Opposition Brief — Walters v. Daughters of Charity National Health System, Inc.

Supreme Court. U.S.

FILED

No. 04-566 NUV 2 4 2004

OPER SRE STERK

eo ee

In The

Supreme Court of the GAnited States

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UNITED STATES OF AMERICA,

EX REL., J. EDWARD WALTERS,

Petitioner,

v.

THE DAUGHTERS OF CHARITY NATIONAL

HEALTH SYSTEM, PROVIDENCE HOSPITAL,

SETON MEDICAL MANAGEMENT, INC.,

AND ASCENSION HEALTH, INC.,

Respondents.

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On Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The Eleventh Circuit

«

PROVIDENCE HOSPITAL’S RESPONSE

TO PETITION FOR A WRIT

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Attorneys for Providence Hospital

HELMSING, LEACH, HERLONG, HALL RENDER KILLIAN

NEWMAN & ROUSE, P.C. HEATH & LYMAN, PS.C.

R. ALAN ALEXANDER DAVID B. HONIG

FREDERICK G. HELMSING Counsel of Record

Post Office Box 2767 Suite 2000, Box 82064

Mobile, AL 36652-2767 One American Square

(251) 432-5521 — voice Indianapolis, IN 46282

(251) 432-0633 — fax (317) 633-4884 — voice

(317) 633-4878 — fax

COCKLE LAW BRIEF PRINTING CO (800) 225-6964

OR CALL COLLECT (402) 342-2831

QUESTION PRESENTED

Whether a factually correct Cost Report constitutes a

false claim under the False Claims Act, 31 U.S.C. §3729, et

seq., because worksheets not considered in determining

future payment rates were appended to the Cost Report?

CORPORATE DISCLOSURE STATEMENT

Daughters of Charity National Health System, Inc. is

a Missouri non-profit corporation, with its principal place

of business in St. Louis, Missouri. Ascension Health is the

sole corporate member of Daughters of Charity National

Health System, Inc.

Providence Hospital is an Alabama _ not-for-profit

corporation, with its principal place of business in Mobile,

Alabama. Ascension Health is the sole corporate member

of Providence Hospital.

Seton Medical Management, Inc. is an Alabama not-

for-profit corporation, with its principal place of business

in Mobile, Alabama.

Ascension Health is a Missouri non-profit corporation

with its principal place of business in St. Louis, Missouri.

Ascension Health is the sole corporate member of Daugh-

ters of Charity National Health System, Inc. Ascension

Health is the sole corporate member of Providence Hospi-

tal.

ili

TABLE OF CONTENTS

Page

STATEMENT OF THE CASE ...................scsccecesseeeees 1

hsb shi ab isi deala secu Gudsiabdosuusienibadansvdeuudiien 2

iv

TABLE OF AUTHORITIES

Page !

CASES:

Harrison v. Westinghouse Savannah River Co., 176

Be Fe Ce I i inci nceen elkienendcsasnnidlinns 5

Harrison v. Westinghouse Savannah River Co., 352

Be ee Ce I ST wince rtssncasiinnrcinrinacacieoccnsaknetessiadiinns 5

- Hindo v. University of Health Sciences/The Chicago

Medical School, 65 F.3d 608 (7th Cir. 1995), cert.

denied, 516 U.S. 1114, 116 S.Ct. 915, 113 L.Ed.2d

I I hiiicissdassicsnte sp ated cad cite sicidatlamaigdiga tae coats aaianaie’ 6

Kennard v. Comstock Resources, Inc. 363 F.3d 1039

LI TGRG Sila onikaiaceaeadcucutendtcs cocmtbaemamaaieaeensones 4,5

Robertson v. Bell Helicopter Textron, Inc., 32 F.3d

948 (5th Cir. 1994), cert. denied, 513 U.S. 1154,

115 S.Ct. 1110, 1380 L.Ed.2d 1075 (1995) ...... 6

United States ex rel. Clausen v. Laboratory Corpo-

ration of America, 290 F.3d 1301 (11th Cir. 2002),

cert. denied, 537 U.S. 1105, 123 S.Ct. 870, 154

SE Fe GT stihintnnpduciacttnsacusppiadaeiieeoliciadoraianiaawalanlinss 4

United States v. Bornstein, 423 U.S. 303, 96 S.Ct.

