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UNITED STATES DISTRICT COURT WESTERN DISTRICT OF KENTUCKY AT LOUISVILLE CIVIL ACTION NO. 3:04-CV-400-H UNITED STATES OF AMERICA, ex. rel. PLAINTIFFS BONNIE SCHAEFER V. CONTI MEDICAL CONCEPTS, INC., ANTHONY CONTI, AND VICTORIA CONTI MEMORANDUM OPINION In this que tam action originally brought by Bonnie Schaefer, the United States seeks recovery from Defendants under the False Claims Act ("the FCA") for their improper billing of medical back braces to Medicare and Medicaid. In essence, the government claims that Defendants over-billed for back braces they provided to patients from 1999-2003 by utilizing an improper billing code and that Defendants acted with reckless disregard of the truth or falsity of the claims submitted. The case is set to for trial beginning January 11, 2010, and the United States has moved for partial summary judgment and in limine to exclude certain evidence. The Court will address each in turn. I. Defendant Conti Medical Concepts, Inc. ("CMC"), was a Kentucky Corporation in the business of supplying durable medical equipment, such as back braces.1 Anthony Conti was the president of CMC and is married to Victoria Conti. Mrs. Conti worked for CMC on a regular
The company is no longer in business, largely as a result of a government raid and subsequent criminal proceedings involving the same facts as this case.
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DEFENDANTS

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basis performing a variety of job functions. She managed the books of the company and, at times, submitted claims to insurance companies including Medicare and Medicaid. In 2006, Mrs. Conti signed CMC's annual report as the company's vice-president2 and in 2004 she signed as CMC's president on Mr. Conti's Certificate of Incumbency and as a board member on a Certificate of Action of the Board of Directors of Conti Medical Concepts, Inc. All of those signatures post-date the billing period in question and Mrs. Conti contends that she was not an officer or director of CMC at any relevant time. The essential issue in this case is the method of billing Medicare and Medicaid for medical equipment that CMC supplied to patients. Like most medical providers, CMC submits its bills on a standard form called a "HCFA 1500." These forms have spaces for codes that identify the products provided and the insurance companies, including Medicare and Medicaid, have set amounts that they pay for different codes. Thus, the code represents the product received and dictates the payment to the provider. The relevant medical equipment in this case is a back brace called "System-Loc." The brace consists of a front and back piece that join around the patient's body to create a v-shaped brace. CMC provided at least 734 System-Loc braces to patients on government insurance programs from 1999 to 2003. For each brace, CMC submitted a HCFA 1500 with the billing code L0565. Medicare and Medicaid reimburse providers $874.04 per brace under this code. However, the United States contends that the proper coding of the System-Loc brace from 1999-

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However, the report lists Anthony Conti as the sole officer of the company.

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2003 was L0515 with the miscellaneous code L1499.3 Bills submitted with these codes are reimbursed at only $509.22 per total brace. The evidence as to the proper coding points in several directions. Defendants contend that there was significant confusion among medical providers about the proper coding of the System-Loc brace from 1999-2003. Defendants cite to trial testimony from a criminal matter involving these same facts stating that Medicare and Medicaid did not officially assign a code to the System-Loc brace until July 3, 2003. Moreover, Defendants assert that a representative of Medicare and Medicaid reviewed Defendants' billing policies and informed them everything was being done properly. However, a patient status form approved by one of Defendants' employees indicates that in a March 16, 2000, phone call to "HCPCS"4 Defendants were informed that the proper codes for the "V-Loc" brace5 were L0515 and L1499. On the other hand, the government argues that at all relevant times the L0515-L1499 combination was the only proper coding. As evidence, the government cites a 1999 letter to the System-Loc manufacturer from the national group that assigns codes stating that the L0515L1499 combination is the proper method for billing the System-Loc brace despite the manufacturer's request that the coding be changed to L0565. The manufacturer of the System-

