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United States ex rel. Herbold v. Doctor's Choice Home Care, Inc.

United States District Court, M.D. Florida, Tampa Division

October 31, 2019

UNITED STATES OF AMERICA, ex rel. CORINA HERBOLD f/k/a Corina Duffy, Plaintiff,
v.
DOCTOR'S CHOICE HOME CARE, INC., TIMOTHY T. BEACH, and STUART C. CHRISTENSEN, Defendants.

          ORDER

          VIRGINIA M. HERNANDEZ COVINGTON UNITED STATES DISTRICT JUDGE

         This matter comes before the Court upon consideration of Defendant Doctor's Choice Home Care, Inc.'s Motion to Dismiss (Doc. # 58), filed on August 21, 2019. Defendants Timothy T. Beach and Stuart C. Christensen joined in the Motion. (Doc. ## 59, 60). The United States responded in opposition on September 27, 2019. (Doc. # 73). Doctor's Choice replied on October 18, 2019, (Doc. # 76), and the United States filed a sur-reply on October 30, 2019. (Doc. # 80). For the reasons that follow, the Motion is denied.

         I. Background

         Relator Corina Herbold initiated this qui tam False Claims Act (FCA) case against Doctor's Choice, Beach, and Christensen on April 30, 2015. (Doc. # 1). In February 2019, the United States elected to intervene in the action, and the case was unsealed. (Doc. ## 29-31). The United States filed its Complaint in intervention on May 24, 2019. (Doc. # 38). The Complaint asserts claims under the FCA for presentation of false claims, false statements, and reverse false claims. (Id.). The Complaint also asserts claims under Florida state law for unjust enrichment and payment by mistake. (Id.).

         The Complaint provides over fifty pages of detailed factual allegations. Thus, the Court recites only the allegations necessary to decide the Motion to Dismiss.

         Doctor's Choice provides home health care services in Florida. (Id. at 5). These services are billed primarily to Medicare. (Id.). Christensen was Doctor's Choice's Chief Executive Officer and Vice President. (Id.). Beach was Doctor's Choice's President. (Id.). Health at Home Homecare, LLC, is a home health care services company affiliated with Doctor's Choice. (Id. at 6). Christensen and Beach are co-founders and executives of Health at Home. (Id.). The United States alleges, and cites emails supporting, that Doctor's Choice “jointly marketed their services” with Health at Home and encouraged Doctor's Choice Account Executives to “generate referrals of patients to” Health at Home. (Id. at 6-7).

         Doctor's Choice submitted Medicare claims electronically through an intermediary company, Palmetto Government Benefits Administrators. (Id. at 17). To electronically submit claims to Medicare, Doctor's Choice entered into an Electronic Data Interchange Enrollment Agreement, through which Doctor's Choice agreed to “submit claims that are accurate, complete, and truthful.” (Id.).

         Doctor's Choice was also required to file an annual cost report with Palmetto. (Id.). Doctor's Choice was required to certify that its cost reports “were (1) truthful, i.e., that the cost information contained in the report is true and accurate; (2) correct, i.e., that it was entitled to reimbursement for the reported costs in accordance with applicable instructions; (3) complete, i.e., that the cost report is based upon all information known to DCHC; and (4) that the services identified in the cost report were not corrupted by kickbacks, and were otherwise provided in compliance with all applicable health care laws and regulations, including the Stark Statute and [Anti-Kickback Statute].” (Id. at 17-18).

         The United States alleges that Defendants engaged in two unlawful schemes. First, from 2010 to 2016, Defendants allegedly “knowingly billed Medicare, or caused Medicare to be billed, for home health services to patients referred to [Doctor's Choice] by three physicians with whom [Doctor's Choice], Beach and Christensen had entered into sham Medical Director Agreements for the purposes of inducing and/or rewarding referrals.” (Id. at 2). “None of the three implicated physicians performed the work they billed as DCHC Medical Directors, yet in order to continue to induce and generate referrals, Defendants continued to pay, or caused to be paid, the Medical Directors' invoices.” (Id. at 2-3). The United States alleges Defendants violated the Stark Law (and thus the FCA) by submitting claims for reimbursement based on referrals from these three physicians. (Id. at 2). The United States also alleges that Defendants were unjustly enriched and paid by mistake as a result of this conduct. (Id.).

