alternatively, that should I determine that I am empowered
to review the Secretary's
delegation of authority to the I.G., the delegation should be affirmed. He asserts
that the delegation is
consistent with the I.G.'s statutory mandate of authority. The I.G. argues further
that Congress expressly
approved the Secretary's delegation of authority under the Act. The I.G. asserts
that the Secretary's
delegation is not a delegation to conduct "regulatory investigations,"
and the investigation which led to the
I.G.'s notice of proposed penalties, assessments, and exclusions was not a "regulatory
investigation." He
contends that even absent a finding that Congress had approved the delegation
from the Secretary to the
I.G., the delegation is not a delegation of a "program operating responsibility."
I conclude that I am not empowered to decide the lawfulness of the Secretary's
delegation to the I.G.
because regulations enacted pursuant to the Act proscribe administrative law
judges from deciding the
validity of the regulations, and the Secretary's delegation to the I.G. to act
in exclusion cases is embodied in
those regulations. Therefore, I make no decision as to the merits of the arguments
on this issue.
The Act does not specifically prescribe who shall conduct hearings, and it
does not describe the ambit of an
administrative law judge's authority to hear and decide cases. However, regulations
adopted to implement
the Act do specifically address elements of the administrative law judge's hearing
and decision authority. I
am required to apply these regulations.
The regulations provide, at 42 C.F.R. 1003.111, that if a respondent requests
a hearing, the case will be
assigned to an administrative law judge for a hearing and decision. The regulations
describe the issues
which may be heard and the parties' respective burdens of proof as to those
issues. 42 C.F.R. 1003.114.
These regulations neither state nor suggest that the issues which may be considered
include questions
concerning the lawfulness of the Secretary's delegations of authority. However,
the regulations provide, at
42 C.F.R. 1003.115(c), that the administrative law judge "does not have
the authority to decide upon the
validity of Federal statutes or regulations."
The regulations also specifically describe many of the authorities delegated
to the I.G. by the Secretary
pursuant to the Act. The regulations authorize the I.G. to impose penalties,
assessments, and exclusions.
42 C.F.R 1003.102. They authorize the I.G. to implement statutory provisions
concerning the amounts of
penalties and assessments. 42 C.F.R. 1003.103-104. The regulations also establish
criteria to be followed
by the I.G. in determining the appropriate length of exclusions to be imposed
pursuant to the Act. 42
C.F.R. 1003.107. The regulations empower the I.G. to serve notices of proposed
determinations and to
represent the Secretary in hearings requested pursuant to the Act. 42 C.F.R.
1003.109, 1003.112.
A decision by me as to the lawfulness of the Secretary's delegation to the
I.G. would necessarily encompass
a determination of the validity of the aforesaid regulations. This would directly
contravene the proscription
against administrative law judges deciding the validity of federal regulations
contained in 42 C.F.R.
1003.115(c).
2. Respondents presented or caused to be presented claims for items or services
which they knew,
had reason to know, or should have known were not provided as claimed, in violation
of Section 1128A of
the Social Security Act.
The heart of these cases is whether Respondents presented or caused to be presented
claims in violation of
the Act. I conclude that the I.G. proved by a preponderance of the evidence
that Respondents unlawfully
presented or caused to be presented 208 of the 211 claims at issue.
In order to prove a violation of the Act, the I.G. must establish by a preponderance
of the evidence that
three elements are present. First, the I.G. must prove that a respondent presented
or caused to be presented
reimbursement claims for the items or services at issue. Second, he must establish
that the items or
services were not provided as claimed. Finally, the I.G. must prove that a respondent
"knew" or "should
know" that the items or services were not provided as claimed. Social Security
Act, section
1128A(a)(1)(A); 42 C.F.R. 1003.102, 1003.114(a).
There is no dispute in this case that Respondents presented or caused to be
presented for reimbursement the
211 claims for items or services at issue. The parties dispute whether the items
or services were provided
as claimed, and whether Respondents knew, had reason to know, or should have
known that the items or
services were not provided as claimed.
The cases involve two distinct types of claims which Respondents presented
or caused to be presented for
Medicare reimbursement. The first group (counts 1-120 and 201-211) consists
of 131 claims for anesthesia
services rendered by Respondents between January, 1984 and January, 1985. The
second group (counts
121-200) consists of 80 claims for services rendered by Respondents during coronary
artery bypass graft
and other cardiac surgeries performed between December, 1982 and December, 1985.
I conclude that 208 of these 211 claims contain material misrepresentations
of fact. Of the 131 anesthesia
claims, 128 falsely assert that anesthesia services were provided either by
an anesthesiologist or by a
CRNA who was employed by Respondents. In fact, anesthesia was provided in the
cases represented by
these claims by a CRNA who was not employed by Respondents. Medicare substantially
overpaid
Respondents for anesthesia services as a consequence of these misrepresentations.
The 80 claims in cardiac cases each falsely assert that Respondents provided
services, in addition to
anesthesia, for which they were entitled to reimbursement. These claims also
contain false assertions that
two anesthesiologists were necessary to perform the services for which reimbursement
was claimed.
Respondents' false assertions in these claims caused Medicare to reimburse Respondents
thousands of
dollars which Respondents were not entitled to receive.
These claims evidence a pattern by Respondents of willfully ignoring both Medicare
reimbursement
criteria and the facts of the cases for which they were claiming reimbursement,
in order to maximize their
reimbursement from Medicare. By their behavior, Respondents denied any duty
to Medicare to honestly
and accurately claim reimbursement for their services. They treated Medicare
reimbursement requirements
as obstacles to be hurdled on the pathway to remuneration.
It is not a necessary prerequisite to liability under the Act to find a pattern
or scheme of false claims
activity. Liability depends on findings that a respondent knew, had reason to
know, or should have known
that individual claims are false. However, if there is a pattern of claims activity
in a particular case, that
pattern may be significant in establishing a respondent's motivation and his
level of culpability. That may,
in turn, be important in determining what, if any, penalties, assessments, and
exclusions should be
imposed.
The conclusion I draw from Respondents' conduct is that they were determined
to say to Medicare
whatever they deemed to be necessary to maximize their reimbursement, without
regard to the truthfulness
of their statements. Their disregard of the program's reimbursement requirements
and for the truth of their
assertions borders on fraud.
a. Items or services were not provided as claimed.
i. Counts 1-120 and 201-211.
I conclude that 128 of these 131 claims are false in that they each misrepresent
that services were provided,
either by an anesthesiologist or by a CRNA employed by Respondent AA. The items
or services on which
these claims are based were, in fact, rendered by CRNAs who were not employed
by Respondent AA. The
I.G. failed to prove that three of the 131 claims (counts 106, 207 and 211)
are false. The records relied on
by the I.G. to support his contention that the claims contained in counts 106
and 207 are inconclusive.
Findings 86-87. I accept as credible Respondents' explanation for the services
claimed in count 211.
Finding 89.
Nearly all of the 131 claims are for anesthesia rendered during surgeries.
Most of these claims represent
that anesthesiologists provided the items or services for which reimbursement
is claimed. Finding 65.
Some represent that anesthesia was provided by CRNAs employed by Respondent
AA. Finding 67.
The evidence which substantiates my conclusion that anesthesia in these cases
was primarily provided by
CRNAs, and not by anesthesiologists, consists of the operating room records
prepared at DMGH by
operating room personnel not affiliated with Respondents. The testimony of these
personnel, which I find
to be credible is that they were instructed to record the names of all persons
in attendance at every
operation. Finding 69. I am not satisfied that the operating room records which
these personnel prepared
were completely accurate -- the witnesses conceded that it was possible that
individuals could enter the
operating room during surgery, remain for a brief period, and leave without
their names being recorded in
the operating room records. But the witnesses agreed that the names of individuals
who were principally
responsible for providing services during surgery were recorded on the operating
room record. Finding 71.
