Document:

EX-10.1 Settlement Agreement

 

Exhibit 10.1

SETTLEMENT AGREEMENT

I. PARTIES

     This Settlement Agreement (“Agreement”) is entered into among the United States of America,
acting through the United States Department of Justice and on behalf of the Office of Inspector
General (“OIG-HHS”) of the Department of Health and Human Services (“HHS”), the TRICARE Management
Activity (“TMA”), through its General Counsel, and the Office of Personnel Management (“OPM”),
which administers the Federal Employees Health Benefits Program (“FEHBP”)(collectively the “United
States”); Pediatrix Medical Group, Inc. (hereafter “Pediatrix”); and Daniel M. Hall, MD (hereafter
the “Relator”), (hereafter collectively referred to as the “Parties”), through their authorized
representatives.

II. PREAMBLE

     As a preamble to this Agreement, the Parties agree to the following:

     A. Pediatrix is a publicly-traded company, incorporated under the laws of the State of
Florida. Pediatrix’s network of affiliated physician groups provides medical services in various
hospital neonatal intensive care units (“NICUs”) in 32 states and Puerto Rico.

     B. The Relator, Daniel M. Hall, MD, is an individual resident of the State of Colorado.
On or about May 24, 2002, the Relator filed a qui tam action in the United States District Court for the
District of Maryland captioned United States ex rel. Daniel
M. Hall, MD v. Pediatrix Medical Group, Inc., Civil No. L-02-1805, (hereinafter “the Civil Action”). The Relator is a
board-certified neonatologist.

 

 

     C. The United States has filed of Notice of Intention to Intervene in the Civil Action.

     D. Pediatrix has entered into or will be entering into separate settlement agreements
(hereinafter referred to as the “Medicaid State Settlement Agreements”) with the states which will
be receiving settlement funds from Pediatrix pursuant to Paragraph III.1.d. below for the Covered
Conduct described in Paragraph II.F. below (hereinafter referred to as the “Medicaid Participating
States”).

     E. The United States and the Medicaid Participating States contend that Pediatrix knowingly
submitted or caused to be submitted false claims for payment to the Medicaid Participating States’
Medicaid programs, established pursuant to, or in connection with, Title XIX of the Social Security
Act, 42 U.S.C. §§ 1396-1396v (the “Medicaid Program”); and the United States further contends that
Pediatrix knowingly submitted or caused to be submitted claims for payment to the TRICARE Program
(formerly known as the Civilian Health and Medical Program of the Uniformed Services (“CHAMPUS”)),
10 U.S.C. §§ 1071-1110, which is administered by the Department of
Defense through TMA, and to FEHBP, 5 U.S.C §§ 8901-8914, which is administered by the Office
of Personnel Management.

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     F. The United States contends that it has claims under the False Claims Act, 31 U.S.C. §§
3729-3733, and that it and the Medicaid Participating States (hereinafter collectively referred to
as the “Government”) have certain other civil claims against Pediatrix for engaging in the
following conduct with respect to the Medicaid, TRICARE, and FEHB programs: that Pediatrix during
the period from January 1, 1996 through December 31, 1999, improperly billed CPT codes applicable
to neonatal services that did not accurately correspond to the medical condition of the infant or
the services provided (hereinafter referred to as the “Covered Conduct”), including, but not
limited to the following:

          1. Pediatrix admitted infants to NICUs using CPT code 99295 (admission of critically ill
infant), and knowingly submitted false claims for payments to the above-referenced federal
programs, when the Government contends that at certain times, as many as one-third or more of those
infants were not in fact critically ill;

          2. Pediatrix used CPT codes 99296 (critical/unstable) and 99297 (critical/stable) for
subsequent days of treatment, and knowingly submitted false claims for payments to the
above-referenced federal programs, when the Government contends that at certain times,
as many as one-half or more of those infants were not in fact critically ill;

          3. Pediatrix used CPT codes 99296 (critical/unstable) and 99297 (critical/stable) on
discharge days, representing the last

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days of service, and knowingly submitted false claims for
payments to the above-referenced federal programs, when the Government contends that at certain
times, as many as 85% or more of those infants were not in fact critically ill and should have been
discharged using CPT discharge codes 99238 or 99239.

     G. The United States also contends that it has certain administrative claims, as specified in
Paragraphs 4, 5 and 6 of Article III below, against Pediatrix for engaging in the Covered Conduct.

     H. Pediatrix denies the allegations of the Relator in the Civil Action, the allegations in
paragraphs E., F. and G. of this Article II and all wrongdoing and/or liability under the False
Claims Act, 31 U.S.C. 3729 through 3733.

     I. This Agreement is neither an admission of liability by Pediatrix nor a concession by the
United States that its claims are not well-founded.

