Petition for Writ of Certiorari — Steven Zorn, et al., Petitioners v. Stephen B. Grant, on Behalf of the United States and the State of Iowa, et al.

Supreme Court briefFeb 5, 2025

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APPENDIX

TABLE OF CONTENTS

Page

APPENDIX A—Eighth Circuit Opinion

(July 5, 2024) ....................................................... 1a

APPENDIX B—District Court Order

(Sept. 23, 2022) ................................................. 42a

APPENDIX C—Eighth Circuit Order

Denying Rehearing (Oct. 9, 2024) .................. 156a

APPENDIX D—Plaintiff’s Attachment 6 to

Third Amended Complaint (September

6, 2016 CMS Letter), R. 59-6 .......................... 158a

APPENDIX E—Plaintiff’s Attachment 7 to

Third Amended Complaint (January 22,

2018 CMS Letter), R. 59-7 .............................. 170a

APPENDIX A

_________

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

_________

No. 22-3481

_________

STEPHEN B. GRANT, ON BEHALF OF THE UNITED STATES

OF AMERICA AND ON BEHALF OF THE STATE OF IOWA,

Plaintiff-Appellee

STEVEN ZORN; IOWA SLEEP DISORDERS CENTER, P.C.;

IOWA CPAP, L.L.C.,

Defendants-Appellants.

_________

No. 22-3591

_________

STEPHEN B. GRANT, ON BEHALF OF THE UNITED STATES

OF AMERICA AND ON BEHALF OF THE STATE OF IOWA,

Plaintiff-Appellant

STEVEN ZORN; IOWA SLEEP DISORDERS CENTER, P.C.;

IOWA CPAP, L.L.C.,

Defendants-Appellees.

_________

Appeal from United States District Court

for the Southern District of Iowa - Central

_________

Submitted: December 13, 2023

Filed: July 5, 2024

_________

BEFORE: SMITH, 1 CHIEF JUDGE, GRUENDER AND

GRASZ, CIRCUIT JUDGES.

_________

GRUENDER, CIRCUIT JUDGE.

The False Claims Act (“FCA”) and the Iowa False

Claims Act (“IFCA”) authorize private citizens, known

as qui tam relators, to recover from those who make

false or fraudulent claims for payment to the United

States and the State of Iowa respectively. Relator,

Stephen Grant, a sleep medicine practitioner, brought

this qui tam action under the FCA and the IFCA

against Steven Zorn, Iowa Sleep Disorders Center

(“Iowa Sleep”), and Iowa CPAP. After a bench trial,

the district court found that the defendants had

Judge Smith completed his term as chief judge of the

circuit on March 10, 2024. See 28 U.S.C. § 45 (a)(3)(A).

submitted 1,050 false claims to the United States and

the State of Iowa. The district court subsequently

imposed a total award of $7,598,991.50. For the

reasons set forth below, we affirm in part, vacate in

part, and remand for further proceedings consistent

with this opinion.

Zorn operated and held substantial ownership

interests in Iowa Sleep, a medical practice

specializing in sleep medicine, and Iowa CPAP, a

medical equipment company. Due to financial

difficulties at Iowa Sleep, Iowa CPAP provided loans

to Iowa Sleep. Iowa Sleep referred patients to Iowa

CPAP for free consultations.

Iowa Sleep accepted state and federal funds for its

services

through

government

reimbursement

programs like Medicare, Medicaid, and Tricare. The

amount that can be billed for services rendered

through government healthcare programs depends on

a variety of factors, including the time spent with the

patient and the complexity of the visit. The

government determines the appropriate amount to be

reimbursed based on the “code” billed by the provider.

In sleep medicine, claims for initial patient visits are

coded from 99201 to 99205, and claims for established

patient visits are coded from 99211 to 99215. The last

number of a code represents the complexity of the

visit. Codes ending in the number “5” (e.g., “99205”)

are considered the most complex and are reimbursed

by the government at a higher rate than any other

code.

The Centers for Medicare & Medicaid Services

(“CMS”) oversees claims submitted to the federal

government for reimbursement. CMS contracts with

third-party administrators like AdvanceMed to

handle claims and review, investigate, and audit

payments made on behalf of the federal government.

CMS, through AdvanceMed, advises service providers

on proper billing practices and may notify service

providers of suspected discrepancies between

submitted claims and actual services rendered.

In September 2016, AdvanceMed sent a letter to

Zorn expressing concern that Zorn was overbilling the

government for his services. The letter informed Zorn

that, between June 2012 and June 2016, he had billed

the majority of his established patient visits at codes

99214 and 99215 and all of his initial patient visits at

code 99205. AdvanceMed stated that “[m]ore variety

would be expected,” and it “would like to educate

[Zorn’s] office” on proper billing practices.

In January 2018, following an audit of patient

records from January 2017 to September 2017,

AdvanceMed sent another letter to Zorn. This letter

informed Zorn that AdvanceMed had “identified

overpayments made to” him. The letter suggested that

Zorn “[c]onsider and implement corrections to billing

procedures that could prevent such errors in the

future.”

Grant practiced sleep medicine at Iowa Sleep and

held 10% ownership interests in both Iowa Sleep and

Iowa CPAP. Grant obtained copies of the AdvanceMed

letters through Iowa Sleep’s office manager. He

became concerned that “if there were any forensic

ramifications from [Zorn’s overbilling], it would fall

squarely on [Grant], as well as the knowledge that Dr.

Zorn was doing this and [Grant] was not doing

anything about it.”

In March 2018, Grant filed this qui tam action on

behalf of the United States and the State of Iowa

(collectively, “the government”) against Zorn, Iowa

Sleep, and Iowa CPAP, alleging the defendants had

violated the FCA and the IFCA by knowingly

overbilling the government for initial and established

patient visits. See 31 U.S.C. § 3729(a)(1); Iowa Code §

685.2. He further alleged that the defendants had

violated the FCA and the IFCA by knowingly

soliciting and directing referrals from Iowa Sleep to

Iowa CPAP in violation of the Anti-Kickback Statute

and the Stark Law. See 42 U.S.C. §§ 1320a7b(b)(2)(A),

1395nn(a)(1)(A).

The

government

declined to intervene in the action. See 31 U.S.C. §

3730(b)(2); Iowa Code § 685.3(2)(b).

Zorn fired Grant from Iowa Sleep in September

2018. Grant subsequently amended his complaint to

include a claim for retaliation under the FCA and the

IFCA against Iowa Sleep. See 31 U.S.C. § 3730(h);

Iowa Code § 685.3(6). He alleged that Zorn fired him

for reporting potential FCA and IFCA violations to the

government.

During discovery, Grant requested 1,167 medical

files from the defendants. Believing Grant’s request to

be too burdensome, the defendants asked Richard

Braak, a certified public accountant, to randomly

select thirty-one patient files from a list of Zorn’s

patient files. Braak randomly chose thirty-one files,

all of which pertained to initial patient visits, and the

defendants provided these thirty-one files to Grant.

Instead of asking the district court to compel the

defendants to produce additional patient files, Grant

retained Ted Lodden, a certified public accountant, to

determine whether the thirty-one file sample size

provided by the defendants was representative of

Zorn’s entire billing practice. Lodden did not

independently calculate the statistical validity of the

thirty-one file sample size. Nevertheless, he testified

that extrapolation from the thirty-one files to the

entirety of Zorn’s billing practice was appropriate.

The defendants subsequently filed a motion to

exclude Lodden’s testimony under Daubert and

Federal Rule of Evidence 702. They asserted that

Lodden’s testimony on extrapolation was entirely

speculative since it was based on a sample size not

proven to be statistically valid. The district court

concluded that a statistically valid sample was not

necessary for extrapolation in this case and declined

to exclude Lodden’s testimony.

Grant also retained Nizar Suleman, a sleep

medicine physician, as an expert witness. In his

expert report, Suleman compared Zorn’s billing rates

to publicly available data on average billing rates.

Suleman concluded that Zorn had overbilled for his

services. For their part, the defendants retained

James Alexander, a physician and medical coding

consultant, as their expert witness. In his expert

report, Alexander reviewed the sample of thirty-one

patient files and determined that, depending on the

amount of services received by patients, either twenty

or twenty-four of those files were billed inaccurately.

The defendants filed a motion to exclude Suleman’s

testimony under Daubert and Federal Rule of

Evidence 702. In opposition to the defendants’ motion,

Grant produced a “supplemental” report authored by

Suleman. In this additional report, Suleman

examined the same thirty-one patient files reviewed

by Alexander and concluded that Zorn had overbilled

in all thirty-one cases. In their reply brief in support

of their motion to exclude Suleman’s original

testimony, the defendants also argued that Suleman

could not testify as to the thirty-one files because his

additional report was an untimely and improper

rebuttal report. The district court excluded some of

Suleman’s original testimony. It also concluded that

the defendants were not prejudiced by the information

contained in Suleman’s additional report and declined

to exclude it.

The defendants moved for summary judgment,

arguing that Grant’s claims were barred by the public

disclosure provisions of the FCA and IFCA, which

prohibit qui tam claims based on information

available in the public domain. See 31 U.S.C. §

3730(e)(4); Iowa Code § 685.3(5)(c). The defendants

further argued that they should be awarded summary

judgment on the Anti-Kickback Statute and Stark

Law claim due to insufficient evidence of an illegal

kickback or self-referral scheme. The district court

rejected the defendants’ public disclosure defense but

awarded summary judgment to the defendants on the

Anti-Kickback Statute and Stark Law claim.

After a bench trial, the defendants renewed their

request to dismiss the claims pursuant to the public

disclosure provisions of the FCA and IFCA. The

district court rejected this request and instead found

the defendants liable on several claims. The district

court held that Iowa Sleep had violated the antiretaliation provisions of the FCA and IFCA by firing

Grant. Accordingly, the district court awarded Grant

$50,000 in backpay and $300,000 in special damages

resulting from emotional distress. The district court,

however, declined to award any punitive damages

under the anti-retaliation provisions of the FCA and

IFCA.

The district court also concluded that the defendants

had overbilled on initial patient visits but not on

established patient visits. It estimated that 90% of the

initial patient claims submitted to the government

were false, resulting in a total number of 230 false

claims to Medicaid, 764 false claims to Medicare, and

56 false claims to Tricare. The district court held that

the 764 false claims to Medicare resulted in actual

damages to the government of $86,332. Because the

FCA and IFCA provide for treble damages, the district

court subsequently trebled the actual damages to

$258,996. See 31 U.S.C. § 3729(a)(1)(G); Iowa Code §

685.2. The district court, however, did not assess any

damages for the false Medicaid or Tricare claims due

to a lack of evidence regarding their reimbursement

rates.

The FCA and IFCA provide that a person who

submits false or fraudulent claims to the government

is liable for a civil penalty for each false or fraudulent

claim. See 31 U.S.C. § 3729(a)(1)(G); Iowa Code §

685.2. To calculate the civil penalty, the district court

assessed statutory per-claim penalties of $5,000 for

those violations that occurred on or before November

2, 2015 and statutory per-claim penalties of $12,537

for those violations that occurred after November 2,

2015 for the Medicare, Medicaid, and Tricare claims.2

This produced a total civil penalty of $7,699,525.

Citing the Eighth Amendment’s Excessive Fines

Clause, the district court reduced the total civil

penalty to $6,474,900. As a result, the combined

award of treble damages and civil penalties was

reduced from $7,958,521 to $6,733,896. The district

court thus imposed an award of treble damages and

civil penalties twenty-six times the amount of treble

damages and seventy-eight times the amount of

actual damages.

Grant requested and was awarded attorneys’ fees of

$432,448.50, costs of $75,786.27, and interest on

backpay of $6,860.73. He also requested that, as

relator, the district court award him 30% of the treble

damages and civil penalty. See 31 U.S.C. § 3730(d)(2)

(providing that relators in non-intervened qui tam

We take no position on whether civil penalties under the

FCA and IFCA can be assessed without an underlying finding

of actual damages on the Medicaid and Tricare claims. The

defendants did not brief the issue. See Allison v. Dep’t of Corr.,

94 F.3rd 494, 497 n.1 (8th Cir. 1996)

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actions are entitled to “not less than 25 percent and

not more than 30 percent of the proceeds of the

action”); Iowa Code § 685.3(4)(b). The district court

held that Grant was entitled to 30% of the treble

damages and civil penalty and thereby awarded him

an additional $2,020,168.80. Pursuant to an

agreement between the United States and the State

of Iowa, the remaining balance of $4,713,727.20 would

be remitted solely to the United States.

In total, the defendants were held liable for backpay

plus interest of $56,860.73, special damages of

$300,000, treble damages of $258,996, an adjusted

civil penalty of $6,474,900, attorneys’ fees of

$432,448.50, and costs of $75,786.27. Combining

these amounts produced a total award of

$7,598,991.50.

II.

On appeal, the defendants assert Grant’s claims are

barred by the public disclosure provisions of the FCA

and IFCA, the district court should have excluded

Suleman’s testimony regarding the thirty-one patient

files, and the district court should have excluded

Lodden’s testimony on extrapolation. Grant crossappeals, asserting the district court should have found

defendants liable for overbilling on established

patient visits, the district court erred in granting

summary judgment on the Stark Law and AntiKickback Statute claim, and the district court should

have awarded Grant punitive damages under the

anti-retaliation provisions of the FCA and IFCA. Both

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parties take issue with the district court’s

determination of damages and civil penalties.

We begin by addressing the defendants’ challenge to

the district court’s denial of their public disclosure

defense. The defendants assert Grant’s qui tam action

is barred because the AdvanceMed letters publicly

disclosed the defendants’ fraudulent billing practices

prior to Grant bringing suit. We review de novo the

district court’s determination regarding the

applicability of the public disclosure bar. U.S. ex rel.

Paulos v. Stryker Corp., 762 F.3d 688, 692 (8th Cir.

2014).

The public disclosure provisions of the FCA and

IFCA bar a qui tam action whenever a qui tam relator

brings suit based on information available in the

public domain, unless the relator is an “original source

of the information.” 31 U.S.C. § 3730(e)(4); Iowa Code

§ 685.3(5)(c). A relator brings suit based on

information available in the public domain when

“substantially the same allegations or transactions as

alleged in the action or claim were publicly disclosed .

. . in a congressional, Government Accountability

Office, or other Federal report, hearing, audit, or

investigation.” 31 U.S.C. § 3730(e)(4)(A). The public

disclosure bar aims to “strike a balance between

encouraging private persons to root out fraud and

stifling parasitic lawsuits.” Graham Cnty. Soil &

Water Conservation Dist. v. U.S. ex rel. Wilson, 559

U.S. 280, 295 (2010).

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We conclude the public disclosure bar is inapplicable

because Grant’s complaint did not allege

“substantially the same allegations” contained in the

AdvanceMed letters.3 To establish liability, Grant was

required to prove that the defendants “knowingly

present[ed], or cause[d] to be presented, a false or

fraudulent claim for payment or approval” to the

government. 31 U.S.C. § 3729(a)(1)(A); Iowa Code §

685.2. In line with this objective, Grant’s complaint

alleged that the defendants knowingly submitted false

claims to the government. The AdvanceMed letters,

however, revealed only the possibility of inaccurate

billing. They did not disclose that the fraudulent

actions had occurred. See U.S. ex rel. Rabushka v.

Crane Co., 40 F.3d 1509, 1513 (8th Cir. 1994) (finding

the public disclosure bar to be inapplicable when the

publicly available information “fail[ed] to suggest to

the uninitiated reader . . . that [the defendant’s]

pension liability was intentionally understated”

(emphasis added)).

Even though the AdvanceMed letters failed to

accuse expressly the defendants of committing fraud,

the defendants contend that the public disclosure bar

should still be given effect as the letters contained the

“essential elements comprising [the] fraudulent

transaction[s] . . . so as to raise a reasonable inference

of fraud.” Id. at 1514. To the contrary, an uninitiated

reader of the AdvanceMed letters would infer that the

We do not address whether the AdvanceMed letters

constitute a public “Federal report, hearing, audit, or

investigation.”

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defendants had acted without the requisite scienter.

The September 2016 letter instructed the defendants

to use the information in the letter “to determine

whether corrections to [their] billing and claim

submission procedures [would be] required to prevent

future errors.” It offered to “educate” Zorn’s office on

proper billing practices. The January 2018 letter

included information on proper billing procedures and

asked the defendants to “[c]onsider and implement

corrections to billing procedures that could prevent

such errors in the future.” Given the letters repeated

references to the defendants’ “errors” and the

accompanying offers for remedial education, an

uninitiated reader would not reasonably infer from

the letters that the defendants had committed fraud.

The district court thus properly rejected the

defendants’ public disclosure defense, and we need not

decide whether Grant qualifies as an “original

source.”

Next, the defendants contend the district court

improperly admitted Suleman’s testimony, first

articulated in his additional report, that the

defendants had overbilled on all thirty-one patient

files. The defendants assert the additional report was

an untimely and improper rebuttal report, the

introduction of which prejudiced them at trial.

Because the defendants filed a motion to exclude

Suleman’s testimony, which the district court denied,

we review the district court’s evidentiary ruling for an

abuse of discretion. See United States v. Flenoid, 415

F.3d 974, 976 (8th Cir. 2005). A district court abuses

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its discretion when it bases its decision “on an

erroneous view of the law or a clearly erroneous

assessment of the evidence.” Lancaster v. BNSF Ry.

Co., 75 F.4th 967, 969 (8th Cir. 2023).

Federal Rule of Civil Procedure 26(e) requires a

party to supplement a previous disclosure if they

learn “that in some material respect the disclosure . .

. [was] incomplete or incorrect.” This duty to

supplement a prior disclosure extends to information

included in expert reports and given during expert

depositions. Fed. R. Civ. P. 26(e)(2). Parties must

submit these supplemental expert disclosures “by the

time the party’s pretrial disclosures under Rule

26(a)(3) are due.” Id. If a party fails to timely disclose

or supplement a report, then “the party is not allowed

to use that information . . . to supply evidence on a

motion, at a hearing, or at trial, unless the failure [to

produce the report] was substantially justified or

harmless.” Fed. R. Civ. P. 37(c)(1).

Grant was required to supplement expert reports by

July 1, 2020 and submit rebuttal expert reports by

December 23, 2020. He did not submit Suleman’s

additional report until January 6, 2021. Despite this

untimely submission, Grant could rely on the

information first articulated in Suleman’s additional

report at trial if the failure to produce it was

“substantially justified or harmless.” Id. Here, the

district court extended the expert deposition deadline

to allow the defendants to depose Suleman about the

additional report. In addition, Suleman’s additional

report was based entirely on data provided by the

defendants themselves. We therefore discern no abuse

15a

of discretion in the district court’s determination that

the defendants were not prejudiced by the information

first articulated in the additional report.

The defendants also take issue with Lodden’s

testimony that extrapolation from the sample of

thirty-one patient files provided by the defendants to

the entirety of Zorn’s billing practice was appropriate.

