will call our second and last case of this morning number eight hundred sixteen ninety three united states the u p m c at all mr simpson and necessary in order to determine whether the complaint states the claim of the false claims act based on underlying violation of the stark law those three questions of whether the complaint possibly alleges the existence of an indirect compensation arrangement whether plausibly alleges th events don't meet an exception of the statute and whether a possibly alleges that they acted knowingly is to find a stark in the false claims that it's amazing how we can start off and i cope people would happens for example with a b s and get into that i can start with such a simple concept don't if your doc don't refer people down the hall for testing in a lab for example that you have a financial interest that was the whole concept here  it and so it would seem here that you've got to somehow show that there were referrals  d facility component the physician would be able to submit a claim for his for his personally perform services the hospital submit claims for the for the hospital component of the services and this is really exactly the same situation effect there are referrals to the own for doctor to do the surgery but the ancillary in effect the ancillary aspect of the referral is that the hospital benefits for an unnecessary procedure law based upon an understanding that when physicians have financial arrangements with hospitals or other sylvie's there is a tendency to over utilize resources and so therefore congress passed the stark law however the stark law bonuses i am focusing on well first of all the existence of the conversation arrangement which i which is not really disputed is a quote the senator has a question about whether the indirect compensation arrangement definition is satisfied because assumed that this was part of the we have this intersection of the stork the stark law that makes it a defense but then with the false claims act that requires so this is a question about whether it remains a dispense whether it's an affirmative element you have to buffer market value when a physician is compensated a above the ninetieth percentile and question and we have detailed allegations about about you know physician compensation surveys that reflect the compensation f for hero surgeons at the median at the seventy fifth percentile and at the ninetieth percentile and in this case we have shown that many of these positions they're not just being compensated at around the ninety percentile they're getting compensated multiples  compensation is largely not entirely but largely driven by the w r v a use that the physicians are credited with and again we have survey information showing neurosurgeons the number of our use that they generate at the median seventy fifth percentile that it could be that they are that they are that they are being profession we allege in the complaint that it is simply not credible for physicians generally to to regularly generate more than twenty five thousand our views and that's an allegation that has to be accepted as true at this you know one of the ways is that physicians were being credited as being first assistant in surgeries when when they did not meet the requirements they were being credited as teaching positions when they didn't meet the requirements to do so well he was the for a period of time the chairman of the department and and be allegation is that you know he was sort of the driving force behind getting the positions to really that the that there are a few numbers would be inflated and those are not just possible but they are good for the users of the united states intervened in a portion of this case and entered smoking gun or a picture of both of my colleagues images bookie don't you really need some allegation that the people you p m c deliberately fashion the compensation system to reflect the value of the referrals no payer out there in the health care system i think that's probably a fair statement you are so what's this what's so suspicious for a surgeon to be paid above the medicare rate well it's not the our complaint is not simply that they're being paid averaging out the compensations me well the complexity of the surgery is definitely going to enter into it and and again that is one of the allegations we have is that it is that design system this way lead to them performing overly complex procedures fire and didn't have facts that would indicate a fire and without these you don't consider being paid two or three times the ninetieth percentile to be smoke free so let me answer that question  standing alone no you don't consider a two and a half million dollar settlement in a prior false claims act case to be smoke again your honor there is no admission of liability and that the answer is no you don't consider the allegations that surgeons were putting other surgeons on falsely this person assisted us to be smoke there is no particularity we have to accept that is true do you consider it to be smoke if you look i think you reckon aren't they do you consider the pleading that the teaching assistants were falsely dumb that the only reason that's not smoke is because it's not pleaded particularly enough not only would it need to be pleaded with particularity and if you look at those allegations paragraph one forty nine paragraph one hundred seventy eight there are two docs or doctors mention two there is no indication of any time period for that generalized more work for our clients this is the year we're going to have great outcomes there's nothing about that standing alone that shows these compensation arrangements and let's be clear this is alleged to be a form of standard contract that you p p uses