     J. To avoid the delay, uncertainty, inconvenience, and expense of protracted litigation of the
above claims, the Parties reach a full and final settlement pursuant to the Terms and Conditions
below.

III. TERMS AND CONDITIONS

     1. Pediatrix agrees to pay to the United States and to the Medicaid Participating States,
collectively, the sum of $25,078,918.00 (Twenty-five million, seventy eight thousand, nine hundred
and eighteen dollars)(the “Settlement Amount”). The United

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States agrees to pay $1,557,588.00 (One million, five hundred fifty-seven thousand, five hundred eighty-eight dollars) to Relator.
Pediatrix further agrees to pay Relator for certain agreed upon attorney’s fees and expenses. The
foregoing payments shall be made as follows:

          a. Pediatrix agrees to pay the full Settlement Amount to the United States by electronic
funds transfer pursuant to written instructions to be provided by the United States Attorney’s
Office for the District of Maryland. Pediatrix agrees to make this electronic funds transfer no
later than five business days following the Effective Date of this Agreement.

          b. Contingent upon the United States receiving the Settlement Amount from Pediatrix, and as
soon as feasible after receipt, the United States agrees to pay $1,557,588.00 (One million, five
hundred fifty-seven thousand, five hundred eighty-eight dollars) to Relator by electronic funds
transfer pursuant to written instructions provided by Relator’s counsel, James T. Ratner.

          c. In accordance with 31 U.S.C. § 3730(d), at the same time that it pays the Settlement
Amount to the United States, Pediatrix shall convey to Relator, pursuant to Relator’s counsel’s
written instructions, payment for reasonable attorney’s fees and expenses incurred in connection
with the Civil Action as agreed to separately between Pediatrix and Relator’s counsel. This payment
of attorney’s fees is in addition to, and not included within, the Settlement Amount payment that
Pediatrix is making pursuant to this

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Agreement. Relator represents that his counsel in the Civil
Action is James T. Ratner, and Relator hereby agrees to hold Pediatrix harmless from any claims by
other attorneys known to Relator to a share of said attorney’s fees and expenses.

          d. Contingent upon the United States receiving the Settlement Amount from Pediatrix, and as
soon as feasible after receipt, the United States agrees to pay $9,503,039.00 (Nine million, five
hundred three thousand, thirty nine dollars) (the “Medicaid Participating State Settlement Amount”)
by electronic funds transfer to an escrow agent to be identified by and pursuant to written
instructions to be provided by the negotiating team for the Medicaid Participating States.
Pursuant to the terms and conditions of the Medicaid State Settlement Agreements, the escrow agent
shall pay each Medicaid Participating State an amount to be determined by the
negotiating team based on each Medicaid Participating State’s relative utilization of, and
payment for, Pediatrix’s services.

     2. Subject to the exceptions in Paragraph 7 below, in consideration of the obligations of
Pediatrix in this Agreement, and conditioned upon Pediatrix’s full payment of the Settlement
Amount, the United States (on behalf of itself, its officers, agents, agencies, and departments)
agrees to release Pediatrix, its wholly-owned subsidiaries, and any affiliated professional
associations, corporations, and partnerships over which Pediatrix has established a controlling
financial interest in their operations, as defined by the Financial Accounting Standards Board
(collectively

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the “Pediatrix Entities”), any of the Pediatrix Entities’ current and former
officers, directors, employees, and agents, and any of their successors and assigns (who, together
with the Pediatrix Entities, shall constitute the “Pediatrix Released Parties”) from any civil or
administrative monetary claim the United States has or may have for the Covered Conduct under the
False Claims Act, 31 U.S.C. §§ 3729-3733; the Civil Monetary Penalties Law, 42 U.S.C. § 1320a-7a;
the Program Fraud Civil Remedies Act, 31 U.S.C. §§ 3801-3812; or the common law theories of payment
by mistake, unjust enrichment, and fraud.

     3. Subject to the exceptions in Paragraph 7 below, in consideration of the obligations of
Pediatrix in this Agreement, and conditioned upon Pediatrix’s full payment of the Settlement
Amount and Relator’s receipt of the payments described in Paragraph III.1.c., Relator, on
behalf of himself, his heirs, successors, partners, employees, agents, attorneys, consultants and
assigns, will dismiss the Civil Action pursuant to Paragraph 22, and covenants not to sue with
respect to, and releases, acquits, waives and forever discharges the Pediatrix Released Parties
from any and all rights, claims, expenses, debts, liabilities, demands, obligations, costs,
damages, injuries, actions and causes of action of every nature, including under the False Claims
Act, 31 U.S.C. § 3729 et seq., whether known or unknown, suspected or unsuspected, in law or in
equity, related or unrelated to the Civil Action or the Covered Conduct, including those for
attorney’s fees, prior to the Effective Date of this Agreement.