They assert that, under Federal Rule of Evidence 702

and Daubert, which prohibit reliance on unreliable

scientific evidence, Lodden should have been

precluded from testifying on statistical sampling and

extrapolation, as he did not independently calculate

the statistical validity of the thirty-one file sample

size. See Fed. R. Evid. 702; Daubert v. Merrell Dow

Pharms., Inc., 509 U.S. 579, 589 (1993) (“[T]he trial

judge must ensure that any and all scientific

testimony or evidence admitted is . . . reliable.”).

Because the defendants filed a motion to exclude

Lodden’s testimony, which the district court denied,

we review the district court’s admission of Lodden’s

testimony for an abuse of discretion. See Flenoid, 415

F.3d at 976.

Although a statistical analysis regarding the

validity of a thirty-one sample size would have been

preferable, we cannot say the district court abused its

discretion in allowing Lodden’s testimony. The

concerns underlying Daubert exclusion of dubious

scientific testimony are less stringent in a case such

as this one, which involved a bench trial where the

judge served as both factfinder and gatekeeper of

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evidence. See In re Zurn Pex Plumbing Prod. Liab.

Litig., 644 F.3d 604, 613 (8th Cir. 2011) (“The district

court’s gatekeeping function under Daubert ensures

that expert evidence submitted to the jury is

sufficiently relevant and reliable, but there is less

need for the gatekeeper to keep the gate when the

gatekeeper is keeping the gate only for himself.”

(citations and internal quotation marks omitted)).

Lodden explained that, based on the AdvanceMed

letters, the reports by Suleman and Alexander, and

Braak’s use of random selection, he believed the

thirty-one files provided by the defendants were

chosen from a “homogeneous population.” Because the

thirty-one files were randomly chosen from a

homogeneous population and thirty-one “is a common

sample size when [dealing with] a population of a

thousand,” Lodden testified that extrapolation was

appropriate. Despite any statistical deficiencies in

Lodden’s testimony, we cannot say it was entirely

“speculative, unsupported by sufficient facts, or

contrary to the facts of the case.” Lancaster, 75 F.4th

at 970-71 (noting that expert testimony is unreliable

when the expert’s opinion is “speculative”). We discern

no abuse of discretion.

Turning now to the cross-appeal, Grant contends the

district court also should have found the defendants

liable for overbilling on established patient visits. He

claims there existed sufficient evidence showing the

defendants fraudulently overbilled the government on

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those codes as well. Following a bench trial, we review

the district court’s legal conclusions de novo and its

factual findings for clear error. Kaplan v. Mayo Clinic,

847 F.3d 988, 991 (8th Cir. 2017).

Here, Grant failed to present any evidence showing

the defendants submitted false or fraudulent

documentation to the government for established

patient visits. Grant cannot rely on the sample of

thirty-one patient files as evidence of liability for

established patient visits because all thirty-one files

pertained to initial patient visits. As the district court

noted, “[a]lthough the Court has found that

extrapolation from the 31 chart sample is appropriate

for charts coded 99205, extrapolation is not warranted

for entirely different codes, where no patient charts

were ever examined by any expert witness.” Although

Grant asserts there is no reason to distinguish

between initial and established patient visits,

Suleman testified that, unlike initial patient visits,

most established patient visits are routinely billed at

the highest coding levels. In light of this testimony,

one cannot necessarily infer the defendants

fraudulently

overbilled

the

government

established patient visits just because they did so on

initial patient visits. Therefore, the district court did

not err in declining to find liability on established

patient visits.

Grant asserts the district court erred in granting

summary judgment to the defendants on the AntiKickback Statute and Stark Law claim because he

18a

presented sufficient evidence of an illegal kickback

and self-referral scheme. We review de novo the

district court’s grant of summary judgment. Minn.

Ass’n of Nurse Anesthetists v. Allina Health Sys.

Corp., 276 F.3d 1032, 1051 (8th Cir. 2002). Summary

judgment is proper if, “taking the evidence in the light

most favorable to the non-moving party, there is no

genuine issue of material fact and the moving party is

entitled to judgment as a matter of law.” Id.

The Anti-Kickback Statute prohibits medical

providers from knowingly or willfully paying another

“to induce such person to refer an individual to a

person for the furnishing or arranging for the

furnishing of any item or service for which payment

may be made in whole or in part under a Federal

health care program.” 42 U.S.C. § 1320a-7b(b)(2)(A).

The Stark Law prohibits physicians from making a

referral to an entity for “the furnishing of designated

health services” if the referring physician has a

nonexempt “financial relationship” with that entity.

42 U.S.C. § 1395nn(a)(1)(A).

Neither the Anti-Kickback Statute nor the Stark

Law provide for a private right of action. They are

criminal statutes. Therefore, Grant sued the

defendants for violations of these statutes under the

FCA and the IFCA, claiming the defendants’

violations of these statutes resulted in the submission

of fraudulent claims to the government. Although

Grant presented evidence that a kickback or selfreferral scheme existed between Iowa Sleep and Iowa

CPAP, he failed to present evidence that any

purported violations of the Anti-Kickback Statute or

19a

the Stark Law resulted in the submission of false or

fraudulent claims to the government. The mere

existence of a kickback or self-referral scheme does

not establish liability under the FCA or the IFCA. The

“sine qua non” of an FCA or IFCA violation is “the act

of submitting a fraudulent claim to the government.”

U.S. ex rel. Benaissa v. Trinity Health, 963 F.3d 733,

739-40 (8th Cir. 2014) (rejecting the plaintiff’s

argument “that, if [the defendant] compensated

physicians for illegal referrals in violation of the

federal Stark and Anti-Kickback statutes, every claim

submitted for services provided by those physicians

would be a false or fraudulent claim under the FCA”);

see U.S. ex rel. Thayer v. Planned Parenthood of the

Heartland, 765 F.3d 914, 916 n.1 (8th Cir. 2014).

Summary judgment was therefore proper.

Grant asserts the district court should have

awarded him punitive damages under the antiretaliation provisions of the FCA and IFCA. We

review the district court’s denial of punitive damages

for an abuse of discretion. McAdoo v. Martin, 899 F.3d

521, 525 (8th Cir. 2018).

According to Grant, punitive damages are available

under the FCA because the FCA provides relief “shall

include reinstatement[,] . . . 2 times the amount of

back pay, interest on the back pay, and compensation

for any special damages.” 31 U.S.C. § 3730(h)(2).

Grant contends the word “include” denotes a nonexhaustive list of recoverable damages that includes

punitive damages. In declining to award Grant

20a

punitive damages under the FCA, the district court

stated that the double backpay award “signals an

intent by Congress to impose punitive relief.” The

district court held that an award of punitive damages

would render the double backpay award superfluous.

In light of this double backpay provision, we cannot

say the district court abused its discretion in declining

to award punitive damages. Grant fails to cite any

cases specifically holding that punitive damages are

available under the FCA’s anti-retaliation provision.

Grant contends punitive damages are available

under the IFCA because Iowa law provides “[i]n a trial

of a claim involving the request for punitive or

exemplary damages, the court . . . shall make findings,

indicating . . . [w]hether . . . the conduct of the

defendant . . . constituted willful and wanton

disregard for the rights or safety of another.” Iowa

Code § 668A.1(1)(a). Even if we were to assume that

Iowa Code § 668A.1(1)(a) is applicable to the instant

case, the statute only requires the district court “make

findings” as to the defendant’s conduct. It does not

mandate the district court actually impose punitive

damages. Therefore, the district court did not act

inconsistently with Iowa Code § 668A.1(1)(a) in

declining to award Grant punitive damages under the

IFCA. We discern no abuse of discretion.

The defendants and Grant both challenge the

district court’s determination of damages and civil

penalties. Following a bench trial, we review the

district court’s legal conclusions de novo and its

21a

factual findings for clear error. Kaplan, 847 F.3d at

991.

The defendants assert the district court should not

have estimated the number of false claims because

damages must be “proved with mathematical

precision . . . through an expert statistician utilizing

reliable sampling methodology.” However, in cases

involving the FCA and the IFCA, “the Government is

entitled to rough remedial justice, that is, it may

demand compensation according to somewhat

imprecise formulas.” U.S. ex rel. Zissler v. Regents of

the Univ. of Minn., 154 F.3d 870, 873 (8th Cir. 1998);

see Thayer, 765 F.3d at 916 n.1. We thus reject the

defendants’ contention that damages be proved with

mathematical precision.

Grant contends the district court should have

applied a civil penalty of $5,500 for each false claim

that occurred on or before November 2, 2015 to

account for inflation. Under the Federal Civil

Penalties Inflation Adjustment Act Improvements Act

of 2015, civil monetary penalties must be adjusted for

inflation. Pub. L. No. 114-74, § 701 (codified at 28

U.S.C. § 2461 note). For “all violations occurring on or

before November 2, 2015,” the minimum penalty for

FCA violations was raised “from $5,000 to $5,500.” 28

C.F.R. § 85.3(a)(9). Here, the district court imposed a

minimum penalty of $5,000 for those violations

occurring on or before November 2, 2015. The district

22a

court should have determined a minimum penalty of

$5,500 for each false claim.

Both parties assert the district court misapplied the

Eighth Amendment’s Excessive Fines Clause. Grant

asserts the district court should not have remitted the

original award of treble damages and civil penalties

from $7,958,521 to $6,733,896. The defendants claim

the treble damages and civil penalties award of

$6,733,896 still violates the Excessive Fines Clause.

The Eighth Amendment prohibits the imposition of

“excessive fines.” U.S. Const. amend. VIII. The

Excessive Fines Clause “limits the government’s

power to extract payments, whether in cash or in kind,

as punishment for some offense.” United States v.

Bajakajian, 524 U.S. 321, 329 (1998) (internal

quotation marks omitted). The FCA’s combination of

treble damages with per-claim penalties constitutes a

punitive sanction that falls within the reach of the

Excessive Fines Clause. United States v. Aleff, 772

F.3d 508, 512 (8th Cir. 2014).

As a threshold matter, we must determine whether

the Excessive Fines Clause applies in qui tam actions

where the government has chosen not to intervene.

The Supreme Court has declined to answer this

question. See Browning-Ferris Indus., Inc. v. Kelco

Disposal, Inc., 492 U.S. 257, 275 n.21 (1989). We also

have not conclusively answered this question. In a qui

tam action in which the government declined to

intervene at the district court, we stated that FCA

penalties fall within the reach of the Excessive Fines

23a

Clause; however, we ultimately decided the case on a

different issue. See Hays v. Hoffman, 325 F.3d 982,

992 (8th Cir. 2003).

One of our sister circuits, however, has answered

this question in the affirmative. In Yates v. Pinellas

Hematology & Oncology, P.A., 21 F.4th 1288, 1308

(11th Cir. 2021), the Eleventh Circuit noted that the

Excessive Fines Clause “applies only to payments

imposed by the United States (or the States) and

payable to it (or them).” The Eleventh Circuit held

that the monetary awards in non-intervened qui tam

actions are “payable” to the government because the

government shares in the proceeds of the action. Id.

The monetary awards in non-intervened qui tam

actions are also “imposed” by the government because

the government maintains “sufficient control” over

the action. Id. at 1310. For example, the government

retains the right to request to intervene at any time,

can obtain a stay of discovery, and can settle the

action notwithstanding the objections of the relator.

Id. at 1311. Even though the government is not a

formal party to a non-intervened qui tam action, “it

remains a real party in interest.” Id. at 1309-10.

Because the monetary awards in non-intervened

actions are imposed by the government and payable

to it, the Eleventh Circuit held that the damages and

statutory penalties awarded in non-intervened qui

tam actions are subject to the Excessive Fines Clause.

Id. at 1314. We see no reason to depart from Yates in

this regard and likewise hold that the Excessive Fines

Clause applies in non-intervened qui tam actions.

24a

Having determined that the Excessive Fines Clause

applies in non-intervened qui tam actions, we next

address whether the punitive sanction imposed by the

district court is “excessive.” A punitive sanction under

the FCA is “excessive” when it is “grossly

disproportional to the gravity of a defendant’s

offense.” Bajakajian, 524 U.S. at 334. Proportionality

is determined by a variety of factors, including the

reprehensibility of the defendant’s conduct, the

relationship between the penalty and the harm to the

victim, the sanctions in other cases for comparable

misconduct, legislative intent, and the defendant’s

ability to pay. Aleff, 772 F.3d at 512. The plaintiffs

assert, and the defendants accept, that cases

analyzing punitive damages under the Due Process

Clause are instructive in analyzing punitive sanctions

under the Excessive Fines Clause. Indeed, in Aleff, we

applied due process principles from BMW of North

America, Inc. v. Gore, 517 U.S. 559 (1996), to evaluate

the constitutionality of a punitive sanction under the

Excessive Fines Clause. See 772 F.3d at 512-13; see

also U.S. ex rel. Drakeford v. Tuomey, 792 F.3d 364,

387-90 (4th Cir. 2015) (concluding that a punitive

sanction was constitutional under both the Due

Process Clause and the Excessive Fines Clause after

conducting a due process analysis); United States v.

Rogan, 517 F.3d 449, 454 (7th Cir. 2008) (noting, in

the context of an Excessive Fines Clause challenge,

that the punitive sanction imposed by the district

court was “less than four times actual damages,

[which is] well within the single-digit level that State

Farm Mut. Auto Ins. Co. v. Campbell, 538 U.S. 408

25a

(2003), thinks not ‘grossly excessive’ for punitive

damages” and that “[i]t’s hard to see why the

[Supreme] Court’s approach to punitive damages

under the Fifth Amendment would differ dramatically

from analysis under the Excessive Fines Clause”).

We conclude the punitive sanction imposed by the

district court violates the Excessive Fines Clause, and

we discern two errors in the district court’s analysis.

First, the district court should not have used the

entire treble damages amount of $258,996 as the

representative amount of “the gravity of [the

defendants’] offense.” Bajakajian, 524 U.S. at 334. The

“gravity of [the defendants’] offense” refers to the

amount of compensatory damages and does not

include a punitive portion. See State Farm, 538 U.S.

at 425 (“[A]n award of more than four times the

amount of compensatory damages might be close to

the line of constitutional impropriety.” (emphasis

added)). Although the Supreme Court has recognized

that treble damages have a compensatory aspect

“beyond the amount of the fraud,” it has also noted

that treble damages serve “punitive objectives.” Cook

County v. U.S. ex rel. Chandler, 538 U.S. 119, 130

(2003). Therefore, the difference between the amount

of treble damages ($258,996) and the amount of actual

damages ($86,332) is a hybrid of compensatory and

punitive damages. See Drakeford, 792 F.3d at 389

(“[T]he additional sum . . . resulting from the trebling

of actual damages is a hybrid of compensatory and

26a

punitive damages.”). 4 The district court improperly

inflated the amount of compensatory damages by

using the entire amount of treble damages as its

baseline. It should have instead removed the punitive

portion from its analysis.

The Supreme Court has not provided guidance as to

the exact division between compensatory and punitive

damages in a treble damages award. However, it has

noted that the government’s injury includes not

merely the amount of the fraud itself, but also “the

costs, delays, and inconveniences occasioned by

fraudulent claims.” Cook County, 538 U.S. at 130.

According to the Supreme Court, “[t]he most obvious

indication that the treble damages ceiling has a

remedial place . . . is its qui tam feature with its

possibility of diverting as much as 30 percent of the

Government’s recovery to a private relator who began

the action.” Id. at 131; see Drakeford, 792 F.3d at 389

(holding to be compensatory at least the portion of the

trebled award allocated to the relator). We decline to

decide the exact amount of compensatory damages

and instead leave to the district court the task of

determining that amount in the first instance. See

Tovar v. Essentia Health, 857 F.3d 771, 779 (8th Cir.

2017) (“[W]hen it would be beneficial for the district

We are aware the amounts of treble and actual damages

may be higher than $258,996 and $86,332 respectively

considering the district court did not assess any damages for

the false Medicaid or Tricare claims. However, Grant failed to

present any evidence regarding the reimbursement rates for

such claims. Therefore, $258,996 and $86,332 are the relevant

amounts for our purposes here.

27a

court to consider an alternative argument in the first

instance, we may remand the matter to the district

court.”).

The second error we discern is the imposition of a

punitive sanction twenty-six times the amount of

treble damages and seventy-eight times the amount

of actual damages awarded. The Supreme Court has

stated that “an award of more than four times the

amount of compensatory damages might be close to

the line of constitutional impropriety.” State Farm,

538 U.S. at 425. In addition, “[t]he most important

indicium of the reasonableness of a punitive damages

award is the degree of reprehensibility of the

defendant’s conduct,” and the Supreme Court has held

that purely economic harm, as here, is less

reprehensible than “tortious conduct [that] evince[s]

an indifference to . . . the health or safety of others.”

Id. at 419. Although we have previously upheld

double-digit multipliers in Adeli v. Silverstar

Automotive, Inc., 960 F.3d 452 (8th Cir. 2020), and

Grabinski v. Blue Springs Ford Sales, Inc., 203 F.3d

1024 (8th Cir. 2000), we cannot say the defendants’

conduct here was as reprehensible as the defendants’

conduct in those cases. In Adeli and Grabinski, the

defendants engaged in tortious conduct that evinced

an indifference to the health or safety of others. The

defendants here caused a relatively small amount

($86,332) of only economic loss and did not endanger

the health or safety of others. Even though Grant

asserts the defendants engaged in tortious conduct by

destroying medical records, contriving false

diagnoses, and declining to consider treatment

28a

alternatives, Grant does not cite any record support

for these allegations. While these injuries “were

theoretically possible,” we “cannot let the imagination

run wild” in terms of speculated harm. Adeli, 960 F.3d

at 462-63. We thus conclude this case is unlike Adeli

and Grabinski and that the imposition of a doubledigit multiplier is unwarranted under these facts. See

State Farm, 538 U.S. at 425 (stating that “few awards

exceeding a single digit ratio between punitive and

compensatory damages, to a significant degree,” are

constitutional); see also Solem v. Helm, 463 U.S. 277,

294 (1983) (acknowledging that decisions involving

line-drawing are “troubling” but that “courts are

constantly called upon to draw . . . lines in a variety of

contexts”).

Our conclusion is supported by circuit precedent. In

a comparable case involving the FCA, where the

defendants similarly caused only economic loss, we

upheld a punitive sanction 4.3 times the amount of

actual damages and 1.4 times the amount of treble

damages. See Aleff, 772 F.3d at 513. In justifying this

punitive sanction, we reasoned that the defendants’

scheme to defraud the government spanned two states

and more than six years. Id. at 512-13. The

defendants received $303,890 to which they were not

entitled. Id. at 513. Due to the defendants’ wrongful

conduct, the government “had to bear the cost of

investigating the fraud and suffered damage to the

integrity of one of its programs.” Id. Based on these

comparable facts, we conclude the district court

should have limited the punitive sanction to a singledigit multiplier of compensatory damages.

29a

The concurrence emphasizes we owe Congress’s

judgment “substantial deference” and asserts that

“fair notice” is a key factor in determining whether a

punitive sanction constitutes an excessive fine. We

recognize the punitive sanction of $6,733,896 is within

the FCA’s and the IFCA’s statutory limits and that we

must accord “substantial deference” to legislative

judgments concerning appropriate sanctions for the

conduct at issue. Grabinski, 203 F.3d at 1026.