The operating room records which were created during the surgeries for which
these claims sought
reimbursement establish in every case that the principal anesthesia person was
a CRNA. Records created
prior to May 4, 1984, with few exceptions, show only CRNAs as having provided
anesthesia.
Records created beginning May 4, 1984 show a CRNA as the first listed anesthesia
provider, followed by
an anesthesiologist. The presence of these anesthesiologists' names in the records
does not detract from my
conclusion that the CRNA whose name appears first on the operating room record
in each of these claims
is the individual who actually provided anesthesia. I find the inclusion of
anesthesiologists' names on the
operating room records beginning May 4 consistent with the testimony of operating
room personnel that
they were instructed to list the name of an anesthesiologist after the name
of the CRNA who actually
rendered anesthesia, whether or not the anesthesiologist was present, in order
to demonstrate that
supervision was being provided during surgeries. Finding 75.
Respondents argue that their anesthesia records are a more reliable indicator
of the anesthesia personnel
present during surgery and who actually rendered anesthesia than are the operating
room records created
by third parties. I conclude that the anesthesia records do not establish that
the anesthesiologists who
signed them or stamped them with their signatures actually rendered anesthesia.
The names of anesthesia personnel were often added to anesthesia records under
circumstances which call
into question the accuracy of the additions. Respondents conceded that they
frequently signed anesthesia
records after the fact. Signing of anesthesia records could occur days or longer
after the surgery took
place. Signing did not occur in the operating room suite, but in the DMGH records
department. Records
were often signed or stamped in large groups. I.G. Ex. 227/3. The anesthesiologist
signing a particular
record may not have participated in the case documented by that record. Id.
By contrast, the records
prepared by operating room personnel were prepared contemporaneously with surgery.
Furthermore, the anesthesia records are, by and large, consistent with the
operating room records in that
they show that CRNAs were the primary providers of anesthesia. These records
appear in the
overwhelming majority of instances to have been prepared and signed by a CRNA
whose name is listed in
the operating room record. Signatures of anesthesiologists appear as additions
to these records.
The I.G. also established inconsistencies between Respondents' assertions as
to how they practiced
anesthesia and Respondents' anesthesia records. For example, individual Respondents
testified that, when
anesthesiologists were assigned to perform open heart surgery, they would have
no other anesthesia
assignments which overlapped that surgery. Tr. at 1613-1614. However anesthesiologists'
signatures on
some records suggest that either this testimony is untrue or anesthesiologists
signed records to indicate that
they were present during surgeries when, in fact, they were not present. Tr.
at 1654-1661.
Therefore, the preponderance of the evidence establishes that CRNAs were the
principal providers of
anesthesia for the claims in counts 1-105, 107-120, 201-206, and 208-210. Those
claims which assert
(counts 1, 6, 11, 14-16, 21, 26-47, 49-54, 56-105, 107-120, 201-206, and 208-210)
or imply (counts 48 and
55) that anesthesiologists rendered the items or services for which reimbursement
was claimed constitute
claims for reimbursement for items or services which were not provided as claimed.
In making this
conclusion, I accept the possibility that in some of these claims anesthesiologists
may have been present for
short periods during surgery, may have actually provided some services, or may
have in some respects
directed the actions of CRNAs. But the claims represent that anesthesiologists
rendered all of the claimed
services, and that representation is false.
The CRNAs who rendered the anesthesia for which Respondents claimed reimbursement
in these claims
were not "employed" by Respondents within the meaning of relevant
Medicare reimbursement regulations.
Thus, those claims which assert that anesthesia was rendered by CRNAs who were
employees of
Respondent AA (counts 2-10, 12-13, 17-20, 22-24, 205, 208, and 209) constitute
claims for reimbursement
for items or services which were not provided as claimed.
Medicare reimbursement regulations which became effective on October 1, 1983
provide for
reimbursement for CRNAs' services where the CRNAs are "employed" by
anesthesiologists. 42 C.F.R.
405.553(b)(3). Prior to October 1, 1983, Medicare provided for reimbursement
for CRNAs' services
incident to services provided by anesthesiologists, where the CRNAs were employed
by anesthesiologists.
Finding 34.
Neither statute nor regulations define the term "employed" as it
applies to anesthesiologists' claims for
reimbursement for CRNAs' services. The I.G. argues that Blue Cross defined "employed"
by advising
Iowa anesthesiologists that they must create federal W-2 forms for CRNAs associated
with them, for those
CRNAs to be employees. The I.G. asserts that Blue Cross' interpretation of the
term is consistent with the
Health Care Financing Administration's (HCFA) policy as to the meaning of the
term. The I.G. also argues
that CRNAs associated with Respondents would not be considered to be "employed"
under applicable
federal case law. Respondents assert that, in the absence of a definition, the
term must be defined as it is
used under Iowa common law. they argue that, under the Iowa common law test,
Respondents exercised a
degree of control over the CRNAS such that the CRNAS must be employees.
The Medicare program is a federal program of health care benefits. There is
nothing in either statutes or
implementing regulations which suggests that Congress intended to defer to the
states for purposes of
defining statutory or regulatory language, or for applying reimbursement criteria.
To the contrary,
Congress plainly intended to implement a program which uses uniform federal
standards to define benefit
and reimbursement criteria. I conclude that Iowa law does not define the term
"employed" as it is used in
federal Medicare regulations which govern anesthesia reimbursement.
In the absence of a regulatory definition, "employed" should be applied
within the common and ordinary
meaning of the term under federal law. Federal courts have on many occasions
ruled on the question of
what constitutes an employment relationship. Decisions have been issued in a
variety of contexts. Cases
cited by the I.G. address the issue of what constitutes an employment relationship
for purposes of
application of the Internal Revenue laws. Saiki v. United States, 306 F. 2d
642 (8th Cir. 1962). Other
decisions consider the question of what constitutes employment in the context
of the antitrust laws.
Columbia River Co. v. Hinton, 315 U.S. 143 (1942); Taylor v. Local No. 7, International
Union of
Journeymen Horseshoers, 353 F.2d 593 (4th Cir. 1965). Others consider the meaning
of the term in the
context of the National Labor Relations Act. N.L.R.B. v. A.S. Abell Company,
327 F.2d 1 (4th Cir. 1964).
These decisions state a common standard for determining whether an employment relationship exists:
The usual test employed for determining whether one performing services for
another is an independent
contractor or an employee is found in the nature and the amount of control reserved
by the person for
whom the work is done.
Taylor at 353 F.2d 596. The extent to which a party is "controlled"
is measured in terms of the degree to
which the principal may intervene to control the details of the agent's performance.
Saiki at 306 F.2d 651.
However, the reservation of some degree of control in the principal does not
necessarily establish an
employment relationship. Id.; Taylor at 596, 597-599.
The test necessarily requires the weighing of several factors which may evidence
the presence or absence
of control. It is not unusual for a relationship to manifest some of the elements
of an employment
relationship as well as some of the elements of an independent contractor relationship:
The test, however, admits much more readily of statement than of application.
Resolution of the
question must depend largely upon the peculiar facts of each case. Moreover,
no single factor is
controlling and the totality of the circumstances must be considered.
Abell at 327 F.2d 4. Therefore, under applicable Medicare regulations, a CRNA
is employed by an
anesthesiologist where the anesthesiologist retains substantial control over
the details of the performance of
the CRNA's work.
