HomeMy WebLinkAbout11-0323LED
IN THE COURT OF COMMON PLcr Dc F I?
7Jris.
CUMBERLAND COUNTY
COMMONWEALTH OF PENNSYLjAjAjj 14 Am 01-
CARLISLE HMA, LLC d/b/a CARLISLE
REGIONAL MEDICAL CENTER and
HEALTH MANAGEMENT
ASSOCIATES, INC.
Plaintiffs,
VS.
STEVENS & LEE, P.C.,
LAWRENCE B. SELKOWITZ, ESQUIRE,
AND JAMES W. SAXTON, ESQUIRE,
Defendants.
"., MBERLAND C (;. UF:
NO. 'E HS Ul"" v ','Q/vvt
JURY TRIAL DEMANDED
PRAECIPE FOR ISSUANCE OF WRIT OF SUMMONS
TO THE PROTHONOTARY:
Issue Summons in Civil Action in the above case. Writ of Summons shall be forwarded
to the Attorney.
POST & SCHELL, P.C.
BY: ?c=?...vX.c
Robin Locke Nagele, Esquire (ID #36992)
John N. Joseph, Esquire (#ID 46643)
Four Penn Center
1600 John F. Kennedy Blvd.
Philadelphia, PA 19103
(215) 587-1000, P ca)
(215) 320-4144, F tct
WRIT OF SUMMONS
TO: See Attached list for names of Defendants.
eQ? a53? o?
You are notified that the Plaintiff has commenced an action against u.
SEAL
Prothonotary, Cumberland County
Date:
Clerk/Deputy
TO: Stevens & Lee, P.C., Defendant,
111 North Sixth Street
P.O. Box 679, Reading, PA 19603-0697
TO: Lawrence B. Selkowitz., Esquire, Defendant,
111 North Sixth Street
P.O. Box 679, Reading, PA 19603-0697
TO: James W. Saxton, Esquire, Defendant,
111 North Sixth Street
P.O. Box 679, Reading, PA 19603-0697
l'
Evan Black, Esquire
Attorney ID # 17784
Stephanie Hersperger, Esquire
Attorney ID # 78735
717-441-7051
THOMAS, THOMAS & HAFER LLP
305 NORTH FRONT STREET
P.O. BOX 999
HARRISBURG, PA 17108
Attorneys for Plaintiffs
FILED-OFFICE
OF THE PROTHO°IOTAR`;'
2011 JAN 13 PH
F t A
CARLISLE HMA, LLC d/b/a CARLISLE
REGIONAL MEDICAL CENTER and
HEALTH MANAGEMENT ASSOCIATES,
INC.,
Plaintiffs
VS.
STEVENS & LEE, P.C.,
LAWRENCE B. SELKOWITZ, ESQUIRE
AND JAMES W. SAXTON, ESQUIRE,
Defendants.
IN THE COURT OF COMMON PLEAS
CUMBERLAND COUNTY, PA
a?1! l
NO. - 206 i -323 CIVIL TERM
CIVIL ACTION -LAW
JURY TRIAL DEMANDED
PRAECIPE FOR ENTRY OF APPEARANCE
TO THE PROTHONOTARY OF SAID COURT:
Please enter the appearance of Evan Black, Esquire, Stephanie L. Hersperger, Esquire
and the law firm of Thomas, Thomas & Hafer, LLP as Co-Counsel on behalf of Plaintiffs in the
above matter.
Respectfully submitted,
Date: 41711,
THOMAS, THOMAS & HAFER, LLP
By:
Evan Black. uire
Attorney I.D. 17884
Stephanie L. Hersperger, Esquire
Attorney I.D. 78735
305 North Front Street
PO Box 999
Harrisburg, PA 17108
4
CERTIFICATE OF SERVICE
I, Joan L. Wolfe, employee of the law firm of Thomas, Thomas & Hafer, LLP, hereby
certify that a true and correct copy of the foregoing document was sent to the following counsel
of record by placing a copy of same by First Class in the United States mail, postage prepaid, at
Harrisburg, Pennsylvania addressed as follows:
Jeffrey McCarron, Esquire
Swartz Campbell, LLC
2 Liberty Place
50 S. 16`x` Street, Floor 28
Philadelphia, PA 19102
Attorney for Defendants
Robin Locke Nagele, Esquire
John N. Joseph, Esquire
Post & Schell, P.C.
Four Penn Center
1600 John F. Kennedy Blvd.
Philadelphia, PA 19103
Attorneys for Plaintiffs
THOMAS, THOMAS & HAFER, LLP
Date: - Q?-t' ZlAv*
' Jo L. Wolfe
t
.
POST & SCHELL, P.C.
BY: ROBIN LOCKE NAGELE, ESQ
I.D. NO. 36992
BY: JOHN N. JOSEPH, ESQ.
I.D. NO. 46643
FOUR PENN CENTER, 14TH FLOOR
1600 JOHN F KENNEDY BLVD.
PHILADELPHIA, PA 19103
(215) 587-1000 (P)
(215) 587-1444 (F)
CARLISLE HMA, LLC d/b/a CARLISLE
REGIONAL MEDICAL CENTER and
HEALTH MANAGEMENT
ASSOCIATES, INC.,
Plaintiffs,
VS.
STEVENS & LEE, P.C.,
LAWRENCE B. SELKOWITZ, ESQUIRE,
and JAMES W. SAXTON, ESQUIRE,
Defendants.
ATTORNEYS FOR PLAINTIFFS,
CARLISLE HMA, LLC d/b/a
CARLISLE REGIONAL MEDICAL
CENTER and HEALTH MANAGEMENT
ASSOCIATES, INC.
IN THE COURT OF COMMON PLEAS
CUMBERLAND COUNTY
NO. 2011-323 CIVIL TERM
JURY TRIAL DEMANDE#, c
--- - E
CIVIL ACTION
ACCEPTANCE OF SERVICE
I, JEFFREY B. McCARRON, accept service of the Writ of Summons in the above-
referenced matter on behalf of Defendant Lawrence B. Selkowitz, Esquire, and certify that I am
authorized to do so.
SWARTZ CAMPBELL, LLC.
? // By:
Dated
WV17JA-,-
JF/YFIWY . M C RO , ESQ.
A orney f De ndants
Two Liberty Place
50 South 16th Street, Floor 28
Philadelphia, PA 19102
(215) 564-5190 (P)
(215) 299-4301 (F)
CERTIFICATE OF SERVICE;
I, Robin Locke Nagele, Esquire, hereby certify that I caused a true and correct copy of
the foregoing Acceptance of Service to be served by U.S. First Class Mail, postage prepaid, upon
the following at the address indicated:
Jeffrey B. McCarron, Esquire
Swartz Campbell LLC
Two Libert Place
50 South 16th Street, Floor 28
Philadelphia, PA 19102
Dated ROBIN LOCKE NAGEL +
POST & SCHELL, P.C.
BY: ROBIN LOCKE NAGELE, ESQ.
I.D. NO. 36992
BY: JOHN N. JOSEPH, ESQ.
I.D. NO. 46643
FOUR PENN CENTER, 14TH FLOOR
1600 JOHN F KENNEDY BLVD.
PHILADELPHIA, PA 19103
(215) 587-1000 (P)
(215) 587-1444 (F)
CARLISLE HMA, LLC d/b/a CARLISLE
REGIONAL MEDICAL CENTER and
HEALTH MANAGEMENT
ASSOCIATES, INC.,
Plaintiffs,
ATTORNEYS FOR PLAINTIFFS,
CARLISLE HMA, LLC d/b/a
CARLISLE REGIONAL MEDICAL
CENTER and HEALTH MANAGEMENT
ASSOCIATES, INC.
Jr',
C
IN THE COURT OF COMMO5 PLZAS
CUMBERLAND COUNTY
NO. 2011-323 CIVIL TERM
VS.
STEVENS & LEE, P.C.,
LAWRENCE B. SELKOWITZ, ESQUIRE,
and JAMES W. SAXTON, ESQUIRE,
Defendants.
JURY TRIAL DEMANDED
CIVIL ACTION
ACCEPTANCE OF SERVICE.
I, JEFFREY B. McCARRON, accept service of the Writ of Summons in the above-
referenced matter on behalf of Defendant James W. Saxton Esquire, and certify that I am
authorized to do so.
SWARTZ CAMPBELL, LLC.
B)
Dated
Two Liberty Place
50 South 16th Street, Floor 28
Philadelphia, PA 19102
(215) 564-5190 (P)
(215) 2994301 (F)
CERTIFICATE OF SERVICE
I, Robin Locke Nagele, Esquire, hereby certify that I caused a true and correct copy of
the foregoing Acceptance of Service to be served by U.S. First Class Mail, postage prepaid, upon
the following at the address indicated:
Jeffrey B. McCarron, Esquire
Swartz Campbell LLC
Two Libert Place
50 South 16th Street, Floor 28
Philadelphia, PA 19102
Dated ROBIN L OC NAGE E
..:
POST & SCHELL, P.C.
BY: ROBIN LOCKE NAGELE, ESQ
I.D. NO. 36992
BY: JOHN N. JOSEPH, ESQ.
I.D. NO. 46643
FOUR PENN CENTER, 14TH FLOOR
1600 JOHN F KENNEDY BLVD.
PHILADELPHIA, PA 19103
(215) 587-1000 (P)
(215) 587-1444 (F)
CARLISLE HMA, LLC d/b/a CARLISLE
REGIONAL MEDICAL CENTER and
HEALTH MANAGEMENT
ASSOCIATES, INC.,
Plaintiffs,
ATTORNEYS FOR PLAINTIFFS,
CARLISLE HMA, LLC d/b/a
CARLISLE REGIONAL MEDICAL
CENTER and HEALTH MANAOEME*
ASSOCIATES., INC.
ET°
VS.
STEVENS & LEE, P.C.,
LAWRENCE B. SELKOWITZ, ESQUIRE,
and JAMES W. SAXTON, ESQUIRE,
Defendants.
IN THE COURT OF COMMON PLEAS
CUMBERLAND COUNTY
NO. 2011-323 CIVIL TERM
JURY TRIAL DEMANDED
CIVIL ACTION
ACCEPTANCE OF SERVICE
I, JEFFREY B. McCARRON, accept service of the Writ of Summons in the above-
referenced matter on behalf of Defendant Stevens & Lee. P.C., and certify that I am authorized
to do so.
SWARTZ CAMPBELL, LLC.
(p l? By:
Dated
Two Liberty Place
50 South 16'h Street, Floor 28
Philadelphia, PA 19102
(215) 564-5190 (P)
(215) 2994301 (F)
CERTIFICATE OF SERVICE
I, Robin Locke Nagele, Esquire, hereby certify that I caused a true and correct copy of
the foregoing Acceptance of Service to be served by U.S. First Class Mail, postage prepaid, upon
the following at the address indicated:
Jeffrey B. McCarron, Esquire
Swartz Campbell LLC
Two Libert Place
50 South 16`h Street, Floor 28
Philadelphia, PA 19102
Date ROBIN LOCKE NAGE E Y
IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY
COMMONWEALTH OF PENNSYLANIA
CARLISLE HMA, LLC d/b/a CARLISLE
REGIONAL MEDICAL CENTER and
NO. 2011-323 CIVIL TERM
HEALTH MANAGEMENT
ASSOCIATES, INC.
Plaintiffs,
Vs.
STEVENS & LEE, P.C.,
LAWRENCE B. SELKOWITZ, ESQUIRE,
and JAMES W. SAXTON, ESQUIRE,
Defendants.
CIVIL ACTION COMPLAINT
NOTICE TO DEFEND
NOTICE
You have been sued in Court. If you wish to defend
against the claims set forth in the following pages, you
must take action within twenty (20) days after this
Complaint and Notice are served, by entering a written
appearance personally or by an attorney and filing in
writing with the Court your defenses or objections to the
claims set forth against you. You are warned that if you
fail to do so the case may proceed without you and a
judgment may be entered against you by the Court
without further notice for any money claimed in the
Complaint or for any other claim or relief requested by
the Plaintiff. You may lose money or property or other
rights important to you.
YOU SHOULD TAKE THIS PAPER TO YOUR
LAWYER AT ONCE. IF YOU DO NOT HAVE A
LAWYER OR CANNOT AFFORD ONE, GO TO OR
TELEPHONE THE OFFICE SET FORTH BELOW TO
FIND OUT WHERE YOU CAN GET LEGAL HELP.
JURY TRIAL DEMANDED
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AVISO
Le han demandado en la cone. Si usted quiere defenderse de
estas demandas expuestas en las paginas siguientes, usted tiene
veinte (20) dial de plazo de la demanda y notificacion para
asentar una comparesencia escrita en persona o por su abogado
y archivar con la corte en forma escrita sus defensas o sus
objeciones a las demandas en contra de su persona. Sea
avisado que si usted no se defiende, la corte puede continuar la
demanda en contra suya y puede entrar una decision contra
usted sin aviso o notificacion adicional por la cantidad de
dinero de la demanda o por cualquier reclamacion hecha por el
demandante. Usted puede perder dinero o propiedad u otros
derechos importantes para usted.
LISTED DEBE DE LLEVAR ESTA DEMANDA A UN
ABOGADO INMEDIATAMENTE. SI NO TIENE
ABOGADO O SI NO TIENE EL DINERO SUFICIENTE
PARA PAGAR TAL SERVICIO, VAYA EN PERSONA O
LLAME POR TELEFONO A LA OFICINA CUYA
DIRECCION SE ENCUENTRA ESCRITO ABAJO PARA
AVERIGUAR DONDE SE PUEDE CONSEGUIR
ASISTENCIA LEGAL.
CUMBERLAND COUNTY BAR ASSOCIATION
Lawyer Referral and Information Service
32 South Bedford Street
Carlisle, PA 17013
1-800-990-9108
717-249-3166
ASSOCIACION DE ABOGADOS DE FILADELFIA
Servicio De Referencia E Informacion Lega
32 South Bedford Street
Carlisle, PA 17013
1-800-990-9108
717-249-3166
POST & SCHELL, P.C.
BY: ROBIN LOCKE NAGELE, ESQ
I.D. NO. 36992
BY: JOHN N. JOSEPH, ESQ.
I.D. NO. 46643
FOUR PENN CENTER, 14TH FLOOR
1600 JOHN F. KENNEDY BLVD.
PHILADELPHIA, PA 19103
(215) 587-1000 (PH)
(215) 587-1444 (FX)
CARLISLE HMA, LLC d/b/a CARLISLE
REGIONAL MEDICAL CENTER and
HEALTH MANAGEMENT
ASSOCIATES, INC.
Plaintiffs,
VS.
STEVENS & LEE, P.C.,
LAWRENCE B. SELKOWITZ, ESQUIRE,
and JAMES W. SAXTON, ESQUIRE,
Defendants.
COMPLAINT
COURT OF COMMON PLEAS
CUMBERLAND COUNTY
NO. 2011-323 CIVIL TERM
JURY TRIAL DEMANDED
CIVIL ACTION
NOW COME, the Plaintiffs, Carlisle HMA, LLC d/b/a Carlisle Regional Medical Center
("Carlisle Regional Medical Center" or the "Hospital") and Health Management Associates, Inc.
(collectively, "HMA"), by and through their legal counsel, Robin Locke Nagele, Esquire and
John N. Joseph. Esquire, and do allege and aver as follows:
1. JURISDICTION AND VENUE
Jurisdiction and venue are proper in the Court of Common Pleas of Cumberland
County because that is where the cause of action arose and where Carlisle Regional Medical
Center has its principal place of business.
2. Plaintiffs hereby make demand for a jury trial pursuant to Pennsylvania Rule of
ATTORNEYS FOR PLAINTIFFS,
CARLISLE HMA, LLC d/b/a
CARLISLE REGIONAL MEDICAL
CENTER and HEALTH
MANAGEMENT ASSOCIATES, INC.
Civil Procedure 1007.1.
II. PARTIES
Plaintiff, Carlisle Regional Medical Center, is a limited liability company
organized and existing under the laws of the Commonwealth of Pennsylvania with its principal
place of business at 361 Alexander Spring Road, Carlisle, Pennsylvania, 17015. Carlisle
Regional Medical Center is a wholly owned subsidiary of Health Management Associates, Inc.
4. Plaintiff, Health Management Associates, Inc. is a corporation organized under
the laws of Florida, with its principal offices at 5811 Pelican Bay Boulevard, Suite 500, Naples,
FL 34108.
Defendant, Stevens & Lee, P.C., is a professional corporation organized and
existing under the laws of the Commonwealth of Pennsylvania with its principal offices located
at 111 North Sixth Street, P.O. Box 679, Reading, PA 19603-0697.
6. Defendant, Lawrence B. Selkowitz, Esquire ("Selkowitz"), is a citizen and
domiciliary of the Commonwealth of Pennsylvania, and is an adult individual licensed to
practice law in the Commonwealth of Pennsylvania, who is employed by Stevens & Lee.
7. At all relevant times hereto, Defendant Selkowitz was the actual and/or ostensible
employee and agent of Defendant Stevens & Lee, acting within the course and scope of his
employment with Defendant Stevens & Lee.
8. Defendant, James W. Saxton, Esquire ("Saxton") is a citizen and domiciliary of
the Commonwealth of Pennsylvania and is an adult individual licensed to practice law in the
Commonwealth of Pennsylvania, who is employed by Stevens & Lee.
9. At all relevant times hereto, Defendant Saxton was the actual and/or ostensible
employee and agent of Defendant Stevens & Lee, acting within the course and scope of his
employment with Defendant Stevens & Lee.
2
10. Defendant Stevens & Lee is vicariously liable for the acts of its employees and
agents, Selkowitz and Saxton.
11. The Defendants are referred to collectively herein as "S&L" or "Stevens & Lee."
III. FACTUAL ALLEGATIONS
12. This action arises out of the negligent mishandling by Stevens & Lee of a
groundless qui tam lawsuit originally captioned United States of America ex rel. Ted D.
Kosenske, M.D. v. Carlisle HMA, Inc., Carlisle Regional Surgery Center, Carlisle Regional
Medical Center, and Hospital Management Associates, Inc., No. 1:05-cv-2184 (M.D. Pa.) ("the
Lawsuit"). The caption was subsequently amended and corrected to include as defendants only
"Carlisle HMA, Inc." [sic] and Health Management Associates, Inc. The Complaint filed in the
Lawsuit ("the Complaint") is attached hereto as Exhibit "A."
13. The Lawsuit was brought under the "whistleblower" provisions of the federal
False Claims Act, by Ted D. Kosenske, M.D. ("Kosenske"), a disgruntled ex-employee and
current competitor of Carlisle Regional Medical Center's exclusive anesthesiology provider
group, Blue Mountain Anesthesia Associates, P.C. ("BMAA"). Kosenske's groundless qui tam
lawsuit, in which he stood to gain substantially from any financial recovery, erroneously alleged
that pain management services performed by him on behalf of Carlisle Regional Medical Center
while employed by BMAA were the result of an unlawful business relationship between the
Hospital and the BMAA physicians (including him) that violated the federal "fraud and abuse"
laws, specifically, the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b) ("AKS"), the Ethics In
Patient Referrals Act, 42 U.S.C. § 1395nn ("Stark"), and the federal False Claims Act, 31 U.S.C.
§ 3731 et seq. ("FCA")
14. The AKS is a broadly worded federal criminal statute that makes it a felony to,
knowingly and willfully, offer, accept, solicit or receive any form of "remuneration" as an illegal
3
inducement to refer a patient for items or services that are reimbursable under federal and state
healthcare programs, including Medicare and Medicaid. The AKS is not intended to prohibit
legitimate business arrangements, and the Office of Inspector General of the Department of
Health and Human Services ("OIG") has promulgated a series of regulatory "safe harbors"
covering such common arrangements as employment agreements, services contracts, office and
equipment leases, and discount arrangements to enable the healthcare industry to continue to
conduct business on a commercially reasonable basis.
15. The Stark law is a broadly worded federal civil statute that prohibits healthcare
entities from billing the Medicare program for the provision of certain specified items or services
that result from a referral by a physician with which the billing entity has a "financial
relationship" unless the financial relationship is structured to meet the requirements of the Stark
statute and interpretive regulations. There are very extensive and comprehensive Stark
regulations that define the boundaries of lawful commercial relationships.
16. The FCA enables the federal government to seek civil recovery of federal funds
paid out as the result of "false or fraudulent" claims. The FCA has been interpreted as
permitting recovery under certain circumstances for funds paid out for legitimate and medically
necessary items and services that were "tainted" by violations of the AKS or the Stark law. The
FCA's qui tam provisions authorize the prosecution of FCA claims by private individuals acting
in the name of the government, even where, as here, the government itself has declined to
prosecute the case.
17. Kosenske's qui tam Lawsuit in this case alleged that the pain management
services he (and others) had provided as agents of BMAA on behalf of Carlisle Regional
Medical Center were "tainted" by AKS and Stark violations arising from the relationship
4
between Carlisle Regional Medical Center and the BMAA physicians, and therefore that all of
the Hospital's billings in connection with its pain management program constituted "false
claims" within the meaning of the FCA.
18. In truth, the Hospital had a lawful, appropriate, and commercially reasonable
exclusive contract relationship with BMAA (not the individual BMAA physicians), in which it
made its facilities available to BMAA, on an exclusive basis, to provide anesthesiology and pain
management services on its behalf and for the benefit of its patients. The arrangement was no
different than the arrangement that hospitals across the country have to secure needed services
such as anesthesiology, radiology, and laboratory medicine to support the provision of services
by other physicians. As is typical, the Hospital did not pay BMAA for its services, and BMAA
did not pay the Hospital for access to its facilities. As is typical, each of the parties to the
arrangement billed patients and their insurers (including Medicare and Medicaid) separately for
the facilities and services each provided. The fact that this was a completely ordinary and non-
remarkable relationship is confirmed by the fact that: (i) the United States Department of Justice
declined to exercise its right to intervene and pursue Kosenske's meritless allegations, and (ii)
after the matter was settled by Kosenske and HMA, the OIG opted not to pursue any
administrative sanction or seek a Corporate Integrity Agreement from HMA.
19. During the course of its representation of HMA, S&L continuously advised HMA
that the qui tam allegations regarding its contract with BMAA were without merit and that this
was a case that HMA should win.
20. Notwithstanding those representations, S&L negligently breached its professional
obligation to properly defend the case by failing to assert and preserve critically important
factual and legal defenses.
21. By virtue of S&L's negligence in failing to assert and preserve conclusive and
winning defenses, HMA was ultimately precluded from asserting dispositive winning arguments
that would have defeated the meritless allegations brought by Kosenske, thus forcing Carlisle
Regional Medical Center, instead, to pay a substantial settlement to avoid exponentially higher
financial exposure under the FCA.
THE AGREEMENT
22. BMAA was formed in late 1992 by the four anesthesiologists who, prior to that
time, provided all the anesthesiology services to Carlisle Regional Medical Center's predecessor
in interest, referred to herein as "Carlisle Hospital."
23. The original four shareholders of BMAA were Howard Alster (President), Judy
Baumgart, Ron Sola and Kosenske.
24. On or about December 31, 1992, BMAA (not the individual BMAA physicians)
and Carlisle Hospital entered into an Anesthesiology Services Agreement ("Agreement"), a fully
executed agreement for an indefinite term, terminable only for cause. This Agreement gave
BMAA the exclusive right to provide all anesthesiology services (including pain management
services) on behalf of Carlisle Hospital, throughout the term of the Agreement, at the original
and any new locations where the Hospital would be providing such services.
25. BMAA, through Kosenske, was developing a pain management practice at the
time the Agreement was entered into, and the contract entitled BMAA to be the Hospital's
exclusive provider of anesthesia and pain management "wherever the hospital goes." BMAA,
primarily through Kosenske himself, started providing pain management services pursuant to the
terms of the Agreement within months of the Agreement's execution.
6
26. Under the terms of the Agreement, Carlisle Hospital provided all of the space,
equipment and staffing needed to support the provision of anesthesiology and pain management
services, and, pursuant to usual and customary billing practices, billed patients for such space,
equipment and staffing through the "technical fee" (which, in the case of inpatient
anesthesiology services, was included within a predetermined prospective fixed fee known as a
"Diagnostic Related Grouping" or "DRG" and, in the case of pain management, was billed
separately by the Hospital).
27. BMAA provided the "professional" component of all professional anesthesiology
and pain management services provided at the Hospital, and, pursuant to usual and customary
billing practices, billed patients for such services through a "professional fee."
28. In or about 1998, Carlisle Hospital and BMAA decided that the pain management
service, which had grown considerably since 1992 and had outgrown the space available in the
Hospital's surgical suite, should be moved to a new Hospital location. Accordingly, when
Carlisle Hospital constructed an outpatient facility a few miles from its main campus, Carlisle
Hospital and BMAA moved the pain management service to this new location, where it
continued to be operated in the same manner as it had at the main campus, as an outpatient
department of the Hospital. As it had at the main hospital campus, Carlisle Hospital provided
space, equipment and staffing and billed payors a "technical fee" for these things, while BMAA
provided the professional component of the pain management services and billed its
"professional fee." Patients registered as Hospital outpatients, and procedures were billed as
Hospital outpatient procedures.
29. The Agreement was still in effect in June, 2001, the date that Carlisle HMA, LLC
acquired the assets of Carlisle Hospital, and succeeded to Carlisle Hospital's rights under the
Agreement. The Agreement remained in effect between BMAA and Carlisle Regional Medical
Center at all relevant times pertinent hereto.
KOSENSKE'S QUI TAM LAWSUIT AND
ENSUING DISTRICT COURT LITIGATION
30. On or about October 26, 2005, Kosenske filed the Lawsuit.
31. Pursuant to the provisions of the FCA, the Lawsuit was initially filed in camera
and under seal, and was referred to the United States Government to make a determination as to
whether or not to intervene in the action. HMA and Carlisle Regional Medical Center were
unaware of the action until in or about 2006.
32. In the Lawsuit, Kosenske erroneously alleged that Carlisle Regional Medical
Center was illegally providing free rent, equipment and supplies at its outpatient facility to
BMAA (primarily Kosenske) in return for patient referrals in violation of Stark and the AKS.
Kosenske asserted that these alleged violations of Stark and AKS rendered the Hospital's
billings for pain management services "false claims" within the meaning of the FCA.
33. Specifically, Kosenske erroneously alleged that the Hospital was not billing, and
could not bill, any "technical fee" for those pain management services that constituted only
Evaluation and Management Services ("E/M Services") because E/M Services constituted purely
professional services, with no billable technical component.
34. The alleged factual predicate for Kosenske's claims is set forth in the qui tam
Complaint. Kosenske's Complaint included the following demonstrably false and inaccurate
factual and legal allegations:
That Carlisle Regional Medical Center maintained a pain clinic "through"
a Medicare-certified Ambulatory Surgery Center ("ASC") (as opposed to
a hospital outpatient department, which is how the services were actually
provided). (Complaint, ¶¶ 47-48, 62).
8
b. That Carlisle Regional Medical Center submitted the claims as though
they were outpatient hospital services, when in fact they should have been
billed as ASC services. (Complaint, ¶ 63).
C. That the majority (65 percent) of BMAA's pain management practice was
Physician E/M Services which are "100 percent reimbursable" to the
physicians, with no corresponding reimbursement to the hospital through a
facility fee. (Complaint, ¶¶ 54-58, 75).
d. That the pain clinic consists of 1,526 square feet of space located within
the ASC that includes three medical examination rooms, a nursing station,
patient restrooms, medical secretary space and waiting area, which is used
exclusively for Physician Billable E/M Services. (Complaint, ¶ 71).
e. That Carlisle Regional Medical Center provided approximately $62,000
per year in "free space," as well as $133,090 per year in "free equipment
and services," thus allowing the BMAA physicians to bill for E/M
Services without incurring any overhead cost. (Complaint, ¶¶ 81, 96).
f. That Carlisle Regional Medical Center "forgave" the BMAA physicians'
rental payment demand and obligations in order to secure their allegiance
and maintain the Hospital's $300,000 per year profit stream from the pain
management procedures and to avoid BMAA's developing a competing
pain management center.
g. That HMA "knew" or acted in "reckless disregard" or "deliberate
ignorance" of the fact that it had an obligation to collect rent and secure
payments and agreement so as to comply with Stark and AKS.
These untrue allegations were based on a fundamentally false premise - namely that BMAA was
providing pain management services as a private professional service as opposed to as a hospital
service. The actual arrangement between Carlisle Hospital and BMAA for the provision of pain
management services was a lawful and typical hospital-physician arrangement.
35. In the Complaint, the plaintiff sought the following relief from the court:
a. Order BMAA and HMA to develop compliant written agreements
documenting the space, equipment and staff arrangements and paying
HMA all past amounts due for rental, equipment and staffing costs.
b. Enjoin further submission of claims for the pain management services
until proper agreements are in place and all past due amounts paid.
C. Judgment for plaintiff for the false claims with trebling and payment of
appropriate penalties.
9
d. Allocation of up to 25 percent of the award for Kosenske.
e. Attorneys fees for Kosenske.
36. Based on the false allegation that Carlisle Regional Medical Center was not
billing, and could not properly bill, payors for the E/M Services, Kosenske incorrectly alleged
that Carlisle Regional Medical Center's failure to seek payment from the BMAA physicians or
BMAA for the space, equipment and supplies constituted illegal remuneration to BMAA and/or
the BMAA physicians within the meaning of Stark and AKS.
37. Kosenske's original factual and legal premise was completely wrong: Carlisle
Regional Medical Center had, in fact, lawfully billed and collected the technical facility fee for
all pain management services, including E/M services, provided through its outpatient
department.
38. In addition, Kosenske's premise that the relationship between Carlisle Regional
Medical Center and BMAA created a "financial relationship" between Carlisle Regional
Medical Center and the BMAA physicians for purposes of the Stark law was incorrect as a
matter of fact and law.
39. On or about June 19, 2006, the government, after investigating Kosenske's
allegations against Carlisle Regional Medical Center and HMA, declined to intervene in the
Lawsuit. On or about June 29, 2006, the Complaint was unsealed. On or about July 21, 2006,
Kosenske filed an Affidavit of Service stating that all defendants had been served with the
Summons and Complaint and other documents of record on July 17, 2006.
40. On or about August 8, 2006, HMA, through attorney Joseph A. Ricci, Esquire
filed an answer with affirmative defenses to plaintiff's Complaint ("the Answer"). The Answer
included the following factual averments:
10
The pain management services provided by BMAA were not in a
separately licensed facility but were provided, appropriately, through an
outpatient department of the hospital. (Answer, at Introduction).
b. BMAA provided pain management services through an exclusive contract
that covered the entire hospital, including its outpatient pain management
department. (Answer, ¶ 48).
C. All pain management services, including E/M Services and procedures,
are performed in the same location. (Answer, ¶ 52).
d. E/M Services are not solely physician services, but also provide a
technical and facility component. (Answer, ¶T 54-59, 70).
All billing by Carlisle Regional Medical Center is properly for the
technical component of outpatient services, and should not be billed
according to a composite ASC rate. (Answer, ¶ 65).
f. BMAA's pain management services are distinguishable from a physician's
private professional services in his own office because they include a
facility and technical component which would not be true for a private,
non-hospital based physician service. (Answer, ¶ 67).
g. The space occupied by BMAA at the outpatient center was provided
pursuant to the terms of the exclusive contract between BMAA and
Carlisle Regional Medical Center, and the terms for its use are set forth in
that contract. (Answer, ¶ 72-73).
h. The space occupied by BMAA is not used exclusively for pain
management services but is also used for ophthalmology services.
(Answer ¶ 74).
The BMAA physicians are "under contract to provide professional
medical services for the benefit of the patients" of the hospital. They are
not being offered or provided any "inducements" to refer patients to the
hospital. (Answer, ¶¶ 82, 85).
The use of exclusive contracts for anesthesiology and other house-based
services is standard in the industry in order to promote higher quality of
care and 24/7 coverage. (Answer, ¶¶ 140, 169).
41. During the discovery phase of the Lawsuit, it became clear that Kosenske's
predicate factual allegations were wrong because he had failed to recognize the fact that (i) the
pain clinic operated as an outpatient department of the hospital, and not a private practice, and
(ii) the relationship between Carlisle Regional Medical Center and BMAA did not create a
"financial relationship" for Stark purposes between Carlisle Regional Medical Center and the
BMAA physicians (as opposed to BMAA itself). Under standard billing rules and practices,
Hospital outpatient clinics bill patients and their insurers for the cost of providing space,
equipment and supplies to support the provision of outpatient professional service, and the
Hospital was therefore precluded as a matter of law from seeking payment from BMAA or the
BMAA physicians. Under then prevailing Stark regulations, the agreement between Carlisle
Regional Medical Center and BMAA did not create a "financial relationship" between the
plaintiffs and the BMAA physicians (as opposed to BMAA itself) for Stark purposes.