However, we must be mindful not to give “undue

deference”

legislative

judgments

about

excessiveness. Yates, 21 F.4th at 1323 (Newsom, J.,

concurring); see Bajakajian, 524 U.S. at 336 (noting

that “judgments about the appropriate punishment

for an offense belong in the first instance to the

legislature” but that a statutorily prescribed

forfeiture was nonetheless unconstitutional under the

Excessive Fines Clause). Otherwise, Congress would

in effect be “suppl[ying] an answer to the questions of

what a fine should be and whether it’s excessive.”

Yates, 21 F.4th at 1318 (Newsom, J., concurring); see

id. (stating that the Eleventh Circuit’s “strong

presumption of constitutionality” had created a

dynamic that was “strange for much the same reason

that it would be odd . . . to presume that a police

officer’s use of force wasn’t excessive simply because

he said so”).5

Unlike the Eleventh Circuit, we are not bound by our

precedents to maintain a “hyper-deferential posture toward

Congress’s judgments about excessiveness.” Id. at 1318; see,

30a

Rather, in determining the constitutionality of a

punitive sanction, the reprehensibility of the

defendant’s conduct is the “most important indicium.”

State Farm, 538 U.S. at 419. We do not mean to

suggest the defendants’ conduct here was not

reprehensible. The defendants received money to

which they were not entitled and damaged

government programs. Nevertheless, the defendants

caused a modest amount of economic loss. A “more

modest punishment for this reprehensible conduct

could have satisfied the [government’s] legitimate

objectives.” Id. at 419-20.

III.

For the foregoing reasons, we vacate the punitive

sanction and remand with directions to apply a

baseline civil penalty of $5,500 for those violations

that occurred on or before November 2, 2015,

determine the amount of treble damages that is

compensatory and the amount that is punitive, ensure

the punitive sanction falls within an appropriate

single-digit multiplier of the amount of compensatory

damages, and enter judgment accordingly. The

judgment of the district court is otherwise affirmed.

e.g., United States v. Lippert, 148 F.3d 974, 977 (8th Cir.

1998); Aleff, 772 F.3d at 512-13.

31a

SMITH, Chief Judge, concurring in part and

concurring in the judgement.

I join the court’s opinion, except for Section II(C)(3)

and Part III. I agree that the district court misapplied

the Eighth Amendment’s Excessive Fines Clause, and

I agree with vacatur of the civil penalties award and

with remand, but I would do so for different reasons.

In the majority’s view, the Excessive Fines Clause

requires a downward adjustment of the False Claims

Act’s (FCA) civil penalties to a single-digit ratio. In my

view, no adjustment is required. At least on this

record, the FCA’s civil penalties are not excessive. I

would direct the district court to increase the civil

penalties award to the minimum amount that the

FCA prescribes.

The current version of the FCA declares that

persons who knowingly defraud federal programs

should pay treble damages and a per-claim civil

penalty of $5,000 to $10,000 (adjusted for inflation).

31 U.S.C. § 3729(a)(1). Here, the trier of fact found

that Steven Zorn and his businesses (collectively,

“Zorn”)

knowingly

defrauded

three

federal

programs—Medicare, Medicaid, and Tricare—1,050

times. Thus, in addition to treble damages, the FCA

requires Zorn to pay civil penalties between $5.25

million and $10.50 million (plus inflation

adjustments).

Circuit precedent describes the FCA’s civil penalties

as “punitive in nature” and reviewable under the

Excessive Fines Clause. United States v. Aleff, 772

32a

F.3d 508, 512 (8th Cir. 2014). A court should reduce

these penalties if they are “grossly disproportional to

the gravity of a defendant’s offense.” Id. (internal

quotation marks omitted). “Proportionality is

determined by a variety of factors, including the

reprehensibility of the defendant’s conduct; the

relationship between the penalty and the harm to the

victim; and the sanctions in other cases for

comparable misconduct.” Id. Civil penalties “within

the FCA’s statutory limits,” or “less than [the]

statutory maximum,” are generally not excessive. See

id. at 513.

In Eighth Amendment cases, we must remain

mindful “that judgments about the appropriate

punishment for an offense belong in the first instance

to the legislature.” United States v. Bajakajian, 524

U.S. 321, 336 (1998). When Congress specifies a

penalty, we owe its judgment “substantial deference.”

Grabinski v. Blue Springs Ford Sales, Inc., 203 F.3d

1024, 1026 (8th Cir. 2000) (quoting BMW of N. Am.,

Inc. v. Gore, 517 U.S. 559, 583 (1996)). “The Supreme

Court long ago declared that damages awarded

pursuant to a statute violate [the Constitution] only if

they are ‘so severe and oppressive as to be wholly

disproportioned to the offense and obviously

unreasonable.’” Capitol Recs., Inc. v. Thomas-Rasset,

692 F.3d 899, 907 (8th Cir. 2012) (quoting St. Louis,

Iron Mountain & S. Ry. Co. v. Williams, 251 U.S. 63,

67 (1919)). We will set aside an award as “grossly

excessive” only if it “‘shock[s] the conscience’ of the

court or ‘demonstrate[s] passion or prejudice on the

part of the trier of fact.’” May v. Nationstar Mortg.,

33a

LLC, 852 F.3d 806, 815 (8th Cir. 2017) (quoting

Ondrisek v. Hoffman, 698 F.3d 1020, 1028 (8th Cir.

2012)). The court will properly “reduce[] a verdict only

in rare situations where there is ‘plain injustice or a

monstrous or shocking result.’” Ondrisek, 698 F.3d at

1027 (quoting Vanskike v. Union Pac. R.R. Co., 725

F.2d 1146, 1150 (8th Cir. 1984)).

The standard for assessing shock value is a dim and

dotted line in Eighth Amendment jurisprudence.

Supreme Court precedent points in two directions. 6

Compare United States v. Tsarnaev, 595 U.S. 302,

319–20 (2022) (evaluating an Eighth Amendment

claim with reference to the government’s “traditional

authority”); Timbs v. Indiana, 586 U.S. 146, 151–53

(2019) (tracing the ban on excessive fines to medieval

England and concluding that “the protection against

excessive fines has been a constant shield throughout

Anglo-American history”), with Kennedy v. Louisiana,

554 U.S. 407, 419 (2008) (“The [Eighth] Amendment

draws its meaning from the evolving standards of

decency that mark the progress of a maturing society.”

(cleaned up)); Atkins v. Virginia, 536 U.S. 304, 312

(2002) (“Proportionality review under those evolving

standards should be informed by objective factors to

In practice, laws made by Congress rarely violate the

Eighth Amendment. A penalty imposed by an act of Congress

has shocked the Supreme Court’s conscience only twice. See

Bajakajian, 524 U.S. at 337 (invalidating as excessive the

forfeiture of $357,144 cash after an international traveler did

not report the sum to customs inspectors); Trop v. Dulles, 356

U.S. 86, 101 (1958) (plurality opinion) (invalidating as cruel

and unusual the denaturalization of a military deserter).

34a

the maximum possible extent. We have pinpointed

that the clearest and most reliable objective evidence

of contemporary values is the legislation enacted by

the country’s legislatures.” (cleaned up)). Regardless

of which approach is better law, Zorn’s civil penalties

do not clearly offend historical or evolving standards.7

On the contrary, the majority opinion finds that civil

penalties of $5.25 million to $10.50 million are

excessive in relation to $86,332 in actual damages, or

$258,996 in treble damages, that Zorn caused. The

majority opinion largely relies on three cases (or their

The FCA and its robust civil penalties find support in

English and American history and in modern federal and

state legislation. See Note, The History and Development of

Qui Tam, 1972 Wash. U. L.Q. 81, 83–101 (discussing the

history of qui tam actions); Harold J. Krent, Executive Control

over Criminal Law Enforcement: Some Lessons from History,

38 Am. U. L. Rev. 275, 296–97 & n.104 (1989) (collecting

pertinent acts of Congress from the 1790s); Kenneth Mann,

Punitive Civil Sanctions: The Middleground Between

Criminal and Civil Law, 101 Yale L.J. 1795, 1844 (1992)

(“Legislative adoption of punitive civil sanctions—multiple

damages, forfeitures, and penalties—grew rapidly during the

middle of the century and has continued to expand in recent

years.”); Isaac D. Buck, Side Effects: State Anti-Fraud

Statutes, Off-Label Marketing, and the Solvable Challenge of

Causation, 36 Cardozo L. Rev. 2129, 2138 (2015) (observing

that “as many as thirty states had false claims acts” in mid2014). Zorn has not shown that his penalties are excessive

compared to historical or contemporary penalties for similar

misconduct. See Aleff, 772 F.3d at 512 (identifying “the

sanctions in other cases for comparable misconduct” as an

important factor in our proportionality analysis).

35a

progeny). See Gore, 517 U.S. 559; State Farm Mut.

Auto. Ins. Co. v. Campbell, 538 U.S. 408 (2003); Yates

v. Pinellas Hematology & Oncology, P.A., 21 F.4th

1288 (11th Cir. 2021). I read these cases differently.

In Gore, a car owner sued an automobile distributor,

arguing that the company violated Alabama law by

maintaining a nationwide policy of making minor

repairs to damaged vehicles but then selling those

vehicles as new. 517 U.S. at 563–64. An Alabama jury

awarded $4,000 in actual damages and $4 million in

punitive damages, id. at 565, basing the punitive

damages on “similar sales in other jurisdictions,” id.

at 567. The Alabama Supreme Court reduced the

punitive damages to $2 million. Id. The United States

Supreme Court granted certiorari and held that $2

million was excessive and arbitrary under the

Fourteenth Amendment’s Due Process Clause. Id. at

568, 585–86. By penalizing the distributor, BMW, for

not disclosing minor repairs, Alabama sought to

impose its own views about consumer protection on

the rest of the country. Id. at 568–73, 585. The Court

said: “[W]hile we do not doubt that Congress has

ample authority to enact such a policy for the entire

Nation, it is clear that no single State could do so, or

even impose its own policy choice on neighboring

States.” Id. at 571 (footnote omitted). The $2 million

award was arbitrary because Alabama never gave

BMW fair notice that it would consider out-of-state

conduct. Id. at 572–74 & nn.20–21. “Elementary

notions of fairness enshrined in our constitutional

jurisprudence dictate that a person receive fair notice

not only of the conduct that will subject him to

36a

punishment, but also of the severity of the penalty

that a State may impose.” Id. at 574. “[T]hat BMW did

not receive adequate notice of the magnitude of the

sanction that Alabama might impose for adhering to

the nondisclosure policy . . . [led the Court] to the

conclusion that the $2 million award against BMW

[was] grossly excessive . . . .” Id. at 574–75.

In State Farm, a husband and wife sued their

automobile insurer, State Farm, in Utah state court

following a serious car accident and insurance

dispute. 538 U.S. at 412–14. The couple argued not

only that State Farm personally wronged them but

also that State Farm had “a national scheme to meet

corporate fiscal goals by capping payouts on claims

company wide.” Id. at 415 (internal quotation marks

omitted). At trial, they presented evidence about

“State Farm’s business practices for over 20 years in

numerous States.” Id. “The jury awarded the [couple]

$2.6 million in compensatory damages and $145

million in punitive damages, which the trial court

reduced to $1 million and $25 million respectively.”

Id. “The Utah Supreme Court . . . reinstated the $145

million punitive damages award.” Id. The United

States Supreme Court granted certiorari and held

that the award was “grossly excessive or arbitrary”

under the Fourteenth Amendment’s Due Process

Clause. Id. at 416, 429. Quoting Gore, the Court

reiterated that punitive damages may not be imposed

without “fair notice.” Id. at 417 (quoting Gore, 517

U.S. at 574). “[P]unitive damages,” the Court said,

“pose an acute danger of arbitrary deprivation of

property” because “[j]ury instructions typically leave

37a

the jury with wide discretion in choosing amounts.”

Id. (quoting Honda Motor Co. v. Oberg, 512 U.S. 415,

432 (1994)). “[A]s a general rule,” a state does not have

a legitimate interest “in imposing punitive damages

to punish a defendant for unlawful acts committed

outside of the State’s jurisdiction.” Id. at 421. To the

extent a state court may seek to hold a defendant

accountable for out-of-state conduct, it “would need to

apply the laws of the[] relevant jurisdiction[s],” not its

own state’s laws. Id. at 421–22.

Gore and State Farm are readily distinguishable

from this case. Those cases concerned the Due Process

Clause; this case concerns the Excessive Fines Clause.

Those cases were about the extraterritorial

application of state law; this case is about the

domestic application of federal law. Those cases

involved punitive damages awarded by juries; this

case involves civil penalties determined by Congress.

And most notably, this case does not raise fair notice

concerns.

“Elementary notions of fairness enshrined in our

constitutional jurisprudence dictate that a person

receive fair notice not only of the conduct that will

subject him to punishment, but also of the severity of

the penalty that [the government] may impose.” Gore,

517 U.S. at 574. Zorn chose to participate in Medicare,

Medicaid, and Tricare and voluntarily submitted to

the laws and regulations that govern these programs.

If he wanted to know the severity of penalties imposed

on persons who knowingly submit false claims, he

merely needed to consult the statute. See 31 U.S.C.

§ 3729(a)(1). He had fair notice about the potential

38a

consequences of his actions. This fair notice

diminishes any concern about the civil penalties

award being excessive. See Capitol, 692 F.3d at 907

(“The Supreme Court never has held that the punitive

damages guideposts are applicable in the context of

statutory damages. . . . Th[e] concern about fair notice

does not apply to statutory damages, because those

damages are identified and constrained by the

authorizing statute.”).

In Yates, the Eleventh Circuit confronted the same

question presented here. A medical practice tried to

defraud Medicare by submitting numerous false

claims. 21 F.4th at 1295. A federal jury found 214

violations, resulting in $755.54 in actual damages. Id.

at 1296. Applying the FCA, the district court trebled

those damages to $2,266.62 and imposed inflationadjusted civil penalties of $1,177,000, the statutory

minimum. Id. at 1297. On the excessive fines issue,

the Eleventh Circuit affirmed. Id. at 1314. It

acknowledged that a 1,558:1 ratio “may raise an

eyebrow.” Id. However, any excessiveness concerns

“are negated when one realizes that this total is the

result of [the defendant’s] repeated (214) instances of

fraud against the United States.” Id. “Congress, as a

representative body, can distill the monetary value

society places on harmful conduct . . . .” Id. (quoting

United States v. Chaplin’s, Inc., 646 F.3d 846, 852

(11th Cir. 2011)). “Fraud harms the United States in

ways untethered to the value of any ultimate

payment.” Id. at 1316. “Fraudulent claims make the

administration of Medicare more difficult, and

widespread fraud would undermine public confidence

39a

in the system.” Id. (quoting United States v. Mackby,

339 F.3d 1013, 1019 (9th Cir. 2003)). When fraud

becomes common, it “shakes the public’s faith in the

government’s competence and may encourage others

similarly situated to act in a like fashion.” Id. (quoting

United States ex rel. Bunk v. Gosselin World Wide

Moving, N.V., 741 F.3d 390, 409 (4th Cir. 2013)).

“‘[S]ubstantial penalties,’” the Eleventh Circuit

concluded, “‘serve as a powerful mechanism to

dissuade’ repeated violations of the FCA.” Id. (quoting

United States ex rel. Drakeford v. Tuomey, 792 F.3d

364, 389 (4th Cir. 2015)).

Yates does not support Zorn’s excessive fines

defense. Yates affirmed a ratio of civil penalties to

actual damages of 1,558:1 based on 214 violations

totaling $755.54 ($3.53 per violation). The majority

opinion directs the district court to reduce Zorn’s civil

penalties to a single-digit ratio based on 1,050

violations totaling $86,332 ($82.22 per violation).

Zorn’s fraud surpasses the fraud committed in Yates.

I would follow the Eleventh Circuit’s example and

enforce the FCA’s minimum civil penalties against

Zorn. See 31 U.S.C. § 3729(a)(1).

Congress has wide discretion to decide “the most

effective way to insure the integrity of federal funds.”

United States v. Sabri, 326 F.3d 937, 944 (8th Cir.

2003), aff’d, 541 U.S. 600 (2004). When Congress

amended the FCA, it decided that a per-claim civil

penalty of $5,000 to $10,000 (adjusted for inflation)

was necessary to compensate the government,

incentivize qui tam relators, and deter knowing

submissions of false claims. See Cook Cnty. v. United

40a

States ex rel. Chandler, 538 U.S. 119, 133 (2003)

(describing how Congress’s “1986 amendments . . .

increased the Government’s measure of recovery[] and

enhanced the incentives for relators to bring suit”);

Hudson v. United States, 522 U.S. 93, 102 (1997)

(“[A]ll civil penalties have some deterrent effect.”);

United States v. Ursery, 518 U.S. 267, 283–84 (1996)

(“Civil penalties are designed as a rough form of

‘liquidated damages’ for the harms suffered by the

Government as a result of a defendant’s conduct.”

(quoting Rex Trailer Co. v. United States, 350 U.S.

148, 153–54 (1956))).

“It makes no sense to consider the disparity between

‘actual harm’ and an award of [civil penalties] when

[civil penalties] are designed precisely for instances

where actual harm is difficult or impossible to

calculate.” Capitol, 692 F.3d at 907–08. The

constitutionality of Zorn’s civil penalties should not

depend on “a simple mathematical formula . . . that

compares actual and potential damages to the [FCA’s]

punitive award.” Gore, 517 U.S. at 582 (emphasis

omitted). The FCA gave Zorn “fair notice” about the

potential consequences of defrauding Medicare,

Medicaid, and Tricare. See id. at 574. Still, he

knowingly submitted 1,050 false claims. Requiring

Zorn to pay the amount that Congress has prescribed

is not a “plain injustice or a monstrous or shocking

result.” Ondrisek, 698 F.3d at 1027 (quoting Vanskike,

725 F.2d at 1150). “[T]he severity of the penalty” was

predictable from Zorn’s standpoint, see Gore, 517 U.S.

at 574, and “is not grossly disproportional” to “the

41a

reprehensibility of [his] conduct,” Aleff, 772 F.3d at

512.

I concur in part and concur in the judgment, but I

respectfully decline to join the majority opinion’s

directions to the district court on remand.

42a

APPENDIX B

_________

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF IOWA

CENTRAL DIVISION

_________

Civil No. 4:18-cv-00095-SMR-SBJ

_________

STEPHEN B. GRANT, ON BEHALF OF THE UNITED

STATES OF AMERICA AND ON BEHALF OF THE STATE OF

IOWA,

Plaintiff/Relator,

STEVEN K. ZORN, IOWA SLEEP DISORDERS

CENTER, P.C., AND IOWA CPAP, L.L.C.,

Defendants.

_________

Filed: September 23, 2022

_________

TRIAL ORDER

43a

Plaintiff/Relator Dr. Stephen B. Grant (“Plaintiff,”

or “Dr. Grant”) 1 filed this qui tam lawsuit as a

whistleblower on behalf of the United States of

America and the State of Iowa. He alleges his former

employer, a sleep medicine clinic, violated state and

federal law by overbilling government payors for

medical services. The case proceeded to trial after the

state and federal government declined to intervene. A

five-day bench trial was held from January 10, 2022

to January 14, 2022. This Order presents the Court’s

findings of fact and conclusions of law.

