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United States ex rel. Richardson v. Lexington Foot And Ankle Center, PSC

United States District Court, E.D. Kentucky, Central Division, Lexington

June 5, 2018



          Danny C. Reeves United States District Judge

         Relators Jeffrey Richardson and Ramona Brooks filed this qui tam action under the False Claims Act against Defendants Michael Allen, DPM, Lexington Foot & Ankle Center, PSC, and Lexington Diabetic Center, PSC, on March 15, 2017. [Record No. 1] They allege that Allen and the defendant organizations took part in fraudulent schemes to gain reimbursement to which they were not entitled from federal health care programs. The United States filed a notice of its election not to intervene on February 9, 2018. [Record No. 13] The Court directed that the Complaint be unsealed and the relators were permitted to serve the defendants. The defendants then filed a motion to dismiss on April 23, 2018. [Record No. 15] Shortly thereafter, on May 8, 2018, the United States filed a motion to partially intervene. [Record No. 17]

         For the reasons that follow, the defendants' motion to dismiss will be granted and the United States' motion to intervene will be denied, as moot.


         Defendant Michael Allen is a podiatrist and the president/director of Defendant Lexington Foot & Ankle Center, PSC, which owns and operates eight podiatric clinics in various locations around Kentucky. [Record No. 1, ¶¶ 12, 14] Allen is also the president and director of Defendant Lexington Diabetic Center, PSC, which offers diabetic and primary medical care services in two locations in Kentucky. Id. at ¶ 13. Relators Richardson and Brooks are podiatrists who were previously employed by Allen and Lexington Foot & Ankle Center. Id. at ¶ 10-11. Richardson was employed from December 2012 to September 2016 and Brooks for a substantially shorter period (July 2016 to September 2016). Id.

         The relators claim that, during their respective tenures, they became familiar with the defendants' fraudulent activities through a variety of avenues. Id. at ¶ 65. They allege that Allen oversaw the defendants' medical records and billing systems, and controlled and trained all of the billing and records staff. Id. at ¶ 85. According to the relators, the staff was trained to ensure that records contained key terms and findings to obtain payment from federal health care programs. Id. Allen and his staff instructed podiatrists to include “key terms” in their patient records and would even add such terms after-the-fact to justify billing. Id. at ¶ 87-88. To ensure that key terms and phrases were incorporated into patient records, Allen and the defendants utilized templates which included language likely to cause reimbursement. Id. at ¶ 89. Podiatrists were admonished when they resisted using the templates. Id. at ¶ at 90 The relators allege that Allen trained each of them personally and instructed them to “upcode” patient encounters. Id. at ¶ 78. Specifically, Allen instructed them to “always bill a Level 3, ” or mid-level encounter, no matter how straightforward the visit may have been. Id. The relators allege that Allen frequently “encountered” patients without entering the examination room. Id. at ¶ 81. They contend that they “saw” such encounters “falsely billed to federal health care programs by Dr. Allen and his staff as Level 3 encounters.” Id. Richardson claims that approximately 40 patients told him that Allen diagnosed them from the exam room doorway. Id. at ¶ 83. The relators allege, “[u]pon information and belief” that these encounters were billed falsely at Allen's typical Level 3 encounter rate. Id.

         The relators also contend that Allen trained his staff to upcode medical procedures. Id. at ¶ 91. For example, with respect to nail care, Allen instructed them to always use the billing code for “six or more toes, ” regardless of the number of toes actually treated. Id. ¶ 95. They also allege that he instructed them to always use the more complex of two codes available for hammertoe surgeries. Id. at ¶¶ 109-110.

         The relators claim that Allen routinely billed for nail avulsions (an involved procedure, requiring local anesthesia) when he actually performed simple “corner clips.” Id. at ¶¶ 98-100. Richardson contends that he observed this on 20 to 30 occasions when he saw Allen's patients for follow-up visits after Allen had purportedly performed a nail avulsion. Id. at ¶ 100. Richardson examined the patients, expecting to find the “telltale inflammation, missing nail plate, healing wound in the nail bed . . ., ” but there were “no physical signs whatsoever” of the nail avulsion described in Allen's notes. Id. When Richardson questioned the patients about their encounters with Allen, they “routinely responded” by telling Richardson that there was no procedure performed. Id. at ¶ 101.

         The relators provide two particular allegations regarding upcoding for nail avulsions. They claim that Allen saw “Patient A” in June 2016, and diagnosed a fungal infection of the toenail, atherosclerosis, diabetic neuropathy, and an ingrown nail. Id. at ¶ 102. Allen's records indicated that he performed a nail avulsion. Id. Patient A followed up with Allen in July 2016, but the record for that date does not mention the nail avulsion or the “characteristic post-procedure presentation” of the affected toe. Id. at ¶ 103. Richardson followed up with Patient A in late August 2016 and inquired about the avulsion procedure. Id. at ¶ 104. Patient A “responded to the effect of, ‘I don't know what you are talking about. I just come here to get my nails trimmed.'” Richardson saw no physical signs that a nail avulsion had been performed. Id. The relators allege, “[u]pon information and belief, ” Allen submitted or caused to be submitted false claims for reimbursement of a nail avulsion on Patient A that he did not perform. Id. ¶ 105.

