Health Law Brief: Board of Registration in Medicine v. Sturdy Memorial Hospital, 2011 WL 7102574 (Mass. Super. Dec. 12, 2011)

By Leda Tabaie with credit to Jennifer Gallop, Esq. and Anthony J. Cichello, Esq

In December of 2011, the Superior Court of Massachusetts enforced an investigative subpoena issued by the Massachusetts Board of Registration in Medicine (“Board”) to Sturdy Memorial Hospital, Inc. (“Sturdy”), compelling the disclo­sure of materials claimed by Sturdy to be privileged core materials of medical peer review committee. The subpoena at issue sought to compel the production of certain handwritten notes (“Notes”) cre­ated by Sturdy’s Medical Director concerning a physician, Dr. Doe, about whom complaints had been lodged. The Board sought all docu­ments pertaining to Dr. Doe, includ­ing documents relating to incident reports referencing the physician and the investigation thereof, such as the Notes. Sturdy objected to producing the Notes, claiming they were protected by the medical peer review privilege under G.L. c. 111, § 204(a). The Board asserted that the Notes are protected under G.L. c. 111, § 205(b), which would allow for the production of such materials to the Board prior to the institution of a formal administrative proceed­ing under G.L. c. 30A. The Superior Court agreed with the Board, hold­ing that the Notes constituted raw materials protected only by Section 205(b) and were therefore immedi­ately discoverable by the Board.1

The fundamental purpose of the medical peer review privilege is to achieve quality health care by promoting candor and confidential­ity in the peer review process and to “foster aggressive critiquing of medical care by the provider’s peers.” 2 G.L. c. 111, § 204(a) protects so-called “core materi­als,” i.e., the proceedings, reports, and records of a medical peer re­view committee. Section 205(b) protects from disclosure the “raw materials” of a peer review com­mittee, specifically, “[i]nformation and records which are necessary to comply with risk management and quality assurance programs… and which are necessary to the work product of medical peer re­view committees.” Both catego­ries of peer review material are protected from disclosure to third parties except the Board of Regis­tration, which can obtain the Sec­tion 205(b) materials upon request but can only obtain Section 204(a) core materials after the institution of a formal adjudicatory proceed­ing. 3

In the Sturdy case, the medical director, Dr. Pietro, served as the coordinator of the hospital’s Pa­tient Care Assessment Program (“PCAP”) and as chairman of its Clinical Risk Management Com­mittee (“CRMC”). Both of these programs operated as peer review functions under the hospital’s by­laws. To support its claim that the Notes were protected under Section 204(a), Sturdy introduced an affidavit from Dr. Pietro which claimed that the Notes were core materials made pursuant to his duties as coordinator of PCAP and CRMC. Thus, Sturdy argued that, per Section 204(a), the Notes were not then subject to production to the Board, which had not yet com­menced an adjudicatory proceed­ing. In contrast, the Board argued that the Notes were only protected by Section 205(b) which allows the Board to inspect, maintain, and uti­lize such raw materials prior to the commencement of formal adjudi­catory proceedings.

In finding that the Notes at issue constituted raw materials, the Stur­dy court relied heavily on the analy­sis of the Supreme Judicial Court (“SJC”) in its 2009 case, Hallmark, in which the SJC distinguished peer review core materials protected un­der Section 204(a) from Section 205(b) raw materials. In Hallmark, the SJC recounted the statutory history of the peer review privi­lege, noting that, in 1987, it had held that Section 204(a) did not protect “raw materials” relied on by a peer review committee if they were obtained from other sourc­es.4 In response to that decision, the Massachusetts Legislature enacted Section 205(b) to extend the medical peer review privilege to documents that might otherwise fall outside the scope of Section 204(a), but that are nonetheless necessary to risk management and quality assurance programs. The Hallmark court pointed out that while both sections shield in­formation from the general public and other third parties, Section 204(a) shields information from the Board only until the Board commences formal proceedings under G.L. c. 30A, whereas raw materials protected under Section 205(b) may be inspected, maintained, and utilized by the Board upon request.