I. BACKGROUND AND FINDINGS OF FACT2

Rule 52 of the Federal Rules of Civil Procedure

provides, “[i]n an action tried on the facts without a

In this case, Dr. Grant brings both qui tam claims and a

wrongful termination claim. For the qui tam claims, his role

in the case is as a “relator” because the United States and the

State of Iowa are the real parties in interest. See United

States ex rel. Joshi v. St. Luke’s Hosp., Inc., 441 F.3d 552, 560

(8th Cir. 2006). Dr. Grant brings wrongful termination claims

on his own behalf which makes him a typical “plaintiff.” For

simplicity, the Court will refer to him as “Plaintiff’ in this

Order, even when discussing the qui tam claims.

As used in this Order, citations beginning with “Pl. Ex.,”

refer to Plaintiff’s exhibits; citations beginning with “Def.

Ex.,” refer to Defendants’ exhibits; and citations beginning

with “Tr.” refer to the trial transcript. The parties’ exhibits

are cited with the exhibit identifier and page number. Thus,

“Def. Ex. 1 at 1,” refers to page one of Defendants’ exhibit one.

Transcript citations are formatted such that the number

preceding the colon is the page number, and the number

44a

jury . . ., the court must find the facts specially and

state its conclusions of law separately. The findings

and conclusions . . . may appear in an opinion or a

memorandum of decision filed by the court.” Fed. R.

Civ. P. 52(a)(1). Consistent with Rule 52, the Court’s

findings of fact are set out in Section I. The procedural

history of this case is recited in Section II. The Court’s

conclusions of law are set out in its legal analysis of

Plaintiff’s claims in Section III.

In a bench trial under Federal Rule of Civil

Procedure 52, the court’s findings of fact are presumed

to be based on admissible evidence only. Williams v.

Illinois, 567 U.S. 50, 69 (2012); Harris v. Rivera, 454

U.S. 339, 346 (1981) (“In bench trials, judges routinely

hear inadmissible evidence that they are presumed to

ignore when making decisions.”). It is a “‘wellestablished presumption’ that ‘the judge [has]

adhered to basic rules of procedure,’ when the judge is

acting as a factfinder.” Williams, 567 U.S. at 69–70

(quoting Harris, 454 U.S. 346–47) (alterations in

original and emphasis omitted). Therefore, any

objections that relate to evidence which the Court

cites below are overruled.

A. Dr. Steven K. Zorn

Defendant Dr. Steven K. Zorn graduated from

medical school at the University of WisconsinMadison in 1972. Pl. Ex. 1 at 1. He originally began

practicing pulmonary medicine before transitioning

into sleep medicine around 1990. Tr. 3:6–3:7, 3:23–25,

following the colon is the line number. Thus, “Tr. 756:14”

refers to line 14 of page 756 of the trial transcript.

45a

671:1–671:2. Dr. Zorn began exclusively practicing

sleep medicine in 2006. Tr. 4:1–4:3, 5:5–5:10.

At trial, Dr. Zorn explained that a sleep physician

specializes in sleep disorders including insomnia,

hypersomnia, and parasomnia. Tr. 670:21–670:25. He

explained that sleep medicine is a referral-based

practice and the patients he sees at Iowa Sleep are

sent to him because they experience sleep difficulties.

Tr. 53:16–54:1. Dr. Zorn holds board certifications in

sleep medicine from the American Academy of Sleep

Medicine (“AASM”) and the American Board of

Internal Medicine (“ABIM”). Pl. Ex. 1 at 2. In addition

to his sleep medicine certifications, he holds a

Registered

Polysomnographic

Technologist

(“RPSGT”) certification, which ensures basic

competency in polysomnographic technology used to

identify sleep abnormalities. Pl. Ex. 1 at 2; Tr. 4:16–

4:20.

B. Dr. Stephen B. Grant

Plaintiff Dr. Stephen B. Grant is also a boardcertified sleep physician, having graduated from the

University of Colorado Health Sciences Center in

2002. Pl. Ex. 3 at 1; Tr. 377:13–377:17. He also serves

as a lieutenant colonel in the United States Air Force.

Tr. 373:13–373:20. Dr. Grant is a flight surgeon with

the Air Force and he is married with five children. Pl.

Ex. 3 at 1; Tr. 372:16–372:20. He was hired by Iowa

Sleep Disorders Center (“Iowa Sleep”) in August 2009

and worked there until his termination on September

28, 2018. Pl. Ex. 53; Tr. 82:4–82:8.

46a

C. Iowa Sleep

1. In General

Dr. Zorn opened Iowa Sleep in 2006 and was

originally the sole owner of the medical practice. Tr.

5:9–5:12, 682:11–682:15. Iowa Sleep operates one

location in West Des Moines and one in Ankeny. Tr.

5:13–5:14, 5:20–6:1, 6:7–6:8. The West Des Moines

clinic is the original location and the Ankeny location

opened in 2008. Tr. 6:5–6:6, 6:11–6:12. Dr. Zorn and

Dr. Grant would alternate between the West Des

Moines and Ankeny locations; thus, they were rarely

in the same location at the same time. Tr. 11:6–11:8,

387:21–387:23. Since 2006, Iowa Sleep has employed

two physicians other than Dr. Zorn—Dr. Grant and

Dr. Kahleel Ahmed. Tr. 6:13–6:15, 163:5–163:6. Dr.

Ahmed worked at Iowa Sleep until approximately

2010. Tr. 6:23–6:24.

At Iowa Sleep, new patients will typically see a toplevel provider for their initial visit but if they are

progressing well, they will be seen by a mid-level

provider, such as a physician’s assistant. Tr. 684:15–

685:1. New patients at Iowa Sleep were randomly

assigned to either Dr. Zorn or Dr. Grant. Tr. 63:7–

63:11. Return visits for established patients were also

randomly assigned. Tr. 704:11–704:14.

Upon his hiring, Dr. Grant received a ten percent

equity interest in both Iowa Sleep and Iowa CPAP. Tr.

5:18–5:19, 819:9–819:22. Dr. Grant is the only other

physician who has held an ownership stake in Iowa

Sleep. Tr. 5:18–5:19. Dr. Grant had a contractual

option to buy a larger stake in both companies but he

47a

never exercised it. Tr. 829:5–829:9. Since Dr. Grant’s

termination, Dr. Zorn has again been the sole owner

of Iowa Sleep. Tr. 5:13–5:14.

2. Sleep Studies

A sleep study is a diagnostic tool used by sleep

physicians. It is a cardiovascular and respiratory test

designed to diagnose sleep disorders, primarily

obstructive sleep apnea (“OSA”). 3 Tr. 40:14–40:16,

41:1–41:3. A sleep study records the body’s activity

during sleep, including a patient’s breathing, pulse

rate, and oxygen levels. It is designed to evaluate

certain parameters of a person’s sleep to ascertain

whether they are experiencing arrhythmias, apneic

events, or sleep arousals, among other issues. Tr.

829:12–829:19. Sleep studies have historically been

conducted at a clinic under the supervision of medical

professionals. Recently, technology has advanced to

allow a patient to undergo a more limited sleep study

without spending the night at a clinic, known as an

“at-home” sleep study. Tr. 40:20–40:22. At-home sleep

studies have limited diagnostic capabilities because

they only measure a patient’s oxygen levels, heart

rate, and whether they stop breathing. Tr. 829:20–

829:23. Thus, an at-home sleep study can only

diagnose OSA. Tr. 829:23–829:25.

OSA is a condition where the airway collapses from the tip

of the uvula to near the vocal cords. Tr. 688:2–688:3. Dr. Zorn

asserted there is a strong correlation between strokes and

OSA and the evidence is strengthening that strokes are often

caused by untreated OSA. Tr. 685:13–685:18.

48a

One key component of a sleep study is the scoring of

apneas and hypopneas, which is done by counting

“events” and dividing it by the number of hours slept.

Tr. 42:9–42:25, 119:4–119:7. The “score” attributed for

obstructive events is an Apnea Hypopnea Index or

AHI score. Tr. 43:12–43:15. Mild OSA is diagnosed by

an AHI of 5 to 15. Tr. 558:2–558:5. Moderate OSA

requires an AHI of 15 to 30. Tr. 558:6–558:11. Severe

OSA requires an AHI greater than 30. Tr. 558:12–

558:13. Importantly, the AHI score determines

whether an insurer will pay for a CPAP machine.4 Tr.

119:16–119:18.

Sleep studies performed at Iowa Sleep are scored by

certified sleep technicians. 5 Tr. 41:4–41:6, 41:14–

41:16, 118:21–118:24. The results of a sleep study,

reflected on a “sleep record,” are transmitted to a

physician to verify its accuracy. Tr. 119:7–119:11. The

AASM recommends that sleep studies be reviewed by

a board-certified sleep physician. Tr. 132:23–133:2.

A continuous positive air pressure machine (“CPAP”)

provides a constant level of air pressure to a sleeping

individual’s upper respiratory tract, allowing oxygen to reach

their lungs thereby preventing collapse of the airway. Tr.

690:21–691:4. A CPAP machine can be ordered regardless of

a patient’s AHI score, but it will only be paid for by insurance

if the patient has an AHI score that determines that a CPAP

is medically necessary, generally beginning at an AHI score

of 5. Tr. 119:19–120:2.

Testimony at trial indicated that some labs use sleep

scoring by machines but all the labs at Iowa Sleep manually

scored the studies. Tr. 500:1–500:5.

49a

3. Financial Difficulties

Iowa Sleep has experienced financial difficulties for

several years but both locations continue to operate.

Tr. 10:4–10:13. The financial difficulties stem

primarily from a transition from in-lab sleep studies

to at-home sleep studies, a trend that began in central

Iowa around 2011. Tr. 94:21–94:23. At-home sleep

studies have a significantly lower reimbursement

rate, making it a more attractive option for health

insurance companies. This in turn leads them to

authorize fewer in-lab studies when an at-home

version is an option. Tr. 94:6–94:18, 838:14–838:18.

Iowa Sleep’s operations manager Brandon Butters

echoed Dr. Zorn’s testimony that, beginning in 2011,

at-home sleep studies began widespread use in

clinical sleep medicine. Tr. 105:24–106:7.

Both Dr. Zorn and Dr. Grant were paid a salary of

$240,000 per year by Iowa Sleep. Tr. 12:1–12:10, 97:1–

97:2. In response to the financial strain, Dr. Zorn

testified that he started working Saturdays beginning

in 2013; loaned money from Iowa CPAP to Iowa Sleep;

and took a salary reduction from 2012 through 2019.

Tr. 95:4–95:24. Dr. Zorn testified that he personally

loaned $55,000 to Iowa Sleep, which is still

outstanding. Tr. 841:19–841:24. He testified that

Iowa Sleep’s bank frequently contacted the company

to transfer funds to allow it to meet payroll. Tr. 843:7–

843:11. Iowa Sleep rents its West Des Moines building

from Dr. Zorn, but he has not collected rent since

2012. Tr. 13:5–13:8, 841:25–842:4. Dr. Zorn testified

that he considers the rents still owed. Tr. 15:19–15:20.

50a

D. Iowa CPAP

In 2011, Dr. Zorn opened Iowa CPAP, a durable

medical equipment (“DME”) company which supplies

equipment for patients diagnosed with OSA. Tr. 6:25–

7:1, 690:12–690:14. The original Iowa CPAP is in West

Des Moines in a building directly adjacent to Iowa

Sleep. Pl. Ex. 40. A second Iowa CPAP location was

opened in Ankeny in 2008. Tr. 9:3–9:5. The Iowa

CPAP in Ankeny is approximately three miles from

the Iowa Sleep location in Ankeny. Tr. 9:21. Dr. Zorn

receives a management fee from Iowa CPAP and 90

percent of the profits from the company, which has

been profitable since 2011. Tr. 12:19–12:25, 14:21–

14:22.

The Iowa CPAP building in West Des Moines was

purchased by Zorn Investments II in approximately

2012; the company purchased the Iowa Sleep location

in Ankeny in 2009. BZ Tr. 42:2–42:7, 43:13–43:14. 6

The building for the Iowa Sleep location in West Des

Moines is owned by Dr. Zorn personally, which he

purchased around 1980. Tr. 7:25–8:3, 8:17–8:19, BZ

Tr. 42:14–42:21. It is a triple net lease, meaning that

Iowa Sleep is responsible for property taxes, building

maintenance, and insurance. Tr. 930:3–930:9, BZ Tr.

Dr. Zorn’s wife, Barb Zorn, served as the administrator of

Iowa Sleep and Iowa CPAP. BZ Tr. 5:12–5:18. She was

deposed in pre-trial discovery but, sadly, she died prior to

trial. The parties agreed to submit her testimony via

deposition. Her testimony will be identified with the prefix

“BZ Tr.”

51a

45:6–45:22. Iowa CPAP rents its Ankeny location from

another company. BZ Tr. 44:1–44:4.

Iowa CPAP does not accept government-payors

because the Stark Law prohibits referrals from Iowa

Sleep in light of Dr. Zorn’s ownership stake. Tr. 139:5–

139:9; see also 42 U.S.C. § 1395nn(a)(1). However,

Iowa CPAP permits patients with government

insurance to pay for equipment out of pocket. Tr.

695:16–695:18.

E. Relationship between Iowa Sleep and Iowa CPAP

As previously noted, because of Iowa Sleep’s

financial problems, Iowa CPAP has provided several

loans to the company. Tr. 16:3–16:5. Some loans

remain outstanding. Tr. 16:17–16:18. Beyond this

financial relationship, the Court heard testimony

about the companies’ extensive affiliation.

1. CPAP Coordinator

In 2012, Butters informed Iowa Sleep employees via

memorandum that the company was establishing a

position titled “Iowa Sleep Disorders Center CPAP

Coordinator.” Pl. Ex. 43 at 1. Despite its title, the

CPAP Coordinator was paid by Iowa CPAP and

maintained an office at Iowa CPAP. Tr. 17:18–17:19,

18:20–18:22. Barb Zorn described the CPAP

coordinator as a shared employee between the two

companies. BZ Tr. 6:10–6:15. The CPAP coordinator

has access to the electronic medical records system

(“EMR”) at Iowa Sleep and, according to Dr. Zorn, the

coordinator’s job is to collate the information for the

patient to ease the insurance approval process. Tr.

16:25–17:17, 692:5–692:7.

52a

Dr. Zorn describes the CPAP coordinator as a “free

service” for Iowa Sleep patients, including those on

Medicare. Tr. 18:22–18:24, 695:4–695:7. He maintains

the CPAP coordinator service is provided regardless

of the DME supplier the patient chooses. Tr. 18:23–

19:4, 20:16–20:19, 695:4–695:18. However, he

acknowledged that the health care records of a patient

prescribed CPAP therapy would typically be provided

to the CPAP coordinator and no hard copy of a

prescription was provided to the patient. Tr. 20:20–

20:25, 21:20–21:25. This is supported by Plaintiff’s

Exhibit 42, which is a notice from Iowa Sleep

informing a patient that “[w]e will give our Iowa

CPAP Coordinator your order and demographic

information” and the patient will be contacted within

two business days. Pl. Ex. 42; Tr. 23:9–23:20. Dr. Zorn

rejected the suggestion that patients are “escorted”

over to Iowa CPAP after they are prescribed CPAP

therapy, claiming that Iowa CPAP loses money by

providing a CPAP coordinator to patients with a

government payor. Tr. 713:11–713:18.

2. Referrals to Iowa CPAP

Butters testified that during his time at Iowa CPAP,

all CPAP referrals were sent over to Iowa CPAP. Tr.

127:18–127:19. Plaintiff’s Exhibit 21 are notes from

an Iowa Sleep leadership team meeting from May 24,

2016. The notes suggest that all new orders were to be

sent to Iowa CPAP. Pl. Ex. 21. Evidence was

introduced at trial that outside DMEs were not

permitted to advertise at Iowa Sleep, which Dr. Zorn

acknowledged was accurate. He implied that it was

not his decision and an email sent by Butters to Iowa

53a

Sleep employees about this prohibition was not sent

at his direction. Pl. Ex. 44; Tr. 24:9–24:18.

F. Allegations of Up-Coding

Voluminous evidence was presented at trial

regarding medical billing, which included the legal

and contractual requirements for medical providers to

bill at certain levels. Both Dr. Zorn and Dr. Grant

testified on the requirements. The Court also heard

testimony expounding on the requirements by

Plaintiff’s expert witness Dr. Nizar Suleman and

Defendants’ expert witness Dr. James Alexander. Dr.

Suleman is a board-certified, critical care physician

who specializes in pulmonary and sleep disorders. Pl.

Ex. 4. He has maintained a clinical practice since July

2005. Tr. 260:11–260:17. Dr. Alexander is a physician

and health care compliance consultant who previously

worked as a medical director for a large Medicare

program and a commercial health insurance program.

Tr. 580:3–580:9, 580:25–581:5. Dr. Alexander gives

presentations to physicians about proper medical

coding. Tr. 581:10–581:18. Defendants’ Exhibit A, a

reference guide (“Guidelines”) circulated by Medicare

to assist medical providers with coding, also developed

the Court’s knowledge in this area. See Def. Ex. A.

1. Medical Billing Generally

Health care providers receive compensation for their

services by billing according to specific numerical

codes. The codes were devised by the American

Medical Association (“AMA”) and are used across

medical specialties. The Centers for Medicare &

Medicaid Services (“CMS”) has adopted the AMA

54a

coding guidelines for the purpose of billing Medicare

and Medicaid. 7 The amount of reimbursement to a

provider is determined by the evaluation and

management code (“E/M code”) submitted by the

medical provider, which is based on the level of

service.

Providers must submit documentation to support

their claims and codes. Two Guidelines govern the

submission of documents in support of billing codes

and are identified by year of promulgation: 1995

Guidelines and 1997 Guidelines. Providers were

permitted to use either of these Guidelines for the

time period relevant to this case. 8 Def. Ex. A at 4.

Testimony at trial indicated that the 1995 Guidelines

are easier to use and require less documentation. Tr.

284:21–284:22.

a. Component Billing

The CMS Guidelines direct that component billing

should guide the selection of a billing code unless the

visit is predominated by coordination of care and/or

counseling (“CC/C”). Def. Ex. A at 10 (providing that

“[v]isits that consist predominately of counseling

and/or coordination of care are an exception to this

This Order will regularly refer to the government health

insurance programs of Medicare and Medicaid. They have

important distinguishing characteristics which the Court will

define as needed. For simplicity, when discussing the two

programs in a manner where the differences are irrelevant,

the Court will simply use “Medicare.”

The AMA has since promulgated new E/M codes effective

January 1, 2021.