         The United States describes the second scheme this way:

[Doctor's Choice], through Beach and Christensen, hired employees who were the wives of physicians who then began to refer more patients to [Doctor's Choice], and [Doctor's Choice] paid those employees based on the volume or value of referrals by their physician spouses in violation of the Stark Law, and therefore the FCA, and also in a manner that unjustly enriched Defendants and caused the United States to pay DCHC by mistake.

(Id.).

         A. Medical Director Referrals Scheme

         Regarding the first alleged scheme, Doctor's Choice had numerous Medical Directors over the years and the Complaint contains allegations about Doctor's Choice's payment of Medical Directors and the Medical Director's referral rates. (Id. at 21-52).

         The Complaint alleges that Doctor's Choice made a practice of closely tracking Medical Directors' referrals, and that Doctor's Choice executives, including Christensen and Beach, would push Medical Directors for more referrals. (Id. at 21) When a Medical Director did not refer as many patients as hoped, Doctor's Choice would terminate the Medical Directorship early. (Id.).

         For example, in a July 2010 email, Christensen expressed disappointment with Dr. Gelvin, a Medical Director who had not referred as many patients as Doctor's Choice expected:

Dr. Gelvin is not working out as a med director. As you can see, he has only given us 17 ref in 6 mo. He was good for 7 last month and 1 this month. I think we could find someone more productive with his spot. We have paid him 6K so far.

(Id. at 22). Dr. Gelvin continued to refer fewer patients than desired, and his Medical Directorship was allegedly terminated as a result. (Id.).

         Likewise, on October 24, 2012, Christensen emailed a Doctor's Choice Account Executive about Medical Director Dr. Ruano, attaching a spreadsheet of referrals for the month and stating: “I feel it is time to start to think of a new Med Director. Dr. Ruano is not pulling his weight.” (Id. at 23). About a year later, on October 10, 2013, Christensen emailed multiple Account Executives regarding referrals from Medical Directors generally and Dr. Ruano in particular. (Id.). Christensen stated that Dr. Ruano was “not good” because he had made no referrals that month. (Id.) Christensen also remarked that Doctor's Choice's Medical Directors were “not doing good. My suggestion is to have a talk with them and let them know what the expectation is.” (Id.). A few weeks later, Dr. Ruano and Doctor's Choice agreed to terminate his Medical Directorship early. (Id.).

         Christensen expressed similar dissatisfaction with Medical Director Dr. Janick's rate of referrals. On January 14, 2014, Christensen emailed a Doctor's Choice Account Executive and others, stating: “Did Dr. J get his check[?] Where are his referrals[?] I need to turn the business on[.]” (Id. at 42). Again, on January 29, 2014, Christensen sent another email, directing Doctor's Choice's Vice President of Marketing and Sales to

[G]o see Dr. Janick and have a very frank conversation about the volume we are receiving. He is our Medical Director and he has NOT sent us as much as we agreed he would. I need him to know that we are not getting business so if it comes down to us making a change because we are not getting business he will understand.

(Id.). In early March 2014, Dr. Janick resigned as Medical Director. (Id. at 43).

         Moreover, after Dr. Stolarski ended his term as Medical Director with Doctor's Choice and became a Medical Director at a competitor, Beach emailed Dr. Stolarski on October 15, 2012. (Id. at 33). In that email, Beach expressed his understanding that Dr. Stolarski owed Doctor's Choice half of his referrals for home health care services and threatened to “[n]otify all State and Federal Agencies of [Relator Herbold's] illegal activities, ” including “medical director invoices, ” unless Dr. Stolarski continued to refer half of his referrals to Doctor's Choice. (Id. at 33-34).