I conclude that Blue Cross did not correctly state the regulatory definition
of "employed" when it defined it
in terms of whether anesthesiologists prepared federal W-2 forms on behalf of
CRNAs. Preparation of a
W-2 form is an indicator of an employment relationship, but it is not dispositive
of the issue. A much
broader range of factors must be considered under the standards enunciated in
Saiki, Taylor, and related
cases.
There are elements of the relationship between Respondents and some of the
CRNAs who rendered
services in the cases for which the claims at issue were presented which suggest
the presence of an
employment relationship. Some of the CRNAs were contractually obligated to render
services to
Respondents for a stipulated annual fee, not dependent on the volume of work
they performed or the nature
and difficulty of the cases they worked on. This fee has the earmarks of a salary.
The evidence also shows that CRNAs who were associated with Respondents were
expected to be
available, at the Respondents' direction, to perform work assigned to them by
Respondents. CRNAs
associated with Respondents received time off for illness and vacation and were
paid moving expenses
when they agreed to associate with Respondents.
However, this evidence of control is outweighed by evidence of the day-to-day
working relationship
between anesthesiologists and CRNAs associated with Respondents. The evidence
is that CRNAs and
anesthesiologists considered themselves to be, and operated as, interchangeable
and essentially coequal
elements in a single enterprise. There was no hierarchy of employer to employee
or master to servant.
One of Respondent's witnesses described the relationship as follows:
I see them as interacting as nearly equal colleagues. They're all specialists
in the field and they share
information back and forth and share their skills much as a couple of surgeons
might.
Tr. at 1059. Respondents allowed CRNAs to provide anesthesia in many cases
without closely supervising
the CRNAs. Findings 94-96. In at least some cases, CRNAs provided anesthesia
without any supervision
by, or even the presence of, anesthesiologists. I.G. Ex. 226/1, 227/2. Respondents
deemed the CRNAs
who were associated with them to be skilled professionals and treated them as
professional colleagues. In
response to a question concerning the qualifications of CRNAs associated with
Respondent AA,
Respondent Quam, an anesthesiologist, testified that:
The CRNAs that I work with are very capable of doing extremely fine anesthesia.
In fact, I think every
one of the CRNAs in our department have had the opportunity to put one of my
family members to sleep
and I think that's the criteria that I use as to if I want them working for
me. If they are allowed to put one
of my family members to sleep, then they meet the criteria for working in our
department. And everyone
in the department has had that opportunity to work on one of my family members.
Tr. at 1663. Respondent Quam also characterized the "supervision"
he rendered of one CRNA as
"observation," testifying that "Mr. . . . [Respondent] McDonough
has been in practice a lot longer than I
have." Tr. at 1643.
This is not to suggest that anesthesiologists associated with Respondent AA
exercised no control over
CRNAs. But I am satisfied from the evidence in this case that the degree of
control and supervision which
was retained by anesthesiologists was minimal. The working relationship between
Respondent AA, its
anesthesiolo-gists, and CRNAs who were associated with them was not an employment
relationship.
Additional evidence supporting this conclusion exists in documents which describe
the relationship
between CRNAs and Respondent AA. Some of the CRNAs, including Respondents McDonough
and
Nelson, were partners in Respondent AA and shared in the expenses and profits.
Respondent AA entered
into "independent contractor" agreements with some of the CRNAs with
whom it associated, and the
testimony was that Respondent maintained the same working relationship with
those CRNAs who did not
execute such agreements. Finding 106. The agreements explicitly stated that
the CRNAs were
independent contractors and not employees. Finding 104. CRNAs were free to seek
other work when not
involved with cases assigned by Respondents. Respondents did not withhold federal
income taxes for
CRNAs and made no Social Security contributions on their behalf. Findings 108,
110. CRNAs were
required to obtain their own insurance.
Furthermore, Respondents described their relationship with CRNAs to third parties
as an independent
contractor relationship, when it suited their interests to do so. Finding 218.
Indeed, the only time when
Respondents appeared to have characterized the relationship as an employment
relationship is when they
sought Medicare reimbursement for CRNAs' services.
None of this evidence is dispositive of the issue when considered in isolation.
For example, Respondents
could have incorrectly characterized an employment relationship as an independent
contractor relationship
without altering the realities of the relationship. But I am satisfied from
all of the evidence that the
relationship between Respondent AA and the CRNAs was not an employment relationship.
The misrepresentations contained in the claims described in counts 1-105, 107-120,
201-206, 208-210
significantly affected the reimbursement Medicare paid for the services which
were claimed. But for these
misrepresentations, Medicare would have reimbursed Respondents for substantially
less than Respondents
received. Respondents' assertion that any misrepresentations on these claims
amounted to harmless error is
without merit.
Regulations adopted in 1983 provided for a higher reimbursement rate for services
rendered by CRNAs
who were employed by anesthesiologists and under their medical direction than
for CRNAs who were
contract personnel but who were medically directed by anesthesiologists. Findings
47, 48; 42 C.F.R.
404.553(b) and (c). Anesthesiologists are reimbursed for the time expended in
providing anesthesia by
their medically directed CRNA employees at the same rate as if the anesthesiologists
had personally
provided the anesthesia. Anesthesiologists are reimbursed for the time expended
in providing anesthesia
by medically directed CRNA contractors at half the rate that anesthesiologists
are reimbursed. Id.
All of the 128 false claims at issue here seek reimbursement for services rendered
after the effective date of
the 1983 regulations. All of the claims seek reimbursement as if the services
rendered were either
personally provided by anesthesiologists or by CRNAs employed by anesthesiologists
and under their
medical direction. In fact, anesthesia was primarily rendered by CRNAs who were
not employed by
anesthesiologists. Based on the representations in the claims, Medicare reimbursed
Respondents for the
time claimed as if services had been rendered by anesthesiologists. The reimbursement
for anesthesia time
paid by Medicare was twice the maximum reimbursement Medicare would have paid
had the services on
these claims been legitimately stated. Respondents were paid thousands of dollars
more in reimbursement
on these claims than they were entitled to receive.
Respondents argue that anesthesiologists were present throughout the anesthesia
for which these claims
were presented and that they were, therefore, entitled to full reimbursement
regardless of whether CRNA
employees or CRNA contractors performed the services. They did not prove this
assertion. I have
concluded that the evidence establishes that CRNAs were the primary providers
of anesthesia in the cases
represented by these claims. And, while it is possible that anesthesiologists
may have been present for
some portion of the anesthesia, the evidence does not prove that they were there
for the entire procedure,
rendering anesthesia on a "one on one" basis with CRNAs, as is asserted
by Respondents. See Findings
81-83.
Considerable testimony was offered at the hearing in these cases as to the
question of whether Respondents
provided "medical direction" to CRNAs as is required by regulation.
42 C.F.R. 405.552(a). Had the I.G.
established that Respondents failed to provide medical direction in any of the
claims at issue, then
Respondents would not have been entitled to any reimbursement for that claim,
regardless of whether the
CRNA who provided the service was an employee or a contractor.
Regulations require that, in order to be reimbursed for anesthesia services,
including services rendered by a
CRNA, an anesthesiologist must: perform a pre-anesthesthetic examination and
evaluation; prescribe the
anesthesia plan; personally participate in the most demanding procedures in
the anesthesia plan, including
induction and emergence; ensure that any procedures in the anesthesia plan that
he or she does not perform
are performed by a qualified individual; monitor the course of anesthesia administration
at frequent
intervals; and provide indicated postanesthesia care. 42 C.F.R. 405.552(a).
The evidence establishes that
there existed a general pattern of behavior by Respondents in which they did
not provide medical direction
to CRNAs. There is credible evidence in the record of this case that, in at
least some cases, CRNAs
performed services on their own. Finding 95.
However, the evidence does not establish a lack of medical direction in any
one of the claims at issue.