55a

rule.”). For time-based billing, “time is the key or

controlling factor to qualify for a particular level of

E/M services.” Id. The three key components for

selecting the appropriate component billing level are

patient

history,

examination,

and

medical

decisionmaking (“MDM”). Id.

i. Patient history

The types of history a medical provider may discuss

during a visit is: (a) the patient’s chief complaint; (b)

a brief history of present illness; (c) a review of

symptoms; and (d) any pertinent past, family, and/or

social history. A patient’s history is categorized in

ascending level of complexity as (1) problem focused;

(2) expanded-problem focused; (3) detailed; or (4)

comprehensive. Id. The level of complexity is

determined by the degree of detail needed for each

type of history. Id. Not all types of medical history

(aside from the chief complaint) are necessary for this

component.

ii. Physical examination

Next, a medical provider must conduct a physical

examination of the patient. This examination may be

multi-system

examination,

involving

the

examination of one or more organ systems or body

areas, or a single organ system examination. Id. at 14.

Dr. Zorn conducted multisystem examinations, which

are categorized in the same ascending order of

complexity as patient history: problem focused,

expanded-problem

focused,

detailed,

comprehensive. Id. at 16. A detailed examination

includes at least six organ systems or body areas and

56a

a comprehensive examination consists of eight or nine

organ systems or body areas.

iii. Medical decisionmaking (“MDM”)

MDM calls for a medical provider to establish a

diagnosis and/or select a management option as

guided by a patient’s level of risk. Id. at 18. Level of

risk is determined by the number of possible

diagnoses, the amount and complexity of data to be

reviewed, and the risk of significant complications.

Id.; Tr. 268:14–268:25. MDM will be further expanded

on below.

b. Time-based billing

Time-based billing, rather than component-based

billing, is permissible when more than half the time

with the patient is spent counseling or coordinating

care. Def. Ex. A at 23; Tr. 315:6–315:14, 315:21–

315:23. A medical provider who bills based on time

must document the length of the patient visit and

record the counseling and/or care coordination

activities, a flat statement that a specific amount of

time was spent on CC/C is not enough. Def. Ex. A at

23; Tr. 664:8–664:22.

It is undisputed that every service performed and

billed for by a provider must be medically necessary.

Tr. 286:25–287:2, 627:23–628:2. A provider may not

“pre-bill” a visit under time-based billing by

determining ex ante that an appointment is scheduled

for 60 minutes so a top-level billing code is warranted.

Tr. 289:6–289:10. Dr. Suleman testified that prebilling “should never happen.” Tr. 289:21. Dr.

Suleman said billing must be based on medical

57a

necessity as determined by patient presentation,

amount of work-up, data review, and plan of care

rather than billing based strictly on scheduled

appointment duration. Tr. 289:12–289:16. On crossexamination, Dr. Zorn agreed that a doctor may not

predicate time-based billing solely on the time allotted

for the appointment. Tr. 853:6–853:17.

2. Medical Coding Used in Sleep Medicine

Three types of billing codes are used in sleep

medicine: initial visit codes, return visit codes, and

sleep study codes. Tr. 262:2–262:6. An initial visit for

a new patient is coded 99201 through 99205 with the

code depending on the medical needs of the patient

and their medical complexity. Tr. 262:8–262:12.

Initial visits require specific levels of the three

components to satisfy a particular level of code. Def.

Ex. A at 10; Tr. 262:19–262:21. Initial visit codes may

only be billed to Medicare once every three years. Def.

Ex. A at 9; Tr. 263:18–263:23.

Return visit codes are 99211 through 99215 and are

determined predominantly by the complexity of the

medical decisionmaking for the patient. Tr. 262:14–

262:18. Established patient codes only require that

two out of the three components—medical history,

physical examination, and medical decisionmaking—

be satisfied for a higher level of code. Tr. 262:21–

262:24. A patient must receive treatment from a

physician of the same specialty within the same group

practice within the previous three years to be eligible

for an established patient code. Def. Ex. A at 9.

58a

a. Requirements for 99205 billing code

A 99205 billing code requires three things. First, it

requires an extensive medical history with multiple

components in the history, including a review of ten

organs. Dr. Suleman explained the patient’s medical,

family, and social history must also be extensive and

the patient must have multiple complex problems

with high risk. Def. Ex. A at 10–15; Tr. 267:20–268:4,

518:4–518:9, 595:5–595:8.

Next, the physical examination must be

comprehensive for a 99205 billing code. Dr. Suleman

said physical examination of eight 9 or more organ

systems or a comprehensive evaluation of a single

organ system would qualify as a comprehensive

examination. Def. Ex. A at 15–17; Tr. 268:9–268:13,

595:12–595:19.

However,

comprehensive

examination must be based on the patient’s medical

necessity and the presenting problem(s).

The last component to bill a code 99205 is the MDM.

To appropriately bill for the highest level of MDM,

decision making must be of the highest complexity for

The 1997 Guidelines require findings about nine organ

systems or body areas. Def. Ex. A at 16.

59a

two of the three categories. 10 Def. Ex. A at 18; Tr.

300:8–300:13. As an example for medical

management, a patient with a minor condition that is

stable or improving is assessed a lower score, but a

patient with a new problem needing follow-up care

receives a higher score. Tr. 268:17–268:20. Dr.

Suleman explained that the number of diagnoses and

treatment options in sleep medicine is limited because

so few sleep patients need complex care because they

are medically stable. Tr. 301:7–301:13.

The amount and complexity of data to be reviewed

depends on the existence of external medical

diagnostics, such as an EKG, X-ray, or other lab tests.

Tr. 268:22–268:25. According to Dr. Suleman, he

typically only needs to review a limited universe of

documents for a new patient including the referring

physician’s progress notes, a sleep questionnaire, and

if the patient has had cardiac or lung function testing.

Below is a reproduction of the CMS Reference Guidelines

outlining the categorization for MDM. A patient with two of

the three “High Complexity” decisions is deemed as requiring

a high level of MDM. Def. Ex. A at 18.

Type of

Decisionmaking

Number of

Diagnoses or

Management

Options

Amount and/or

Complexity of

Data to be

Reviewed

Risk of

Significant

Complications,

Morbidity,

and/or Mortality

Straightforward

Minimal

Minimal or None

Minimal

Low Complexity

Moderate

Complexity

Limited

Low

Multiple

Moderate

High Complexity

Extensive

High

60a

Tr. 303:19–304:7. He testified the information is very

focused and not particularly voluminous. Tr. 304:7–

304:12.

Level of patient risk is the third component of MDM.

Tr. 269:5–269:6. According to Dr. Suleman, level of

risk can be determined by the presenting problem,

diagnostic procedure (i.e., basic lab test versus

coronary angiogram), or management option (such as

bed rest versus major elective surgery). Tr. 269:8–

269:11, 269:15–269:20, 269:23–269:25. A high

complexity patient has four or more diagnoses or

treatment options, more than four data sets to be

reviewed, and a high level of risk. Tr. 270:4–270:7.

In general, as well as in MDM billing, a doctor is not

permitted to bill for a condition unrelated to the

presenting problem because it would result in

overlapping care and duplication of medical services.

This would essentially create medical necessity rather

than treating it.11 Tr. 305:13–305:24. This principle is

reflected in the CMS Guidelines which states, “[t]he

services must also be within the scope of practice for

the relevant type of provider in the State in which

they are furnished.” Def. Ex. A at 8.

Dr. Suleman expanded on this issue where he described

it as “ethically wrong” to bill for a co–morbidity that is

unrelated to the problem for which the patient is presenting.

For example, a sleep doctor should not bill for coronary artery

disease which is being treated by another physician. However,

if the patient tells his sleep doctor that wearing his CPAP

mask leads to pressure in his chest and radiation down his

arm, it would be a different scenario. Tr. 305:19–306:5.

61a

In sum, a code 99205 requires significant

documentation of a comprehensive medical history,

comprehensive examination, and a high level of

MDM. Tr. 270:8–270:11. The Guidelines are clear that

sheer “volume of documentation” may not be used to

determine the specific level of billing. Def. Ex. A at 7.

3. Dr. Zorn’s Coding Practices

a. Medicare Billing

Dr. Zorn used the 1995 Guidelines for billing

purposes and testified that he personally reviewed

them. Tr. 49:9–49:14, 284:13–284:15. Pulmonary

medicine, which Dr. Zorn practiced for years prior to

transitioning into sleep medicine, uses the same

coding Guidelines. Tr. 48:9–48:14. He testified at trial

that he attended annual courses to maintain his

proficiency in sleep medicine and coding. Tr. 48:20–

48:22. Dr. Zorn agreed that a code 99205 requires a

comprehensive review of medical history, a

comprehensive exam, and medical decisionmaking of

high complexity. Tr. 49:15–49:19.

Plaintiff’s Exhibit 14, which outlines the frequency

of specific codes that Dr. Zorn billed to Medicare,

reflects his position that his sleep patients are

complex and necessitate high levels of billing. For

example, in 2012, Dr. Zorn saw 764 new patients. He

billed 743 (97.2%) of those initial visits at code 99205.

Pl. Ex. 14 at 1. The next year he billed 659 out of his

660 new patients at code 99205 for a rate of 99.8%. Id.

at 2. In 2014, 98.9% of initial visits were billed at code

99205. Id. at 3. 97.1% of initial visits were coded

99205 in 2015. Id. at 4. The following year, Dr. Zorn

62a

billed 1,076 (98%) initial visits for new patients at

code 99205 out of a total 1097 new patients seen in

2016. Id. at 5. During the year 2017, 1094 new

patients were seen by Dr. Zorn, and 976 (89.2%) of

them were billed at code 99205. Id. at 6.

Dr. Zorn’s coding changed markedly beginning in

2018. By 2018, he was billing code 99204 much more

often than code 99205: 989 initial visits were billed at

code 99204 where only 42 initial visits were coded as

99205. Id. at 7. This timeline coincides with this

lawsuit and the Civil Investigative Demands (“CID”)

for documents served by the Government. 12 Tr.

444:17–444:25.

At trial, Dr. Zorn described the steps he took to

educate and improve his coding. Iowa Sleep retained

an external coding consultant to help with coding

issues. Tr. 807:16–807:21. He said he read four books

on coding and researched the internet to ensure he

was coding correctly. Tr. 828:4–828:14. Dr. Zorn said

his research did not provide reasons to believe he was

out of line or did not understand any coding practice.

Tr. 828:15–829:1.

b. AdvanceMed Education Letters

CMS contracts with third-party administrators like

AdvanceMed to administer, process, and pay valid

claims to qualified providers. They also review,

This suit is a qui tam suit brought on behalf of the United

States of America and the State of Iowa. For simplicity, they

will be referred to collectively as the “Government” unless a

distinction is relevant.

63a

investigate, and audit payments made on behalf of the

federal government. See generally 42 U.S.C.

§§ 1395kk1(a), 1395ddd(a)–(b). One of those

authorized reviewers, AdvanceMed, sent a letter to

Dr. Zorn on September 6, 2016. The letter noted that

he billed 100 percent of his initial patient visits at

code 99205 between June 24, 2012, and June 24, 2016,

but “more variety would be expected” of the billing

codes. Pl. Ex. 20 at 2. The letter described that the

majority of his established patient office visits were

billed at codes 99214 and 99215. Pl. Ex. 20 at 2. Code

99214 accounted for 76% of Dr. Zorn’s established

patient visits for that time period. Pl. Ex. 20 at 2.

Additionally, AdvanceMed found that Dr. Zorn was

“ranked number one for paid amount” among all

Medicare providers in Iowa for claims involving

billing codes 95810 and 95811, used for sleep studies,

and that some patients received three or more sleep

studies during the four-year period of review. Pl. Ex.

20 at 4–5. The September 2016 AdvanceMed letter

concluded by informing Dr. Zorn that the

documentation submitted with the claims was

insufficient to support his billing practices for that

time period and provided education on the criteria for

billing at the relevant rates. See id.

In his testimony, Dr. Zorn said this review was

probably “cherry-picked.” Tr. 71:13. Dr. Alexander

described the letter from AdvanceMed as an education

letter, generated by a statistical analysis of claims for

payment. Tr. 588:7–588:17. The September 2016

AdvanceMed letter did not lead Dr. Zorn to change his

billing practices but caused him to increase his

64a

documentation. Tr. 72:11–72:15, 73:3–73:22. Dr. Zorn

testified he did not receive any other education or

information on his coding practices prior to the

September 2016 AdvanceMed letter. Tr. 53:5–53:8.

AdvanceMed sent a second letter to Dr. Zorn on

January 22, 2018. Pl. Ex. 25. The purpose of the

second letter was to present its findings from a followup integrity review and provide additional education

to Iowa Sleep. Pl. Ex. 25. It identified overpayments

made to Dr. Zorn after finding AdvanceMed’s records

“indicated a high incidence of billing for the highest

level E/M codes.” Id. Like the September 2016

AdvanceMed letter, the January 2018 AdvanceMed

letter noted that Dr. Zorn exclusively billed code

99205 for new patients and selected code 99214 76%

of the time for established patients. Id. The medical

review concluded that documentation did not support

the level of service for which Dr. Zorn billed and

provided several examples. Id. The January 2018

AdvanceMed letter described some of the supporting

documentation as copied and pasted, which was

shown by duplication of grammatical errors and

occasional transferal of incorrect information. Id.

Despite this observation of copied or templated

grammatical errors, Dr. Zorn denied that data from

prior visits would auto-populate for established

patient encounters. Tr. 860:23–861:18. AdvanceMed’s

review found that some office visits were separated by

less than one month, with no health status change

noted. Id. Without a change in health status,

AdvanceMed noted that a comprehensive history and

physical examination would be unnecessary. Id.

65a

c. Wellmark Billing Issues

Dr. Zorn was separately notified about coding issues

by Wellmark. On January 20, 2017, Wellmark sent a

letter to Dr. Zorn that demanded he provide them a

refund of $12,790.58 for overpayment. Pl. Ex. 23 at 1.

Wellmark objected to Dr. Zorn’s coding for both initial

and return visits, based upon its review of the medical

records he submitted. Id. at 6–17.

This letter was sent after Wellmark had previously

educated Dr. Zorn on inappropriate use of code 99214

on two separate occasions in 2010. Tr. 150:6–150:10,

150:22–150:25, 153:12–153:16. Dr. Zorn’s billing

codes submitted to Wellmark changed in the

immediate years after the 2010 education. However,

Debra Robles, a fraud investigator for Wellmark,

testified the insurer observed what it considered upcoding beginning again in 2016. Tr. 152:17–153:8. The

alleged up-coding consisted of increased use of codes

99205, 99215, and 99214. Tr. 153:9–153:11.

Dr. Zorn insisted at trial that the medical director

for Wellmark never reviewed the medical records and

that Wellmark was “relying on MCMC,” which he says

owns AdvanceMed. Tr. 75:2–75:3, 75:9–75:13. Dr.

Zorn testified that, after receiving the Wellmark

letter, he was confused about their coding system and

requested a meeting. Tr. 805:19–806:6. He eventually

met with Dr. Gutshall, the chief medical director for

Wellmark. Tr. 806:3–806:6. Dr. Zorn said he did not

get answers to his questions about the coding issues

at the meeting. Tr. 806:16–806:25.

66a

Dr. Zorn received a second letter from Wellmark on

August 1, 2017. Pl. Ex. 24. This second letter

concluded that the additional documentation provided

by Dr. Zorn in response to their initial audit did not

impact Wellmark’s original findings. Pl. Ex. 24 at 1.

Robles testified that Dr. Zorn did not change his

coding practices, so he was placed on prepayment

review by Wellmark beginning on May 14, 2018,

which required him to submit medical records prior to

payment on a claim. Tr. 148:18–148:25, 163:8–163:10.

Dr. Zorn denied ever being placed on prepayment

review and asserted the first time he heard about it

was at trial. Tr. 807:4–807:15.

Wellmark also issued an overpayment letter to Dr.

Grant in 2017, demanding $9,493.12. Def. Ex. C. Dr.

Grant testified he was initially unaware Wellmark

had contacted him to inform him that his coding was

not supported by the documentation because he never

opened his professional mail personally. Tr. 382:2–

382:7. Dr. Grant appealed the overpayment

determination which was later denied. Def. Ex. D.

After both Dr. Zorn’s and Dr. Grant’s appeals of the

overpayment letters were denied, Wellmark held a

conference call with the doctors. Tr. 163:3–163:5. Dr.

Grant was not placed on prepayment billing review

because he had altered his coding practices. Tr. 163:7–

163:8, 163:10–163:12. Dr. Grant testified that he had

tapered down his billing from code 99205 to code

99204 after witnessing regular “claw-back” letters

from Wellmark. Tr. 390:5–390:18.

Dr. Grant repeatedly testified that Dr. Zorn told him

to bill new patients at code 99205 and established

67a

patients at code 99215. Tr. 429:1–429:14, 522:16–

522:19, 548:22–549:6. Dr. Zorn denied instructing Dr.

Grant how to code his visits, testifying that he

presumed that Dr. Grant had training based on the

quality of the medical education programs he

attended. Tr. 699:18–700:4. Dr. Grant testified he did

not have coding training during his residency and he

relied on Dr. Zorn for mentorship. Tr. 382:13–382:16.

d. Dr. Zorn’s Billing Template

At trial, the Court heard extensive testimony

pertaining to a billing template created by Dr. Zorn

around 2009 or 2010 to document the medical services

he provided. Tr. 50:23–51:3, 52:15–52:16. He

explained there were no good templates for sleep

medicine in Intergy, the EMR provider for Iowa Sleep,

so he began to modify the default option. Tr. 51:6–

51:9, 51:15–51:22. Dr. Zorn confirmed that his

personal template has been modified more than fifty

times. Pl. Ex. 16A; Tr. 51:23–51:52.

Examples of Dr. Zorn’s template were introduced

into evidence as Exhibit 16B, which shows that only

the highest billing codes had shortcut tabs in

template. See Pl. Ex. 16B. Dr. Grant adduced that Dr.

Zorn was “fluffing up the note,” meaning adding

irrelevant or unnecessary services or documentation,

to support a higher level of billing than necessary. Tr.

441:4–441:8. Dr. Suleman echoed this conclusion,

opining that of the systems included in the template,

gastrointestinal, musculoskeletal, ophthalmologic,

dermatologic review of systems, are not medically

necessary for evaluation of an established patient

68a

with diagnosed sleep apnea. Tr. 282:4–282:5, 283:17–

283:19, 288:6–288:8.

Dr. Zorn denied that the purpose of his template was

to enable him to bill at the highest level. Tr. 858:1–

858:4. However, Butters testified that the template

would be edited or changed to add more boxes for

documentation purposes when audit results and

feedback indicated insufficient documentation to

support Dr. Zorn’s coding. Tr. 111:15–111:19, 112:10–

112:13, 142:8–142:10. Multiple witnesses testified

that Dr. Zorn exhorted other providers to use his

template, with his common refrain being “we have to

get credit for what we do.” Tr. 385:6–385:8, 385:13–

385:16. Finally, Dr. Zorn’s billing template was often

a topic of discussion at management meetings. Tr.

110:8–110:12.

