Friday, September 4, 2009

Published Eleventh Circuit Opinion On Medicare Lawsuit Against Tenet Health

In Boca Raton Community Hospital v. Tenet Health Care Corporation (07-14352), the Eleventh Circuit affirmed the district court's denial of class certification, striking of the plaintiff's expert witness and the entry of summary judgment.

Judge Carnes started the opinion by stating:
More than a hundred years ago the mother of modern nursing, Florence Nightingale, observed: “It may be a strange principle to enunciate as the very first requirement in a Hospital that it should do the sick no harm. It is quite necessary, nevertheless, to lay down such a principle . . . .” When Nightingale wrote those words hospitals were not the sanitary sanctuaries they have become, and the harm she meant to shield her patients from was new or worsening illness. Since then the health care situation has become more complicated. Some hospitals are part of profit-driven, multi-billion dollar corporations, and the harm they can do has taken on additional forms. One such corporation is Tenet Health Care, and this case is about the economic harm it did by manipulating part of the Medicare program.
Boca believed that in the period before the 2003 changes, Tenet had been gaming the outlier program to get more reimbursements than its extraordinary-cost cases justified. Boca filed a class action complaint to that effect in March 2005 and amended it to include a revised class definition in June 2006. In the amended complaint, Boca alleged that Tenet increased its outlier reimbursements by dramatically raising its charges without reference to any actual cost increases, making average-cost cases look like outlier cases.
The Plaintiff's Expert
The party offering the expert testimony has the burden of demonstrating that the testimony is “relevant to the task at hand” and “logically advances a material aspect” of its case.  The offering party must show that the opinion meets the Daubert criteria, including reliable methodology and helpfulness to the factfinder in understanding the evidence or determining a fact, by a preponderance of the evidence. See Rink, 400 F.3d at 1292.  The district court found Boca’s method inadequate and speculative because it did not attempt to show what amount of Tenet’s charges were unlawful. Instead it focused on approximating Tenet’s actual costs more closely. To do this, Boca’s method swapped the outdated audited ratios (or the artificially high average ratios) the Center used to determine Tenet’s outlier payments for the more current and accurate unaudited ratios.
The district court’s conclusion that Boca’s expert opinion on injury and damages did not fit its liability theory was not manifestly erroneous because, like an oversized coat, the expert opinion covered too much. Under Boca’s liability theory, it is not unlawful for hospitals to overcharge (that is, to increase charges out of step with costs) as long as their audited ratios do not fall below the low National Threshold. Because Boca’s expert opinion uses unaudited ratios to approximate Tenet’s actual costs, it includes the outlier payments Tenet got from lawful overcharging, as well as unlawful overcharging, as part of Boca’s injury and damages.
Boca drew a line between lawful and unlawful behavior for liability purposes: the low National Threshold. Boca could have walked that line in a way that fit its theory of injury and damages to its liability theory; it could have chosen a method that showed that the behavior Boca claims caused its injuries, Tenet’s unlawful overcharging, actually impacted the loss threshold. All that Boca’s expert opinion purported to show, however, was the amount of most clearly lawful outlier payments Tenet could have gotten—the amount of outlier money Tenet would have received if it had used its actual costs to apply for the payments. What Boca’s expert opinion fails to recognize (which, by contrast, its liability theory does) is the range of behavior between clearly unlawful and perfectly lawful. Having tailored a trim-fitting liability theory for the body of its case against Tenet, Boca cannot hang a baggy injury and damages theory on it. Whatever expert opinion Boca provided had to be suitably proportioned. And because Boca’s injury and damages opinion was not confined to charges that its liability theory would consider unlawful, it was too broad. It was ill-fitting. Thus the district court did not abuse its discretion by excluding Boca’s expert opinion on injury and damages for lack of fit with its liability theory.
The Summary Judgment and Class Certification Order
The decision to affirm the district court's conclusion about the expert ended the discussion about the other two issues.  The court stated:
Our conclusion that the district court did not abuse its discretion in excluding Boca’s expert opinion on injury and damages compels a second one: that the district court’s grant of summary judgment in favor of Tenet was appropriate. Without its expert opinion, Boca has not offered any evidence of injury—an essential element of its RICO claim.
Because summary judgment was appropriate, Boca’s challenge to the district court’s denial of class certification is moot. See Rink, 400 F.3d at 1297 (“Because we have found that summary judgment was properly granted as to the underlying claims of the class representatives, the issue of class certification is moot.”).
Tenet Was Not Blameless
The district court made a point to emphasize, as we do now, that while summary judgment for Tenet was appropriate, Tenet was not blameless. The record shows that Tenet hospitals took advantage of a system designed to help pay for the sickest and least fortunate patients to heal. The people hurt the most by Tenet’s manipulation of the Medicare outlier program through excessive charge increases are the uninsured, who are forced to pay hospitals’ “sticker prices” instead of the reduced rates insurance companies negotiate for their clients. This may not be what Florence Nightingale had in mind when she warned about the harm hospitals could do, but it is still a harm against which patients deserve protection. The government has addressed this new strain of harm by recovering almost a billion dollars from Tenet and making changes to the way the outlier program runs. Hopefully those actions will help prevent similar abuse in the future and serve to remind hospitals that their first duty is to do no harm to anyone.


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