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United States, ex rel. Tra v. Fesen

United States District Court, D. Kansas

July 31, 2019




         This case comes before the court on Defendants' motions to dismiss the government's intervenor complaint. (Docs. 41, 43.) The motions are fully briefed and ripe for decision. (Docs. 42, 44, 51, 54, 55.) Defendants' motions are GRANTED IN PART AND DENIED IN PART for the reasons stated herein.

         I. Facts and Procedural History

         This is an action under the False Claims Act, 31 U.S.C. § 3730(b)(4) (the “FCA”). The action was originally filed by relator Frank Tra on May 28, 2014. (Doc. 1.) After numerous extensions of time to intervene were granted, the government filed its intervenor complaint on October 26, 2018. The government brings this action on behalf of the Centers for Medicare & Medicaid Services (“CMS”) and the Department of Health and Human Services (“HHS”). The facts set forth herein are taken from the intervenor complaint, which are assumed to be true at this stage of the proceedings.

         Defendant Dr. Mark Fesen (“Fesen”) is a licensed medical oncologist. Fesen formerly practiced at Defendant Hutchinson Clinic, P.A. (the “Clinic”). While practicing at the Clinic, Fesen was a Medicare provider. Relator Tra is a clinical oncology pharmacist who worked at the Clinic from 2007 to 2014. Because of his role as an oncology pharmacist, Tra was aware of the chemotherapy and other anti-cancer drugs used by the oncologists at the Clinic. (Doc. 25 at 1-2, 11.)

         Medicare pays for health-care services for the elderly and disabled, including services and drugs by physicians.[1] CMS contracts with a Medicare Administrative Contractor (“MAC”) to process and pay claims in specific areas. For the state of Kansas, Wisconsin Physician Services Insurance Corporation (“WPS”) is the MAC that processes claims for providers. To be a Medicare provider, a physician must submit a Medicare Enrollment Application. In order to receive payment from Medicare, Fesen submits a CMS Form 1500 Health Insurance Claim Form (“Form 1500”) to WPS, who would then pay or deny the claim on behalf of CMS. In doing so, WPS follows the applicable Medicare rules, regulations, and procedures. (Doc. 25 at 5-6.)

         By statute, Medicare only pays for services that are “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). With respect to drugs, those are covered only if they “are reasonable and necessary for the diagnosis or treatment of the illness or injury for which they are administered according to accepted standards of medical practice.” (Doc. 25 at 6) (citing Medicare Benefit Policy Manual, Ch. 15 at 50.) A provider and facility must ensure that the services provided to the beneficiary are medically necessary. (Id. at 7) (citing 42 U.S.C. § 1320c-5(a)). Form 1500 requires providers to certify that “the services on this form were medically necessary.” (Id.)

         As of May 16, 2009, local coverage determination L28576 (“LCD”) issued by WPS provided coverage guidance and limitations for chemotherapy drugs. According to the LCD, a drug must be used as set forth in certain compendia ratings, including the National Comprehensive Cancer Network (NCCN) Drugs and Biologies Compendium and the Thomson Micromedex DrugDex (collectively, the “compendia”). The Clinic followed the guidelines and incorporated the requirements into its own policy and stated that “Medicare guidelines require NCCN category 1 or 2A, or DrugDex Class 1, 2a, or 2b for payment, ” and that “[c]overage for medication is based on the patient's condition, the appropriateness of the dose and route of administration, based on the clinical condition and the standard of medical practice regarding the effectiveness of the drug for the diagnosis and condition. The drug must be used according to the indication and protocol listed in the accepted compendia ratings.” (Doc. 25 at 8-9.)