for all of its physicians whether there are no surgeons they are mental health care providers they are dermatologists they are the n t is they are pediatricians it is a form contract it is set up you p p has set it up using the medicare same metric of our views that are designed to compensate physicians for their for their work that they personally perform that we have an allegation here that a majority of the patients are being being covered by medicare and medicaid and the physicians are essentially a loss leader for the hospital and getting paid one hundred thirty percent of what they're bringing in on these procedures is that smoke you know we don't have that that if you smoke so if for example you combine a salary you well over the ninety s percentile on this survey data with an r v you level that's far below the median so you can look at a combination of those two things and say on its face it looks like there's something problematic here but what we have our view levels for some of the physicians alleged compensation alleged for only four and both of them point in the same direction these are undervalued allegations these are doctors who were credited with earning a large number of our the use and were compensated based on those are the use stark the purpose of start going to if we just take a step back is your case depend on our respectfully disagreeing with our sister circuit the fourth circuit into a me it does not well the fourth circuit in two won't mean held it said it page three seventy four there is a referral when hospital bills a facility fee in connection with personally performed service and it cited the federal register passages so they didn't have to be a direct causal relationship  just that there were allegations in the complaint here from about paragraph one ninety one through the low to hundreds that the hospital is benefiting similarly to the way that the hospitals benefit into all me from the different fees that it's getting as a result so it doesn't unless were to disagree with you or me it doesn't help and the federal register doesn't seem to require that there be a strict causal relationship it can be this indirect there's a causation he a correlation here in the hospital winds up making more money a so let's talk about for me since you brought it up i think there are two important things that are going to keep in mind the first citizen is that in twenty there was a significant amount of factual allegations and then facts that actually played out at trial showing that we had the vacuous involved described payments for referrals these were part time employment contracts negotiated for one particular practice out of extensively documented concern about the hospital losing those referral dollars because the doctors were going to open a competing ambulatory surgery center all of those sorts of facts that go into what the intent was  contract are very different from this case the concern about losing rafal dollars that shows up in to me if not here this is a case in which the standard contract again it's a standard contract that may not to the extent that the to me court looked at the fact that those surgeons were only doing outpatient procedures their office visits were somewhere else they were only doing outpatient procedures and so there was automatically a one to one correlation because it's different from this case you've done a good dive into the record except i don't read the passages on page three seventy nine is actually turning on that i  pissed the more that the hospital got from the positions performing the in some the more procedures the physicians performed at the hospital the more facility fees told me collected and the more compensation the physicians received in the form of increased base salaries and productivity bonuses so i don't see this is turning on this guy's compensation allegations i don't see this turning on part time or outpatient says that it's turning on the discussion earlier there that varies is broader than i'll start by pointing to the federal registry notice that was put out this summer that we cited in our brief their request for information because c m s is looking at whether to revise the stark law and as they explained to the satish eighty three federal register twenty nine five twenty five and what this says is by design the stark law is intended to disconnect a physicians health care decision making from his or her financial interest in other health care providers and suppliers if the scenario that judge ambo mentioned with the dr who sending someone down the hall to get physical therapy because he happens to own a physical therapy affability as well it is a financial interest in other combiners  base contracts give physicians a financial interest in their own work and what the commentary extensively discusses whenever this issue of personally perform services come up is that the stark who have a problem even if you have a fixed and also or what is what is your argument as to how you would distinguish truly there is no similar allegation think it's important to judge beavis you mentioned allegations in the complaint about performing more complex procedures than necessary that are in the paragraphs one hundred eighty eight to paragraph two hundred twelve there is no mention of a single doctor in those paragraphs there is no mention of a single procedure and there is no mention of how you pm c or you p p knew that any procedure was being performed as a more complex one than it should have been performed us we want to talk about the teaching physician fraud there are as i said only mentions of two doctors with no time period with no no no identification of a surgery and i think the district contract was right to say if you