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     4. In consideration of the obligations of Pediatrix in this Agreement and the
Corporate Integrity Agreement (“CIA”) entered into between OIG-HHS and Pediatrix, and conditioned
upon Pediatrix’s full payment of the Settlement Amount, the OIG-HHS agrees to release and refrain
from instituting, directing, or maintaining any administrative action seeking exclusion from
Medicare, Medicaid, and other Federal health care programs (as defined in 42 U.S.C. § 1320a-7b(f))
against the Pediatrix Entities under 42 U.S.C. § 1320a-7a (Civil Monetary Penalties Law) or 42
U.S.C. § 1320a-7(b)(7) (permissive exclusion for fraud, kickbacks, and other prohibited activities)
for the Covered Conduct, except as reserved in Paragraph
7 below, and as reserved in this Paragraph. The OIG-HHS expressly reserves all rights to
comply with any statutory obligations to exclude Pediatrix from Medicare, Medicaid, and other
Federal health care programs under 42 U.S.C. § 1320a-7(a) (mandatory exclusion) based upon the
Covered Conduct. Nothing in this Paragraph precludes the OIG-HHS from taking action against
entities or persons, or for conduct and practices, for which claims have been reserved in Paragraph
7 below.

     5. In consideration of the obligations of Pediatrix set forth in this Agreement, and
conditioned upon Pediatrix’s full payment of the Settlement Amount, TMA agrees to release and
refrain from instituting, directing, or maintaining any administrative

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action seeking exclusion
from the TRICARE Program against the Pediatrix Entities under 32 C.F.R. § 199.9 for the Covered
Conduct, except as reserved in Paragraph 7 below and as reserved in this Paragraph. TMA expressly
reserves all rights to comply with any statutory obligation to exclude Pediatrix from the Tricare
program under 32 C.F.R. §§ 199.9 (f)(1)(i)(A), (f)(1)(i)(B), and (f)(1)(iii), based upon the
Covered Conduct. Nothing in this Paragraph precludes TMA or the TRICARE Program from taking action
against entities or persons, or for conduct and practices, for which claims have been reserved in
Paragraph 7 below.

     6. In consideration of the obligations of Pediatrix in this Agreement, and conditioned upon
Pediatrix’s full payment of the Settlement Amount, OPM agrees to release and refrain from instituting, directing, or
maintaining any administrative action seeking exclusion from the FEHBP against the Pediatrix
Entities under 5 U.S.C. § 8902a or 5 C.F.R. Part 970 for the Covered Conduct, except as reserved in
Paragraph 7 below and except if excluded by OIG-HHS pursuant to 42 U.S.C. § 1320a-7(a). Nothing in
this Paragraph precludes OPM from taking action against entities or persons, or for conduct and
practices, for which claims have been reserved in Paragraph 7 below.

     7. Notwithstanding any term of this Agreement, specifically reserved and excluded from
the scope and terms of this Agreement as to any entity or person (including Pediatrix and Relator)
are the following claims of the United States:

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          a. Any civil, criminal, or administrative liability arising under Title 26, U.S. Code
(Internal Revenue Code);

          b. Any criminal liability;

          c. Except as explicitly stated in this Agreement, any administrative liability, including
mandatory exclusion from Federal health care programs;

          d. Any liability to the United States (or its agencies) for any conduct other than the
Covered Conduct;

          e. Any liability based upon such obligations as are created by this Agreement;

          f. Any civil or administrative liability of individuals (including current or former
directors, officers, employees, agents, or shareholders of Pediatrix) who are indicted, charged, or
convicted for, or who enter into a plea agreement to, the Covered Conduct.

     8. Relator and his heirs, successors, attorneys, agents, and assigns agree not to object to
this Agreement and agree and confirm that this Agreement is fair, adequate, and reasonable under
all the circumstances, pursuant to 31 U.S.C. § 3730(c)(2)(B) and, conditioned upon receipt of
Relator’s share, Relator, for himself individually, and for his heirs, successors, agents, and
assigns, fully and finally releases, waives, and forever discharges the United States, its
officers, agents, and employees, from any claims arising from or relating to 31 U.S.C. § 3730; from
any claims arising from the filing of the Civil Action; and from any other claims for a share of
the

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Settlement Amount; and in full settlement of any claims Relator may have under this Agreement.
This Agreement does not resolve or in any manner affect any claims the United States has or may
have against the Relator arising under Title 26, U.S. Code (Internal Revenue Code), or any claims
arising under this Agreement.

