Mason v. Health Management Associates, Inc.

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF NORTH CAROLINA

CHARLOTTE DIVISION

CIVIL ACTION NO. 3:10-CV-00472-KDB

THOMAS L. MASON, ET AL.,

Plaintiffs,

v. ORDER

HEALTH MANAGEMENT

ASSOCIATES, LLC, ET AL.,

Defendants.

THIS MATTER IS BEFORE THE COURT on the Defendants’ Motion in Limine to

exclude HMA Carlisle LLC’s Plea Agreement and HMA’s Non-Prosecution Agreement. (Doc.

No. 359). As previously discussed by the Court in denying Defendants’ motion for summary

judgment, this dispute centers on the termination of Mid-Atlantic Emergency Associates, PLLC’s

(“MEMA”) contracts at Mooresville Hospital Management Associates, LLC d/b/a Lake Norman

Regional Medical Center (“Lake Norman”) and Statesville HMA, LLC d/b/a Davis Regional

Medical Center (“Davis”). Plaintiffs filed this action alleging that the termination of their contracts

was due to their refusal to participate in and their complaints about fraudulent medical treatment

and billing occurring at Lake Norman and Davis hospitals. Defendants contend that the contracts

were terminated for legitimate business reasons. The Court has reviewed the motion, the parties’

briefs and exhibits, and other relevant pleadings of record. For the reasons discussed below, the

Court will grant in part and deny in part the Motion.

I. LEGAL STANDARD

Evidence is relevant if “it has any tendency to make a fact more or less probable than it

would be without the evidence” and “the fact is of consequence in determining the action.” Fed.

R. Evid. 401. Hence, the threshold for relevancy is low. United States v. Awni Shauaib Zayyad,

741 F.3d 452, 459 (4th Cir. 2014) (citing United States v. Powers, 59 F.3d 1460, 1465 (4th Cir.

1995)). Relevant evidence will be excluded only when the probative value of that evidence is

substantially outweighed by the unfairly prejudicial nature of the evidence. Fed. R. Evid. 403;

United States v. Glass, 2023 U.S. Dist. LEXIS 103712, *9 (W.D.N.C. June 13, 2023). In analyzing

evidence under the balancing test of Rule 403, the court is “required to look at the evidence in a

light most favorable to its proponent, maximizing its probative value and minimizing its prejudicial

effect.” United States v. Russell, 971 F.2d 1098, 1106 (4th Cir. 1992) (internal quotation and

citation omitted). Where a party seeks to introduce evidence that is probative, "the balance under

Rule 403 should be struck in favor of admissibility, and evidence should be excluded only

sparingly." United States v. Lentz, 524 F.3d 501, 525 (4th Cir. 2008) (quoting United States v.

Aramony, 88 F.3d 1369, 1378 (4th Cir. 1996)).

II. DISCUSSION

On September 21, 2018, the Defendants entered into a non-prosecution agreement (“NPA”)

with the Criminal Fraud Section of the United States Department of Justice. In the NPA HMA

admitted that:

“HMA executives instituted a formal and aggressive plan to improperly increase

overall ED inpatient admission rates at all HMA Hospitals. As part of the plan,

HMA executives set mandatory companywide admission rate benchmarks for

patients presenting to HMA Hospital EDs – a range of 15–20% for all patients

presenting to the ED, depending on the HMA Hospital, and then 50% for patients

65 and older (i.e. Medicare beneficiaries) – solely to increase HMA revenue.”

See Doc. No. 370-40. HMA also admitted that the scheme “was executed through various improper

means, including by HMA executives pressuring and coercing HMA Hospital administrators,

contracted ED physician practice groups, including Company A [EmCare Inc.], and medical

directors and physicians treating HMA’s ED patients to meet mandatory admission rate

benchmarks[.]” Id. Similarly, HMA Carlisle, one of HMA’s subsidiary hospitals, agreed to plead

guilty to conspiracy under 18 U.S.C. § 1349 to commit health care fraud in violation of 18 U.S.C.

§ 1347. See Doc. No. 360-2. HMA Carlisle’s Plea Agreement, and its Statement of Facts, describe

the improper admissions scheme that occurred on a nationwide basis and at HMA Carlisle

specifically. Id.

Defendants seek to exclude both agreements and their statements of facts arguing that they

are not relevant to the issues before the jury and highly prejudicial. Plaintiffs retort that these

agreements are party-opponent admissions that are highly relevant and will help the jury

contextualize Plaintiffs’ claim. After careful review of the motion, the Court will permit the

introduction of HMA’s Non-Prosecution Agreement’s Statement of Facts (“NPA SOF”) but will

exclude the remainder of the Non-Prosecution Agreement and HMA Carlisle’s Plea Agreement

and Statement of Facts.

To begin with, the NPA SOF is clearly relevant. The NPA SOF contains party-opponent

admissions about the admissions-related benchmarks and tactics that were used to improperly

pressure ER physicians to admit patients. The NPA SOF acknowledges that these tactics took place

at Lake Norman and Davis hospitals and support the MEMA physicians’ complaints. The

admissions are therefore highly probative of Plaintiffs’ claims generally. More specifically, the

NPA SOF’s admissions are relevant to Plaintiffs’ belief that an FCA violation was occurring,

Defendants’ notice that Plaintiffs were alleging an FCA violation, and Defendants’ motive in

terminating MEMA’s contracts. Defendants’ argument to the contrary strains credulity.

The NPA SOF’s relevancy is also not substantially outweighed by unfair prejudice. The

admissions contained in the NPA SOF are no doubt prejudicial to Defendants; but not unfairly so.