The SJC found this distinction to be consistent with the overarching ob­jectives of the medical peer review privilege because only the Board, and not the general public, would gain access to the materials and they would remain confidential. The Board, the court reasoned, is part of the regulatory scheme intended to protect the public in­terest by promoting the highest quality medical services through conducting disciplinary proceed­ings. In its analysis, the Hallmark court also explained that the prop­er inquiry for determining what protective status the Notes would receive involved analyzing “the way in which a document was created and the purpose for which it was used, not…its content.”5

The court rejected Sturdy’s conten­tion that the Notes were created by, for, or otherwise as a result of a medical peer review committee, noting that, at best, the materials were created “for” a peer review committee. Even if created “for” such a committee, the court never­theless found the Notes to be only raw materials protected by Section 205(b). In making this finding, the court placed particular emphasis on the fact that the Notes were not made in response to a specific request by a medical peer review committee, but instead were made in anticipation of potential con­sideration by such a committee. The court reasoned that, because there was no evidence on record that a peer review committee ever convened, generated any record, or rendered any decision concern­ing Dr. Doe, the Notes were not pro­tected under Section 204(a).6

This case takes a very narrow view of the materials protected by Sec­tion 204(a) from disclosure to the Board during the investigatory stage. While Hallmark and Beth Israel both held that raw materials obtained from other sources were subject to production to the Board during this stage, neither required the production of the work product of the hospital’s Medical Director in the course of his duties as the coordinator and chairman of the hospital’s designated peer review committees. In analyzing contest­ed materials regarding privilege, the Sturdy court seemed to em­phasize form over substance in a way that favors Board access. The Court gave little credence to the Medical Director’s affidavit explain­ing the purpose for which the Notes were created. Instead, it focused on timing and the fact that a peer review committee had not yet con­vened. Indeed, the court observed that the “Notes may, at some point be necessary work product of a medical peer review committee” and presumably then would be pro­tected from Board review.7

This ruling, if followed by other courts, could have practical im­plications for health care provid­ers. The Notes were not specifi­cally designated as privileged peer medical review materials and the Medical Director was not careful about specifying in what capac­ity he was creating the Notes. At­torneys should consider advising healthcare clients to be mindful of the timing and process for pro­tecting materials under the medi­cal peer review privilege. Further­more, early on, clients may want to consider convening a formal review committee meeting to preserve the confidentiality of materials made in connection with incident reports or investigations of professional mis­conduct. Finally, there is a concern that a more restrictive definition of the core peer review protection of Section 204(a) and the heightened possibility of early-stage disclosure of materials to the Board of Reg­istration disciplinary unit, particu­larly notes created by the Medical Director or another physician peer review committee, could under­mine the candor and openness that is necessary for an effective peer review process.

Leda Tabaie is a graduate of Northeastern University School of Law, class of 2012. Through­out her law school career, Leda has interned with the Honorable Judge William G. Young of the United States District Court for the District of Massachusetts, the Reproductive Freedom Proj­ect at the American Civil Liber­ties Union, and Oxfam America. With this strong background in public interest, Leda aspires to advocate for reproductive justice in Boston.


(Endnotes)

1 Board of Registration in Medicine v. Sturdy Memorial Hospital, No. MICV2011-04006-C, 2011 WL 7102574, *4 (Mass. Super. Dec. 12, 2011).

2 Board of Registration in Medicine v. Hallmark Health Corporation, 454 Mass. 498 (2009).

3 G.L. c. 111, §§204(a), 205(b).

4 Beth Israel Hosp. Ass’n. v. Board of Registration in Medicine, 401 Mass. 172, 183 (1987).

5 Sturdy, 2011 WL at *2, citing Hallmark, 454 Mass. at 509.

6 See Beth Israel Hospital Association v. Board of Registration in Medicine, 401 Mass. 172, 183 (1987) (“Section 204 does not protect information generated by other components of the QPCAP system or the ‘raw materials’ relied on by a [peer review committee] if obtained from other sources.”); Carr v. Howard, 426 Mass. 514, 522 n.7 (1998) (holding that protection under Section 204(a) only applies to documents which are themselves a product of the proceedings, reports, and records of a peer review committee, and not merely materials made to be presented to such a committee).

7 Sturdy Memorial Hospital, 2011 WL at *4

Health Law Brief: Gauthier v. Director of the Office of Medicaid, 80 Mass. App. Ct. 777 (2011)

By Matthew S. Buehler

The Massachusetts Medicaid plan, MassHealth, pays for nurs­ing home care received by individ­uals who have less than $2,000 in assets and meet certain other criteria.1 This creates an incen­tive, however, for individuals to give away their assets to friends and families in order to qualify for nursing home benefits. To mini­mize this incentive, MassHealth reviews asset transfers made by an applicant. 2 The Appeals Court in Gauthier v. Director of the Of­fice of Medicaid, 80 Mass. App. Ct. 777 (2011), reviewed such an asset transfer in the form of a care agreement.