Furthermore, exclusivity alone is not and has never been construed as establishing a "financial
relationship" for Stark and AKS purposes.
STEVENS & LEE ENTERS ITS APPEARANCE
42. On or about December 27, 2006, Stevens & Lee, through Selkowitz and Saxton,
entered its appearance and took over the handling of the case.
43. On information and belief, after S&L entered its appearance in the case and
assumed responsibility for the defense of the case, all of the strategic decisions were made
exclusively by S&L and not by Ricci.
44. After assuming responsibility for the defense, S&L proceeded with a certain
amount of investigation and discovery. However, despite the extremely high stakes of the
litigation, S&L's factual work-up of the case fell far below the standard of professional practice.
By way of example (and not of limitation), S&L:
a. failed to interview, take the depositions of, and/or identify for trial a large
number of critically important fact witnesses, including former hospital,
corporate and compliance personnel.
b. failed to obtain expert consultation on critically important issues such as
the complex Medicare/Medicaid billing requirements, Stark and AKS
interpretation based on regulations, commentary and industry standards,
12
and the fair market value element of the personal services exception and
safe harbor.
C. failed to subpoena and obtain BMAA's billing records, and to
comprehensively audit and analyze the Hospital's own billing records, to
gather further proof that Kosenske's central factual allegations were
incorrect.
d. failed to consult with or identify experts or produce any expert reports
within the discovery deadline imposed by the court.
45. During its investigation of the case, S&L developed the factual predicate
necessary to establish that Kosenske's foundational allegations were false, because (i) the
Hospital was, in fact, being reimbursed for the space, equipment and supplies utilized in its pain
management program through the "technical fee" billed to patients and insurers, and as such,
could not have billed the physicians for such space, equipment and supplies, and (ii) there was
no "direct or indirect financial relationship" between Carlisle Regional Medical Center and the
BMAA physicians for Stark purposes.
46. Although the evidentiary basis for these winning defenses had been established in
discovery, S&L never argued to the court that (i) the requisite liability element of
"remuneration" in the form of free rent to the BMAA physicians or BMAA did not exist because
Medicare and other payors were properly reimbursing Carlisle Regional Medical Center for its
technical facility fee, and that therefore HMA could not have lawfully billed BMAA or the
BMAA physicians for these items, and (ii) there was no "direct or indirect financial relationship"
between HMA and the BMAA physicians within the meaning of the Stark regulations.
Consequently, the opportunity to assert and preserve these winning defenses was lost.
STEVENS & LEE's DEFICIENT HANDLING OF
SUMMARY JUDGMENT CROSS-MOTIONS
47. On or about June 6, 2007, S&L filed a Motion for Summary Judgment against
plaintiff on both Stark and AKS grounds. Kosenske opposed the Motion for Summary Judgment
13
and filed his own Motion for Summary Judgment limited to the Stark issues, which S&L
opposed, using the same arguments that it had advanced in support of its own Motion for
Summary Judgment.
48. S&L's affirmative Motion for Summary Judgment on HMA's behalf, along with
its response to Kosenske's motion, inexplicably omitted HMA's strongest and incontrovertible
arguments, and made other fatal errors that ultimately caused HMA to forever lose key defenses
for trial and on appeal.
49. Most importantly, S&L failed to make the affirmative argument that there was no
predicate financial or remunerative relationship between the parties, an essential prerequisite for
Stark and AKS liability, because (i) there was no "free" space, equipment, supplies or personnel
provided to the BMAA physicians or BMAA because the pain management practice was a
hospital-based service for which HMA was properly billing and collecting a technical fee from
patients and payors and therefore HMA could not lawfully have charged BMAA or the BMAA
physicians for these items, and (ii) there was no "direct or indirect financial relationship"
between Carlisle Regional Medical Center and the BMAA physicians for purposes of the Stark
law; and (iii) exclusivity alone has never been found to create a financial or remunerative
relationship for Stark and AKS purposes.
50. Instead of asserting the affirmative winning argument that there was no
"remuneration" paid to the BMAA physicians or BMAA and no "financial relationship" between
Carlisle Regional Medical Center and the BMAA physicians, S&L made the narrow, circular
argument that there was no "financial relationship" for Stark and AKS purposes simply because
HMA and BMAA had entered into a "personal services agreement" that was legally compliant
under Stark and AKS.
14
51. While claiming that no financial relationship existed due to the "personal
services" exception, S&L was in reality conceding that there was in fact a prima facie financial
relationship for Stark and AKS purposes, but that it was excepted from liability by the Stark and
AKS regulations.
52. S&L's reliance solely on the "personal services" exception stripped HMA of the
winning legal argument that no prima facie "financial relationship" existed, because (i) the
Hospital never paid any remuneration in the form of free rent as it had lawfully billed for and
received fees for the space, equipment and supplies used in the pain management practice, and
therefore could not have charged BMAA or the BMAA physicians for these items, (ii) the
Hospital had no "direct or indirect financial relationship" with the BMAA physicians within the
meaning of the Stark regulations, and (iii) exclusivity alone has never been found to create a
financial or remunerative relationship for Stark and AKS purposes. The loss of these
incontrovertible defenses inured to the extreme prejudice of HMA's ability to successfully
defend the case.
53. Having relied exclusively on the "personal services" exception, S&L then
compounded its error by failing to produce essential evidence required to meet HMA's burden of
proving the specific elements of the "personal services" exception, including, most significantly,
(i) fact testimony needed to establish that there was a written agreement covering the pain
management services, and (ii) expert testimony required to prove that the arrangement was "fair
market value," as is required under Pennsylvania law.
54. S&L's handling of the Stark issues at the Summary Judgment stage ultimately
doomed HMA's Stark defense, by (i) restricting HMA's defense to a single contention - i.e., that
HMA had complied with the "personal services" exception to Stark, and then (ii) failing to put
15
forth essential proof required to meet HMA's burden of establishing that HMA had complied
with the Stark "personal services" exception, including essential fact testimony and expert
testimony required under Pennsylvania law.
55. S&L's handling of the AKS issues at the Summary Judgment stage ultimately
doomed HMA's AKS defense, by (i) restricting HMA's defense to a single contention - i.e., that
HMA had complied with the "personal services" safe harbor under the AKS, (ii) failing to put
forth essential proof required to meet HMA's burden of establishing that HMA had complied
with the AKS "personal services" exception, including essential fact testimony and expert
testimony required under Pennsylvania law, and (iii) failing to argue that even if the court were
to find that there was a financial relationship between HMA and BMAA that did not qualify for
the "personal services" safe harbor, Kosenske still could not prevail because there was no
evidence of intent to violate the AKS.
56. This fatal flaw in S&L's presentation of HMA's case directly and inexorably led
to a Third Circuit opinion on Summary Judgment that was so devastating to HMA's underlying
case that it could not risk taking the case to trial and risk paying treble damages plus civil
penalties.
57. S&L's Motion for Summary Judgment on behalf of HMA contained additional
clear and fatal deficiencies, including, but not limited to, the following:
a. failing to argue or proffer evidence or expert testimony to explain that the
Medicare billing regulations treat physician services differently for billing
purposes depending on whether those services are offered through a
hospital outpatient department, private practice, or freestanding center, all
of which factored into Kosenske's erroneous premise in filing the action,
and the lack of viability of his claims;
b. failing to distinguish between the Stark and AKS legal theories in making
its arguments in support of and opposition to summary judgment, thus
leading to unwarranted adverse rulings, on appeal, as to both the Stark and
AKS causes of action;
16
C. failing to distinguish between Stark and AKS regulatory analysis on the
issue of whether "exclusivity" creates a "financial relationship" for either
Stark or AKS purposes;
d. treating the Stark personal services "exception" and the AKS personal
services "safe harbor" as if they are identical, which they are not;
e. failing to argue on summary judgment that the failure to fit within an AKS
"safe harbor" does not equate to a violation of the AKS, absent proof of
intent to violate the statute;
f. failing to argue that Kosenske could not establish intent for purposes of a
predicate AKS violation;
g. failing to introduce into the summary judgment record the facts essential
to proving that HMA was in full compliance with the Stark "personal
services" exception and the AKS "personal services" safe harbor,
including, but not limited to, (i) essential fact witness testimony to rebut
Kosenske's pointed argument that the 1992 Agreement did not extend to
pain management services provided at the pain clinic; and (ii) essential
expert witness testimony needed to establish that the arrangement between
the Hospital and BMAA was a fair market value arrangement;
h. making the patently frivolous argument that there was no "referral" within
the meaning of the Stark law, despite clear regulatory guidance to the
contrary set forth in 42 CFR § 411.351, thus damaging HMA's credibility
and inviting Third Circuit reversal;
failing to proffer necessary and appropriate facts and make necessary and
appropriate legal arguments in support of HMA's motions and in
opposition to Kosenske's motion.
58. S&L's response to Kosenske's motion contained the same fatal deficiencies that
were in its original motion.
THE DISTRICT COURT'S ERRONEOUS OPINION
59. On or about November 14, 2007, the District Court granted S&L's defective
Motion for Summary Judgment, and denied Kosenske's Motion for Summary Judgment. The
District Court's Opinion demonstrates that S&L's submission of a legally deficient evidentiary
record and legally deficient legal arguments in its moving and opposing papers misled the
District Court into a significant reversible error. The District Court reached the correct result but
17
for the wrong reasons - adopting legally unsustainable arguments put forth by S&L that led it
into reversible error, and failing to articulate the reasons that S&L should have, but did not,
bring forth, as to why HMA should prevail in the case.
60. The particularly harmful elements of the District Court opinion caused by S&L's
negligence include, but are not limited to, the following:
a. As a direct result of S&L's fatally flawed arguments, the District Court
erroneously concluded, as a matter of law, that the exclusive right to
provide services as well as the receipt of "office space, medical equipment
and clerical personnel without charge" constituted "remuneration" which
created a "financial relationship" for Stark purposes. (Trial Court
Opinion, pp. 16-17). S&L led the District Court into this reversible error
by failing to present and support the essential arguments that neither the
exclusivity nor the provision of rent, equipment and staff constituted
"remuneration" or created a "financial relationship" for Stark purposes
because (i) the hospital was, in fact, being reimbursed for the rent,
equipment and staff through the "technical fee" and therefore could not
have lawfully billed the BMAA physicians or BMAA for these items; (ii)
the hospital did not have a direct or indirect relationship with the BMAA
physicians within the meaning of the Stark regulations; and (iii)
exclusivity alone has never created a financial relationship for Stark
purposes.
b. As a direct result of S&L's fatally flawed and deficient summary
judgment presentation, the District Court judge decided that there was no
"financial relationship" between Carlisle Regional Medical Center and the
BMAA physicians based solely on its conclusion that Carlisle Regional
Medical Center had complied with the "personal services" exception to
Stark, which conclusion was ultimately unsustainable because of the
deficiency of the proofs presented by S&L.
As a direct result of S&L's failure to acknowledge and meet Kosenske's
compelling argument that HMA had the burden of proof on the elements
of the statutory "personal services" exception, S&L created an evidentiary
record that was so inadequate that the District Court lacked the necessary
factual foundation to support its ruling in favor of HMA.
d. S&L's failure to distinguish the different elements for establishing liability
under the AKS and the Stark statute misled the District Court into
erroneously treating the AKS and Stark analysis as legally
indistinguishable theories of liability, thereby converting Kosenske's
Stark-based summary judgment motion into a de facto AKS-based
summary judgment motion in terms of its legal effect.
18
e. The District Court determined that Carlisle Regional Medical Center and
HMA had the burden of proof on the "Fair Market Value" ("FMV")
element of the Stark exception. S&L failed, however, to present any
affirmative evidence that the agreement satisfied the FMV element of the
Stark exception, notwithstanding defendant Selkowitz's admission in
correspondence to HMA that proof of FMV requires expert testimony.
Left without any affirmative proof from which to derive FMV, the District
Court was then led into error when it adopted S&L's tautological
argument that "by definition, the terms of the contract reflect the fair
market value of the benefits conferred on each party." (Trial Court
Opinion, page 27). S&L's complete failure to present any evidence to
support its contention that the contract was for FMV was at odds with
existing well established legal precedent and was a material factor in the
Third Circuit's ultimate reversal.
f. Because S&L had not presented the argument, the District Court failed to
determine that the AKS-based claim failed as a matter of law because
there was no intent to violate the AKS.
THE THIRD CIRCUIT'S REVERSAL AND
SETTING OF THE LAW OF THE CASE
61. S&L's negligent handling of the appeal compounded the problems created by
S&L's inadequate and defective Summary Judgment record and the District Court's resulting
opinion. Without difficulty, Kosenske's appellate briefing handily exposed the serious flaws in
the District Court's decision that had adopted S&L's flawed arguments, focusing, in particular
on:
a. the absence of proof of fair market value and the District Court's
remarkable conclusion that fair market value could be inferred merely
from the fact of a negotiated agreement.
b. the absence of proof that the 1992 Agreement covered the pain
management services provided at the outpatient department.
C. the Trial Court's "alternative" holding that BMAA could not make any
referrals to the Hospital under a provider-based arrangement.
62. S&L's appellate response ignored Kosenske's legal arguments, and simply
reiterated the same flawed arguments it had presented in the District Court, including its legally
19
unsustainable argument that the Stark definition of "referral" is fundamentally at odds with the
requirements of separate provider-based billing regulations.
63. The Third Circuit made short shrift of the District Court's analysis that it had
adopted from S&L's flawed legal arguments, and in so doing, established as the binding law of
the case, that: (i) the BMAA/HMA arrangement created a remunerative relationship for purposes
of Stark and AKS analysis; and (ii) the BMAA/HMA arrangement did not meet the requirements
of the "personal services" exception/safe harbor under either Stark or AKS.
64. The Third Circuit also treated the AKS and Stark analysis as "indistinguishable."
(Third Circuit Opinion, at 4). As a direct consequence, HMA was precluded from asserting key
winning defenses. Specifically, the Third Circuit ruled, in relevant part, as follows:
a. the 1992 Agreement did not cover pain management services at the new
facility;
b. the receipt of office space, equipment and support personnel, along with
the grant of exclusivity, created a remunerative relationship for Stark and
AKS purposes;
HMA had the burden of demonstrating its right to a Stark or AKS
exception/safe harbor, and it failed to carry its burden;
d. the arrangement for pain management services did not fit within the
"personal services" exception/safe harbor under Stark or AKS because:
i. there was no written contract; and
ii. there was no proof that it was a "fair market value" arrangement.
e. S&L's argument that there could be no "referral" for Stark or AKS
purposes, because pain management was an outpatient hospital service,
was contrary to the text of applicable regulations.
65. The Third Circuit reversed the District Court's grant of Summary Judgment in
HMA's favor and remanded the case for "further proceedings consistent with this opinion." In a
footnote, the Third Circuit stated that the sole issue left for resolution was whether HMA
20
possessed the requisite knowledge or intent to violate the False Claims Act. The Third Circuit
ruling thus eliminated forever major winning defenses devastating HMA's underlying case.
SUBSEQUENT PROCEEDINGS AND FORCED SETTLEMENT
66. S&L filed a Petition for Rehearing with the Third Circuit but that Petition was
denied.
67. The Sonnenschein firm entered its appearance and took over the handling of the
case from S&L, and in a renewed Motion for Summary Judgment sought to finally assert the key
defenses that S&L should previously have timely raised.
68. After the subsequent cross-motions for summary judgment, the District Court
held that the Third Circuit's opinion had foreclosed significant portions of HMA's defense. The
District Court, on remand ruled that the Third Circuit's mandate:
a. precluded it from considering, anew, whether there was a "financial
relationship" between the parties for Stark purposes;
b. precluded it from considering whether the individual BMAA physicians
had a "financial relationship" with HMA for Stark purposes; and
c. held that there was a question of fact as to whether HMA possessed the
requisite scienter to violate the FCA.
69. The District Court further rejected HMA's summary judgment motion on the
AKS claims, ruling that Kosenske had created a sufficient factual dispute as to the issues of AKS
intent and FCA scienter to warrant a trial.
70. S&L's multiple and egregious errors foreclosed the assertion of absolute defenses
on behalf of HMA and compromised its position to such a degree that HMA was forced to settle
this otherwise meritless case for a substantial sum, rather than expose itself to an exponentially
higher amount under the False Claims Act at trial without the incontrovertible defenses that S&L
failed to plead, support and preserve.
21
71. But for S&L's negligent failures to plead, support and/or preserve conclusive and
dispositive defenses, its negligent assertion of meritless legal positions without any legal
authority, and its failure to address in any manner the legal arguments raised by Kosenske at the
District Court level and at the Third Circuit Court of Appeals, HMA would have been
exonerated. But for S&L's negligent representation of HMA, Kosenske's claims would have
been dismissed because HMA's agreement with BMAA was a legal and appropriate garden
variety contract that did not violate any federal laws.
72. But for S&L's negligent representation, HMA would not have been precluded
from asserting defenses that would have defeated Kosenske's allegations and they would not
have been forced to pay a substantial settlement to avoid going to trial without the defenses that
S&L failed to plead, support and preserve.
FIRST CLAIM FOR RELIEF AGAINST ALL DEFENDANTS
Professional Negligence
73. Plaintiffs incorporate by reference all the allegations contained in paragraphs 1
through 72, inclusively, as though same were set forth more fully at length herein.
74. Defendants were retained to, charged for, were paid for, and assumed
responsibility for defending HMA in the Lawsuit.
75. The Defendants Stevens & Lee, Lawrence D. Selkowitz, Esquire and James W.
Saxton, Esquire, acted jointly and severally in their representation of Carlisle Regional Medical
Center and Health Management Associates, Inc.
76. The Defendants Stevens & Lee, Lawrence D. Selkowitz, Esquire and James W.
Saxton, Esquire, jointly and severally, failed to exercise the competence and diligence normally
exercised by lawyers in similar circumstances in their representation of Carlisle Regional
Medical Center and Health Management Associates, Inc., by among other things:
22
Failing to make the threshold argument that the parties did not have a
financial or remunerative relationship for Stark or AKS purposes because
(i) there was no "remuneration" paid to the BMAA physicians or BMAA
in the form of free rent as the Hospital was independently billing for the
space, equipment and supplies used in the provision of pain management
services and could not lawfully have charged BMAA or the BMAA
physicians for those items, (ii) the parties did not meet the test for a
"direct or indirect financial relationship" under Stark, and (iii) exclusivity
alone has never been held to create a "financial relationship" for Stark or
AKS purposes;
b. Failing to proffer any expert testimony on "fair market value" despite well
established legal precedent stating that fair market value requires expert
opinion testimony and that HMA had the burden of proof on this issue;
C. Failing to proffer fact testimony (by way of affidavit or deposition)
sufficient to defeat Kosenske's argument that the long-standing written
services agreement between the parties did not encompass the provision of
pain management services in the hospital outpatient department;
d. Failing to offer expert testimony to explain why the Hospital's receipt of a
technical fee negated any possible finding of "remuneration" and a
"financial relationship";
e. Failing to distinguish between the Stark and AKS legal theories, and
therefore, failing to argue lack of "intent" under the AKS;
£ Failing to assert the intent-based defense that failure to comply strictly
with the terms of an AKS safe harbor does not mean that the conduct was
illegal because liability under the AKS required Kosenske to prove intent;
g. Failing to put forth an appropriate evidentiary record and sufficient legal
argument to sustain HMA's burden of establishing the existence of a
Stark- and AKS-compliant personal services agreement;
h. Relying on a weak and unsustainable argument, without any legal
authority, that there was no "referral" for Stark purposes;
Asserting the legally meritless and erroneous argument that, because the
BMAA physicians were providing pain management services through a
hospital outpatient department, they were legally incapable of making
"referrals" to the Hospital for purposes of imposing liability under Stark;
Failing to adduce and present any expert testimony to address, as a matter
of evidentiary proof (as opposed to legal argument) the complexities of the
Medicare/Medicaid billing system and the nuances of the federal fraud and
abuse laws;
23
k. Failing to provide competent representation to a client;
Failing to act with reasonable diligence and promptness in representing a
client;
in. Failing to adequately supervise subordinate attorney(s);
n. Waiving HMA's defenses by failing to assert them;
o. Otherwise failing to use the care, skill and diligence reasonable under the
circumstances.
77. Defendants' acts and omissions, more fully described above, failed to conform to
the standards of the practice of law among attorneys with respect to defending a healthcare
provider from qui tam allegations alleging violations of the Anti-Kickback Statute, the Stark
Statute and the federal False Claims Act.
78. As a direct and proximate result of the Defendants' negligence, Carlisle Regional
Medical Center and Health Management Associates, Inc. have incurred damages, losses, costs
and expenses in excess of $50,000, which are more fully described above.
WHEREFORE, on Count I, Plaintiffs Carlisle HMA, LLC and Health Management
Associates, Inc. demand judgment in their favor against the Defendants Stevens & Lee, P.C.,
Lawrence B. Selkowitz, Esquire and James W. Saxton, Esquire, jointly and severally, and
demand all damages sustained as a result of Defendants' negligence, together with attorneys
fees, costs, expenses and interest as provided by law, and such other relief as the Court deems
just and appropriate.
SECOND CLAIM FOR RELIEF AGAINST ALL DEFENDANTS
Breach of Contract
79. Plaintiffs Carlisle Regional Medical Center and Health Management Associates,
Inc. incorporate by reference paragraphs 1 through 78 as though fully set forth at length herein.
24
80. Defendant Stevens & Lee (including Defendants Selkowitz and Saxton), entered
into an agreement with Plaintiffs Carlisle Regional Medical Center and Health Management
Associates, Inc. to provide legal services in connection with defending qui tam allegations under
the federal False Claims Act, in the Lawsuit.
81. No written fee agreement setting forth the basis or the rate of fees and the scope
of the representation is known to exist. The agreements between the Defendant Stevens & Lee
and HMA were oral.
82. Defendants were retained to, charged for, were paid for, and assumed
responsibility for defending HMA in the Lawsuit.
83. Defendant Stevens & Lee breached its agreement with HMA by, among other
things:
a. Failing to make the threshold argument that the parties did not have a
financial or remunerative relationship for Stark and AKS purposes
because (i) the Hospital was independently billing for the space,
equipment and supplies used in the provision of pain management services
and could not lawfully have charged BMAA or the BMAA physicians for
those items, (ii) the parties did not meet the test for a "direct or indirect
financial relationship" under Stark and (iii) exclusivity alone has never
been held to create a "financial relationship" for Stark or AKS purposes;
b. Failing to proffer any expert testimony on "fair market value" despite well
established legal precedent stating that fair market value requires expert
opinion testimony and that HMA had the burden of proof on this issue;
C. Failing to proffer fact testimony (by way of affidavit or deposition)
sufficient to defeat Kosenske's argument that the long-standing written
services agreement between the parties did not encompass the provision of
pain management services in the hospital outpatient department;
d. Failing to offer expert testimony to explain why the Hospital's receipt of a
technical fee negated any possible "financial relationship";
e. Failing to distinguish between the Stark and AKS legal theories, and
therefore, failing to argue lack of intent under the AKS;
25
f. Failing to assert the intent-based defense that failure to comply strictly
with the terms of an AKS safe harbor does not mean that the conduct was
illegal because liability under the AKS required Kosenske to prove intent;
g. Failing to put forth an appropriate evidentiary record and sufficient legal
argument to sustain HMA's burden of establishing the existence of a
Stark- and AKS-compliant personal services agreement;
h. Relying on a weak and unsustainable argument, without any legal
authority, that there was no "referral" for Stark purposes;
Asserting the legally meritless and erroneous argument that, because the
BMAA physicians were providing pain management services through a
hospital outpatient department, they were legally incapable of making
"referrals" to the Hospital for purposes of imposing liability under Stark;
Failing to adduce and present any expert testimony to address, as a matter
of evidentiary proof (as opposed to legal argument) the complexities of the
Medicare/Medicaid billing system and the nuances of the federal fraud and
abuse laws;
k. Failing to provide competent representation to a client;
Failing to act with reasonable diligence and promptness in representing a
client;
in. Failing to adequately supervise subordinate attorney(s);
n. Waiving HMA's defenses by failing to assert them;
o. Otherwise failing to use the care, skill and diligence reasonable under the
circumstances.
84. S&L's failure to fulfill its contractual obligation to provide a competent legal
representation to Health Management Associates, Inc. and Carlisle Regional Medical Center
caused significant damages, losses, costs and expenses in excess of $50,000, which are more
fully described above.
85. Plaintiffs Health Management Associates, Inc. and Carlisle Regional Medical
Center are entitled to recover from S&L the full amount of all fees, costs and other expenses paid
to S&L during the course of the engagement.
26
WHEREFORE, on Count II, Plaintiffs Carlisle HMA, LLC and Health Management
Associates, Inc. demand judgment in their favor and against the Defendants Stevens & Lee, P.C.,
Lawrence B. Selkowitz, Esquire and James W. Saxton, Esquire, jointly and severally, and
demand all damages sustained as a result of Defendants' breach of contract, together with
attorneys fees, costs, expenses and interest as provided by law, and such other relief as the Court
deems just and appropriate.
Respectfully submitted,
POST & SCHELL, P.C.
ROBIN LOCKE NAGELE, SQUIRE
JOHN JOSEPH, ESQUIRE
Attorneys for Plaintiffs,
Carlisle HMA, LLC and Health Management
Associates, Inc.
27
VERIFICATION
I, Timothy R. Parry, Esquire, an authorized representative of Plaintiffs Carlisle HMA,
LLC and Health Management Associates, Inc., do hereby verify that I have personal knowledge
of the facts and matters set forth in the foregoing Civil Action Complaint, and that the facts
stated therein are true and correct to the best of my knowledge, information, and belief. The
allegations of the Civil Action Complaint are based on information furnished to counsel under
my direction. The language of the Civil Action Complaint is that of counsel and not my own.
This verification is made subject to the penalties 18 Pa. C.S. § 4904, relating to unworn
falsification to authorities.
Timothy R. Parri/, Esquire
Senior Vice President and
Dated: January 7, 2011
EXHIBIT "A"
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 1 of 45
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
United States of America ex rel Ted D.
Kosenske, M.D., Civil Action No.
Plaintiff
V.
FILED IN CAMERA AND
UNDER SEAL
Carlisle HMA, Inc., Carlisle Regional : JURY TRIAL DEMANDED
Surgery Center, Carlisle Regional
Medical Center, and Hospital
Management Associates, Inc.,
Defendants
COMPLAINT
INTRODUCTION
This is an action brought on behalf of the United States of America by Ted
D. Kosenske, M.D. ("Dr. Kosenske" or "the Relator") against Carlisle HMA, Inc.,
Carlisle Regional Surgery Center, Carlisle Regional Medical Center, and Hospital
Management Associates, Inc. (collectively referred to as the "HMA
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 2 of 45
Defendants"), pursuant to the qui tam provisions of the civil False Claims Act, 31
U.S.C. § 3729 - § 3733, and principles of common law.
The HMA Defendants implemented a scheme in violation of the Anti-
kickback statute and the Stark II self-referral prohibitions under which the HMA
Defendants induced certain pain management physicians to refer individuals for
outpatient pain management procedures while allowing certain pain management
physicians to perform and bill physician consultations, office visits and the
physician component of such procedures without charging the physicians for the
use of space, equipment and personnel utilized by the physicians and consumed in
the physician-billable services. HMA Defendants' provision of free space,
equipment and personnel at no charge violates the Anti-kickback statute,
enforceable through the False Claims Act. Because the services, although
performed in an ambulatory surgery facility, were billed as hospital outpatient
claims, a "designated health service" under Stark II, the HMA Defendants'
provision of free space, equipment and personnel devoted to physician-billable
services violates Stark II, also enforceable through the False Claims Act.
Following Dr. Kosenske's research and understanding of the existence of a
compliance issue due to the non-payment of rent, and after Dr. Kosenske's
statement to his former partners that they must pay rent, Dr. Kosenske was told to
"keep his mouth shut" and that no rent was due and owing to the HMA
2
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 3 of 45
Defendants. The HMA Defendants' forbearance of rent and personal services
payments to the pain management physicians, other than Dr. Kosenske, was
designed to influence the physicians' medical judgment to refer exclusively to the
HMA Defendants' facilities for pain management procedures, and to give
incentives to the physicians to forego development of their own free-standing
surgery center at which outpatient pain management procedures could be
performed. As a result of the HMA Defendants' forbearance of space and
equipment rental fees and personal services fees, the HMA Defendants have been
able to retain in excess of $300,000 profits annually; however, each of the HMA
Defendants' claims during the time were illegal and non-reimbursable inasmuch as
the structure giving rise to the referrals violated both the Anti-kickback statute and
Stark II.
Despite Dr. Kosenske's admonition and objection, the HMA Defendants did
not impose any rental fees, took affirmative efforts to prevent him from
establishing an ambulatory surgery center in competition with HMA, and are
presently damaging competition in the market place pursuant to their illegal
inducements for referrals.
PARTIES
3
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 4 of 45
1. Plaintiff Ted D. Kosenske, M.D. ("Dr. Kosenske") is a citizen of the
United States of America who resides at 4 Carothers Circle, Mechanicsburg, PA
17050. Dr. Kosenske is a physician licensed to practice medicine in the
Commonwealth of Pennsylvania since 1990, and is Board Certified in both
Anesthesia and Pain Medicine.
2. Defendant Carlisle HMA, Inc. is a Pennsylvania for-profit corporation
with a business address upon information and belief at 246 Parker Street, Carlisle,
PA 17013.
3. Defendant Carlisle Regional Surgery Center upon information and
belief is a Pennsylvania corporation owned by Carlisle HMA, Inc., which operates
an ambulatory surgery facility ("ASF") at 5 Sprint Drive, Carlisle, PA 17013.
4. Defendant Carlisle Regional Medical Center is a hospital licensed by
the Pennsylvania Department of Health that operates between 150 and 200 beds in
Carlisle, Pennsylvania. Certain executive employed by CRMC have been directly
involved in the Anti-kickback and Stark II violations.
5. Defendant Hospital Management Associates, Inc. ("HMA") is, upon
information and belief, a Florida corporation with offices at 5811 Pelican Bay
Boulevard, Suite 500, Naples, FL 34108-2710. HMA is a holding company that
purchases, owns and operates hospitals throughout the United States, mostly in
rural settings, and, upon information and belief, owns and controls and/or is
4
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 5 of 45
responsible for the operations of Carlisle HMA, Inc., Carlisle Regional Surgery
Center, and Carlisle Regional Medical Center, and lists a Pennsylvania business
registration at 1635 Market Street, Philadelphia, PA 19103.
JURISDICTION AND VENUE
6. This Court has subject matter jurisdiction over this action pursuant to
31 U.S.C. § 3732(a), the federal civil False Claims Act, which is a law of the
United States, 28 U.S.C. § 1331 and § 1345.
7. The Relator has direct and independent knowledge, pursuant to the
meaning and definition of that phrase under 31 U.S.C. § 3730(e)(4)(B), based upon
the Relator's independent investigation of information upon which the allegations
set forth in this Complaint are based and pursuant to the Disclosure Statement filed
contemporaneously with the Complaint.
8. This Court has personal jurisdiction over the Relator because Dr.
Kosenske resides in and practices medicine in the Middle District of Pennsylvania.
9. None of the allegations presented in the Complaint or the Disclosure
Statement are based upon public disclosure of allegations or transactions in a
criminal, civil or administrative hearing, in a Congressional, administrative or
General Accounting Office report, audit or investigation or from the news media.
5
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 6 of 45
10. This Court has jurisdiction over Carlisle HMA, Carlisle Regional
Medical Center and Carlisle Regional Surgery Center because each entity is
located within and conducts business in the Middle District of Pennsylvania.
11. Venue in the Middle District of Pennsylvania is proper pursuant to 31
U.S.C. § 3732(a) and 28 U.S.C. § 1931(b)-(c). All services billed to federal
health care programs pursuant to the improper inducements and self-referral
prohibitions were performed in Carlisle in the Middle District. Virtually all of the
HMA Defendants' operations giving rise to the false claims are located and
provided within the Middle District of Pennsylvania.
12. This Court has personal jurisdiction over Defendant HMA because it
has performed all of the billing on behalf of Carlisle Regional Surgery Center and
Carlisle Regional Medical Center giving rise to the false claims in this case,
thereby performing numerous acts proscribed by 31 U.S.C. § 3729 within the
Middle District of Pennsylvania.