         According to the United States, these emails - and other allegations discussed below - show that the Medical Director Agreements with Dr. Stolarski, Dr. Frey, and Dr. Janick were shams. (Id. at 11). Importantly, the claims in the Complaint are based only on Doctor's Choice's relationship with these three doctors: Dr. Stolarski, Dr. Janick, and Dr. Frey. (Id. at 2). The allegations about each doctor's relationship with Doctor's Choice follow.

         1. Dr. Stolarski

         Doctor's Choice was aware that Dr. Stolarski would be a good source of referrals because he had many patients who required home health services. (Id. at 24). Ultimately, Dr. Stolarski ended up serving as a Medical Director for either Doctor's Choice or the affiliated Health at Home on three occasions. (Id.). First, in mid-2010, Beach and Christensen offered Dr. Stolarski the position of Medical Director for Health at Home because “the Medical Director position in DCHC's Sarasota office was then filled by Dr. Gelvin, and Florida law permits only one Medical Director per location.” (Id. at 25). Although he had referred only one patient to Doctor's Choice between January and June 2010, Dr. Stolarski's referrals to Doctor's Choice increased after this job offer. (Id.).

         Once Dr. Stolarski “signed a Job Description to be Medical Advisor for [Health at Home] and also completed an IRS Form W-9 for [Health at Home]” in September 2010, his referrals to Doctor's Choice increased even more. (Id.). Between September 16 and November 30, 2010, Dr. Stolarski referred fifty-six patients to Doctor's Choice. (Id.). The United States includes a list of representative claims paid by Medicare to Doctor's Choice for home health services provided to patients Dr. Stolarski referred. (Id. at 26).

         Dr. Stolarski's referrals to Doctor's Choice increased even more in December 2010, when he officially began his term as Medical Director to Health at Home. (Id. at 27). From December 2010 through May 2011, Dr. Stolarski referred 143 patients to Doctor's Choice. (Id.). Again, the United States includes a list of representative claims paid by Medicare to Doctor's Choice for home health services provided to patients Dr. Stolarski referred. (Id.). During his Medical Directorship with Health at Home, Dr. Stolarski submitted thirty-six invoices and was paid over $25, 000. (Id. at 28).

         Once a Medical Directorship at Doctor's Choice became available, Doctor's Choice hired Dr. Stolarski as Medical Director on June 1, 2011. (Id. at 29). Dr. Stolarski resigned his first Medical Directorship with Doctor's Choice on September 18, 2012. (Id.). During his first Medical Directorship with Doctor's Choice, Dr. Stolarski referred 426 patients to Doctor's Choice. (Id. at 30). The Complaint contains a list of sample claims paid by Medicare to Doctor's Choice for home health services provided to patients Dr. Stolarski referred. (Id.). During this time, Dr. Stolarski submitted over 150 invoices and was paid over $75, 000. (Id. at 31). “After Dr. Stolarski left as [] Medical Director, Christensen told a [Doctor's Choice] Account Executive that [Doctor's Choice] paid Dr. Stolarski ‘a lot of good money' and got a lot of referrals from him in return.” (Id. at 34).

         After his first Medical Directorship with Doctor's Choice ended, Dr. Stolarski's referrals to Doctor's Choice “dropped substantially.” (Id.). From September 19, 2012, to November 1, 2014, Dr. Stolarski referred only forty-four patients to Doctor's Choice. (Id.).

         Although Dr. Stolarski had resigned as Medical Director, Doctor's Choice “attempted to induce Dr. Stolarski to again refer patients to [Doctor's Choice] by offering him a Medical Directorship plus in-kind remuneration in the form of [Doctor's Choice] marketing and promoting Dr. Stolarski.” (Id. at 35). Accordingly, Dr. Stolarski became Doctor's Choice's Medical Director for a second time in November 2014. (Id. at 35). “Dr. Stolarski negotiated the terms of this Medical Advisor agreement with Beach and Christensen, on behalf of [Doctor's Choice], including one conversation where they promised to pay him $7500 per month and another conversation where they discussed possible ways to justify paying him that amount.” (Id.).