Specifically, the plaintiff in Gauth­ier entered into a care agree­ment with her son whereby she transferred all of her assets to him. The plaintiff applied to MassHealth roughly two years later for nursing home benefits. MassHealth, however, found that the care agreement was a dis­qualifying asset transfer.

MassHealth reviews all asset transfers made an applicant for nursing home benefits within the five years preceding the applica­tion. If MassHealth determines that an applicant has made a “disqualifying transfer” of assets during that period, it imposes a period of ineligibility before the applicant can receive benefits.3

A contract for future care (such as the agreement between the plain­tiff and her son) is “a disqualify­ing transfer of assets to the ex­tent that the transaction does not have an ascertainable fair-market value or if the transaction is not embodied in a valid contract that is legally and reasonably enforce­able by the applicant.”4 However, even if a disqualifying transfer has occurred, no ineligibility peri­od will be imposed if the applicant “demonstrates to the MassHealth agency’s satisfaction that (1) the resources were transferred exclu­sively for a purpose other than to qualify for MassHealth; or (2) the [applicant] intended to dispose of the resource at either fair-market value or for other valuable con­sideration. Valuable consider­ation is a tangible benefit equal to at least the fair-market value of the transferred resource.”5

The ineligibility period (in months) imposed for a disqualifying trans­fer of assets is “equal to the to­tal, cumulative, uncompensated value … of all resources trans­ferred … divided by the average monthly cost to a private patient receiving nursing-facility services in … Massachusetts at the time of application, as determined by the MassHealth agency.”6 The “uncompensated value” of a re­source is defined as “the differ­ence between the fair-market value of the resource ,,, at the time of transfer … and the actual amount the individual received.”7 Fair market value is “an esti­mate of the value of a resource if sold at the prevailing price.” 8

The plaintiff suffered from Al­zheimer’s disease. By Septem­ber 2004, when the plaintiff was 79 years old, her condition had reached the point where she could no longer live alone and she moved in with her son and his wife (the plaintiff’s daughter-in-law). The son and daughter-in-law subsequently renovated their home and built a living area for the plaintiff. In March 2006, the plaintiff entered into a Care Agreement (“the Agreement”) with her son. Under the Agree­ment, the son agreed to provide the plaintiff with lodging, 3 meals a day and weekly houseclean­ing and laundry services. In re­turn, the plaintiff agreed to pay $225,000 up-front to her son.

After 90 days, the son had the right to terminate the Agreement for “good and sufficient cause” and keep any payments. “Good and sufficient cause” was de­fined to include if the plaintiff could no longer care for her per­sonal needs, including bathing or dressing herself. The Agreement remained in effect over 2 years until the son terminated it in May 2008 after he had back surgery and could no longer lift the plain­tiff. At that time, the plaintiff had paid $182,000 to her son and did not have any further assets.

Upon termination of the Agree­ment, the plaintiff moved into a nursing home and applied for MassHealth benefits. MassHealth though denied her application on the ground that the Agreement was a disqualifying transfer. The plaintiff appealed the denial of MassHealth benefits with the Of­fice of Medicaid Board of Hear­ings. After a hearing, the agency Hearing Officer upheld the denial of benefits.

In particular, the Hearing Officer found that the plaintiff’s payment of $182,000 to her son was a dis­qualifying transfer as the Agree­ment had no fair-market value. The Hearing Officer further found the payment was made at least in part to qualify for MassHealth. As a result, the plaintiff was in­eligible for nursing home benefits for 682 days ($182,000 divided by a $267 average daily cost of a private nursing home in Massa­chusetts).