Ree ie cae WH GU nisick ctcitcndnincsdcinsshnttkincandicenneadene 3

United States v. McNinch, 356 U.S. 595, 78 S.Ct.

as ae ae BNE I inisncctndenntidghanesentamesnucassioiente 3

United States v. Neifert-White Co., 390 U.S. 228, 88

S.Ct. 959, 19 L.2d.2d 1061 (19G8).................csscccssscsceseses 3

United States v. Tieger, 234 F.2d 589 (3rd Cir. 1956)......... 3

Ee ee

TABLE OF AUTHORITIES - Continued

Page

STATUTES:

False Claims Act, 31 U.S.C. §3729, et seq. .......c:scccccsseereeeees 1

False Claims Act, 31 U.S. C. §3729(a)(7)..........ccccccsseeeeeeeees 4

False Claims Act, 31 U.S.C. $3730..............ccceccocccsscescsscccess 6

MISCELLANEOUS:

H.R.Rep. No. 660, 99th Cong., 2d Sess. 22 (1986).............. 6

a

1

STATEMENT OF THE CASE

Providence Hospital (“Providence”) was a Participat-

ing Provider for Medicare and Medicaid services with the

United States Health Care Financing Administration

(“HCFA”) and its successor agency, the Center for Medi-

care and Medicaid services (“CMS”). In 1997 Providence

submitted an Annual Cost Report covering the periods

from July 1, 1996, through June 30, 1997. Annual Cost

Reports submitted by hospitals are used by the Secretary

of Health and Human Services (“Secretary”) to determine

future payment rates to Participating Providers.

Providence’s 1997 Cost Report was filed along with

worksheets showing calculations. The Secretary only

considered the Cost Report itself, not the worksheets, in

setting future payment rates. One of those worksheets,

Worksheet A, included sums expended for “Medical Sup-

plies Charged to Patient” and “Drugs Charged to Pa-

tients,” both under the Worksheet headed “Ancillary

Service Cost Centers.” However, the Cost Report itself

listed the “Ancillary Service Pass Through Costs” as $0.

Petitioner filed his lawsuit pursuant to the False

Claims Act (“FCA”), 31 U.S.C. §3729, et seq., alleging,

among other things, that the Cost Report constituted a

false claim because it might have been used, along with

cost reports from all other participating providers through-

out the country, to determine future payment rates. The

trial court dismissed the claim for failure to state a cause

of action. First, the Cost Report itself refuted the allega-

tions, as the costs at issue were not included and therefore

no false claims under Petitioner’s theory were ever sub-

mitted. Second, the alleged overcharges, even had they

2

been included in the Cost Report, were not claims for

payment.

4

Vv

ARGUMENT

Petitioner’s request for a writ of certiorari is based on

both factual and legal errors. It is further flawed in that it

would expand the body of potential qui tam relators from

whistleblowers with actual knowledge to the entire uni-

verse of potential plaintiffs hoping to search for a lawsuit

through discovery.

Petitioner’s factual basis for the Writ is his allegation

that Respondent Hospital misstated costs in its Annual

Cost Report, thereby causing inflation in the costs owed by

the Secretary of Health and Human Services in determin-

ing reimbursement rates. Petition, p. 6. This is factually

incorrect. As the trial court noted,

the allegation is contradicted by the Annual Cost

Report itself.... The trouble with Plaintiff’s

theory is that the worksheet is not the cost re-

port. Those items — medical supplies and drugs —

are listed on the worksheet under the heading

‘Ancillary Service Cost Centers,’ but those costs

are not actually claimed on the Annual Cost Re-

port. The Cost Report lists the ‘Ancillary Service

Pass Through Costs’ filed as $0. Because these

overcharges were not actually claimed on the

Cost Report, no false claim was submitted.

