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United States of America v. Staten Island University

May 13, 2011

UNITED STATES OF AMERICA,
EX REL ELIZABETH M. RYAN, PLAINTIFFS,
v.
STATEN ISLAND UNIVERSITY
HOSPITAL; GILBERT LEDERMAN;
GILBERT LEDERMAN, M.D., P.C.;
PHILIP JAYSILVERMAN, DEFENDANTS.
GILBERT LEDERMAN; GILBERT
LEDERMAN, M.D., P.C., THIRD-PARTY PLAINTIFFS,
v.
REGENCY ALLIANCE SERVICES, INC.;
PHYSICIANS MANAGEMENT GROUP, THIRD-PARTY DEFENDANTS.



The opinion of the court was delivered by: John Gleeson, United States District Judge

MEMORANDUM AND ORDER

This action was commenced on June 6, 2004 when relator Elizabeth M. Ryan filed a complaint against Staten Island University Hospital ("SIUH"), Gilbert Lederman ("Lederman"), Gilbert Lederman, M.D., P.C. ("Lederman P.C."), and Philip Jay Silverman pursuant to the qui tam provisions of the False Claims Act ("FCA"), 31 U.S.C. § 3730(b). The relator's complaint alleges, inter alia, that beginning in the mid-1990s, the defendants performed more than 10,000 Stereotactic Body Radiosurgery ("BRS") procedures on their patients, that these procedures were not approved for reimbursement by Medicare, but that Lederman and Lederman P.C. (collectively, the "Lederman defendants") submitted thousands of false claims for Medicare reimbursement. On July 31, 2008, the United States intervened in the action by filing a complaint against the Lederman defendants. The government asserts two claims under the FCA, pursuant to 31 U.S.C. §§ 3729(a)(1) and 3729(a)(2), and two common law claims for unjust enrichment and payment by mistake.

On November 1, 2010, the Lederman defendants filed a third-party complaint against Regency Alliance Services, Inc. ("Regency") and Physicians Management Group ("PMG"), alleging that Regency and PMG were coding and billing experts working for the Lederman defendants during the relevant period, and that the allegedly false claims were submitted by Regency and PMG on behalf of the Lederman defendants. The Lederman defendants seek contribution and indemnification from the third-party defendants in the event that they are held liable for unjust enrichment or payment by mistake. PMG has not filed a motion to dismiss or otherwise appeared in this action. On March 24, 2011, Lederman filed a motion for entry of default against PMG. The Clerk entered default on April 11, 2011. On February 25, 2011, Regency filed a motion to dismiss the Lederman defendants' third-party complaint, or in the alternative, to vacate my October 18, 2010 order granting the Leaderman defendants leave to implead Regency. Oral argument was heard on the motion on April 22, 2011. For the reasons stated below, Regency's motion to dismiss is granted. In addition, the Lederman defendants' claims for contribution and implied indemnity against PMG are dismissed.

BACKGROUND*fn1

A. The Medicare Program and Its Treatment of Stereotactic Radiosurgery

The Medicare program was established by enactment of Title XVIII of the Social Security Act. Part B of the Medicare program provides federal funding for certain physician services provided to Medicare beneficiaries. Claims under Part B for Medicare payment for physician services are administered by private carriers ("Part B carriers"), which enter into contracts with the Secretary of Health and Human Services. Physicians bill their services to these carriers using standard 5-digit billing codes, which are based on codes designated by the American Medical Association (AMA) called "Physicians' Current Procedural Terminology" ("CPT") codes. Part B carriers determine the reimbursement amount of each claim based on the lesser of the actual charge and a standardized fee schedule for the appropriate CPT code.

