A lawsuit is moving forward against two large healthcare organizations that allegedly terminated contracts after two Charlotte doctors refused to take part in a false billing scheme after a federal judge ruled that corporate entities have standing to bring retaliation claims for damages under state and federal False Claims Acts.
Thomas Mason and Steven Folstad are the owners of Mid-Atlantic Emergency Medical Associates (MEMA), which until 2010 provided medical services to Davis Regional Medical Center and Lake Norman Regional Medical Center, two hospitals that were then owned by Health Management Associates. They claim that HMA and EmCare, which provided emergency room doctors at the hospitals for HMA, submitted false bill claims to Medicare and other entities. When the doctors refused to take part in the scheme, HMA terminated contracts with MEMA in retaliation, the lawsuit against HMA and EmCare alleges.
In an Oct. 24 ruling, U.S. District Judge Kenneth D. Bell denied a motion to dismiss the lawsuit. Bell held that corporate entities, just like individuals, can bring retaliation claims under the False Claims Act, which Congress created to expose fraud that the government itself cannot easily uncover by encouraging private parties to report fraudulent conduct.
The FCA only names aggrieved parties as “employees,” “contractors” and “agents.” HMA and EmCare maintained the claim should be dropped, because the act doesn’t include ‘entities’ such as MEMA. Bell disagreed.
“Even if defendants are correct, and entities that are ‘contractors’ or ‘agents’ are not protected from retaliation, the question becomes whether MEMA, a group of physicians, should be considered a group of ‘individuals’ rather than an ‘entity,’” Bell wrote.
The lawsuit alleges the physicians, through MEMA, complained about the fraudulent conduct, and HMA, through MEMA, retaliated against the physicians, Bell wrote.
“Given the remedial nature of the anti-retaliation statute, the plain language of the statue allows MEMA to bring claims of retaliation in violation of both the federal and state False Claims Acts,” Bell wrote.
Regarding the doctors’ claim for unfair and deceptive trade practices, Bell cited a 2018 North Carolina Court of Appeals opinion, Hamlet v. Hernandez that held a business dispute between a hospital and physician did not fall under the learned profession exception of the UDTPA. (On Dec. 3, North Carolina Supreme Court Justice let the opinion stand in a 3-3 decision.)
Because the lawsuit stems from a business relationship between the parties, the learned profession exception does not apply, Bell wrote.
“Plaintiffs’ unfair and deceptive trade practices claims arise out of the professional service agreements with the HMA Defendants, not the rendering of medical care,” he wrote.
Bell also permitted the doctors to move ahead with a defamation claim against HMA. They claim that HMA told several other physicians that MEMA was terminated because of its failure to commit to HMA’s quality program and because of MEMA’s patient satisfaction scores; Bell found that this constituted an actionable claim for defamation.
Tom Myrick, Paul Peralta, Ben Shook, and Emily Pera of Moore & Van Allen in Charlotte, James Wyatt of Wyatt & Blake in Charlotte and Marc S. Raspanti and Pamela Coyle Brecht of Pietragallo Gordon Alfano Bosick & Raspanti in Philadelphia represented the plaintiffs.
“Judge Bell persuasively articulates why the anti-retaliation provisions of the False Claim Acts apply to contractors and agents, which include entities such as Mid-Atlantic Emergency Medical Associates, and not just individual employees,” Myrick said. “This decision also holds that retaliatory termination is an improper motive under a tortious interference with contractual relationship claim, which cannot be justified by a profit motive. Companies that retaliate against their agents or contractors, even entity agents or contractors, by terminating them for refusing to participate in fraud for profit is prohibited by the False Claim Acts, and they will be held accountable.”
Mason and Folstad originally filed the lawsuit on their own behalf and on behalf of the United States and the states of North Carolina, Florida, Georgia, Oklahoma, Tennessee, and Texas. In 2017, EmCare paid $33 million to settle the government’s claims against it and in 2018, HMA and Community Health Systems paid $262 million.
Chris Lam of Bradley Arant Boult Cummings in Charlotte represents HMA. George Breen of Epstein Becker & Green in Washington represents EmCare. They could not be reached for comment.
Follow Bill Cresenzo on Twitter @bcresenzonclw