When questioned why he declined to use Dr. Zorn’s

template, Dr. Grant said he found the template overly

complicated and did not accomplish much. Tr. 385:9–

385:13. According to Dr. Grant, Iowa Sleep’s computer

server crashed because the strain the template placed

on it. Tr. 386:22–387:2. The template outlined

examinations which, in Dr. Grant’s opinion, were not

medically necessary and could not be physically

performed in the examination rooms at Iowa Sleep.

Tr. 385:17–385:21, 444:3–444:8.

Dr. Grant said that Dr. Zorn implied that Iowa Sleep

was returning money to Wellmark because Dr. Grant

was not completing the appropriate documentation

which entailed, in part, on using Dr. Zorn’s template.

Tr. 388:3–388:19. He said Dr. Zorn was consistent in

69a

his position that Iowa Sleep was under-coding and

other providers needed to code at his level. Tr. 389:6–

389:22. Butters testified similarly, stating that other

providers were asked to use Dr. Zorn’s template to

support their coding but they found the template was

“very complex and too convoluted to use.” Tr. 111:3–

111:12. Dr. Zorn denied asking Dr. Grant to use his

billing template. Tr. 93:13–93:20.

In contrast to Dr. Zorn, Dr. Grant testified that he

used the Intergy template every day because it closely

focused on the pertinent, appropriate questions and

data relevant to the history, exam, and

decisionmaking required for a sleep patient. Tr.

383:12–383:20. He explained that he used the

neurology template in Intergy because the contours

were appropriate and he believed other templates

included unnecessary information. Tr. 383:23–384:4.

Dr. Grant opined that it was difficult to template

every patient so he typed the majority of his medical

notes, which allowed him to narrate the patient’s

issues and provided him more flexibility. Tr. 384:16–

384:24.

e. Dr. Alexander’s Testimony on Coding

Dr. Alexander was retained by Defendants to

provide his expert opinion on Dr. Zorn’s coding

practices. He acknowledged that he does not have any

sleep medicine training and has never provided expert

testimony in a sleep medicine case, but maintained he

has extensive experience with E/M codes, which are

used in all types of medical specialties. Tr. 635:11–

636:11, 638:7–638:12.

70a

Dr. Alexander opined that sleep medicine is an

appropriate specialty to use time-based billing, so long

as CC/C accounts for at least half of the time billed.

Tr. 592:21–593:5. He testified that, for time-based

billing, it is not necessary for a provider to write every

detail from a patient visit. There must only be

sufficient documentation for a skilled auditor,

typically a medical professional, to be able to ascertain

that the billed time is accurate. Tr. 598:2–598:7. Dr.

Alexander agreed time-based billing must only

include tasks that are medically necessary and that

medical necessity must be clearly documented. Tr.

627:23–628:6. He said that Medicare permits auditors

to exercise clinical judgment based on the medical

records, to determine if it would be reasonable that a

provider spent half their time on CC/C, even if not

expressly documented. Tr. 632:5–632:20. Dr.

Alexander agreed that volume of documentation

cannot create or substitute for medical necessity. Tr.

650:1–650:5. He testified that Dr. Zorn did not meet

the documentation standards for the levels he billed,

but he could have satisfied the code 99205

requirements because of the complexity of his patients

if he had documented properly. Tr. 600:23–601:9.

Dr. Alexander conducted an audit of 31 randomly

selected patient charts coded at 99205 that were

submitted to Medicare. Tr. 582:6–582:22. These

charts were all initial visits within the timeframe of

2011 to 2017. Tr. 265:19–265:21. Dr. Alexander

testified that 31 was an appropriate sample size

because it is consistent with the standard used by

Medicare for probe audits and reviews of billing

71a

irregularities by Medicare contractors. 13 Tr. 584:6–

584:11.

Dr. Alexander’s audit found 1 out of 31 (3%) initial

patient visits were correctly coded at 99205 under

component-based billing. Def. Ex. S.; Tr. 626:12–

627:3. He determined that six more visits were

permissibly coded at 99205 when using time-based

billing, provided there was sufficient time spent on

CC/C. Def. Ex. S; Tr. 604:22–605:7. In total, Dr.

Alexander opined that 7 out of 31 charts (22.6%) were

correctly coded if using component-based or timebased billing.

Dr. Alexander later conducted a supplemental audit

based on an assumption that Dr. Zorn spent an hour

with each patient—even if not sufficiently

documented—yielding an additional four 99205 codes,

A probe audit is a standardized audit used by Medicare

program integrity contractors when investigating billing and

coding problems. Tr. 584:21–585:3. Probe audits are initiated

when there is a statistically significant departure of coding in

a practice. Tr. 585:6–585:12. The cycle of a probe audit goes:

first, an education letter is transmitted to a provider

explaining the statistical issue with their claims and

encouraging education; next, specific claims are selected by

the auditor who requests documentation to support the billing

and coding; and then the documentation is analyzed to

determine if there is a problem and, if there is, provide

education to help the provider improve and correct their

coding practices. Tr. 585:19–586:12. Three cycles of probe

audits are allowed to permit a provider to get into compliance

with regulations. Tr. 586:23–587:4. If three probe audits does

not bring a provider into compliance, they are place on prepayment review. Tr. 587:19–587:24.

72a

which increased the accuracy rate to 35.4%. Def. Ex.

S; Tr. 605:14–606:21. He determined that the

remaining 20 charts under this supplemental audit

were still not sufficiently documented to support timebased billing or he did not find it credible that Dr.

Zorn spent half his time on CC/C. Tr. 606:22–607:7. In

support of this conclusion, Dr. Alexander observed

that Dr. Zorn did not typically have a specific

statement of time spent in the visit that would

document the CC/C in a sufficient manner. Tr.

663:22–664:1.

Dr. Alexander expressly concluded Dr. Zorn was a

poor documenter in terms of providing Medicare with

enough information to justify his billing codes. Tr.

611:20–611:21, 668:12–668:18. He opined that the

primary infirmity in Dr. Zorn’s billing was that level

of risk and medical decisionmaking was not at a

sufficient level to justify code 99205 but rather code

99204. Tr. 662:14–663:6. This is because the patients

in the audit sample were medically stable with one

exception. Tr. 658:19–658:25. He did opine that sleep

patients in general are often “very complex” and most

are not simple. Tr. 666:20–666:23. Dr. Alexander

testified that the files he reviewed in the sample did

not have a templated appearance but were wellorganized, logically arranged, and thoughtful. Tr.

666:5–666:19.

f. Dr. Suleman’s Testimony on Coding

Dr. Suleman also reviewed the sample of 31 patient

charts from Dr. Alexander’s audit, maintaining that

Dr. Alexander overestimated the frequency Dr. Zorn

73a

appropriately coded his patient visits. Where Dr.

Alexander asserted that 6 or 7 charts were coded

correctly, Dr. Suleman did not find any charts which

met the criteria for code 99205. Pl. Ex. 29; Tr. 265:24–

266:7, 266:14–266:18. Dr. Suleman opined the audited

charts were frequently over-coded by more than onelevel and most should have been billed at code 99202.14

Pl. Ex. 29; Tr. 266:17–266:18, 319:20–319:22. Dr.

Suleman said none of the charts qualified as a high

level of risk under the Guidelines. Tr. 271:18–271:21,

308:18–308:22.

Dr. Suleman further explained that a 99205 code for

an initial visit is very infrequent in sleep medicine and

it would be a major outlier in any practice for the

highest level code to be billed exclusively for an initial

office visit. Tr. 291:19–291:23. This contention is well

supported, as sleep physicians bill code 99205

approximately 13% of visits according to data

available on Medicare’s website. 15 Tr. 292:2–292:6.

Dr. Suleman admitted he used an online calculator to

determine the E/M coding but said he conducted an

independent review of the records beforehand and the

calculator was used to confirm his impression. Tr. 368:7–

368:11. The calculator includes a proviso that it “does not

guarantee a specific audit result” and “requires interpretation

of provider documentation.” Pl. Ex. 30; Tr. 365:19–365:23. Dr.

Suleman agreed with Defendants that there is some

subjectivity in billing but not all the same direction and not

for 30 of 31 charts. Tr. 367:19–367:24.

On cross-examination, defense counsel pointed out the

“sleep medicine” is no longer a specific specialty that can be

sorted on the website. Dr. Suleman acknowledged this was

74a

Return visits are billed at code 99215 approximately

7.5% of the time nationally. Tr. 321:2–321:5. Dr.

Suleman stated he did not bill code 99205 at all in his

own sleep medicine practice and only eight visits were

billed at code 99215 in 2019. Tr. 324:19–324:24. He

said he coded all 23 of the new patients he saw in his

personal practice at code 99204. Tr. 356:10–356:12.

Dr. Suleman testified that he sees a combination of

pulmonary and sleep patients including patients with

shortness of breath and multiple problems beyond

sleep disorders, disputing defense counsel’s assertion

that because his coding was typically one level below

Dr. Zorn’s, it was not an apples to apples comparison.

Tr. 357:10–357:14.

For management options, Dr. Suleman observed

some of the charts had over-the-counter allergy

medications but generally fell into the low to moderate

categories. Tr. 309:22–310:5. Within the audit sample,

Dr. Suleman observed that the patients presented

with one or two problems—typically snoring, difficulty

staying awake, or falling asleep. Tr. 272:10–272:16.

None of the patients complained of shortness of

breath, used supplemental oxygen, or had any acute

neurologic symptoms. Tr. 272:19–272:21. He said this

accurate and was unable to explain why it was no longer

available. The percentage of 99205 codes for pulmonary

medicine, which both Dr. Suleman and defense counsel

agreed was the closest comparator, was 25 percent. Defense

counsel noted this was twice the rate as the 13% quoted by

Dr. Suleman for sleep medicine. Tr. 354:1–355:15. To that end

85% of initial visits for pulmonary patients are coded 99204

or 99205. Tr. 355:16–355:21.

75a

was consistent with most patients presenting to a

sleep clinic who are generally, if not always, very

stable. Tr. 272:17–272:18. He concluded none of the

patients had a high, and few had a moderate, level of

risk necessitating a code 99205. Tr. 273:4–273:7.

Dr. Suleman explained why Dr. Zorn was incorrect

that his patients were all high risk was because Iowa

Sleep is a specialty clinic. The specialization limits the

presenting problem and limits the medical necessity

for history, physical examination, and diagnostic and

treatment options, which in turn reduces billing. Tr.

274:18–274:24. Essentially, medical necessity for a

high-level visit is rare because there are limited

problems and limited diagnostic and treatment

options. Tr. 320:14–320:22. Under this logic, a

specialist does not ipso facto have complex patients

justifying a top-level billing. Tr. 275:13–275:18. Such

a billing philosophy violates the principle of medical

necessity because even if a physician is a consulting

physician, the patient has been referred for a specific

problem. Tr. 275:18–275:25.

Dr. Suleman acknowledged that occasionally a

patient may have complex sleep-related concerns

which requires multiple differentials for evaluation

and treatment but did not observe any patients within

the audit sample with such complexity. Tr. 274:25–

275:3. They were, in his words, “fairly

straightforward, noncomplex patients.” Tr. 275:6–

275:7.

Dr. Suleman rejected the suggestion by Dr. Zorn’s

counsel that a sleep patient could be high risk for

76a

MDM purposes because a sleep study is analogous to

cardiovascular imaging—a specific example of a high

risk procedure in the Guidelines. See Def. Ex. A at 22.

He explained that cardiovascular imaging entails

injection of contrast and catheterization of coronary

arteries, which could lead to death or arterial

perforation. Tr. 346:15–346:20. Dr. Suleman said that

a low risk treatment option like a physiologic test not

under stress, such as pulmonary function testing, is a

more accurate comparator to a sleep study. Tr.

347:14–347:17.

Dr. Suleman testified that established patients

rarely require comprehensive history evaluations

unless their health circumstances have changed. Tr.

294:20–294:25. One example of a patient’s notes

discussed at trial states the patient had not reported

any changes in status, as shown by the multiple

notations of “no change . . . since last clinic visit.” Pl.

Ex. 17 at 4–5. The CMS Guidelines spell out how

rarely an established patient requires complex

decisionmaking: “[i]n general, decision making for a

diagnosed problem is easier than decision making for

an identified but undiagnosed problem . . . [p]roblems

that are improving or resolving are less complex than

those problems that are worsening or failing to change

as expected.” Def. Ex. A at 18. The Guidelines further

state that "[a]nother indicator of complexity of

diagnosis or management problems is a need to seek

advice from other health care professionals." Def. Ex.

A at 18. Dr. Suleman testified he found no evidence

that Dr. Zorn sought the advice or referral to another

health care professional. Tr. 303:7–303:11.

77a

As far as any time-based billing, Dr. Suleman opined

that none of the 31 charts he reviewed met the 60minute requirement for code 99205. Tr. 315:8–315:9.

One example of patient counseling was shown in

Plaintiff’s Exhibit 17; Dr. Suleman described it as

basic and said it could be completed in five to ten

minutes—far below the 30 minutes required for code

99205. Tr. 318:12–318:22.

During his testimony, Dr. Suleman compared

patient notes of Dr. Grant and Dr. Zorn during a

return visits. He opined that Dr. Grant’s notes were

focused on the patient’s presenting condition—in that

case sleep apnea—and did not repeat unnecessary

parts of the examination because it was an

established patient. Tr. 280:16–280:20; see also Pl. Ex.

17. Contrasted with Dr. Grant, he found Dr. Zorn’s

patient notes for an appointment for an established

patient as reflecting unnecessary examinations for an

established patient being seen for consultation

regarding the result of an at-home sleep study. Tr.

283:2–283:4, 286:3–286:4. Dr. Suleman opined that

Dr. Zorn performed numerous unneeded, unnecessary

examinations not relevant to the patient’s presenting

problem. Tr. 286:12–286:13. For example, Dr. Zorn

examined the patient’s hearing, checked pupil

reactivity, and performed abdominal palpations. Pl.

Ex. 17; Tr. 282:17–283:5. Dr. Suleman speculated that

a patient may wonder why these examinations are

being performed at such an appointment at all. Tr.

283:4–283:5. In his testimony, Dr. Zorn confirmed

that he conducts a physical examination during

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return visits to make sure he is “not missing

something.” Tr. 743:24–743:25.

g. Dr. Zorn’s Coding Changes

Beginning in 2018, Dr. Zorn’s coding practices began

to change. For the year 2017, Dr. Zorn had billed code

99205 for 976 new patient visits compared with only

104 initial visits at code 99204. Pl. Ex. 14 at 6. This

ratio was almost entirely flipped for 2018. In 2018,

code 99204 was billed 989 times whereas code 99205

was billed 105 times. Pl. Ex. 14 at 7. Dr. Zorn did not

bill code 99205 at all for 2019 or 2020. Pl. Ex. 14 at 8–

Dr. Zorn testified that he changed his coding

because it was causing a “crisis” in the office

stemming from insurance companies requesting

patient charts, costing the company money, and

harming staff morale. Tr. 741:1–741:8. He insisted

that he coded appropriately for all the preceding years

and his coding changes saddened him because he

“caved” to insurance companies. Tr. 741:9–741:10.

This coding change coincided with his placement on

prepayment review by Wellmark. Tr. 148:18–148:25.

4. Dr. Grant’s Termination

Dr. Zorn fired Dr. Grant on September 28, 2018. Pl.

Ex. 53; Tr. 82:4–82:8. According to Dr. Zorn, his

decision to terminate Dr. Grant was a financiallydriven decision as a way to improve Iowa Sleep’s

finances. Tr. 846:1–846:4. The company’s finances

began to deteriorate after the sleep medicine practice

underwent significant economic challenges following

the increased preference for at-home sleep studies by

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insurance companies. The evidence at trial illustrated

that Dr. Grant and Dr. Zorn began to clash over Iowa

Sleep’s finances beginning in 2016.

In October 2016, Dr. Zorn held a performance review

with Dr. Grant in which he chastised Dr. Grant for

failing to refer more patients to Iowa CPAP.16 See Pl.

Ex. 22. The written portion of the review, admitted as

Plaintiff’s Exhibit 22, noted “Iowa CPAP, no year have

our billings matched.” Pl. Ex. 22. The first page of the

review illustrated the disparity between the two

doctors as far as referrals from Iowa Sleep to Iowa

CPAP. Tr. 415:13–415:25. Dr. Zorn conceded at trial

this remark pertained to referrals from Iowa Sleep to

Iowa CPAP. Tr. 26:5–26:10. He described this

comment as stemming from his concern that Dr.

Grant may not have been providing the benefits of

CPAP therapy to patients who had OSA. Tr. 26:20–

26:23. Dr. Zorn reiterated at trial his position that

CPAP is a first-line therapy according to the AASM,

regardless of whether it is mild, moderate, or severe.

Tr. 820:18–820:21. He said recommendation of a

CPAP is not optional for the provider and is only

subject to refusal by the patient. Tr. 820:23–821:1.

The written review also included a side-by-side

chart comparing the revenue generated by the two

doctors for Iowa Sleep. Pl. Ex. 22 at 4. This also

Dr. Grant testified that around that time, he had asked

Dr. Zorn why Iowa CPAP was loaning money to Iowa Sleep

and he believed the meeting in October 2016 was for the

purpose of discussing these financial details. Tr. 414:2–414:5,

413:2–413:4.

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included the same notation that “[n]o year have our

billings matched.” Pl. Ex. 22 at 4. The disparity ranges

from Dr. Grant billing 70.4% of Dr. Zorn’s billings in

2015 to 90.7% in 2013. Pl. Ex. 22 at 4. The chart

displayed the partial year billing for 2016 where Dr.

Grant had billed only 64.6% of Dr. Zorn’s total billing

until that date. Pl. Ex. 22 at 4. Dr. Zorn explained at

trial that his concern over billing discrepancies was

not financial but “patient care” and appropriate

treatment of CPAP patients. Tr. 83:3–83:5, 93:11–

93:12. He also expressed concern that Dr. Grant was

not seeing as many patients as Dr. Zorn. Tr. 820:7–

820:14. Dr. Zorn saw 27% more patients than Dr.

Grant between 2011 and 2017. Tr. 700:24–701:3.

In the ensuing years, Dr. Grant testified that he

learned more about Dr. Zorn’s coding practices and

believed Dr. Zorn was intentionally, fraudulently

billing private insurance companies and Medicare. Tr.

437:14–437:17, 440:2. He said he was stunned when

he learned of the referral disparity between the

doctors because patients at Iowa Sleep were randomly

assigned between them. Tr. 63:7–63:11, 429:23–430:5.

Dr. Grant echoed the testimony of Dr. Suleman

regarding coding in sleep medicine, positing that

occasionally a patient with undiagnosed OSA could be

considered high risk but they typically need to have

an occupation where falling asleep is especially

dangerous, such as a pilot or driver, or need to have

profound comorbidities. Tr. 555:7–555:17. Dr. Grant

also testified that he learned, prior to this litigation,

that the national average for initial visits billed at

code 99205 was at or below 13%. Tr. 407:2–407:19. Dr.

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Grant said that his memory was that return visits

were billed nationally at code 99215 less than 6% of

the time. Tr. 412:11–412:14. Dr. Grant testified that

he personally confirmed Dr. Suleman’s previous

observation of the statistics using a website which

archives certain internet pages to verify changes. Tr.

