BROOKLYN OFFICE I ev· - The State AG Report · False Claims Act") and N.Y. Fin. Law§ 187et seq....

FILED IN CLERK'S OfFICE

U.S. DISTRICT COURT E.D.H.Y.

* JUN 2 5 2014 * UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK BROOKLYN OFFICE

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UNITED STATES OF AMERICA and the STATE I COMPLAINT

OF NEW YORK ex rei. I ev· 1 4 Jason Halegoua, M.D., I

-against-

Plaintiffs/Relator, FILED IN CAMERA AND UNDER SEAL PURSUANT TO

Pro HEALTH Care Associates LLP f/k:la PEDIATRIC & ADOLESCENT MEDICINE, Freed, Kleinberg, Nussbaum, Festa & Kronberg M.D., LLP f/k:la Freed, Scherz, Kleinberg, Nussbaum & Festa, M.D., LLP, Jay A. Freed, !

M.D., Arnold A. Scherz, M.D., Mitchell Kleinberg, I M.D., Michael Nussbaum, M.D., Robert Festa, ' M.D., and Jason Kronberg, D.O.,

Defendants.

31 u.s.c. § 3730(b)

SPATT, J.

Plaintiffs, the United States of America and the State of New York, ex rel. Jason

Halegoua, M.D., by and through relator's attorneys, Sadowski Fischer PLLC, allege for

his qui tam complaint as follows:

PRELIMINARY STATEMENT AND NATURE OF THE ACTION

1. This is a civil action brought by relator Jason Halegoua, M.D. ("Relator")

on his own behalf and on behalf of the United States of America ("United States") and

the State ofNew York ("New York) against ProHEALTH Care Associates LLP flk:/a

PEDIATRIC & ADOLESCENT MEDICINE ("ProHealth"), Freed, Kleinberg,

Nussbaum, Festa, & Kronberg M.D., LLP flk:/a Freed, Scherz, Kleinberg, Nussbaum &

Festa, M.D., LLP (the "Practice"), Jay A. Freed, M.D. ("Freed"), Arnold A. Scherz,

M.D. ("Scherz"), Mitchell Kleinberg, M.D. ("Kleinberg"), Michael Nussbaum, M.D.

("Nussbaum"), Robert Festa, M.D. ("Festa"), and Jason Kronberg, D.O. ("Kronberg")

3943

Case 2:14-cv-03943-JS-SIL Document 1 Filed 06/25/14 Page 1 of 15 PageID #: 1

(collectively, ProHealth, Practice, Freed, Scherz, Kleinberg, Nussbaum, Festa and

Kronberg are known as "Defendants") under 31 U.S.C. §§ 3729 et seq. (the "Federal

False Claims Act") and N.Y. Fin. Law§ 187et seq. (the "New York False Claims Act"),

to recover damages sustained by, and penalties owed to, the United States and New York

State as the result ofthe partners of Practice billing Medicaid, TRICARE and

CHAMPV A for services not rendered and having knowingly presented or caused to be

presented to Medicaid, TRICARE and CHAMPV A false claims for the payment of funds.

2. These claims are based on Defendants' submission of false and fraudulent

claims to the Government for reimbursement for services that were not provided by the

individual defendants, but were instead provided by employees of Defendants who were

not enrolled as Medicaid providers, although billing records presented by Defendants to

the Government indicated that the individual defendants had provided those services.

Additionally, Defendants made claims for reimbursement for services provided by

unsupervised physician's assistants.

JURISDICTION AND VENUE

3. This Court has jurisdiction over the claims brought under the False Claims

Act pursuant to 31 U.S.C. § 3730(a), 28 U.S.C. §§ 1331, 1345, and 1367.

4. Venue lies in this District pursuant to 31 U.S.C. § 3732(a), and 28

U.S.C. §§ 1391(b) and 1391(c), because Defendants do business in this District, and

because many ofthe acts complained of herein took place in this District.

5. This suit is not based upon prior public disclosures of allegations or

transactions in a criminal, civil, or administrative hearing, lawsuit or investigation or in a

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Government Accounting Office or Auditor General's report, hearing, audit, or

investigation, or from the news media.