     9. Conditioned upon receipt of the payments described in Paragraph III.1.c., Relator, for
himself, and for his heirs, successors, attorneys, agents, and assigns, agrees to release the
Pediatrix Released Parties from any liability to Relator arising from the filing of the Civil Action, including claims under 31 U.S.C. § 3730(d) for attorney’s
fees and expenses, and any other claims the Relator has asserted or could have asserted, whether or
not relating to the Civil Action, as of the Effective Date of this Agreement. In consideration of
the obligations of the Relator set forth in this Agreement, the Pediatrix Released Parties fully
and finally release, waive and forever discharge the Relator and his heirs, successors, assigns,
agents and attorneys from any claims the Pediatrix Released Parties have asserted or could have
asserted, whether or not relating to the Civil Action, as of the Effective Date of this Agreement.

     10. In the event of any criminal prosecution or administrative action relating to the
Covered Conduct, Pediatrix waives and shall not assert any defenses Pediatrix may have based in
whole or in part on a contention that, under the Double Jeopardy Clause in the Fifth Amendment of
the Constitution, or under the

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Excessive Fines Clause in the Eighth Amendment of the Constitution,
this Agreement bars a remedy sought in such criminal prosecution or administrative action. Nothing
in this Paragraph or any other provision of this Agreement constitutes an agreement by the United
States concerning the characterization of the Settlement Amount for purposes of the Internal
Revenue laws, Title 26 of the United States Code.

     11. The Pediatrix Released Parties fully and finally release the United States, its agencies,
employees, servants, and agents from any claims (including attorney’s fees, costs, and expenses of
every kind and however denominated) that the Pediatrix Released Parties have asserted, could have
asserted, or may assert in the future against the United States, its agencies, employees, servants,
and agents, related to the Covered Conduct and the United States’ investigation and prosecution
thereof.

     12. The Settlement Amount shall not be decreased as a result of the denial of claims for
payment now being withheld from payment by any TRICARE or FEHBP carrier or intermediary, or by any
state payer, related to the Covered Conduct; and Pediatrix shall not resubmit to any TRICARE or
FEHBP carrier or intermediary, or to any state payer, any previously denied claims related to the
Covered Conduct, and shall not appeal any such denials of claims.

     13. Pediatrix agrees to the following to the extent applicable:

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          a. Unallowable Costs Defined: That all costs (as defined in the Federal
Acquisition Regulation, 48 C.F.R. § 31.205-47; and in Titles XVIII and XIX of the Social Security
Act, 42 U.S.C. §§ 1395-1395ggg and 1396-1396v; and the regulations and official program directives
promulgated thereunder) incurred by or on behalf of Pediatrix, its present or former officers,
directors, employees, shareholders, and agents in connection with the following shall be
“unallowable costs” on government contracts and under the Medicaid Program, TRICARE Program,
and FEHBP:

               (1) the matters covered by this Agreement;

               (2) the United States’ or any states’ audits and investigations of the matters covered by this
Agreement;

               (3) Pediatrix’s investigation, defense, and corrective actions undertaken in response to the
United States’ or any states’ audits and investigations in connection with the matters covered by
this Agreement (including attorney’s fees);

               (4) the negotiation and performance of this Agreement;

               (5) the payments Pediatrix makes to the United States and to the Medicaid Participating States
pursuant to this Agreement and any payments that Pediatrix may make to Relator, including
attorney’s fees and expenses; and

               (6) the negotiation of, and obligations undertaken pursuant to the CIA to:

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                    (i) retain an independent review organization to perform annual reviews as described in
Section III of the CIA; and

                    (ii) prepare and submit reports to the OIG-HHS. However, nothing in this Paragraph
13.a.(6) that may apply to the obligations undertaken pursuant to the CIA affects the status of
costs that are not allowable based on any other authority
applicable to Pediatrix. (All costs described or set forth in this Paragraph 13.a are
hereafter “unallowable costs.”)

          b. Future Treatment of Unallowable Costs: If applicable, these unallowable costs
shall be separately determined and accounted for by Pediatrix, and Pediatrix shall not charge such
unallowable costs directly or indirectly to any contracts with the United States or any State
Medicaid program, or seek payment for such unallowable costs through any cost report, cost
statement, information statement, or payment request submitted by Pediatrix or any of its
subsidiaries or affiliates to the Medicaid, TRICARE, or FEHBP Programs.

          c. Treatment of Unallowable Costs Previously Submitted for Payment: If
applicable, Pediatrix further agrees that within 90 days of the Effective Date of this Agreement it
shall identify to applicable TRICARE fiscal intermediaries, carriers, and/or contractors, and
Medicaid and FEHBP fiscal agents, any unallowable costs (as defined in this Paragraph) included in
payments previously sought from the United States, or any State Medicaid

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program, including, but not limited to, payments sought in any cost reports, cost statements, information reports, or
payment requests already submitted by Pediatrix or any of its subsidiaries or affiliates, and shall
request, and agree, that such cost reports, cost statements, information reports, or payment
requests, even if already settled, be adjusted to account for the effect of the
inclusion of the unallowable costs. Pediatrix agrees that the United States, at a minimum,
shall be entitled to recoup from Pediatrix any overpayment plus applicable interest and penalties
as a result of the inclusion of such unallowable costs on previously-submitted cost reports,
information reports, cost statements, or requests for payment.

