United States v. Sutter Health

Background

Relator Laurie M. Hanvey brought claims under the federal False Claims Act and the California False Claims Act. She alleges that Sutter Health knowingly entered compensation arrangements with physician groups that violated the Anti-Kickback Statute and the Stark Law, and then knowingly submitted or caused others to submit false claims for services provided to referred patients.

Sutter Health moved to exclude the opinions of three experts retained by the relator: Kathleen McNamara, Jerry Pratt, M.D., and Stanley J. Sokolove. The court applied Federal Rule of Evidence 702, which requires expert testimony to be based on reliable reasoning or methods that can properly be applied to the facts. The court emphasized that experts may assist the jury with specialized knowledge but may not simply decide factual issues for the jury or provide unsupported conclusions.

Kathleen McNamara

The court excluded McNamara’s opinion that Sac Cardio was double-billing because that was a factual question for the jury. The court did not exclude her related opinion that double-billing, if it occurred, would be commercially unreasonable. The court also excluded her opinion that Sutter Health knew or was deliberately unaware of the alleged double-billing because the opinion appeared to draw conclusions about Sutter Health’s state of mind from the evidence rather than from specialized expertise.

The court allowed McNamara’s opinion that Sutter Health should have verified whether physician groups were improperly billing for services connected to mid-level practitioners. It also allowed her analysis that Sac Cardio profited from a physician-assistant arrangement and her opinion that the fair-market-value analysis of Sac Cardio’s call coverage was problematic.

The court excluded McNamara’s opinion that Sac Cardio did not provide the backup surgeon required by its call-coverage agreements, but explained that she could still testify about whether such a failure would make the agreement commercially unreasonable. The court excluded her opinions that Sac Cardio’s administrative time entries were not credible and that Dr. Roberts’s medical-director services were commercially unreasonable or inadequately documented. The court also excluded her opinion that East Bay Cardiac’s physicians failed to provide the call coverage required by their contracts, while allowing testimony about the commercial reasonableness of that arrangement if the required coverage was not provided.

The court allowed McNamara to base her fair-market-value calculations for East Bay Cardiac’s data-collection services on Dr. Pratt’s estimate of the time reasonably required for that work. It also allowed her opinion that East Bay Cardiac’s medical-director time entries were not credible and her opinion that the call-coverage arrangement between Liu PC and Sutter Health was inconsistent with fair market value. The court excluded her opinion that CEPMG was double-billing, finding that the report did not adequately explain why CEPMG’s billing was improper, but allowed her to testify about whether such billing would be commercially reasonable or indicated that CEPMG was overfunded.

Jerry Pratt, M.D.

The court rejected Sutter Health’s general argument that Pratt lacked relevant experience. It found that his experience creating surgical programs and serving as a medical director could support opinions about surgical practice and related administrative duties. The court allowed Pratt’s opinion that Sac Cardio’s medical-directorship arrangements involved too many compensable hours and his opinion that Sac Cardio’s physician-assistant services should have been billed by the party paying for them.

The court excluded Pratt’s opinion that Sac Cardio’s call-coverage arrangements were unreasonable because the facts he relied on did not adequately support that conclusion. It also excluded his opinions that Dr. Roberts’s medical-director compensation was unreasonable because the hours were infeasible and that the hours Roberts logged were unreasonable. The court found that Pratt had not adequately considered Roberts’s specific projects and responsibilities.

The court allowed Pratt’s opinion that Sutter Health employed an unusually large number of medical directors within the Sutter Heart & Vascular Institute and regional service line. It also allowed his opinion that East Bay Cardiac’s reported call volume was unrealistic and his opinion that the reported time for physician data collection was excessive. The court excluded his opinions about whether Sutter Health appropriately paid for full-time cardiothoracic and half-time thoracic call coverage and whether the call-coverage payments properly excluded an indigent-care component.

Stanley J. Sokolove

Sokolove was retained to address whether Sutter Health’s conduct was consistent with guidance, practices, and regulations of the Centers for Medicare & Medicaid Services, the federal agency that administers Medicare and Medicaid programs. The court denied without prejudice Sutter Health’s general challenge that Sokolove offered improper legal opinions. The court found that the cited portions did not identify specific statutes or legal authorities and did not, on the record presented, establish that the opinions were improper legal conclusions. Sutter Health may raise specific, clearly identified objections in a later motion in limine.

The court found that the “Incident To” billing guidance was not applicable to the services at issue, but declined to exclude Sokolove’s opinions in their entirety because they also relied on his opinions about hospital auditing, compliance programs, and how Sutter Health should have detected alleged double-billing. The court allowed his opinions concerning the CEPMG subsidy, including opinions about documentation and the subsidy’s possible effect on CEPMG’s patient-admission strategy. It also allowed his opinion that the Centers for Medicare & Medicaid Services would have disallowed Sac Cardio’s physician-assistant claims if it had known that Sutter Health paid the underlying expenses through a noncompliant financial arrangement.

The court allowed Sokolove’s testimony about audit processes because Sutter Health placed its compliance and alleged lack of knowledge at issue. The court found that this testimony could help explain how federal healthcare reimbursement is monitored and how hospitals can identify improper billing.

Disposition

Judge Westmore granted in part and denied in part all three motions to exclude. The court excluded the specified opinions of McNamara, Pratt, and Sokolove, while permitting the remaining opinions described in the order. The court’s ruling concerned the admissibility of expert testimony and did not decide the underlying False Claims Act or California False Claims Act claims.