6. To the extent that there has been a public disclosure, the Relator is an

original source under 31 U.S.C. §3730(e)(4). He has direct and independent knowledge

ofthe information on which the allegations are based and has voluntarily provided the

information to the Government before filing an action under this section which is based

on the information.

PARTIES

7. Plaintiffs are the United States of America, on behalf of its agencies the

United States Department of Health and Human Services ("HHS") and the Centers for

Medicare and Medicaid Services ("CMS"), and the State ofNew York, on behalfofits

agency, the Human Resources Administration, Division of Social Services.

8. Relator Jason Halegoua, M.D. ("Relator"), is a medical doctor, licensed in

New York State, who practices pediatric medicine. He worked for Defendants for 5

years as a pediatrician, prior to starting his current practice.

9. Defendant, Pro HEALTH Care Associates LLP, is a physician practice

with locations throughout Long Island.

10. Defendant, Freed, Kleinberg, Nussbaum, Festa, & Kronberg M.D., LLP, is

a physician practice group that practices under the ProHealth umbrella. It was previously

known as Freed, Scherz, Kleinberg, Nussbaum & Festa M.D., LLP.

11. Defendant, Jay A. Freed, M.D., is a medical doctor and at all relevant

times herein was a partner of the Practice ("Freed").

12. Defendant, Alfred A. Scherz, M.D., is a medical doctor and at certain

times relevant herein was a partner of the Practice ("Scherz").

3


13. Defendant, Mitchell Kleinberg, M.D., is a medical doctor and at all

relevant times herein was a partner of the Practice ("Kleinberg").

14. Defendant, Michael Nussbaum, M.D., is a medical doctor and at all

relevant times herein was a partner of the Practice ("Nussbaum").

15. Defendant, Robert Festa, M.D., is a medical doctor and at all relevant

times herein was a partner of the Practice ("Festa").

16. Defendant, Jason Kronberg, D.O., is a doctor of osteopathy and at all

relevant times herein was a partner of the Practice ("Kronberg")( collectively, Freed,

Scherz, Kleinberg, Nussbaum, Festa and Kronberg are referred to as "Owners").

THE LAW

The Federal False Claims Act

17. The False Claims Act, as amended, provides, in pertinent part, that:

[A]ny person who (A) knowingly presents, or causes to be presented a false or fraudulent claim for payment or approval; B) knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim ... (G) knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government, is liable to the United States Government for a civil penalty of not less than [$5,500] and not more than [$11 ,000] ... plus 3 times the amount of damages which the Government sustains because of the act of that person.

The New York State False Claims Act

18. The New York State False Claims Act provides, in pertinent part, that:

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Any person who (a) knowingly presents, or causes to be presented a false or fraudulent claim for payment or approval; (b) knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim; ... (g) knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the state or a local government; or (h) knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the state or a local government, or conspires to do the same; shall be liable to the state or a local government, as applicable, for a civil penalty of not less than six thousand dollars and not more than twelve thousand dollars, plus three times the amount of all damages, including consequential damages, which the state or local government sustains because of the act of that person.

Medicaid

19. Medicaid is a program that provides medical coverage to the needy, the

blind, the disabled, and to needy families with dependent children. 42 U.S.C. §§ 1396-

1396v. At the federal level, CMS administers Medicaid. All49 states with Medicaid

programs have a state Medicaid agency to administer its program.

20. Payments for goods and services covered by Medicaid come from both

federal and state funds (collectively referred to as "Medicaid Funds"), with the federal

contribution computed separately for each state. 42 U.S.C. §§ 1396b; 1396d (b). Each

state's obligation varies depending upon various factors, but generally ranges from 40-

60% of the total payments within each state.

21. Federal law authorizes the states to expend Medicaid funds on behalf of

eligible beneficiaries to pay for, among other things: (a) drugs; (b) hospital services; and

(c) physicians' services. 42 U.S.C. § 1396a (10) (A); 1396d (a) (xvii) (1), (2), (5) (A),

(6), (9), (12), and (13).