Guidance as to whether a particular service is covered under Part B is provided by Local Coverage Determinations ("LCDs") issued by Part B carriers. Empire Medicare Services ("Empire"), the Part B carrier to which the Lederman defendants submitted their Medicare claims during the relevant period, issued two LCDs in 1996 and 2001, respectively, which advised physicians to use CPT code 61793 when billing for stereotactic radiosurgery and which indicated that coverage for stereotactic radiosurgery was limited to treatment of diseases above the neck. The 2001 LCD also instructed that code 61793 could be billed only once per course of treatment, regardless of the number of sessions required. The AMA provided the same instruction in its CPT code book. The AMA also prescribed that a second code, 77432, which applied to the radiation treatment management of cerebral lesions, could be used only once per treatment. No CPT code covered BRS during the period relevant to this action.

B. Defendants' Alleged Activities

At the time of the events giving rise to this action, Lederman was the Director of Radiation Oncology for SIUH, and Silverman was an attending physician practicing in the Department of Radiation Oncology at SIUH. Lederman P.C. was a professional corporation owned exclusively by Lederman, through which he billed Medicare for professional services that he and other oncologists provided at SIUH. From approximately 1996 through the end of 2003, the defendants created and disseminated materials falsely representing that BRS was a successful treatment for many forms of primary and metastatic cancers, including lung, liver, bladder, pancreatic, and colon cancers. The defendants also offered cancer patients free consultations in which they provided false information concerning the effectiveness of BRS. During the relevant period, the defendants administered BRS to a variety of below-the-neck cancers in thousands of patients, and, although they were aware of Empire's LCDs, they submitted falsely coded bills for Medicare reimbursement for this treatment. On December 5, 2008, the government provided a list of 364 claims it contends were fraudulent. The list included 26 claims under billing code 61793 and 320 claims under billing code 77432. As a result of these claims, defendants received Medicare reimbursement to which they were not entitled.

C. The Plaintiffs' Claims for Relief

The relator filed her complaint on June 6, 2004 in accordance with the FCA's quitam provisions, 31 U.S.C. § 3730(b). The complaint lists six counts, including Count III for false claims for payment for services not reasonable and necessary for the treatment of an illness in violation of Title XVIII of the Social Security Act § 1862(a)(1)(A), and Count V for conspiracy to defraud and to submit false claims under 31 U.S.C. § 3792. On February 28, 2008, the United States filed notice pursuant to the FCA, 31 U.S.C. §§ 3730(b)(2) and 3730(b)(4)(A), that it intended to intervene only with respect to the relator's third and fifth counts, and only as against SIUH and the Lederman defendants. On July 31, 2008, the United States filed a complaint against just the Lederman defendants. The complaint asserts four causes of action: (1) knowingly making false claims for payment, in violation of the FCA, 31 U.S.C. § 3729; (2) making false statements, in violation of the FCA, 31 U.S.C. § 3792(a)(2); (3) unjust enrichment by receipt of reimbursement for services not covered; and (4) payment under mistake of fact concerning coverage of the treatments for which reimbursements were received.

D. The Settlement Agreement Between the Plaintiffs and SIUH

On September 5, 2008, the government, the relator and SIUH entered into a settlement agreement that was approved by the Court on September 10, 2010 ("the SIUH settlement"). SIUH agreed to pay the United States $25,022,76.00 plus interest, of which the United States agreed to pay the relator $3,753,414.00. SIUH further agreed to pay $160,000 for the relator's expenses and attorney's fees and costs. In exchange, the government and the relator agreed to release SIUH and SIUH's sole corporate member, "together with their current and former officers, directors, trustees, agents and employees (excluding Gilbert Lederman, Gilbert Lederman, M.D., P.C., and Philip Jay Silverman), and their subsidiaries and the successors and assigns of any of them," from liability for all claims asserted in this case. On August 7, 2009, the United States voluntarily dismissed its claims against SIUH with prejudice.

E. Relator's Partial Voluntary Dismissal

On April 14, 2009, the relator voluntarily dismissed, without prejudice, Counts I,II, IV, and VI of her complaint as against all defendants. The relator also dismissed without prejudice all claims against Silverman. On June 1, 2009, the relator agreed by stipulation to dismiss all portions of her remaining ...


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