     Any payments due after the adjustments have been made shall be paid to the United States
pursuant to the direction of the Department of Justice and/or the affected agencies. The United
States reserves its rights to disagree with any calculations submitted by Pediatrix or any of its
subsidiaries or affiliates on the effect of inclusion of unallowable costs (as defined in this
Paragraph) on Pediatrix or any of its subsidiaries or affiliates’ cost reports, cost statements, or
information reports.

          d. Nothing in this Agreement shall constitute a waiver of the rights of the United States to
audit, examine, or re-examine Pediatrix’s books and records to determine that no unallowable costs
have been claimed in accordance with the provisions of this Paragraph.

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     14. This Agreement is intended to be for the benefit of the Parties only, including
the Pediatrix Released Parties. The Parties do not release any claims against any other person or
entity, except to the extent provided for in Paragraph 15 below.

     15. Pediatrix waives and shall not seek payment for any of the health care billings covered
by this Agreement from any health care beneficiaries or their parents, sponsors, legally
responsible individuals, or third party payers based upon the claims defined as Covered Conduct.

     16. Pediatrix warrants that it has reviewed its financial situation and that it
currently is solvent within the meaning of 11 U.S.C. §§ 547(b)(3) and 548(a)(1)(B)(ii)(I), and
shall remain solvent following payment to the United States of the Settlement Amount. Further, the
Parties warrant that, in evaluating whether to execute this Agreement, they (a) have intended that
the mutual promises, covenants, and obligations set forth constitute a contemporaneous exchange for
new value given to Pediatrix, within the meaning of 11 U.S.C. § 547(c)(1); and (b) conclude that
these mutual promises, covenants, and obligations do, in fact, constitute such a contemporaneous
exchange. Further, the Parties warrant that the mutual promises, covenants, and obligations set
forth herein are intended to and do, in fact, represent a reasonably equivalent exchange of value
that is not intended to hinder, delay, or defraud any entity to which Pediatrix was or became
indebted to on or after the date of this transfer, within the meaning of 11 U.S.C. § 548(a)(1).

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     17. Except as expressly provided to the contrary in this Agreement, each Party shall bear
its own legal and other costs incurred in connection with this matter, including the preparation and performance of this
Agreement.

     18. Pediatrix represents that this Agreement is freely and voluntarily entered into without
any degree of duress or compulsion whatsoever.

     19. Relator represents that this Agreement is freely and voluntarily entered into without
any degree of duress or compulsion whatsoever.

     20. This Agreement is governed by the laws of the United States. The Parties agree that the
exclusive jurisdiction and venue for any dispute arising between and among the Parties under this
Agreement is the United States District Court for the District of Maryland, except that disputes
arising under the CIA shall be resolved exclusively under the dispute resolution provisions in the
CIA.

     21. This Agreement constitutes the complete agreement between the Parties. This
Agreement may not be amended except by written consent of the Parties.

     22. Upon receipt of the payments described in Paragraph 1.a.-c. above, the United States and
Relator shall promptly sign and file in the Civil Action a Joint Stipulation of Dismissal, with
prejudice, of the Civil Action pursuant to the terms of this Agreement.

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     23. The individuals signing this Agreement on behalf of Pediatrix represent and warrant that
they are authorized by Pediatrix to execute this Agreement. The individual signing this Agreement on behalf of
Relator represents and warrants that he is authorized by Relator to execute this Agreement. The
United States signatories represent that they are signing this Agreement in their official
capacities and that they are authorized to execute this Agreement.

     24. This Agreement may be executed in counterparts, each of which constitutes an original
and all of which constitute one and the same Agreement.

     25. This Agreement is binding on Pediatrix’s successors, transferees, heirs, and assigns.

     26. This Agreement is binding on Relator’s successors, transferees, heirs, and assigns.

     27. All Parties consent to the United States’ disclosure of this Agreement, and
information about this Agreement, to the public.

     28. Any notices required under this Agreement shall be directed to the following persons:

On behalf of Pediatrix:

Thomas W. Hawkins (or his successor)

Senior Vice President and General Counsel

Pediatrix Medical Group, Inc.

131 Concord Terrace

Sunrise, Florida 33323

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On behalf of the United States, its agencies,

departments and divisions:

Rod J. Rosenstein (or his successor)

United States Attorney

101 W. Lombard Street

Baltimore, Maryland 21201

On behalf of the Relator:

James T. Ratner

P.O. Box 177

Mt. Tremper, New York 12457

     29. This Agreement is effective on the date of signature of the last signatory to the
Agreement (the “Effective Date”). Facsimiles of signatures shall constitute acceptable, binding
signatures for purposes of this Agreement.