6
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 7 of 45
FACTUAL BACKGROUND
A. Medicare
13. In 1965, Congress established the Medicare program to provide health
insurance for the elderly and disabled. Payments from the Medicare program are
made through a trust fund ("the Medicare Trust Fund"), which is funded through
payroll deductions taken from the work force in addition to government
contributions.
14. The Medicare program is administered through the U.S. Department
of Health and Human Services and the Centers for Medicare and Medicaid
Services ("CMS"), an agency within HHS.
15. Administration of claims is effectuated through local Medicare
carriers, who are responsible for processing Medicare claims, determining
coverage, and making payments from the Medicare Trust Fund.
16. Claims for physician services are paid pursuant to Part B of the
Medicare program, and administered by Medicare carriers.
17. Payments for hospital claims are paid pursuant to Part A of the
Medicare program, and administered by fiscal intermediaries.
18. Outpatient hospital claims are paid separate and apart from hospital
Part A claims, pursuant to a Medicare reimbursement schedule.
7
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 8 of 45
19. Ambulatory surgery facility ("ASF") claims are paid pursuant to Part
B of the Medicare program, are paid pursuant to a fixed schedule for services.
B. Other Federally Funded Health Insurance Programs
20. Federal health care programs include any plan or program that
provides health benefits directly or indirectly through insurance or otherwise
funded directly in whole or in part by the United States government. 42 U.S.C. §
1320a-7b(f)(1). These include military benefits through the TRICARE program,
the Federal Employees Health Benefit Program, and other federally funded
insurance (excluding federal workers compensation claims).
21. State Medical Assistance (or "Medicaid") programs are also federal
health care programs. 42 U.S.C. § 1320a-7b(f)(2).
C. The Anti-Kickback Statute
22. The federal Anti-kickback statute makes it a criminal offense to
knowingly and willfully offer, pay, solicit, or receive any remuneration to induce
or reward referrals of items or services reimbursable by a federal health care
program. 42 U.S.C. § 1320a-7b(b) (1)(A), (2)(B). It also applies to any
purchasing, leasing, ordering or arranging for or recommending purchasing,
leasing or ordering any service or item payable by any federal health care program.
23. Where remuneration is paid purposefully to induce or reward referrals
of items or services payable by any federal health care program, the anti-kickback
8
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 9 of 45
statute is violated. The statute imposes liability to parties on both sides of an
impermissible "kickback" transaction. For purposes of the anti-kickback statute,
the term "remuneration" includes the transfer of anything of value, directly or
indirectly, overtly or covertly, in cash or in kind.
1. One Purpose Rule
24. The federal anti-kickback statute has been interpreted to cover any
arrangement where one purpose of the remuneration was to obtain money for the
referral of services or to induce further referrals or recommendations. U.S. v.
McClatchey, 217 F.3d 823 (10th Cir. 2000); U.S. v. LaRue, 261 F.3d 993 (10th Cir.
2001); U.S. v. Greber, 760 F.2d 68 (3rd Cir. 1985); and U.S. v. Kats, 871 F.2d 105
(9th Cir. 1989). The United States Supreme Court has refused to hear appeals from
each of these decisions, most recently the LaHue case on January 7, 2002. LaRue v.
U.S., _ U.S. _, 122 S. Ct. 819 (2002).
9
Case 1:05-cv-02184-CCC Document l Filed 10/26/05 Page 10 of 45
2. Medical Necessity Irrelevant
25. It does not matter whether a service was medically necessary; a
person violates the Anti-kickback statute even if he receives a kickback payment
for a medically necessary procedure. U.S. v. Nachamie, 101 F. Supp. 2d 134, 155
(S.D. NY 2000). Even though payment of remuneration under the Anti-kickback
statute did not affect patient care, it is irrelevant and not a defense for violating the
Anti-kickback statute. U.S. v. Anderson, 85 F. Supp. 2d 1047, 1054 (D. Kan.
1999). The Anti-kickback statute can be violated where remuneration is tied to
referrals even though each referral was for medically necessary services. U.S. v.
Liss, 265 F.3d 1220 (11th Cir. 2001).
3. Anti-Kickback Safe Harbor Regulations
26. Since 1991, the Office of Inspector General ("OIG") has promulgated
several regulations, pursuant to its statutory directive, outlining specific terms and
conditions relating to transactions that will immunize various arrangements,
commonly referred to as "Safe Harbor" regulations. Safe Harbor regulations have
been developed for space rental arrangements; equipment rental arrangements; and
personal services arrangements. 42 C.F.R. § 1041.952(b) - (d).
27. Although an arrangement that does not satisfy each and every Safe
Harbor element is not illegal per se, the lack of any written agreement and the
provision of free services evidences a violation of the Anti-kickback statute.
10
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28. Negative impact on competition and competitors, and the provision of
incentives and benefits with respect to referring physicians and the effect of
potential referrals on physicians' judgment are also factors that demonstrate
potential violation of the Anti-kickback statute.
29. Where a hospital "provides physicians with services for free or less
than fair market value, or relieves physicians of financial obligations they would
otherwise incur", evidence of inducement and a violation of the Anti-kickback
statute exists. 70 Federal Register 4858, 4866 (January 31, 2005).
30. OIG has on multiple occasions indicated that a computer has
independent value to a physician and providing a free computer to a physician may
constitute an illegal inducement. 70 Federal Register 59015, 59018 (October 11,
2005). There is a substantial risk that free or reduced price goods or services may
be used as a vehicle to disguise or confer an unlawful payment for referrals of
federal health care program business. Id. at 59016. Provision of valuable
technology to physicians or other sources of federal health care program referrals
poses a heightened risk of fraud and abuse. This increases as the value of the
technology to the recipient increases. Id. at 59021.
31. Preventing both the corruption of medical judgment by financial
incentives and improper steering of patients is an important protective function of
the Anti-kickback statute. 70 Federal Register 38086 (July 1, 2005).
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 12 of 45
D. Stark II
32. The Medicare provisions of the Social Security Act contain self-
referral prohibitions commonly referred to as the Stark Law, which was amended
in 1993 to preclude physician referrals to an entity with which the physician has a
financial relationship or ownership interest for a list of "designated health
services", unless complex statutory and regulatory exceptions are satisfied. 42
U.S.C. § 1395nn, et seq.
33. Claims submitted by the recipient of the referral that do not satisfy all
elements of all applicable exceptions are illegal per se; and any entity that
furnishes DHS pursuant to a prohibited referral is not permitted to present a claim
or bill to the Medicare program or to any individual, third party payor, or other
entity for DHS performed pursuant to the prohibited referral. 42 U.S.C. §
1395nn(a)(1)(B); and 42 C.F.R. § 411.353(b).
34. An entity that collects payment for DHS performed under a prohibited
referral must refund all collected amounts within sixty days. 42 C.F.R. §
411.353(d); and 42 C.F.R. § 1003.101.
35. Numerous statutory exceptions to the Stark self-referral prohibition
were enacted and two phases of comprehensive regulations have been
promulgated. The Stark II Phase II regulations were published March 26, 2004,
effective July 26, 2004. 69 Federal Register 16054-16146 (March 26, 2004).
12
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 13 of 45
36. Stark II Phase II regulations include exceptions similar (but not
identical) to the Anti-kickback Safe Harbors for rental of office space, 42 C.F.R. §
411.357(a)(1)-(7); rental of equipment, 42 C.F.R. § 411.357(b)(1)-(6); and
personal service arrangements, 42 C.F.R. § 411.357(d)(1)(i)-(vi).
37. Unlike non-compliance with the Anti-kickback Safe Harbor
regulations, non-compliance with a Stark II statutory or regulatory exception
renders the claim illegal per se.
38. Where an arrangement affects more than one Stark II exception, each
applicable exception must be completely satisfied.
13
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E. Provider Contracts and Certifications
39. Medicare providers, including the ASF and hospital HMA
Defendants, are required to enter into provider agreements with the federal
government.
40. Under the terms of the provider agreement, a Medicare provider
certifies that it will comply with all laws and regulations concerning proper
practices for Medicare providers.
41. The HMA Defendants certified compliance with the Anti-kickback
statute.
42. The HMA Defendants certified compliance with the Stark II laws and
regulations.
43. Compliance with a provider agreement is a condition for receipt of
reimbursement from the Medicare program.
44. HMA Defendants' compliance with both the Anti-kickback statute
and Stark II is a condition precedent to receipt of any payment from any federally
funded health care programs (with respect to the Anti-kickback statute), and for all
Medicare and Medicaid claims (pursuant to Stark II).
14
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 15 of 45
F. Implied Certification Non-Compliance - False Claims Act
Vinlatinnc
45. A false certification of compliance with the Anti-kickback statute and
Stark II creates liability under the False Claims Act when certification is a
prerequisite to obtaining a government benefit such as Medicare and other federal
health care program reimbursement. U.S. ex rel Thompson v. Columbia HCA
Health Care Corp., 125 F.3d 899, 901-902 (5th Cir. 1997). The Third Circuit
recently recognized alleged violations of Stark II and the Anti-kickback statute as
the basis for a False Claims Act relator suit. U.S. ex rel Schmidt v. Zimmer, 386
F.3d 235 (3rd Cir. 2004). Most recently, the Eleventh Circuit held on September 9,
2005 that a violation of the Anti-kickback statute can form the basis of a qui tam
action under the False Claims Act. U.S. ex rel McNutt v. Haleyyille Medical
Supplies, Inc., F.3d (11th Cir. 2005).
46. Under the implied certification theory incorporating Anti-kickback
and Stark II violations, each claim submitted pursuant to an improper referral is
improper and separately actionable under the False Claims Act.
G. The Pain Clinic - Physician Services
47. HMA developed and implemented a Pain Clinic through the HMA
ASF (Carlisle Regional Surgery Center).
48. The Pain Clinic, functioning inside of HMA's ASF, is operated by
Blue Mountain Anesthesia Associates, P.C. ("BMAA" ).
15
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 16 of 45
49. BMAA physician shareholders include Howard Alster, M.D., Ivan
Sola, M.D., Daniel Chess, M.D. and Arun Kapoor, M.D. Dr. Kosenske was
previously a partner in BMAA.
50. Patients present to the Pain Clinic pursuant to referrals from primary
care or other specialist physicians or providers.
51. Patients presenting at the Pain Clinic inside the HMA ASF are
evaluated by pain management physicians, given prescriptions for medication,
given prescriptions for physical therapy or recommended for a variety of injections
and procedures.
52. Injections and procedures are performed at the HMA ASF in space
separate and apart from that in which the pain management physicians perform
their evaluation and management services.
53. Not every patient receives injections or procedures. In fact, only one-
third of the patients who present to the Pain Clinic receive injections and
procedures. The majority receive physician pain management and evaluation
("E/M") services only.
54. Pursuant to the data collected by Dr. Kosenske, approximately sixty-
five percent (65%) of the total patient encounters include exclusively physician
E/Mservices and only one-third receive injections and procedures.
16
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 17 of 45
55. Physicians in the Pain Clinic spend eighty percent (80%) of their time
performing physician billable E/M services, and only twenty percent (20%) of their
time performing procedures. This is because the various consultations, and new
and established office visit services consume substantially more time than the
procedures. The consultations, new patient E/M and established patient E/M
services are collectively referred to as "Physician Billable E/M Services."
56. The Physician Billable E/M Services include consultations under CPT
codes 99241-99245; new patient E/M services billable under CPT codes 99202-
99025; and established patient E/M services billable under CPT codes 99212-
99215. The pain management physicians are also able to bill the professional
component of each procedure performed.
57. The Physician Billable E/M Services comprise sixty-five (65%) of the
total patient encounters at the pain management clinic within the HMA ASF.
58. Each Physician Billable E/M Service is billed to federal health care
programs (as well as all commercial insurance payors), collected by and paid to the
BMAA physicians.
59. In addition, the BMAA physicians are able to capture reimbursement
for the professional component of the procedures described below.
H. The Facility Procedures
17
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 18 of 45
60. When medically indicated, the Pain Clinic physicians recommend the
patients receive one or more injections or procedures performed at the HMA ASF.
Each procedure will be summarized and followed by the applicable CPT or
HCPCS code:
• Epidural Steroid Injections 62311
• Sacro-Iliac Joint Injections G0260
• Stellate Ganglion Nerve Block 64150
• Intercostal Nerve Block 64420
• Intercostal Nerve Block Multiple Level 64421
• Paravertebral Blocks 64520
• Brachial Plexus Blocks 64415
• Blood Patch 62273
• Epidural Steroids Cerv/Thor 62310
• Epidural Steroids Lumbar 62311
• Perc. SCS Implant 63650
• Radiofrequency Lesioning 64622
• Intercostal Nerve Lesioning 64620
61. The foregoing injections and procedures will be collectively referred
to as "the Procedures."
I. HMA Defendants Billing Scheme and Procedures
62. Each of the Procedures are performed in the HMA ASF.
63. Although the HMA ASF claims should be submitted as ASF claims
pursuant to the fixed reimbursement schedule for all Medicare certified ASFs,
HMA's corporate offices in Florida submit the claims as though they were
outpatient hospital services.
18
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64. An ASF is a facility separate and distinct from a hospital outpatient
department.
65. The HMA Defendants' billing scheme, under which upon information
and belief it disguises ASF services as outpatient hospital services, allows HMA
Defendants to capture otherwise bundled reimbursements such as clinical
laboratory tests. Had these services not been billed as outpatient hospital services,
the clinical laboratory services would have been bundled in the ASF composite
rate.
66. Each Procedure has two components: (a) a facility fee properly
billable by the ASF, but instead billed by HMA as a hospital outpatient services;
and (b) a professional component billable by the physicians for the physician
service in performing the Procedure.
I Pain Clinic v. Traditional Anesthesia
67. Unlike the traditional anesthesia service performed in an ASF or a
hospital as an inherent function of a surgical procedure, where anesthesiologists do
not perform consultations, new patient E/M services or established patient E/M
services, anesthesiologists in BMAA and the HMA Pain Clinic perform physician
services no different than a primary care physician in private practice, a surgeon in
his own office, or any other specialist generating services directly reimbursable to
the physician.
19
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K. Anti-Kickback and Stark II Implicated
68. Delivery of anesthesia during surgical procedures does not include
any referral by the anesthesiologist; however, an anesthesiologist performing pain
management services in the Pain Clinic who establishes a plan of care and directs
the patient to receive the Procedures at the HMA ASF, makes a referral pursuant to
the definition of that term under Stark II, 42 C.F.R. § 411.351; and makes both a
referral and a recommendation or arrangement for services under the Anti-
kickback statute, 42 U.S.C. § 1320a-7b(b)(1)(B).
69. Where a pain management physician utilizes space owned by a
hospital or ASF, equipment owned by a hospital or ASF, and personnel such as
nursing and clerical staff employed by a hospital or ASF, the referrals,
arrangements and recommendations to the hospital or ASF for a service payable by
any federal health care program implicates the Anti-kickback statute, 42 U.S.C. §
1320a-7b(b)(1)(A)-(B); and implicates Stark II if the Procedure is, as in the present
case, a hospital outpatient service (rendering it DHS). 42 U.S.C. §
1395nn(h)(6)(K); and 42 U.S.C. § 411.351.
L. The HMA Defendants' Free Space
70. The Pain Clinic within the HMA ASF comprises, pursuant to the
Relator's measurements, 1,526 square feet of space, including three medical
examination rooms, a nursing station, patient restrooms, medical secretary space
20
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 21 of 45
and waiting room. This space is consumed by the pain management physicians
exclusively for Physician Billable E/M Services.
71. In addition to the 1,526 square feet used exclusively by physicians,
the Pain Clinic physicians share an additional 5,221 square feet of space including
waiting room, conference room, break room, locker rooms, manager's office,
restrooms, and clerical services space. The exclusive space and shared space will
be collectively referred to as the Space.
72. Despite the Pain Clinic physicians' exclusive use of the Space, and
notwithstanding 65% of the patient encounters result in Physician Billable E/M
Services, HMA Defendants provide the Space free.
73. The HMA Defendants have no written lease and charge no rent to the
Pain Clinic physicians for use of the Space.
74. The pain management physicians spend approximately 32 hours each
week utilizing the three examination rooms exclusively. No other physicians who
have staff privileges at the ASF or Carlisle Regional Medical Center have access to
the Pain Clinic Space utilized exclusively by the BMAA physicians.
75. The Physician Billable E/M Services are 100% reimbursable to the
physicians. The HMA Defendants have and claim no, right, title or interest to
reimbursement for the Physician Billable E/M Services.
21
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76. None of the 10-day or 90-day minor or major surgery global billing
rules apply to the Physician Billable E/M Services. Therefore, the Physician
Billable E/M Services are unconnected to the Procedures.
77. Utilization of the Space at no charge creates a financial relationship as
defined by Stark II. 42 U.S.C. § 1395nn(a)(2)(B), and § 1395nn(h)(1)(B); and 42
C.F.R. § 411.354(a)(1)(ii).
78. The HMA Defendants' provision of space to the pain management
physicians at no charge relieves a significant financial obligation the pain
management physicians would otherwise incur, and is provided below market
value; therefore, it is something of value, constituting "remuneration" under the
Anti-kickback statute. 42 U.S.C. § 1320a-7b(b)(1), (2).
79. The fair market value for Class A specialty physician office space in
Carlisle is, upon information and belief, $22 per square foot.
80. The total annual value of the Space provided by HMA Defendants to
the Pain Clinic physicians is calculated as follows:
(a) Exclusive space (1,526 square feet) x $22 (market
value square foot rate) = $33,572, multiplied by
.65 (a percentage of office encounters devoted
exclusively to Physician Billable E/M Services) _
$21,822;
(b) The total value of shared space is calculated as
follows: 5,221 square feet x $22 = $114,862, x .35
(percentage of encounters devoted to purely ASF
services) = $40,201; and
22
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 23 of 45
(c) The total value for exclusive and shared space =
$62,023 per year.
81. The HMA Defendants are not providing merely below market value
rental arrangements to induce referrals for Stark DHS or for services billable to
federal health care programs. Instead, the HMA Defendants are providing
approximately $62,000 worth of free space per year, thereby allowing the
physicians to bill their own Physician Billable E/M Services without any overhead
cost and relieving a significant financial obligation that would otherwise be
incurred.
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M. The HMA Defendants' Free Equipment
82. Within the Space, the HMA Defendants provide the pain management
physicians various items of equipment owned and paid for by the HMA
Defendants including three examination tables; waiting room furniture; furniture
and supplies for the break room; exam room furniture; conference room furniture;
furniture for physicians' offices, nurses stations and secretaries; chart racks; an
expensive Pyxis drug dispensing system; computers, copiers, printers, fax
machines, patient monitors, gowns, bed linen, patient education devices and other
items.
83. The cost of these various pieces of equipment is unknown to the
Relator; however, they have more than de minimus value.
84. Each of the items of equipment identified in the preceding paragraphs
are used by the physicians 65% of the time for their own Physician Billable E/M
Services.
85. Were the physicians to practice pain management in the open market
external to the inducements offered by the HMA Defendants, physicians would
have to pay 100% of the fair market value for such equipment, as they would have
to pay 100% of the value for the Space.
24
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 25 of 45
N. The HMA Defendants' Free Personal Services
86. The HMA Defendants also provide numerous professional and
clerical staff who are employed by the HMA Defendants but provided at no charge
to the Pain Clinic physicians.
87. The individuals employed by the HMA physicians include two nurses
(working 32 hours per week at rates of approximately $26.50 per hour); secretaries
working at 64 hours per week paid at a rate of $13.50 per hour; a receptionist paid
at $13.50 per hour; an office manager who has developed detailed policies and
procedures, provides management functions, documentation guidance, JCAHO and
Department of Health regulatory compliance (but is apparently unaware of Stark
and fraud and abuse compliance issues); housekeeping services, and certain
services provided by the Carlisle Regional Medical Center Chief Executive
Officer, Chief Financial Officer, Chief Nursing Officer and Head of Surgical
Services.
88. The value of the nurses' salaries are calculated as follows: 64 hours
per week (2 nurses, 32 hours) x $26.50 = $1,696 = $88,192 x .65 (the physician
exclusive multiplier) _ $57,324.
89. The value of the two secretaries working at 64 hours per week is
calculated as follows: 64 x $13.50 = $864 x 52 = $44,928 x .65 = $29,203.
25
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 26 of 45
90. The value of the receptionist working at 32 hours per week is
calculated as follows: 32 x $13.50 per hour = $432 x 52 = $22,464 x.35 = $7,862.
91. The value of the office manager is calculated by taking her annual
$83,000 salary plus benefit package x.35 = $29,050.
92. The value of the maintenance and housekeeping at 16 hours per week
paid at $11.60 per hour over 52 weeks times the multiplier = $9,651.
93. The total value of professional and clerical services provided by the
HMA Defendants equals approximately $133,090.
94. This does not include the amount of administrative, management and
strategic time spent by the Carlisle Regional Medical Center CEO, CFO, CNO and
HSS.
95. The HMA Defendants also provide free printing services, free
transcription services, free utilities (free electricity, water, HVAC and internet
access), free local and long distance telephone service, free security protection, free
photocopying and free courier services. The Relator is incapable of quantifying
the precise value of these free administrative services but believes they are more
than nominal.
96. The $133,090 value of professional and clerical services provided free
by the HMA Defendants to the BMAA physicians constitutes a financial
relationship under Stark 11, and remuneration under the Anti-kickback statute
26
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 27 of 45
inasmuch as the physicians would have to purchase and pay for those services if
they performed Physician Billable E/M Services in the open market, but are
relieved of doing so in the FIMA arrangement.
97. Nevertheless, the HMA Defendants charge the pain management
physicians nothing for these personal and professional services, as inducement to
the pain management physicians for their referrals of patients to the HMA ASF for
the Procedures.
0. The Facility Fee for the Procedures
98. The facility fee for the Procedures is far more expensive and lucrative
than the physician component for each Procedure. Medicare pays HMA the
following amounts for each of the Procedures:
• Epidural Steroid Injections $279
• Sacro-Illiac Joint Injections $326
• Stellate Ganglion Nerve Block $326
• Intercostal Nerve Block $326
• Intercostal Nerve Block Multiple Levels $326
• Paravertebral Blocks $326
• Brachial Plexus Blocks $326
• Blood Patch $326
• Epidural Steroids Cervical/Thoracic $326
• Epidural Steroids Lumbar $326
• Perc. SCS Implant $437
• Radiofrequency Lesioning $326
• Intercostal Nerve Lesioning $326
P. The HMA Defendants' Actual Knowledge
27
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 28 of 45
99. In or about March 2003, Dr. Kosenske approached HMA Defendants'
representatives about developing a physician-owned surgery center.
100. In or about June 2003, Richard Schaffner, then-Chief Operating
Officer of Carlisle Regional Medical Center, notified the BMAA physicians that a
substantial compliance problem existed and that the HMA Defendants needed to
collect rent from the physicians.
101. Dr. Kosenske, having the traditional anesthesiologist mindset that
performance of any anesthesia service including pain management did not require
payment of rent, became concerned and agreed the issue should be analyzed.
102. Richard Schaffner, former CRMC COO and former Chief Financial
Officer Earl Fitzpatrick, met with the physicians on June 22, 2003 to discuss the
need to pay rent. The HMA Defendants' officers indicated they would provide a
definite amount of rental payments that should be made as soon as possible. Dr.
Kosenske at that point was willing to pay rent, but had no idea what would be due
and owing under the circumstances.
103. The HMA Defendants provided no additional information for seven
(7) months.
104. In or about January 2004, the new HMA CFO, Corey Rhoades,
approached the BMAA physicians and again identified a serious compliance issue
under which the physicians needed to pay rent.
28
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 29 of 45
105. Then-CFO Corey Rhoades developed a document entitled: "Carlisle
Regional Medical Center, Pain Clinic, Q1 FY 2004 Annualized", outlining the
various financial factors inherent to the rent. Corey Rhoades, the Carlisle Regional
Medical Center CFO, calculated the HMA Defendants should obtain payments
from the BMAA physicians in the amount of $187,033 per year.
106. Prior to January 2004, no employee, agent or officer of any HMA
Defendant had quantified the amount the BMAA physicians should pay.
107. At that point, Dr. Kosenske told his partners: "We must pay rent."
108. Dr. Alster, one of the other BMAA partners, said to Dr. Kosenske:
"Keep your mouth shut."
109. Despite Dr. Kosenske's protestations to pay rent based upon the
compliance issue, Dr. Kosenske's partners refused to do so.
110. Dr. Kosenske has never held more than 20% equity interest in
BMAA. He had no power to force his other partners to pay the rent, nor did he
have any power to require HMA to bill BMAA for space and equipment rental and
personal services.
111. The remaining partners flatly took the position that they did not have
to pay rent despite the three meetings with the hospital executives.
112. Upon information and belief, one or more of the remaining partners of
BMAA had discussions with the HMA Defendants' officers and employees
29
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 30 of 45
without Dr. Kosenske being present, and may have made an arrangement whereby
no rent was to be paid in exchange for not developing a physician-owned
outpatient or surgery center.
113. At no time was Dr. Kosenske involved in or part of any discussions
about waiving rent or service payments for any reason, whether it be referrals or
avoiding development of a physician-owned surgery center.
114. Upon learning of the compliance issue, Dr. Kosenske steadfastly took
the position that rent should be paid and insisted to his partners that whatever
rental payment was ultimately quantified should be reimbursed to the HMA
Defendants.
115. Dr. Kosenske, due to market limitations, had no other choice but to
perform Procedures inside the HAM Defendants' ASF.
116. Dr. Kosenske, however, began to implement a strategy to develop a
free-standing physician-owned surgery center and moved forward with the plan to
do so promptly upon learning of the compliance issue.
117. Since at least June 2003, HMA Defendants' officers, employees or
agents had actual knowledge that, pursuant to either the Anti-kickback statute, the
Stark II law or both, payments should be collected from the physicians for space
rental, equipment rental and personal services reduced by the percentage allocated
30
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 31 of 45
to the physicians' exclusive use of such space, equipment and personal services for
their own Physician Billable E/M Services.
118. Nevertheless, despite this actual knowledge, since June 2003, the
HMA Defendants have failed and refused to collect any payments from the BMAA
physicians, over Dr. Kosenske's protestations.
Q. The HMA Defendants' Motivation Not to Collect Rent or
Personal Services Payments
119. The BMAA physicians refer thousands of patients for thousands of
Procedures each year to the HMA Defendants' ASF.
120. For Medicare alone, upon information and belief, about 1,000 patient
Procedures are performed each year. The average reimbursement for the
Procedures is $335 for Medicare patients. Commercial third party payors'
reimbursement is typically higher.
121. Upon information and belief, the total amount of profit generated by
the HMA Defendants for the facility fee inherent to all of the Procedures
performed each year by BMAA physicians is approximately $300,000.
122. Upon information and belief, Dr. Kosenske's partners may have
objected to the HMA Defendants' rental request because they found it unfair to be
charged approximately $140,000 for rent when the ASF or one of the other HMA
Defendants would stand to make a $300,000 per year profit, plus income from the
rent.
31
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123. As indicated above, Dr. Kosenske, upon learning that no rent would
be paid, began to work toward development of a physician-owned surgery center.
Dr. Kosenske initially worked to develop potential joint venture partners. Shortly
thereafter, the hospital COO apparently dropped the rental demand to the other
BMAA partners.
124. Ultimately, HMA Defendants interfered with and successfully
prevented other facilities and entities in the region from entering into a joint
venture arrangement, requiring Dr. Kosenske and other physicians to finance the
development of a free-standing physician-owned ASF on their own.
125. Upon information and belief, the HMA Defendants forgave the
BMAA physicians' rental payment demand and obligations, in order to secure their
allegiance and maintain the HMA Defendants' $300,000 per year profit stream
from the Procedures, and avoiding the pain management physicians' development
of a competitive physician-owned ASF.
126. Although Dr. Kosenske cannot quantify the HMA Defendants'
motivation sufficient to identify criminal intent, it is clear, for purposes of False
Claims Act liability, that the HMA Defendants knew they had a rental obligation
under either the Anti-kickback statute or Stark or both, and either recklessly
disregarded or deliberately ignored their obligations to secure payments and
agreements in material compliance with the Safe Harbor space, equipment and
32
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 33 of 45
management services Safe Harbor regulations, and the space, equipment and
personal services exceptions under Stark II.
127. The HAM Defendants, with actual knowledge of their rental and
services collection obligations, and with either reckless disregard or deliberate
ignorance of their obligations, submitted thousands of claims to Medicare,
Medicaid, FEHBP, TRICARE and other federally funded health care programs,
and hundreds of claims to commercial third party payors for Procedures referred to
them by the pain management physicians.
33
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 34 of 45
R. The Stark and Anti-Kickback Violations
128. Each referral, recommendation or arranging for a Procedure at the
HMA Defendants' ASF was induced by the HMA Defendants based upon
hundreds of thousands of dollars worth of free space, equipment and personal
services, without any payments whatsoever, with claims for such Procedures being
submitted to Medicare, Medicaid and other federally funded health care programs,
all of which violated the Anti-kickback statute and Stark II.
S. Dr. Kosenske's Departure
129. After several months of discussions with his partners that led to
fruitless compliance efforts, Dr. Kosenske announced in the Fall of 2004 that he
was leaving the partnership and verbally advised one or more of his partners of his
decision. He indicated that he was essentially going out on his own to perform
pain management services, but would share call for the traditional anesthesia
services.
130. Subsequently, his remaining partners apparently had clandestine
meetings with Ron Bierman, the newest HMA CEO, the details of which are
unknown to Dr. Kosenske; however, upon information and belief, he avers that
some plan may have been implemented to make life difficult for him and delay Dr.
Kosenske's ultimate status as a competitor of the HMA Defendants and BMAA
physicians.
34
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 35 of 45
131. Shortly thereafter, the BMAA physicians denied the existence of Dr.
Kosenske's verbal notice of departure, delaying his status as a competitor.
132. Dr. Kosenske then submitted a written notice of his intent to terminate
his partnership status with BMAA on April 12, 2005.
133. Dr. Kosenske's final date as an employee of and partner in BMAA
was September 23, 2005.
134. Dr. Kosenske has established a private pain medicine practice and is
attempting to develop and implement a pain management clinic in the Carlisle area
in competition with the HMA Defendants' Pain Clinic.
135. The HMA Defendants forced Dr. Kosenske to resign his medical staff
privileges at Carlisle Regional Medical Center despite the fact that the BMAA
physicians do not have an exclusive contract for anesthesia services at the hospital.
136. Dr. Kosenske has reapplied for staff privileges and, to date, has not
been awarded those privileges.
137. Dr. Kosenske remains otherwise eligible to be a member of the
medical staff at Carlisle Regional Medical Center; however, the HMA Defendants
have, upon information and belief, implemented additional punitive tactics against
Dr. Kosenske due to his status as a competitor.
138. As of the date of Dr. Kosenske's departure, September 23, 2005, the
HMA Defendants had not yet insisted on the collection of a single dollar from
35
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 36 of 45
BMAA for space rental, equipment rental and the utilization of personal services
applicable exclusively to the Physicians Billable Services.
139. Based upon Dr. Kosenske's calculations, it is estimated that over
$250,000 in federal health care program reimbursement has been collected by the
HMA Defendants each year as a result of the referrals generated pursuant to the
non-compliant arrangements.
T. Particular Claims Subiect to the Improper Arrangement
140. In order to discharge his obligations under Rule 9(b) of the Federal
Rules of Civil Procedure, Dr. Kosenske has attempted to obtain specific
illustrations of claims submitted pursuant to the illegal arrangement between HMA
Defendants and BMAA, to which he has consistently objected.
141. On June 24, 2005, Dr. Arun Kapoor performed an epidural steroidal
injection on patient F.M., HIC # 174-05-0817B, pursuant to the illegal referral
described above. HMA Defendants billed the claim as an outpatient Procedure in
the amount of $1,283.25. Medicare paid the HMA Defendants $278.65 for this
claim.
142. On June 22, 2005, Dr. Daniel Chess performed an epidural steroidal
injection on patient W.P., HIC # 202-12-2491A, pursuant to the illegal referral
described above. HMA Defendants billed the claim as an outpatient Procedure in
36
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 37 of 45
the amount of $1,283.25. Medicare paid the HMA Defendants $278.65 for this
claim.