22. Medicaid relies upon certified provider agreements such as CMS-855-A

and CMS-8551, hospital cost reports such as CMS-2552, and claim forms such as CMS-

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1450 and CMS-1500. CMS and state Medicaid programs condition payment of claims on

health care providers' compliance with federal and state law.

TRICARE/CHAMPV A

23. In addition to Medicaid, there are other government-funded healthcare

programs. One program is the Department of Defense's healthcare system, TRICARE,

which provides care for approximately eight million people. TRICARE provides

healthcare to active duty service personnel and to non-active duty beneficiaries, including

dependents of active duty personnel and military retirees and their dependents.

24. TRICARE operates through military hospitals and clinics worldwide and

is supplemented through contracts with civilian healthcare providers. TRICARE is a

triple-option benefit program designed to give beneficiaries a choice among health

maintenance organizations, preferred provider organizations, and fee-for-service benefits.

Five managed care contractors create networks of civilian healthcare providers.

25. CHAMPVA, administered by the Department ofVeterans Affairs,

provides healthcare coverage to qualified families of deceased or disabled veterans.

THE FACTS

26. Relator worked as an employee physician of the Practice for

approximately five years between 2004 and 2009, providing pediatric medical services to

Practice patients. Relator was never an owner of the practice.

27. During the time that Relator worked at the Practice, Freed, Scherz (until

his retirement), Kleinberg, Nussbaum, Festa and Kronberg owned the Practice.

28. Shortly after Relator left the practice, Dr. Scherz retired.

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29. During the time that Relator worked for the Practice, Medicaid and

TRICARE recipients accounted for approximately 20- 30% of the Practice's patients.

30. During the time that Relator worked for the Practice, there were

approximately 17-18 practitioners working in the various Practice offices, including

employee physicians, Owners, nurse practitioners, and physicians' assistants.

31. During the relevant time period, Practice offices were located at 270

Union Avenue, Holbrook, NY 11741 ("Holbrook"), 911 Montauk Highway, Shirley, NY,

11967 ("Shirley"), Route 25A Wading River, NY 11792 ("Wading River"), and 635

Belle Terre Road, Port Jefferson, NY 11777 ("Port Jefferson"), and an office that has

been subsequently closed, located in Riverhead, NY ("Riverhead").

32. Each of the 17-18 practitioners had responsibilities for seeing patients,

although the Owners tended to see significantly fewer patients than other practitioners.

Billing Medicaid, TRICARE and CHAMPV A for visits to Doctors that Hadn't Been Seen by the Individual Defendants

1. Billing Employee Physicians as Owners

33. Although the Practice kept internal records indicating which of its

practitioners were responsible for providing services to patients, these records were not

presented for reimbursement to any insurance companies, Medicaid, TRICARE or

CHAMPVA.

34. Instead, during the time that Relator worked for the Practice, each and

every patient visit was billed by the Practice as a visit with one of Drs. Freed, Scherz,

Kleinberg, Nussbaum, Festa or Kronberg. No patient visits were ever billed under any of

the other practitioners' names, including Relator's name.

7


35. Each of the practitioners other than Drs. Freed, Scherz, Kleinberg,

Nussbaum, Festa and Kronberg was "assigned" to one of the Owners. For example,

Relator was "assigned" to Dr. Freed. Each and every procedure performed by Relator

was billed as if the procedure had been performed by Dr. Freed.

36. As another example, Dr. Jay Iype was "assigned" to Dr. Nussbaum, and

each and every procedure performed by Dr. Iype was billed as if the procedure had been

performed by Dr. Nussbaum.

37. Similarly, Jennifer Nastasi, M.D. was, for a time, "assigned" to Dr.

Scherz, and each and every procedure performed by Dr. Nastasi was billed as if the

procedure had been performed by Dr. Scherz.

