CASES IN COURT

The U.S. Supreme Court recently issued a landmark decision in a much anticipated case, Cook County v. United States ex rel. Chandler, 2003 WL 890268, S.Ct. (March 10, 2003). The Court's unanimous opinion authored by Justice Souter resolved a split among the circuit courts by holding that municipal corporations are 'persons' amenable to qui tam actions under the False Claims Act, and subject to the imposition of civil penalties, treble damages, and costs. See, 31 U.S.C. ' 3729(a). The split among the circuits developed in part because in Vermont Agency of Natural Resources v. United States ex rel. Stevens, 529 U.S. 765, 120 S.Ct. 1858 (2000), a fractured majority of the Court held, on federalism grounds (Eleventh Amendment immunity), that states were not 'persons' subject to qui tam actions under the False Claims Act.The San Diego Hospital Association and one of its facilities, Sharp Memorial Hospital, agreed to pay $6.2 million to resolve allegations that false claims were submitted over an 8-year period by the hospital in its Medicare cost reports that improperly misstated organ acquisition costs by including various employee salaries, medical director's fees, and other related expenses that were not related to such organ acquisition activities, and therefore did not qualify for reimbursement under Medicare regulations. The government's case developed from allegations made in United States and State of California ex rel. King v. San Diego Hosp. Assoc., Civ. No. 00-CV-0848-BTM(RBB) (S.D. Cal. filed Apr. 26, 2000), a qui tam suit brought by a heart transplant coordinator for Sharp Memorial Hospital. The press release is available at www.usdoj.gov/opa/pr/2003/March/03_civ_139.htm.Dentsply International, Inc., the world's largest dental device manufacturer, agreed to pay $600,000 to resolve allegations that the company defrauded the Department of Veterans Administration (VA) and the Department of Defense (DOD) in connection with sales of 'Advance Hybrid Ionomer Cement,' a now-discontinued dental cement. According to the government, Dentsply manufactured this dental cement for about 6 years, during which time the company received complaints from dentists who had used the product on patients, and who complained about some patients experiencing fractured teeth and roots, among other problems. Under the federal Food, Drug & Cosmetic Act and implementing agency (FDA) regulations, Dentsply was required to report serious injuries and malfunctions to the agency by means of a Medical Device Report (MDR). Because the company did not file any MDRs that complied with these requirements, the government contended that Dentsply filed false claims to the VA and DOD, since the government agencies' contracts required it to comply with all FDA statutes and regulations. This case was filed by a qui tam relator, Dr. Julie Kazimiroff. A press release is available at www.usao-edpa.com/Pr/203/mar/destsply.html. Settlement agreements have been reached with five hospitals located in Texas, Washington, Florida, and Oregon to resolve suits that they improperly billed Medicare for procedures related to the use of experimental medical devices over a 9-year period (1986 through 1995). To settle with the government, the five hospitals agreed to pay a collective total of $4.9 million. (Methodist Hospital and St. Luke's Episcopal Hospital in Houston agreed to pay $2.75 million and $575,000, respectively; Deaconess Medical Center in Spokane agreed to pay $775,000; Legacy Good Samaritan Hospital and Medical Center in Portland agreed to pay $410,000; and Orlando Regional Medical Center agreed to pay $390,000.) The government's press release indicates that these cases are the latest in a group of settlements arising from over 100 qui tam suits filed against hospitals by Kevin Cosens, a former medical device salesman. Including these settlements, more than $45 million has now been collected in this national qui tam litigation. The press release is available at www.usdoj.gov/opa/pr/2003/February/03civ103.htm. Suits seeking nearly $500,000 in claims and interest have been filed against two Massachusetts hospitals, Lahey Clinic Hospital and University of Massachusetts Memorial Medical Center, for improperly billing Medicare for laboratory services that were provided to outpatients. One form of the alleged improper billing concerns hematology indices, measurements and ratios that are calculated from the results of hematology tests (including red blood cell width and volume, and platelet volume). The government contends that the facilities billed for hematology indices, even though these tests were not medically necessary to treat or diagnose patients' illnesses or injuries, and even though such tests were not ordered by an attending physician. The other alleged form of improper billing involves 'unbundling' of automated, multi-channel chemistry panels, which should have been billed under Medicare regulations as one charge, but were instead billed separately (to obtain increased Medicare payments). These suits were developed during an investigation that resulted in a settlement with eight other Massachusetts hospitals in 2000.