IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF MICHIGAN

UNITED STATES OF AMERICA, ) Case No.

Ex rel. Jay Meythaler, ) Hon.

)

Plaintiff, ) FILED IN CAMERA

) &

v. ) UNDER SEAL

)

)

DETROIT MEDICAL CENTER, INC., ) FALSE CLAIMS ACT

a Michigan corporation, )

VANGUARD HEALTH SYSTEMS, INC., )

a Delaware corporation, )

TENET HEALTHCARE CORP., )

a Delaware corporation, )

REHABILITATION INSTITUTE OF )

MICHIGAN, a Delaware corporation )

) JURY TRIAL DEMANDED

)

Defendants. )

)

PLAINTIFF’S COMPLAINT FOR VIOLATIONS OF THE

FEDERAL FALSE CLAIMS ACT, ANTI-KICKBACK STATUTES,

AND THE STARK LAW

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INTRODUCTION

1. Qui Tam Relator, Dr. Jay Meythaler, brings this action on 

his own behalf and on behalf of the United States of America and the 

State of Michigan to recover civil damages and penalties under 

various federal statutes and regulations that govern the practices of 

healthcare providers in referring patients and in billing for their 

services. 

2. The illegal conduct alleged in this Complaint involves the 

provision of services by physicians, nurse practitioners, and 

physicians’ assistants who were associated in some way with 

Defendant Detroit Medical Center, Inc. (“DMC”) and other entities 

who were in business with DMC. 

3. The DMC controls the largest hospital complex in the City 

of Detroit, which includes eight hospitals and 1500-1800 doctors 

within its system. The DMC also provides a Graduate Medical 

Education Program, working in conjunction with the Wayne State 

University Medical School. 

4. Relator’s allegations involve illegal arrangements 

between DMC and others concerning the use and assignment of 

resident physicians in DMC’s Graduate Medical Education (“GME”)

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programs, as well as illegalities in the billings submitted to the United 

States government for the medical services provided by those 

resident physicians. 

5. Relator’s allegations also involve illegal arrangements 

under which physicians who were not practicing at DMC were 

permitted to employ DMC’s nurse practitioners and physicians’ 

assistants in return for the physicians’ promises to refer their patients 

for treatment and care at DMC facilities.

PARTIES

6. Relator Dr. Jay Meythaler, M.D. (“Relator” or “Dr. 

Meythaler”) is a resident of Michigan and a citizen of the United 

States. He is a board-certified physical medicine and rehabilitation 

and is licensed to practice medicine under the laws of Michigan, 

Alabama, Wyoming, Wisconsin, Montana, Idaho and Washington. 

Since 2004, Dr. Meythaler has been chairman of the Wayne State 

University division of the Physical Medicine and Rehabilitation 

program at Oakwood Hospital, which is part of the DMC. He 

practiced at DMC from 2004 to 2010.

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7. The real parties in interest to the claims set forth in 

this Complaint are the United States of America and the State of 

Michigan.

8. Defendants Detroit Medical Center, Inc. (“DMC”) is a 

Michigan not-for-profit corporation with its principal place of 

business at 3990 John R. Corporate Offices, Detroit, Michigan 

48201. In the time period most relevant to this Complaint, 

between January 2004 and December 2013, the President and 

Chief Executive Officer of DMC was Michael Duggan. Mr. 

Duggan is now the Mayor of the City of Detroit.

9. Defendant Vanguard Health Systems, Inc. (“Vanguard”) 

is a Delaware corporation with its principal place of business at 

20 Burton Hills Blvd., Suite 100, Nashville, Tennessee 37215. 

Vanguard acquired DMC on January 1, 2011.

10. Defendant Tenet Healthcare Corporation (“Tenet”) is a 

Delaware corporation with its principal place of business at 1445 

Ross Avenue, Suite 1400, Dallas, Texas 75202. Tenet acquired 

Vanguard, including DMC, in 2013.

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11. Defendant Rehabilitation Institute of Michigan (“RIM”) is 

a Michigan not-for-profit corporation with its principal place of 

business at 261 Mack Avenue, Suite 509, Detroit, Michigan 

48201. RIM is affiliated with DMC and placed many medical 

billings for reimbursement to the United States government.