         The relators contend that Allen also performed a nail avulsion on “Patient B” in June 2016. Id. at ¶ 106. Allen saw Patient B again in mid-July 2016, but his notes made no mention of the nail avulsion. Id. at ¶ 107. Instead, Allen recorded that he debrided Patient B's toenails and two calluses. Id. Patient B's medical record does not contain a medical consent form, which the relators allege is always completed before an avulsion. Id. at ¶ 106. As with Patient A, the relators allege, upon information and belief, that Allen submitted or caused to be submitted false claims for reimbursement of a nail avulsion that he did not perform. Id. at ¶ 108.

         The relators also claim that Allen performed medically unnecessary and unreasonable procedures. Id. at ¶ 111. Namely, they assert that Allen almost always performed a tarsal tunnel release when he performed an endoscopic plantar fasciotomy. Id. They contend that he did so without properly diagnosing patients with tarsal tunnel syndrome and when patients had no symptoms of tarsal tunnel syndrome. Id. According to the relators, Allen did it simply so he and Lexington Foot & Ankle could falsely bill for the procedure. Id.

         The relators allege that Allen also ordered unnecessary and unreasonable tests and durable medical equipment (“DME”) and instructed the relators to do the same. Id. at ¶ 129. For example, Richardson contends that Allen ordered a “substantial combination” of MRI scans, x-rays, Unna boots, Xerosox, walking boots, surgical shoes, shoe inserts, and night splints as a first line of treatment for minor tendonitis. Id. at ¶ 132. Allen instructed and encouraged staff to order diagnostic tests and encouraged the use of higher paying CPT codes for x-rays. Id. at ¶¶134-135.

         Defendants Allen and Lexington Foot & Ankle own and operate an MRI machine at their Harrodsburg Road clinic in Lexington, Kentucky. Id. at ¶ 142. The relators allege that the defendants violated the Stark Law's prohibition on self-referral, 42 U.S.C. § 1395nn, by ordering MRIs and scheduling patients for appointments at Lexington Foot & Ankle Harrodsburg Road clinic. Id. They further contend that the defendants' staff placed written confirmation in patient records indicating that third-party MRI services were offered to patients when no such alternative services were actually offered. Id. at ¶ 143.

         The relators also claim that Allen and Lexington Foot & Ankle impermissibly referred patients to Lexington Diabetic Center. Before Allen or other podiatrists may perform a surgical procedure, the patient must be medically cleared to undergo surgery. Id. at ¶ 146. The relators allege that Allen and Lexington Foot & Ankle self-referred all, or nearly all, of their surgical candidates to Lexington Diabetic Center for their pre-operative examinations, in violation of the Stark Law. ¶ 147. According to the relators, “patients are just automatically, without option, scheduled to go to Lexington Diabetic Center, PSC for pre-operative examination. . . .” ¶ 149. In addition, Lexington Diabetic Center owns and operates a device used to administer nerve conduction studies. ¶ 151. The relators assert that the defendants impermissibly self-referred all, or nearly all of their patients who received nerve conduction studies to Lexington Diabetic Center. Id.

         The staff of Lexington Foot & Ankle provides podiatric services to residents of approximately 25 nursing homes in Central Kentucky. Id. at ¶ 115. However, routine nail and foot care is not covered by Medicare ordinarily. 42 C.F.R. § 411.15. But such care may be reimbursable when systemic conditions cause circulation or sensation deficits such that routine care may pose a hazard if performed by a non-professional.[1] The relators assert that the defendants provided routine nail and foot care to nursing home patients (and billed federal programs accordingly) without regard to whether exceptional circumstances were present. Id. at ¶¶ 115, 123. The relators further allege that, once a nursing home patient received foot and nail care, the patient was placed in rotation in which the patient was seen every 61 days (the maximum Medicare will allow) indefinitely. Id. at ¶ 121. The relators state that the same scheme occurred on an outpatient basis at Lexington Foot & Ankle Center. Id. at ¶ 121.

         The relators claim that the defendants frequently utilized nurse practitioners to perform routine foot and nail care of patients in nursing homes. Id. at ¶ 125. They further allege that the nurse practitioners were always or almost always sent to perform these procedures alone, which made all billing for these services fraudulent. Id. at ¶ 125. The relators also contend that, “upon information and belief, ” the services provided by nurse ...

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