143. On July 22, 2005, Dr. Arun Kapoor performed an epidural steroidal
injection on patient P.M., HIC # 204-26-9459A, pursuant to the illegal referral
described above. HMA Defendants billed the claim as an outpatient Procedure in
the amount of $1,283.25. Medicare paid the HMA Defendants $278.65 for this
claim.
144. On June 24, 2005, Dr. Arun Kapoor performed a tendon sheath
ligament injection (CPT code 20550) and a peripheral nerve block (CPT code
64450) on patient K.S., HIC # 201-42-6341A, pursuant to the illegal referral
described above. HMA Defendants billed the claim as an outpatient Procedure in
the amount of $641.63. Medicare paid the HMA Defendants $95.15 for the nerve
block and $25.77 for the trigger point injection.
145. On June 24, 2005, Dr. Arun Kapoor performed an unidentified
injection procedure on patient G.H., Policy # 384991, submitted to Fortis Insurance
Company, pursuant to the illegal referral described above. HMA Defendants billed
the claim as an outpatient Procedure in the amount of $1,508.86. Medicare paid
the HMA Defendants $924 for this claim.
146. On August 2, 2005, Dr. Daniel Chess performed a trigger point
injection and peripheral nerve block procedure on patient K.S., pursuant to the
37
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 38 of 45
illegal referral described above. This EOB demonstrates the effect of the
misidentified billing described above. The patient's family physician, Dr. Michael
Daniels, referred K.S. for laboratory services performed at Carlisle Regional
Medical Center, not at the HMA surgery center. The clinical laboratory services
were unrelated to the Procedures performed in the Pain Clinic. Had they been
performed in the Surgery Center/Pain Clinic, they would have been bundled into
the ASF reimbursement composite rate. By billing the services as outpatient
claims, the HMA Defendants are able to capture additional reimbursement. This is
further evidence of the applicability of Stark II and additional false claims
submitted by HMA Defendants.
38
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 39 of 45
U. The Illeial Recruitment Fee
147. Hospital payments to physician practices to assist in the recruitment of
new physicians to the area constitutes remuneration under the Anti-kickback
statute and a financial relationship under Stark II.
148. Documented community need is an imperative compliance element
before a hospital can make recruitment payments to a physician practice under the
Anti-kickback statute and Stark II. See 70 Federal Register 4858, 4868 (January
31, 2005).
149. Upon information and belief, HMA Defendants are actively recruiting
a replacement for Dr. Kosenske to perform pain management services inside
BMAA even though (a) Dr. Kosenske remains in the market place; (b) no
documented community need for additional anesthesiologists in the Carlisle market
exists; and (c) the HMA Defendants have, to date, precluded Dr. Kosenske from
accessing his prior staff privileges at the Carlisle Regional Medical Center.
150. Community need cannot be created by knocking a competitor such as
Dr. Kosenske out of the marketplace.
151. The payments for recruitment fees and support to BMAA for a new
anesthesiologist to the BMAA practice violates both the Anti-kickback statute and
Stark II and is further evidence of the HMA Defendants' improper motive to retain
39
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 40 of 45
extensive profits and earnings from pain management Procedures performed by
independent, yet practically captive, BMAA physicians.
V. Harm to Competition
152. Dr. Kosenske has established his own private practice, Cumberland
Valley Pain Management, P.C. If Dr. Kosenske wishes to perform services
identical to the Physician Billable E/M Services described above, he must pay for
office space, equipment and staff.
153. The HMA Defendants' failure to collect rent from the BMAA
physicians is a direct harm to competition, and evidence of non-compliance with
the Anti-kickback statute and Stark II.
154. When Dr. Kosenske implements final development of an ASF at
which Procedures can be performed similar to those described above, Dr.
Kosenske will have to pay for space, equipment and staff, unlike his BMAA
competitors, rendering Dr. Kosenske at a competitive disadvantage, and providing
further evidence of the HMA Defendants' illegal conduct.
40
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 41 of 45
COUNTI
FALSE CLAIMS ACT VIOLATION
31 U.S.C. § 1329
155. Paragraphs 1 through 154 are incorporated into Count I as if fully set
forth herein.
156. This is a civil action brought by Dr. Kosenske on behalf of the United
States against the HMA Defendants under the federal civil False Claims Act, 31
U.S.C. § 3729(a)(1) and (2), and 31 U.S.C. § 3730(b).
157. The HMA Defendants knowingly, or in reckless disregard or
deliberate ignorance of the truth or falsity of the information involved, presented or
caused to be presented, and are still presenting, or causing to be presented, false or
fraudulent claims for payment by federally funded health insurance programs
based upon the illegal referrals induced by the provision of free space, equipment
and personal and professional services given to the referring physicians in violation
of the Anti-kickback statute or Stark II, or both, and in violation of the conditions
of reimbursement requiring compliance with both the Anti-kickback statute and
Stark, in violation of, inter alia, 31 U.S.C. § 3729(a)(1).
158. The HMA Defendants, in reckless disregard or deliberate ignorance of
the truth or falsity of the information involved, made, used, caused to be made or
caused to be used, false or fraudulent records and statements to get false or
41
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 42 of 45
fraudulent claims paid or approved, in violation of, inter alia, 31 U.S.C. §
3729(a)(2).
159. The United States of America, unaware of the falsity of the claims
and/or statements made or caused to be made by the HMA Defendants, and in
reliance on the accuracy of these claims and/or statements, paid and may continue
to pay for pain management Procedures provided to individuals insured by
federally funded health insurance programs, including Medicare, generated by
illegal referrals.
160. As a result of the HMA Defendants' actions, the United States of
America has been, and will continue to be, substantially damaged.
WHEREFORE, Dr. Kosenske respectfully requests judgment be entered
against the HMA Defendants, as follows:
(a) Blue Mountain Anesthesia Associates, P.C. and
the appropriate HMA Defendant(s) be ordered to
immediately develop, execute and implement
space rental agreements, equipment rental
agreements and personal services agreements
under which Blue Mountain Anesthesia
Associates, P.C. pays to the appropriate HMA
Defendant(s) actual fair market value fees and
payments for all space, equipment and personnel
owned or employed by the HMA Defendants and
utilized by Blue Mountain Anesthesia Associates,
P.C. in the performance of Physician Billable E/M
Services;
(b) The HMA Defendants be enjoined and ordered to
cease and desist from submitting and/or causing
42
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 43 of 45
the submission of any further false claims or other
claims for any Procedures defined herein until fair
market value of all space rental, equipment rental
and personal services BMAA have utilized are
paid in full;
(c) The HMA Defendants be ordered to cease and
desist from submitting and/or causing the
submission of any additional false claims or
otherwise violating 31 U.S.C. § 3729;
(d) Judgment be entered in Plaintiff's favor and
against the MM Defendants in the amount of
each and every false or fraudulent claim submitted
pursuant to the illegal free space, equipment and
personal services arrangement, multiplied and
tripled as provided by 31 U.S.C. § 3729(a), plus a
civil penalty of not less than Five Thousand
Dollars ($5,000) nor more than Ten Thousand
Dollars ($10,000) per claim submitted since at
least June 2003, if not before, as provided by 31
U.S.C. § 3729(a), to the extent such multiplied
penalty shall fairly compensate the United States
of America for losses resulting from the free space,
equipment and services scheme undertaken by the
HMA Defendants to induce referrals for
Procedures, together with the penalties for specific
claims to be identified at trial after full discovery;
(e) Plaintiff be awarded the maximum amount allowed
pursuant to 31 U.S.C. § 3730(d) including up to
25% of the proceeds of the action or settlement of
the claim;
(f) Judgment be granted for Plaintiff and against the
HMA Defendants for all costs, including but not
limited to, court costs, expert fees and all
attorneys' fees incurred by Plaintiff in the
prosecution of this suit pursuant to 31 U.S.C. §
3730(d)(1); and
43
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 44 of 45
(g) Plaintiff be granted such other and further relief as
the Court deems just and proper.
Respectfully submitted,
CHARLES I. ARTZ & ASSOCIATES
CIA2440
Charles I. Artz, Esquire
I.D. #PA 55747
200 North Third Street, Suite 12-B
Harrisburg, PA 17101
(717) 238-9905
Fax (717) 238-2443
E-Mail: ciaL&artzhealthlaw.com
Attorneys for Plaintiff,
Ted D. Kosenske, M.D.
DATED: October 26, 2005
44
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 45 of 45
CERTIFICATE OF SERVICE
I, Charles I. Artz, Esquire, hereby certify that on this 26th day of October
2005, a true and correct copy of the foregoing document was served upon the party
named below by depositing the same in the United States Mail, First Class postage
pre-paid, and addressed as follows:
The Honorable John Ashcroft
United States Attorney General
U.S. Department of Justice
950 Pennsylvania Avenue, N.W.
Washington, D.C. 20530-0001
Thomas Marino, Esq.
United States Attorney for the Middle District of Pennsylvania
Third and Walnut Streets
Harrisburg, PA 17101
CIA2440
Charles I. Artz, Esquire
CERTIFICATE OF SERVICE
I, Robin Locke Nagele, Esquire, hereby certify that I caused a true and correct copy of
the foregoing Complaint to be served by U.S. First Class Mail, postage prepaid, upon the
following at the address indicated:
Jeffrey B. McCarron, Esquire
Swartz Campbell LLC
Two Libert Place
50 South 16th Street, Floor 28
Philadelphia, PA 19102
Attorney for Defedants
Evan Black, Esquire
305 North Front Street
P.O. Box 999
Harrisburg, PA 17108
Attorney for Plaintiffs
Dated ROBIN LOCKE NAGE E
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY
COMMONWEALTH OF PENNSYLANIA
CARLISLE HMA, LLC d/b/a CARLISLE
REGIONAL MEDICAL CENTER and
HEALTH MANAGEMENT
ASSOCIATES, INC.
Plaintiffs,
VS.
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JURY TRIAL DEMAN Dr--
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STEVENS & LEE, P.C.,
LAWRENCE B. SELKOWITZ, ESQUIRE,
AND JAMES W. SAXTON, ESQUIRE,
Defendants.
Certificate of Merit Pursuant to Pa.R.C.P. 1042.3 as to
Defendant James W. Saxton, Esquire
COMMONWEALTH OF PENNSYLVANIA ss
COUNTY OF PHILADELPHIA
I, Robin Locke Nagele of Post & Schell, P.C., hereby certify that an appropriate licensed
professional has supplied a written statement to the undersigned that there exists a reasonable
probability to conclude that the care, skill or knowledge exercised or exhibited in connection
with the representation of Carlisle HMA, LLC d/b/a Carlisle Regional Medical Center and
Health Management Associates, Inc. (collectively "HMA") in the lawsuit United States of
America ex rel. Ted D. Kosenske, M.D. v. Carlisle HMA, Inc., Carlisle Regional Medical Center,
and Hospital Management Associates, Inc. [sic], No. 1:05-cv-2184 (M.D. PA), by James W.
Saxton, Esquire fell outside acceptable professional standards and that such conduct was a
cause in bringing about harm to HMA.
ROBIN LOCKE NAGEL , ESQUIRE
POST & SCHELL, P.C.
Attorneys for Plaintiffs,
Carlisle HMA, LLC. and Health Management
Associates, Inc.
Sworn to and Subscribed Before
me this /?4? day of April, 2011.
NOTARY PUBLIC
COMMONWEALTH OF PENNSYLVANIA
Notarial Seal
Deborah A. MacNlchol, Notary Public
City of Philadelphia, Philadelphia County
My Commission Expires OCt 8, 2013
Member, Pennsrivania Association of Notaries
CERTIFICATE OF SERVICE
I, Robin Locke Nagele, Esquire, hereby certify that I caused a true and correct copy of
the foregoing Certificate of Merit as to Defendant James W. Saxton, Esquire to be served by U.S.
First Class Mail, postage prepaid, upon the following at the address indicated:
Jeffrey B. McCarron, Esquire
Swartz Campbell LLC
Two Liberty Place
50 South 16`" Street, Floor 28
Philadelphia, PA 19102
Attorney for Defendants
Evan Black, Esquire
305 North Front Street
P.O. Box 999
Harrisburg, PA 17108
Co-Counsel for Plaintiffs
Dated' ROBIN L CKE NAGELE
e
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY
COMMONWEALTH OF PENNSYLANIA
CARLISLE HMA, LLC d/b/a CARLISLE
REGIONAL MEDICAL CENTER and
HEALTH MANAGEMENT
ASSOCIATES, INC.
Plaintiffs,
VS.
STEVENS & LEE, P.C.,
LAWRENCE B. SELKOWITZ, ESQUIRE,
AND JAMES W. SAXTON, ESQUIRE,
Defendants.
NO. 1\-'3a3
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CD
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=
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CD
-< CO
JURY TRIAL DEMANDED
Certificate of Merit Pursuant to Pa.R. C.P. 1042.3 as to
Defendant Lawrence B. Selkowitz, Esquire
COMMONWEALTH OF PENNSYLVANIA ss
COUNTY OF PHILADELPHIA
I, Robin Locke Nagele of Post & Schell, P.C., hereby certify that an appropriate licensed
professional has supplied a written statement to the undersigned that there exists a reasonable
probability to conclude that the care, skill or knowledge exercised or exhibited in connection
with the representation of Carlisle HMA, LLC d/b/a Carlisle Regional Medical Center and
Health Management Associates, Inc. (collectively "HMA") in the lawsuit United States of
America ex rel. Ted D. Kosenske, M.D. v. Carlisle HMA, Inc., Carlisle Regional Medical Center,
and Hospital Management Associates, Inc. [sic], No. 1:05-cv-2184 (M.D. PA), by Lawrence B.
Selkowitz, Esquire fell outside acceptable professional standards and that such conduct was a
cause in bringing about harm to HMA.
ROBIN LOCKE NAGEL , ESQUIRE
POST & SCHELL, P.C.
Attorneys for Plaintiffs,
Carlisle HMA, LLC. and Health Management
Associates, Inc.
Sworn to and Subscribed Before
me this //2?'' day of April, 2011.
NOTARY PUBLIC
COMMONWEALTH OF PENNSYLVANIA
Notarial Seal
Deborah A. MacNichol, Notary Public
City of Philadelphia, Philadelphia County
My Commission Expires Oct. 8, 2013
Member. Pennsylvania Assodation of Notaries
CERTIFICATE OF SERVICE
I, Robin Locke Nagele, Esquire, hereby certify that I caused a true and correct copy of
the foregoing Certificate of Merit as to Defendant Lawrence B. Selkowitz, Esquire to be served
by U.S. First Class Mail, postage prepaid, upon the following at the address indicated:
Jeffrey B. McCarron, Esquire
Swartz Campbell LLC
Two Liberty Place
50 South 16th Street, Floor 28
Philadelphia, PA 19102
Attorney for Defendants
Evan Black, Esquire
305 North Front Street
P.O. Box 999
Harrisburg, PA 17108
Co-Counsel for Plaintiffs
t1h(III - A
Dated ' ' 1 4--!?
ROBIN LOCKS NAGEL
,.
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY
COMMONWEALTH OF PENNSYLANIA
CARLISLE HMA, LLC d/b/a CARLISLE
REGIONAL MEDICAL CENTER and
HEALTH MANAGEMENT
ASSOCIATES, INC.
Plaintiffs,
VS.
STEVENS & LEE, P.C.,
LAWRENCE B. SELKOWITZ, ESQUIRE,
AND JAMES W. SAXTON, ESQUIRE,
Defendants.
NO.v%jI- 323
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JURY TRIAL DEMANDED
Certificate of Merit Pursuant to Pa.R.C.P. 1042.3 as to
Defendant Stevens & Lee, P. C.
COMMONWEALTH OF PENNSYLVANIA ss
COUNTY OF PHILADELPHIA
I, Robin Locke Nagele of Post & Schell, P.C., hereby certify that an appropriate licensed
professional has supplied a written statement to the undersigned that there exists a reasonable
probability to conclude that the care, skill or knowledge exercised or exhibited in connection
with the representation of Carlisle HMA, LLC d/b/a Carlisle Regional Medical Center and
Health Management Associates, Inc. (collectively "HMA") in the lawsuit United States of
America ex rel. Ted D. Kosenske, M.D. v. Carlisle HMA, Inc., Carlisle Regional Medical Center,
and Hospital Management Associates, Inc. [sic], No. 1:05-cv-2184 (M.D. PA), by licensed
professionals for whom defendant Stevens & Lee, P.C. is legally responsible, fell outside
acceptable professional standards and that such conduct was a cause in bringing about harm to
HMA.
ROBIN LOCKS NAGELE, SQUIRE
POST & SCHELL, P.C.
Attorneys for Plaintiffs,
Carlisle HMA, LLC. and Health Management
Associates, Inc.
Sworn to and Subscribed Before
me this ?/7?9 day of April, 2011.
/)?r ?'-- 11
NOTARY PUBLIC
COMMONWEALTH OF PENNSYLVANIA
Notarial Seal
Deborah A. MacNichol, Notary Public
City of Philadelphia, Philadelphia County
My Commission Expires Oct. 8, 2013
Member, Pennsvivania Association of Notaries
CERTIFICATE OF SERVICE
I, Robin Locke Nagele, Esquire, hereby certify that I caused a true and correct copy of
the foregoing Certificate of Merit as to Defendant Stevens & Lee, P.C. to be served by U.S. First
Class Mail, postage prepaid, upon the following at the address indicated:
Jeffrey B. McCarron, Esquire
Swartz Campbell LLC
Two Liberty Place
50 South 16`h Street, Floor 28
Philadelphia, PA 19102
Attorney for Defendants
Evan Black, Esquire
305 North Front Street
P.O. Box 999
Harrisburg, PA 17108
Co-Counsel for Plaintiffs
W ?t1 Ali
Dated ROBIN LOCKS NAGELE
SWARTZ CAMPBELL LLC
BY: JEFFREY B. MC CARRON
KATHLEEN M. CARSON
I.D. Nos. 49467 and 47981
Two Liberty Place, 28th Floor
50 South 16th Street
Philadelphia, PA 19102
(215) 564-5190
j mccanon.(a-?,swartzcampbell.com
kcarson@sw artzcampbel 1. corn
FILED-OFFICr
THE PEROTHONt
f4f l APP 28 PM 1; S7
UbBERLANo C0UNT
PENNSYLVANIA
Attorneys for Defendants,
Stevens & Lee, P.C., Lawrence B.
Selkowitz, Esquire and James W.
Saxton, Esquire
IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY
CARLISLE HMA, LLC d/b/a CARLISLE No. 2011-323 CIVIL TERM
REGIONAL MEDICAL CENTER and
HEALTH MANAGEMENT ASSOCIATES, INC.,
Plaintiffs,
V.
STEVENS & LEE, P.C.,
LAWRENCE B. SELKOWITZ, ESQUIRE
and JAMES W. SAXTON, ESQUIRE.
Defendants.
DEFENDANTS' PRELIMINARY OBJECTIONS TO
PLAINTIFFS' COMPLAINT
Defendants, Stevens & Lee, P.C., Lawrence B. Selkowitz, Esquire and James W.
Saxton, Esquire, through their attorneys, Swartz Campbell LLC, assert preliminary
objections to plaintiffs' complaint for failure to state a cause of action for which relief
may be granted and to strike for lack of conformity to rule of court:
1. The Allegations of the Complaint
This action arises out of the representation of plaintiffs, Carlisle HMA, LLC and
Health Management Associates, Inc. (collectively "plaintiffs"), by Stevens & Lee, P.C.
for the defense of an underlying qui tam action captioned, United States ofAmerica ex
SWARTZ CAMPBELL LLC
ATTORNEYS AT LAW
I' ' 7
rel. Ted D. Kosenske, M.D. v. Carlisle HMA, Inc., et al., No. 1:05-cv-2184 (M.D. Pa.)
("the underlying action"). Complaint at 112.
2. Plaintiffs were defendants in the underlying action.
3. This action is based on the contention Stevens & Lee did not properly represent
plaintiffs during the defense of the underlying action by Kosenske and caused plaintiffs
to pay to settle the underlying action. See generally, Complaint.
4. Selkowitz and Saxton are lawyers affiliated with Steven & Lee. Complaint at ¶T
6-9.
5. The underlying action was brought under the "whistleblower" provisions of the
federal False Claims Act by Ted D. Kosenske, M.D., an ex-employee/shareholder and
competitor of Carlisle Regional Medical Center's ("the Hospital") exclusive
anesthesiology provider group, Blue Mountain Anesthesia Associates, P.C. ("BMAA")
Complaint at 113.
6. The claims by Kosenske were based on the contention the Hospital and plaintiffs
were involved in a financial relationship with BMAA in violation of the Ethics in Patient
Referral Act, 42 U.S.C. § 1395nn ("Stark") and the Anti-Kickback Statute, 42 U.S.C. §
1320a-7b(b) ("AKS"). Id.
7. Kosenske asserted the alleged violations of Stark and AKS rendered the plaintiffs'
billings for pain management services "false claims" within the meaning of the False
Claims Act, 31 U.S.C. § 3731 et seq. ("FCA"). Complaint at ¶¶ 13, 16-17.
8. The underlying action was filed by Kosenske on October 26, 2005. Complaint at
$ 30.
2
SWARTZ CAMPBELL LLC
ATTORNEYS AT LAW
9. Stevens & Lee undertook the representation of HMA on December 27, 2006.
Complaint at 142.
10. According to plaintiffs, once Stevens & Lee became involved it allegedly failed
to: (1) interview, depose or identify a large number of critically important fact witnesses,
including former hospital corporate and compliance personnel; (2) obtain expert
consultation on Medicare/Medicaid billing requirements, Stark and AKS interpretation
based on regulations, commentary and industry standards and the fair market value
element of the personal services exception and safe harbor; (3) subpoena and obtain
BMAA's billing records and to comprehensively audit and analyze the hospital's own
billing records to establish that Kosenske's central factual allegations were incorrect; and
(4) consult with or identify experts or produce expert reports within the discovery
deadline. Complaint at ¶ 44.
11. Plaintiffs did not allege facts to make the criticisms in the complaint relevant by
alleging the activities they contend should have been done would have altered the
outcome of the underlying action.
12. On November 14, 2007, the district court granted the motion for summary
judgment filed by Stevens & Lee on behalf of plaintiffs and denied Kosenke's motion for
summary judgment. Complaint at ¶ 59.
13. The district court concluded that plaintiffs had complied with the personal
services exception to the Stark law and AKS. Complaint at ¶ 60.
14. The district court's grant of summary judgment was reversed by the Third Circuit
Court of Appeals which, among other things, found that the arrangement for pain
management services did not fit within the personal services exception under Stark or the
SWARTZ CAMPBELL LLC
ATTORNEYS AT LAW
1 i
AKS because there was no written contract for pain management services between
plaintiffs and BMAA and no proof it was a fair market value arrangement. Complaint at
164.
15. The Third Circuit decided there existed a financial relationship between BMAA
and plaintiffs which implicated Stark and AKS. Compliant at 163.
16. The underlying action was remanded to the district court for further proceedings
consistent with the Third Circuit's opinion. Complaint at ¶ 65.
17. After the case was remanded, another law firm, the Sonnenschein firm, took over
the case from Stevens & Lee and attempted to assert in a renewed motion for summary
judgment, defenses plaintiffs contend should have been previously asserted. Complaint
at 167.
18. The district court denied the renewed motion for summary judgment finding that
the Third Circuit's opinion had foreclosed significant portions of plaintiffs' defense
including: whether there was a financial relationship between the parties for Stark
purposes; and whether the individual BMAA physicians had a "financial relationship"
with plaintiffs for Stark purposes. Complaint at 168.
19. The district court further found that there was a genuine issue of material fact
about whether plaintiffs possessed the required scienter or intent to violate the False
Claims Act and AKS. Complaint at 169.
20. Upon denial of the renewed summary judgment motion, plaintiffs settled the
underlying action even though it had defenses to the Kosenske claims, i.e., the lack of
necessary scienter or intent under AKS and the False Claims Act. Complaint at 1169,
70.
4
SWARTZ CAMPBELL LLC
ATTORNEYS AT LAW
21. Plaintiffs then filed this action seeking to recover from defendants the amount it
alleged to pay to settle the underlying action. Complaint at 172.
22. The claims asserted by plaintiffs against defendants are for negligence and breach
of contract.
23. Plaintiffs did not allege they were not aware of the alleged errors which form the
basis for this action when they settled the underlying action.
24. Plaintiffs were not represented by defendants in connection with the negotiations
for or the settlement of the underlying action. See Complaint at 167.
25. Plaintiffs do not allege any misrepresentations by defendants to in connection
with the settlement.
26. Plaintiffs, in the ad damnum clauses for their negligence and breach of contract
claims, also seek to recover attorneys fees incurred in the prosecution of this action. See
Complaint at pp. 24, 27.
27. Plaintiffs also request "such other relief as the Court deems just and appropriate."
Id.
II. Preliminary Objections in the Nature of a Demurrer
A. Plaintiffs Claims Are Barred By Their Settlement of the Underlying
Action
28. Plaintiffs fail to state claims for professional negligence and breach of contract.
29. Plaintiffs, having settled the underlying action, cannot pursue a claim against their
lawyers. See Muhammad v. Strassburger, McKenna, Messer, Shilobod and Gutnick, 526
Pa. 541, 587 A.2d 1346 (1991), rehearing denied, 528 Pa. 345, 598 A.2d 27 (1991), cert
denied, 112 S.Ct. 196, (1991).
5
SWARTZ CAMPBELL LLC
ATTORNEYS AT LAW
1` Y
30. Muhammad forecloses dissatisfied litigants who agree to a settlement from
subsequently filing a lawsuit against their attorneys. Id. at p. 552, 587 A.2d at 1351.
31. The only exception to the Muhammad rule is where plaintiffs were fraudulently
induced to settle the underlying action. Id.
32. A party seeking to pursue a claim against his lawyer after a settlement must plead,
with specificity, fraud in the inducement. Id.
33. Where a client is aware of alleged malpractice which the client believes affects
the value of the case but agrees to settle anyway, the client is barred from later suing his
or her attorney. Muhammad, 526 Pa. at 553, n. 11.
34. Plaintiffs do not allege they were fraudulently induced to settle the underlying
action.
35. Plaintiffs were represented by counsel other than Stevens & Lee at the time they
settled the underlying action and did not rely on Stevens & Lee when they decided to
settle.
36. Plaintiffs were aware of the issues they complain of in the complaint at the time
they settled the underlying action.
37. Plaintiffs' settlement of the underlying claim forecloses them from proceeding
with their claims for negligence and breach of contract.
38. Plaintiffs' claims for professional negligence and breach of contract should be
dismissed with prejudice.
6
SWARTZ CAMPBELL LLC
ATTORNEYS AT LAW
B. Plaintiffs Fail to Allege Facts to Establish Actual Loss
39. Proof of actual loss is an essential element in a legal malpractice action based on
negligence or breach of contract. Kituskie v. Corbman, 552 Pa. 275, 714 A.2d 1027, 1030
(1998); Duke & Co. v. Anderson, 275 Pa. Super. 65, 418 A.2d 613, 617 (1980).
40. Actual loss can only be established by proving the plaintiff would have been
successful in the underlying suit except for the failure of his attorney to exercise ordinary
skill and knowledge. Trauma Serv. Group, P. C. v. Hunter MacLean, 2000 U.S. Dist.
LEXIS 3712 at *9 (E.D. Pa. 2000)
41. Plaintiffs claim is based on the contention they would have succeeded before the
Third Circuit Court of Appeals based on the absence of a financial relationship between
plaintiffs and BMAA.
42. The Third Circuit determined there was a financial relationship between plaintiffs
and BMAA sufficient to implicate Stark and AKS.
43. The allegations of the complaint do not establish plaintiffs would have succeeded
in the Third Circuit.
44. The allegations of the complaint do not establish actual loss.
C. Plaintiffs Cannot Recover Attorneys' Fees Incurred in the
Prosecution of this Action
45. Plaintiffs seek to recover attorney's fees incurred in the prosecution of this action
as part of their alleged damages.
46. Pennsylvania follows the general, American rule that there can be no recovery of
attorneys' fees from an adverse party, absent an express statutory authorization, a clear
agreement by the parties or some other established exception. Chatham
Communications, Inc. v. General Press Corp., 463 Pa. 292, 300-01, 344 A.2d 837, 842
7
SWARTZ CAMPBELL LLC
ATTORNEYS AT LAW
(1975) (quoting Corace v. Balint, 418 Pa. 262, 271, 210 A.2d 882, 886-87 (1965)); In re
Kling, 433 Pa. 118, 121, 249 A.2d 552,554 (1969); Shapiro v. Magaziner, 418 Pa. 278,
280, 210 A.2d 890, 892 (1965). See generally 42 Pa.C.S. § 2503(10) (providing that "a
litigant is entitled to attorneys' fees as part of the taxable costs, only in circumstances
specified by statute heretofore or hereafter enacted"); 42 Pa. C.S.A S.A. 1726(a)(1) (Attorney
fees are not a taxable item of costs).
47. Pennsylvania law does not permit the recovery of attorneys fees from an adverse
party under the circumstances alleged in the complaint.
48. There is no statute, rule, or contract provision which grants plaintiffs the right to
recover attorney's fees incurred in the prosecution of their claims for negligence and
breach of contract against defendants.
49. Plaintiffs' request for attorney's fees should be stricken from the ad damnum
clauses of plaintiffs' claims for relief.
III. Preliminary Objection Pursuant to Pa. R. Civ. P. 1028(a)(2)
A. Plaintiffs' Request for "Such Other Relief As The Court Deems Just
And Appropriate" Should Be Stricken
50. Plaintiffs demand recovery of "such other relief as the Court deems just and
appropriate" in their claims for relief.
51. A demand for "such other relief as the Court deems just and appropriate" is not a
plain statement about the nature and extent of the relief demanded by plaintiff. See Pa.
R.C.P. 1021.
52. The demand for "such other relief as the Court deems just and appropriate" is
improper and should be stricken from the complaint.
8
SWARTZ CAMPBELL LLC
ATTORNEYS AT LAW
WHEREFORE, defendants, Stevens & Lee, P.C., Lawrence B. Selkowitz, Esquire
and James W. Saxton, Esquire, respectfully request that this Court sustain their
preliminary objections and dismiss plaintiffs' complaint with prejudice or, alternatively,
strike plaintiffs' request for attorneys fees incurred in the prosecution of this action and
the request for "such other relief as the Court deems just and appropriate."
SWARTZ CAMPBELL LLC
4 / I at_?
JEFF Y B. M ARRON
KATHLEEN M. CARSON
Attorneys for Defendants,
Stevens & Lee, P.C., Lawrence B.
Selkowitz, Esquire and James W. Saxton,
Esquire,
Dated: April 28, 2011
9
SWARTZ CAMPBELL LLC
ATTORNEYS AT LAW
?XN??ir
IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY
COMMONWEALTH OF PENNSYLANIA
CARLISLE HMA, LLC d/b/a CARLISLE
REGIONAL MEDICAL CENTER and
HEALTH MANAGEMENT
ASSOCIATES, INC.
Plaintiffs,
NO. 2011-323 CIVIL TERM
Vs.
STEVENS & LEE, P.C.,
LAWRENCE B. SELKOWITZ, ESQUIRE,
and JAMES W. SAXTON, ESQUIRE,
Defendants.
JURY TRIAL DEMANDED
CIVIL ACTION COMPLAINT
NOTICE TO DEFEND
NOTICE
You have been sued in Court. If you wish to defend
against the claims set forth in the following pages, you
must take action within twenty (20) days after this
Complaint and Notice are served, by entering a written
appearance personally or by an attorney and filing in
writing with the Court your defenses or objections to the
claims set forth against you. You are warned that if you
fail to do so the case may proceed without you and a
judgment may be entered against you by the Court
without further notice for any money claimed in the
Complaint or for any other claim or relief requested by
the Plaintiff. You may lose money or property or other
rights important to you.
YOU SHOULD TAKE THIS PAPER TO YOUR
LAWYER AT ONCE. IF YOU DO NOT HAVE A
LAWYER OR CANNOT AFFORD ONE, GO TO OR
TELEPHONE THE OFFICE SET FORTH BELOW TO
FIND OUT WHERE YOU CAN GET LEGAL HELP.
AVISO
Le han demandado en la corte. Si usted quiere defenderse de
estas demandas expuestas en las paginas siguientes, usted tiene
veinte (20) dias de plazo de la demanda y notificacion pare
asentar una comparesencia escrita en persona o por su abogado
y archivar con la corte en forma escrita sus defensas o sus
objeciones a las demandas en contra de su persona. Sea
avisado que si usted no se defende, la corte puede continuar la
demanda en contra suya y puede entrar una decision contra
usted sin aviso o notificacion adicional por la cantidad de
dinero de la demanda o por cualquier reclamation hecha por el
demandante. Usted puede perder dinero o propiedad u otros
derechos importantes para usted.