want to come in here and say in  to couple it with recital c and the settlement agreement which shows that you p m c did not bless this situation and in fact it affirmatively went to the government when it landed that before it knew that this case had been filed and you can see that again in settlement recital see there is also a reference to dr al qada having a bill in short cut there are no specifics about what that shortcut is no allegation that you p p or you p m c zero or any hospital knew about this short t at any time that would have been relevant to whether this is a stark violation i think it's telling when you look at the later science or argument really to look at their website grief they spend one paragraph arguing that they're scienter and it's at parrot pages twenty five to twenty six and they say three things first that the doctors knew the compensation exceeded fair market value there's no citation second that the defendants knew that our views were implausible just because they were high citing survey data that's wrong whether or not our the use implausible does not turn on simply the number and i think you can see that  will be on the national average they are beyond three you're seeing that they're being well they are beyond three survey data points that there were leaders have offered you but there is no information about where those data points were drawn from and who the couple hundred respondents were what that went into calculating them stayed up points and whether they were at comparable hospitals whether they were doctors with comparable practices whether they were performing the same complexity of surgery or they want to add a small community based low hospital in central pennsylvania where i grew up and they might have only one neurosurgeon because they don't have high volume so simply looking  at survey data alone is not a valid way to find you've heard that there was compensation beyond fair market value or that there was something essentially fishy going on here that the university that you p m c and you people knew about w terminated him even though he did everything they asked him to do which in context were later understood referred to pumping up the volume of w our views if there now we can talk about whether that was specific enough or not but it was specific enough that the later was told by an administrator to pump up the volume of r v use your response is well that's just that's just making it more profitable it doesn't imply anything dishonest here certainly i can know eighteen hundred  is always going to be someone who builds three thousand hours a year and someone who builds eight hundred hours a year and the median maybe someone in the middle and you have outliers and this is a preeminent health care system employing preeminent physicians to perform complex surgeries that people travel from everywhere to come receive their health care here it's not enough to just say these doctors had high are the us and four of them again there's one compensation data about four of them four of them were paid as that level when you look at the contract the contract contains no information that would allow you to draw any any direct or indirect influence that there is disguised payments for on the part of law for that there's any fraud going on i think a lot some would want to know did i happen to have three cases that went to trial did i happen to have four supreme court arguments could i happen to have three clients under investigation what is the reason for it certainly they might be interested in understanding it by just questions do in order to could we find that to be reckless i think that you could do that you could certainly you could wonder about it but you would want their already associates who claim hundred twenty two hundred we keep the people four thousand we don't ask questions i don't know that there's any obligation to ask questions in that situation there are and so let me give you an example there's one case that cited in there in the case that the earlier cite and there was a situation where one of the doctors in the complaint is alleged to have been credited with are the use that work out to nine thousand hours a year nine thousand hours a year and they were later points out there's only eight thousand seven hundred hours in a year in that situation i think you could certainly say that there is reckless disregard of not to what has to be more than the physical number of hours in the year before they're not saying it has to but i'm saying that would be one circumstance that i think you could find would trigger an obligation to do that the facts that are played here are simply that some doctors have high are the use based on base and instructions and guidance from their leaders to work hard discovery well first of all again not to keep pressing on this but it has to be played with particularity which is a higher standard and that's because this is a fraud statue i mean we're not looking at just kind of inadvertent mistakes we're looking for fide and so you do need to have particularly you need to have specifics about how are the use were being used to disguise payments for the files there's no discussion about anticipated before all dollars there's no discussion about net operating losses that are going to result from these contracts there's actually almost no information about the contracts themselves we don't know what the base salary is there's no allegation about how many our views have to be completed to make that base salary there's not even an allegation  of these doctors got a productivity bonus i mean all we really have is is the allegation that there are two components in the contract a base component and a potential productivity component