JURISDICTION AND VENUE

12. This action arises under the laws of the United States to 

redress violations of the following statutes and their attendant 

regulations: the False Claims Act (“FCA”), 31 U.S.C. § 3729, et seq.;

the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b); and the Stark 

Law, 42 U.S.C. § 1395nn. 

13. This Court has subject-matter jurisdiction under 31 U.S.C. 

§ 3732(a) and 28 U.S.C. § 1331.

14. This Court has personal jurisdiction over all of the 

Defendants because they have all conducted business in 

southeastern Michigan at all times relevant to this complaint and 

therefore have a continuous and systematic presence in this District. 

In addition, each Defendant regularly performs health care services 

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for persons entitled to benefits under Medicaid and Medicare, and 

each Defendant submits claims for payment of those benefits.

15. Venue lies within this district under 28 U.S.C. § 1391(b) & 

(c) and 31 U.S.C. § 3732(a) because Defendants transact business 

within this District and the facts forming the basis of this Complaint 

occurred within this district.

16. The facts and circumstances of Defendants’ violations of 

the FCA have not been publicly disclosed in a criminal, civil, or 

administrative hearing, nor in any congressional, administrative, or 

General Accounting Office or Auditor General’s report, hearing, audit, 

investigation, or in the news media.

17. Relator is the original source of the information upon 

which this Complaint is based, as that phrase is used in the FCA, and 

he provided disclosures of the allegations of this Complaint to the 

United States prior to filing this Complaint.

APPLICABLE LAW

18. The wrongful conduct by Defendants implicates 

numerous provisions of federal law regarding the provision of 

healthcare services and the manner of billing for those services, 

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especially to Medicaid and Medicare. The most relevant provisions 

are as follows.

False Claims Act

19. The FCA imposes liability on any person who knowingly 

presents or causes a false or fraudulent claim to be presented for 

payment, or to a false record or statement made to get a false or 

fraudulent claim paid by the government. 31 U.S.C. §3729(a)(1)&(2). 

20. Under the FCA, no proof of specific intent to defraud is 

required. For the purposes of the FCA, “knowing” and “knowingly” 

mean that a person, with respect to information: 

(a) has actual knowledge of the information;

(b) acts in deliberate ignorance of the truth or falsity of the 

information; or 

(c) acts in reckless disregard of the truth or falsity of the 

information. 

31 U.S.C. §3729(b).

21. The FCA is violated not only by a person who makes a 

false statement or a false record to get the government to pay a 

claim, but also by one who engages in a course of conduct that 

causes the government to pay a false or fraudulent claim for money.

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The Anti-Kickback Statute

22. The Anti-Kickback Statute makes it a crime to knowingly 

and willfully offer, pay, solicit, or receive any remuneration for the

purposes of inducing a person to:

(a) refer an individual or a person for the furnishing of any 

item or service covered under a federal health care 

program; or

(b) purchase, lease, order, arrange for, or recommend any 

good, facility, service, or item covered under a federal 

health care program.

42 U.S.C. § 1320a-7b(b)(1) & (2).

23. The term “any remuneration” includes any kickback, 

bribe, or rebate, direct or indirect, overt or covert, in cash or in kind. 

42 U.S.C. § 1320a-7b(b)(1).

24. Violations of the Anti-Kickback Statute must be knowing 

and willful. 42 U.S.C. § 1320a-7b(b)(1). An act is willful if “the act 

was committed voluntarily and purposely, with the specific intent to do 

something the law forbids, that is with a bad purpose, either to 

disobey or disregard the law.” United States v. Starks, 157 F.3d 833, 

837-38 (11th Cir. 1998).

25. The Anti-Kickback Statute has been interpreted to cover 

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any arrangement where one purpose of the remuneration was to 

obtain money for the referral of service or to induce further referrals. 

United States v. Greber, 760 F.2d 86 (3rd Cir.), cert. denied, 474 U.S. 

988 (1985). Payments made to physicians to induce referrals, even if 

also intended to compensate for professional services, violate the 

Anti-Kickback Statute. United States ex rel. Pogue v. Diabetes 

Treatment Centers of America, 2008 U.S. Dist. LEXIS 55432 (D.C. 

Cir. 2008).