USTED DEBE DE LLEVAR ESTA DEMANDA A UN
ABOGADO INMEDIATAMENTE. SI NO TIENE
ABOGADO 0 SI NO TIENE EL DINERO SURCIENTE
PARA PAGAR TAL SERVICIO, VAYA EN PERSONA 0
LLAME POR TELEFONO A LA OFICINA CUYA
DIRECCION SE ENCUENTRA ESCRITO ABAJO PARA
AVERIGUAR DONDE SE PUEDE CONSEGUIR
ASISTENCIA LEGAL.
CUMBERLAND COUNTY BAR ASSOCIATION ASSOCIACION DE ABOGADOS DE FILADELFIA
Lawyer Referral and Information Service Servicio De Referencia E Information Lega
32 South Bedford Street 32 South Bedford Street
Carlisle, PA 17013 Carlisle, PA 17013
1-800-990-9108 1-800-990-9108
717-249-3166 717-249-3166
s
POST & SCHELL, P.C.
BY: ROBIN LOCKE NAGELE, ESQ
I.D. NO. 36992
BY: JOHN N. JOSEPH, ESQ.
I.D. NO. 46643
FOUR PENN CENTER, 14TH FLOOR
1600 JOHN F. KENNEDY BLVD.
PHILADELPHIA, PA 19103
(215) 587-1000 (PH)
(215) 587-1444 (FX)
CARLISLE HMA, LLC d/b/a CARLISLE
REGIONAL MEDICAL CENTER and
HEALTH MANAGEMENT
ASSOCIATES, INC.
Plaintiffs,
VS.
STEVENS & LEE, P.C.,
LAWRENCE B..SELKOWITZ, ESQUIRE,
and JAMES W. SAXTON, ESQUIRE,
Defendants.
COMPLAINT
COURT OF COMMON PLEAS
CUMBERLAND COUNTY
NO. 2011-323 CIVIL TERM
JURY TRIAL DEMANDED
CIVIL ACTION
NOW COME, the Plaintiffs, Carlisle HMA, LLC d/b/a Carlisle Regional Medical Center
("Carlisle Regional Medical Center" or the "Hospital") and Health Management Associates, Inc.
(collectively, "HMA"), by and through their legal counsel, Robin Locke Nagele, Esquire and
John N. Joseph. Esquire, and do allege and aver as follows:
I. JURISDICTION AND VENUE
1. Jurisdiction and venue are proper in the Court of Common Pleas of Cumberland
County because that is where the cause of action arose and where Carlisle Regional Medical
Center has its principal place of business.
2. Plaintiffs hereby make demand for a jury trial pursuant to Pennsylvania Rule of
ATTORNEYS FOR PLAINTIFFS,
CARLISLE HMA, LLC d/b/a
CARLISLE REGIONAL MEDICAL
CENTER and HEALTH
MANAGEMENT ASSOCIATES, INC.
Civil Procedure 1007.1.
U. PARTIES
3. Plaintiff, Carlisle Regional Medical Center, is a limited liability company
organized and existing under the laws of the Commonwealth of Pennsylvania with its principal
place of business at 361 Alexander Spring Road, Carlisle, Pennsylvania, 17015. Carlisle
Regional Medical Center is a wholly owned subsidiary of Health Management Associates, Inc.
4. Plaintiff, Health Management Associates, Inc. is a corporation organized under
the laws of Florida, with its principal offices at 5811 Pelican Bay Boulevard, Suite 500, Naples,
FL 34108.
5. Defendant, Stevens & Lee, P.C., is a professional corporation organized and
existing under the laws of the Commonwealth of Pennsylvania with its principal offices located
at 111 North Sixth Street, P.O. Box 679, Reading, PA 19603-0697.
6. Defendant, Lawrence B. Selkowitz, Esquire ("Selkowitz"), is a citizen and
domiciliary of the Commonwealth of Pennsylvania, and is an adult individual licensed to
practice law in the Commonwealth of Pennsylvania, who is employed by Stevens & Lee.
7. At all relevant times hereto, Defendant Selkowitz was the actual and/or ostensible
employee and agent of Defendant Stevens & Lee, acting within the course and scope of his
employment with Defendant Stevens & Lee.
8. Defendant, James W. Saxton, Esquire ("Saxton") is a citizen and domiciliary of
the Commonwealth of Pennsylvania and is an adult individual licensed to practice law in the
Commonwealth of Pennsylvania, who is employed by Stevens & Lee.
9. At all relevant times hereto, Defendant Saxton was the actual and/or ostensible
employee and agent of Defendant Stevens & Lee, acting within the course and scope of his
employment with Defendant Stevens & Lee.
2
10. Defendant Stevens & Lee is vicariously liable for the acts of its employees and
agents, Selkowitz and Saxton.
11. The Defendants are referred to collectively herein as "S&L" or "Stevens & Lee."
III. FACTUAL ALLEGATIONS
12. This action arises out of the negligent mishandling by Stevens & Lee of a
groundless qui tam lawsuit originally captioned United States ofAmerica ex rel. Ted D.
Kosenske, M.D. v. Carlisle HMA, Inc., Carlisle Regional Surgery Center, Carlisle Regional
Medical Center, and Hospital Management Associates, Inc., No. 1:05-cv-2184 (M.D. Pa.) ("the
Lawsuit"). The caption was subsequently amended and corrected to include as defendants only
"Carlisle HMA, Inc." [sic) and Health Management Associates, Inc. The Complaint filed in the
Lawsuit ("the Complaint") is attached hereto as Exhibit "A."
13. The Lawsuit was brought under the "whistleblower" provisions of the federal
False Claims Act, by Ted D. Kosenske, M.D. ("Kosenske"), a disgruntled ex-employee and
current competitor of Carlisle Regional Medical Center's exclusive anesthesiology provider
group, Blue Mountain Anesthesia Associates, P.C. ("BMAA"). Kosenske's groundless qui tam
lawsuit, in which he stood to gain substantially from any financial recovery, erroneously alleged
that pain management services performed by him on behalf of Carlisle Regional Medical Center
while employed by BMAA were the result of an unlawful business relationship between the
Hospital and the BMAA physicians (including him) that violated the federal "fraud and abuse"
laws, specifically, the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b) ("AKS"), the Ethics In
Patient Referrals Act, 42 U.S.C. § 1395nn ("Stark"), and the federal False Claims Act, 31 U.S.C.
§ 3731 et seq. ("FCA").
14. The AKS is a broadly worded federal criminal statute that makes it a felony to,
knowingly and willfully, offer, accept, solicit or receive any form of "remuneration" as an illegal
inducement to refer a patient for items or services that are reimbursable under federal and state
healthcare programs, including Medicare and Medicaid. The AKS is not intended to prohibit
legitimate business arrangements, and the Office of Inspector General of the Department of
Health and Human Services ("OIG") has promulgated a series of regulatory "safe harbors"
covering such common arrangements as employment agreements, services contracts, office and
equipment leases, and discount arrangements to enable the healthcare industry to continue to
conduct business on a commercially reasonable basis.
15. The Stark law is a broadly worded federal civil statute that prohibits healthcare
entities from billing the Medicare program for the provision of certain specified items or services
that result from a referral by a physician with which the billing entity has a "financial
relationship" unless the financial relationship is structured to meet the requirements of the Stark
statute and interpretive regulations. There are very extensive and comprehensive Stark
regulations that define the boundaries of lawful commercial relationships.
16. The FCA enables the federal government to seek civil recovery of federal funds
paid out as the result of "false or fraudulent" claims. The FCA has been interpreted as
permitting recovery under certain circumstances for funds paid out for legitimate and medically
necessary items and services that were "tainted" by violations of the AKS or the Stark law. The
FCA's qui tam provisions authorize the prosecution of FCA claims by private individuals acting
in the name of the government, even where, as here, the government itself has declined to
prosecute the case.
17. Kosenske's qui tam Lawsuit in this case alleged that the pain management
services he (and others) had provided as agents of BMAA on behalf of Carlisle Regional
Medical Center were "tainted" by AKS and Stark violations arising from the relationship
4
between Carlisle Regional Medical Center and the BMAA physicians, and therefore that all of
the Hospital's billings in connection with its pain management program constituted "false
claims" within the meaning of the FCA.
18. In truth, the Hospital had a lawful, appropriate, and commercially reasonable
exclusive contract relationship with BMAA (not the individual BMAA physicians), in which it
made its facilities available to BMAA, on an exclusive basis, to provide anesthesiology and pain
management services on its behalf and for the benefit of its patients. The arrangement was no
different than the arrangement that hospitals across the country have to secure needed services
such as anesthesiology, radiology, and laboratory medicine to support the provision of services
by other physicians. As is typical, the Hospital did not pay BMAA for its services, and BMAA
did not pay the Hospital for access to its facilities. As is typical, each of the parties to the
arrangement billed patients and their insurers (including Medicare and Medicaid) separately for
the facilities and services each provided. The fact that this was a completely ordinary and non-
remarkable relationship is confirmed by the fact that: (i) the United States Department of Justice
declined to exercise its right to intervene and pursue Kosenske's meritless allegations, and (ii)
after the matter was settled by Kosenske and HMA, the OIG opted not to pursue any
administrative sanction or seek a Corporate Integrity Agreement from HMA.
19. During the course of its representation of HMA, S&L continuously advised HMA
that the qui tam allegations regarding its contract with BMAA were without merit and that this
was a case that HMA should win.
20. Notwithstanding those representations, S&L negligently breached its professional
obligation to properly defend the case by failing to assert and preserve critically important
factual and legal defenses.
5
21. By virtue of S&L's negligence in failing to assert and preserve conclusive and
winning defenses, HMA was ultimately precluded from asserting dispositive winning arguments
that would have defeated the meritless allegations brought by Kosenske, thus forcing Carlisle
Regional Medical Center, instead, to pay a substantial settlement to avoid exponentially higher
financial exposure under the FCA.
THE AGREEMENT
22. BMAA was formed in late 1992 by the four anesthesiologists who, prior to that
time, provided all the anesthesiology services to Carlisle Regional Medical Center's predecessor
in interest, referred to herein as "Carlisle Hospital."
23. The original four shareholders of BMAA were Howard Alster (President), Judy
Baumgart, Ron Sola and Kosenske.
24. On or about December 31, 1992, BMAA (not the individual BMAA physicians)
and Carlisle Hospital entered into an Anesthesiology Services Agreement ("Agreement"), a fully
executed agreement for an indefinite term, terminable only for cause. This Agreement gave
BMAA the exclusive right to provide all anesthesiology services (including pain management
services) on behalf of Carlisle Hospital, throughout the term of the Agreement, at the original
and any new locations where the Hospital would be providing such services.
25. BMAA, through Kosenske, was developing a pain management practice at the
time the Agreement was entered into, and the contract entitled BMAA to be the Hospital's
exclusive provider of anesthesia and pain management "wherever the hospital goes." BMAA,
primarily through Kosenske himself, started providing pain management services pursuant to the
terms of the Agreement within months of the Agreement's execution.
6
26. Under the terms of the Agreement, Carlisle Hospital provided all of the space,
equipment and staffing needed to support the provision of anesthesiology and pain management
services, and, pursuant to usual and customary billing practices, billed patients for such space,
equipment and staffing through the "technical fee" (which, in the case of inpatient
anesthesiology services, was included within a predetermined prospective fixed fee known as a
"Diagnostic Related Grouping" or "DRG" and, in the case of pain management, was billed
separately by the Hospital).
27. BMAA provided the "professional" component of all professional anesthesiology
and pain management services provided at the Hospital, and, pursuant to usual and customary
billing practices, billed patients for such services through a "professional fee."
28. In or about 1998, Carlisle Hospital and BMAA decided that the pain management
service, which had grown considerably since 1992 and had outgrown the space available in the
Hospital's surgical suite, should be moved to a new Hospital location. Accordingly, when
Carlisle Hospital constructed an outpatient facility a few miles from its main campus, Carlisle
Hospital and BMAA moved the pain management service to this new location, where it
continued to be operated in the same manner as it had at the main campus, as an outpatient
department of the Hospital. As it had at the main hospital campus, Carlisle Hospital provided
space, equipment and staffing and billed payors a "technical fee" for these things, while BMAA
provided the professional component of the pain management services and billed its
"professional fee." Patients registered as Hospital outpatients, and procedures were billed as
Hospital outpatient procedures.
29. The Agreement was still in effect in June, 2001, the date that Carlisle HMA, LLC
acquired the assets of Carlisle Hospital, and succeeded to Carlisle Hospital's rights under the
Agreement. The Agreement remained in effect between BMAA and Carlisle Regional Medical
Center at all relevant times pertinent hereto.
KOSENSKE'S QUI TAM LAWSUIT AND
ENSUING DISTRICT COURT LITIGATION
30. On or about October 26, 2005, Kosenske filed the Lawsuit.
31. Pursuant to the provisions of the FCA, the Lawsuit was initially filed in camera
and under seal, and was referred to the United States Government to make a determination as to
whether or not to intervene in the action. HMA and Carlisle Regional Medical Center were
unaware of the action until in or about 2006.
32. In the Lawsuit, Kosenske erroneously alleged that Carlisle Regional Medical
Center was illegally providing free rent, equipment and supplies at its outpatient facility to
BMAA (primarily Kosenske) in return for patient referrals in violation of Stark and the AKS.
Kosenske asserted that these alleged violations of Stark and AKS rendered the Hospital's
billings for pain management services "false claims" within the meaning of the FCA.
33. Specifically, Kosenske erroneously alleged that the Hospital was not billing, and
could not bill, any "technical fee" for those pain management services that constituted only
Evaluation and Management Services ("E/M Services") because E/M Services constituted purely
professional services, with no billable technical component.
34. The alleged factual predicate for Kosenske's claims is set forth in the qui tam
Complaint. Kosenske's Complaint included the following demonstrably false and inaccurate
factual and legal allegations:
a. That Carlisle Regional Medical Center maintained a pain clinic "through"
a Medicare-certified Ambulatory Surgery Center ("ASC") (as opposed to
a hospital outpatient department, which is how the services were actually
provided). (Complaint, 1147-48, 62).
b. That Carlisle Regional Medical Center submitted the claims as though
they were outpatient hospital services, when in fact they should have been
billed as ASC services. (Complaint, ¶ 63).
That the majority (65 percent) of BMAA's pain management practice was
Physician E/M Services which are "100 percent reimbursable" to the
physicians, with no corresponding reimbursement to the hospital through a
facility fee. (Complaint, % 54-58, 75).
d. That the pain clinic consists of 1,526 square feet of space located within
the ASC that includes three medical examination rooms, a nursing station,
patient restrooms, medical secretary space and waiting area, which is used
exclusively for Physician Billable E/M Services. (Complaint, 171).
That Carlisle Regional Medical Center provided approximately $62,000
per year in "free space," as well as $133,090 per year in "free equipment
and services," thus allowing the BMAA physicians to bill for E/M
Services without incurring any overhead cost. (Complaint, 1181, 96).
That Carlisle Regional Medical Center "forgave" the BMAA physicians'
rental payment demand and obligations in order to secure their allegiance
and maintain the Hospital's $300,000 per year profit stream from the pain
management procedures and to avoid BMAA's developing a competing
pain management center.
g. That HMA "knew" or acted in "reckless disregard" or "deliberate
ignorance" of the fact that it had an obligation to collect rent and secure
payments and agreement so as to comply with Stark and AKS.
These untrue allegations were based on a fundamentally false premise - namely that BMAA was
providing pain management services as a private professional service as opposed to as a hospital
service. The actual arrangement between Carlisle Hospital and BMAA for the provision of pain
management services was a lawful and typical hospital-physician arrangement.
35. In the Complaint, the plaintiff sought the following relief from the court:
Order BMAA and HMA to develop compliant written agreements
documenting the space, equipment and staff arrangements and paying
HMA all past amounts due for rental, equipment and staffing costs.
b. Enjoin further submission of claims for the pain management services
until proper agreements are in place and all past due amounts paid.
C. Judgment for plaintiff for the false claims with trebling and payment of
appropriate penalties.
9
d. Allocation of up to 25 percent of the award for Kosenske.
e. Attorneys fees for Kosenske.
36. Based on the false allegation that Carlisle Regional Medical Center was not
billing, and could not properly bill, payors for the E/M Services, Kosenske incorrectly alleged
that Carlisle Regional Medical Center's failure to seek payment from the BMAA physicians or
BMAA for the space, equipment and supplies constituted illegal remuneration to BMAA and/or
the BMAA physicians within the meaning of Stark and AKS.
37. Kosenske's original factual and legal premise was completely wrong: Carlisle
Regional Medical Center had, in fact, lawfully billed and collected the technical facility fee for
all pain management services, including E/M services, provided through its outpatient
department.
38. In addition, Kosenske's premise that the relationship between Carlisle Regional
Medical Center and BMAA created a "financial relationship" between Carlisle Regional
Medical Center and the BMAA physicians for purposes of the Stark law was incorrect as a
matter of fact and law.
39. On or about June 19, 2006, the government, after investigating Kosenske's
allegations against Carlisle Regional Medical Center and HMA, declined to intervene in the
Lawsuit. On or about June 29, 2006, the Complaint was unsealed. On or about July 21, 2006,
Kosenske filed an Affidavit of Service stating that all defendants had been served with the
Summons and Complaint and other documents of record on July 17, 2006.
40. On or about August 8, 2006, HMA, through attorney Joseph A. Ricci, Esquire
filed an answer with affirmative defenses to plaintiff's Complaint ("the Answer"). The Answer
included the following factual averments:
10
a. The pain management services provided by BMAA were not in a
separately licensed facility but were provided, appropriately, through an
outpatient department of the hospital. (Answer, at Introduction).
b. BMAA provided pain management services through an exclusive contract
that covered the entire hospital, including its outpatient pain management
department. (Answer, ¶ 48).
C. All pain management services, including E/M Services and procedures,
are performed in the same location. (Answer, 152).
d. E/M Services are not solely physician services, but also provide a
technical and facility component. (Answer, IM 54-59, 70).
e. All billing by Carlisle Regional Medical Center is properly for the
technical component of outpatient services, and should not be billed
according to a composite ASC rate. (Answer, $ 65).
BMAA's pain management services are distinguishable from a physician's
private professional services in his own office because they include a
facility and technical component which would not be true for a private,
non-hospital based physician service. (Answer, $ 67).
g. The space occupied by BMAA at the outpatient center was provided
pursuant to the terms of the exclusive contract between BMAA and
Carlisle Regional Medical Center, and the terms for its use are set forth in
that contract. (Answer, 172-73).
h. The space occupied by BMAA is not used exclusively for pain
management services but is also used for ophthalmology services.
(Answer ¶ 74).
The BMAA physicians are "under contract to provide professional
medical services for the benefit of the patients" of the hospital. They are
not being offered or provided any "inducements" to refer patients to the
hospital. (Answer, IT 82, 85).
The use of exclusive contracts for anesthesiology and other house-based
services is standard in the industry in order to promote higher quality of
care and 24/7 coverage. (Answer, IM 140, 169).
41. During the discovery phase of the Lawsuit, it became clear that Kosenske's
predicate factual allegations were wrong because he had failed to recognize the fact that (i) the
pain clinic operated as an outpatient department of the hospital, and not a private practice, and
(ii) the relationship between Carlisle Regional Medical Center and BMAA did not create a
11
"financial relationship" for Stark purposes between Carlisle Regional Medical Center and the
BMAA physicians (as opposed to BMAA itself). Under standard billing rules and practices,
Hospital outpatient clinics bill patients and their insurers for the cost of providing space,
equipment and supplies to support the provision of outpatient professional service, and the
Hospital was therefore precluded as a matter of law from seeking payment from BMAA or the
BMAA physicians. Under then prevailing Stark regulations, the agreement between Carlisle
Regional Medical Center and BMAA did not create a "financial relationship" between the
plaintiffs and the BMAA physicians (as opposed to BMAA itself) for Stark purposes.
Furthermore, exclusivity alone is not and has never been construed as establishing a "financial
relationship" for Stark and AKS purposes.
STEVENS & LEE ENTERS ITS APPEARANCE
42. On or about December 27, 2006, Stevens & Lee, through Selkowitz and Saxton,
entered its appearance and took over the handling of the case.
43. On information and belief, after S&L entered its appearance in the case and
assumed responsibility for the defense of the case, all of the strategic decisions were made
exclusively by S&L and not by Ricci.
44. After assuming responsibility for the defense, S&L proceeded with a certain
amount of investigation and discovery. However, despite the extremely high stakes of the
litigation, S&L's factual work-up of the case fell far below the standard of professional practice.
By way of example (and not of limitation), S&L:
a. failed to interview, take the depositions of, and/or identify for trial a large
number of critically important fact witnesses, including former hospital,
corporate and compliance personnel.
b. failed to obtain expert consultation on critically important issues such as
the complex Medicare/Medicaid billing requirements, Stark and AKS
interpretation based on regulations, commentary and industry standards,
12
and the fair market value element of the personal services exception and
safe harbor.
C. failed to subpoena and obtain BMAA's billing records, and to
comprehensively audit and analyze the Hospital's own billing records, to
gather further proof that Kosenske's central factual allegations were
incorrect.
d. failed to consult with or identify experts or produce any expert reports
within the discovery deadline imposed by the court.
45. During its investigation of the case, S&L developed the factual predicate
necessary to establish that Kosenske's foundational allegations were false, because (i) the
Hospital was, in fact, being reimbursed for the space, equipment and supplies utilized in its pain
management program through the "technical fee" billed to patients and insurers, and as such,
could not have billed the physicians for such space, equipment and supplies, and (ii) there was
no "direct or indirect financial relationship" between Carlisle Regional Medical Center and the
BMAA physicians for Stark purposes.
46. Although the evidentiary basis for these winning defenses had been established in
discovery, S&L never argued to the court that (i) the requisite liability element of
"remuneration" in the form of free rent to the BMAA physicians or BMAA did not exist because
Medicare and other payors were properly reimbursing Carlisle Regional Medical Center for its
technical facility fee, and that therefore HMA could not have lawfully billed BMAA or the
BMAA physicians for these items, and (ii) there was no "direct or indirect financial relationship"
between HMA and the BMAA physicians within the meaning of the Stark regulations.
Consequently, the opportunity to assert and preserve these winning defenses was lost.
STEVENS & LEE's DEFICIENT HANDLING OF
SUMMARY JUDGMENT CROSS-MOTIONS
47. On or about June 6, 2007, S&L filed a Motion for Summary Judgment against
plaintiff on both Stark and AKS grounds. Kosenske opposed the Motion for Summary Judgment
13
and filed his own Motion for Summary Judgment limited to the Stark issues, which S&L
opposed, using the same arguments that it had advanced in support of its own Motion for
Summary Judgment.
48. S&L's affirmative Motion for Summary Judgment on HMA's behalf, along with
its response to Kosenske's motion, inexplicably omitted HMA's strongest and incontrovertible
arguments, and made other fatal errors that ultimately caused HMA to forever lose key defenses
for trial and on appeal.
49. Most importantly, S&L failed to make the affirmative argument that there was no
predicate financial or remunerative relationship between the parties, an essential prerequisite for
Stark and AKS liability, because (i) there was no "free" space, equipment, supplies or personnel
provided to the BMAA physicians or BMAA because the pain management practice was a
hospital-based service for which HMA was properly billing and collecting a technical fee from
patients and payors and therefore HMA could not lawfully have charged BMAA or the BMAA
physicians for these items, and (ii) there was no "direct or indirect financial relationship"
between Carlisle Regional Medical Center and the BMAA physicians for purposes of the Stark
law; and (iii) exclusivity alone has never been found to create a financial or remunerative
relationship for Stark and AKS purposes.
50. Instead of asserting the affirmative winning argument that there was no
"remuneration" paid to the BMAA physicians or BMAA and no "financial relationship" between
Carlisle Regional Medical Center and the BMAA physicians, S&L made the narrow, circular
argument that there was no "financial relationship" for Stark and AKS purposes simply because
i
HMA and BMAA had entered into a "personal services agreement" that was legally compliant
under Stark and AKS.
14
51. While claiming that no financial relationship existed due to the "personal
services" exception, S&L was in reality conceding that there was in fact a prima facie financial
relationship for Stark and AKS purposes, but that it was excepted from liability by the Stark and
AKS regulations.
52. S&L's reliance solely on the "personal services" exception stripped HMA of the
winning legal argument that no prima facie "financial relationship" existed, because (i) the
Hospital never paid any remuneration in the form of free rent as it had lawfully billed for and
received fees for the space, equipment and supplies used in the pain management practice, and
therefore could not have charged BMAA or the BMAA physicians for these items, (ii) the
Hospital had no "direct or indirect financial relationship" with the BMAA physicians within the
meaning of the Stark regulations, and (iii) exclusivity alone has never been found to create a
financial or remunerative relationship for Stark and AKS purposes. The loss of these
incontrovertible defenses inured to the extreme prejudice of HMA's ability to successfully
defend the case.
53. Having relied exclusively on the "personal services" exception, S&L then
compounded its error by failing to produce essential evidence required to meet HMA's burden of
proving the specific elements of the "personal services" exception, including, most significantly,
(i) fact testimony needed to establish that there was a written agreement covering the pain
management services, and (ii) expert testimony required to prove that the arrangement was "fair
market value," as is required under Pennsylvania law.
54. S&L's handling of the Stark issues at the Summary Judgment stage ultimately
doomed HMA's Stark defense, by (i) restricting HMA's defense to a single contention - i.e., that
HMA had complied with the "personal services" exception to Stark, and then (ii) failing to put
15
forth essential proof required to meet HMA's burden of establishing that HMA had complied
with the Stark "personal services" exception, including essential fact testimony and expert
testimony required under Pennsylvania law.
55. S&L's handling of the AKS issues at the Summary Judgment stage ultimately
doomed HMA's AKS defense, by (i) restricting HMA's defense to a single contention - i.e., that
HMA had complied with the "personal services" safe harbor under the AKS, (ii) failing to put
forth essential proof required to meet HMA's burden of establishing that HMA had complied
with the AKS "personal services" exception, including essential fact testimony and expert
testimony required under Pennsylvania law, and (iii) failing to argue that even if the court were
to find that there was a financial relationship between HMA and BMAA that did not qualify for
the "personal services" safe harbor, Kosenske still could not prevail because there was no
evidence of intent to violate the AKS.
56. This fatal flaw in S&L's presentation of HMA's case directly and inexorably led
to a Third Circuit opinion on Summary Judgment that was so devastating to HMA's underlying
case that it could not risk taking the case to trial and risk paying treble damages plus civil
penalties.
57. S&L's Motion for Summary Judgment on behalf of HMA contained additional
clear and fatal deficiencies, including, but not limited to, the following:
a. failing to argue or proffer evidence or expert testimony to explain that the
Medicare billing regulations treat physician services differently for billing
purposes depending on whether those services are offered through a
hospital outpatient department, private practice, or freestanding center, all
of which factored into Kosenske's erroneous premise in filing the action,
and the lack of viability of his claims;
b. failing to distinguish between the Stark and AKS legal theories in making
its arguments in support of and opposition to summary judgment, thus
leading to unwarranted adverse rulings, on appeal, as to both the Stark and
AKS causes of action;
16
C. failing to distinguish between Stark and AKS regulatory analysis on the
issue of whether "exclusivity" creates a "financial relationship" for either
Stark or AKS purposes;
d. treating the Stark personal services "exception" and the AKS personal
services "safe harbor" as if they are identical, which they are not;
e. failing to argue on summary judgment that the failure to fit within an AKS
"safe harbor" does not equate to a violation of the AKS, absent proof of
intent to violate the statute;
f. failing to argue that Kosenske could not establish intent for purposes of a
predicate AKS violation;
g. failing to introduce into the summary judgment record the facts essential
to proving that HMA was in full compliance with the Stark "personal
services" exception and the AKS "personal services" safe harbor,
including, but not limited to, (i) essential fact witness testimony to rebut
Kosenske's pointed argument that the 1992 Agreement did not extend to
pain management services provided at the pain clinic; and (ii) essential
expert witness testimony needed to establish that the arrangement between
the Hospital and BMAA was a fair market value arrangement;
h. snaking the patently frivolous argument that there was no "referral" within
the meaning of the Stark law, despite clear regulatory guidance to the
contrary set forth in 42 CFR § 411.351, thus damaging HMA's credibility
and inviting Third Circuit reversal;
failing to proffer necessary and appropriate facts and make necessary and
appropriate legal arguments in support of HMA's motions and in
opposition to Kosenske's motion.
58. S&L's response to Kosenske's motion contained the same fatal deficiencies that
were in its original motion.
THE DISTRICT COURT'S ERRONEOUS OPINION
59. On or about November 14, 2007, the District Court granted S&L's defective
Motion for Summary Judgment, and denied Kosenske's Motion for Summary Judgment. The
District Court's Opinion demonstrates that S&L's submission of a legally deficient evidentiary
record and legally deficient legal arguments in its moving and opposing papers misled the
District Court into a significant reversible error. The District Court reached the correct result but
17
for the wrong reasons - adopting legally unsustainable arguments put forth by S&L that led it
into reversible error, and failing to articulate the reasons that S&L should have, but did not,
bring forth, as to why HMA should prevail in the case.
60. The particularly harmful elements of the District Court opinion caused by S&L's
negligence include, but are not limited to, the following:
a. As a direct result of S&L's fatally flawed arguments, the District Court
erroneously concluded, as a matter of law, that the exclusive right to
provide services as well as the receipt of "office space, medical equipment
and clerical personnel without charge" constituted "remuneration" which
created a "financial relationship" for Stark purposes. (Trial Court
Opinion, pp. 16-17). S&L led the District Court into this reversible error
by failing to present and support the essential arguments that neither the
exclusivity nor the provision of rent, equipment and staff constituted
"remuneration" or created a "financial relationship" for Stark purposes
because (i) the hospital was, in fact, being reimbursed for the rent,
equipment and staff through the "technical fee" and therefore could not
have lawfully billed the BMAA physicians or BMAA for these items; (ii)
the hospital did not have a direct or indirect relationship with the BMAA
physicians within the meaning of the Stark regulations; and (iii)
exclusivity alone has never created a financial relationship for Stark
purposes.
b. As a direct result of S&L's fatally flawed and deficient summary
judgment presentation, the District Court judge decided that there was no
"financial relationship" between Carlisle Regional Medical Center and the
BMAA physicians based solely on its conclusion that Carlisle Regional
Medical Center had complied with the "personal services" exception to
Stark, which conclusion was ultimately unsustainable because of the
deficiency of the proofs presented by S&L.
C. As a direct result of S&L's failure to acknowledge and meet Kosenske's
compelling argument that HMA had the burden of proof on the elements
of the statutory "personal services" exception, S&L created an evidentiary
record that was so inadequate that the District Court lacked the necessary
factual foundation to support its ruling in favor of HMA.
d. S&L's failure to distinguish the different elements for establishing liability
under the AKS and the Stark statute misled the District Court into
erroneously treating the AKS and Stark analysis as legally
indistinguishable theories of liability, thereby converting Kosenske's
Stark-based summary judgment motion into a de facto AKS-based
summary judgment motion in terms of its legal effect.
18
e. The District Court determined that Carlisle Regional Medical Center and
HMA had the burden of proof on the "Fair Market Value" ("FMV")
element of the Stark exception. S&L failed, however, to present any
affirmative evidence that the agreement satisfied the FMV element of the
Stark exception, notwithstanding defendant Selkowitz's admission in
correspondence to HMA that proof of FMV requires expert testimony.
Left without any affirmative proof from which to derive FMV, the District
Court was then led into error when it adopted S&L's tautological
argument that "by definition, the terms of the contract reflect the fair
market value of the benefits conferred on each party." (Trial Court
Opinion, page 27). S&L's complete failure to present any evidence to
support its contention that the contract was for FMV was at odds with
existing well established legal precedent and was a material factor in the
Third Circuit's ultimate reversal.
f. Because S&L had not presented the argument, the District Court failed to
determine that the AKS-based claim failed as a matter of law because
there was no intent to violate the AKS.
THE THIRD CIRCUIT'S REVERSAL AND
SETTING OF THE LAW OF THE CASE
61. S&L's negligent handling of the appeal compounded the problems created by -
S&L's inadequate and defective Summary Judgment record and the District Court's resulting
opinion. Without difficulty, Kosenske's appellate briefing handily exposed the serious flaws in
the District Court's decision that had adopted S&L's flawed arguments, focusing, in particular
on:
a. the absence of proof of fair market value and the District Court's
remarkable conclusion that fair market value could be inferred merely
from the fact of a negotiated agreement.
b. the absence of proof that the 1992 Agreement covered the pain
management services provided at the outpatient department.