There were no witnesses who testified that, with respect to any of the claims,
medical direction was not
provided. The medical records furnished with respect to these claims do not
establish absence of medical
direction. Therefore, the evidence does not establish that Respondents falsely
claimed that they provided
medical direction with respect to these claims.
ii. Counts 121-200.
I conclude that these 80 claims contain numerous misrepresentations and false
statements. As a
consequence, Medicare overpaid Respondents thousands of dollars on these claims.
All of these claims are for reimbursement for services performed during cardiac
or related surgery. Most
of these claims involve coronary artery bypass surgery. Finding 118. The common
feature of every one of
these operations is that, at some point during the surgery, the patient's heart
was induced to rest and vital
respiratory and heart functions were assumed by a heart-lung machine, a pump
which circulated the
patient's blood and perfused it with oxygen.
The claims which Respondents presented or caused to be presented in connection
with these surgeries, in
effect, seek reimbursement for the operation and monitoring of the heart-lung
machine -- that is to say,
perfusion services. Many of the claims assert that Respondents provided a service
which Respondents
described as "pump monitoring." Finding 120. Some of these claims
contain a Blue Cross procedure code
used to identify perfusion services. Findings 124-126. Others contain a lengthy
listing of services which
Respondents claim to have rendered in addition to anesthesia, including monitoring
the heart-lung
machine. Finding 130.
These representations are false. The credible testimony was that the heart-lung
machine was neither
operated nor closely monitored by an anesthesiologist or a CRNA. Finding 122.
That service was
performed by a perfusionist. The perfusionist was not contractually associated
with or employed by
Respondents.
Many of the 80 claims at issue also contain false representations that a second
anesthesiologist was
necessary to perform perfusion services. Some claims assert that the services
of two anesthesiologists were
needed at all times to provide "pump monitoring." Finding 132. Many
claims assert that "pump
monitoring" was provided by a second anesthesiologist. Finding 138. Others
contain statements certifying
that named anesthesiologists personally provided the items or services which
were claimed. Findings 145.
However, the evidence establishes that, not only did Respondents not perform
perfusion services as they
claimed, but two anesthesiologists usually were not present to perform the services
which were rendered.
The items or services provided on the individual cases represented by these
80 claims were generally
provided by an anesthesiologist and a CRNA.
There are exceptions to this general conclusion. As Respondents note, the anesthesia
records in evidence
do show that a second anesthesiologist participated in some of these cases.
But I am satisfied from the
operating room records in evidence that the primary providers of services in
most of these cases were
anesthesiologists and CRNAs.
Indeed, not only were the services of two anesthesiologists not generally provided
for these surgeries, but,
often, two anesthesia personnel were not present at all times, as was represented
by Respondents on many
of the 80 claims. The least demanding part of cardiac surgery for the anesthesia
personnel was that period
when the patients' heart and respiratory functions were performed by the heart-lung
machine. It was not
unusual during that part of the surgery at DMGH for one of the anesthesia personnel
in attendance to take a
break and to leave the operating room. Tr. at 438.
Medicare compensates for perfusion services as a separate item or service from
anesthesia services.
Respondents did not provide these items or services and were not entitled to
be reimbursed for them. By
virtue of their false representations, Respondents were overpaid thousands of
dollars on these claims.
Finding 152.
Respondents argue that, even if the claims misrepresented the items or services
which were claimed,
Respondents were, nevertheless, not overpaid. Respondents assert that the claims
legitimately seek
reimbursement for anesthesia services and for unique additional services which
Respondents provided and
for which they were entitled to reimbursement. They argue that any false statements
on the claims were
simply inartful descriptions of legitimate reimbursable services.
A claim for an item or service which is not provided as claimed is a false
claim pursuant to the Act,
regardless of whether the party who presents the claim rendered some service
for which he would be
entitled to reimbursement. Respondents' claim that they were providing reimbursable,
albeit inaccurately
described, items or services is, therefore, not a defense on the issue of their
liability under the Act.
On the other hand, proof by Respondents that the false statements in their
claims amounted to nothing
more than inaccurate descriptions of reimbursable services would constitute
a basis to mitigate any
penalties, assessments, or exclusions that might otherwise be imposed. The Act
was not intended to
severely penalize providers for inadvertent and harmless mistakes.
The burden is on Respondents to prove that their false statements are harmless.
In order for Respondents
to prevail on their assertion that they were providing reimbursable services
in addition to anesthesia, they
must prove that they provided the services they claimed for and that the services
were not covered by the
formula Respondents used in calculating the fee for anesthesia.
Central to Respondents' argument that there was no overpayment on these claims
is their contention that
they were providing items or services in addition to anesthesia services for
which they were entitled to
reimbursement. Respondent Loerke, an anesthesiologist, asserted that Respondents
provided, in addition
to anesthesia, "a highly intensive medical procedure" which he labeled
"cardio vascular management." Tr.
at 900, 902-903. He described this alleged additional service in terms of a
range of monitoring and
evaluating activities.
Essentially, Respondents claim that they wore two hats when participating in
cardiac cases. They contend
that they performed the full range of anesthesia services which anesthesiologists
provide in such cases.
They argue that, additionally, they provided "cardio vascular management"
as a service above and beyond
their anesthesia services which was not included in their base anesthesia charge.
Respondents assert that
this service required the presence of a second anesthesia professional. According
to Respondents, it was
this service that was claimed under the sobriquets "pump monitoring"
and "recording & monitoring of
intracardiac pressures heart lung machine EKG arterial & central venous
pressures cardiac output
measurements." Tr. at 901-903.
Medicare regulations do not prescribe a formula which anesthesiologists must
employ to claim
reimbursement for their services. However, the regulations acknowledge that
many anesthesiologists do
use a formula, generally derived from documents prepared by anesthesiologists'
professional associations,
known as "relative value" guides. Findings 44-46. These formulas classify
anesthesia procedures in terms
of procedure-specific base value units. Id. Base units are a function of the
difficulty and complexity of the
procedures. Anesthesiologists utilizing these formulas to charge for their services
charge a specific number
of base units, depending on the procedure performed, and add to the base units
time units derived from the
amount of time it took to perform the procedure. The sum is then multiplied
by a conversion factor to
establish the fee to be charged.
The principle which underlies these formulas is that the base units established
for a specific procedure
encompasses all of the services rendered by anesthesiologists during that procedure
(there are exceptions,
such as the insertion of a swan-ganz catheter or an arterial line). The base
unit includes all "monitoring"
activities performed by an anesthesiologist.
Respondents argue that Medicare regulations do not require them to claim anesthesia
reimbursement
pursuant to a formula. That is true. However, Respondents did use a formula,
derived from the Iowa
Relative Value Index, to calculate their fees in the 80 claims at issue. R.
Ex. 2/1; Tr. at 1299; Finding 150.
Having done so, they cannot now credibly argue that the veracity of their claims
should not be judged
pursuant to the criteria contained in that formula. The base units they charged
for anesthesia in the 80
claims encompassed all of the items or services rendered in connection with
providing anesthesia.
I am not persuaded that Respondents were providing items or services in addition
to the kinds of items or
services which should have been included in their base anesthesia fee. First,
Respondents failed to prove
that they actually provided the ostensibly additional services which they alleged
to have provided in the
individual cases at issue.
Respondent Loerke asserted that Respondents were performing, as "cardio
vascular management," a series
of monitoring functions and tests which did not fall within the definition of
anesthesia services and which
required the presence of a second anesthesia professional during surgery. Tr.
at 883-889. These ostensible
additional items or services include monitoring of arterial blood gases, electrolytes,
central venous
pressures, pulmonary artery pressure, cardiac output, pulmonary capillary wedge
pressure, urine output,
core temperature, multi-lead EKG, activated coagulation times, hematocrit, and
development of a heparin
dose response curve. Tr. at 898-899.
