United States District Court, D. Massachusetts
UNITED STATES OF AMERICA, ex rel. JEFFREY J. BIERMAN
ORTHOFIX INTERNATIONAL, N. V., et al
For Marcus Laughlin, Consolidated Plaintiff: J. Stephen Hunnicutt, LEAD ATTORNEY, PRO HAC VICE, The Hunnicutt Law Firm, Dallas, TX; Steven H. Schafer, Stephen H. Schafer and Associates, Needham, MA.
For United States of America, ex rel., Plaintiff: Neil V. Getnick, LEAD ATTORNEY, Getnick & Getnick, New York, NY; Scott J. Tucker, LEAD ATTORNEY, Tucker, Saltzman & Dyer, LLP, Boston, MA; Patrick M. Callahan, United States Attorney's Office MA, Boston, MA.
For Jeffrey J. Bierman, Plaintiff: Courtney Baron, Matthew K. Organ, LEAD ATTORNEYS, PRO HAC VICE, Goldberg Kohn Ltd., Chicago, IL; David J. Chizewer, LEAD ATTORNEY, Goldberg Kohn LTD, Chicago, IL; Emily D. Gilman, LEAD ATTORNEY, PRO HAC VICE, Goldberg Kohn LTD., Chicago, IL; Erika Ithurburn, Margaret J. Finerty, Richard J. Dircks, Stuart Altschuler, LEAD ATTORNEYS, PRO HAC VICE, Getnick & Getnick LLP, New York, NY; Neil V. Getnick, LEAD ATTORNEY, Getnick & Getnick, New York, NY; Scott J. Tucker, LEAD ATTORNEY, Tucker, Saltzman & Dyer, LLP, Boston, MA; G. Robert Blakey, PRO HAC VICE, Notre Dame Law School, Notre Dame, IN; Patrick M. Callahan, United States Attorney's Office MA, Boston, MA.
For OrthoLogic Corp., Defendant: Don P. Martin, Michael S. Catlett, LEAD ATTORNEYS, PRO HAC VICE, Quarles & Brady LLP, Phoenix, AZ; Kelli A. Edson, Quarles & Brady LLP, Tampa, FL.
For E.B.I., Bioelectron Inc., LVB Acquisition, Inc., Biomet, Inc., Defendants: Allison J. Caplis, Robert L. Toll, LEAD ATTORNEYS, PRO HAC VICE, Hogan Lovells U.S. LLP, Baltimore, MD; Andrea W. Trento, LEAD ATTORNEY, PRO HAC VICE, Hogan & Hartson, L.L.P., Baltimore, MD; Douglas A. Robertson, LEAD ATTORNEY, Martin, Magnuson, McCarthy and Kenney, Boston, MA; Hogan & Hartson, L.L.P., LEAD ATTORNEY, PRO HAC VICE, Columbia Square, Washington, DC; Mitchell J. Lazris, LEAD ATTORNEY, Hogan & Harston LLP, Washington, DC; Stephen J. Immelt, LEAD ATTORNEY, Hogan Lovells US, LLLP, Baltimore, MD.
For Smith & Nephew Inc., Defendant: Diana K. Lloyd, LEAD ATTORNEY, Eric J. Teasdale, Genevieve Aguilar Reardon, James W. Evans, Choate, Hall & Stewart, Boston, MA.
For DJO Incorporated, The Blackstone Group L.P., ReAble Therapeutics, Inc., Defendants: George M. Linge, Kathleen H. McGuan, LEAD ATTORNEYS, Andrew C. Bernasconi, Reed Smith LLP, Pittsburgh, PA; Joseph J. Mahady, Thomas H. Suddath, Jr., LEAD ATTORNEYS, PRO HAC VICE, Reed Smith LLP, Philadelphia, PA.
For EBI Holdings, Inc., EBI Medical Systems, Inc., Defendants: Allison J. Caplis, Robert L. Toll, LEAD ATTORNEYS, PRO HAC VICE, Hogan Lovells U.S. LLP, Baltimore, MD; Douglas A. Robertson, LEAD ATTORNEY, Martin, Magnuson, McCarthy and Kenney, Boston, MA.
RYA W. ZOBEL, UNITED STATES DISTRICT JUDGE.
Plaintiff-relator Jeffrey J. Bierman brought this qui tam action on behalf of the United States and several state and municipal entities alleging that numerous defendants, including EBI and DJO, violated the federal False Claims Act, 31 U.S.C. § 3729; the federal Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b); and various state and local fraud laws that closely mirror the False Claims Act. The allegations
all relate to reimbursement claims that the defendants submitted to Medicare for purchases of their bone growth stimulator devices. The federal government elected not to intervene, Docket # 26, and the relator is now pursuing the case directly.