C. the Trial Court's "alternative" holding that BMAA could not make any
referrals to the Hospital under a provider-based arrangement.
62. S&L's appellate response ignored Kosenske's legal arguments, and simply
reiterated the same flawed arguments it had presented in the District Court, including its legally
19
unsustainable argument that the Stark definition of "referral" is fundamentally at odds with the
requirements of separate provider-based billing regulations.
63. The Third Circuit made short shrift of the District Court's analysis that it had
adopted from S&L's flawed legal arguments, and in so doing, established as the binding law of
the case, that: (1) the BMAA/HMA arrangement created a remunerative relationship for purposes
of Stark and AKS analysis; and (ii) the BMAA/HMA arrangement did not meet the requirements
of the "personal services" exception/safe harbor under either Stark or AKS.
64. The Third Circuit also treated the AKS and Stark analysis as "indistinguishable."
(Third Circuit Opinion, at 4). As a direct consequence, HMA was precluded from asserting key
winning defenses. Specifically, the Third Circuit ruled, in relevant part, as follows:
a. the 1992 Agreement did not cover pain management services at the new
facility;
b. the receipt of office space, equipment and support personnel, along with
the grant of exclusivity, created a remunerative relationship for Stark and
AKS purposes;
C. HMA had the burden of demonstrating its right to a Stark or AKS
exception/safe harbor, and it failed to carry its burden;
d. the arrangement for pain management services did not fit within the
"personal services" exception/safe harbor under Stark or AKS because:
i. there was no written contract; and
ii. there was no proof that it was a "fair market value" arrangement.
e. S&L's argument that there could be no "referral" for Stark or AKS
purposes, because pain management was an outpatient hospital service,
was contrary to the text of applicable regulations.
65. The Third Circuit reversed the District Court's grant of Summary Judgment in
HMA's favor and remanded the case for "further proceedings consistent with this opinion." In a
footnote, the Third Circuit stated that the sole issue left for resolution was whether HMA
20
possessed the requisite knowledge or intent to violate the False Claims Act. The Third Circuit
ruling thus eliminated forever major winning defenses devastating HMA's underlying case.
SUBSEQUENT PROCEEDINGS AND FORCED SETTLEMENT
66. S&L filed a Petition for Rehearing with the Third Circuit but that Petition was
denied.
67. The Sonnenschein firm entered its appearance and took over the handling of the
case from S&L, and in a renewed Motion for Summary Judgment sought to finally assert the key
defenses that S&L should previously have timely raised.
68. After the subsequent cross-motions for summary judgment, the District Court
held that the Third Circuit's opinion had foreclosed significant portions of HMA's defense. The
District Court, on remand ruled that the Third Circuit's mandate:
a. precluded it from considering, anew, whether there was a "financial
relationship" between the parties for Stark purposes;
b. precluded it from considering whether the individual BMAA physicians
had a "financial relationship" with HMA for Stark purposes; and
c. held that there was a question of fact as to whether HMA possessed the
requisite scienter to violate the FCA.
69. The District Court further rejected HMA's summary judgment motion on the
AKS claims, ruling that Kosenske had created a sufficient factual dispute as to the issues of AKS
intent and FCA scienter to warrant a trial.
70. S&L's multiple and egregious errors foreclosed the assertion of absolute defenses
on behalf of HMA and compromised its position to such a degree that HMA was forced to settle
this otherwise meritless case for a substantial sum, rather than expose itself to an exponentially
higher amount under the False Claims Act at trial without the incontrovertible defenses that S&L
failed to plead, support and preserve.
21
71. But for S&L's negligent failures to plead, support and/or preserve conclusive and
dispositive defenses, its negligent assertion of meritless legal positions without any legal
authority, and its failure to address in any manner the legal arguments raised by Kosenske at the
District Court level and at the Third Circuit Court of Appeals, HMA would have been
exonerated. But for S&L's negligent representation of HMA, Kosenske's claims would have
been dismissed because HMA's agreement with BMAA was a legal and appropriate garden
variety contract that did not violate any federal laws.
72. But for S&L's negligent representation, HMA would not have been precluded
from asserting defenses that would have defeated Kosenske's allegations and they would not
have been forced to pay a substantial settlement to avoid going to trial without the defenses that
S&L failed to plead, support and preserve.
FIRST CLAIM FOR RELIEF AGAINST ALL DEFENDANTS
Professional Negligence
73. Plaintiffs incorporate by reference all the allegations contained in paragraphs l
through 72, inclusively, as though same were set forth more fully at length herein.
74. Defendants were retained to, charged for, were paid for, and assumed
responsibility for defending HMA in the Lawsuit.
75. The Defendants Stevens & Lee, Lawrence D. Selkowitz, Esquire and James W.
Saxton, Esquire, acted jointly and severally in their representation of Carlisle Regional Medical
Center and Health Management Associates, Inc.
76. The Defendants Stevens & Lee, Lawrence D. Selkowitz, Esquire and James W.
Saxton, Esquire, jointly and severally, failed to exercise the competence and diligence nonnally
exercised by lawyers in similar circumstances in their representation of Carlisle Regional
Medical Center and Health Management Associates, Inc., by among other things:
22
a. Failing to make the threshold argument that the parties did not have a
financial or remunerative relationship for Stark or AKS purposes because
(i) there was no "remuneration" paid to the BMAA physicians or BMAA
in the form of free rent as the Hospital was independently billing for the
space, equipment and supplies used in the provision of pain management
services and could not lawfully have charged BMAA or the BMAA
physicians for those items, (ii) the parties did not meet the test for a
"direct or indirect financial relationship" under Stark, and (iii) exclusivity
alone has never been held to create a "financial relationship" for Stark or
AKS purposes;
b. Failing to proffer any expert testimony on "fair market value" despite well
established legal precedent stating that fair market value requires expert
opinion testimony and that HMA had the burden of proof on this issue;
Failing to proffer fact testimony (by way of affidavit or deposition)
sufficient to defeat Kosenske's argument that the long-standing written
services agreement between the parties did not encompass the provision of
pain management services in the hospital outpatient department;
d. Failing to offer expert testimony to explain why the Hospital's receipt of a
technical fee negated any possible finding of "remuneration" and a
"financial relationship";
e. Failing to distinguish between the Stark and AKS legal theories, and
therefore, failing to argue lack of "intent" under the AKS;
f. Failing to assert the intent-based defense that failure to comply strictly
with the terms of an AKS safe harbor does not mean that the conduct was
illegal because liability under the AKS required Kosenske to prove intent;
g. Failing to put forth an appropriate evidentiary record and sufficient legal
argument to sustain HMA's burden of establishing the existence of a
Stark- and AKS-compliant personal services agreement;
h. Relying on a weak and unsustainable argument, without any legal
authority, that there was no "referral" for Stark purposes;
Asserting the legally meritless and erroneous argument that, because the
BMAA physicians were providing pain management services through a
hospital outpatient department, they were legally incapable of making
"referrals" to the Hospital for purposes of imposing liability under Stark;
Failing to adduce and present any expert testimony to address, as a matter
of evidentiary proof (as opposed to legal argument) the complexities of the
Medicare/Medicaid billing system and the nuances of the federal fraud and
abuse laws;
23
k. Failing to provide competent representation to a client;
1. Failing to act with reasonable diligence and promptness in representing a
client;
M. Failing to adequately supervise subordinate attorney(s);
n. Waiving HMA's defenses by failing to assert them;
o. Otherwise failing to use the care, skill and diligence reasonable under the
circumstances.
77. Defendants' acts and omissions, more fully described above, failed to conform to
the standards of the practice of law among attorneys with respect to defending a healthcare
provider from gui tam allegations alleging violations of the Anti-Kickback Statute, the Stark
Statute and the federal False Claims Act.
78. As a direct and proximate result of the Defendants' negligence, Carlisle Regional
Medical Center and Health Management Associates, Inc. have incurred damages, losses, costs
and expenses in excess of $50,000, which are more fully described above.
WHEREFORE, on Count I, Plaintiffs Carlisle HMA, LLC and Health Management
Associates, Inc. demand judgment in their favor against the Defendants Stevens & Lee, P.C.,
Lawrence B. Selkowitz, Esquire and James W. Saxton, Esquire, jointly and severally, and
demand all damages sustained as a result of Defendants' negligence, together with attorneys
fees, costs, expenses and interest as provided by law, and such other relief as the Court deems
just and appropriate.
SECOND CLAIM FOR RELIEF AGAINST ALL DEFENDANTS
Breach of Contract
79. Plaintiffs Carlisle Regional Medical Center and Health Management Associates,
Inc. incorporate by reference paragraphs 1 through 78 as though fully set forth at length herein.
24
.
80. Defendant Stevens & Lee (including Defendants Selkowitz and Saxton), entered
into an agreement with Plaintiffs Carlisle Regional Medical Center and Health Management
Associates, Inc. to provide legal services in connection with defending qui tam allegations under
the federal False Claims Act, in the Lawsuit.
81. No written fee agreement setting forth the basis or the rate of fees and the scope
of the representation is known to exist. The agreements between the Defendant Stevens & Lee
and HMA were oral.
82. Defendants were retained to, charged for, were paid for, and assumed
responsibility for defending HMA in the Lawsuit.
83. Defendant Stevens & Lee breached its agreement with HMA by, among other
things:
a. Failing to make the threshold argument that the parties did not have a
financial or remunerative relationship for Stark and AKS purposes
because (i) the Hospital was independently billing for the space,
equipment and supplies used in the provision of pain management services
and could not lawfully have charged BMAA or the BMAA physicians for
those items, (ii) the parties did not meet the test for a "direct or indirect
financial relationship" under Stark and (iii) exclusivity alone has never
been held to create a "financial relationship" for Stark or AKS purposes;
b. Failing to proffer any expert testimony on "fair market value" despite well
established legal precedent stating that fair market value requires expert
opinion testimony and that HMA had the burden of proof on this issue;
C. Failing to proffer fact testimony (by way of affidavit or deposition)
sufficient to defeat Kosenske's argument that the long-standing written
services agreement between the parties did not encompass the provision of
pain management services in the hospital outpatient department;
d. Failing to offer expert testimony to explain why the Hospital's receipt of a
technical fee negated any possible "financial relationship";
e. Failing to distinguish between the Stark and AKS legal theories, and
therefore, failing to argue lack of intent under the AKS;
25
f. Failing to assert the intent-based defense that failure to comply strictly
with the terms of an AKS safe harbor does not mean that the conduct was
illegal because liability under the AKS required Kosenske to prove intent;
g. Failing to put forth an appropriate evidentiary record and sufficient legal
argument to sustain HMA's burden of establishing the existence of a
Stark- and AKS-compliant personal services agreement;
h. Relying on a weak and unsustainable argument, without any legal
authority, that there was no "referral" for Stark purposes;
Asserting the legally meritless and erroneous argument that, because the
BMAA physicians were providing pain management services through a
hospital outpatient department, they were legally incapable of making
"referrals" to the Hospital for purposes of imposing liability under Stark;
Failing to adduce and present any expert testimony to address, as a matter
of evidentiary proof (as opposed to legal argument) the complexities of the
Medicare/Medicaid billing system and the nuances of the federal fraud and
abuse laws;
k. Failing to provide competent representation to a client;
Failing to act with reasonable diligence and promptness in representing a
client;
M. Failing to adequately supervise subordinate attorney(s);
n. Waiving HMA's defenses by failing to assert them;
Otherwise failing to use the care, skill and diligence reasonable under the
circumstances.
84. S&L's failure to fulfill its contractual obligation to provide a competent legal
representation to Health Management Associates, Inc. and Carlisle Regional Medical Center
caused significant damages, losses, costs and expenses in excess of $50,000, which are more
fully described above.
85. Plaintiffs Health Management Associates, Inc. and Carlisle Regional Medical
Center are entitled to recover from S&L the full amount of all fees, costs and other expenses paid
to S&L during the course of the engagement.
26
WHEREFORE, on Count II, Plaintiffs Carlisle HMA, LLC and Health Management
Associates, Inc. demand judgment in their favor and against the Defendants Stevens & Lee, P.C.,
Lawrence B. Selkowitz, Esquire and James W. Saxton, Esquire, jointly and severally, and
demand all damages sustained as a result of Defendants' breach of contract, together with
attorneys fees, costs, expenses and interest as provided by law, and such other relief as the Court
deems just and appropriate.
Respectfully submitted,
POST & SCHELL, P.C.
QL
ROBIN LOCKE NAGELE, SQUIRE
JOHN JOSEPH, ESQUIRE
Attorneys for Plaintiffs,
Carlisle HMA, LLC and Health Management
Associates; Inc. -
27
VERIFICATION
I, Timothy R. Parry, Esquire, an authorized representative of Plaintiffs Carlisle HMA,
LLC and Health Management Associates, Inc., do hereby verify that I have personal knowledge
of the facts and matters set forth in the foregoing Civil Action Complaint, and that the facts
stated therein are true and correct to the best of my knowledge, information, and belief. The
allegations of the Civil Action Complaint are based on information furnished to counsel under
my direction. The language of the Civil Action Complaint is that of counsel and not my own.
This verification is made subject to the penalties 18 Pa. C.S. § 4904, relating to unworn
falsification to authorities.
Timothy R. P , Esquire
Senior Vice President and Gener ounsel
Dated: January 7, 2011
EXHIBIT "A"
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 1 of 45
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
United States of America ex rel Ted D.
Kosenske, M.D., Civil Action No.
Plaintiff
V. FILED IN CAMERA AND
UNDER SEAL
Carlisle HMA, Inc., Carlisle Regional : JURY TRIAL DEMANDED
Surgery Center, Carlisle Regional
Medical Center, and Hospital
Management Associates, Inc., :
Defendants
COMPLAINT
INTRODUCTION
This is an action brought on behalf of the United States of America by Ted
D. Kosenske, M.D. ("Dr. Kosenske" or "the Relator") against Carlisle HMA, Inc.,
Carlisle Regional Surgery Center, Carlisle Regional Medical Center, and Hospital
Management Associates, Inc. (collectively referred to as the "HMA
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 2 of 45
Defendants"), pursuant to the qui tam provisions of the civil False Claims Act, 31
U.S.C. § 3729 - § 3733, and principles of common law.
The HMA Defendants implemented a scheme in violation of the Anti-
kickback statute and the Stark II self-referral prohibitions under which the HMA
Defendants induced certain pain management physicians to refer individuals for
outpatient pain management procedures while allowing certain pain management
physicians to perform and bill physician consultations, office visits and the
physician component of such procedures without charging the physicians for the
use of space, equipment and personnel utilized by the physicians and consumed in
the physician-billable services. HMA Defendants' provision of free space,
equipment and personnel at no charge violates the Anti-kickback statute,
enforceable through the False Claims Act. Because the services, although
performed in an ambulatory surgery facility, were billed as hospital outpatient
claims, a "designated health service" under Stark II, the HMA Defendants'
provision of free space, equipment and personnel devoted to physician-billable
services violates Stark Il, also enforceable through the False Claims Act.
Following Dr. Kosenske's research and understanding of the existence of a
compliance issue due to the non-payment of rent, and after Dr. Kosenske's
statement to his former partners that they must pay rent, Dr. Kosenske was told to
"keep his mouth shut" and that no rent was due and owing to the MIA
2
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 3 of 45
Defendants. The HMA Defendants' forbearance of rent and personal services
payments to the pain management physicians, other than Dr. Kosenske, was
designed to influence the physicians' medical judgment to refer exclusively to the
HMA Defendants' facilities for pain management procedures, and to give
incentives to the physicians to forego development of their own free-standing
surgery center at which outpatient pain management procedures could be
performed. As a result of the HMA Defendants' forbearance of space and
equipment rental fees and personal services fees, the HMA Defendants have been
able to retain in excess of $300,000 profits annually; however, each of the HMA
Defendants' claims during the time were illegal and non-reimbursable inasmuch as
the structure giving rise to the referrals violated both the Anti-kickback statute and
Stark II.
Despite Dr. Kosenske's admonition and objection, the HMA Defendants did
not impose any rental fees, took affirmative efforts to prevent him from
establishing an ambulatory surgery center in competition with HMA, and are
presently damaging competition in the market place pursuant to their illegal
inducements for referrals.
PARTIES
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 4 of 45
1. Plaintiff Ted D. Kosenske, M.D. ("Dr. Kosenske") is a citizen of the
United States of America who resides at 4 Carothers Circle, Mechanicsburg, PA
17050. Dr. Kosenske is a physician licensed to practice medicine in the
Commonwealth of Pennsylvania since 1990, and is Board Certified in both
Anesthesia and Pain Medicine.
2. Defendant Carlisle H Lk, Inc. is a Pennsylvania for-profit corporation
with a business address upon information and belief at 246 Parker Street, Carlisle,
PA 17013.
3. Defendant Carlisle Regional Surgery Center upon information and
belief is a Pennsylvania corporation owned by Carlisle HMA, Inc., which operates
an ambulatory surgery facility ("ASF") at 5 Sprint Drive, Carlisle, PA 17013.
4. Defendant Carlisle Regional Medical Center is a hospital licensed by
the Pennsylvania Department of Health that operates between 150 and 200 beds in
Carlisle, Pennsylvania. Certain executive employed by CRMC have been directly
involved in the Anti-kickback and Stark II violations.
5. Defendant Hospital Management Associates, Inc. ("HMA") is, upon
information and belief, a Florida corporation with offices at 5811 Pelican Bay
Boulevard, Suite 500, Naples, FL 34108-2710. HMA is a holding company that
purchases, owns and operates hospitals throughout the United States, mostly in
rural settings, and, upon information and belief, owns and controls and/or is
4
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 5 of 45
responsible for the operations of Carlisle HMA, Inc., Carlisle Regional Surgery
Center, and Carlisle Regional Medical Center, and lists a Pennsylvania business
registration at 1635 Market Street, Philadelphia, PA 19103.
JURISDICTION AND VENUE
6. This Court has subject matter jurisdiction over this action pursuant to
31 U.S.C. § 3732(a), the federal civil False Claims Act, which is a law of the
United States, 28 U.S.C. § 1331 and § 1345.
7. The Relator has direct and independent knowledge, pursuant to the
meaning and definition of that phrase under 31 U.S.C. § 3730(e)(4)(B), based upon
the Relator's independent investigation of information upon which the allegations
set forth in this Complaint are based and pursuant to the Disclosure Statement filed
contemporaneously with the Complaint.
8. This Court has personal jurisdiction over the Relator because Dr.
Kosenske resides in and practices medicine in the Middle District of Pennsylvania.
9. None of the allegations presented in the Complaint or the Disclosure
Statement are based upon public disclosure of allegations or transactions in a
criminal, civil or administrative hearing, in a Congressional, administrative or
General Accounting Office report, audit or investigation or from the news media.
5
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 6 of 45
10. This Court has jurisdiction over Carlisle HMA, Carlisle Regional
Medical Center and Carlisle Regional Surgery Center because each entity is
located within and conducts business in the Middle District of Pennsylvania.
11. Venue in the Middle District of Pennsylvania is proper pursuant to 31
U.S.C. § 3732(a) and 28 U.S.C. § 1931(b)-(c). All services billed to federal
health care programs pursuant to the improper inducements and self-referral
prohibitions were performed in Carlisle in the Middle District. Virtually all of the
HMA Defendants' operations giving rise to the false claims are located and
provided within the Middle District of Pennsylvania.
12. This Court has personal jurisdiction over Defendant HMA because it
has performed all of the billing on behalf of Carlisle Regional Surgery Center and
Carlisle Regional Medical Center giving rise to the false claims in this case,
thereby performing numerous acts proscribed by 31 U.S.C. § 3729 within the
Middle District of Pennsylvania.
6
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 7 of 45
FACTUAL BACKGROUND
A. Medicare
13. In 1965, Congress established the Medicare program to provide health
insurance for the elderly and disabled. Payments from the Medicare program are
made through a trust fund ("the Medicare Trust Fund"), which is funded through
payroll deductions taken from the work force in addition to government
contributions.
14. The Medicare program is administered through the U.S. Department
of Health and Human Services and the Centers for Medicare and Medicaid
Services ("CMS"), an agency within HHS.
15. Administration of claims is effectuated through local Medicare
carriers, who are responsible for processing Medicare claims, determining
coverage, and making payments from the Medicare Trust Fund.
16. Claims for physician services are paid pursuant to Part B of the
Medicare program, and administered by Medicare carriers.
17. Payments for hospital claims are paid pursuant to Part A of the
Medicare program, and administered by fiscal intermediaries.
18. Outpatient hospital claims are paid separate and apart from hospital
i
Part A claims, pursuant to a Medicare reimbursement schedule.
7
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 8 of 45
19. Ambulatory surgery facility ("ASF") claims are paid pursuant to Part
B of the Medicare program, are paid pursuant to a fixed schedule for services.
B. Other Federally Funded Health Insurance Programs
20. Federal health care programs include any plan or program that
provides health benefits directly or indirectly through insurance or otherwise
funded directly in whole or in part by the United States government. 42 U.S.C. §
1320a-7b(f)(1). These include military benefits through the TRICARE program,
the Federal Employees Health Benefit Program, and other federally funded
insurance (excluding federal workers compensation claims).
21. State Medical Assistance (or "Medicaid") programs are also federal
health care programs. 42 U.S.C. § 1320a-7b(f)(2).
C. The Anti-Kickback Statute
22. The federal Anti-kickback statute makes it a criminal offense to
knowingly and willfully offer, pay, solicit, or receive any remuneration to induce
or reward referrals of items or services reimbursable by a federal health care
program. 42 U.S.C. § 1320a-7b(b) (1)(A), (2)(B). It also applies to any
purchasing, leasing, ordering or arranging for or recommending purchasing,
leasing or ordering any service or item payable by any federal health care program.
23. Where remuneration is paid purposefully to induce or reward referrals
of items or services payable by any federal health care program, the anti-kickback
8
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 9 of 45
statute is violated. The statute imposes liability to parties on both sides of an
impermissible "kickback" transaction. For purposes of the anti-kickback statute,
the term "remuneration" includes the transfer of anything of value, directly or
indirectly, overtly or covertly, in cash or in kind.
1. One Purpose Rule
24. The federal anti-kickback statute has been interpreted to cover any
arrangement where one purpose of the remuneration was to obtain money for the
referral of services or to induce further referrals or recommendations. U.S. v.
McClatchey, 217 F.3d 823 (10th Cir. 2000); U.S. v. LaRue, 261 F.3d 993 (10th Cir.
2001); U.S. v. Greber, 760 F.2d 68 (3rd Cir. 1985); and U.S. v. Kats, 871 F.2d 105
(9th Cir. 1989). The United States Supreme Court has refused to hear appeals from
each of these decisions, most recently the LaHue case on January 7, 2002. LaHue v.
U.S., _ U.S. _, 122 S. Ct. 819 (2002).
9
Case 1:05-cv-02184-CCC Document l Filed 10/26/05 Page 10 of 45
2. Medical Necessity Irrelevant
25. It does not matter whether a service was medically necessary; a
person violates the Anti-kickback statute even if he receives a kickback payment
for a medically necessary procedure. U.S. v. Nachamie, 101 F. Supp. 2d 134, 155
(S.D. NY 2000). Even though payment of remuneration under the Anti-kickback
statute did not affect patient care, it is irrelevant and not a defense for violating the
Anti-kickback statute. U.S. v. Anderson, 85 F. Supp. 2d 1047, 1054 (D. Kan.
1999). The Anti-kickback statute can be violated where remuneration is tied to
referrals even though each referral was for medically necessary services. U.S. v.
Liss, 265 F.3 d 1220 (11th Cir. 2001).
3. Anti-Kickback Safe Harbor Regulations
26. Since 1991, the Office of Inspector General ("OIG") has promulgated
several regulations, pursuant to its statutory directive, outlining specific terrns and
conditions relating to transactions that will immunize various arrangements,
commonly referred to as "Safe Harbor" regulations. Safe Harbor regulations have
been developed for space rental arrangements; equipment rental arrangements; and
personal services arrangements. 42 C.F.R. § 1001.952(b) - (d).
27. Although an arrangement that does not satisfy each and every Safe
Harbor element is not illegal per se, the lack of any written agreement and the
provision of free services evidences a violation of the Anti-kickback statute.
10
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 11 of 45
28. Negative impact on competition and competitors, and the provision of
incentives and benefits with respect to referring physicians and the effect of
potential referrals on physicians' judgment are also factors that demonstrate
potential violation of the Anti-kickback statute.
29. Where a hospital "provides physicians with services for free or less
than fair market value, or relieves physicians of financial obligations they would
otherwise incur", evidence of inducement and a violation of the Anti-kickback
statute exists. 70 Federal Register 4858, 4866 (January 31, 2005).
30. OIG has on multiple occasions indicated that a computer has
independent value to a physician and providing a free computer to a physician may
constitute an illegal inducement. 70 Federal Register 59015, 59018 (October 11,
2005). There is a substantial risk that free or reduced price goods or services may
be used as a vehicle to disguise or confer an unlawful payment for referrals of
federal health care program business. Id. at 59016. Provision of valuable
technology to physicians or other sources of federal health care program referrals
poses a heightened risk of fraud and abuse. This increases as the value of the
technology to the recipient increases. Id. at 59021.
31. Preventing both the corruption of medical judgment by financial
incentives and improper steering of patients is an important protective function of
the Anti-kickback statute. 70 Federal Register 38086 (July 1, 2005).
11
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 12 of 45
D. Stark II
32. The Medicare provisions of the Social Security Act contain self-
referral prohibitions commonly referred to as the Stark Law, which was amended
in 1993 to preclude physician referrals to an entity with which the physician has a
financial relationship or ownership interest for a list of "designated health
services", unless complex statutory and regulatory exceptions are satisfied. 42
U.S.C. § 1395nn, et seq.
33. Claims submitted by the recipient of the referral that do not satisfy all
elements of all applicable exceptions are illegal per se; and any entity that
furnishes DHS pursuant to a prohibited referral is not permitted to present a claim
or bill to the Medicare program or to any individual, third party payor, or other
entity for DHS performed pursuant to the prohibited referral. 42 U.S.C. §
1395nn(a)(1)(B); and 42 C.F.R. § 411.353(b).
34. An entity that collects payment for DHS performed under a prohibited
referral must refund all collected amounts within sixty days. 42 C.F.R. §
411.353(d); and 42 C.F.R. § 1003.101.
35. Numerous statutory exceptions to the Stark self-referral prohibition
were enacted and two phases of comprehensive regulations have been
promulgated. The Stark II Phase II regulations were published March 26, 2004,
effective July 26, 2004. 69 Federal Register 16054-16146 (March 26, 2004).
12
¦ ' .
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 13 of 45
36. Stark II Phase II regulations include exceptions similar (but not
identical) to the Anti-kickback Safe Harbors for rental of office space, 42 C.F.R. §
411.357(a)(1)-(7); rental of equipment, 42 C.F.R. § 411.357(b)(1)-(6); and
personal service arrangements, 42 C.F.R. § 411.357(d)(1)(i)-(vi).
37. Unlike non-compliance with the Anti-kickback Safe Harbor
regulations, non-compliance with a Stark II statutory or regulatory exception
renders the claim illegal per se.
38. Where an arrangement affects more than one Stark 11 exception, each
applicable exception must be completely satisfied.
13
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Case 1:05-cv-02184 CCC Document 1 Filed 10/26/05 Page 14 of 45
E. Provider Contracts and Certifications
39. Medicare providers, including the ASF and hospital HMA
Defendants, are required to enter into provider agreements with the federal
government.
40. Under the terms of the provider agreement, a Medicare provider
certifies that it will comply with all laws and regulations concerning proper
practices for Medicare providers.
41. The FRVIA Defendants certified compliance with the Anti-kickback
statute.
42. The HMA Defendants certified compliance with the Stark II laws and
regulations.
43. Compliance with a provider agreement is a condition for receipt of
reimbursement from the Medicare program.
44. HMA Defendants' compliance with both the Anti-kickback statute
and Stark II is a condition precedent to receipt of any payment from any federally
funded health care programs (with respect to the Anti-kickback statute), and for all
Medicare and Medicaid claims (pursuant to Stark II).
14
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 15 of 45
F. Implied Certification Non-Compliance - False Claims Act
Violations
45. A false certification of compliance with the Anti-kickback statute and
Stark II creates liability under the False Claims Act when certification is a
prerequisite to obtaining a government benefit such as Medicare and other federal
health care program reimbursement. U.S. ex rel Thompson v. Columbia HCA
Health Care Corp., 125 F.3d 899, 901-902 (5th Cir. 1997). The Third Circuit
recently recognized alleged violations of Stark II and the Anti-kickback statute as
the basis for a False Claims Act relator suit. U.S. ex rel Schmidt v. Zimmer, 386
F.3d 235 (3rd Cir. 2004). Most recently, the Eleventh Circuit held on September 9,
2005 that a violation of the Anti-kickback statute can form the basis of a gui tam
action under the False Claims Act. U.S. ex rel McNutt v. Halewille Medical
Supplies, Inc., F.3d (11th Cir. 2005).
46. Under the implied certification theory incorporating Anti-kickback
and Stark II violations, each claim submitted pursuant to an improper referral is
improper and separately actionable under the False Claims Act.
G. The Pain Clinic - Physician Services
47. HMA developed and implemented a Pain Clinic through the HMA
ASF (Carlisle Regional Surgery Center).
48. The Pain Clinic, functioning inside of HMA's ASF, is operated by
Blue Mountain Anesthesia Associates, P.C. (`BMAA")
15
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 16 of 45
49. BMAA physician shareholders include Howard Alster, M.D., Ivan
Sola, M.D., Daniel Chess, M.D. and Arun Kapoor, M.D. Dr. Kosenske was
previously a partner in BMAA.
50. Patients present to the Pain Clinic pursuant to referrals from primary
care or other specialist physicians or providers.
51. Patients presenting at the Pain Clinic inside the HMA ASF are
evaluated by pain management physicians, given prescriptions for medication,
given prescriptions for physical therapy or recommended for a variety of injections
and procedures.
52. Injections and procedures are performed at the HMA ASF in space
separate and apart from that in which the pain management physicians perform
their evaluation and management services.
53. Not every patient receives injections or procedures. In fact, only one-
third of the patients who present to the Pain Clinic receive injections and
procedures. The majority receive physician pain management and evaluation
("E/M") services only.
54. Pursuant to the data collected by Dr. Kosenske, approximately sixty-
five percent (65%) of the total patient encounters include exclusively physician
E/Mservices and only one-third receive injections and procedures.
16
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 17 of 45
55. Physicians in the Pain Clinic spend eighty percent (80%) of their time
performing physician billable E/M services, and only twenty percent (20%) of their
time performing procedures. This is because the various consultations, and new
and established office visit services consume substantially more time than the
procedures. The consultations, new patient E/M and established patient E/M
services are collectively referred to as "Physician Billable E/M Services."
56. The Physician Billable E/M Services include consultations under CPT
codes 99241-99245; new patient E/M services billable under CPT codes 99202-
99025; and established patient E/M services billable under CPT codes 99212-
99215. The pain management physicians are also able to bill the professional
component of each procedure performed.
57. The Physician Billable E/M Services comprise sixty-five (65%) of the
total patient encounters at the pain management clinic within the HMA ASF.
58. Each Physician Billable E/M Service is billed to federal health care
programs (as well as all commercial insurance payors), collected by and paid to the
BMAA physicians.
59. In addition, the BMAA physicians are able to capture reimbursement
for the professional component of the procedures described below.
H. The Facility Procedures
17
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 18 of 45
60. When medically indicated, the Pain Clinic physicians recommend the
patients receive one or more injections or procedures performed at the HMA ASF.
Each procedure will be summarized and followed by the applicable CPT or
HCPCS code:
• Epidural Steroid Injections 62311
• Sacro-Iliac Joint Injections G0260
• Stellate Ganglion Nerve Block 64150
• Intercostal Nerve Block 64420
• Intercostal Nerve Block Multiple Level 64421
• Paravertebral Blocks 64520
• Brachial Plexus Blocks 64415
• Blood Patch 62273
• Epidural Steroids Cerv/Thor 62310
• Epidural Steroids Lumbar 62311
• Perc. SCS Implant 63650
• Radiofrequency Lesioning 64622
• Intercostal Nerve Lesioning 64620
61. The foregoing injections and procedures will be collectively referred
to as "the Procedures."