See United States v. Williams, 445 F.3d 724, 730 (4th Cir. 2006) (“the mere fact that the evidence

will damage the defendant’s case is not enough – the evidence must be unfairly prejudicial, and

the unfair prejudice must substantially outweigh the probative value of the evidence.”); United

States v. Newell, 2015 U.S. Dist. LEXIS 25569, at *22 (W.D.N.C. Mar. 3, 2015) (“all incriminating

evidence is inherently prejudicial.”) The NPA SOF is simply an acknowledgement by HMA of its

admittedly improper conduct. HMA cannot sweep these relevant admissions under the rug because

it may hurt them in this civil action. Moreover, the Court will not permit the use of the NPA SOF

for any improper purpose and will instruct the jury accordingly if a risk of unfair prejudice or

confusion arises.

Aside from their relevancy arguments, Defendants argue that admission of the NPA SOF

would violate Federal Rule of Evidence 408. Defendants are mistaken. Rule 408(a) states:

"Evidence of the following is not admissible — on behalf of any party — either to

prove or disprove the validity or amount of a disputed claim or to impeach by a

prior inconsistent statement or a contradiction: (1) furnishing, promising, or

offering — or accepting, promising to accept, or offering to accept — a valuable

consideration in compromising or attempting to compromise the claim; and (2)

conduct or a statement made during compromise negotiations about the claim —

except when offered in a criminal case and when the negotiations related to a claim

by a public office in the exercise of its regulatory, investigative, or enforcement

authority."

Fed. R. Evid. 408(a). Even if the NPA qualifies as a statement compromising on a claim, Rule 408

would only prevent its admission to prove the validity of a disputed claim or for impeachment

purposes. A court may admit a statement compromising on a claim for another purpose. See, e.g.,

City of Huntington v. AmerisourceBergen Drug Corp., 2021 U.S. Dist. LEXIS 82371, at *19–21

(S.D. W. Va. Apr. 29, 2021) (holding that Rule 408 does not prohibit admission of settlements

with government entities to establish a pattern of conduct that demonstrated knowledge). As

Defendants have continually stressed, this case is not about their fraud. Whether Defendants

violated the FCA, and the other relevant state laws, is a distinct question from whether they

committed fraud. In other words, Defendants could have committed fraud but not violated the FCA

or the state laws at issue. The NPA SOF is therefore not being used to prove or disprove the validity

of a disputed claim.1 Accordingly, Rule 408 is inapplicable.

In sum, the Court finds that the NPA SOF’s relevancy is not substantially outweighed by

undue prejudice, and it is not being used to prove the validity of Plaintiffs’ claims. The Court will

therefore deny the motion as to the NPA SOF. However, the Court will grant the motion as to the

NPA itself as needlessly cumulative under Rule 403. See Fed. R. Evid. 403 (“The court may

exclude relevant evidence if its probative value is substantially outweighed by a danger of…

needlessly presenting cumulative evidence.”). Any relevant information2 contained in the NPA is

also contained in NPA SOF. Therefore, the admission of the NPA is redundant and cumulative.

Turning to the HMA Carlisle Plea Agreement and Statement of Facts, the Court finds that

much of the NPA SOF analysis equally applies to it. At the same time, there are important

differences between the agreements. First, HMA Carlisle is not a party to this case. HMA Carlisle

is a subsidiary of HMA. A subsidiary is presumed to retain a “separate and distinct” identity from

its parent company unless extraordinary circumstances support disregarding it. See Foster v. Unifi,

1 Again, if Plaintiffs attempt to use the NPA SOF for an impermissible purpose ( i.e. to prove the

validity of their claims) the Court will strike the testimony and instruct the jury accordingly.

2 The NPA also contains a significant amount of information that is irrelevant to the matter before

this Court.

Inc., 661 S.E.2d 789, at *1–2 (N.C. Ct. App. 2008) (unpublished table decision) (quoting B-W

Acceptance Corp. v. Spencer, 149 S.E.2d 570, 574 (N.C. 1966)); State ex rel. Cooper v. Ridgeway

Brands Mfg., LLC, 666 S.E.2d 107, 112–13 (N.C. Ct. App. 2008). This separateness diminishes

the relevancy and probative value of HMA Carlisle’s admissions. Second, any admissions relevant

to the HMA nationwide scheme, and therefore this matter, are duplicative of the admissions

contained in the NPA SOF. Plaintiffs contend that they need the HMA Carlisle Plea Agreement

“to show Defendants’ motives, intent, knowledge, and plans to implement the top-down, company-

wide conspiracy and fraudulent scheme throughout all Division I hospitals.” See Doc. No. 367.

However, the introduction of the NPA Statement of Facts accomplishes this goal. In the NPA

Statement of Facts the Defendants admit that they instituted “a formal and aggressive plan to

improperly increase overall ED inpatient admission rates at all HMA Hospitals”; that the

“benchmarks were not put in place to improve the level of patient care”; that the Defendants used

“various improper means, including by HMA executives pressuring and coercing . . . contracted

ED physician practice groups, including . . . medical directors and physicians treating HMA’s ED

patients to meet mandatory admission rate benchmarks”; and that daily meetings with ED

physicians were “designed to improperly pressure the ED physicians to admit patients who did not

require inpatient admission.” See Doc. No. 360-3. Therefore, the probative value of the HMA

Carlisle Plea Agreement is diminished even further by its redundancy. In short, the HMA Carlisle

Plea Agreement’s probative value is minimal, relevancy attenuated, and information duplicative

of the NPA SOF. The Court will therefore exclude it on those grounds.

IT IS THEREFORE ORDERED THAT Defendants’ Motion in Limine to exclude

Carlisle HMA LLC’s Plea Agreement and HMA’s Non-Prosecution Agreement, (Doc. No. 359),

is GRANTED in part and DENIED in part.

SO ORDERED

Signed: August 16, 2023

Kenneth D. Bell oe,

i Distri Alt

United States District Judge a of