38. Indeed, Relator found out after he left the Practice that he had never been

assigned the required provider registration number necessary or in any way enrolled

enabling him to bill Medicaid, TRICARE, and CHAMPV A. Indeed, most, if not all of

the employee physicians other than the Owners were not enrolled as providers in these

programs.

39. Employee physicians were billed as Owners in all offices.

2. Billing Physicians Assistants and Nurse Practitioners as Owners

40. Physicians' assistants and nurse practitioners were also assigned to one of

the Owners in the same manner that employee physicians were, and all were billed as if

they were one of the Owners.

41. Most, if not all, of the nurse practitioners were not enrolled as providers in

Medicaid, TRICARE, and/or CHAMPV A. Physicians' assistants were not entitled to be

enrolled as providers, although they, too were billed as Owners.

8


42. Nurse practitioners and physicians' assistants were present in all offices

and were always billed as Owners.

3. Billing for Unsupervised Physicians' Assistants

43. The Wading River office was staffed generally with employee physicians,

and occasionally physicians' assistants. Very rarely if ever did any of Drs. Freed, Scherz,

Kleinberg, or Nussbaum ever work in that office. Prior to becoming an Owner, Kronberg

spent some time in the Wading River office, but after he became an Owner, he spent

approximately 1 -2 days a week there.

44. When Wading River was staffed by a physician's assistant, that

physician's assistant would be in the office alone. No physician was on site supervising

the physician's assistant.

45. At Holbrook, the biggest office by far, when there were office hours after

5 p.m., the office would frequently be staffed just by physicians' assistants, with no

physician on site supervising. Evening and weekend hours were strictly staffed by

employee physicians and/or unsupervised physicians' assistants.

46. Riverhead was staffed primarily with either nurse practitioners or

unsupervised physicians' assistants. There was only a single practitioner at that office at

a time.

47. In every office, there were instances when physicians' assistants were left

unsupervised. The most egregious instances were Holbrook at nights and on weekends,

and at Wading River and Riverhead, to the extent a physician's assistant was staffing the

office, such physician's assistant would be the only practitioner present.

9


48. Those physicians' assistants' visits with patients, with no physician

supervising, were also billed as if the procedures had been performed by one of Drs.

Freed, Scherz, Kleinberg, Nussbaum, Festa or Kronberg. Although the practice billed

Medicaid, TRICARE and CHAMPV A for procedures as if they were performed by the

owners of the practice, this was simply untrue.

49. Defendants simply did not provide the bulk of the services for which they

billed Medicaid, TRICARE and CHAMPV A.

I.

Violations of the Federal False Claims Act (31 U.S.C. § 3729 (a)(l)(A))

Presenting False Claims for Payment

50. The United States incorporates by reference the preceding paragraphs as if

fully set forth herein.

51. The United States seeks relief against Defendants under Section

3729(a)(l)(A) ofthe False Claims Act, 31 U.S.C. § 3729(a)(l)(A).

52. Defendants knowingly presented, or caused to be presented, false or

fraudulent claims for payment or approval in connection with the submission of their

requests for reimbursement under the Medicaid program.

53. Defendants caused the United States to reimburse Medicaid funds under

the Medicaid program because of their fraudulent conduct.

54. By reason of Defendants' false claims, the United States has been

damaged in a substantial amount to be determined at trial.

10


II.

Violations of the Federal False Claims Act (31 U.S.C. § 3729 (a)(1)(B))

Use of False Statements




§ 3729(a)(2) ofthe False Claims Act, 31 U.S.C. 3729(a)(l)(B).

57. Defendants knowingly made, used, or caused to be made or used, false

records or statements material to false and fraudulent claims, in connection with the

submission of its requests for reimbursement under the Medicaid program.





III.

Violations of the Federal False Claims Act (31 U.S.C. § 3729 (a)(1)(G))

Use of False Statements




§ 3729(a)(1)(G) ofthe False Claims Act, 31 U.S.C. § 3729(a)(l)(G).

62. Defendants knowingly made, used, or caused to be made or used, false

records or statements material to an obligation to pay or transmit money or property to

the Government, or knowingly concealed or knowingly and improperly avoided or

11


decreased an obligation to pay or transmit money or property to the Government in

connection with the submission of their requests for reimbursement under the Medicaid

program.