1. HMA Defendants Billing Scheme and Procedures
62. Each of the Procedures are performed in the HMA ASF.
63. Although the HMA ASF claims should be submitted as ASF claims
pursuant to the fixed reimbursement schedule for all Medicare certified ASFs,
HMA's corporate offices in Florida submit the claims as though they were
outpatient hospital services.
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Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 19 of 45
64. An ASF is a facility separate and distinct from a hospital outpatient
department.
65. The HMA Defendants' billing scheme, under which upon information
and belief it disguises ASF services as outpatient hospital services, allows HMA
Defendants to capture otherwise bundled reimbursements such as clinical
laboratory tests. Had these services not been billed as outpatient hospital services,
the clinical laboratory services would have been bundled in the ASF composite
rate.
66. Each Procedure has two components: (a) a facility fee properly
billable by the ASF, but instead billed by HMA as a hospital outpatient services;
and (b) a professional component billable by the physicians for the physician
service in performing the Procedure.
J. Pain Clinic v. Traditional Anesthesia
67. Unlike the traditional anesthesia service performed in an ASF or a
hospital as an inherent function of a surgical procedure, where anesthesiologists do
not perform consultations, new patient E/M services or established patient E/M
services, anesthesiologists in BMAA and the HAM Pain Clinic perform physician
services no different than a primary care physician in private practice, a surgeon in
his own office, or any other specialist generating services directly reimbursable to
the physician.
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K. Anti-Kickback and Stark II Implicated
68. Delivery of anesthesia during surgical procedures does not include
any referral by the anesthesiologist; however, an anesthesiologist performing pain
management services in the Pain Clinic who establishes a plan of care and directs
the patient to receive the Procedures at the HMA ASF, makes a referral pursuant to
the definition of that term under Stark II, 42 C.F.R. § 411.351; and makes both a
referral and a recommendation or arrangement for services under the Anti-
kickback statute, 42 U.S.C. § 1320a-7b(b)(1)(B).
69. Where a pain management physician utilizes space owned by a
hospital or ASF, equipment owned by a hospital or ASF, and personnel such as
nursing and clerical staff employed by a hospital or ASF, the referrals,
arrangements and recommendations to the hospital or ASF for a service payable by
any federal health care program implicates the Anti-kickback statute, 42 U.S.C. §
1320a-7b(b)(l)(A)-(B); and implicates Stark II if the Procedure is, as in the present
case, a hospital outpatient service (rendering it DHS). 42 U.S.C. §
1395nn(h)(6)(K); and 42 U.S.C. § 411.351.
L. The HMA Defendants' Free Space
70. The Pain Clinic within the HMA ASF comprises, pursuant to the
Relator's measurements, 1,526 square feet of space, including three medical
examination rooms, a nursing station, patient restrooms, medical secretary space
20
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and waiting room. This space is consumed by the pain management physicians
exclusively for Physician Billable E/M Services.
71. In addition to the 1,526 square feet used exclusively by physicians,
the Pain Clinic physicians share an additional 5,221 square feet of space including
waiting room, conference room, break room, locker rooms, manager's office,
restrooms, and clerical services space. The exclusive space and shared space will
be collectively referred to as the Space.
72. Despite the Pain Clinic physicians' exclusive use of the Space, and
notwithstanding 65% of the patient encounters result in Physician Billable E/M
Services, HMA Defendants provide the Space free.
73. The HMA Defendants have no written lease and charge no rent to the
Pain Clinic physicians for use of the Space.
74. The pain management physicians spend approximately 32 hours each
week utilizing the three examination rooms exclusively. No other physicians who
have staff privileges at the ASF or Carlisle Regional Medical Center have access to
the Pain Clinic Space utilized exclusively by the BMAA physicians.
75. The Physician Billable E/M Services are 100% reimbursable to the
physicians. The HMA Defendants have and claim no, right, title or interest to
reimbursement for the Physician Billable E/M Services.
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76. None of the 10-day or 90-day minor or major surgery global billing
rules apply to the Physician Billable E/M Services. Therefore, the Physician
Billable E/M Services are unconnected to the Procedures.
77. Utilization of the Space at no charge creates a financial relationship as
defined by Stark II. 42 U.S.C. § 1395nn(a)(2)(B), and § 1395nn(h)(1)(B); and 42
C.F.R. § 411.354(a)(1)(ii).
78. The HMA Defendants' provision of space to the pain management
physicians at no charge relieves a significant financial obligation the pain
management physicians would otherwise incur, and is provided below market
value; therefore, it is something of value, constituting "remuneration" under the
Anti-kickback statute. 42 U.S.C. § 1320a-7b(b)(1), (2).
79. The fair market value for Class A specialty physician office space in
Carlisle is, upon information and belief, $22 per square foot.
80. The total annual value of the Space provided by HMA Defendants to
the Pain Clinic physicians is calculated as follows:
(a) Exclusive space (1,526 square feet) x $22 (market
value square foot rate) = $33,572, multiplied by
.65 (a percentage of office encounters devoted
exclusively to Physician Billable E/M Services) _
$21,822;
(b) The total value of shared space is calculated as
follows: 5,221 square feet x $22 = $114,862, x .35
(percentage of encounters devoted to purely ASF
services) = $40,201; and
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(c) The total value for exclusive and shared space =
$62,023 per year.
81. The HMA Defendants are not providing merely below market value
rental arrangements to induce referrals for Stark DHS or for services billable to
federal health care programs. Instead, the HMA Defendants are providing
approximately $62,000 worth of free space per year, thereby allowing the
physicians to bill their own Physician Billable E/M Services without any overhead
cost and relieving a significant financial obligation that would otherwise be
incurred.
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M. The HMA Defendants' Free Equipment
82. Within the Space, the HMA Defendants provide the pain management
physicians various items of equipment owned and paid for by the BMA
Defendants including three examination tables; waiting room furniture; furniture
and supplies for the break room; exam room furniture; conference room furniture;
furniture for physicians' offices, nurses stations and secretaries; chart racks; an
expensive Pyxis drug dispensing system; computers, copiers, printers, fax
machines, patient monitors, gowns, bed linen, patient education devices and other
items.
83. The cost of these various pieces of equipment is unknown to the
Relator; however, they have more than de minimus value.
84. Each of the items of equipment identified in the preceding paragraphs
are used by the physicians 65% of the time for their own Physician Billable E/M
Services.
85. Were the physicians to practice pain management in the open market
external to the inducements offered by the HMA Defendants, physicians would
have to pay 100% of the fair market value for such equipment, as they would have
to pay 100% of the value for the Space.
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N. The HMA Defendants' Free Personal Services
86. The HMA Defendants also provide numerous professional and
clerical staff who are employed by the HMA Defendants but provided at no charge
to the Pain Clinic physicians.
87. The individuals employed by the HMA physicians include two nurses
(working 32 hours per week at rates of approximately $26.50 per hour); secretaries
working at 64 hours per week paid at a rate of $13.50 per hour; a receptionist paid
at $13.50 per hour; an office manager who has developed detailed policies and
procedures, provides management functions, documentation guidance, JCAHO and
Department of Health regulatory compliance (but is apparently unaware of Stark
and fraud and abuse compliance issues); housekeeping services, and certain
services provided by the Carlisle Regional Medical Center Chief Executive
Officer, Chief Financial Officer, Chief Nursing Officer and Head of Surgical
Services.
88. The value of the nurses' salaries are calculated as follows: 64 hours
per week (2 nurses, 32 hours) x $26.50 = $1,696 = $88,192 x .65 (the physician
exclusive multiplier) _ $57,324.
89. The value of the two secretaries working at 64 hours per week is
calculated as follows: 64 x $13.50 = $864 x 52 = $44,928 x.65 = $29,203.
25
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90. The value of the receptionist working at 32 hours per week is
calculated as follows: 32 x $13.50 per hour = $432 x 52 = $22,464 x .35 = $7,862.
91. The value of the office manager is calculated by taking her annual
$83,000 salary plus benefit package x .35 = $29,050.
92. The value of the maintenance and housekeeping at 16 hours per week
paid at $11.60 per hour over 52 weeks times the multiplier = $9,651.
93. The total value of professional and clerical services provided by the
H NIA Defendants equals approximately $133,090.
94. This does not include the amount of administrative, management and
strategic time spent by the Carlisle Regional Medical Center CEO, CFO, CNO and
HSS.
95. The HMA Defendants also provide free printing services, free
transcription services, free utilities (free electricity, water, HVAC and internet
access), free local and long distance telephone service, free security protection, free
photocopying and free courier services. The Relator is incapable of quantifying
the precise value of these free administrative services but believes they are more
than nominal.
96. The $133,090 value of professional and clerical services provided free
by the HMA Defendants to the BMAA physicians constitutes a financial
relationship under Stark II, and remuneration under the Anti-kickback statute
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inasmuch as the physicians would have to purchase and pay for those services if
they performed Physician Billable E/M Services in the open market, but are
relieved of doing so in the HMA arrangement.
97. Nevertheless, the FIMA Defendants charge the pain management
physicians nothing for these personal and professional services, as inducement to
the pain management physicians for their referrals of patients to the HMA ASF for
the Procedures.
0. The Facility Fee for the Procedures
98. The facility fee for the Procedures is far more expensive and lucrative
than the physician component for each Procedure. Medicare pays FIMA the
following amounts for each of the Procedures:
• Epidural Steroid Injections $279
• Sacro-Illiac Joint Injections $326
• Stellate Ganglion Nerve Block $326
• Intercostal Nerve Block $326
• Intercostal Nerve Block Multiple Levels $326
• Paravertebral Blocks $326
• Brachial Plexus Blocks $326
• Blood Patch $326
• Epidural Steroids Cervical/Thoracic $326
• Epidural Steroids Lumbar $326
• Perc. SCS Implant $437
• Radiofrequency Lesioning $326
• Intercostal Nerve Lesioning $326
P. The HMA Defendants' Actual Knowledge
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99. In or about March 2003, Dr. Kosenske approached HMA Defendants'
representatives about developing a physician-owned surgery center.
100. In or about June 2003, Richard Schaffner, then-Chief Operating
Officer of Carlisle Regional Medical Center, notified the BMAA physicians that a
substantial compliance problem existed and that the HMA Defendants needed to
collect rent from the physicians.
101. Dr. Kosenske, having the traditional anesthesiologist mindset that
performance of any anesthesia service including pain management did not require
payment of rent, became concerned and agreed the issue should be analyzed.
102. Richard Schaffner, former CRMC COO and former Chief Financial
Officer Earl Fitzpatrick, met with the physicians on June 22, 2003 to discuss the
need to pay rent. The HMA Defendants' officers indicated they would provide a
definite amount of rental payments that should be made as soon as possible. Dr.
Kosenske at that point was willing to pay rent, but had no idea what would be due
and owing under the circumstances.
103. The HMA Defendants provided no additional information for seven
(7) months.
104. In or about January 2004, the new FE WA CFO, Corey Rhoades,
approached the BMAA physicians and again identified a serious compliance issue
under which the physicians needed to pay rent.
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105. Then-CFO Corey Rhoades developed a document entitled: "Carlisle
Regional Medical Center, Pain Clinic, Q1 FY 2004 Annualized", outlining the
various financial factors inherent to the rent. Corey Rhoades, the Carlisle Regional
Medical Center CFO, calculated the HMA Defendants should obtain payments
from the BMAA physicians in the amount of $187,033 per year.
106. Prior to January 2004, no employee, agent or officer of any HMA
Defendant had quantified the amount the BMAA physicians should pay.
107. At that point, Dr. Kosenske told his partners: "We must pay rent."
108. Dr. Alster, one of the other BMAA partners, said to Dr. Kosenske:
"Keep your mouth shut."
109. Despite Dr. Kosenske's protestations to pay rent based upon the
compliance issue, Dr. Kosenske's partners refused to do so.
110. Dr. Kosenske has never held more than 20% equity interest in
BMAA. He had no power to force his other partners to pay the rent, nor did he
have any power to require HMA to bill BMAA for space and equipment rental and
personal services.
111. The remaining partners flatly took the position that they did not have
to pay rent despite the three meetings with the hospital executives.
112. Upon information and belief, one or more of the remaining partners of
BMAA had discussions with the HMA Defendants' officers and employees
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without Dr. Kosenske being present, and may have made an arrangement whereby
no rent was to be paid in exchange for not developing a physician-owned
outpatient or surgery center.
113. At no time was Dr. Kosenske involved in or part of any discussions
about waiving rent or service payments for any reason, whether it be referrals or
avoiding development of a physician-owned surgery center.
114. Upon learning of the compliance issue, Dr. Kosenske steadfastly took
the position that rent should be paid and insisted to his partners that whatever
rental payment was ultimately quantified should be reimbursed to the HMA
Defendants.
115. Dr. Kosenske, due to market limitations, had no other choice but to
perform Procedures inside the HMA Defendants' ASF.
116. Dr. Kosenske, however, began to implement a strategy to develop a
free-standing physician-owned surgery center and moved forward with the plan to
do so promptly upon learning of the compliance issue.
117. Since at least June 2003, HMA Defendants' officers, employees or
agents had actual knowledge that, pursuant to either the Anti-kickback statute, the
Stark II law or both, payments should be collected from the physicians for space
rental, equipment rental and personal services reduced by the percentage allocated
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to the physicians' exclusive use of such space, equipment and personal services for
their own Physician Billable E/M Services.
118. Nevertheless, despite this actual knowledge, since June 2003, the
HMA Defendants have failed and refused to collect any payments from the BMAA
physicians, over Dr. Kosenske's protestations.
Q. The HMA Defendants' Motivation Not to Collect Rent or
Personal Services Payments
119. The BMAA physicians refer thousands of patients for thousands of
Procedures each year to the HMA Defendants' ASF.
120. For Medicare alone, upon information and belief, about 1,000 patient
Procedures are performed each year. The average reimbursement for the
Procedures is $335 for Medicare patients. Commercial third party payors'
reimbursement is typically higher.
121. Upon information and belief, the total amount of profit generated by
the HMA Defendants for the facility fee inherent to all of the Procedures
performed each year by BMAA physicians is approximately $300,000.
122. Upon information and belief, Dr. Kosenske's partners may have
objected to the HMA Defendants' rental request because they found it unfair to be
charged approximately $140,000 for rent when the ASF or one of the other HMA
Defendants would stand to make a $300,000 per year profit, plus income from the
rent.
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123. As indicated above, Dr. Kosenske, upon learning that no rent would
be paid, began to work toward development of a physician-owned surgery center.
Dr. Kosenske initially worked to develop potential joint venture partners. Shortly
thereafter, the hospital COO apparently dropped the rental demand to the other
BMAA partners.
124. Ultimately, HMA Defendants interfered with and successfully
prevented other facilities and entities in the region from entering into a joint
venture arrangement, requiring Dr. Kosenske and other physicians to finance the
development of a free-standing physician-owned ASF on their own.
125. Upon information and belief, the H1VIA Defendants forgave the
BMAA physicians' rental payment demand and obligations, in order to secure their
allegiance and maintain the HIM Defendants' $300,000 per year profit stream
from the Procedures, and avoiding the pain management physicians' development
of a competitive physician-owned ASF.
126. Although Dr. Kosenske cannot quantify the HMA Defendants'
motivation sufficient to identify criminal intent, it is clear, for purposes of False
Claims Act liability, that the HMA Defendants knew they had a rental obligation
under either the Anti-kickback statute or Stark or both, and either recklessly
disregarded or deliberately ignored their obligations to secure payments and
agreements in material compliance with the Safe Harbor space, equipment and
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management services Safe Harbor regulations, and the space, equipment and
personal services exceptions under Stark II.
127. The HMA Defendants, with actual knowledge of their rental and
services collection obligations, and with either reckless disregard or deliberate
ignorance of their obligations, submitted thousands of claims to Medicare,
Medicaid, FEHBP, TRICARE and other federally funded health care programs,
and hundreds of claims to commercial third party payors for Procedures referred to
them by the pain management physicians.
33
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R. The Stark and Anti-Kickback Violations
128. Each referral, recommendation or arranging for a Procedure at the
HMA Defendants' ASF was induced by the HMA Defendants based upon
hundreds of thousands of dollars worth of free space, equipment and personal
services, without any payments whatsoever, with claims for such Procedures being
submitted to Medicare, Medicaid and other federally funded health care programs,
all of which violated the Anti-kickback statute and Stark II.
S. Dr. Kosenske's Departure
129. After several months of discussions with his partners that led to
fruitless compliance efforts, Dr. Kosenske announced in the Fall of 2004 that he
was leaving the partnership and verbally advised one or more of his partners of his
decision. He indicated that he was essentially going out on his own to perform
pain management services, but would share call for the traditional anesthesia
services.
130. Subsequently, his remaining partners apparently had clandestine
meetings with Ron Bierman, the newest HMA CEO, the details of which are
unknown to Dr. Kosenske; however, upon information and belief, he avers that
some plan may have been implemented to make life difficult for him and delay Dr.
Kosenske's ultimate status as a competitor of the HMA Defendants and BMAA
physicians.
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131. Shortly thereafter, the BMAA physicians denied the existence of Dr.
Kosenske's verbal notice of departure, delaying his status as a competitor.
132. Dr. Kosenske then submitted a written notice of his intent to terminate
his partnership status with BMAA on April 12, 2005.
133. Dr. Kosenske's final date as an employee of and partner in BMAA
was September 23, 2005.
134. Dr. Kosenske has established a private pain medicine practice and is
attempting to develop and implement a pain management clinic in the Carlisle area
in competition with the HMA Defendants' Pain Clinic.
135. The HMA Defendants forced Dr. Kosenske to resign his medical staff
privileges at Carlisle Regional Medical Center despite the fact that the BMAA
physicians do not have an exclusive contract for anesthesia services at the hospital.
136. Dr. Kosenske has reapplied for staff privileges and, to date, has not
been awarded those privileges.
137. Dr. Kosenske remains otherwise eligible to be a member of the
medical staff at Carlisle Regional Medical Center; however, the HMA Defendants
have, upon information and belief, implemented additional punitive tactics against
Dr. Kosenske due to his status as a competitor.
138. As of the date of Dr. Kosenske's departure, September 23, 2005, the
HMA Defendants had not yet insisted on the collection of a single dollar from
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BMAA for space rental, equipment rental and the utilization of personal services
applicable exclusively to the Physicians Billable Services.
139. Based upon Dr. Kosenske's calculations, it is estimated that over
$250,000 in federal health care program reimbursement has been collected by the
HMA Defendants each year as a result of the referrals generated pursuant to the
non-compliant arrangements.
T. Particular Claims Subiect to the Improper Arrangement
140. In order to discharge his obligations under Rule 9(b) of the Federal
Rules of Civil Procedure, Dr. Kosenske has attempted to obtain specific
illustrations of claims submitted pursuant to the illegal arrangement between HMA
Defendants and BMAA, to which he has consistently objected.
141. On June 24, 2005, Dr. Arun Kapoor performed an epidural steroidal
injection on patient F.M., HIC # 174-05-0817B, pursuant to the illegal referral
described above. HMA Defendants billed the claim as an outpatient Procedure in
the amount of $1,283.25. Medicare paid the HMA Defendants $278.65 for this
claim.
142. On June 22, 2005, Dr. Daniel Chess performed an epidural steroidal
injection on patient W.P., HIC # 202-12-2491A, pursuant to the illegal referral
described above. HMA Defendants billed the claim as an outpatient Procedure in
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the amount of $1,283.25. Medicare paid the HMA Defendants $278.65 for this
claim.
143. On July 22, 2005, Dr. Arun Kapoor performed an epidural steroidal
injection on patient P.M., HIC # 204-26-9459A, pursuant to the illegal referral
described above. HMA Defendants billed the claim as an outpatient Procedure in
the amount of $1,283.25. Medicare paid the HMA Defendants $278.65 for this
claim.
144. On June 24, 2005, Dr. Arun Kapoor performed a tendon sheath
ligament injection (CPT code 20550) and a peripheral nerve block (CPT code
64450) on patient K.S., HIC # 201-42-6341A, pursuant to the illegal referral
described above. HMA Defendants billed the claim as an outpatient Procedure in
the amount of $641.63. Medicare paid the HMA Defendants $95.15 for the nerve
block and $25.77 for the trigger point injection.
145. On June 24, 2005, Dr. Arun Kapoor performed an unidentified
injection procedure on patient G.H., Policy # 384991, submitted to Fortis Insurance
Company, pursuant to the illegal referral described above. HMA Defendants billed
the claim as an outpatient Procedure in the amount of $1,508.86. Medicare paid
the HMA Defendants $924 for this claim.
146. On August 2, 2005, Dr. Daniel Chess performed a trigger point
injection and peripheral nerve block procedure on patient K.S., pursuant to the
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illegal referral described above. This EOB demonstrates the effect of the
misidentified billing described above. The patient's family physician, Dr. Michael
Daniels, referred K.S. for laboratory services performed at Carlisle Regional
Medical Center, not at the HMA surgery center. The clinical laboratory services
were unrelated to the Procedures performed in the Pain Clinic. Had they been
performed in the Surgery Center/Pain Clinic, they would have been bundled into
the ASF reimbursement composite rate. By billing the services as outpatient
claims, the HMA Defendants are able to capture additional reimbursement. This is
further evidence of the applicability of Stark II and additional false claims
submitted by HMA Defendants.
38
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U. The Illegal Recruitment Fee
147. Hospital payments to physician practices to assist in the recruitment of
new physicians to the area constitutes remuneration under the Anti-kickback
statute and a financial relationship under Stark II.
148. Documented community need is an imperative compliance element
before a hospital can make recruitment payments to a physician practice under the
Anti-kickback statute and Stark II. See 70 Federal Register 4858, 4868 (January
31, 2005).
149. Upon information and belief, HMA Defendants are actively recruiting
a replacement for Dr. Kosenske to perform pain management services inside
BMAA even though (a) Dr. Kosenske remains in the market place; (b) no
documented community need for additional anesthesiologists in the Carlisle market
exists; and (c) the HMA Defendants have, to date, precluded Dr. Kosenske from
accessing his prior staff privileges at the Carlisle Regional Medical Center.
150. Community need cannot be created by knocking a competitor such as
Dr. Kosenske out of the marketplace.
151. The payments for recruitment fees and support to BMAA for a new
anesthesiologist to the BMAA practice violates both the Anti-kickback statute and
Stark II and is further evidence of the HMA Defendants' improper motive to retain
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extensive profits and earnings from pain management Procedures performed by
independent, yet practically captive, BMAA physicians.
V. Harm to Competition
152. Dr. Kosenske has established his own private practice, Cumberland
Valley Pain Management, P.C. If Dr. Kosenske wishes to perform services
identical to the Physician Billable E/M Services described above, he must pay for
office space, equipment and staff.
153. The HMA Defendants' failure to collect rent from the BMAA
physicians is a direct harm to competition, and evidence of non-compliance with
the Anti-kickback statute and Stark II.
154. When Dr. Kosenske implements final development of an ASF at
which Procedures can be performed similar to those described above, Dr.
Kosenske will have to pay for space, equipment and staff, unlike his BMAA
competitors, rendering Dr. Kosenske at a competitive disadvantage, and providing
further evidence of the HMA Defendants' illegal conduct.
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COUNTI
FALSE CLAIMS ACT VIOLATION
31 U.S.C. 4,1329
155. Paragraphs 1 through 154 are incorporated into Count I as if fully set
forth herein.
156. This is a civil action brought by Dr. Kosenske on behalf of the United
States against the HMA Defendants under the federal civil False Claims Act, 31
U.S.C. § 3729(a)(1) and (2), and 31 U.S.C. § 3730(b).
157. The IB4A Defendants knowingly, or in reckless disregard or
deliberate ignorance of the truth or falsity of the information involved, presented or
caused to be presented, and are still presenting, or causing to be presented, false or
fraudulent claims for payment by federally funded health insurance programs
based upon the illegal referrals induced by the provision of free space, equipment
and personal and professional services given to the referring physicians in violation
of the Anti-kickback statute or Stark II, or both, and in violation of the conditions
of reimbursement requiring compliance with both the Anti-kickback statute and
Stark, in violation of, inter alia, 31 U.S.C. § 3729(a)(1).
158. The HNIA Defendants, in reckless disregard or deliberate ignorance of
the truth or falsity of the information involved, made, used, caused to be made or
caused to be used, false or fraudulent records and statements to get false or
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fraudulent claims paid or approved, in violation of, inter alia, 31 U.S.C. §
3729(a)(2).
159. The United States of America, unaware of the falsity of the claims
and/or statements made or caused to be made by the HMA Defendants, and in
reliance on the accuracy of these claims and/or statements, paid and may continue
to pay for pain management Procedures provided to individuals insured by
federally funded health insurance programs, including Medicare, generated by
illegal referrals.
160. As a result of the HMA Defendants' actions, the United States of
America has been, and will continue to be, substantially damaged.
WHEREFORE, Dr. Kosenske respectfully requests judgment be entered
against the HMA Defendants, as follows:
(a) Blue Mountain Anesthesia Associates, P.C. and
the appropriate HMA Defendant(s) be ordered to
immediately develop, execute and implement
space rental agreements, equipment rental
agreements and personal services agreements
under which Blue Mountain Anesthesia
Associates, P.C. pays to the appropriate HMA
Defendant(s) actual fair market value fees and
payments for all space, equipment and personnel
owned or employed by the HMA Defendants and
utilized by Blue Mountain Anesthesia Associates,
P.C. in the performance of Physician Billable E/M
Services;
(b) The HMA Defendants be enjoined and ordered to
cease and desist from submitting and/or causing
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the submission of any further false claims or other
claims for any Procedures defined herein until fair
market value of all space rental, equipment rental
and personal services BMAA have utilized are
paid in full;
(c) The HMA Defendants be ordered to cease and
desist from submitting and/or causing the
submission of any additional false claims or
otherwise violating 31 U.S.C. § 3729;
(d) Judgment be entered in Plaintiffs favor and
against the BMA Defendants in the amount of
each and every false or fraudulent claim submitted
pursuant to the illegal free space, equipment and
personal services arrangement, multiplied and
tripled as provided by 31 U.S.C. § 3729(a), plus a
civil penalty of not less than Five Thousand
Dollars ($5,000) nor more than Ten Thousand
Dollars ($10,000) per claim submitted since at
least June 2003, if not before, as provided by 31
U.S.C. § 3729(a), to the extent such multiplied
penalty shall fairly compensate the United States
of America for losses resulting from the free space,
equipment and services scheme undertaken by the
BMA Defendants to induce referrals for
Procedures, together with the penalties for specific
claims to be identified at trial after full discovery;
(e) Plaintiff be awarded the maximum amount allowed
pursuant to 31 U.S.C. § 3730(d) including up to
25% of the proceeds of the action or settlement of
the claim;
(f) Judgment be granted for Plaintiff and against the
HMA Defendants for all costs, including but not
limited to, court costs, expert fees and all
attorneys' fees incurred by Plaintiff in the
prosecution of this suit pursuant to 31 U.S.C. §
3730(d)(1); and
43
Case 1:05-cv-02184-CCC Document 1 Filed 10126/05 Page 44 of 45
(g) Plaintiff be granted such other and further relief as
the Court deems just and proper.
Respectfully submitted,
CHARLES I. ARTZ & ASSOCIATES
CIA2440
Charles I. Artz, Esquire
I.D. #PA 55747
200 North Third Street, Suite 12-B
Harrisburg, PA 17101
(717) 238-9905
Fax (717) 238-2443
E-Mail: cia@,artzhealthlaw.corn
Attorneys for Plaintiff,
Ted D. ICosenske, M.D.
DATED: October 26, 2005
44
0
Case 1:05-cv-02184-CCC Document 1 Filed 10/26/05 Page 45 of 45
CERTIFICATE OF SERVICE
I, Charles I. Artz, Esquire, hereby certify that on this 26th day of October
2005, a true and correct copy of the foregoing document was served upon the party
named below by depositing the same in the United States Mail, First Class postage
pre-paid, and addressed as follows:
The Honorable John Ashcroft
United States Attorney General
U.S. Department of Justice
950 Pennsylvania Avenue, N.W.
Washington, D.C. 20530-0001
Thomas Marino, Esq.
United States Attorney for the Middle District of Pennsylvania
Third and Walnut Streets
Harrisburg, PA 17101
CIA2440
Charles I. Artz, Esquire
0
CERTIFICATE OF SERVICE
I, Robin Locke Nagele, Esquire, hereby certify that I caused a true and correct copy of
the foregoing Complaint to be served by U.S. First Class Mail, postage prepaid, upon the
following at the address indicated:
Jeffrey B. McCarron, Esquire
Swartz Campbell LLC
Two Libert Place
50 South 16`x' Street, Floor 28
Philadelphia, PA 19102
Attorney for Defedants
Evan Black, Esquire
305 North Front Street
P.O. Box 999
Harrisburg, PA 17108
Attorney for Plaintiffs
y?`r'1I
Dated
ROBIN LOCKS NAGS E
CERTIFICATE OF SERVICE
Kathleen M. Carson certifies that she served a true and correct copy of the
defendants' preliminary objections to plaintiffs' complaint on counsel listed below by
first class, United States mail, postage pre-paid on April 28, 2011.
Robin Locke Nagele, Esquire
John N. Joseph, Esquire
Four Penn Center, 14`h Floor
1600 John F. Kennedy Boulevard
Philadelphia, PA 19103
Kathleen M. Carson
10
SWARTZ CAMPBELL LLC
ATTORNEYS AT LAW
PRAECIPE FOR LISTING CASE FOR ARGUMENT
(Must be typewritten and submitted in triplicate)
HE PROTHONOTARY OF CUMBERLAND COUNTY: (List the within matter for the next
TO T
Argument Court.) Preliminary Objections
------------------------------ _ ) rte,>
--
---------------
----------------------------------- 3
CAPTION OF CASE
(entire caption must be stated in full) zCo ?
=:;u =
-
CARLISLE HMA, LLC d/b/a CARLISLE, REGIONAL MEDICAL CENTER, r
CD rN3
HEALTH MANAGEMENT ASSOCIATES, INC.,
vs. CD -0
STEVENS & LEE, P.C., LAWRENCE B. SELKOWITZ, -
ESQUIRE & JAMES W. SAXTON, ESQUIRE.
323 rn
No 2011 ermo
1. State matter to be argued (i.e., plaintiffs motion for new trial, defendant's demurrer to
complaint, etc.):
Defendants' Prelimin Objections
2. Identify all counsel who will argue cases:
(a) for plaintiffs:
Robin Locke Nagele, Esquire, John N. Joseph, Esquire
(Name and Address)
Four Penn Center, 14th Floor, 1600 J.F.K. Blvd, Philadelphia, PA 19103
(b) for defendants:
Kathleen M. Carson, Esquire
(Name and Address)
Two Liberty Place, 28th Floor, Philadelphia, PA 19102
3. 1 will notify all parties in writing within two days that this case has been listed for
argument.
4. Argument Court Date: May 27, 2011
,A
z rt
AC)
e?-n
Inn
Signature
n
V ,1 --
kl?
Print your name
D z Je- tLeery. fc-, -f-f Date:
(aB I j ( Attom for
INSTRUCTIONS:
1. Original and two copies of all briefs must be filed with the COURT ADMINISTRATOR
(not the Prothonotary) before argument.
2. The moving party shall file and serve their brief 12 days prior to argument.
3. The responding party shall file their brief 5 days prior to argument.
4. If argument is continued new briefs must be filed the with the
case sCO sRT
ADMINISTRATOR (not the Prothonotary) after
Cn/A
PRAECIPE FOR LISTING CASE FOR ARGUMENT
(Must be typewritten and submitted in triplicate)
3
TO THE PROTHONOTARY OF CUMBERLAND COUNTY: (List the within matter e Lwt rri-
Argument Court.) Preliminary Objections 4 r-::0 Vin"
-------------------------------------------------------------------------------------------- --------- - -
CAPTION OF CASE
(entire caption must be stated in full) ?= a --
CARLISLE HMA, LLC d/b/a CARLISLE, REGIONAL MEDICAL CENTER, wC-) c7)
a 1J
7
HEATLH MANAGEMENT ASSOCIATES, INC. 1
vs. y
STEVENS & LEE, P.C., LAWRENCE B. SELKOWITZ,
ESQUIRE & JAMES W. SAXTON, ESQUIRE
No. 2011 323 Term
1. State matter to be argued (i.e., plaintiffs motion for new trial, defendant's demurrer to
complaint, etc.):
Defendants' Preliminary Objections
2. Identify all counsel who will argue cases:
(a) for plaintiffs:
Robin Locke Naegle, Esquire, John N. Joseph, Esquire
(Name and Address)
Four Penn Center, 14th Floor, 1600 J.F.K. Boulevard, Philadelphia, PA 19103
(b) for defendants:
Jeffrey B. McCarron, Esquire, Kathleen M. Carson, Esquire
(Name and Address)
Two Liberty Place, 28th Floor, 50 S. 16th Street, Philadelphia, PA 19102
3. 1 will notify all parties in writing within two days that this case has been listed for
argument.