In essence, the L0515 code is used for the back portion of the brace and the L1499 miscellaneous code is used for the front portion of the brace. The two codes combined result in a reimbursement for the full System-Loc product. HCPCS stands for Healthcare Common Procedure Coding System, which is the general label for the coding numbers used in healthcare billing. It is unclear whether Defendants called the national group that assigns HCPCS codes or some other entity. "V-Loc" was the name of a similar brace manufactured prior to the System-Loc. At the hearing, the parties informed the Court that the System-Loc brace serves the same function as the V-Loc brace but has at least one additional feature. The government contends that the CMC employee was actually calling about a System-Loc brace, not a V-Loc brace.
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Loc brace would inform medical providers, if they asked, that the L0515-L1499 codes were the proper method for billing its product. However, there is no physical evidence indicating that the manufacturer ever sent notice of the proper coding methods to CMC or that CMC ever inquired with the manufacturer regarding the proper codes. Another letter was sent by the manufacturer to the group responsible for coding on behalf of Medicare in 2003 to request a change to the L0565 code, but that request was also denied and Medicare restated its position that L0515 with the L1499 miscellaneous code was the proper method of billing. In addition to submitting bills with improper coding, the government contends that CMC altered medical records to induce higher payments from Medicare and Medicaid. According to the United States, employees of CMC, at Mr. Conti's direction, altered prescriptions written for the V-Loc brace to call for a more expensive brace called a Pro-Fitt, which was properly billable under the L0565 code. After altering the prescription, the government contends that CMC provided the patient with a System-Loc brace and billed for a Pro-Fitt brace. Defendants directly dispute this contention. While Defendants agree that some prescriptions were changed from VLoc to Pro-Fitt, Defendants contend that this was done because the V-Loc was no longer being manufactured and Defendants believed that the Pro-Fitt was the proper brace for Medicare and Medicaid patients. Defendants assert that all patients received the brace for which the insurance companies were billed and there is no significant evidence from the government to the contrary. However, on July 18, 2007, Mr. Conti pled guilty to the following criminal count: On or about August 12, 2003, in the Western District of Kentucky, Jefferson County, Kentucky, the defendant, ANTHONY J. CONTI, knowingly and willfully made and caused to be made a false statement and representation of material fact for use in determining rights to a payment under a Federal health care program as that term is defined in Title 42, Units States Code, Section 1320a-7b(f). That is, an employee of Conti Medical Concepts, based on policy and procedure established by defendant, 4

ANTHONY J. CONTI, altered a prescription for a patient, V.F., which prescription was submitted to Medicare in support of its request for payment relating to Medicare beneficiary, V.F. (emphasis in original). The plea agreement leading to this plea was reached after the government presented its evidence at the criminal trial. In return for dropping all other charges, Mr. Conti pled guilty to a misdemeanor for one count of altering prescriptions and was forced to pay a $100 fine. Additionally, Mr. Conti surrendered any right to the contents of a Medicare escrow account, totaling approximately $79,279.35.6 There was no evidence that this was the actual damage done as a result of the falsification of V.F.'s prescription and no findings by the court as to actual damages. CMC, as an entity, also pled guilty to a felony for the same acts related to a different patient. Because the company was no longer in existence and had no assets, restitution from CMC was not awarded. The government dropped all charges against Mrs. Conti. II. Motions for summary judgment are governed by Federal Rule of Civil Procedure 56(c). "The judgment sought should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Id. "The moving party has the `initial responsibility of informing the district court of the basis for its motion, and identifying those portions' of the record showing an absence of a genuine issue of fact." Mt. Lebanon Personal Care Home, Inc. v. Hoover Universal, Inc., 276 F.3d 845, 848 (6th Cir. 2002) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)). Then "the non-moving party must come
Apparently this was the amount believed to be in the escrow account. In reality, the account contained slightly less and Mr. Conti personally paid the difference. The court labeled this amount as a restitution award.
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forward with `specific facts showing that there is a genuine issue for trial.'" Id. (quoting Fed. R. Civ. P. 56(e)). Important to this case, "summary judgment is likely to be inappropriate in cases where the issues involve intent." Canderm Pharmacal, Ltd. v. Elder Pharmaceuticals, Inc., 862 F.2d 597, 601 (6th Cir. 1988) (quotation omitted). However, such a statement does not mean that summary judgment for the plaintiff is impermissible where the claim involves a scienter element. See, e.g., United States v. Midwest Specialties, Inc., 142 F.3d 296 (6th Cir. 1998) (affirming a grant of summary judgment to the government under the False Claims Act, the same statute in issue here). III. The government brings this case under the False Claims Act ("FCA") based on two distinct factual allegations: (1) submission of improperly coded bills violated 31 U.S.C.

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