EBI and DJO, the only active defendants left in the case, move for partial summary judgment on two of the relator's False Claims Act liability theories: that every claim for purchase of a bone growth stimulator device they submitted to Medicare is actionable under the False Claims Act because, first, they did not comply with an obligation called " Supplier Standard No. 5 and, second, they did not offer to rent, rather than sell, their devices. As to the first theory, EBI and DJO contend that Supplier Standard No. 5 does not impose a condition of payment, wherefore certification of compliance with it (or lack thereof) is irrelevant to Medicare's decision to pay an individual claim. As to the second theory, EBI and DJO contend that they have no obligation to rent their devices, so failure to do so cannot result in FCA liability. The motions are allowed.
The parties and allegations are described at length in the court's 2010 ruling on defendants' motions to dismiss; I will, therefore, recite them only briefly here. See U.S. ex rel. Bierman v. Orthofix Int'l, N.V., 748 F.Supp.2d 123, 125-27 (D. Mass. 2010).
Each of the defendants sells bone growth stimulator devices, which are covered by Medicare. Medicare classifies the stimulators as " inexpensive or other routinely purchased" durable medical equipment, and it pays for them on either a
monthly rental or purchase basis. The fee schedule for reimbursements varies from state to state, but, generally speaking, the purchase price for the stimulators is about ten times more than their monthly rental price.
The Centers for Medicare and Medicaid Services (" CMS" ), which is the successor of the former Health Care Financing Administration, is the federal agency that administers the Medicare program. Specifically, CMS oversees reimbursements for bone growth stimulator devices. CMS also promulgates and oversees the regulations that govern these reimbursements. CMS's regulations require a supplier of medical equipment that seeks to receive Medicare billing privileges to submit a Medicare Enrollment Application, or Form CMS-855S, and renew it every three years. As discussed in more detail below, the application requires the supplier to certify that it will abide by applicable Medicare laws, regulations, and program instructions. One such regulation that is central to the present motions is a set of Supplier Standards, which impose certain obligations on durable medical equipment suppliers. See 42 C.F.R. § 424.57(c). At this stage of the case, defendants do not challenge that they were out of compliance with one of the Supplier Standards, referred to as Supplier Standard No. 5, for at least part of the relevant time period.
After a supplier receives billing privileges, it may submit reimbursement claims to CMS using a Form CMS-1500 accompanied by a Certificate of Medical Necessity. For each reimbursement, the CMS-1500 requires the supplier to indicate whether the bill is for a rental item, a purchase of new equipment, or a purchase of used equipment. The supplier must also certify on the CMS-1500 that " the services shown on the form were medically indicated and necessary to the health of the patient." Likewise, the accompanying Certificate of Medical Necessity must include certain information about the patient's needs and be signed by the ordering health care professional. Each defendant submitted many CMS-1500s and Certificates of Medical Necessity to CMS seeking reimbursements for its bone growth stimulator devices.
The relator filed his original complaint on March 23, 2005, and it was unsealed on November 28, 2008. The currently operative complaint, or second amended complaint (" SAC" ), followed on June 11, 2010. Docket # 121. The court denied defendants' motions to dismiss the SAC's claims on December 8, 2010, concluding that the allegations, if taken as true, were sufficient to state a claim for violations of the False Claims Act. Docket # 165. The court approved a stipulation of dismissal of claims against one of the originally named defendants, Orthofix, on April 12, 2013 (Docket # 218), and the case against defendant Smith & Nephew Inc. is stayed pending government approval of a settlement (Docket # 314). Fact discovery is now substantially complete, and expert discovery is underway.
II. Legal Standard
Summary judgment will be granted if there is no genuine dispute as to any material fact and the movant is entitled to
judgment as a matter of law. Fed.R.Civ.P. 56(a). The court must view the record in the light most favorable to the nonmovant and draw all justifiable inferences in that party's favor. Anderson v. Liberty Lobby, Inc.,477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The moving party initially bears the burden of demonstrating the absence of a genuine issue of material fact. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp.,475 U.S. 574, 586 n.10, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). If the moving party has carried its burden, to defeat the motion, the nonmovant must then " come forward with 'specific facts showing that there is a genuine issue for trial.'" Id. at 587 (quoting Fed.R.Civ.P. 56(e) (emphasis omitted)). The " mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment." Anderson, 477 U.S. at 247-48. " When opposing parties tell two different stories, one of which is blatantly contradicted by the record, so ...