26. A violation of the Anti-Kickback Statute constitutes a 

felony punishable by a maximum of $25,000, imprisonment of as 

many as five years, or both. Any person convicted under the AntiKickback Statute must be excluded from participation in federal 

health care programs for a period of at least five years. 42 U.S.C. § 

1320a-7(a)(1).

27. In addition, regardless of whether a person has been 

convicted under the Anti-Kickback Statute, the Secretary of Health 

and Human Services can make his or her own finding of a violation of 

the Anti-Kickback Statute and may exclude that person from federal 

health care programs for a period of time to be determined by the 

Secretary’s discretion. The Secretary may also impose 

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administrative sanctions of up to $50,000. 42 U.S.C. § 1320a-7(b)

28. The Department of Health and Human Services has 

promulgated “safe harbor” regulations that define practices that are 

not subject to prosecution or sanctions under the Anti-Kickback 

Statute. This “safe harbor” provision covers only those practices that 

meet all of the specified conditions. See 42 C.F.R. § 1001.952. None 

of the practices alleged in this Complaint as violating the AntiKickback Statute fall within this “safe harbor.”

The Stark Law

29. Section 1877 of the Social Security Act, 42 U.S.C. § 

1395nn(a)(1) (“the Stark Law”), prohibits a physician from referring 

Medicare patients for certain “Designated Health Services” to an 

entity with which the physician or the physician’s immediate family 

has a “financial relationship.” The Stark Law also creates certain 

exceptions to this prohibition.

30. The Stark Law’s prohibition applies to both inpatient and 

outpatient hospital services.

31. The Stark Law broadly defines “financial relationship” to 

include any ownership interest, investment interest, or compensation 

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agreement that involves and direct or indirect remuneration between 

a physician and an entity providing “Designated Health Services.”

32. The exceptions to the prohibitions of the Stark Law 

pertain to identifying specific types of investments and compensation 

agreements.

33. Violations of the Stark Law may subject a physician to 

exclusion from participation in federal health care programs. Such 

violations may also entail various financial penalties, including a civil 

monetary penalty of $15,000 for each individual violation and an 

assessment of three times the amount claimed for a particular service 

in connection with a violation of the Stark Law. 42 U.S.C. § 

1395nn(g).

FACTUAL BACKGROUND

34. Dr. Meythaler is well-qualified to serve as a Relator in 

this case. He earned Juris Doctorate from Southern Methodist 

University in 1980. He received his medical degree in 1983 from 

the University of Wisconsin. In 1986 he completed his residency 

at the University of Wisconsin. From 1986 to1992, served as the 

first residency director of physical medicine and rehabilitation at 

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the University of Virginia. Between 1992 and 1994, he was on 

the faculty of the University of Alabama Medical School, first as 

an Associate Professor and then as Professor While at the 

University of Alabama Medical School, he was director of the 

residency program. Since 2004, he has worked at Oakwood 

Hospital, where he has been Director and Chair of Physical 

Medicine and Rehabilitation. During his time at Oakwood 

Hospital, he initiated a new residency program associated with 

the Wayne State University Medical School. 

35. In addition to his professional credentials and 

experience, Dr. Meythaler is familiar with the ways in which 

hospitals can violate the FCA and other federal laws that 

regulate the provision of and billing for healthcare services. 

While working at the University of Alabama, he uncovered 

serious violations of the FCA and was the relator in another qui 

tam action filed in the United States District Court for the 

Northern District of Alabama, United States, ex rel. Jay 

Meythaler v. University of Alabama Health Servs. Foundation, 

P.C., Case No. CV-04-B-0112-S. That case resulted in a settlement 

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between the United States and the defendant healthcare providers.

36. Through his association with DMC, Dr. Meythaler 

acquired personal knowledge of many of the violations set forth in this 

complaint.

DMC’s History of Fraudulent Billing and Its 2010 Settlement with the 

Justice Department

37. DMC and its subsidiaries have admitted extensive 

violations of False Claims Act and other federal statutes and 

regulations. In a settlement agreement executed in December 2010 

(“the 2010 Settlement Agreement”), DMC agreed to pay the federal 

government $30 million in return for a release of claims by the federal 

government in connection with these violations. 