Respondent Loerke's assertions were generalized claims that such items or services
were provided by
Respondents. The anesthesia records in evidence in these case do not demonstrate
systematic
documentation of the items or services Respondents alleged to have provided
in addition to anesthesia. I
do not accept Respondents' assertions that they provided such items or services
in specific cases, in the
absence of credible documentation that such services were provided.
Second, I find nothing in the evidence offered by Respondents which establishes
that the monitoring and
evaluating functions they claimed to have performed consisted of items or services
other than anesthesia
services which should have been included in the base units Respondents charged.
The Iowa Relative Value
Index Guide, which Respondents used as a basis for determining their fees for
cardiac anesthesia, provides
that:
The total value for anesthetic services includes usual pre and post operative
visits, administration of
anesthesia, monitoring of essential functions, plus administration of fluids,
blood and medications required.
R. Ex. 2/1 (emphasis added). There is no credible evidence of record which
proves that the items or
services provided by Respondents, even assuming they provided all of the items
or services they alleged to
have provided, consisted of anything other than "monitoring of essential
functions." Tr. at 571-573, 669.
b. Respondents knew, had reason to know, or should have known that the items
or services were not
provided as claimed.
Respondents knew that many of the items or services in the 211 claims at issue
were not provided as
claimed. To the extent Respondents did not know that items or services were
not provided as claimed, they
either had reason to know or should have known that they were not provided as
claimed.
A person "knows" that an item or service is not provided as claimed
within the meaning of the Act when he
or she knows that the information that he or she is placing or causing to be
placed on a claim is untrue.
The Inspector General v. Thuong Vo, M.D. and Nga Thieu Du, Docket No. C-45 (1989).
It is not
necessary for a respondent to personally make a false claim in order to satisfy
the "knows" test. All that is
necessary to satisfy the test is that a respondent issue instructions concerning
the preparation of claims
which he or she knows will result in the inclusion of false information in the
claims.
Respondents' Medicare claims were prepared for them by an agent, Donna Elliot
Henderson. Findings 51,
55, 57. The evidence establishes that Ms. Henderson generally used little or
no initiative in determining
what information to place on claims. I conclude that she prepared claims based
on both the general
directions Respondents gave to her and on specific information that Respondents
transmitted to her for
preparing individual claims. Findings 57. With few exceptions, to the extent
that the claims at issue
contained false statements, these statements were the consequence of directives
and information given to
Ms. Henderson by Respondents.
Respondents attempted to disassociate themselves from Ms. Henderson's claim
preparation activity.
Respondents testified that they did not prepare or even review claims. In their
post-hearing brief,
Respondents averred that they did not know what information was contained in
the claims that Ms.
Henderson submitted on their behalf. But these assertions beg the question of
whether Respondents knew
that items or services were being provided as claimed. Respondents knew that
they were transmitting
incorrect information to Ms. Henderson. They, therefore, necessarily knew that
she would submit false
claims on their behalf.
Respondents issued many directives to Ms. Henderson and provided her with much
information which they
knew would result in the creation of false claims. Respondents knew that the
items or services provided in
the claims contained in counts 1, 6, 11, 14-16, 21, 26-47, 49-54, 56-105, 107-120,
201-206, and 208-210
were not primarily provided by anesthesiologists but were, in fact, provided
by CRNAs. Finding 156.
However, Respondents provided Ms. Henderson with documentation which led her
to assert on these
claims that the items or services for which reimbursement was being claimed
had been provided by
anesthesiologists. Finding 157.
Respondents knew that the phrase "recording & monitoring of intracardiac
pressures heart lung machine
EKG arterial & central venous pressure cardiac output measurements"
did not accurately describe items or
services which they had provided. Finding 181. Notwithstanding, they directed
Ms. Henderson to record
this statement on claims. Respondents thus knew that the items or services in
the claims contained in
counts 168-172 were not provided as claimed.
Respondents knew that two anesthesiologists did not provide the items or services
in the surgeries for
which they caused to be presented claims contained in counts 121-200. Findings
159-162, 164.
Notwithstanding, they directed Ms. Henderson to tell Blue Cross that two anesthesiologists
had participated
in these surgeries and that their services were necessary. Finding 163. Ms.
Henderson testified that she
was directed by Dr. Conally, a deceased former member of Respondent AA, to state
in claims for
anesthesia reimbursement for cardiac cases that the services of two anesthesiologists
were needed. Tr. at
1135, 1188. Respondent Loerke testified that the intent was to communicate that
"two people," rather than
two anesthesiologists, were involved in the surgery. Respondent Loerke's testimony
is not credible on this
issue. Therefore, Respondents knew that the assertions in claims contained in
counts 121-200, that two
anesthesiologists provided the items or services, were false.
The I.G. asserts that Respondents also knew that their representations as to
the employment status of
CRNAs were false. For reasons described infra, Respondents had reason to know
and should have known
that the CRNAs were not "employed," within the meaning of Medicare
reimbursement criteria. But I
conclude that they did not know that the CRNAs were not employed by them.
There is no evidence in the record which establishes that Medicare or Blue
Cross ever communicated an
accurate definition of "employed" to Respondents. Blue Cross did tell
Respondents that "employed" meant
preparing a W-2 form on the CRNAs' behalf, but, as I have held supra, at part
2 (a)(1) of this Analysis, that
definition misstated the employment test. Therefore, Respondents did not have
actual knowledge that the
CRNAs were not employed by them.
The I.G. asserts that, even if Respondents did not know the definition of "employed,"
Respondents had
sufficient knowledge to know that Blue Cross defined the term in a manner inconsistent
with the
relationship that Respondents maintained with the CRNAs with whom they were
affiliated.
Notwithstanding this, Respondents continued to represent that the CRNAs were
their employees. The I.G.
argues that this action by Respondents constitutes reckless disregard of the
truth or falseness of their
statements and, according to the I.G., such reckless disregard satisfies the
"knows" test of the Act.
There are decisions issued pursuant to the Act which state that reckless disregard
of the truth or falseness of
information presented in claims amounts to knowledge that the claims are false.
See The Inspector General
v. George A. Kern, M.D., Docket No. C-25 (1987). I disagree with this analysis.
A party does not have to
know that a claim is false in order to be held liable under the Act. However,
the meaning of the term
"knows" is plain and its application should be limited to those situations
where the party has actual
knowledge that the information he is presenting or causing to be presented is
false. Vo, supra, at 18-19.
Respondents had reason to know that many of the items or services for which
they claimed reimbursement
were not provided as claimed. The "reason to know" standard contained
in the Act prior to December 22,
1987 created a duty on the part of a provider to prevent the submission of false
or improper claims where:
(1) the provider had sufficient information to place him, as a reasonable medical
provider, on notice that
the claims presented were for services not provided as claimed, or (2) there
were pre-existing duties which
would require a provider to verify the truth, accuracy, and completeness of
claims. Vo, supra at 19; Kern,
supra,at 5-7.
Although Respondents did not know whether the CRNAs with whom they were affiliated
were "employed"
by them within the meaning of Medicare regulations, they knew that an employment
relationship was a
prerequisite to claiming reimbursement at the rates which Respondents were claiming.
Findings 166-167.
They knew that Blue Cross defined "employed" by stating a condition
that Respondents did not satisfy.
