United States of America, ex rel. v. Sightpath Medical, Inc.

Background

The Cameron-Ehlen Group, Inc., doing business as Precision Lens, distributes intraocular lenses and other ophthalmic-surgery products. Paul Ehlen is Precision Lens’s founder and majority owner. Kipp Fesenmaier worked for Sightpath Medical, Inc., a corporate partner of Precision Lens, including for several years as a vice president.

Fesenmaier filed a qui tam complaint in 2013. The United States later filed an intervenor complaint alleging that Precision Lens and Ehlen offered unlawful payments or other benefits to physicians and that, as a result, false claims were submitted to federal health-care programs, including Medicare, in violation of the False Claims Act. The claims were based on alleged violations of the Anti-Kickback Statute. The parties filed cross-motions for summary judgment and to exclude expert testimony. They also appealed portions of the magistrate judge’s July 10, 2020 order concerning sanctions and discovery.

Summary Judgment

The court denied Plaintiffs’ motion for partial summary judgment. Plaintiffs argued that undisputed evidence established Anti-Kickback Statute violations involving Medicare claims connected to benefits provided to 18 physicians. The court held that the evidence established the remuneration element for 12 doctors: Drs. John Bormes, Curt Wischmeier, Timothy Cavanaugh, Elizabeth Davis, Richard DeChamplain, Michel Gelinas, David Hardten, Patrick Riedel, Kurt Weir, Stephen Wiles, and two additional doctors identified in the opinion as Drs. McKnight and Schlecht. The court found genuine factual disputes about whether remuneration was provided to Drs. Kevin Flaherty, Matthew Hattenhauer, Richard Lindstrom, Jitendra Swarup, Vance Thompson, and David West.

The court also found factual disputes about inducement, which asks whether one purpose of the remuneration was to encourage physicians to purchase, recommend, or refer products or services payable by Medicare. Although Plaintiffs presented evidence supporting an inference of improper inducement, the defendants presented evidence that some benefits were social courtesies or gifts exchanged among friends, that some physicians paid or shared expenses, and that Ehlen did not intend to induce referrals. Because a jury could credit either side’s evidence, Plaintiffs were not entitled to summary judgment.

The court denied Defendants’ motion for summary judgment on all False Claims Act claims. The defendants argued that Plaintiffs lacked evidence of falsity and causation for two categories of Medicare claims: 47,122 Professional Fee claims, which reimbursed physicians for their services, and 45,910 Facility Fee claims, which reimbursed facilities for costs including staff and surgical supplies.

For the Professional Fee claims, the court rejected the argument that Plaintiffs had to prove the alleged kickbacks were the “but-for” cause of the cataract surgeries or that the surgeries would not have occurred without the kickbacks. The court held that if the sale of the defendants’ lenses resulted from an Anti-Kickback Statute violation, Medicare claims for related cataract surgeries could also result from that violation. Medical necessity or the possibility that the surgeries would have occurred anyway did not categorically defeat the claims.

For the Facility Fee claims, the court held that Plaintiffs had presented enough evidence for a jury to find a causal link. The evidence included that physicians who allegedly received kickbacks chose or recommended the lenses, later performed cataract surgeries using the defendants’ products, and submitted or caused Medicare claims related to those surgeries. The court also held that the one-year period Plaintiffs used to connect alleged kickbacks to later Medicare claims was not, by itself, enough to establish causation, but Plaintiffs relied on additional evidence that created fact issues. The defendants’ summary-judgment motion therefore was denied.

Expert Testimony

The court granted in part and denied in part Plaintiffs’ motion to exclude the defendants’ experts.

Scott Van Meter’s testimony was excluded as to causation because his statistical analysis of changes in physicians’ use of the defendants’ products was irrelevant to the applicable causation standard. He also could not directly testify about the defendants’ intent. But he could testify about underlying facts, including changes in product use and whether the defendants targeted physicians who were more likely to generate business, because those facts could be relevant to intent.

David Gregory’s opinions were excluded to the extent they relied on a “but-for” causation standard or categorically excluded Medicare claims that did not directly reimburse the defendants’ products. His opinions about Medicare claim modifiers and whether Ian Dew’s analysis included unrelated procedures were admissible as rebuttal testimony. The court denied Plaintiffs’ motion to exclude David Duffus, whose testimony was offered to challenge the valuation analysis of Plaintiffs’ expert.

The court granted in part and denied in part Defendants’ motion to exclude Plaintiffs’ experts. Dr. Adriane Fugh-Berman could testify about marketing practices and underlying conduct relevant to whether the defendants intended to influence physicians, but she could not directly testify about her conclusions regarding the defendants’ intent. The court denied the motion to exclude Ian Dew, who analyzed Medicare claims, because an expert may base an opinion on facts assumed to be true when the party offering the expert must prove those facts through other evidence.

Appeals of the Magistrate Judge’s Order

The court reviewed the magistrate judge’s nondispositive rulings under the deferential standard of whether they were clearly erroneous or contrary to law.

The court affirmed the sanction excluding Plaintiffs’ untimely identified false claims. Plaintiffs had identified thousands of additional claims after the discovery deadline and without seeking permission. The court also affirmed the denial of Plaintiffs’ motion to compel expense reports and related documents because the magistrate judge reasonably found that further production would be highly burdensome and offer limited benefit.

The court reversed the claims-matching sanction. That sanction barred Plaintiffs from introducing evidence beyond their witness’s deposition testimony about how they determined that approximately 27,000 newly identified Medicare claims involved the defendants’ products. The district court could not identify a clear discovery order that required the witness to answer general questions about all 27,000 claims rather than questions concerning 25 representative claims. Because the prior orders were ambiguous, the sanction was clearly erroneous.

The court did not decide the merits of Plaintiffs’ challenge to the medical-necessity sanction because medical necessity was irrelevant under the court’s ruling that but-for causation was not required. The challenge was therefore moot.

The court affirmed the findings and sanction concerning the defendants’ failure to preserve relevant text messages. The defendants did not take reasonable steps to preserve those messages after their duty to preserve evidence arose, and the magistrate judge’s order requiring production of relevant text messages that the defendants still had or could obtain was not clearly erroneous or contrary to law. The court also affirmed the finding that Defendants had not shown that Plaintiffs destroyed relevant digital records or that Defendants were prejudiced by any alleged loss.

Disposition

The order expressly provides that: Plaintiffs’ motion for partial summary judgment is denied; Defendants’ motion for summary judgment is denied; Plaintiffs’ motion to exclude expert testimony is granted in part and denied in part; Defendants’ motion to exclude expert testimony is granted in part and denied in part; and the magistrate judge’s July 10, 2020 order is affirmed in part and reversed in part. The court reversed only the claims-matching sanction and affirmed the order in all other respects.