         From November 1, 2014, to March 31, 2016, Dr. Stolarski referred 631 patients to Doctor's Choice. (Id. at 37). Again, the Complaint contains a list of sample claims paid by Medicare to Doctor's Choice for home health services provided to patients Dr. Stolarski referred. (Id.). During his second Medical Directorship with Doctor's Choice, Dr. Stolarski submitted over forty invoices and was paid over $80, 000. (Id. at 38).

         In early January 2016, “the United States served investigative subpoenas on Dr. Stolarski, on Beach individually, on Christensen individually, and on [Doctor's Choice] by serving Beach and Christensen.” (Id.). “Shortly thereafter, Dr. Stolarski's referrals to [Doctor's Choice] began to drop sharply.” (Id.). According to the United States,

From January 1, 2016, through March 31, 2016, Dr. Stolarski referred 136 patients to [Doctor's Choice], or nearly 50 patients per month. However, from April 1, 2016, through December 31, 2016, he referred only 101 patients to [Doctor's Choice], or barely 11 patients per month. And from January 1, 2017, through December 31, 2017, he referred only 16 patients to [Doctor's Choice], or just over 1 patient per month.

(Id.).

         2. Dr. Frey

         In 2011, Doctor's Choice learned that many of Dr. Frey's patients were Medicare beneficiaries, which enticed Christensen and Beach to meet with Dr. Frey to discuss becoming a Medical Director. (Id. at 44). Because of the legal limits on the number of Medical Directors Doctor's Choice can have and the lack of Medical Director openings at the time, Doctor's Choice hired Dr. Frey as a consultant instead. (Id. at 45).

         As a consultant, Dr. Frey was ostensibly paid for providing “in-service trainings” to Doctor's Choice staff. (Id.). Yet Dr. Frey did not come into Doctor's Choice's offices to provide trainings; instead, some Doctor's Choice staff went to Dr. Frey's office “to watch him perform procedures he was otherwise performing, which provided DCHC staff little if any educational value.” (Id.). According to the United States, Doctor's Choice merely “called it ‘training' in order to justify compensating Dr. Frey.” (Id.). Moreover, “[t]hese payments were not consistent with fair market value or commercially reasonable because they were not meaningful training, ” and “the payments were determined in a manner that took into account the volume or value of Dr. Frey's referrals because [Doctor's Choice] made those payments to reward him for referrals.” (Id.). Indeed, after he became a consultant, Dr. Frey - who had previously referred only twelve patients to Doctor's Choice over a more than two- year period - referred over thirty-five patients to Doctor's Choice in six months. (Id. at 45-46).

         Eventually, Doctor's Choice ended its consultancy with Dr. Frey because Christensen grew concerned “that paying Dr. Frey as a consultant could run afoul of Florida's prohibition on having more than one Medical Director.” (Id. at 47). After his consultancy ended, Dr. Frey “substantially decreased his referrals to” Doctor's Choice. (Id. at 47).

         When a Medical Directorship became available in late 2012, Doctor's Choice hired Dr. Frey as a Medical Director. (Id.). Once he was hired as Medical Director, Dr. Frey's referral of patients to Doctor's Choice for home health services increased, and he referred 244 patients in just under two years. (Id.). The United States includes a list of sample claims for reimbursement submitted by Doctor's Choice for treatment of patients referred by Dr. Frey while he was a Medical Director. (Id. at 48).

         “[I]n early 2014, when Dr. Frey's referrals were again down, one of the assigned [Doctor's Choice] Account Executives told him that [Doctor's Choice] might not be able to keep him as a Medical Director.” (Id. at 52). “On several occasions during his Directorship, one of the assigned Account Executives would confront Dr. Frey about referring patients to home health agencies other than [Doctor's Choice], telling him that, because he was ...


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