In reviewing the Hearing Officer’s decision, the Appeals Court first upheld the finding that the Agree­ment was a disqualifying trans­fer.9 Fair-market value is deter­mined by reviewing the value of what the applicant received at the time of transfer.10 At the time of its execution, however, the Agreement was ambiguous as to how long the son would care for the plaintiff and what care she would receive. The Agreement did not have a set duration and lacked benchmarks for care pro­vided. The Agreement instead only required the son to care for the plaintiff as much he could for as long as he could.11

Moreover, the plaintiff was al­ready in failing health in March 2006 due to Alzheimer’s and needed one-on-one supervision. As a result, the son literally could have terminated the Agreement at any time. The son did provide a newly built living area to the plaintiff but he retained title to it. The son further controlled how long the plaintiff could live there as he could cancel the Agreement without having to make a refund. These factors provided sub­stantial evidence to support the Hearing Officer’s finding that the Agreement did not, at the time of its execution, have an ascertain­able fair market and hence was a disqualifying transfer.12

The Appeals Court next reviewed the Hearing Officer’s finding that the plaintiff entered into the Agreement at least in part in or­der to qualify for MassHealth. MassHealth provides an excep­tion for transfers made solely for another purpose than qualifying for benefits. 13 To qualify for this exception, an applicant must provide more than verbal assur­ances as to his or her intent. An applicant must instead prove his or her intent through convincing evidence.14 The Appeals Court found that substantial evidence supported the finding that the plaintiff did not meet this burden.

The plaintiff was already in fail­ing health when she executed the Agreement. The Agreement thus contemplated a possible future where the plaintiff would need more care than the son and his wife could provide. At that time, the plaintiff would have no al­ternative but to go to a nursing home, and would have to apply for MassHealth. This supported the conclusion that one purpose of the Agreement was to enable the plaintiff to qualify for MassHealth if and when her son could no lon­ger care for her.15

The Appeals Court found, how­ever, that these facts were in­sufficient to end the inquiry into the intent of the Agreement. MassHealth regulations also pro­vide an exception for transfers where the applicant intended to receive valuable consideration.16 The Appeals Court noted that it was possible that the son intend­ed to give the plaintiff fair consid­eration, even if he believed that she would ultimately have to re­ceive nursing home care. In fact, the son did build a living area for the plaintiff and cared for her un­der the Agreement for nearly two years. The Appeals Court stated that these facts could support a finding that the plaintiff did in­tend to receive fair consideration, although the Hearing Officer did not make any separate findings on this issue. The Appeals Court thus remanded the case for fur­ther findings.17

In addition, the Appeals Court addressed the calculation of the plaintiff’s ineligibility period. The Hearing Officer based the ineligibility period on the entire $182,000 transfer by the plain­tiff. This period is supposed to be based on uncompensated value, i.e., the difference between what the plaintiff paid under the Agree­ment and what it was worth.18 The plaintiff paid $182,000 un­der the Agreement, although, as discussed above, it is difficult to determine the fair market value for what the plaintiff received. The Hearing Officer appears to have treated the Agreement as worthless based on its lack of val­ue when executed. The Hearing Officer also noted, though, that the plaintiff received 22 months of care under the Agreement – and that the average monthly cost of nursing home care was $8,010. The plaintiff thus likely would have paid nearly $182,000 if she spent those 22 months in a nursing home instead.

The Appeals Court noted that MassHealth regulations are un­clear whether uncompensated value is measured at the time of execution or by the services sub­sequently provided under a con­tract. The Court indicated that it preferred calculating the value of the contract based on the value of services actually provided but it declined to make a definitive ruling without more guidance from the agency. Instead, the case was remanded for further findings as to the intent and un­compensated value of the Agree­ment.19 Until then, the value of future care contracts will remain uncertain.

Matthew S. Buehler is a contract Staff Attorney at DentaQuest, LLC. Mr. Buehler’s practice focusses on regulatory compliance and filings and representing the company in administrative proceedings. Mr. Buehler graduated from Suffolk Uni­versity Law School in 1995. Prior to joining DentaQuest, Mr. Buehler worked primarily in the public sector, including the Office of Medicaid and the Office of the Attorney General, Insurance Division. While at the Of­fice of Medicaid, Mr. Buehler brought enforcement actions under the ‘pay­er-of-last-resort’ of the state and fed­eral Medicaid acts and represented the MassHealth program in court proceeding. Mr. Buehler further de­fended administrative appeals of MassHealth audits. While at the At­torney General’s Insurance Division, Mr. Buehler brought enforcement ac­tions under the consumer protection, healthcare and insurance statutes. In addition, Mr. Buehler has worked as an attorney for the Attorney Gen­eral’s Civil Rights Division and the Massachusetts Commission Against Discrimination.

