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United States v. Fresenius Medical Care Holdings, Inc.,

United States District Court, D. Massachusetts

March 19, 2019



          George A. O'Toole, Jr. United States District Judge

         The relator and government allege in this False Claims Act litigation that Fresenius Medical Care Holdings, Inc. (“Fresenius”) fraudulently billed Medicare for excessive and medically unnecessary hepatitis B surface antigen (“BsAG”) tests. Fresenius has filed two motions to compel discovery of materials that the government has withheld under assertions of the deliberative process and attorney-client privileges.

         I. Motion to Compel Testimony of Center for Medicare and Medicaid Services' Corporate Representative

         The first motion seeks to compel Dr. Michael Handrigan, the Rule 30(b)(6) designee for the Centers for Medicare and Medicaid Services (“CMS”), to answer questions concerning the substance of conversations he had with his attorneys during a deposition break that preceded a change in his testimony. Fresenius claims that the government waived or admitted the inapplicability of the attorney-client privilege to these communications, but it is apparent from the deposition transcript that the government's purported admission was nothing more than a brief, and quickly corrected, misunderstanding. The circumstances shown on the record do not come close to an intentional waiver of the attorney-client privilege. The motion is denied.

         II. Motion to Compel Documents and Testimony of Government Audit

         The second motion seeks the production of documents and deposition testimony related to the government audit of Fresenius laboratory testing and Medicare billing practices for patients with end-stage renal disease (“ESRD”). The audit was announced in late 2007 by the Office of Inspector General (“OIG”) of the Department of Health and Human Services and was conducted by auditors in OIG's Office of Audit Services (“OAS”).

         The audit had two expressed objectives. The first was to determine whether the composite-rate tests that Fresenius had billed for ESRD patients complied with Medicare rules and requirements. The second objective was to gather data on other separately billable tests-i.e., tests not covered by the composite rate-that were commonly provided to ESRD patients, and potentially to report any patterns and trends in the data to CMS. OIG stated that it would issue a final report of its findings concerning the first objective, but that no report would be issued concerning information gathered as to the second objective unless a qualitative assessment of the gathered data was made. In other words, as to the second objective of the audit, OAS from the outset did not anticipate necessarily issuing any concluding report or decision. OAS also requested, and subsequently received from Fresenius, all records of tests relevant to either of the objectives that occurred within the timeframe randomly selected by OAS. Because data concerning separately billed BsAG testing fell within the scope of the second objective, all requested records of those tests during the audit sample period were produced.

         In planning and conducting the audit, OAS auditors communicated and exchanged documents among themselves and with attorneys in other government offices, two of which are particularly relevant here. One was the Office of Counsel to the Inspector General (“OCIG”). OCIG serves as in-house legal counsel to OIG, providing legal advice, representation, and support to its component offices with respect to all aspects of its operations. The other was the Center for Medicare and Medicaid Services Division of the Office of General Counsel (“OGC”). OGC serves as legal counsel to CMS and provides legal advice and counsel to agency personnel on issues relating to fraud and abuse in Medicare and Medicaid programs.

         In March 2010, more than two years after the audit was announced, OIG issued as planned a final report regarding the first objective of the OAS study concerning composite-rate tests. It did not issue a report regarding the second audit objective concerning separately billable tests, a quiescence the original plan had contemplated as possible. It did share in an informal way some of the information gathered regarding separately billed tests with Fresenius and with other government officials.

         In this litigation the government has produced many of the communications and data from the audit, but it continues to withhold 139 documents and responses to 11 objected-to deposition questions. Briefly put, it claims that all the withheld matters are protected by the “deliberative process privilege” because they are “predecisional” and “deliberative” with respect to the March 2010 report, and that most of them are also protected by the attorney-client privilege because they reflect discussions between auditors and legal staff.

         A. Deliberative Process Privilege

         The so-called “deliberative process” privilege provides a government agency with protection against compelled disclosure of “documents reflecting advisory opinions, recommendations and deliberations comprising part of a process by which governmental decisions and policies are formulated.” Dep't of Interior v. Klamath Water Users Protective Ass'n, 532 U.S. 1, 8 (2001) (quoting NLRB v. Sears, Roebuck & Co., 421 U.S. 132, 150 (1975)). Information that is simply factual is generally excluded from protection by the privilege unless it would reveal details of the decisional process. Providence Journal Co. v. U.S. Dep't of Army, 981 F.2d 552, 559 (1st Cir. 1992).

         In order for the privilege to apply, the government here must establish that a document is both “predecisional, that is, ‘antecedent to the adoption of agency policy, '” and “deliberative, that is, actually ‘related to the process by which policies are formulated.'” Texaco P.R., Inc. v. Dep't of Consumer Affairs, 60 F.3d 867, 884 (1st Cir. 1995) (quoting Nat'l Wildlife Fed'n v. U.S. Forest Serv., 861 F.2d 1114, 1117 (9th Cir. 1988)).

         The privilege is a qualified one. Even if a document is properly characterized as both predecisional and deliberative, its nondisclosure is not automatically justified. Id. at 885. The public interest in protecting the deliberative process must be balanced against the movant's particular need for the information in the litigation. Id.; Ass'n for Reduction of Violence v. Hall, 734 F.2d 63, 66 (1st Cir. 1984). A litigant's showing that the information sought is relevant, helpful, and unavailable from other sources, or essential to ...

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