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THE UNITED STATES OF AMERICA

	 	 	 	 	 
	 	ROD J. ROSENSTEIN

United States Attorney

 	 
	DATED: 9/21/06 	BY: /s/ Roann Nichols
 	 
	 	Roann Nichols 	 
	 	Assistant United States Attorney 	 
	 
	 	 	 
	DATED: 9/20/06 	BY: /s/ Tarra DeShields
 	 
	 	Tarra DeShields 	 
	 	Assistant United States
Attorney

TROY A. EID

United States Attorney 	 
	 
	 	 	 
	DATED: 9/19/06 	BY: /s/ Edwin Winstead
 	 
	 	Edwin Winstead 	 
	 	Assistant United States Attorney 	 
	 
	 	 	 
	DATED: 9/18/06 	BY: /s/ Gregory E. Demske
 	 
	 	GREGORY E. DEMSKE 	 
	 	Assistant Inspector General for
Legal Affairs

Office of Counsel to the Inspector General

Office of Inspector General

United States Department of Health
and Human Services 	 
	 
	 	 	 
	DATED: 9/20/06 	BY: /s/ Laurel C. Gillespie
 	 
	 	LAUREL C. GILLESPIE 	 
	 	Deputy General Counsel

TRICARE Management Activity

United States Department of Defense 	 
	 
	 	 	 
	DATED: 9/18/06 	BY: /s/ Kathleen McGettigan
 	 
	 	KATHLEEN McGETTIGAN

Deputy Associate Director

Center for Retirement & Insurance Services

United States Office of Personnel Management 	 
	 
	 	 	 
	DATED: 9/18/06 	BY: /s/ J. David Cope
 	 
	 	J. DAVID COPE

Assistant Inspector General for Legal Affairs

United States Office of Personnel Management 	 

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PEDIATRIX MEDICAL GROUP, INC. — DEFENDANT

	 	 	 	 	 
	 
	 
	DATED: 9/19/06 	BY: /s/ Thomas W. Hawkins
 	 
	 	Thomas W. Hawkins

Senior Vice President and General Counsel

Pediatrix Medical Group, Inc. 	 
	 
	 	 	 
	DATED: 9/20/06 	BY:
/s/ Ronald L. Wisor, Jr.
 	 
	 	Stephen J. Immelt 	 
	 	Ronald L. Wisor Jr.

Hogan & Hartson L.L.P.

Counsel for Pediatrix

Daniel M. Hall, MD - RELATOR

	 	 	 	 	 
	 
	 	 	 
	DATED: 8/21/06 	BY: /s/ Daniel M. Hall, MD
 	 
	 	Daniel M. Hall, MD 	 
	 	 	 
	 
	 	 	 
	DATED: 9/18/06 	BY: /s/ James T. Ratner
 	 
	 	James T. Ratner 	 
	 	Counsel for Relator 	 
	 

-21-EX-10.2 Model State Settlement Agreement

 

Exhibit 10.2

MODEL STATE

SETTLEMENT AGREEMENT

I. PARTIES

     This Settlement Agreement (“Agreement”) is entered into by the State of ___
(hereinafter “State”) and Pediatrix Medical Group, Inc. (hereinafter “Pediatrix”), hereinafter
collectively referred to as the “Parties.”

II. PREAMBLE

     As a preamble to this Agreement, the Parties agree to the following:

          A. Pediatrix is a publicly-traded company, incorporated under the laws of the State of
Florida. Pediatrix’s network of affiliated physician groups provides medical services in various
hospital neonatal intensive care units (“NICUs”) in 32 states and Puerto Rico.

          B. Pediatrix has entered into a Settlement Agreement with the United States of America
regarding the Covered Conduct described in paragraph II.D. below (the “Federal Settlement
Agreement”).

          C. The State contends that Pediatrix submitted or caused to be submitted false claims for
payment to the State’s Medicaid program, established pursuant to or in connection with Title XIX
of the Social Security Act, 42 U.S.C. §§ 1396-1396v (the “Medicaid Program”).