(Endnotes)

1 130 C.M.R. § 519.006.

2 130 C.M.R. §§ 520.018 & 520.019.

3 130 C.M.R. § 520.019.

4 130 C.M.R. § 520.007(J)(4).

5 130 C.M.R. § 520.019(F).

6 130 C.M.R. § 520.019(G)(1).

7 130 C.M.R. § 515.001.

8 130 C.M.R. § 515.001.

9 The plaintiff initially sought judicial review under G.L. c. 30A, § 14(7) of MassHealth’s decision. The Superior Court (Donovan, J.) upheld the denial of benefits and the plaintiff appealed this decision to the state Appeals Court.

10 Forman v. Director of Office of Medicaid, 79 Mass. App. Ct. 218, 224-25.

11 Gauthier, 80 Mass. App. Ct. at 784-85.

12 Gauthier, 80 Mass. App. Ct. at 784-85.

13 130 C.M.R. § 520.019(F)(1).

14 Gauthier, 80 Mass. App. Ct. at 785 (citing State Medicaid Manual).

15 Gauthier, 80 Mass. App. Ct. at 785-86.

16 130 C.M.R. § 520.019(F)(2).

17 Gauthier, 80 Mass. App. Ct. at 786-87.

18 130 C.M.R. § 520.019(G)(1).

19 Gauthier, 80 Mass. App. Ct. at 787-90.

Health Law Brief: Guardianship of Mary Moe, 81 Mass. App. Ct. 136 (2012)

By Margaretta Homsey Kroeger

In January 2012, the Massachu­setts Appeals Court reviewed an order of the Probate and Family Court appointing the parents of a mentally ill pregnant woman as her guardians for the purpose of consenting to an abortion and to a sterilization procedure. The Appeals Court determined that the order violated the woman’s right to due process and did not comply with the requirements of the state’s substituted judgment statute.1 Accordingly, the Appeals Court reversed in part, vacated in part, and remanded the matter for further proceedings.

At the time of the appeal, Mary Moe2 was a 32-year-old pregnant woman diagnosed with schizo­phrenia and/or schizoaffective disorder and bipolar disorder. She had suffered a psychotic break when she was in college and had been hospitalized numerous times due to her mental illness. Moe had also been pregnant on two previous occasions. The first time she became pregnant she had an abortion, and the second time she gave birth to a son who was placed in the custody of her parents. Moe’s psychotic break occurred at some point after she had the abortion and before the birth of her son.

In October 2011, Moe had visited a hospital emergency room where it was determined that she was two or three months pregnant. The Department of Mental Health then filed a petition requesting that Moe’s parents be appointed as her guardians for the purpose of consenting to an abortion. A hearing on the petition was held before a judge of the Probate and Family Court in December 2011. At the hearing, Moe stated that she would not have an abortion. She also made several inaccurate assertions, including that she was not pregnant, that she had met the judge before, and that she had previously given birth to a girl named Nancy, when she had in fact given birth to a boy. Based on these “substantial delusional beliefs,” the judge found that Moe was incompetent to decide whether to have an abortion.3

The judge appointed a guardian ad litem (“GAL”) to investigate wheth­er, under a substituted judgment analysis,4 Moe would consent to an abortion if she were com­petent. In Massachusetts, court authorization is required before a guardian may consent to cer­tain extraordinary medical proce­dures on behalf of a person who has been found incompetent.5 In determining whether to authorize a procedure, the court will apply the doctrine of substituted judg­ment, whereby it “substitutes it­self as nearly as possible for the individual in the decision making process.”6 In doing so, the court “seeks to maintain the integrity of the incompetent person” by pro­viding an opportunity to exercise his or her fundamental right to de­cide whether to consent to such a procedure.7 The court must de­termine not “what is necessarily the best decision but rather what decision would be made by the incompetent person if he or she were competent.”8

The GAL submitted a report concluding that Moe would not choose to have an abortion if she were competent. The record revealed that Moe became “agi­tated and emotional” discussing her first pregnancy that ended in an abortion.9 Moe had also stated that she was “very Catholic” and would never have an abortion.10 However, her parents stated that Moe was not an “active” Catholic and they believed it was in her best interest to have an abor­tion.11

After considering the facts con­tained in the GAL report, the judge reached the opposite conclusion than the GAL. Without holding a hearing, the judge found that Moe would choose to have an abortion if she were competent and or­dered that Moe’s parents be ap­pointed as guardians to consent to the abortion. The judge further ordered, sua sponte, that Moe be sterilized by the medical facility that performed the abortion pro­cedure. Moe then appealed the order.