         From 2008 to 2011, Fesen provided oncology services to his patients, which included prescribing and administering treatments. The Clinic's billing department would then bill the insurance company. In late 2008 or early 2009, Tra noticed problems with Fesen's practice, including the use of the drug Avastin for prostate cancer, as to which it was allegedly not indicated. In September 2009, there was a meeting regarding the clinical billing concerns regarding the regimens being prescribed by Fesen. The Clinic's board decided that the Medicare guidelines will be followed in the oncology department. In October 2009, the Board issued a mandate requiring that Fesen “become compliant with Medicare rules.” (Doc. 25 at 14.) Allegedly, Fesen continued to fail to comply with Medicare requirements and continued to submit false claims, i.e. claims that were medically unnecessary. The Clinic allegedly failed to take any action to determine whether it had submitted improper claims to Medicare. (Doc. 25 at 11-14.)

         In 2010, the Clinic hired an outside consultant, Dr. Gingrich, to perform chart reviews of oncology patients. After reviewing five charts from both Fesen and Dr. Estephan, another oncologist at the Clinic, Gingrich found no concerns with Estephan's charts but found that all treatments were inappropriate and not in compliance with compendia guidelines with respect to Fesen's patients. (Doc. 25 at 15-16.) With respect to one patient, Fesen was prescribing the powerful drug Rituxan even though the patient had no positive pathology after 2005. Gingrich stated that the prescribing of the drug to this patient was “unnecessary” and “unbelievable.” (Id. at 16.) After this review, the patient was not provided any additional Rituxan. (Id.) Gingrich even sought confirmation from the Clinic that the five charts he was provided were random samples.

         Gingrich did a second review with a larger sample in September 2010. This sample included 59 Fesen patients and 16 Estephan patients. Again, Gingrich determined there were no significant issues with Estephan's patients. Gingrich determined that 30 of Fesen's patients received treatments that were not evidence-based or in accordance with the compendia. In seven cases, Gingrich found that the drug Rituxan was “given either inappropriately as to a patient with large cell lymphoma in the maintenance phase [where current data do not support extended therapy] or given >2 years to patients with follicular lymphoma [where current data support every 6 months x 2 years maintenance].” (Doc. 25 at 17) (brackets in original.) Rituxan is expensive and Medicare pays between $2, 000 to $4, 000 per infusion. Gingrich also found the medical records to be poorly documented in about six cases and he could not discern a clear indication of clinical intent or direction from those records. On September 27, 2010, the Clinic's board met to discuss the audit. On October 12, the Clinic's administrative counsel met with Fesen and discussed the findings. (Doc. 25 at 19.)

         At the meeting, Fesen resisted moving toward so-called “evidence-based medicine.” (Id.) Gingrich responded by telling Mike Harms, the chief financial officer of the Clinic (“CFO”), that Fesen was ignoring national guidelines for the treatment of cancer patients. Fesen eventually agreed to comply with some of the Board's mandates. The Clinic then tasked Tra with overseeing Fesen's treatments. “Tra consistently caught and corrected attempts by Fesen to inappropriately fractionate doses to allow more frequent infusions, to use regimens not approved by the compendia, and to give Rituxan maintenance beyond the two years permitted.” (Doc. 25 at 20.) On April 12, 2010, Tra forwarded information regarding private insurance denials to the CFO. Those denials determined that the treatment was not medically necessary, including Rituxan claims that were given beyond two years. Tra recommended that the Clinic go in and review patients who had Rituxan for more than two years and to stop the medication. Tra also recommended removing patients who have been prescribed off-label Avastin. In one case, Tra reported a patient who had been on Rituxan for eight years. In another case, a patient was prescribed Rituxan even though there were repeated negative bone-marrow scans. The prolonged use of Rituxan for that patient allegedly caused numerous health problems. (Doc. 25 at 20-21.)

         On November 30, 2010, the CFO, CEO, and the board discussed Fesen's misuse of the drug Navelbine. They had concerns that the drug was being administered against board policy and without Tra's approval. Fesen was fined $10, 000 by the board in December 2010 to compensate the Clinic for legal expenses and exposure of the Clinic. The board, however, did not report the misuse of Navelbine to Medicare or repay any reimbursement. (Doc. 25 at 21-22.)