Pet.Supp.App., p. 12.

There is simply nothing for this Honorable Court to

consider, for no inflated costs were submitted. The factual

premise of Petitioner’s argument is flawed. Absent any

a

——

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3

inflation of costs, there was nothing for the Secretary to

consider, and there was no claim that could be false.

Petitioner’s argument suffers another crucial factual

flaw, the absence of a claim for payment. The alleged

overstatements found in Providence’s worksheets were not

claims for payment. Petitioner posits that such calcula-

tions could be used by the Secretary in determining future

payment schedules. However, as the trial court noted,

“[s])ubmitting false data unrelated to a claim for payment

is not prohibited by the FCA.” Pet.Supp.App., p. 12. The

trial court’s ruling, and the appellate court’s affirmation of

same, are consistent with this Honorable Court’s pro-

nouncement in United States v. McNinch, 356 U.S. 595,

599, 78 S.Ct. 950, 2 L.Ed.2d 1001 (1958), “‘the conception

of a claim against the government normally connotes a

demand for money or for some transfer of public prop-

erty.” quoting United States v. Tieger, 234 F.2d 589, 591

(3rd Cir. 1956). accord United States v. Bornstein, 423 U.S.

303, 309 fn. 4, 96 S.Ct. 523, 46 L.Ed.2d 514 (1976). This

Honorable Court has, in one instance, found “claim” as

used in the FCA sufficiently expansive to reach loan

applications, but even that case was limited to false

statements “made with the purpose and effect of inducing

the Government immediately to part with money.” United

States v. Neifert-White Co., 390 U.S. 228, 232, 88 S.Ct. 959,

19 L.Ed.2d 1061 (1968). In the instant cause Petitioner

theorizes only that data from Providence might be a small

part of calculations to determine future payments. No

immediate parting of money was alleged. The worksheets

were not demands for money or property, and they were

not prepared to induce the Government to immediately

part with money. Even had they been submitted as part of

4

Providence’s Cost Reports, they could not form the basis

for FCA liability, as they were not claims.

Petitioner alleged certification was proper to resolve

conflict amongst the Circuit Courts of Appeal. There is no

such conflict.

The Court below quoted United States ex rel. Clausen

v. Laboratory Corporation of America, 290 F.3d 1301, 1311

(11th Cir. 2002), cert. denied, 537 U.S. 1105, 123 S.Ct. 870,

154 L.Ed.2d 774 (2003), “[w]ithout the presentment of...

a [false or fraudulent] claim, while the practices of an

entity that provides services to the Government may be

unwise or improper, there is simply no actionable damage

to the public fisc as required under the FCA.” Pet.App. A-6.

Petitioner argued this ruling conflicts with rulings from

the Tenth and Fourth Circuits. He is not correct.

Petitioner’s claim of conflict relies entirely on the

conclusion of the above-quoted sentence rather than the

underlying premise. The underlying premise of the sen-

tence is the absence of a claim, not damage to the public

fisc. The Clausen court concluded ‘without a claim, there is

no false claim damaging the public fisc.’ Petitioner, search-

ing for conflict, misreads the decision to state ‘absent

damages to the public fisc, there can be no FCA claim’ and

from this erroneous reading finds conflict.

The Tenth Circuit Court of Appeals’ decision in Ken-

nard v. Comstock Resources, Inc. 363 F.3d 1039 (10th Cir.

2004), did not address the absence of a claim. The exis-

tence of a claim was not disputed. Rather, the Kennard

court interpreted a section of the False Claims Act, 31

U.S.C. §3729(a)(7), not at issue in the instant cause. That

section of the statute provides that “a false record or

statement to conceal, avoid, or decrease an obligation to

ee ——— =

5

... transfer money ... to the Government” is actionable.

