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U.S. EX REL. GEAR v. EMERGENCY MEDICAL ASSOCIATES OF ILL.

June 23, 2004.

UNITED STATES OF AMERICA, ex rel. DR. BRENT GEAR, Plaintiff,
v.
EMERGENCY MEDICAL ASSOCIATES OF ILLINOIS, INC. and ILLINOIS/INDIANA EM-1 MEDICAL SERVICES, S.C., Defendants.



The opinion of the court was delivered by: CHARLES NORGLE, District Judge

OPINION AND ORDER

Plaintiff Brent Gear, D.O. (hereinafter "Dr. Gear" or "Relator") brings this qui tam lawsuit under the False Claims Act, 31 U.S.C. § 3729 et seq., against Defendants Emergency Medical Associates of Illinois, Inc. and Illinois/Indiana EM-1 Medical Services, S.C. (collectively "EmCare"). EmCare now moves to dismiss Plaintiff's Second Amended Complaint for lack of subject matter jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1) and 31 U.S.C. § 3730(e)(4), and for failure to plead fraud with particularity pursuant to Fed.R.Civ.P. 9(b). For the following reasons, EmCare's motion is denied.

I. BACKGROUND

  Beginning in June 1997, Dr. Gear participated as a resident in Midwestern University's ("Midwestern") graduate medical education ("GME") residency program. As a resident,*fn1 Dr. Gear was responsible for diagnosing and treating patients while working under the direct physical supervision of an attending physician.*fn2 As the program required, Dr. Gear worked a minimum of 18 supervised shifts per month at various hospital emergency rooms, all of which were participants in Midwestern's GME residency program. For the work performed within the scope of his residency, Midwestern paid Dr. Gear a salary. This salary, which ranged from $29,000 to $33,000 annually regardless of how many hours he actually worked, was determined pursuant to a contract ("Resident Contract") between Dr. Gear and Midwestern. Dr. Gear successfully completed Midwestern's GME residency program in June 2000.

  Defendant EmCare provides emergency medical and administrative staffing services to various hospitals throughout the United States, including those which participate in Midwestern's GME residency program. EmCare uses both contract physicians and residents to staff these emergency rooms. Pursuant to contracts between EmCare and the various hospitals participating in Midwestern's GME residency program, EmCare receives reimbursement for claims made under the Supplementary Medical Insurance Program for the Aged and Disabled, Title XVIII of the Social Security Act, 42 U.S.C. § 1395j et seq. ("Medicare").

  Medicare is a federally funded health insurance program that serves certain disabled people, as well as people age 65 and above. The program reimburses providers who care for Medicare patients in two ways. First, Medicare Part A funds the hospital's institutional health costs associated with each patient. This includes such costs as patient room and board, nursing, resident salaries, and other inpatient care costs. Second, Medicare Part B covers medical services provided on a fee-for-service basis such as physician services, medical supplies, and diagnostic/laboratory tests.

  Medicare reimbursements for costs associated with GME residency programs are funded through a combination of both Part A and Part B. Essentially, Part A reimburses a provider for general costs associated with the residency program, including resident salaries. For example, when a resident working within the scope of his residency program performs a physical examination on a Medicare patient, the cost of this examination is treated as a general cost of the hospital's residency program. As such, it is reimbursable under Medicare Part A. In contrast, Part B reimburses a provider for the specific services performed by attending physicians. In certain instances, a hospital may bill Medicare Part B for attending physician services which are actually conducted by residents working within the scope of their residency programs; however, to do so the residents must be in the physical presence of a teaching physician at the time the services are performed.*fn3 Additionally, senior residents who qualify and become licensed with the state may work outside of their residency program as attending physicians. In such instances, the hospital may bill Medicare Part B for these services.

  On February 22, 2000, Dr. Gear filed a complaint individually, and on behalf of the United States, seeking relief under the False Claims Act, 31 U.S.C. § 3729 et seq., for billing violations he allegedly discovered while working as a resident in Midwestern's GME residency program. After conducting a two-year investigation, the Government filed its Notice of Election to Decline to Intervene on August 21, 2002.