4. Argument Court Date: July 15, 2011
Print your name
Defendants
Attorney for
119)111 Date: b
INSTRUCTIONS:
1. Original and two copies of all briefs must be filed with the COURT ADMINISTRATOR
(not the Prothonotary) before argument.
2. The moving party shall file and serve their brief 12 days prior to argument.
3. The responding party shall file their brief 5 days prior to argument.
4. If argument is continued new briefs must be filed with the COURT
ADMINISTRATOR (not the Prothonotary) after the case is relisted.
SWARTZ CAMPBELL LLC
ATTORNEYS AT LAW
CERTIFICATE OF SERVICE
Kathleen M. Carson certifies that she served a true and correct copy of the defendants'
praecipe for argument for preliminary objections to plaintiffs' complaint on counsel listed below
by first class, United States mail, postage pre-paid on June 10, 2011.
Robin Locke Nagele, Esquire
John N. Joseph, Esquire
Four Penn Center, 14th Floor
1600 John F. Kennedy Boulevard
Philadelphia, PA 19103
Ka Teen M. Carson
SWARTZ CAMPBELL LLC
ATTORNEYS AT LAW
I
CARLISLE HMA, LLC : IN THE COURT OF COMMON PLEAS OF
d/b/a CARLISLE : CUMBERLAND COUNTY, PENNSYLVANIA
REGIONAL MEDICAL
CENTER and HEALTH
MANAGEMENT : CIVIL ACTION
ASSOCIATES, INC.,
Plaintiffs
STEVENS & LEE, P.C., :
LAWRENCE B. N,-)
SELKOWITZ, ESQUIRE, 77
and JAMES W.SAXTON, ESQUIRE, Defendants : NO. 2011-323 CIVIL TERM
IN RE: DEFENDANTS' PRELIMINARY
OBJECTIONS TO PLAINTIFFS' COMPLAINT
BEFORE OLER and GUIDO, JJ.
ORDER OF COURT
AND NOW, this 15`h day of August, 2011, upon consideration of
Defendants' Preliminary Objections to Plaintiffs' Complaint, following oral argument
held on July 15, 2011, and for the reasons stated in the accompanying opinion, it is
ordered and directed as follows:
1. Defendants' demurrer to Plaintiffs' claim for attorney's fees is
granted, to the extent that the claim is for attorney's fees incurred in
the prosecution of the present case, and the claim is stricken to that
extent;
2. Defendants' preliminary objections are otherwise denied; and
3. Defendants are afforded a period of twenty days from the datd
of this order to file an answer to Plaintiffs' complaint -, 7z
.
Robin Locke Nagele, Esq.
John N. Joseph, Esq.
Four Penn Center, 14'h Floor
1600 John F. Kennedy Boulevard
Philadelphia, PA 19103
Attorneys for Plaintiffs
Jeffrey B. McCarron, Esq.
Kathleen M. Carson, Esq.
Two Liberty Place, 28`h Floor
50 South 16th Street
l?W"'"'SI???pK?
Philadelphia, PA 19102
Attorneys for Defendants
BY THE COURT.
CARLISLE HMA, LLC : IN THE COURT OF COMMON PLEAS OF
d/b/a CARLISLE : CUMBERLAND COUNTY, PENNSYLVANIA
REGIONAL MEDICAL
CENTER and HEALTH
MANAGEMENT : CIVIL ACTION
ASSOCIATES, INC.,
Plaintiffs
V.
STEVENS & LEE, P.C.,
LAWRENCE B.
SELKOWITZ, ESQUIRE,
and JAMES W.
SAXTON, ESQUIRE,
Defendants : NO. 2011-323 CIVIL TERM
IN RE: DEFENDANTS' PRELIMINARY
OBJECTIONS TO PLAINTIFFS' COMPLAINT
BEFORE OLER and GUIDO, JJ.
OPINION and ORDER OF COURT
OLER, J., August 15, 2011.
In this legal malpractice action, Plaintiffs have sued a law firm and two of its
members for professional negligence and breach of contract arising out of an alleged
failure to preserve certain winning legal defenses in a federal case in which Defendants
represented Plaintiffs.' As a purported consequence of this failure, Plaintiffs were forced
to engage new counsel and settle the federal case to their financial disadvantage.2
For disposition at this time are preliminary objections filed by Defendants to
Plaintiffs' complaint.3 The preliminary objections consist of (a) a demurrer to the
complaint, based upon the contention that a legal malpractice action can not be premised
See Plaintiffs' Civil Action Complaint, filed on April 11, 2011, Claims for Relief (hereinafter Plaintiffs'
Complaint).
z Plaintiffs' Complaint, IT67-72.
' Defendants' Preliminary Objections to Plaintiffs' Complaint, filed on April 28, 2011 (hereinafter
Defendants' Preliminary Objections).
upon a settlement to which the client consented and in the absence of an actual
determinable loss,4 (b) a demurrer to Plaintiffs' claim for attorney's fees as incompatible
with the American Rule proscribing an award of such fees under normal circumstances,5
and (c) a motion to strike Plaintiffs' request for "such other relief as the court deems just
and appropriate," as impermissibly general.6
Defendants' preliminary objections were argued on July 15, 2011. For the reasons
stated in this opinion, they will be granted with respect to Plaintiffs' claim for attorney's
fees and otherwise denied.
DISCUSSION
Demurrer based upon settlement of underlying action by Plaintiffs. Although as a
general rule a client may not base a legal malpractice action against the attorney whose
services he or she used to effect a settlement of his or her case, when the client has, upon
further reflection, decided the settlement was not in his or her best interests, in the
absence of fraud, the public policy considerations underlying this general rules do not
apply where a settlement has been arrived at subsequent to the attorney's discharge for
malpractice and due to the exigencies created by that malpractice. See White v. Kreithen,
435 Pa. Super. 115, 644 A.2d 1262 (1994). Accordingly, Defendants' demurrer to
Plaintiffs' claims based upon a settlement of the underlying case by subsequent counsel
must be denied.
4 Defendants' Preliminary Objections, ¶¶28-44.
5 Defendants' Preliminary Objections, ¶¶45-49.
6 Defendants' Preliminary Objections, ¶¶50-52.
' See Muhammad v. Strassburger, McKenna, Messer, Shilobod and Gutnick, 526 Pa. 541, 887 A.2d 1346
(1991) (settlement of medical malpractice action).
8 "The primary reason we decide today to disallow negligence or breach of contract suits against lawyers
after a settlement has been negotiated by the attorneys and accepted by the clients is that to allow them
will create chaos in our civil litigation system. Lawyers would be reluctant to settle a case for fear some
enterprising attorney representing a disgruntled client will find a way to sue them for something that
`could have been done, but was not.' We refuse to endorse a rule that will discourage settlements and
increase substantially the number of legal malpractice cases. A long-standing principle of our courts has
been to encourage settlements; we will not now act so as to discourage them." Muhammad v.
Strassburger, McKenna, Messer, Shilobod and Gutnick, 526 Pa. 541, _, 587 A.2d 1346, 1349 (1991).
2
Demurrer based upon indeterminate nature of Plaintiffs' damages. In the present
case, Plaintiffs contend that the monetary loss which they incurred pursuant to a
settlement of the federal case in which certain winning defenses were made unavailable
to them through Defendants' mishandling of the case was, as a matter of practical
economics, unavoidable. Although it may be true that not every factual defense remained
unavailable to Plaintiffs in the underlying case, it would be, in the court's view,
premature to terminate the present case in Defendants' favor at this stage of the
proceedings on the theory that no actual loss of a determinable nature could be fairly
imputed to Defendants' alleged malpractice.
Attorney's fees. "Under the American Rule, applicable in Pennsylvania, a litigant
cannot recover counsel fees from an adverse party unless there is express statutory
authorization, a clear agreement of the parties, or some other established exception."
Trizechahn Gateway LLC v. Titus, 601 Pa. 637, 652, 976 A.2d 474, 482-83 (2009). No
exception to this general rule has been pled herein by Plaintiffs. Accordingly, to the
extent that Plaintiffs' claim for attorney's fees is based upon the attorney's fees which
they are incurring in the prosecution of the present action, the claim will be stricken.
Claim for "such other relief as the court deems just and appropriate. " This
phraseology, or a variant of it, is common to many civil complaints in Pennsylvania and
does not, so far as the court is aware, generally result in surprising and unorthodox forms
of relief being granted by the judiciary. Plaintiffs' brief does not cite any cases for the
proposition that its inclusion in a complaint is improper, and this court has in the past
expressly rejected the argument being made by Plaintiffs on the issue. Wagner v. Ahrens,
59 Cumberland L.J. 49 (2010).
Under these circumstances, the court will apply the general observation of the
Luzeme County Court of Common Pleas that "the propriety of the relief to be awarded, if
any, should be determined at trial, and not at the preliminary objections stage" to
Defendants' request that Plaintiffs' demand for "such other relief as the court deems just
3
and appropriate" be stricken. First Nat'l Bank of Mocanaqua v. Halliday, 17 D. & C.3d
446, 450 (Luzerne Co. 1980).
For the foregoing reasons, the following order will be entered:
ORDER OF COURT
AND NOW, this 15th day of August, 2011, upon consideration of
Defendants' Preliminary Objections to Plaintiffs' Complaint, following oral argument
held on July 15, 2011, and for the reasons stated in the accompanying opinion, it is
ordered and directed as follows:
1. Defendants' demurrer to Plaintiffs' claim for attorney's fees is
granted, to the extent that the claim is for attorney's fees incurred in
the prosecution of the present case, and the claim is stricken to that
extent;
2. Defendants' preliminary objections are otherwise denied; and
3. Defendants are afforded a period of twenty days from the date
of this order to file an answer to Plaintiffs' complaint.
BY THE COURT,
s/ J. Wesley Oler, Jr.
J. Wesley Oler, Jr., J.
Robin Locke Nagele, Esq.
John N. Joseph, Esq.
Four Penn Center, 14'h Floor
1600 John F. Kennedy Boulevard
Philadelphia, PA 19103
Attorneys for Plaintiffs
Jeffrey B. McCarron, Esq.
Kathleen M. Carson, Esq.
Two Liberty Place, 28th Floor
50 South 16th Street
Philadelphia, PA 19102
Attorneys for Defendants
4
POST & SCHELL, P.C.
BY: JOHN N. JOSEPH, ESQUIRE
I.D. # 46643
BY: ROBIN LOCKE NAGELE, ESQUIRE
I.D. # 36992
BY: ABRAHAM REIN, ESQUIRE
I.D. # 207090
FOUR PENN CENTER
1600 JOHN F KENNEDY BLVD.
PHILADELPHIA, PA 19103
215-587-1000
Carlisle HMA, LLC d/b/a Carlisle Regional
Medical Center and Health Management.
Associates, Inc.,
Plaintiff,
i ::L i\? 1 Il?tk?V ?lt?il f
r f E" 1. A-14D COU' '3" ;'
h`YLVAHIA
Attorneys for Plaintiff Carlisle HMA d/b/a
Carlisle Regional Medical Center and Health
Management Associates, Inc,
IN THE COURT OF COMMON PLEAS
CUMBERLAND COUNTY
vs.
Stevens & Lee, P.C., Lawrence B. Selkowitz,
Esq., and James W. Saxton, Esq.,
Defendants.
APRIL TERM, 2011
NO. 2011-323 CIVIL TERM
PLAINTIFFS' REPLY TO DEFENDANTS' NEW MATTER
Plaintiffs, Carlisle HMA, LLC d/b/a Carlisle Regional Medical Center and Health
Management Associates, Inc., by their attorneys, Post & Schell, P.C., hereby reply to
Defendants' New Matter as follows:
86. This paragraph contains legal conclusions to which no response is required. To
the extent a response is required, this paragraph is denied.
87. Denied. Plaintiff, Carlisle HMA, LLC is formerly known as Carlisle HMA, Inc.,
defendant in the underlying action.
88. Denied. See response to paragraph 87.
89. This paragraph contains legal conclusions to which no response is required. To
the extent a response is required, this paragraph is denied.
90. This paragraph contains legal conclusions to which no response is required. To
the extent a response is required, this paragraph is denied.
91. Denied. The Complaint speaks for itself. Plaintiffs note that Carlisle HMA, LLC
is described in the caption as "d/b/a Carlisle Regional Medical Center," and that Carlisle
Regional Medical Center is discussed in, inter alia, paragraph three of the Complaint.
92. Denied. The Complaint speaks for itself. See response to paragraph 91.
93. This paragraph contains legal conclusions to which no response is required. To
the extent a response is required, this paragraph is denied.
94. Admitted.
95. Admitted.
96. Admitted.
97. Denied as stated. Paragraph 97 is vague, ambiguous and unanswerable. It is
admitted that BMAA and CRMC had a mutually exclusive contract for the provision of pain
management services.
98. Denied that this paragraph contains a complete or even accurate summary of the
Third Circuit's opinion, which speaks for itself.
2
99. Denied as stated. This paragraph is vague and unanswerable. To the extent that
paragraph 99 sets forth a conclusion of law it is deemed denied.
100. Admitted, that BMAA did not pay for use of space equipment, staff and supplies
because the patients and their payors were responsible for payment, not BMAA.
101. Denied that this paragraph contains a complete or even accurate summary of the
Third Circuit's opinion, which speaks for itself.
102. Admitted in part, denied in part. It is admitted that defendants stated that there had
been payment of a facility or technical fee but it is denied that defendants submitted necessary
and appropriate evidence and argument that explained the legal significance of the facility or
technical fee.
103. Denied that this paragraph contains a complete or even accurate summary of the
Third Circuit's opinion, which speaks for itself.
104. This paragraph contains legal conclusions to which no response is required. To
the extent a response is required, it is denied,
105. Denied.
106. Denied that this paragraph contains a complete or even accurate summary of the
Third Circuit's opinion, which speaks for itself.
107. Denied that this paragraph contains a complete or even accurate summary of the
Third Circuit's opinion, which speaks for itself.
3
108. Denied as stated. By way of further response, this paragraph contains a
conclusion of law which is deemed denied.
109. Admitted.
110. This paragraph contains a conclusion of law to which no response is required. To
the extent that a response is required, it is denied.
111. Denied.
112. This paragraph contains a conclusion of law to which no response is required. To
the extent that a response is required, it is denied.
113. This paragraph contains a conclusion of law to which no response is required. To
the extent that a response is required, it is denied
114. This paragraph contains a conclusion of law to which no response is required. To
the extent that a response is required, it is denied
115. Denied as stated. CRMC and BMAA negotiated the agreement.
116. Denied as stated. CRMC had knowledge of the agreement. The premise that
"such compensation varied in the aggregate by the volume or value of services" is denied.
117. Denied that this paragraph contains a complete or even accurate summary of the
Third Circuit's opinion, which speaks for itself.
4
118. Denied that this paragraph contains a complete or even accurate summary of the
Third Circuit's opinion, which speaks for itself. It is denied that the Third Circuit's conclusions
were correct.
119. Admitted with qualifications, as follows: (i) The Anesthesiology Services
Agreement entered into on December 31, 1992 was between CRMC and BMAA; (ii) there were
limited joinders signed by BMAA physicians; (iii) the Anesthesiology Services Agreement was
amended multiple times.
120. Denied. It is further denied that this paragraph contains a complete or even
accurate summary of the Third Circuit's opinion, which speaks for itself.
121. Denied that this paragraph contains a complete or even accurate summary of the
Third Circuit's opinion, which speaks for itself.
122. Denied that this paragraph contains a complete or even accurate summary of the
Third Circuit's opinion, which speaks for itself.
123. Denied that this paragraph contains a complete or even accurate summary of the
Third Circuit's opinion, which speaks for itself.
124. Denied that this paragraph contains a complete or even accurate summary of the
Third Circuit's opinion, which speaks for itself.
125. Denied.
126. This paragraph contains legal conclusions to which no response is required. To
the extent a response is required, this paragraph is denied.
5
127. This paragraph contains legal conclusions to which no response is required. To
the extent a response is required, this paragraph is denied.
128. Denied.
129. This paragraph contains legal conclusions to which no response is required. To
the extent a response is required, this paragraph is denied.
130. This paragraph contains legal conclusions to which no response is required.
131. Denied.
132. Denied.
133. This paragraph contains legal conclusions to which no response is required. To
the extent a response is required, this paragraph is denied.
134. As to Mr. Selkowitz's "informed judgment," this paragraph is denied. Further,
this paragraph contains legal conclusions to which no response is required, and to the extent a
response is required, this paragraph is denied.
135. This paragraph contains legal conclusions to which no response is required. It is
admitted that plaintiffs did not intend to violate that law, and that, if the case had been properly
presented and argued to the court by Stevens and Lee, then plaintiffs would have prevailed.
136. Denied.
6
137. This paragraph contains legal conclusions to which no response is required. It is
admitted that plaintiffs did not intend to violate that law, and that, if the case had been properly
presented and argued to the court by Stevens and Lee, then plaintiffs would have prevailed.
138. It is admitted only that certain employees of the defendant to the underlying
action had had concerns based about potential violations of the Anti-Kickback Statute and Stark
law that were based on a misunderstanding of the facts and law, and were wrong.
139. Denied as stated. This paragraph is vague, ambiguous, misleading and
unanswerable. The concepts of "correct[ing]" a "possible violation[]" and "avoid[ing] additional
violations" of the law are incoherent. Plaintiffs did not violate the Stark Law or the Anti-
kickback Statute; there were no violations to correct.
140. Denied as stated. Plaintiffs did not violate the Stark Law or the Anti-kickback
Statute. They properly billed Medicare for services rendered.
141. Denied as stated. Plaintiffs settled the underlying action because they could not
risk taking the case to trial in light of the astronomic exposure they faced as a result of the
negligence of Stevens and Lee.
142. Admitted. Plaintiffs settled the underlying action because they could not risk
taking the case to trial in light of the astronomic exposure they faced as a result of the negligence
of Stevens and Lee.
143. Admitted, to the extent that "not liable on Kosenske's claims" means those claims
were based on an incorrect application of the facts and law.
7
144. Denied as stated. Because certain dispositive defenses, legal arguments and facts
were precluded by the negligence of Stevens and Lee, plaintiffs faced an unreasonably and
irresponsibly high likelihood that they would have been held liable on Kosenske's claims had
they taken the case to trial, even though they had not violated the law.
145. Admitted in part, denied in part. Plaintiffs admit that there were still some
defenses remaining as of the time that plaintiffs terminated Stevens and Lee, and that the
attorneys who replaced Stevens and Lee mounted a very aggressive defense on plaintiffs behalf.
Notwithstanding this aggressive defense, because of the damage inflicted on plaintiffs defense
of the Kosenske action by the negligence of Stevens and Lee, plaintiffs faced an unreasonably
and irresponsibly high likelihood that they would have been held liable on Kosenske's claims
had they taken the case to trial, even though they had not violated the law.
146. Denied as stated. Because of the damage inflicted on plaintiffs defense of the
Kosenske action by the negligence of Stevens and Lee, plaintiffs faced an unreasonably and
irresponsibly high likelihood that they would have been held liable on Kosenske's claims had
they taken the case to trial, even though they had not violated the law. By way of further
response, this paragraph sets forth a conclusion of law which requires no response.
147. This paragraph is vague, ambiguous and unanswerable. By way of further
response, this paragraph sets forth a conclusion of law which requires no response.
148. Denied.
8
149. Denied as stated. Defendants were advised and consulted with regard to the
decision to mediate the case, and never objected to settlement. By way of further response, this
paragraph sets forth a conclusion of law which requires no response.
150. Denied. By way of further response, this paragraph contains legal conclusions to
which no response is required.
151. Denied. By way of further response, this paragraph sets forth a conclusion of law
to which no response is required.
152. Denied. By way of further response, this paragraph sets forth a conclusion of law
to which no response is required.
153. This paragraph contains legal conclusions to which no response is required. To
the extent a response is required, this paragraph is denied.
154. This paragraph contains legal conclusions to which no response is required.
155. Denied.
156. This paragraph contains legal conclusions to which no response is required. To
the extent a response is required, this paragraph is denied.
157. This paragraph contains legal conclusions to which no response is required. To
the extent an answer is required, plaintiffs aver that Stevens and Lee was negligent throughout
the course of its representation of plaintiffs and that this negligence was continuing up until the
date that Stevens and Lee was terminated by the plaintiffs.
158. Admitted.
9
159. Admitted.
160. Admitted that a version of the Summary Judgment motion was sent to Parry and
Tormey before it was filed with the court. Parry and Tormey were the clients of Stevens and Lee
and relied upon Stevens and Lee to exercise appropriate skill and caution in asserting plaintiffs'
legal defenses to Kosenske's claims.
161. Denied. Parry and Tormey were the clients of Stevens and Lee and relied upon
Stevens and Lee to exercise appropriate skill and caution in asserting plaintiffs' legal defenses to
Kosenske's claims.
162. Admitted that a version of the Summary Judgment motion was sent to Parry and
Tormey before it was filed with the court. Parry and Tormey were the clients of Stevens and Lee
and relied upon Stevens and Lee to exercise appropriate skill and caution in asserting plaintiffs'
legal defenses to Kosenske's claims.
163. Admitted that a version of the Summary Judgment motion was sent to Parry and
Tormey before it was filed with the court. Parry and Tormey were the clients of Stevens and Lee
and relied upon Stevens and Lee to exercise appropriate skill and caution in asserting plaintiffs'
legal defenses to Kosenske's claims.
164. Denied. Parry and Tormey were the clients of Stevens and Lee and relied upon
Stevens and Lee to exercise appropriate skill and caution in asserting plaintiffs' legal defenses to
Kosenske's claims. Stevens and Lee held themselves out as experts in this area of the law. By
way of further response, this paragraph sets forth legal conclusions to which no response is
required.
10
165. Denied. Parry and Tormey were the clients of Stevens and Lee and relied upon
Stevens and Lee to exercise appropriate skill and caution in asserting plaintiffs' legal defenses to
Kosenske's claims.
166. Denied. Parry and Tormey were the clients of Stevens and Lee and relied upon
Stevens and Lee to exercise appropriate skill and caution in asserting plaintiffs' legal defenses to
Kosenske's claims. Stevens and Lee held themselves out as experts in this area of the law. By
way of further response, this paragraph sets forth legal conclusions to which no response is
required.
167. Admitted that a draft of the answer to the Summary Judgment motion was sent to
Parry and Tormey prior to filing it with the court. Parry and Tormey were the clients of Stevens
and Lee and relied upon Stevens and Lee to exercise appropriate skill and caution in asserting
plaintiffs' legal defenses to Kosenske's claims.
168. Admitted that a draft of the answer to the Summary Judgment motion was sent to
Parry and Tormey prior to filing it with the court. Parry and Tormey were the clients of Stevens
and Lee and relied upon Stevens and Lee to exercise appropriate skill and caution in asserting
plaintiffs' legal defenses to Kosenske's claims.
169. Admitted in part, denied in part. It is admitted only that at some point Parry
received the answer to Kosenske's summary judgment motion prepared by Stevens and Lee.
The remaining allegations of this paragraph are denied. Parry and Tormey were the clients of
Stevens and Lee and relied upon Stevens and Lee to exercise appropriate skill and caution in
asserting plaintiffs' legal defenses to Kosenske's claims.
11
170. Denied. Parry and Tormey were the clients of Stevens and Lee and relied upon
Stevens and Lee to exercise appropriate skill and caution in asserting plaintiffs' legal defenses to
Kosenske's claims. Stevens and Lee held themselves out as experts in this area of the law. By
way of further response, this paragraph sets forth legal conclusions to which no response is
required.
171. This paragraph contains legal conclusions to which no response is required.
172. Denied as stated. Plaintiffs had no knowledge of Stevens and Lee's negligence
prior to October 22, 2008. By way of further response, this paragraph contains legal conclusions
to which no response is required.
173. This paragraph contains legal conclusions to which no response is required.
174. Denied. By way of further response, this paragraph contains legal conclusions to
which no response is required.
175. Denied as stated. It is admitted only that plaintiffs reviewed the district court's
decision at or about the time it was rendered. Denied that this paragraph contains a complete or
even accurate summary of the district court's opinion, which speaks for itself. By way of further
response, this paragraph sets forth conclusions of law which are deemed denied.
176. Admitted in part, denied in part. It is admitted that the parties entered into a
tolling agreement on our about October 22, 2010. The remaining allegations of this paragraph
are conclusions of law to which no response is required.
12
177. Denied. By way of further response, this paragraph contains legal conclusions to
which no response is required.
178. Denied. By way of further response, this paragraph contains legal conclusions to
which no response is required.
179. Plaintiffs are without knowledge and information sufficient to form a belief as to
the truth of this paragraph, which is therefore denied. By way of further response, this paragraph
contains legal conclusions to which no response is required.
WHEREFORE, plaintiffs demand judgment in their favor and against defendants.
POST & SCHE
By:
Dated: October 6, 2011
JOHN N. JOSEPH, ESQUIRE
ROBIN LOCKE NAGELE, ESQUIRE
ABRAHAM REIN, ESQUIRE
POST & SCHELL, P.C.
1600 JFK BOULEVARD
13TH FLOOR
PHILADELPHIA, PA 19103
215-587-1000
EVAN BLACK, ESQUIRE
THOMAS, THOMAS & HAFER
BY: EVAN BLACK
I.D. # 17884
P.O. BOX 999
HARRISBURG, PA 17108
717-237-7100
Attorneys for Carlisle HMA, LLC d/b/a
Carlisle Regional Medical Center and
Health Management Associates, Inc.,
Plaintiffs
13
VERIFICATION
I, Timothy R. Parry, Esquire, an authorized representative of Plaintiffs Carlisle HMA,
LLC and Health Management Associates, Inc., do hereby verify that I have personal knowledge
of the facts set forth in the foregoing Reply to Defendants' New Matter ("Reply"), and that the
facts stated therein are true and correct to the best of my knowledge, information, and belief.
The facts set forth in the Reply are based on information furnished to counsel under my
direction. The language of the Reply is that of counsel and not my own. This verification is
made subject to the penalties of 18 Pa. C.S. § 4904, relating to unsworn falsification to
authorities.
Timothy R.
CERTIFICATE OF SERVICE
I, Abraham J. Rein, Esquire, hereby certify that I caused a true and correct copy of the
foregoing Plaintiffs' Reply to Defendants' New Matter to be served by U.S. First Class Mail,
postage prepaid, upon the following at the address indicated:
Jeffrey B. McCarron, Esquire
Swartz Campbell LLC
Two Liberty Place
50 South 16th Street, Floor 28
Philadelphia, PA 19102
Attorney for Defendants
Evan Black, Esquire
305 North Front Street
P.O. Box 999
Harrisburg, PA 17108
Co-Counsel for Plaintiffs
I6 -73- Zoi)
Date
J. REIN, ESQUIRE
SWARTZ CAMPBELL LLC
BY: JEFFREY B. MC CARRON
I.D. Nos. 49467
Two Liberty Place, 28th Floor
50 South 16th Street
Philadelphia, PA 19102
(215) 564-5190
lt7iccarron(u;.swartmampbell.com
learson(?r;?s??artzcampbell.com
-ut r
i C bit fY I tOTIHONOT1''SI"t,,
?r E l OCT I 1 P?j 1: ?0
` I "SERLAND COUNTY
PENNSM&RtO or Defendants,
Stevens & Lee, P.C., Lawrence B.
Selkowitz, Esquire and James W.
Saxton, Esquire
IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY
CARLISLE HMA, LLC d/b/a CARLISLE
REGIONAL MEDICAL CENTER and
HEALTH MANAGEMENT ASSOCIATES, INC.,
Plaintiffs,
V.
STEVENS & LEE, P.C.,
LAWRENCE B. SELKOWITZ, ESQUIRE
and JAMES W. SAXTON, ESQUIRE.
Defendants.
No. 2011-323 CIVIL TERM
PRAECIPE TO ATTACH
TO THE PROTHONOTARY AND/OR COURT ADMINISTRATOR:
Kindly attach the original verification of Larry B. Selkowitz, Esquire, to defendants'
answer to complaint with new matter.
SWARTZ, CAMPBELL LLC
BY: ak/O
JYFFRET B. IVC'CARRON
Attorneys for Defendants,
Stevens & Lee, P.C., Lawrence B.
Selkowitz, Esquire and James W.
Saxton, Esquire
DATE: October 7, 2011
SWARTZ CAMPBELL LLC
ATTORNEYS AT LAW
CERTIFICATE OF SERVICE
Jeffrey B. McCarron certifies that she served a true and correct copy of the defendants'
praecipe to remove from argument list on counsel listed below by e-mail and first class, United
States mail, postage pre-paid on October 7, 2011.
Robin Locke Nagele, Esquire
John N. Joseph, Esquire
Four Penn Center, 14th Floor
1600 John F. Kennedy Boulevard
Philadelphia, PA 19103
IL W,_.qbR,
loy . Mc arron
SWARTZ CAMPBELL LLC
ATTORNEYS AT LAW
VERIFICATION
The undersigned verifies that the facts set forth in the answer of defendants to
complaint with new matter are true and correct based on his personal knowledge. The
undersigned understands that false statements herein are made subject to the penalties of
18 Pa C.S.A. §4904, relating to unsworn falsification to authorities.
Larry B. Selkowitz, Esquire
DATE: -t
A 371-1 tl
1
34
POST & SCHELL, P.C.
BY: JOHN N. JOSEPH, ESQUIRE
I.D. # 46643
BY: ROBIN LOCKE NAGELE, ESQUIRE
I.D. # 36992
BY: ABRAHAM REIN, ESQUIRE
I.D. # 207090
FOUR PENN CENTER
1600 JOHN F KENNEDY BLVD.
PHILADELPHIA, PA 19103
215-587-1000
Carlisle HMA, LLC d/b/a Carlisle Regional
Medical Center and Health Management
Associates, Inc.,
Plaintiff,
P Q Tia a
U% 2? 1. r
:c:)
?'Er,IS t l d? ?r,
Attorneys for Plaintiff Carlisle HMA d/b/a
Carlisle Regional Medical Center and Health
Management Associates, Inc.
IN THE COURT OF COMMON PLEAS
CUMBERLAND COUNTY
vs.
Stevens & Lee, P.C., Lawrence B. Selkowitz,
Esq., and James W. Saxton, Esq.,
Defendants.
APRIL TERM, 2011
NO. 2011-323 CIVIL TERM
PLAINTIFFS' PRAECIPE TO SETTLE, DISCONTINUE & END
TO THE PROTHONOTARY:
Kindly mark the above-captioned matter settled, discontinued and ended, with
prejudice.
Respectfully submitted,
POST & SCHELL, P.C.
By: li rL
Dated: JiOH?Z N. OSEPH, ESQUIRE
ROBIN LOCKE NAGELE, ESQUIRE
ABRAHAM REIN ESQUIRE
POST & SCHELL, P.C.
1600 JFK BOULEVARD
13T" FLOOR
PHILADELPHIA, PA 19103
215-587-1000
EVAN BLACK, ESQUIRE
THOMAS, THOMAS & HAFER
BY: EVAN BLACK
I.D. # 17884
P.O. BOX 999
HARRISBURG, PA 17108
717-237-7100
Attorneys for Carlisle HMA, LLC d/b/a
Carlisle Regional Medical Center and
Health Management Associates, Inc.,
Plaintiffs
2
CERTIFICATE OF SERVICE
I, Abraham J. Rein, Esquire, hereby certify that I caused a true and correct copy of the
foregoing Plaintiffs' Praecipe to Settle, Discontinue and End to be served by U.S. First Class
Mail, postage prepaid, upon the following at the address indicated:
Jeffrey B. McCarron, Esquire
Kathleen M. Carson, Esquire
SWARTZ CAMPBELL LLC
Two Liberty Place
50 South 16th Street, Floor 28
Philadelphia, PA 19102
.Attorney for Defendants
Evan Black, Esquire
305 North Front Street
P.O. Box 999
Harrisburg, PA 17108
Co-Counsel for Plaintiffs
? -; (2
Dated
? (L ---
AM J. REIN, ESQUIRE