In reviewing the order, the Appeals Court first observed that the deci­sion to bear or beget a child is a fundamental right of all people, including those who are incom­petent. As a result, the court will apply the doctrine of substitut­ed judgment when determining whether a guardian can consent to an abortion or sterilization on behalf of an incompetent person.

Turning to the portion of the order requiring sterilization, the court stated that, “[b]ecause steriliza­tion is the deprivation of the right to procreate, it is axiomatic that an incompetent person must be given adequate notice of the pro­ceedings,” along with an opportu­nity to be heard on the issue of the ability to give informed con­sent and, if unable to consent, a substituted judgment determina­tion.12 The court noted that none of these procedural requirements were met when the judge ordered Moe’s sterilization sua sponte and without notice. It held that the required level of due process had not been provided, and it re­versed that part of the order.13

The Appeals Court then consid­ered the portion of the order re­quiring an abortion. It first deter­mined that the judge’s decision that Moe was incompetent to de­cide whether to have an abortion was supported by evidence in the record, namely that Moe denied that she was pregnant.14 Howev­er, the court noted that the other evidence on which the judge re­lied, that Moe believed that she had met the judge before and had given birth to a girl, did not support a determination that she was incompetent with respect to the abortion issue, given that “[a] person may be adjudicated le­gally incompetent to make some decisions but competent to make other decisions.”15

The court next determined that the order requiring Moe to have an abortion did not comply with the state’s substituted judgment law. The court stated that, after Moe was found incompetent, the judge was legally required to hold an evidentiary hearing to deter­mine whether she would have an abortion if she were compe­tent, unless the judge found “ex­traordinary circumstances” that required her to be absent from the hearing.16 Alternatively, the judge could have based the sub­stituted judgment determination exclusively on affidavits and doc­umentary evidence if the judge had made “an additional finding, based on representation of coun­sel,” that there were no contested issues of fact.17 Because the judge did not hold a hearing or make the required additional findings, the court vacated the portion of the order requiring the abortion, and remanded the case for “a proper evidentiary inquiry and de­cision on the issue of substituted judgment.”18 Finally, the court vacated the portion of the order appointing Moe’s parents as her guardians to the extent that it was conditioned on the need for them to consent to the abortion, and the court directed that the order be modified to appoint her parents as guardians for general purposes related to routine medi­cal care.19

Margaretta Homsey Kroeger is a Skadden Fellow at Greater Bos­ton Legal Services in the Elder, Health and Disability Unit, where she focuses on advocating for youth with physical and mental disabilities who are aging out of the foster care system. She provides outreach, community education, and direct legal rep­resentation to youth who need assistance accessing disabil­ity benefits, health care, and related services. Prior to her fellowship, Ms. Kroeger clerked for Justice William P. Robinson III of the Rhode Island Supreme Court. She received her law de­gree from Boston College Law School, where she was a Public Service Scholar and served as an articles editor of the Boston College Law Review and as vice president of the Public Interest Law Foundation. She received her undergraduate degree from Harvard University with a con­centration in History.

(Endnotes)

1 Guardianship of Mary Moe, 81 Mass. App. Ct. 136, 139-42 (2012).

2 “Mary Moe” is a pseudonym used to maintain the confidentiality of the lower court proceedings. See G.L. c. 112 § 12S.

3 Guardianship of Moe, 81 Mass. App. Ct. at 137.

4 See G.L. c. 190B, § 5-306A.

5 See id.; see also Matter of Moe, 385 Mass. 555, 559 (1982).

6 Matter of Moe, 385 Mass. at 565.

7 Id.

8 Id.

9 Guardianship of Moe, 81 Mass. App. Ct. at 138.

10 Id.

11 Id.

12 Id. at 139.

13 Id. at 140 (citing U.S. Const. amend. XIV, § 1).

14 Id.

15 Id. (quoting Matter of Moe, 385 Mass. at 567-68).

16 Id. at 141 (quoting G.L. c. 190B, § 5- 306A(d)).

17 Id.

18 Id.

19 Id. at 141-42.

Health Law Brief: U.S. ex. rel. Christopher Drennen v. Fresenius Medical Care Holdings, Inc.