IV.

Violation of the State Of New York False Claims Act, N.Y. Fin. Law§ 187 Et Seq.

65. Plaintiffs incorporate herein by reference the preceding paragraphs of the

Complaint as though fully set forth herein.

66. This is a civil action brought by Relator on behalf of the State of New

York against Defendants under the State ofNew York False Claims Act, N.Y. Fin. Law§

190.2.

67. Defendants, in reckless disregard or deliberate ignorance of the truth or

falsity ofthe information involved, or with actual knowledge of the falsity ofthe

information, knowingly presented or caused to be presented, and may still be presenting

or causing to be presented, a false claim for payment or approval, in violation ofN.Y.

Fin. Law§ 189(a).


falsity. of the information involved, or with actual knowledge of the falsity of the

information, knowingly made, used or caused to be made or used, and may still be

12


making, using or causing to be made or used, false records or statements to get a false

claim paid or approved, in violation ofN.Y. Fin. Law§ 189(b).


falsity of the information involved, or with actual knowledge of the falsity of the

information, knowingly made, used, or caused to be made or used, and may still be

making, using or causing to be made or used, false records or statements to conceal,

avoid, or decrease an obligation to pay or transmit money to the State of New York or

one of its political subdivisions, in violation of N.Y. Fin. Law § 189(g).

70. The State ofNew York, or its political subdivisions, unaware of the falsity

of the claims and/or statements made by Defendants, and in reliance on the accuracy of

these claims and/or statements, paid, and may continue to pay, for health care services for

recipients of health insurance programs funded by the state or its political subdivisions.

71. Had the State ofNew York known that services were not provided by the

enrolled healthcare providers in the Practice, New York would not have paid those

claims.

72. As a result of Defendants' actions, as set forth above, the State of New

York or its political subdivisions have been, and may continue to be, severely damaged in

an amount to be determined at trial.

WHEREFORE, Plaintiffs, the United States and the State ofNew York, ex rei.

Jason Halegoua, M.D. requests that judgment be entered in their favor and against

Defendants as follows:

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(a) On the First, Second and Third Claims for relief (Violations of the Federal

False Claims Act, 31 U.S.C. § 3729(a) (1) for treble the United States' damages, in an

amount to be determined at trial, and an $11 ,000 penalty for each false claim presented;

(b) On the First, Second and Third Claims for relief, awarding Jason

Halegoua, M.D. his relator's share pursuant to 31 U.S.C. § 3730(d);

(c) On the First, Second, and Third Claims for Relief, an award of costs and

attorney's fees pursuant to 31 U.S.C. § 3730(d);

(d) On the Fourth Claim for Relief, (Violations ofthe New York State False

Claims Act, N.Y. Fin. Law§ 187 et seq., for treble the State ofNew York's damages, in

an amount to be determined at trial, and an $12,000 penalty for each false claim

presented;

(e) On the Fourth Claim for Relief, awarding Jason Halegoua, M.D. his

relator's share pursuant to N.Y. Fin. Law§ 187 et seq.;

(f) On the Fourth Claim for Relief, an award of costs and attorneys' fees

pursuant to N.Y. Fin. Law§ 187 et seq.;

(g) Awarding such further relief as is proper.

JURY TRIAL IS DEMANDED

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Dated: New York, New York June 24,2014

TO:

Loretta E. Lynch United States Attorney for the Eastern District of New York 271 Cadman Plaza East Brooklyn, New York 11210

Attorney General Civil Division United States Department of Justice Commercial Litigation Branch Room 9002 601 D Street NW Washington, DC 20004

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Respectfully submitted,

PLAINTIFFS UNITED STATES OF AMERICA and the STATE OF NEW YORK ex rel. JASON HALEGOUA, M.D.

::Jt~!w:_ 39 Broadway, Suite 1540 New York, New York, 10006 212 913 9678 [email protected]

ATTORNEYS FOR RELATOR


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