515:23–516:4.

Dr. Grant said Dr. Zorn did not share the September

2016 AdvanceMed letter with him; he only came to

learn of its existence after Butters provided it to him

in a clandestine manner. Tr. 397:20–398:1. The

September 2016 AdvanceMed letter prompted serious

concern on the part of Dr. Grant because it noted that

disqualification from the Medicare program was a

possible consequence, which would have grave

implications for Iowa Sleep as a business. Tr. 398:6–

399:4.

According to Dr. Grant, his mounting concerns over

the propriety and legality of Dr. Zorn’s—and Iowa

Sleep’s—billing practices is why he filed this lawsuit.

He said he did so, in part, because if Dr. Zorn’s fraud

were uncovered, the record would reflect that he had

the integrity to report it to the appropriate officials.

Tr. 446:23–447:3. One specific personal concern Dr.

Grant had was he said he had a possible upcoming

polygraph for an upgraded security clearance with the

Air Force. He said one focus of such a polygraph is a

query about knowledge of fraud committed against

the government, which he stated he could not

truthfully deny in light of his knowledge of Dr. Zorn’s

coding practices. Tr. 437:21–438:1.

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This case was initially filed under seal in March

2018. [ECF No. 1]. In September 2018, the

Government served CIDs on Dr. Zorn and Iowa

Sleep. 17 Shortly thereafter, on September 17, 2018,

Dr. Grant met with Dr. Zorn to discuss the state of

Iowa Sleep’s finances. Pl. Ex. 51; Tr. 448:9–448:15.

Also in attendance at the meeting was Rod Olson, the

certified public accountant (“CPA”) for Iowa Sleep,

Iowa CPAP, and Dr. Zorn. Tr. 448:18, 913:2–913:25.

During the meeting, Dr. Zorn told Dr. Grant that Iowa

Sleep was in dire financial stress and all shareholders

needed to take a 75% salary reduction. Tr. 449:18–

449:21. Dr. Zorn’s recounting of the meeting was that

the financial difficulties of Iowa Sleep were first

discussed by Olson. Tr. 844:1–844:4. Dr. Zorn reports

that he then interjected that the only option available

was a 75% pay cut reduction for both doctors. Tr.

844:4–844:7. Dr. Grant said he viewed the proposal for

a 75% pay cut as “punitive.” Tr. 459:17. Dr. Zorn

insisted the pay cut proposal was from Olson. Tr.

842:18–842:22. Olson testified that in response to the

pay cut proposal, Dr. Grant told Dr. Zorn that his

situation was “different” from his own and left the

room. Tr. 927:6–927:13. Olson confirmed previous

testimony by Dr. Zorn that financial documents—

projected cash flow and financial statements—from

Dr. Zorn stated in his deposition that he believed the first

round of information had been provided to the government by

that date, at trial Dr. Zorn said he could not remember if that

was the case, but acknowledged his statements in the

deposition. Tr. 87:19–88:14.

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2016, 2017, and through June 2018 were offered to Dr.

Grant at the meeting. Tr. 844:8–844:12, 923:21–924:2.

After not receiving a response from Dr. Grant

regarding the proposal at the meeting, Dr. Zorn sent

a letter to Dr. Grant requesting a decision. Pl. Ex. 51;

Tr. 845:2–845:8. Dr. Grant responded in writing,

declining the proposed pay cut, and requesting access

to Iowa Sleep’s financial records so he could assess for

himself the financial circumstances of the company.

Pl. Ex. 52. Dr. Grant said he was hoping to ascertain

whether a more modest pay reduction could be

appropriate from the documents. Tr. 461:9–461:11.

Dr. Zorn responded to the request for financial records

four days later on September 28, 2018, by terminating

Dr. Grant’s employment effective immediately. Pl. Ex.

53; Tr. 84:8–84:18, 461:19–462:3. Dr. Zorn confirmed

that terminating Dr. Grant was solely his decision. Tr.

85:1–85:3. Dr. Grant stated he was never provided the

requested financial records nor given an opportunity

for a counter-proposal prior to his termination. Tr.

462:20–462:25.

Dr. Zorn explained that he thought further

negotiations on a smaller salary reduction would not

be fruitful because Dr. Grant had rejected a proposal

which was insufficient to fix the financial shortfall. Tr.

845:10–845:15. Dr. Zorn testified that the proposed

pay cut between both physicians would have covered

$360,000 of a $420,000 cashflow shortfall for Iowa

Sleep. Tr. 843:12–843:17. Dr. Zorn said after he fired

Dr. Grant, he took a 50% salary reduction himself. Tr.

846:5–846:9.

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Dr. Zorn acknowledged that he discussed with his

wife the identity of any possible whistleblower who

had triggered the CIDs on Iowa Sleep, but he

dismissed the idea that it was Dr. Grant because “I

gave him 10 percent of the company, and I didn’t think

that he would try and destroy the company.” Tr.

89:12–89:16. Dr. Grant expressly testified that he

believed the financial difficulties of Iowa Sleep were a

false pretext to terminate him in retaliation for his qui

tam lawsuit. Tr. 469:3–469:7. This is because he had

never been previously informed of any dire financial

situation for Iowa Sleep prior to the commencement of

the lawsuit. Tr. 451:4–451:9.

Dr. Grant testified at length about his personal

circumstances following his termination from Iowa

Sleep. He stated that he is obligated to report to the

Air Force any change in his employment and his

termination made him concerned about this issue. Tr.

474:12–474:17. Termination from previous employers

must also be reported to medical credentialing and

insurance organizations. Tr. 473:18–473:24.

Dr. Grant then began working overnight shifts in

the emergency room at the Veterans’ Affairs hospital

(“VA”). Tr. 476:23–476:24. He had previously picked

up shifts at the VA emergency room prior to his

termination from Iowa Sleep. Tr. 541:12–541:14. He

needed to pay $11,000 for “tail” coverage insurance

because his employment contract with Iowa Sleep did

not provide for it.18 Tr. 477:18–477:25, 545:4–545:13.

“Tail coverage provides coverage for claims that are first

made after the policy period expired, but that are based on

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Dr. Grant said he was able to take “as needed” shifts

in the VA emergency room but it took approximately

two weeks after his termination before he could pick

up shifts for other doctors, paid on an hourly basis. Tr.

478:10–478:25, 480:18–480:20. The hours available to

Dr. Grant at the VA were variable so he said he felt

like he needed to work as many hours as possible

because he did not know how many would be available

during the following two-week period. Tr. 479:14–

479:24. He picked up many of the undesirable shifts—

overnights, holidays, weekends—through midFebruary before availability tapered off abruptly. Tr.

480:3–480:15. Dr. Grant testified that his take-home

pay from his work at the VA was the same as Iowa

Sleep. Tr. 542:5–542:7.

As far as working conditions, his work at the VA was

predominantly overnight shifts, from 6 pm to 6 am.

Tr. 482:12–482:13. Dr. Grant estimated that he

worked 30 to 40 percent more hours at the VA than

Iowa Sleep due to the unpredictable nature of the

available hours. Tr. 482:18–482:22. He estimated that

he could match his salary from Iowa Sleep working a

standard 80-hour pay period at the VA. Tr. 483:9–

483:14. Dr. Grant said he began to exceed his earnings

from Iowa Sleep beginning around Thanksgiving

2018. Tr. 483:15–483:18. He rejected the suggestion

that Iowa Sleep was merely an 8 to 4:30 job, because

conduct that occurred prior to the policy’s expiration date.”

Capson Physicians Ins. Co. v. MMIC Ins. Inc., 829 F.3d 951,

953 n.3 (8th Cir. 2016).

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he was always on call for his patients, and available

by phone for the sleep technologists. Tr. 482:2–482:7.

A supervisor at the sleep lab for MercyOne contacted

Dr. Grant around March 2019 to assess his interest in

working there. Tr. 484:11–484:18. Dr. Grant deferred

his start date with MercyOne until June 1, 2019

because he had previously volunteered to deploy to

Sicily for the Navy. Tr. 484:21–485:5, 542:13–542:15.

Dr. Grant said he earns more money at MercyOne

than Iowa Sleep. Tr. 542:16–542:18.

Dr. Grant testified that his termination caused

personal pain. He said his marriage suffered due to

his odd working hours, high stress, and little sleep. Tr.

486:16–486:20. Dr. Grant spoke about the difficulties

with his family including his oldest son. Tr. 486:11–

486:14. The security manager at the base was

suspicious of Dr. Grant’s explanation because his

long-term employment ended with an out of the blue

termination. 19 Tr. 486:24–487:3. He explained his

professional reputation was harmed. Tr. 487:7–

487:17. Dr. Grant tried to refute questions he received

from some people about his purported unhappiness at

Iowa Sleep, which apparently was given as an

explanation for his departure. Pl. Ex. 54; Tr. 488:1–

488:4.

Although not addressed by him, the Court notes that Dr.

Grant’s ability to explain the surrounding circumstances were

limited because the qui tam complaint was not unsealed by

the Court until October 4, 2019. [ECF No. 17].

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II. PROCEDURAL HISTORY

Dr. Grant commenced this suit in March 2018 by

filing a qui tam complaint under seal, as required by

the federal False Claims Act (the “Act” or “FCA”).20

[ECF No. 1]; see 31 U.S.C § 3730(b)(2) (providing that

a complaint by a private party for false claims “shall

remain under seal for at least 60 days”). He then filed

an amended complaint. [ECF No. 8]. After three

extensions, the United States and the State of Iowa

both declined to intervene. [ECF No. 15]. The

amended complaint was then unsealed by order of the

Court. [ECF No. 17]. Dr. Grant amended the

complaint two more times and both parties moved for

summary judgment. [ECF Nos. 48; 51; 52; 59].

Defendants moved for summary judgment on all

counts. [ECF No. 51]. They argued that Plaintiff

claims failed because they were based on information

publicly disclosed during Medicare audits in 2016 and

2018, so they were forbidden under the “public

disclosure bar.” See 31 U.S.C § 3730(e)(4) (providing a

court shall dismiss an action “if substantially the

same allegations or transactions as alleged . . . were

publicly disclosed” in a variety of public contexts).

Defendants sought dismissal of Count III, brought

The language of both the federal and Iowa False Claims

Act are “nearly identical” so the Court will refer to the federal

iteration unless a distinction is necessary. United States ex

rel. Thayer v. Planned Parenthood of the Heartland, 765 F.3d

914, 916 n.l (8th Cir. 2014) (observing “case law interpreting

the [federal False Claims Act] also applies to the [Iowa False

Claims Act]”).

88a

under the Stark Law and the Anti-Kickback Statute

(“AKS”), arguing a claim pursuant to the Stark Law

could not lie because Iowa CPAP never accepted

Medicare or Medicaid patients, the only persons to

whom that law applies. They contended that, Plaintiff

could not maintain a claim under the AKS because

there was no evidence that any payments were made

or received for patient referrals.

Plaintiff moved for partial summary judgment.

[ECF No. 52]. He argued that he was entitled to

judgment as a matter of law under Count I and Count

II because there was no disputed material fact.

Plaintiff urged that he had established all the

elements under the FCA supported by evidence in the

record.

The Court issued an order granting Defendants’

motion in part, including dismissing Count III of the

Third Amended Complaint for violation of the AKS.

[ECF No. 90 at 17]. However, the Court allowed Count

I, Count II, and Count IV to proceed, holding that

summary judgment was not appropriate because

there was a dispute of material fact on the scienter

element. Id. at 14. Plaintiff withdrew his jury demand

in March 2021 and the case proceeded to a bench trial.

The trial began on January 10, 2022, and concluded

on January 14, 2022. [ECF Nos. 94; 126–130].

III. LEGAL ANALYSIS

A. False Claims Acts

The FCA imposes liability on any person who

“knowingly presents, or causes to be presented, a false

or fraudulent claim [to the government] for payment

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or approval.” 31 U.S.C. § 3729(a)(1)(A); Univ. Health

Servs., Inc. v. United States ex rel. Escobar, 579 U.S.

176, 190 (2016). The law also applies to anyone who

“knowingly makes, uses, or causes to be made or used,

a false record or statement material to a false or

fraudulent claim.” 31 U.S.C. § 3729(a)(1)(B). The

scope of liability under the Act is broad because it is

“intended to reach all types of fraud, without

qualification, that might result in financial loss to the

Government.” United States v. Neifert-White Co., 390

U.S. 228, 232 (1968). This serves the purpose of

“protecting the federal fisc by imposing severe

penalties on those whose false or fraudulent claims

cause the government to pay money.” United States ex

rel. Vigil v. Nelnet, Inc., 639 F.3d 791, 796 (8th Cir.

2011). “The FCA attaches liability, not to the

underlying fraudulent activity, but to the claim for

payment.” Olson v. Fairview Health Servs. of Minn.,

831 F.3d 1063, 1070 (8th Cir. 2016) (quoting Costner

v. URS Consultants, Inc., 153 F.3d 667, 677 (8th Cir.

1998)).

The FCA provides two avenues for enforcement.

“First, the Government itself may bring a civil action

against the alleged false claimant.” Vt. Agency of Nat.

Res. v. United States ex rel. Stevens, 529 U.S. 765, 769

(2000). “Second ... a private person (the relator) may

bring a qui tam civil action ‘for the person and for the

United States Government’ against the alleged false

claimant, ‘in the name of the Government.’” Id.

(quoting 31 U.S.C. § 3730(b)(1)). An FCA lawsuit

initiated by a private person must be filed ex parte and

remains sealed for a period of at least sixty days, to

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permit the Government to investigate the allegations.

31 U.S.C. § 3730(b)(2). After it completes its

investigation, the Government may choose to

intervene in the case, and takeover its prosecution, or

decline to intervene and the relator may continue the

prosecution of the matter. See 31 U.S.C. § 3730 (b),(c).

The Government declined to intervene in this case.

To succeed on a claim under the FCA, a relator must

show “(1) the defendant made a claim [to the

Government]; (2) the claim was false or fraudulent;

and (3) the defendant knew the claim was false or

fraudulent.” In re Baycol Prods. Litig., 732 F.3d 869,

875 (8th Cir. 2013) (citation omitted). The relator

bears the burden of proof pertaining to “all essential

elements of the cause of action, including damages, by

a preponderance of the evidence.” 31 U.S.C. § 3731(d).

1. Preliminary Issues

Count III of the Third Amended Complaint alleged

violations of the Stark Law and the AKS. The Court

dismissed the AKS theory on summary judgment.

Despite not seeking relief from this judgment—and

the fact Defendants did not litigate the issue further—

Plaintiff now asks for a verdict on that claim. The

Court will first address the Stark Law claim.

a. Stark Law

Plaintiff argues that Defendants violated the Stark

Law by referring patients insured by Medicare from

Iowa Sleep to Iowa CPAP. There is little doubt that

Iowa Sleep patients in general were heavily steered

toward Iowa CPAP. See, e.g.,, Pl. Exs. 42 (notifying a

patient that their information will be provided to the

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CPAP coordinator); 43 (email from Butters describing

the referral process for the CPAP coordinator); Tr.

122:17–122:22, 126:5–126:8 (Butters testifying that

the “stated goal” of Iowa Sleep was to create referrals

for Iowa CPAP). However, even though Iowa CPAP

does not accept Medicare insurance, patients covered

by Medicare were still initially sent to the CPAP

coordinator for a consultation. Tr. 27:17–27:20, 27:25–

28:2. The Court heard testimony that Medicare

patients were provided the opportunity to pay cash for

CPAP equipment. Tr. 28:7–28:11, 256:2–256:9. Dr.

Zorn testified that few patients ever paid in cash

because it did not make financial sense to have them

do so. Tr. 28:13–28:15. He said he reviewed records

from 2011 to 2021 and found that 17 patients in total

paid cash for a CPAP machine, which was not limited

only to Medicare patients. Tr. 28:18–28:21. Plaintiff

argues that the Stark Law prohibits a referral

arrangement itself, so Iowa Sleep violated the law by

sending its Medicare patients to the CPAP

coordinator. The question is whether the act of

referral to the CPAP coordinator, without purchase of

CPAP equipment, violated the Stark Law.21

It was initially unclear whether the Stark Law applied to

Tricare claims as well. During her deposition, Barb Zorn

acknowledged that Iowa CPAP serviced approximately 18

Tricare patients between 2012 and 2017. BZ Tr. 58:13–60:22.

At the conclusion of trial, Defendants’ counsel stated their

position that Tricare claims could serve as a potential basis

for a Stark Law violation. In post-trial briefing, defense

counsel acknowledges this statement was wrong and the

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The Stark Law prohibits physicians from referring

patients to hospitals or other entities in which they

have a financial relationship. United States ex rel.

Benaissa v. Trinity Health, 963 F.3d 733, 737 n.2 (8th

Cir. 2020); see also 42 U.S.C. § 1395nn(a)(l) (providing

that a physician may not refer Medicare patients to

an entity for “designated health services” if the

referring physician has a nonexempt “financial

relationship” with such entity). The goal of the Stark

Law is “to address overutilization of services by

physicians who stood to profit from referring patients

to facilities or entities in which they had a financial

interest.” United States ex rel. Drakeford v. Tuomey

Healthcare Sys., Inc., 675 F.3d 394, 397 (4th Cir.

2012).

Plaintiff urges the Court to find that it “may

determine that the fact each and every patient

Stark Law only applies to Medicare and Medicaid claims.

[ECF No. 135 at 7].

The Court agrees that this amended stance is correct. See 42

C.F.R. § 411.353(a) (“[A] physician who has a direct or

indirect financial relationship with an entity . .. may not make

a referral to that entity for the furnishing of [medical services]

for which payment otherwise may be made under Medicare.”);

Fresenius Med. Care Holdings, Inc. v. Tucker, 704 F.3d 935,

937 (11th Cir. 2013) (observing that the Stark Law “prohibits

physicians from referring their Medicare and Medicaid

patients to business entities in which the physicians or their

immediate family members have a financial interest.”). The 18

Tricare patients which Defendants concede were serviced by

Iowa CPAP does not violate the Stark Law.

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(including Medicare and Medicaid patients) was

automatically referred to Iowa CPAP militates

additional damages.” [ECF No. 138 at 10–11]. The

basis for this assertion is the fact that the Stark Law

prohibits referral arrangements by itself. Id. Plaintiff

does not provide much support for this capacious

interpretation of the Stark Law.

The problem with Plaintiff’s theory is that the Stark

Law does not contain a private right of action.

Benaissa, 963 F.3d at 737; Ameritox, Ltd. v.

Millennium Labs., Inc., 803 F.3d 518, 522 (11th Cir.

2015). Rather, a violation of the Stark Law can be

pursued by a relator via the FCA. Thus, for a private

actor to bring a Stark Law claim, it is insufficient that

a potential violation be predicated on the mere

referral of a potentially false claim. Corsello v.

Lincare, Inc., 428 F.3d 1008, 1012 (11th Cir. 2005)

(observing “[t]he act of submitting a fraudulent claim

to the government is the ‘sine qua non of a False

Claims Act violation.’”) (quoting United States ex rel.