         A third audit was conducted in April 2011 and included a sample of 49 Fesen patients. Gingrich found that out of 15 patients with hematological problems, 10 were given inappropriate therapies. These included inappropriate medications or inappropriate dosages. A summary of talking points was compiled to discuss with Fesen. The summary stated that Fesen's “practice was not consistent with acceptable oncologic standards” and he was putting the Clinic “at risk for billing and medical necessity issues.” (Doc. 25 at 24.)

         Ultimately, the board encouraged Fesen's resignation from the Clinic. Fesen resigned effective December 31, 2011. After Fesen's resignation, the Clinic did not take any action to investigate previous claims to Medicare or to report any overpayments to Medicare. (Doc. 25 at 24-25.)

         The intervenor complaint also lists nine specific examples of patients who were treated by Fesen. With respect to Patient A, the patient was seen for a diagnosis of stage 1 lymphoma, the medically appropriate treatment for that diagnosis is resection/radiation, not Rituxan. On February 25, 2010, a lab report stated that there was no evidence of lymphoma. On June 3, 2010, a consulting oncologist stated that Patient A was without evidence of the disease. Nevertheless, from March 2010 to October 2010, Fesen and the Clinic submitted claims for Rituxan and chemotherapy infusions that were allegedly medically unnecessary. Patient B was being treated by Fesen for non-Hodgkin's lymphoma. Fesen and the Clinic submitted claims for Rituxan that were allegedly medically unnecessary because the patient was given the medication for more than two years. For Patient G, the medical records showed a diagnosis of lymphoma but there was no progression of the disease and biopsies showed no lymphoma at all. Fesen and the Clinic submitted claims for 13 infusions of Rituxan that were allegedly medically unnecessary. Patient H was diagnosed with non-Hodgkin's lymphoma and received Rituxan for several years, even after there was a negative PET scan and a determination that the disease could not be found. (Doc. 25 at 25-39.)

         The government alleges that these specific incidents are “representative examples of the medically unnecessary services Fesen and Hutchinson Clinic repeatedly billed to Medicare and Tricare.” (Doc. 25 at 39.)

         During May 2008 to December 2011, Fesen and the Clinic billed at least 289, 407 claims to Medicare for Fesen's treatments and were paid over $30 million. Of that, $17 million was for cancer drugs. Specifically, Medicare was billed approximately $3.8 million for Rituxan. The government alleges that the audit results indicate that a significant portion of those payments were for claims that were false because they were for treatments that were medically unnecessary. The government alleges that the Clinic had knowledge of the false claims based on the audits but that it failed to repay the government. (Doc. 25 at 39-41.)

         The intervenor complaint asserts five claims against Defendants. Counts 1 through 3 are claims under the FCA for false claims, reverse false claims, and false records. Count 4 is a claim for unjust enrichment and count 5 is for payment by mistake. Defendants now move for dismissal of the intervenor complaint on the basis that it fails to state a claim and fails to allege fraud with particularity.[2]

         II. Motion to Dismiss Standard

         In order to withstand a motion to dismiss for failure to state a claim, a complaint must contain enough allegations of fact to state a claim to relief that is plausible on its face. Robbins v. Oklahoma, 519 F.3d 1242, 1247 (10th Cir. 2008) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1974 (2007)). All well-pleaded facts and the reasonable inferences derived from those facts are viewed in the light most favorable to the government. Archuleta v. Wagner, 523 F.3d 1278, 1283 (10th Cir. 2008). Conclusory allegations, however, have no bearing upon the court's consideration. Shero v. City of Grove, Okla., 510 F.3d 1196, 1200 (10th Cir. 2007). Rule 12(b)(6) “does not require that Plaintiff establish a prima facie case in her complaint, but rather requires only that the Plaintiff allege enough factual allegations in the complaint to set forth a plausible claim.” Pueblo of Jemez v. United States, 790 F.3d 1143, 1171-72 (10th Cir. 2015) (internal citations omitted). In the end, the issue is not whether the government will ultimately prevail, but whether the government is entitled to offer evidence to support its claims. Beedle v. Wilson, 422 F.3d 1059, 1063 (10th Cir. 2005).

         III. Analysis

         A. ...

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