They also knew that Blue Cross had raised questions in some cases concerning
the employment status of
CRNAs affiliated with Respondents. Finding 174. Given this knowledge, Respondents
had an obligation
to find out whether their relationship with the CRNAs met the regulatory definition
of employment before
they billed for the CRNAs' services as if they were employees. Respondents continued
to file claims for
items or services, including the claims contained in counts 2-5, 7-10, 12-13,
17-20, and 22-24, which
expressly and falsely represented that the CRNAs were their employees. Respondents
had reason to know
that these items or services were not provided as claimed. Finding 180.
Respondents had reason to know that claims for "pump monitoring"
services contained in counts 121-167
and 174-200 were for items or services that were not provided as claimed. The
I.G. did not prove that
Respondents directed Ms. Henderson to inscribe the phrase "pump monitoring"
in the claims she
submitted, or that they knew that she was inscribing that phrase on the claims.
Respondents used the
phrase as a form of shorthand to instruct Ms. Henderson to make claims "recording
& monitoring of
intracardiac pressures heart lung machine EKG arterial & central venous
pressures cardiac output
measurements." Respondents did not review the claims Ms. Henderson prepared
on their behalf.
Therefore, Respondents did not know that Ms. Henderson was copying "pump
monitoring" onto claims,
rather than inscribing the longer phrase which they intended "pump monitoring"
to signify.
However, the I.G. proved that "pump monitoring" was a misstatement
of the items or services which
Respondents intended to claim. Findings 122-123. The I.G. also proved that Respondents
knew that the
phrase was inaccurate. The fact that Respondents knowingly transmitted inaccurate
terminology to Ms.
Henderson placed them under a duty to ensure that Ms. Henderson did not use
this terminology in the
claims she prepared and presented. Respondents did not review her work.
Respondents had reason to know that the procedure code "K3798," which
Ms. Henderson inscribed in
claims contained in counts 146-165 and 196-199, constituted a claim for reimbursement
for items or
services which were not provided as claimed. Ms. Henderson testified that her
decision to incorporate
procedure codes in claims was based on information provided to her by Blue Cross
explaining its decision
to credit claims. It was Ms. Henderson's practice in filing claims not to place
procedure codes next to
claims for items or services where she did not know how Blue Cross characterized
the items or services.
Once Blue Cross provided her with a procedure code to identify a service, she
would continue to use that
code. Finding 63.
Ms. Henderson testified that she assumed that she began using the code designation
"K3798" in
conjunction with "pump monitoring claims" when Blue Cross assigned
that code to an explanation of
benefits for "pump monitoring." Tr. at 1134. Based on this evidence,
Respondents did not instruct Ms.
Henderson to use the procedure code designation. There is no evidence that they
knew she was using it on
the claims. Therefore, Respondents did not know that this false representation
was being made on their
behalf.
But Respondents did know that they were providing Ms. Henderson with false
statements concerning the
"pump monitoring" for which they were directing her to make claims.
Not only were they under a duty to
assure that Ms. Henderson did not file false claims on their behalf for "pump
monitoring," but their
knowledge that the "pump monitoring" terminology was false placed
them under the additional duty to
prevent ancillary falsehoods from being made on their behalf. Respondents made
no effort to review the
claims Ms. Henderson prepared for them. Had they done so, they would have known
that she was also
using the code designation "K3798" with these claims.
The broadest standard of liability under the Act is "should know."
This standard subsumes reckless
disregard for the consequence of a person's acts. It subsumes those situations
where a respondent has
reason to know that items or services were not provided as claimed. "Should
know" also subsumes
negligence in preparing and submitting, or in directing the preparing and submitting
of, claims. Mayers v.
U.S. Dept. of Health and Human Services, 806 F.2d 995 (11th Cir. 1986), cert.
denied, 484 U.S. 822
(1987); Vo, supra, at 20.
Respondents made no effort to review claims preparation or to check reimbursement
explanations against
their own records and their claims. By their own admission, they had no knowledge
of the specific
contents of the claims that were submitted on their behalf. They were indifferent
to what Ms. Henderson
put in their claims, so long as her statements on their behalf succeeded in
obtaining reimbursement from
Medicare for what they thought they were entitled to receive.
Respondents had a duty to accurately and honestly claim reimbursement for their
services. See Finding 56.
See I.G. Ex 277. Their indifference to the accuracy of their claims, coupled
with their tolerance of the
submission of palpably false information on their behalf, constituted a breach
of that duty. Respondents
should have known that the items or services contained in all of the 208 false
claims were not provided as
claimed. Finding 193.
3. The remedy of exclusion is not precluded in this case.
Respondents argue that regardless of whether they are found to have violated
the Act, exclusions cannot
lawfully be imposed against them. They premise this argument on their assertion
that Congress amended
the Act in 1987 by adding the exclusion remedy. They contend that any imposition
of exclusion in these
cases would constitute an unlawful retroactive application of the Act.
Respondents' premise is incorrect and their argument is without merit. The
1981 enactment of the Act
contained the exclusion remedy, and the remedy has been consistently retained
in all subsequent revisions
to the Act. Congress intended that exclusion be a remedy when it enacted the
1981 version of the Act.
H.R. Rep. No. 158, 97th Cong., 1st Sess. 328 (1981). Implementing regulations
have provided for
exclusion as a remedy since their original promulgation in 1983. See 48 Fed.
Reg. 38827 (1983), at 38830,
38837. Decisions applying the Act to individual cases have imposed exclusion
as a remedy since the
original enactment of the Act. Mayers, supra. Thus, the 1987 revisions did not
add exclusion as a remedy.
Exclusion has been, and continues to be, a remedy which is an integral part
of the remedies provided for by
the Act.
4. Penalties, assessments, and exclusions are appropriate in these cases.
The remedial purpose of the Act is to protect government financed health care
programs from fraud and
abuse by providers. Mayers, supra, 806 F.2d at 997; Vo, supra, at 22. The assessment
and penalty
provisions of the Act are designed to implement this remedial purpose in two
ways. One is to enable the
government to recoup the cost of bringing a respondent to justice and the financial
loss to the government
resulting from the false claims presented by that respondent. The other is to
deter other providers from
engaging in the false claims practices engaged in by a particular respondent.
Mayers, supra, at 999; Vo,
supra, at 22.
The exclusion remedy is designed to protect the Medicare and Medicaid programs
from future misconduct.
It is thus distinguishable from assessments which compensate the government
for wrongs already
committed. Medicare has a contractual relationship with those providers of items
or services who treat
beneficiaries and present claims for reimbursement. Medicare is no more obligated
to continue to deal
with dishonest or untrustworthy providers than any purchaser would be obligated
to deal with a dishonest
or untrustworthy supplier. The exclusion remedy allows the Secretary to suspend
his contractual
relationship with those providers of items or services who are dishonest or
untrustworthy. One purpose of
any exclusion, therefore, is to protect the integrity of the Medicare and Medicaid
programs for a sufficient
period of time to assure that they will not continue to be harmed by dishonest
or untrustworthy providers of
items or services.
Exclusion serves an ancillary purpose of deterring providers of items or services,
including those providers
against whom the remedy is imposed, and other providers as well, from engaging
in the same or similar
misconduct as that engaged in by the excluded providers. In that respect, it
is an exemplary remedy which
reinforces the penalties which may be imposed pursuant to the Act.
The Act and implementing regulations provide that a penalty of up to $2,000
and an assessment of not
more than twice the amount claimed may be imposed on a respondent for each item
or service which is
established as not having been provided as claimed. Social Security Act, section
1128A(a); 42 C.F.R.
1002.103-104. The maximum penalty which I may impose against Respondents in
these cases is
$416,000.00, based on their presentation for payment of 208 claims containing
items or services which
were not provided as claimed. The maximum assessment which I may impose against
Respondents in
these cases is $199,438.00, which is twice the aggregate dollars claimed in
the 208 false claims.