Clausen v. Lab. Corp. of Am., Inc., 290 F.3d 1301, 1311

(11th Cir. 2002)); see also United States ex rel. Longhi

v. Lithium Power Techs., Inc., 575 F.3d 458, 467 (5th

Cir. 2009) (“the [FCA] attaches liability ... to the claim

for payment”); cf. United States ex rel. Parikh v.

Citizens Med. Ctr., 977 F. Supp. 2d 654, 663 (S.D. Tex.

2013) (noting that compliance with the Stark Law “is

a condition of payment for Medicare and Medicaid.”).

Because Plaintiff has presented no evidence that

these claims were presented for reimbursement by

Medicare, he cannot prevail on a Stark Law theory.

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b. Anti-Kickback Statute (AKS)

In its order on summary judgment, the Court

determined that Plaintiff did not advance evidence of

an illegal kickback made in connection with a false

claim. [ECF No. 90 at 17]. It reasoned that Plaintiff

“describes nothing of value received by Dr. Zorn and

Iowa Sleep or paid from Iowa CPAP in exchange for

specific referrals to the medical equipment entity.” Id.

Although the loans provided from Iowa CPAP to Iowa

Sleep assisted Iowa Sleep in covering operating

expenses, there was no evidence in the summary

judgment record establishing that the loans were

provided in return ‘“for furnishing or arranging’ of

service referrals.” Id. (quoting United States v. Iqbal,

869 F.3d 627, 630 (8th Cir. 2017)). The Court

determined the summary judgment record only

described a scheme that advanced Dr. Zorn’s own

financial interests by generating more revenue for

both businesses. Id.

Despite the Court’s dismissal of his AKS theory,

Plaintiff requests a verdict on it anyway. The

argument advanced by Plaintiff is that an AKS

violation occurred because Iowa Sleep and Iowa CPAP

share an employee that is fully paid for by Iowa

CPAP—the CPAP coordinator. The CPAP coordinator

position is the “kickback,” according to Plaintiff,

because Iowa Sleep received free “coordinator”

services from Iowa CPAP, a service which Plaintiff

claims the company would otherwise have to pay for,

and Iowa CPAP receives referrals from Iowa Sleep in

exchange. Plaintiff interprets the Court’s order on

summary judgment to preclude an AKS violation

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predicated on an FCA violation but not as foreclosing

recovery on the AKS as a stand-alone violation. [ECF

No. 138 at 12]. He insists that “it would be improper

to withhold damages” because his evidence at trial

established all the elements of an AKS violation. Id.

at 13 (emphasis in original). He asserts liability can

be found pursuant to subsection (b) of the statute

which provides, “[w]hoever knowingly and willfully

solicits or receives any remuneration (including any

kickback, bribe, or rebate) directly or indirectly,

overtly or covertly, in cash or in kind.” 42 U.S.C.

§ 1320a-7b(b).

The AKS can only be enforced by private individuals

via a qui tam lawsuit pursuant to the FCA because

the law does not provide its own private right of

action. See, e.g., United States ex rel. King v. Solvay

Pharms., Inc., 871 F.3d 318, 324 n.1 (5th Cir 2017)

(“The AKS provides no private right of action;

therefore, a private plaintiff may not sue a health care

provider under the AKS alone.”); United States ex rel.

Hart v. McKesson Corp., 15-CV-0903 (RA), 2022 WL

1423476, at *5 (S.D.N.Y. May 5, 2022) (noting “[t]he

AKS and FCA work in conjunction to create a private

right of action for violation of the federal criminal

anti-kickback statute.”); United States v. Halifax

Hosp. Med. Ctr., No. 6:09-cv-1002-Orl-31TBS, 2013

WL 6196562, at *3 n.3 (M.D. Fla. Nov. 26, 2013);

United States ex rel. Dennis v. Health Mgmt. Assocs.,

Inc., No. 3:09-cv-00484, 2013 WL 146048, at *10 (M.D.

Tenn. Jan. 14, 2013) (noting that AKS does not

provide a private right of action). The Court granted

summary judgment for Defendants on the AKS issue

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and Plaintiff cannot seek damages as a stand-alone

violation. Accordingly, the Court declines to rule in

Plaintiff’s favor on this issue.

c. Public Disclosure Bar

Defendants renew their request to dismiss the

claims pursuant to the FCA’s public disclosure bar.

See 31 U.S.C. § 3730(e)(4) (providing for dismissal of

an FCA action if the same allegations were publicly

disclosed previously under specified circumstances).

Defendants renew this request based on their

assertion that Dr. Grant testified at trial that he

interpreted the two AdvanceMed letters as evidence

of fraud by Dr. Zorn. Plaintiff resists, contending that

the letters did not assert that Dr. Zorn “knowingly”

billed false codes which means the public disclosure

bar does not apply.

Among the “restrictions on suits by relators” under

the FCA is the public disclosure bar. State Farm Fire

and Cas. Co. v. United States ex rel. Rigsby, 137 S. Ct.

436, 440 (2016). This prevents “‘opportunistic’

plaintiffs who ‘merely feed off a previous disclosure of

fraud.’” United States v. CSL Behring, L.L.C., 855

F.3d 935, 941 (8th Cir. 2017) (quoting United States v.

Walgreen Co., 846 F.3d 879, 880 (6th Cir. 2017)). The

public disclosure bar prevents individual plaintiffs

from bringing a qui tam complaint based on

“information already in the public domain.” Id.

“Dismissal under the public disclosure bar is thus

required if (1) the defendant has shown public

disclosure under § 3730(e)(4)(A), and (2) the relator

does not fit § 3730(e)(4)(B)’s definition of ‘original

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source.’” United States ex rel. Paulos v. Stryker Corp.,

762 F.3d 688, 692 (8th Cir. 2014).

In the order on summary judgment, the Court

determined that the AdvanceMed letters “did not

reveal any indication of intentional fraudulent

misrepresentations sufficient to disclose his scienter.”

[ECF No. 90 at 10] (emphasis in original). Without

pointing to any specific testimony by Dr. Grant,

Defendants posit he testified that he interpreted the

letters to be evidence of fraud.

Even with testimony by Dr. Grant to that effect, the

AdvanceMed letters would not constitute “the

essential elements exposing the transaction[s] as

fraudulent.” United States ex rel. Rabushka v. Crane

Co., 40 F.3d 1509, 1512 (8th Cir. 1994). Rather, on

their face, the letters are remedial and merely offer

Dr. Zorn and the Iowa Sleep staff additional

education. See Pl. Ex. 20 (offering “additional

education regarding Evaluation and Management

(E/M) services”); Pl. Ex. 25 (same). If the letters were

intended to accuse Dr. Zorn of intentional fraud,

offering additional education would be ineffectual and

would not have been done. Any testimony from Dr.

Grant regarding whether the AdvanceMed letters

indicated fraud on the part of Dr. Zorn certainly

blended with his prior knowledge of Dr. Zorn’s coding

practices. It cannot be said the letters alerted him to

the fraud.22

Plaintiff points out in his resistance, at a minimum, Dr.

Grant is an original source “‘who has knowledge that is

independent of and materially adds’ to the prior public

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2. Definition of Claim under FCA

A “claim” under the FCA includes “any request or

demand, whether under a contract or otherwise, for

money or property and whether or not the United

States has title to the money or property.” 31 U.S.C.

§ 3729(b)(2)(A). Other courts have found that a claim

for Medicare payment is a “claim” under the FCA. See

United States v. Mackby, 261 F.3d 821, 826 (9th Cir.

2001) (noting the parties did not dispute “a claim for

Medicare payment is a ‘claim’ under the FCA”);

United States v. AseraCare, Inc., 938 F.3d 1278, 1284

(11th Cir. 2019) (noting that the FCA “serves as a

mechanism by which the Government may police

noncompliance with Medicare reimbursement

standards after payment has been made.”). Iowa

Sleep and Dr. Zorn submitted thousands of claims to

Medicare for payment. See Pl. Ex. 14. Neither party

disputes that Iowa Sleep and Dr. Zorn submitted

claims to Medicare for payment.

3. Falsity of Claims

Plaintiff contends that Dr. Zorn submitted false

and/or fraudulent claims for payment when he billed

his office visits at a higher code than warranted to

increase his own compensation. The E/M codes alleged

to be improperly billed are codes 99205, 99204, 99215,

and 99214. According to Plaintiff, these codes were

false because they did not meet the criteria for the

specific codes— under either component- or timedisclosure.” Walgreen Co., 846 F.3d at 880 (observing that the

public-disclosure bar does not apply to an “original source” of

the fraud disclosure).

99a

based billing—and many of the services provided by

Dr. Zorn were not medically necessary.

Defendants respond that Dr. Zorn could properly bill

code 99205 because he satisfied the Guidelines under

either the component- or time-based billing method.

They assert that the third component, MDM, is the

one on which Defendants disagree with Plaintiff or

Dr. Suleman. Thus, Defendants argue the basis for

whether Dr. Zorn’s billing of code 99205 was false,

turns on the complexity of his patients. They maintain

that the testimony presented at trial belies Plaintiff’s

argument that the services performed by Dr. Zorn

were medically unnecessary. The Court disagrees.

a. False or Fraudulent

The FCA does not define what makes a claim “false”

or “fraudulent,” Escobar, 579 U.S. at 187, but federal

courts have recognized different varieties of false

claims. See United States ex rel. Wilkins v. United

Health Grp., Inc., 659 F.3d 295, 305 (3d Cir. 2011)

(describing “two categories of false claims under the

FCA: a factually false claim and a legally false

claim.”); United States ex rel. Lemmon v. Envirocare

of Utah, Inc., 614 F.3d 1163, 1167-69 (10th Cir. 2010).

A factually false claim is one in which the claimant

misrepresents the goods or services provided. United

States ex rel. Greenfield v. Medco Health Sols., Inc.,

880 F.3d 89, 94 (3d Cir. 2018); United States ex rel.

Thomas v. Black & Veatch Special Projects Corp., 820

F.3d 1162, 1168 (10th Cir. 2016); Mikes v. Straus, 274

F.3d 687, 697 (2d Cir. 2001) (noting that a factually

false claim is one where a payee submits “an incorrect

100a

description of goods or services provided or a request

for reimbursement for goods or services never

provided.”). Essentially, the facts appearing on the

face of a claim must be untrue. United States ex rel.

Druding v. Care Alts., 952 F.3d 89, 96 (3d Cir. 2020).

A legally false claim can arise when a person

presents a “knowingly false certification of compliance

with a regulation or contractual provision as a

condition of payment.” United States ex rel. Polukoff

v. St. Mark’s Hosp., 895 F.3d 730, 741 (10th Cir. 2018)

(citation omitted). Under a false certification theory,

“[a] claim is also false when a person or entity fails to

comply with statutory, regulatory, or contractual

requirements but certifies that it has complied with

them.” Yates v. Pinellas Hematology & Oncology, P.A.,

21 F.4th 1288, 1299 (11th Cir. 2021); United States v.

Sci. Applications Int’l Corp., 626 F.3d 1257, 1266

(D.C. Cir. 2010); Rodriguez v. Our Lady of Lourdes

Med. Ctr., 552 F.3d 297, 303 (3d Cir. 2008).

False certification on a claim can be express or

implied. Wilkins, 659 F.3d at 305. Express false

certification is contrasted with an implied false

certification, where the issue is not whether a payee

“made an ‘affirmative or express false statement,’ but

whether, through the act of submitting a claim, a

payee knowingly and falsely implied that it was

entitled to payment.” Thomas, 820 F.3d at 1169

(quoting Lemmon, 614 F.3d at 1169) (footnote

omitted).

101a

b. “Reasonable and Necessary”

The Medicare Act provides “no payment may be

made . . . for any expenses incurred for items or

services” which “are not reasonable and necessary for

the diagnosis or treatment of illness or injury or to

improve the functioning of a malformed body

member.” 42 U.S.C. § 1395y(a)(1)(A); see also id.

§ 1320c-5(a)(1) (obligating health care practitioners to

provide medical services “economically and only

when, and to the extent, medically necessary” when

such services are paid for by Medicare). Medical

providers seeking payment under the Act must

“certify the necessity of the services and, in some

instances, recertify the continued need for those

services.” 42 C.F.R. § 424.10(a) (2013). CMS has

defined a “reasonable and necessary” service as one

that “meets, but does not exceed, the patient’s medical

need,” and the service must be furnished “in

accordance with accepted standards of medical

practice for the diagnosis or treatment of the patient’s

condition . . . in a setting appropriate to the patient’s

medical needs and condition[.]” CMS, Medicare

Program Integrity Manual § 13.5.4 (2019).

Courts have held certification by a medical provider

about whether a service or procedure is “reasonable

and necessary” can constitute a false claim for FCA

purposes, if the provider’s determination does not

comport with Medicare’s definition of what is

reasonable and necessary. Polukoff, 895 F.3d at 743

(holding “a doctor’s certification to the government

that a procedure is ‘reasonable and necessary’ is ‘false’

under the FCA if the procedure was not reasonable

102a

and necessary under the government’s definition of

the phrase.”); Druding, 952 F.3d at 97-98; United

States ex rel. Riley v. St. Luke’s Episcopal Hosp., 355

F.3d 370, 376 (5th Cir. 2004) (recognizing that “claims

for medically unnecessary treatment are actionable

under the FCA.”). A claim for a medically unnecessary

procedure is false “if the opinion is not honestly held,

or if it implies the existence of facts—namely, that

[the service] is needed to diagnose or treat a medical

condition, in accordance with accepted standards of

medical practice—that do not exist.” Winter ex rel.

United States v. Gardens Reg’l Hosp. & Med. Ctr., Inc.,

953 F.3d 1108, 1119 (9th Cir. 2020), cert. denied sub

nom. RollinsNelson LTC Corp. v. United States ex rel.

Winters, 141 S. Ct. 1380 (2021).

In Polukoff, the United States Court of Appeals for

the Tenth Circuit held a relator stated a claim under

the FCA when he alleged another physician

performed unnecessary procedures that were

submitted to Medicare for payment. 895 F.3d at 743.

The pertinent allegations were: (1) the defendant had

performed an unusually large number of surgical

procedures; (2) the procedures violated industry

guidelines; (3) other physicians had objected to the

defendant’s practice; (4) an audit uncovered numerous

cases where guidelines were violated; and (5) the

defendant knew that Medicare would not pay for the

procedure for a specific purpose so he represented to

the agency that the procedure had been performed for

a different medical need. Id. These allegations were

sufficient to state an express false certification claim.

Id.

103a

Dr. Suleman and Dr. Grant both testified Dr. Zorn’s

physical examinations were littered with unnecessary

and unperformable services. One example was

stomach palpations. Dr. Zorn disagreed with the

testimony of Dr. Suleman that stomach palpations are

not medically necessary to diagnose sleep issues. Tr.

54:6–54:9. Regardless of the merits, it does not appear

that they can even be effectively performed at Iowa

Sleep. Testimony established that the exam rooms at

Iowa Sleep are approximately eight feet by ten feet.

Tr. 58:24–59:2, 442:10–442:12. There is no

examination table in the rooms at Iowa Sleep, only a

four-foot love seat for the patient. Tr. 59:3–59:11, Tr.

441:11–441:13. The Court credits the testimony of Dr.

Suleman regarding stomach palpations which is

supported by evidence that they cannot be performed

properly within the examination rooms.

Further, iterations of his template reflect Dr. Zorn

engaged in review of a plethora of body parts and

systems including the skin, joint mobility, heart,

speech, gastrointestinal tract, ear, among others. Tr.

57:14–57:15, 58:3–58:18, 59:20–59:23. Even to the

untrained observer, Dr. Zorn’s recounting of his

examinations shows he addressed patently medically

unnecessary topics for a visit to a sleep specialist:

lactose intolerance, psoriasis, humor-induced loss of

consciousness, hallucinations, bleeding issues, side

effects from cancer medications, and handwriting

difficulties. 23 Tr. 719:25–723:25. For example, a

Dr. Zorn said his handwriting observations come from the

administration of the Epworth Sleepiness Scale, which is a

104a

broken leg may make it difficult to sleep, but it is not

an appropriate medical issue for a sleep specialist to

address.

This conclusion is supported by the fact that the vast

majority of the patients at Iowa Sleep were referred

by another physician, typically a general practitioner,

who is more appropriately suited to address such

issues. Dr. Grant and Dr. Zorn testified to this point.

Dr. Zorn and Dr. Grant testified that patients are

typically referred to sleep specialist because the

referring doctor is not entirely comfortable treating

the sleep issue. It quite clear that fatigue from

pharmaceuticals is not one of those areas. Dr. Zorn

said that this extensive of an examination is

necessary because “if you don’t ask, you don’t know.

And if you don’t know, then you’re not a very good

physician.” Tr. 724:18–724:21.

Dr. Zorn described an exhaustive head to toe

examination of a patient which included many

services which Dr. Suleman testified as medically

unnecessary: pupil examination, possible Parkinson’s

Disease, abdominal mass, and leg edema. Tr. 726:16–

730:9. Dr. Zorn testified that a failure to conduct this

type of examination limits a differential diagnosis. Tr.

731:1–731:3. Many of these services were performed

on returning patients, leading Dr. Suleman to observe

series of questions asking a patient to scale their sleepiness

in a variety of situations. Tr. 733:8–733:13. Dr. Zorn testified

he supplements the Epworth Sleepiness Scale with a series of

his own questions verbally. Tr. 734:2–734:10.

105a

that such patients would likely wonder why they were

being performed at all. Tr. 283:4–283:5.

However, Medicare regulations clearly require that

services performed by providers must be within the

scope of their practice. Dr. Zorn expanded

examinations far beyond the scope of what is typical

of a sleep physician, which included repeating services

over and over again. Despite claiming to have

performed extensive examinations, Dr. Zorn failed to

document much of the services he allegedly

performed. On the witness stand, he explained that

despite his extensive physical examination of

patients, he does not write down every negative result

in his letter to a referring physician, so the referred

doctor does not get “bored with the letter.” Tr. 731:10–

731:14, 737:1–737:2. Dr. Zorn opined that the

referring physician would get bored because it would

include a lot of details which would not be important

to them. Tr. 737:3–737:4. He said he does not conduct

his examination in a seriatim manner but it is a mixed

process as he discusses issues with the patient during

the examination. Tr. 732:3–732:7. Simply put, the

Court did not find Dr. Zorn credible.

The Court holds Dr. Zorn submitted false claims to

Medicare for reimbursement by billing for medical

services that were medically unnecessary, beyond the

scope of his practice, and unrelated to the treatment

of his patient’s condition. Unlike Dr. Zorn’s testimony,

the Court finds on the testimony of Dr. Suleman

regarding the lack of necessity for numerous services

performed to be credible and persuasive. Secondarily,

the Court finds that Dr. Zorn’s patients did not

106a

require the level of MDM to bill at the highest levels,

a point to which Dr. Suleman also credibly testified.

Dr. Alexander largely echoed this opinion that Dr.

Zorn’s patients were stable. Thus, Dr. Zorn cannot

rely on time-based billing because Dr. Alexander

testified the necessary CC/C was not documented and

his failure to comply with the “reasonable and

necessary” requirement inflated the o

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