Anesthesia Group Victorious in Whistleblower Lawsuit Based on Reasonable Interpretation of “Emergence”
One of the largest anesthesia groups in the Midwest has won an important victory in US ex rel Donegan v. Anesthesia Associates of Kansas City, 2015 WL 3616640 (W.D. Mo., June 9, 2015), a False Claims Act (FCA) lawsuit initiated by a whistleblower several years ago. On June 9, 2015, a federal district court in Missouri granted the defendant’s motion for summary judgment, effectively ending the case unless the plaintiff or “relator” files and wins an appeal.
Donegan should be helpful to anyone defending against allegations that they billed the federal government improperly for medical services, in violation of the FCA, based on someone else’s interpretation of an ambiguous rule. In the court’s own words, “A relator ‘must show that there is no reasonable interpretation of the law that would make the allegedly false statement true.’”
This the relator, John Donegan, a CRNA formerly employed by the defendant, Anesthesia Associates of Kansas City (AAKC), failed to do. He contended that AAKC had violated the Medicare regulations (42 C.F.R. § 415.110(a)(1)) governing the so-called seven steps of medical direction and specifically the requirement that the medically-directing anesthesiologist “personally participate in the most demanding aspects of the anesthesia plan including, if applicable, induction and emergence.”
Donegan argued that “emergence” occurred in the operating room and was invariably complete before the patient arrived in the recovery room. AAKC’s anesthesiologists, like so many others around the country, frequently did not return to the operating room for emergence but instead saw the patient in recovery. Therefore, according to the complaint, the anesthesiologists’ claims for medically-directed services were fraudulent in that the anesthesiologists “virtually never personally participat[ed] in the emergence of a patient coming out of a general anesthetic in the operating room.”
To commit a violation of the FCA, however, a party must have knowingly submitted false claims. “Knowing” includes acting in “deliberate ignorance” or “reckless disregard” of the truth or falsity of the information at issue, under the statute—but making a reasonable interpretation where there is any ambiguity in the regulations is not acting with the ignorance or disregard. “Emergence” as used in the medical direction regulations is ambiguous, the court ruled, noting that it has not been defined by CMS, by ASA, by the defendants’ Medicare carrier, or in any National Coverage Determination or applicable Local Coverage Determination. The court continued:
There is no guidance from any national or state anesthesiology organization defining “emergence” because emergence is a process, and each patient is different. Some patients take longer than others to recover from the effects of anesthesia, and there are different levels of emergence. The University of Kansas Hospital, where some of AAKC's anesthesiologists and CRNAs received their education and training, teaches its anesthesiology residents and nurse anesthetist students that emergence occurs over a period of time and may take an hour or more.
Given the ambiguity of “emergence,” the defendant’s definition of the process to include the patient’s recovery in the recovery unit was plausible and the view that the regulation was satisfied by seeing the patient in the recovery room was a reasonable interpretation. It was reasonable even though:
Defendant's interpretation is opportunistic because it has a financial motive to interpret the regulation this way. Under Relator's definition of “emergence,” thousands of the procedures Defendant's anesthesiologists performed should have been billed at the lower Medical Supervision rate. But there is “no authoritative contrary interpretation” of the regulation here, and the Eighth Circuit [the federal appellate court for Missouri] has ruled that “a defendant does not act with the requisite deliberate ignorance or reckless disregard by ‘taking advantage of a disputed legal question.’“ [citations omitted] While Relator has arguably put forth a more reasonable interpretation of the regulation, this is not enough.
The opinion suggests that an alternative theory of liability might have been more successful. The relator did not assert this theory in the original or amended complaints, and the court followed standard case law in refusing to consider it. Under that theory, the anesthesiologists should have been present at extubation because that is one of the most demanding procedures in a case. The court found that the argument might have been meritorious but that it was inadmissible since it was not pled until the summary judgment stage.
Readers should take note of the “extubation” theory requiring the medically-directing anesthesiologist’s presence for that procedure—future litigants who challenge anesthesiologists’ participation in “the most demanding aspects of the anesthesia plan including, if applicable, induction and emergence” almost certainly will.
The most significant principle laid down in Donegan is of course its holding that “a defendant is not liable under the FCA if the regulation is ambiguous and its statements would be true under a reasonable interpretation of the regulation.” One attorney, A. Brian Albritton of Phelps Dunbar LLP in Tampa, summed up the impact of Donegan thus on his blog:
Donegan is a real step forward in preventing relators from exploiting ambiguities in Medicare regulations to bring a qui tam action against Medicare providers and hold them hostage if they do not settle. Of course, the Court is not saying a defendant's mistaken or opportunistic interpretation can never give rise to other civil remedies by Medicare—the government has numerous avenues other than the FCA to enforce its regulatory interpretations. Yet, civil remedies are one thing, but subjecting a defendant to harsh FCA sanctions for violating an ambiguous regulation is a whole different order of magnitude. This is especially true for Medicare providers, like the defendant in this case, who easily can bill and submit thousands of small Medicare claims and for whom the $5,500 - $11,000 penalty per Medicare claim can quickly lead to exposure for catastrophic damages if they lose. Essentially, the Court's ruling has brought common sense back to the analysis of when a false claim arises when dealing with ambiguous regulations. Now, at least in the 8th Circuit, a defendant who reasonably interprets an ambiguous regulation in the absence of a contrary authoritative regulation cannot know that its interpretation is false and thus cannot be found guilty of violating the False Claims Act.
We note in closing that the opinion in Donegan, worthy though it is, is a decision on cross-motions for summary judgment, not after trial. A trial is still possible if the relator—the estate of the named CRNA who died after commencing litigation—successfully appeals the decision. We hope that it does not do so, not just because we sympathize with the defendant anesthesia group, which has had to spend a small fortune in legal fees and lost time, but because the decision is well-reasoned and well-explained.