Thus, the Court ruled, while the Government was not the

ultimate recipient of the funds and therefore suffered no

damages, the false claim made in transferring royaities to

the Government for further disbursement to an Indian

Tribe was actionable under the FCA. In Kennard there

was a claim that was false. In the instant cause, there was

no such claim. There is no conflict.

Petitioner’s analysis of conflict suffers the same

deficiencies in discussion of Harrison v. Westinghouse

Savannah River Co., 352 F.3d 908 (4th Cir. 2003), and

Harrison v. Westinghouse Savannah River Co., 176 F.3d

776 (4th Cir. 1999). Both decisions arose from the same

conduct. Just as in Kennard, claims containing falsities

were submitted, and were actionable, though the Govern-

ment suffered no quantifiable monetary damages.

In the instant cause, contrary to Petitioner’s repeated

assertions, no false claims were submitted. The alleged

falsities identified by Petitioner were found only in the

worksheets. The Annual Cost Report itself, the document

Petitioner alleged contained a false claim, did not contain

any such falsity. Respondent does not dispute that a false

claim may be actionable under the FCA where said falsity

is material to the Government’s payment decision, even

absent damages. However, no actionable cause lies under

the FCA, damages or no, absent a claim that is false.

Petitioner, in his conclusion, argued that the qui tam

provisions of the False Claims Act should not be limited to

Relators with insider knowledge. He stated “if the courts

are going to allow individuals and corporations to scam the

system because False Claims Act plaintiffs have not

participated in the fraud and thus, do not have insider

6

knowledge, as was the situation in this case, the weapon is

ineffectual for the great majority of fraud against the

Government and taxpayers.” Petitioner’s theory that

plaintiffs lacking insider knowledge should be permitted to

come forward as qui tam relators, and then search for

lawsuits through discovery, is contrary to the purpose of

the False Claims Act.

The purpose of the False Claims Act is to encourage

“private individuals who are aware of fraud being perpe-

trated against the Government to bring such information

forward,” H.R.Rep. No. 660, 99th Cong., 2d Sess. 22

(1986). The whistleblower section of the False Claims Act,

31 U.S.C. §3730, permits only the “insider/whistleblower’”

to maintain a qui tam action. Hindo v. University of

Health Sciences/The Chicago Medical School, 65 F.3d 608,

612-613 (7th Cir. 1995), cert. denied, 516 U.S. 1114, 116

S.Ct. 915, 113 L.Ed.2d 846 (1996). The whistleblower

provision “is intended to encourage those with knowledge

of fraud to come forward,” Robertson v. Bell Helicopter

Textron, Inc., 32 F.3d 948, 951 (5th Cir. 1994), cert. denied,

513 U.S. 1154, 115 S.Ct. 1110, 130 L.Ed.2d 1075 (1995),

not to encourage plaintiffs to come forward in search of

fraud.

The whistleblower provision of the False Claims Act is

specifically intended by Congress to encourage insiders

with knowledge of fraud to come forward. Petitioner’s

conclusion that such limitation would render the False

Claims Act “ineffectual” merely demonstrates the failure

to understand the purpose of the False Claims Act.

,

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7

CONCLUSION

Petitioner’s request for review is based on misstate-

ments of fact, misstatement of law, and failure to under-

stand the basic purpose of the False Claims Act.

This Honorable Court should DENY Petitioner's

Request for a Writ of Certiorari.

Respectfully submitted,

R. ALAN ALEXANDER

FREDERICK G. HELMSING

HELMSING, LEACH, HERLONG,

EWMAN & ROUSE, P.C.

Post Office Box 2767

Mobile, Alabama 36652-2767

(251) 432-5521 — voice

(251) 4382-0633 — fax

and

DAVID B. HONIG

Counsel of Record

HALL, RENDER, KILLIAN, HEATH

& LYMAN, PS.C.

Suite 2000, Box 82064

One American Square

Indianapolis, Indiana 46282

(317) 633-4884 — voice

(317) 633-4878 — fax

Attorneys for Respondent