38. The 2010 Settlement Agreement was related to the sale 

of DMC to Vanguard. Indeed, in anticipation of its acquisition of 

DMC, Vanguard participated in the 2010 Settlement Agreement. This 

agreement identified certain specific practices and instances of 

wrongdoing for which a release of claims was granted. Among other 

things, this wrongful conduct included DMC’s practice of providing 

marketing materials for physicians. (2010 Settlement Agreement, 

attached as Exhibit 1). But the 2010 Settlement Agreement also 

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expressly excluded other wrongful conduct that was not described in 

the agreement. The agreement specifically referred to all fraud 

having to be divulged at the time of signing. If all the fraud was not 

divulged, then the U.S. government had the ability to penalize the 

DMC and Vanguard for any further fraud discovered.

39. As a matter of fact, the 2010 Settlement Agreement 

disregarded numerous forms of long-term fraudulent and unlawful 

conduct at DMC. In many respects, the fraud to which DMC 

admitted in 2010 was only the tip of the iceberg. 

40. Ironically, after the 2010 Settlement Agreement, and after 

the sale of DMC to Vanguard, the Center for Medicaid and Medicare 

Services (“CMS”), which processes payments to healthcare providers 

on behalf of HHS, returned $20.8 million to Ron Britt, Comptroller of 

Oakwood Hospital. HHS declared the money was awarded as the 

result of an administrative hearing, but it never gave specific reasons 

for reimbursing this amount to Oakwood Hospital.

Fraud in DMC’s GME Program

41. The additional wrongful and fraudulent conduct by 

Defendants began in 1997 with the GME program for resident 

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physicians that was operated by DMC and Wayne State University.

42. Resident physicians working for DMC were assigned to a 

particular hospital in the DMC system, but they often performed 

services for other hospitals as well as the “base” hospital to which 

they were assigned. The method of assigning residents within DMC 

and billing for their services continued from 1997 to at least 2010.

43. This method violates 42 CFR § 413.78, which regulates 

the way in which hospitals can bill Medicaid and Medicare for the 

services of resident physicians who are part of a GME program. 

Specifically, § 413.78 makes it unlawful for one resident physician to 

perform billable services for two different hospitals.

44. In early 2009, DMC asked its department chairs, including 

Dr. Meythaler, to approve a hospital document relating to the costaccounting for the reimbursement for the services of resident 

physicians.

45. In response to DMC’s request for approval, Dr. Meythaler 

informed key officials with DMC and RIM that he would not approve 

the document because it reflected fraud in the cost-accounting and 

billing for the services of resident physicians. Dr. Meythaler asserted 

this position in 2009 in a conference call that included Michael Pelk of 

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DMC, Kevin Smith, the Chief Financial Officer of RIM, and William 

Restum, President of RIM. Dr. Meythaler also asked that DMC 

and/or RIM obtain a legal opinion regarding whether DMC’s practice 

of cost-accounting and billing for resident physicians was fraudulent 

and in violation of federal law, including § 413.78 and other rules.

46. In mid-2009, DMC commissioned an external review 

committee to evaluate DMC’s GME program, including DMC’s 

practice of cost-accounting and billing for resident physicians. The 

external review committee included Dr, John Melvin of Thomas 

Jefferson University and Dr. Michael Lee of the University of North 

Carolina Medical School.

47. The external review committee concluded that DMC 

violated federal law in connection with the GME program and that 

these violations amounted to between $100 million and $200 million.

Fraud in Referral Arrangements Involving DMC’s 

Nurse Practitioners and Physicians’ Assistants

48. DMC employs numerous nurse practitioners and 

physicians’ assistants (collectively, “NP-PAs”).

49. Between 2004 and 2011, seventy of the NP-PAs 

employed by DMC were used by doctors who were not employed in 

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the DMC system. Such use of NP-PAs occurred in numerous 

departments of DMC, including Surgery, Neurosurgery, Pediatrics, 

and Internal Medicine.

50. DMC permitted these doctors to use DMC’s NP-PAs in 

return for the doctors’ promises to use DMC facilities to provide care 

to their patients.

51. Because of this quid pro quo arrangement, DMC was able 

to bill Medicaid and Medicare for as much as $70 million in violation 

of 42 U.S.C. § 1395nn(a)(1) (“the Stark Law”), which prohibits certain 

kinds of self-interested patient referrals.