 

 

          D. The State contends that it has civil claims against Pediatrix under various federal and
state statutes, regulations, rules and/or common law doctrines for engaging in the following
conduct with respect to the State’s Medicaid Program (hereinafter referred to as the “Covered
Conduct”): that Pediatrix during the period from January 1, 1996 through December 31, 1999,
improperly billed CPT codes applicable to neonatal services that did not accurately correspond to
the medical condition of the infant or the services provided, including, but not limited to the
following:

               1. Pediatrix admitted infants to NICUs using CPT code 99295 (admission of critically ill
infant), and submitted false claims for payments to the Medicaid Program, when the State contends
that at certain times, as many as one-third or more of those infants were not in fact critically
ill;

               2. Pediatrix used CPT codes 99296 (critical/unstable) and 99297 (critical/stable) for
subsequent days of treatment, and submitted false claims for payments to the Medicaid Program, when
the State contends that at certain times, as many as one-half or more of those infants were not in
fact critically ill;

               3. Pediatrix used CPT codes 99296 (critical/unstable) and 99297 (critical/stable) on
discharge days, representing the last days of service, and submitted false claims for payments to the Medicaid Program, when the
State contends that at certain times, as many as 85% or more of those infants were not in fact
critically ill and should have been discharged using CPT discharge codes 99238 or 99239.

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          E. The State contends that the Medicaid Program was damaged as a result of the Covered
Conduct.

          F. The State contends that it has certain administrative claims against Pediatrix for engaging
in the Covered Conduct under various federal and state statutes, regulations and rules, including
the provisions for permissive exclusion from the Medicaid program, 42 U.S.C. § 1320a-7(b), the
provisions for civil monetary penalties, 42 U.S.C. §§ 1320a-7a and 1396r-8(b)(3)(C)(ii), and
analogous State provisions.

          G. Pediatrix denies the allegations of the State as set forth in paragraphs D., E. and F. of
this Article II and all wrongdoing and/or liability under any federal or state law.

          H. This Agreement is neither an admission of liability by Pediatrix nor a concession by the
State that its claims are not well-founded.

          I. To avoid the delay, uncertainty, inconvenience, and expense of protracted litigation of the
above claims, the Parties reach a full and final settlement pursuant to the Terms and Conditions below.

III. TERMS AND CONDITIONS

          1. Pediatrix agrees to pay to the United States and to the states that agree to participate in
settlement of the Covered

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Conduct on terms substantially similar to this Agreement (the “Medicaid
Participating States”), collectively, the sum of $25,078,918.00 (Twenty-five million, seventy-eight
thousand, nine hundred eighteen dollars)(the “Settlement Amount”). The foregoing payment shall be
made as follows:

               a. Pediatrix agrees to pay the full Settlement Amount to the United States by electronic
funds transfer pursuant to written instructions to be provided by the United States Attorney’s
Office for the District of Maryland. Pediatrix agrees to make this electronic funds transfer no
later than five business days following the effective date of the Federal Settlement Agreement.

               b. As soon as feasible after receipt, the United States will pay $9,503,039.00 (Nine million,
five hundred three thousand, thirty-nine dollars) (the “Medicaid Participating State Settlement
Amount”) by electronic funds transfer to an Escrow Agent to be identified by and pursuant to
written instructions to be provided by the negotiating team for the Medicaid Participating States.

               c. The Escrow Agent shall pay each Medicaid Participating State which has executed a
settlement agreement with Pediatrix in substantially the same form as this Agreement (a “State
Settlement Agreement”) its share of the Medicaid Participating State Settlement Amount, as
determined by the negotiating team for the Medicaid Participating States based on each Medicaid
Participating State’s relative utilization of, and payment for, Pediatrix’s services, on the
occurrence of the following:

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	 	(i)	 	When all of the states identified in Exhibit A
to this Agreement and Pediatrix have executed State Settlement
Agreements; or
	 
	 	(ii)	 	At the written agreement of Pediatrix and the
negotiating team for the Medicaid Participating States;

provided, however, that Pediatrix shall receive back that portion of the Medicaid Participating
State Settlement Amount attributed to any state listed on Exhibit A that does not execute a State
Settlement Agreement with Pediatrix; and, provided further, that any escrowed funds not disbursed
in accordance with the foregoing terms within 200 days after the Escrow Agent has received the
Medicaid Participating State Settlement Amount shall be disbursed to Pediatrix.

          d. The total portion of the Settlement Amount paid by Pediatrix in settlement for alleged
injury to the Medicaid Program for the State is ___, consisting of a portion paid to
the State under this Agreement and another portion paid to the federal government as part of the
Federal Settlement Agreement. The individual portion of the Medicaid Participating State
Settlement Amount allocable to the State is ___(the “Individual State Settlement
Amount”). The portion of the Federal Settlement Agreement amount allocable to the State is
___.

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          2. Subject to the exceptions in Paragraph III.3. below, in consideration of the obligations of
Pediatrix in this Agreement, and conditioned upon Pediatrix’s full payment of the Settlement
Amount, the State (on behalf of itself, its officers, agents, agencies, and departments) agrees to
release Pediatrix, its parents, subsidiaries, divisions, and affiliates (collectively the
“Pediatrix Entities,” which for purposes of this Agreement shall include any affiliated
professional associations, corporations, and partnerships over which Pediatrix has established a
controlling financial interest in their operations, as defined by the Financial Accounting
Standards Board), any of the Pediatrix Entities’ current and former officers, directors, employees,
and agents, and any of their successors and assigns (who, together with the Pediatrix Entities,
shall constitute the “Pediatrix Released Parties”) from any civil or administrative claim the State has or may have for the Covered Conduct under any
federal or state statute, regulation, rule and/or common law doctrine, including, without
limitation, any civil or administrative monetary claim or any action seeking to exclude, debar,
suspend or otherwise terminate, restrict or limit any of the Pediatrix Released Parties from
participating in the State Medicaid Program.