Neither the law nor regulations provide for a maximum exclusion which I may
impose. However, the
regulations provide that the length of the exclusion should be determined by
the same criteria that I employ
to determine the appropriate amount of the penalty and assessment. 42 C.F.R.
1003.107.
Regulations prescribe that, in determining the amount of a penalty and assessment,
I must consider, as
guidelines, factors which may either be mitigating or aggravating. 42 C.F.R.
1003.106. These include:
(1) the nature of the claim or request for payment and the circumstances under
which it was presented, (2)
the degree of culpability of the person submitting the claim or request for
payment, (3) the history of prior
offenses of the person submitting the claim or request for payment, (4) the
financial condition of the person
presenting the claim or request for payment, and (5) such other matters as justice
may require. 42 C.F.R.
1003.106(a).
The I.G. has the burden of proving the presence of aggravating factors. 42
C.F.R. 1003.114(a). A
respondent has the burden or proving the presence of mitigating factors. 42
C.F.R. 1003.114(c). The
regulations provide that, in cases where mitigating factors preponderate, the
penalty and assessment should
be set sufficiently below the maximum permitted by law. 42 C.F.R. 1003.106(c)(1).
The regulations also
provide that, in cases where aggravating factors preponderate, the penalty and
assessment should be set
close to the maximum permitted by law. 42 C.F.R. 1003.106(c)(2).
The Act has been interpreted to permit the imposition of a penalty and assessment
which exceeds the
amount actually reimbursed to a respondent for items or services not provided
as claimed. Chapman v.
U.S. Dept. of Health & Human Services, 821 F.2d 523 (10th Cir. 1987); Mayers,
supra, 806 F.2d at 999.
This reflects the legislative determination that activities in violation of
the act "result in damages in excess
of the actual amount disbursed by the government to the fraudulent claimant."
Mayers, supra, 806 F.2d at
999.
There exist many aggravating factors in these cases. 42 C.F.R. 1003.106(b)(1).
The false claims were
presented over a lengthy period of time, nearly three years. Finding 203. The
208 false claims constitute a
substantial number of such claims. Finding 204. Respondents false claims caused
overpayments of
thousands of dollars.
The most serious aggravating factor in these cases is Respondents' attitude
towards Medicare
reimbursement requirements. Blue Cross sent frequent communications to anesthesiologists,
including
Respondents, concerning their obligation to comply with Medicare reimbursement
requirements. Findings
213, 214. Respondents dealt with these requirements by telling Blue Cross what
would suffice to generate
reimbursement. They were indifferent to the truthfulness of their representations.
Thus, when Respondents were advised that CRNAs had to be employed by them in
order for Respondents
to receive reimbursement for CRNAs' services at the same rate as for anesthesiologists'
services,
Respondents simply told Blue Cross that the CRNAs were their employees. Respondents
also made efforts
to assure that records at DMGH contained statements which made it appear as
if Respondents' relationships
with CRNAs conformed with Medicare reimbursement requirements. However, they
made no effort to
ascertain whether their relationship with CRNAs was an employment relationship
under Medicare criteria.
In fact, Respondents knew that they had characterized their relationship with
CRNAs as an independent
contractor relationship. Finding 170. On one occasion, when Respondents thought
that it was in their
interest to tell Blue Cross that the relationship with the CRNAs was an independent
contractor relationship,
then they asserted that the CRNAs were independent contractors. Finding 218.
Similarly, it is evident that Respondents made no effort to determine whether
their "pump monitoring"
claims were legitimately reimbursable. Their objective never was to accurately
state the unique services
they were ostensibly providing in addition to anesthesia. Rather, it was to
devise a claims formula which
would convince Blue Cross to reimburse them above their base anesthesia charge.
Finding 215. This
strategy involved the dual falsehoods of claiming for "pump monitoring"
services and asserting that a
second anesthesiologist was needed to provide that service.
Respondents assert that they never received complaints from Blue Cross concerning
the way in which they
were claiming reimbursement. They suggest that Blue Cross owed a duty to Respondents
to scrutinize
their individual claims and to tell Respondents if there were problems with
the claims. I emphatically
disagree with this assertion. Medicare carriers are not obligated to pore over
the myriad of individual
provider claims they process in order to tell providers which claims contain
possible errors or
misstatements. Respondents owed a duty to Blue Cross and Medicare to accurately
and honestly claim
reimbursement for their services, and Blue Cross and Medicare were entitled
to rely on the assumption that
Respondents were performing that duty. In these cases the breach of duty rests
entirely with Respondents.
An additional aggravating factor is the fact that the claims at issue comprise
a pattern of false claims. The
evidence establishes that Respondents routinely filed claims for CRNAs' services
as if the CRNAs were
employed by anesthesiologists, or as if anesthesiologists rendered the services.
I am certain that
Respondents would have continued this practice had not the I.G. responded to
complaints and initiated an
investigation. Similarly, Respondents were routinely generating false reimbursement
claims for "pump
monitoring." This practice only ceased when the perfusionist at DMGH began
experiencing difficulties in
obtaining reimbursement from Medicare for his legitimate services and complained
to Respondents.
Finding 216.
The pattern of false claims by Respondents extended to Medicaid claims which
are not specifically at issue
in these cases. Finding 209. The fact that the claims at issue are part of a
wider pattern of false claims is
an additional aggravating factor. Mayers, supra; Vo, supra.
a. Penalties and assessments.
I impose total penalties of $208,000.00. That sum is only one half the amount
which the law permits,
given the 208 false claims. It is amply justified by the aggravating factors
which I have cited.
Respondents offered no mitigating evidence which would justify reducing the
total penalty. Respondents
did not allege that the amount of the penalty would jeopardize their ability
to continue as health care
providers. I am not persuaded by Respondents' arguments that the false claims
were mere harmless error
and that no loss to Medicare resulted from Respondents' actions.
Furthermore, I find that it is necessary to impose a substantial penalty in
these cases as a deterrent to others
from engaging in the conduct engaged in by Respondents. Respondents' disregard
for Medicare
reimbursement requirements strikes at the heart of the relationship between
the Medicare program and
providers. Medicare depends on provider honesty and good faith. If Medicare
were forced to audit the
millions of claims it receives each year, it would cease to function. Yet Respondents
have, in effect,
asserted that it is not their concern whether their claims were honest or accurate.
Respondents' attitude
would be an invitation to anarchy, were it to prevail.
There is a need to impose substantial assessments in these cases. The I.G.
proved that, as a consequence of
Respondents' false claims, Blue Cross overpaid Respondents by thousands of dollars.
The costs of auditing
Respondents' claims and investigating Respondents was substantial. The hearing
in these cases consumed
nearly two weeks, and the costs of the hearing are only a small percentage of
the total cost to the
government of prosecuting and deciding these cases.
The evidence does not support imposing the assessments proposed by the I.G.
The I.G. proposes that total
assessments in this case be twice the amount claimed by Respondents in the 211
claims at issue. However,
the I.G. did not prove that three of these 211 claims were false. Furthermore,
while the 208 false claims
resulted in substantial overpayments, they also encompassed legitimate charges
for anesthesia services.
Thus, while the claims requested nearly $100,00.00, the overpayments totalled
about $23,000.00
I conclude that assessments of $50,000.00 should be imposed in these cases.
These assessments are
somewhat more than twice the amount overpaid to Respondents. When aggregated
with the penalties I
have determined to impose, the total sum should also fairly compensate the government
for the costs of
investigating and litigating these cases.
