Infirmary seeks to dismiss federal fraud lawsuit

Infirmary Health Systems filed a motion Oct. 7 asking a federal judge to throw out a potential billion-dollar lawsuit, claiming after a two-year investigation, the government failed to sufficiently plead that the hospital’s affiliates violated the False Claims Act, Stark Law and Anti-Kickback Statute. The U.S. Department of Justice took over the case after a former Infirmary doctor brought forth evidence that his employer, Diagnostic Physicians Group (DPG), routinely accepted illegal referrals from two Infirmary-affiliated clinics and in the process, defrauded federal healthcare programs out of millions of dollars in compensation.

“The Defendant Clinics DMC and Northside have longstanding compensation agreements with DPG under which the physician members of DPG provided the full scope of professional medical services at DMC and Northside on a full-time basis,” the motion states. “Under these arrangements, the compensation was set in advance and based on the collections the DMC and Northside Clinics received for the services performed by the DPG physicians. Neither the compensation itself nor any annual compensation adjustments varied based on the volume of referrals. The compensation was at fair market value and commercially reasonable. These arrangements were commercially reasonable, compliant with the Stark Law and Anti-Kickback Statute and did not violate the False Claims Act.”

In addition to the three counts charged under those specific laws, the defendants are also charged with “payment by mistake” and “unjust enrichment.” In lieu of a total dismissal, the defendants also motioned the judge for a “more definite statement” regarding the latter two counts.

“The United States’ common law claims in Counts IV and V should be dismissed on the additional basis that the government fails to identify whether it is proceeding under state or federal law. In this District Court, such general allegations that force defendants and the Court to guess and proceed in the dark are legally deficient and should be dismissed.

“Each claim is so ambiguous that the defendants cannot decipher the elements.”


Original Complaint

 
 

The motion further criticizes the merits of the original charges, arguing the government “fails to state any claim upon which relief can be granted. In its allegations, the Government does not state the who, what, where, when or how of the alleged false claims and their submissions.”

The motion is first legal response to the lawsuit, which was originally filed under seal in 2011 by former DPG cardiologist Dr. Christian Heesch. The False Claims Act provides those familiar with incidents of government waste and fraud to file suit on behalf of the federal government. If the government chooses to intervene, the whistleblower, known as a relator, stands to gain between 25 percent and 30 percent of any judgment against the defendant.

The defendants in the Infirmary case are charged with $521.6 million in total false claims and if found guilty, face punitive damages of as much as three times that amount, plus penalties of $5,000 to $10,000 for each claim falsified.

Lagniappe reported in August that Heesch filed a similar False Claims Act against a previous employer, Verde Valley Medical Center in Cottonwood, Ariz., but it was dismissed after a lengthy court battle. While many of the records in that case remain under seal, it is suggested Heesch received a settlement for charges related to defamation and “injurious falsehood.”

In a separate motion regarding Heesch’s continued involvement in the case in Mobile, U.S. District Court Judge Kristi Dubose ruled Oct. 8 in favor of Infirmary Health Systems, ordering Heesch to file a third amended complaint if he wishes to maintain a personal claim against the Infirmary and its affiliates for retaliation. In his original complaint, Heesch, who joined DPG in 2003, claims he was fired in July 2011, after seeking specific answers about its billing and compensation practices.

In August, prosecutors also dropped charges claiming DPG routinely provided unnecessary medical procedures in order to collect government payments, yet the bulk of Heesch’s complaint remained intact. 

As of the publishing of this article, the court has not responded to Infirmary’s motion for dismissal.