and then in the productivity component the r v you payment is that a forty five dollars of you value and that's it and these facts that was simply not enough to require discovery and it was not enough to get beyond a motion to dismiss and for those reasons it sort of brings us at the end where we started at the beginning when you have a motion to dismiss in connection with a complaint that is quite lengthy has a lot of facts and the to say that there is no way that you can get past the allegations that they just simply don't make a claim here we have to look at a pretty pretty carefully and then the so the question becomes so called prima facia is there enough smoke that we should get discovery in effect when you have all the exceptions of the stark act they were they seemed to require that the compensation not exceed fair market value and it looks as if the productivity compensation bonus here for these neurosurgeons exceeds the typical medicare metric for fair market value maybe the answer is they're have to plead with particularity so that discovery is not about fishing expeditions all of the sort of harms to come from being labelled a fraudster that this court has repeatedly identified as a reason to have a higher pleading standard and went out of its way to stress that if i enter should be rigorously enforced and it is a stringent requirement it is what cabins you know he says but but back again to go we started if you're paid two to three times more than normal purposes of getting payment that they should not have been put into when you had all that together with regard to what's been alleged here at the very least should you not allow the chance to amend the complaint again now i realize it was  once it was offered once and really i think it's important to know that when it was offered the judge said give this your last best chance and what they were later stated was come back by moving some things around shifting some titles but not really adding any new facts and if i could just push back on one point judge you know you suggested that there are allegations that these doctors were being paid more than is normal and i think your reference to normal is is a suggestion that the survey data suggests a lower median fair market value and you can see this just in the definition alone a fair market value which is at forty two c f r four eleven point three five one fair market value is not determined by just doing a point for fair market value of a fair market analysis but other data points are what are you being paid to do where the doctors who were involved in responding to that survey what are they working as many hours on as many complex surgeries did they have the same confessional credentials did they have the same years of experience had they done the same fellowships are they working in the same kind of geographic market all of those factors are relevant so that your show that fair market value is an apples the you based contracts are somehow immune from the stark law and that is not our position our position is that in our view based contract could be a problem in a circumstance in which there were facts that showed the r v you based contract was in fact a disguised mechanism for paying doctors for referrals but our point is that those facts aren't here and so you don't need to answer what really is that is a harder question  view based contracts are somehow per se a problem and you just have to look at this complaint and i'm these facts as they came to the court but by three were later as you were involved in this health care system they couldn't put any meat on the bones of this allegation that somehow this was an improper a range meant designed for improper means it was all about compensating for a fellow dollars it's a standard contract with almost no flex facts pl what about the the point judge third for me give you may be against my better judgment i'm going to give you one last best chance to plead and you came back especially with th for four physicians that's not that's not true there's therefore physicians who were included on the nine ninety's fall for the nonprofit paragraph one twenty five also includes allegations that dr alcott who you know than normal in our views and if yes you are and vastly is an understatement i would submit that these are numbers that are simply out of the ballpark ok and when you combine that with the specific ways we know that they did in fact inflate our views and then when you can find combine that with the fact that that if you take the highest paid neurosurgeons in the country these people are making two or three times how much they're making and then you combine that with the allegations that that fact standing alone is widely viewed in the industry as being a red flag of of over fair market value compensation you have more than a smoking gun i think your honor and again i was going to point you  forty six i'm sorry if you look at paragraph one forty six i mean is that enough to get you over the hump in terms of what you need to do to leave a particular your honor this is where the court reversed the ground of a motion to dismiss in a false claims that case where to be honest the theory of liability was more complicated than this one you had a purchasing arrangement  between a supplier and a purchasing agent for four a group of facilities and it dealt with the pricing and discounts you know and an allegation that the manufacturer caused the in the court goes on to say based on our reading of the first amid a complaint it's not clear that the alleged conduct of zimmer passes muster under the anti kickback and stark acts we therefore conclude that these issues can be resolved in the context of a motion to dismiss accordingly like the