Efforts by Dr. M to Report and Prevent 

DMC’s Fraudulent Conduct

52. Over a two-year period beginning in 2009, Dr. Meythaler 

provided documents outlining DMC’s wrongful and fraudulent conduct 

to Agent Patricia Rossiter of the Federal Bureau of Investigation 

(“FBI”). Agent Rossiter collected the CMS billings as evidence to 

support Dr. Meythaler’s claims but would not issue a copies to 

Relator.

53. On December 6, 2010, when the sale of DMC to 

Vanguard was pending, Dr. Meythaler sent an email to Office of 

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Inspector General (“OIG”) for the Department of Health and Human 

Services (“HHS”), outlining his knowledge of GME fraud, HIPPAA 

violations, Stark II violations at DMC. (Email from Jay Meythaler to 

OIG, Dec. 6, 2010, attached as Exhibit 2).

54. In January 2011, Relator met with Tom Spokaeski, 

Midwest Director of the OIG for HHS. During that same month, 

Relator met with Dewey Powell, Special Agent from HHS. These two 

HHS officials had documents from CMS evidencing the fraud Relator 

was describing.

55. With the sale to Vanguard, DMC began to announce 

some changes in its administrative practices with respect to its 

fraudulent conduct. But, in other respects, the wrongful conduct 

continued, along with attempts to cover it up.

56. On January 1, 2011, one day after the sale of the DMC to 

Vanguard, Mary Zuckerman, Chief Operating Officer of the DMC, 

held a meeting with all seventy of DMC’s NP-PAs. In that meeting 

Ms. Zuckerman informed the NP-PAs that DMC would cease the 

practice of them servicing private doctors.

57. Ms. Zuckerman’s statements and the DMC’s sudden 

change in policy reflected the DMC’s longstanding fraudulent 

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conduct, as well as its own knowledge of that conduct. In her 

capacity as COO, Ms. Zuckerman had known for years about the 

DMC’s quid pro quo involving its NP-PAs; and she knew that violated 

the Stark Law. (See Email from Jay Meythaler to Pamela Rossiter, 

Jan. 11, 2011, attached as Exhibit 3 ) (summarizing Ms. Zuckerman’s 

statements about violations of the Stark Law in connection with the 

assignment of NP-PAs). Even so, she still signed the 2010 

Settlement Agreement, which did not cover the fraud involving this 

quid pro quo.

58. On January 10, 2011, eleven days after the sale of the 

DMC to Vanguard, at a meeting of the chairs of all of DMC’s 

departments, the Dean of the GME program, Val Parisi, declared that 

the Wayne State University Medical School would no longer “own” 

the services of the residents in GME program.

59. At the same meeting in January 2011, Dr. Bonnie 

Stanton, Chief of Pediatrics, asked Dean Parisi about the DMC’s 

unlawful practice of assigning NP-PAs to private doctors as a quid 

pro quo for referrals to DMC facilities. Dean Parisi refused to answer

the question.

60. On March 9, 2011, Dr. Meythaler emailed Special Agent 

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Powell and identified a long list of improper actions taking place at 

DMC, beyond the wrongful conduct identified in the 2010 Settlement 

Agreement, including GME fraud, the NP-PA billing scheme, a 

possible tax situation, and lobbying issues. Dr. Meythaler also 

informed Special Agent Powell about a specific doctor, Dr. Pano 

Papelekas, who conspired with DMC to violate the Stark Law. (Email

from Jay Meythaler to Dewey Powell, Mar. 9, 2011, attached as 

Exhibit 4).

61. On Friday, May 27, 2011, Relator had a telephone 

conversation with Miechela Lefkowitz of CMS to discuss the 

questions of billing fraud that have arisen in connection with DMC’s 

GME program. Three days later, Relator informed executives at 

Oakwood Hospital about this conversation with CMS. (Email from 

Jay Meythaler to Robert Plaskey, Michael Geheb, Colleen Sturr, and 

Ron Britt, May 30, 2011, attached as Exhibit 5).