By Meghan M. Cosgrove

On March 6th, the District Court in Massachusetts denied a motion by Fresenius Medical Care Holdings, Inc. d/b/a Fresenius Medical Care North America (“Fresenius”) to dismiss a qui tam complaint un-der the False Claims Act, 31 U.S.C. §3730, filed by former employee Christopher Drennen (“Drennen”). In reaching its decision, the Court not only found that Drennen’s al-legations of fraud were specific enough to meet the pleading requirements under Rule 9(b) of the Federal Rules of Civil Procedure (“Rule 9(b)”), but also held that the public disclosure bar did not preclude Drennen from filing his action as the Court found him to be an “original source” of the information alleged.

Drennen, a former area manager of Fresenius, the nation’s largest dialysis provider, alleged that the company billed Medicare over a ten (10) year period for certain hepatitis B and ferritin tests that were not medically necessary. Specifically, he claimed that Fresenius billed hepatitis B tests more frequently than Medicare’s National Coverage Decision allowed and without the required supporting documentation, including the physician orders. Drennen made similar claims regarding Fresenius’ billing for ferritin tests although provided less detail with respect to these tests.

The False Claims Act (“FCA”) prohibits the submission of false or fraudulent claims to the federal government and allows private individuals to sue on behalf of the federal government under its “qui tam” provisions.1 It is well-settled case law that qui tam fraud actions brought under the False Claims Act are subject to the heightened pleading requirements of Rule 9(b).2 This rule requires that a plaintiff plead claims of fraud with sufficient particularity such as “the dates of the claims, the content of the forms or bills submitted, their identification numbers, the amount of money charged to the government, the particular goods or services for which the government was billed, the individuals involved in the billing, and the length of time between the alleged fraudulent practices and the submission of claims based on those practices . . .”3 While the “time, place, and content” factors are not used as a checklist, a relator must plead specific information with respect to the claims for payment that are submitted to the government in or-der to meet the Rule 9(b) pleading requirements.4

In this case, Fresenius argued that the information provided by Drennen did not meet the specificity requirement of Rule 9(b) because he did not identify the names of the Fresenius employees who sub-mitted the claims for the tests, the physicians who ordered the tests, or the details about when the tests were billed to Medicare. In rejecting Fresenius’ argument, the Court noted that Drennen identified the location where the unnecessary tests were performed, the type of test performed, the time period during which the tests were per-formed, and the cost billed. In addition, Drennen provided the initials of six (6) patients who received sixty-four (64) unnecessary hepatitis B or ferritin tests. The Court found the information provided by Drennen sufficient to meet the Rule 9(b) pleading requirements.

Beyond the heightened pleading requirement of Rule 9(b), qui tam actions under the False Claims Act are also subject to a dismissal if the activity alleged has already been publicly disclosed (the “public disclosure bar”).5 A relator can still overcome the public disclosure bar, however, if the relator is considered an “original source” of the information.6 To be considered an original source, the relator either must have voluntarily disclosed the information on which the claims are based to the government prior to public disclosure, or have direct and independent knowledge of the publicly disclosed claims and voluntarily provide this information to the government prior to filing an action.7 With respect to the latter category, a relator’s knowledge is considered direct and independent if it has been acquired through the relator’s own efforts and is not dependent upon the public disclo-sure.8 If the information in the relator’s possession is not considered direct and independent, the relator is not considered an “original source” and the public disclosure bar prevents the relator’s action from going forward.

The Court found that all of the elements of the public disclosure bar were met but that Drennen was an “original source” of the information he alleged in his complaint. In reaching its decision, the Court rejected Fresenius’ argument that Drennen needed to have direct and independent knowledge of the billing practices of every Fresenius clinic, the medical history of all patients, and every hepatitis B and ferritin test given from 2001 to the present. Even though Drennen’s personal knowledge of Fresenius’ alleged false and improper billings was limited to just the ten dialysis clinics that Drennen supervised, the Court found the information that Drennen provided with respect to these ten clinics in addition to his knowledge of Fresenius’ nation-wide computer system and Medicare billing system was sufficient to establish Drennen’s direct and independent knowledge for all of the alleged medically unnecessary tests done on a nationwide level, including those occurring in clinics that Drennen did not supervise.