  Choosing to proceed on his own, Dr. Gear filed his First Amended Complaint on December 13, 2002. At the Government's request, the court kept numerous documents related to this case under seal until November 3, 2003. EmCare then moved to dismiss Dr. Gear's First Amended Complaint on various grounds, including those raised in the present motion. In response, Dr. Gear sought leave to file his Second Amended Complaint, which the court granted on December 1, 2003.

  In his Second Amended Complaint, Dr. Gear alleges that EmCare willfully and deliberately overcharged the United States Government for hospital emergency room services provided to Medicare patients which were performed by student doctors. Specifically, Dr. Gear alleges that for a period of at least three years, EmCare improperly billed Medicare for attending physician services which were actually conducted by unsupervised residents working within the scope of Midwestern's GME residency program. Because these unsupervised residents were working to obtain credit in their residency programs, Dr. Gear alleges that Medicare actually paid twice for their services. Once under Part A to cover the cost of the resident's salary, and once under Part B to cover the costs of the attending physician services which were performed by the residents.

  On February 4, 2004, EmCare moved to dismiss Dr. Gear's Second Amended Complaint for lack of subject matter jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1) and 31 U.S.C. § 3730(e)(4), and for failure to plead fraud with particularity pursuant to Fed.R.Civ.P. 9(b). EmCare's motion is fully briefed and ready for ruling. II. DISCUSSION

  The False Claims Act ("FCA") establishes civil penalties for any person who files "a false or fraudulent claim for payment or approval" with the United States Government. 31 U.S.C. § 3729(a)(1); see also United States ex rel Mathews v. Bank of Farmington, 166 F.3d 853, 866 (7th Cir. 1999). The FCA may be enforced by either the Attorney General of the United States or by a private person, known as a relator. See United States ex rel. Chandler v. Cook County, Illinois, 277 F.3d 969, 973 (7th Cir. 2002). An action brought by a relator is designated as a qui tam lawsuit, and it is initially brought on behalf of both the relator and the United States Government. See id. If the Government declines to intervene in the lawsuit, the relator may proceed on his own and will receive a portion of the Government's recovery if he ultimately prevails. See id. The relator's reward can amount to 25 to 30 percent of the judgment or settlement. See United States ex rel. Lu v. Ou, ___ F.3d ___, 2004 WL 1093973, *1, (7th Cir. May 18, 2004).

  Since the Civil War, qui tam suits have been part of the FCA scheme for preventing fraud against the federal government. See United States ex rel. Lamers v. City of Green Bay, 168 F.3d 1013, 1016 (7th Cir. 1999). Congress enacted the qui tam provision of the FCA to encourage individuals with knowledge of government fraud to come forward and report the fraudulent conduct. See Mathews, 166 F.3d at 858 ("Congress wanted to reward private individuals who take significant risks to bring wrongdoing to light, to break conspiracies of silence among employees of malfeasors, and to encourage whistle blowing and disclosure of fraud.").

  Over the years, Congress discovered the need to limit the opportunities by which individuals could bring a qui tam action under the FCA. See Lamers, 168 F.3d at 1016. In 1986, Congress added several jurisdictional bars to the FCA to resolve the tension between encouraging people to come forward with information about government fraud and preventing parasitic lawsuits. See Mathews, 166 F.3d at 858. One such bar is § 3730(e)(4)(A), which prohibits the court from having jurisdiction over actions based upon certain public disclosures. Specifically, § 3730(e)(4)(A) states:
No court shall have jurisdiction over an action under this section based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or from the news media, unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.
  To determine whether § 3730(e)(4)(A) bars the relator's claim, the court must consider three factors: "(1) whether the relator's actions have been publicly disclosed; (2) if so, whether the lawsuit is `based upon' such public disclosure; and (3) if so, whether the relator is an `original source' of the information contained within the public disclosures." United States ex rel. Feingold v. Adminastar Federal, Inc., 324 F.3d 492, 495 (7th Cir. 2003) (citing Mathews, 166 F.3d at 859). The court must address these factors in order, with the threshold inquiry being whether the relator's allegations have been publically disclosed. See Kennard v. Comstock Resources, Inc., 363 F.3d 1039, 1042 (10th Cir. 2004) (indicating that consideration of the original source issue is unnecessary ...

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