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March 27, 2003


The opinion of the court was delivered by: Charles P. Kocoras, Chief United States District Judge


This matter is before the court on Defendant MacNeal Health Services Corporation d/b/a. Genesis Clinical Laboratory's motion for summary judgment and motion to strike. For the reasons stated below, we deny the motion for summary judgment and grant the motion to strike in part and deny it in part.


Genesis Clinical Laboratory ("Genesis") is a wholly-owned subsidiary of MacNeal Health Services Corporation ("MacNeal"). Genesis performs laboratory services for MacNeal Memorial Hospital and for physicians affiliated with the hospital Plaintiff Sandra Johnson ("Johnson") began serving as Director of Operations for Genesis in March 1994. Johnson claims that she discovered that billing clerks at Genesis were improperly entering diagnosis codes on their own and that she informed management repeatedly that the practice resulted in violations of Medicare regulations. According to Johnson, in September 1997, Dr. Jorge Cavero complained to her about the Genesis requisition forms because it forced physicians to illegally bundle profiles, thus forcing physicians to order laboratory testing that was not medically necessary. Johnson claims that, after investigating further, she told Genesis management that the requisition forms did not comply with Medicare rules and procedures. Johnson was fired shortly after she allegedly brought the Medicare non-compliance to the attention of Genesis management. Genesis claims that Johnson was fired because of deficiencies in her work performance. Genesis also claims that Johnson entered into a contract on behalf of Genesis with a company that had financial connections with Johnson's husband. In November 1997. after Johnson's termination, MacNeal's Board of Directors hired Ms, Lale White ("White") to perform an audit of Genesis billing practices and determine whether the laboratory billing was being done correctly. Johnson brought this suit under the qui tam provisions of the False Claims Act, ("FCA"), 31 U.S.C. § 3729 et seq.


Summary judgment is appropriate when the record, viewed in the light most favorable to the non-moving party, reveals that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). In seeking a grant of summary judgment, the moving party must identity "those portions of "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any' which it believes demonstrate the absence of a genuine issue of material fact." Celotex corp. v. Catrett, 477 U.S. 317, 323 (1986) (quoting Fed.R.Civ.P. 56(c)). This initial burden may be satisfied by presenting specific evidence on a particular issue or by pointing out "an absence of evidence to support the non-moving party's case." Id. at 325. Once the movant has met this burden, the non-moving party cannot simply rest on the allegations in the pleadings, but, "by affidavits or as otherwise provided in [Rule 56], must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). A "genuine issue" in the context of a motion for summary judgment is not simply a "metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Rather, a genuine issue of material fact exists when "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Insolia v. Philip Morris, Inc., 216 F.3d 596, 599 (7th Cir. 2000). The court must consider the record as a whole in a light most favorable to the non-moving party and draw all reasonable inferences that favor the non-moving party. Anderson, 477 U.S. at 255; Bay v. Cassens Transport Co., 212 F.3d 969, 972 (7th Cir. 2000).


I. Submission of False Medicare Claims

Johnson claims that the 1997 Genesis requisition forms improperly bundled tests together thus encouraging physicians to order tests that were not medically necessary. Johnson also claims that billing clerks at Genesis improperly filled in diagnosis codes so that Genesis could bill Medicare quicker. According to Johnson, these Genesis practices caused false Medicare claims to be filed with the government. A party is liable under the FCA if that party "knowingly" presents to the United States Government "a false or fraudulent claim for payment or approval." 31 U.S.C. § 3729 (a)(1). A person submits a false claim "knowingly" if the person "has actual knowledge of the information[,]. . .acts in deliberate ignorance of the truth or falsity of the information[,] or . . . acts in reckless disregard of the truth or falsity of the information," 31 U.S.C. § 3729 (b). There is no liability under § 3729(a) for mere "[i]nnocent mistakes or negligence." Hindo v. University of Health Scis./ The Chicago Med. Sch., 65 F.3d 608, 613 (7th Cir. 1995).

Genesis argues that the 1997 requisition form complied with Medicare regulations. According to Genesis, the forms allocated space where physicians could write in the name of tests and thus order individual tests rather than bundles of tests. Genesis also points out that White testified that the requisition form complied with Medicare regulations. The essence of Genesis' argument on this and all other issues is that we should believe Genesis and not Johnson. However, a summary judgment motion is not an abbreviated trial. Anderson, 477 U.S. at 255. We must be mindful not to tread into the domain of the trier of fact and can only find in Genesis' favor if a reasonable jury could not find for Johnson. Id. at 248. Johnson claims that the requisition forms were formatted in a manner that encouraged physicians to order bundles of tests and thus include tests that were medically unnecessary. Johnson also claims that the Genesis Comptroller acknowledged in 1997 that Genesis had not complied with Medicare regulations since 1994. There is a genuine issue of material fact regarding whether or not the 1997 Genesis requisition form violated Medicare regulations.

Johnson also claims that billing clerks at Genesis filled in diagnosis codes in order to facilitate Medicare billing. Medicare guidelines require that a valid diagnosis be entered for every test billed to Medicare and only the physician can fill in the diagnosis. According to Johnson, if the billing clerks at Genesis could not get a diagnosis code from a physician, then they would fill in the code themselves. Johnson estimated that approximately 10,000 false claims were filed by Genesis between 1994 and 1997. Genesis asserts that Johnson's claim that Genesis filed over 10,000 false claims is mere speculation. Genesis also insists that Johnson's job responsibilities did not include overseeing Medicare billing and Genesis points out that Johnson has never actually seen a false claim submitted by Genesis.

Whether or not Genesis filed 10,000 false claims or any false claims is not particularly relevant at this juncture. We are concerned with whether Genesis is liable under the FCA. Genesis repeatedly points out that Johnson never saw a bill that was sent to Medicare. There is no legal requirement that Johnson must have physically held a bill submitted by Genesis and scrutinized its information for Medicare compliance. Nothing prohibits the drawing of reasonable inferences from circumstantial evidence. Whether or not that circumstantial evidence is sufficient to establish Genesis' liability is a determination for the trier of fact.

Johnson claims that she saw billing clerks at their keyboard entering diagnosis codes on their own when the physicians could not provide the codes. Specifically she remembers April Pilarczyk entering diagnosis codes when she could not get them from physicians. Johnson claims that she repeatedly informed management that the billing procedures at Genesis violated Medicare regulations.

Johnson claims that in her job at Genesis she interacted directly with the billing clerks. She also claims that one of her duties at Genesis was to make sure that Genesis compiled with Medicare regulations and to report any violations to the President. Johnson asserts that she acquired additional knowledge regarding Genesis billing procedures because the departments under her supervision included customer service and specimen processing. Genesis again asks us not to believe Johnson and accuses her of fabricating the whole story regarding the diagnosis codes. We find that there is a genuine issue of fact regarding whether Genesis billing clerks were entering diagnosis codes on their own when they could not get a diagnosis from the physicians. Johnson was the Director of Operations for Genesis. Her job involved areas that touched on Medicare billing and she interacted directly with billing clerks at Genesis. ...

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