62. In July, 2011, during a conference call among CMS 

officials and all of the department chairs from DMC and the GME 

program, Dr. Meythaler states his belief that GME fraud had occurred 

and was ongoing. In response to Dr. Meythaler’s statement, Miechela 

Lefkowitz of CMS stated that she knew of fraud at DMC concerning 

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the GME billing and that “[i]t’s not my fault the auditors missed that 

(fraud) at the DMC.” Also present during this conference call were 

Robert Plaskey, GME Director for Oakwood Hosptial, Ron Britt, 

Comptroller for Oakwood Hospital, and Colleen Sturr, Residency 

Coordinator.

63. On July 12, 2011, Dr. Meythaler informed Dr. Thomas 

Nasca of the Accreditation Council for Graduate Medical Education 

(“ACGME”) GME fraud happening at DMC. Dr. Meythaler 

encouraged ACGME to take action by investigating this fraud. (Email 

from Jay Meythaler to Thomas Nasca, July 12, 2011, attached as 

Exhibit 6).

CAUSES OF ACTION

Count I – Violation of 42 CFR §§ 413.78

64. Relator hereby incorporates by reference the allegations 

in Paragraphs 1-63 of this Complaint.

65. As set forth in more detail infra, Defendants violated 

numerous federal statutes and regulations governing billing for 

resident physicians’ services through their administration of the GME 

program at DMC.

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66. More specifically, Defendants violated 42 CFR §§ 413.78

through their joint practice of billing the services of resident 

physicians through more than one hospital.

WHERFORE Relator requests the following relief in accordance 

with applicable statutes and regulations, including the FCA:

a. a civil penalty of up to $11,000.00 for each and every 

violation of the law governing billing for the services of 

resident physicians through GME programs associated 

with Defendants;

b. treble damages for the United States;

c. an award to Relator of 25% for any and all damages 

awarded to the United States, if the United States decides 

to intervene, and an award to Relator of 30% of such 

damages awarded to the United States if the United 

States decides not to intervene;

d. Relator’s attorneys’ fees, costs, and expenses; and

e. Such other relief as the Court deems just and appropriate.

Count II – Violation of the Stark Law

67. Relator hereby incorporates by reference the allegations 

in Paragraphs 1-66 of this Complaint.

68. As set forth in more detail infra, Defendants violated the 

Stark Law through their practice of assigning the NP-PAs employed 

by DMC to private physicians in return for the private physicians’ 

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agreement to refer their patients to DMC facilities.

WHERFORE Relator requests the following relief in accordance 

with applicable statutes and regulations, including the FCA:

a. a civil penalty of up to $15,000.00 for each and every 

service and a civil penalty of $100,000.00 for each 

unlawful arrangement that this Court finds to be an 

unlawful circumvention scheme;

b. treble damages for the United States;

c. an award to Relator of 25% for any and all damages 

awarded to the United States, if the United States decides 

to intervene, and an award to Relator of 30% of such 

damages awarded to the United States if the United 

States decides not to intervene;

d. Relator’s attorneys’ fees, costs, and expenses; and

e. Such other relief as the Court deems just and appropriate

Count III – Violation of the Anti-Kickback Statute

69. Relator hereby incorporates by reference the allegations 

in Paragraphs 1-68 of this Complaint.

70. As set forth in more detail infra, Defendants violated the 

Anti-Kickback statute, 42 U.S.C. § 1320a-7b(b), through their practice 

of assigning the NP-PAs employed by DMC to private physicians in 

return for the private physicians’ agreement to refer their patients to 

DMC facilities.

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WHERFORE Relator requests the following relief in accordance 

with applicable statutes and regulations, including the FCA:

a. a civil penalty of up to $50,000.00 for each and every 

violation of the Anti-Kickback statute;

b. treble damages for the United States;

c. an award to Relator of 25% for any and all damages 

awarded to the United States, if the United States decides 

to intervene, and an award to Relator of 30% of such 

damages awarded to the United States if the United 

States decides not to intervene;

d. Relator’s attorneys’ fees, costs, and expenses; and

e. Such other relief as the Court deems just and appropriate

P.W. MATTHEWS, PLLC

/s/ Phillip Matthews

Philip Matthews (P53649)

Attorney for Relator

22422 Edison Street

Dearborn, MI 48124

313-492-0991/ Fax 313-557-0157

pmlaw@wowway.com

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