It would not be reasonable to make Respondents jointly and severally liable
for the full amount of the
penalties and assessments. One Respondent, Respondent Barnett, retired on August
1, 1984, and had no
responsibility for presenting any of the claims for items or services which
Respondents presented or caused
to be presented after his retirement. Respondent Quam did not become a partner
in Respondent AA until
August 1, 1984. I recognize that his contractor status prior to that date does
not immunize him from
liability on any claims he presented or caused to be presented. But there is
no evidence that Respondent
Quam had any say in directing the policies of Respondent AA prior to the inception
of his partnership in
Respondent AA. Similarly, Respondent Sykes did not become a partner in Respondent
AA until
September, 1985. Respondent Sykes' name appears on none of the claims which
were presented prior to
August, 1984, and on only a few claims after that date.
The false claims were presented between December, 1982 and October, 1985, a
35 month period. I
apportion each Respondent's liability for penalties and assessments based on
his length of tenure as a
partner in AA. Accordingly, I find as follows:
Respondent Loerke was a partner during the entire 35 month period. Respondents
Loerke and
Loerke, P.C. are liable for up to the entire penalties of $208,000.00 and assessments
of $50,000.00;
Respondent Nelson was a partner during the entire 35 month period. Respondents
Nelson and
Nelson, P.C. are liable for up to the entire penalties of $208,000.00 and assessments
of $50,000.00;
Respondent McDonough was a partner during the entire 35 month period. Respondents
McDonough and McDonough, P.C. are liable for up to the entire penalties of $208,000.00
and assessments
of $50,000.00;
Respondent Barnett was a partner during 20 months of the entire 35 month period.
Respondents
Barnett and Barnett, P.C., are liable for 20/35 of the total liability. Respondents
Barnett and Barnett, P.C.,
are liable for penalties not to exceed $118,857.00, and assessments not to exceed
$28,571.00;
Respondent Quam was a partner during 14 months of the entire 35 month period.
Respondents
Quam and Quam, P.C., are liable for 14/35 of the total liability. Respondents
Quam and Quam, P.C., are
liable for penalties not to exceed $83,200.00, and assessments not to exceed
$20,000.00; and
Respondent Sykes was a partner during two months of the entire 35 month period.
Respondents
Sykes and Sykes, P.C., are liable for 2/35 of the total liability. Respondents
Sykes and Sykes, P.C., are
liable for penalties not to exceed $11,886.00, and assessments not to exceed
$2,857.00.
Respondent AA is liable for up to the entire penalties of $211,000.00 and assessments
of $50,000.00. The
total penalties collected by the I.G. from all Respondents shall not exceed
$208,000.00, and the total
assessments collected by the I.G. from all Respondents shall not exceed $50,000.00.
b. Exclusions.
An exclusion imposed pursuant to the Act will have an adverse financial impact
on the person against
whom the exclusion is imposed. However, the law places the integrity of the
Medicare and Medicaid
programs ahead of the pecuniary interests of providers. Thus, in determining
to impose an exclusion, the
primary consideration must be the degree to which the exclusion serves the law's
remedial objectives. An
exclusion is remedial if it does reasonably serve these objectives, even if
it has a severe adverse impact on
the person against whom it is imposed.
There is a legitimate remedial purpose for exclusions in these cases. Respondents
are untrustworthy
providers. The 208 claims contain blatantly false statements of services. The
false claims were perpetrated
over a period of years. They involve a substantial sum of money. And, the circumstances
surrounding the
presentation of these claims establish that Respondents were utterly indifferent
to their obligations to
Medicare.
Exclusions in these cases will serve as a remedy in two respects. First, it
will assure that these Respondents
will not be in a position to do further damage to the integrity of the Medicare
and Medicaid programs.
Second, it will warn Respondents and other providers of services that their
obligations to Medicare cannot
be ignored.
The I.G. did not offer proof as to why ten year exclusions, as opposed to exclusions
of shorter or longer
duration, are reasonable remedies in these cases. It is not necessary to exclude
any of Respondents for ten
years. A maximum exclusion of three years satisfies the law's remedial objectives.
First, it provides a
reason-able period of protection for the Medicare and Medicaid programs against
repetition by these
Respondents of their unlawful conduct. Second, it serves as a powerful deterrent
against Respondents and
other providers engaging in similar conduct to that in these cases.
My decision to impose an exclusion for substantially shorter duration than
that sought by the I.G. is in part
based on the I.G.'s failure to present persuasive evidence justifying the ten
year exclusion which he sought.
It is also based on my evaluation of the misconduct engaged in by Respondents.
The companion law to the Act, section 1128 of the Social Security Act, requires
a minimum five year
exclusion of parties convicted of criminal offenses related to the delivery
of an item or service under
Medicare or Medicaid. Social Security Act, section 1128(a)(1); (c)(3)(B). Had
the I.G. established a
scheme by Respondents to defraud Medicare, then the I.G. would have proven misconduct
which is
criminal in character. Based on such evidence, I would have felt compelled to
impose an exclusion for at
least five years.
However, the evidence in this case does not establish that degree of misconduct
by Respondents. The
evidence proves that Respondents told Medicare whatever they thought was necessary
to maximize their
reimbursement. Respondents were indifferent to the truth or falsity of their
representations. But the
evidence does not establish that Respondents schemed to defraud Medicare by
basing their reimbursement
claims on deliberate falsehoods. Therefore, although an exclusion is certainly
necessary to remedy the
misconduct established in this case, I do not believe that it is appropriate,
based on the evidence of record,
to impose an exclusion of a duration normally reserved for individuals or entities
convicted of criminal
misconduct, or found to have engaged in misconduct of equivalent severity.
Respondents undoubtedly will suffer severe economic impact from these exclusions.
But that is a
necessary consequence of the remedy. The adverse effect exclusions will have
on Respondents is
outweighed by the benefits which the programs will obtain by imposition of the
remedy.
There is no proof of Respondents' claim that exclusion of them will force DMGH
to close. DMGH may
very likely need to obtain other providers of anesthesia. But there is no evidence
in the record of these
cases that DMGH will be unable to accomplish that.
Not all Respondents should be excluded for the same length of time. As with
the penalties and assessments
I have imposed, the exclusions should in some respect reflect the length of
time that individual
Respondents were partners in Respondent AA and were in a position to influence
the actions of the
enterprise. Therefore, I exclude Respondent AA for three years, and I exclude
individual Respondents as
follows:
Respondent Loerke and Respondent Loerke, P.C., are excluded for three years;
Respondent Nelson and Respondent Nelson, P.C., are excluded for three years;
Respondent McDonough and Respondent McDonough, P.C., are excluded for three years;
Respondent Barnett and Respondent Barnett, P.C., are excluded for two years; and
Respondent Quam and Respondent Quam, P.C., are excluded for two years.
Respondent Sykes and Respondent Sykes, P.C., should not be excluded. This
Respondent was a
partner in Respondent AA for only the final two of the 35 months during which
false claims were
presented. The I.G. presented no evidence as to his involvement in the policy
determinations of
Respondent AA. Respondent Sykes bears responsibility for the damages caused
by the claims presented
while he was a partner in Respondent AA. However, the evidence is insufficient
to establish that
Respondent Sykes is so untrustworthy as to require imposition of an exclusion
as an additional remedy.
CONCLUSION AND ORDER
For the reasons set forth in this decision, I impose aggregate civil monetary
penalties of $208,000.00, and
aggregate assessments of $50,000.00 to be apportioned among Respondents as set
forth hereinabove. I
impose an exclusion from participating in Medicare and Medicaid of three years
against Respondent AA,
and certain additional Respondents, and lesser exclusions against other Respondents
as set forth
hereinabove. I impose no exclusion against Respondents Sykes, and Sykes, P.C.
____________________________
Steven T. Kessel
Administrative Law Judge