          3. Notwithstanding any term of this Agreement, the State specifically does not release
the Pediatrix Released Parties or any entity or person from any and all of the following:

               a. any potential criminal, civil or administrative claims arising under the State’s revenue
codes;

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               b. any criminal liability;

               c. any civil or administrative liability that Pediatrix has or may have under any state
statute, regulation, or rule not covered by the release;

               d. except as explicitly stated in this State Settlement Agreement, any administrative
liability, including mandatory exclusion from the State’s Medicaid Program;

               e. any liability to the State (or its agencies) for any conduct other than the Covered
Conduct; or

               f. any claims based upon such obligations as are created by this Agreement.

          4. In the event of any criminal prosecution or administrative action relating to the Covered
Conduct, Pediatrix waives and shall not assert any defenses Pediatrix may have based in whole or in
part on a contention that, under the Double Jeopardy Clause in the Fifth Amendment of the
Constitution, or under the Excessive Fines Clause in the Eighth Amendment of the Constitution, this
Agreement bars a remedy sought in such criminal prosecution or administrative action. Nothing in
this Paragraph or any other provision of this Agreement constitutes an agreement by the State
concerning the characterization of the Settlement Amount for purposes of the State’s revenue laws.

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          5. The Pediatrix Released Parties fully and finally release the State, its agencies,
employees, servants, and agents from any claims (including attorney’s fees, costs, and expenses of
every kind and however denominated) that the Pediatrix Released Parties have asserted, could have
asserted, or may assert in the future against the State, its agencies, employees, servants, and
agents, related to the Covered Conduct and the State’s investigation and prosecution thereof.

          6. The Settlement Amount shall not be decreased as a result of the denial of claims for
payment now being withheld from payment by the State Medicaid Program related to the Covered
Conduct; and Pediatrix shall not resubmit to the State Medicaid
Program any  previously denied claims related to the Covered Conduct, and shall not appeal any such denials
of claims.

          7. This Agreement is intended to be for the benefit of the Parties only, including
the Pediatrix Released Parties. The Parties do not release any claims against any other person or
entity.

          8. Except as expressly provided to the contrary in this Agreement, each Party shall bear its
own legal and other costs incurred in connection with this matter, including the preparation and
performance of this Agreement.

          9. Pediatrix represents that this Agreement is freely and voluntarily entered into without
any degree of duress or compulsion whatsoever.

          10. This Agreement is governed by the laws of the State.

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          11. This Agreement constitutes the complete agreement between the Parties. This
Agreement may not be amended except by written consent of the Parties.

          12. The individuals signing this Agreement on behalf of Pediatrix represent and warrant that
they are authorized by Pediatrix to execute this Agreement. The State signatories represent that
they are signing this Agreement in their official capacities and that they are authorized to
execute this Agreement on behalf of the State and its Medicaid state agency.

          13. The Medicaid Participating State Settlement Amount includes a component for the reasonable
travel costs and expenses of the NAMFCU negotiating team. Such costs and expenses shall be
reimbursed by the Escrow Agent after all Medicaid Participating States execute this Agreement or as
otherwise agreed between Pediatrix and the NAMFCU team.

          14. Each party agrees to perform any further acts and to execute and deliver any further
documents reasonably necessary to carry out this Agreement. This Agreement may be executed in
counterparts, each of which shall constitute an original and all of which taken together shall
constitute one and the same Agreement. Facsimiles of signatures shall constitute acceptable binding
signatures for purposes of this Agreement.

          15. This Agreement is binding on Pediatrix’s successors, transferees, heirs, and assigns.

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          16. The Parties consent to the State’s disclosure of this Agreement, and information
about this Agreement, to the public.

[The remainder of this page is intentionally left blank.]

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EXHIBIT A

LIST OF POTENTIAL MEDICAID PARTICIPATING STATES

Alabama

Alaska

Arkansas

District of Columbia

Georgia

Illinois

Indiana

Kansas

Kentucky

Louisiana

Maryland

Michigan

Missouri

Montana

Nebraska

New Jersey

New Mexico

New York

North Carolina

Ohio

Oklahoma

Oregon

Pennsylvania

South Carolina

South Dakota

Texas

Utah

Virginia

Washington

West Virginia

Wyoming

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