United States Ex Rel. Donegan v. Anesthesia Associates of Kansas City, PC

Citations: 833 F.3d 874; 2016 U.S. App. LEXIS 14830; 2016 WL 4254939Docket: 15-2420

Court: Court of Appeals for the Eighth Circuit; August 12, 2016; Federal Appellate Court

Original Court Document: View Document

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John Timothy Donegan, a Certified Registered Nurse Anesthetist (CRNA), initiated a qui tam lawsuit under the False Claims Act (FCA) against his former employer, Anesthesia Associates of Kansas City, P.C. (AAKC). Donegan claimed that AAKC submitted false Medicare reimbursement claims, specifically for anesthesia services billed at the 'Medical Direction' rate, which required the presence of anesthesiologists during the patients' 'emergence' from anesthesia. He asserted that AAKC failed to meet Medicare conditions for these claims because anesthesiologists were not present during this critical phase. The United States declined to intervene in the case, and the district court granted summary judgment in favor of AAKC, determining that Donegan did not prove that the claims were knowingly false and declined to consider any unpleaded theory of liability. Donegan's estate now appeals this decision. The ruling clarified that the FCA holds liability for the claims submitted rather than the fraudulent actions themselves. The Centers for Medicare and Medicaid Services (CMS) regulate reimbursement for anesthesia, outlining specific requirements for anesthesiologists under the Medical Direction category, which includes the need for direct involvement in critical anesthesia phases and oversight of care.

An anesthesiologist is required to document specific actions in the patient's medical record, including the pre-anesthetic exam, post-anesthesia care, and presence during critical procedures like induction and emergence, as mandated by 42 C.F.R. 415.110(b). AAKC employed CRNA Donegan at Menorah Medical Center from 2006 until January 2012, where CRNAs remain in the operating room throughout procedures while anesthesiologists supervise in multiple operating rooms. Compliance with 'Step Three' of Medical Direction, which necessitates the anesthesiologist's involvement in key aspects of anesthesia, is at issue. At MMC, the anesthesiologist is present for induction but not necessarily for emergence, which Donegan claims was often not observed, suggesting that AAKC sought reimbursement despite non-compliance with regulations. The district court granted AAKC summary judgment, concluding that Relator failed to prove that AAKC knowingly submitted false claims due to the ambiguity of 'emergence,' the reasonable interpretation of AAKC regarding this term, and the lack of evidence for fraudulent intent. On appeal, Relator contests this analysis, and the case will be reviewed to determine if there is sufficient evidence to suggest AAKC's billing practices constituted knowing fraud under the FCA, as defined by 31 U.S.C. 3729.

The United States, as amicus curiae, supports the district court's observation that the Centers for Medicare & Medicaid Services (CMS) has not provided guidance on the term "emergence" in the Medical Direction regulation (42 C.F.R. 415.110(a)(1)(iii)), nor has it been defined by authoritative sources such as national or local Coverage Determinations or professional anesthesia organizations. Due to the regulatory silence and ambiguity surrounding the term, AAKC’s Professional Practice Committee defined "emergence" in its 2001 Corporate Compliance Plan to encompass the recovery room. Medical experts for both parties concurred that "emergence" refers to a post-surgery recovery process that may extend into the recovery room. AAKC’s expert articulated that emergence is a continuous process without a definitive endpoint, which aligns with the understanding of anesthesiologists and Certified Registered Nurse Anesthetists (CRNAs). The court found AAKC’s interpretation of emergence, including continued recovery in the Post-Anesthesia Care Unit (PACU), to be objectively reasonable.

Relator argued against this interpretation, relying on a previous case (Minn. Ass’n of Nurse Anesthetists v. Allina Health Sys. Corp.) where a material fact dispute existed regarding anesthesiologists' participation in emergence. However, the current case focuses on whether AAKC’s reasonable interpretation of the ambiguous regulation negates claims of knowingly submitting false claims under the False Claims Act (FCA). Relator did not provide evidence to counter AAKC’s reasonable interpretation, and their experts suggested that emergence should conclude before transfer to the PACU, which is framed as a regulatory noncompliance issue rather than a claim of knowing fraud. The audit team’s assumption cannot constitute fraud if believed to be correct. Ultimately, the district court’s conclusion that AAKC’s reasonable interpretation of the ambiguous regulation prevents a finding of knowing submission of false claims under the FCA aligns with prior rulings indicating that a reasonable interpretation negates the scienter necessary for fraud claims.

The United States, as amicus, contests the district court's ruling that a defendant's reasonable interpretation of an ambiguous regulation eliminates liability under the False Claims Act (FCA), irrespective of the defendant's state of mind. The term "belies" is not overly broad and aligns with the principle that if a Relator or the government presents adequate evidence of guidance that warned a defendant against a reasonable interpretation of an ambiguous regulation, summary judgment on FCA scienter is inappropriate. This principle previously led to the reversal of summary judgment in the Allina case, where a Medicare memorandum explicitly stated anesthesiologists should not leave patients during procedures.

In the current case, the Relator failed to provide evidence that, at the time AAKC submitted the claims, the government had advised AAKC of a different interpretation of Step Three. The Relator’s reliance on a 1997 report from a former CMS official was deemed insufficient as it did not constitute an official warning of reckless disregard. Furthermore, the argument that AAKC should have sought clarification from CMS regarding their interpretation of "emergence" was rejected, as the agency had not addressed an obvious ambiguity in decades. AAKC's failure to obtain prior approval could not be deemed reckless in this context.

Regarding a new theory presented by the Relator, which suggested that AAKC violated Step Three by not having anesthesiologists present during extubation, the district court found this claim was not adequately articulated in the Amended Complaint. The distinction between claims regarding lack of presence during extubation and emergence, the latter being explicitly mentioned in Step Three, was crucial. The court ruled that the Relator's approach deprived the United States of the chance to consider this theory prior to the decision not to join the case, and thus the court did not err in dismissing it.

Finally, on the documentation issue, the Relator claimed AAKC violated 42 C.F.R. 415.110(b) concerning proper documentation of anesthesiologist presence during critical procedures. AAKC anesthesiologists and CRNAs completed a two-page Anesthesia Services Form, with protocols in place regarding documentation for medical direction status based on case supervision.

The top page of the Anesthesia Services Form remains in the patient’s medical record at MMC, which includes four lines for the anesthesiologist's initials indicating their presence during various stages of anesthesia. Relator requested Medical Direction reimbursement claims from July 1, 2002, along with carbonless copies of the Anesthesia Services Forms, excluding the original top pages from patient records. Among approximately 13,000 claims for general anesthesia, 724 lacked an unsigned emergence line on the carbonless copies. Relator sought partial summary judgment on these claims, arguing that AAKC's failure to comply with the record-keeping requirements of 42 C.F.R. 415.110(b) was evident. The district court noted that the regulation necessitated documentation of the anesthesiologist's presence at emergence in the patient’s medical record, not just in billing records. Anesthesiologists were expected to initial the emergence line on the top copy, which is part of the patient's record, yet Relator did not obtain these top copies. AAKC reviewed fifty patient files and found that the emergence line was completed in nineteen cases. The district court determined that Relator only showed possible negligence in 31 out of 13,000 claims, which does not constitute a violation of the False Claims Act (FCA). This interpretation aligns with legal precedent indicating that noncompliance irrelevant to government's payment decisions does not trigger FCA liability. The district court's judgment was affirmed.