This case serves as a reminder to practitioners that the time, place, and content factors used to establish specificity under Rule 9(b) are not a rigid checklist. A relator may still meet the pleading requirements of Rule 9(b) as long as the information alleged is sufficiently specific with respect to the sub-mission of fraudulent claims to the government. In addition, this case suggests that a relator’s personal knowledge of a limited number of improper billings can be extrapolated in certain circumstances such that the relator can be considered the “original source” for allegations of a nationwide practice of improper billing, even though the relator does not have personal knowledge of every possible alleged violation. In short, it demonstrates that whistleblowers can come from any level within an organization and need only limited knowledge of a company’s business practices to be considered an “original source” for allegations of FCA violations on a nationwide level.

 

Meghan M. Cosgrove is an associate in the Health Care Department at Donoghue Barrett & Singal, P.C.. Pri­or to joining the firm, Ms. Cosgrove served at the Centers for Medicare and Medicaid Services (CMS) in Boston and in Baltimore, Maryland as a Health Insurance Specialist in the Division of Medicare Financial Management and the Division of Technical Payment Policy, respec­tively. During her tenure at CMS, she worked on the Stark Law Phase III regulations, the Specialty Hospital Report to Congress, the EMTALA Technical Advisory Group Report, the Compliance Effectiveness Pilot project, as well as Medicare reim­bursement and coverage issues. Prior to law school, Ms. Cosgrove was the Director of Project Develop­ment at the Federated Ambulatory Surgery Association in Alexandria, VA. Ms. Cosgrove received a Juris Doctorate with a concentration in Health and Biomedical Law with Distinction from Suffolk University Law School, where she was one of the Founding Editors of the Suffolk Journal of Health & Biomedical Law. She received her undergraduate degree in English from the College of the Holy Cross, and is licensed to practice law in the Commonwealth of Massachusetts.

 

(Endnotes)

 

 1 31 U.S.C. §3729 et seq.; These private individuals are often referred to as “whistleblowers” or “relators.”

2 U.S. ex rel. Karvelas v. Melrose-Wakefield Hosp., 360 F.3d 220, 227 (1st Cir. 2004).

3 Id at 233.

4 Id at 226.

5 31 U.S.C. §3730(e)(4)(A); The First Circuit has applied the following analysis in determining whether the public disclosure serves as a bar: (1) whether there has been public disclosure of the allegations or transactions in the relator’s complaint; (2) if so, whether the public disclosure occurred in the manner specified in the statute; (3) if so, whether the relator’s suit is “based upon” those publicly disclosed allegations or transactions; and (4) if the answers to these questions are in the affirmative, whether the relator falls within the “original source” exception as defined in 31 U.S.C. §3730(e) (4)(B). U.S. ex rel. Rost v. Pfizer, Inc., 507 F.3d 720, 728 (1st Cir. 2007). It is important to note that the Patient Protection and Affordable Care Act, Pub. L 111-148 (March 23, 2010) (“PPACA”) significantly narrowed the use of the public disclosure bar as a defense in FCA cases. First, the bar is no longer jurisdictional in nature, rather it provides that a court “shall dismiss an action or claim under this section, unless opposed by the Government . . . “ In addition, the categories of public disclosures have been significantly narrowed post- PPACA as reflected in the italicized terms below. Information is considered “publicly disclosed” and thus a qui tam action is barred if the allegations or transactions are contained in (i) a federal criminal, civil, or administrative hearing in which the government or its agentis a party; (ii) a congressional, Government Accountability Office, or other federal report, hearing, audit, or investigation; or (iii) in the news media.

6 31 U.S.C. §3730(e)(4)(B).

7 31 U.S.C. §3730(e)(4)(B); PPACA also amended the definition of “original source” to remove the requirement that a relator have “direct” knowledge of the allegations or transactions and instead allows a relator who simply has knowledge, whether direct or in-direct, that “is independent of and materially adds to the publicly disclosed allegations or transactions” to be considered an “original source.”

8 U.S. ex rel. O’Keefee v. Sverdup Corp., 131 F. Supp. 2d 87, 93 (D. Mass. 2001); U.S. ex rel. Ondis v. City of Woonsocket, 587 F.3d 49, 59 (1st Cir. 2009).