Court Opinion

ID: 1005799
Source: CourtListenerOpinion
Date Created: 2013-07-04 19:01:44.394339+00
Date Added: 2024-06-11T15:12:30.709335
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS
                FOR THE FOURTH CIRCUIT

UNITED STATES OF AMERICA, ex rel.       
Harold E. Bondy, M.D.,
                 Plaintiff-Appellant,
                 v.
CONSUMER HEALTH FOUNDATION;
HUMANA GROUP HEALTH PLAN,
INCORPORATED; KAISER FOUNDATION
HEALTH PLAN OF THE MID-ATLANTIC
STATES, INCORPORATED,                             No. 00-2520
              Defendants-Appellees,
                and
KAISER PERMANENTE, INCORPORATED,
                        Defendant,
                and
UNITED STATES OF AMERICA,
                  Party in Interest.
                                        
            Appeal from the United States District Court
         for the Eastern District of Virginia, at Alexandria.
               Claude M. Hilton, Chief District Judge.
                          (CA-00-107-A)
                      Argued: September 25, 2001
                      Decided: November 9, 2001
 Before WIDENER, NIEMEYER, and MICHAEL, Circuit Judges.

Affirmed by unpublished per curiam opinion.
2          UNITED STATES v. CONSUMER HEALTH FOUNDATION
                             COUNSEL

ARGUED: Alan Mark Grayson, GRAYSON & KUBLI, P.C.,
McLean, Virginia, for Appellant. Kathleen Heenan McGuan, REED
SMITH, L.L.P., Washington, D.C., for Appellees. ON BRIEF: Jac-
queline E. Bennett, REED SMITH, L.L.P., Washington, D.C.; James
P. Holloway, Megan Tinker, PROSKAUER ROSE, L.L.P., Washing-
ton, D.C.; David W. O’Brien, CROWELL & MORING, L.L.P.,
Washington, D.C., for Appellees.

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

                              OPINION

PER CURIAM:

   Dr. Harold Bondy commenced this qui tam action on behalf of the
United States against the successors to Group Health Association,1 a
health maintenance organization ("HMO"), for submitting false
claims to the United States in violation of the False Claims Act, 31
U.S.C. §§ 3729-34. He also alleged that Group Health Association
terminated his employment as a doctor in retaliation for his investigat-
ing the claim. On cross-motions for summary judgment, the district
court entered judgment in favor of the defendants on the grounds that
(1) Bondy’s evidence failed to establish that Group Health Associa-
tion submitted any false claims to Medicare, and (2) Bondy’s retalia-
tion claim was barred by res judicata in that Bondy previously sued
Group Health Association unsuccessfully in connection with the same
termination of employment. We affirm.
    1
   The assets of Group Health Association were transferred through vari-
ous transactions to Consumer Health Foundation, Humana Group Health
Plan, Inc., and Kaiser Permanente, Inc., all of whom Bondy named as
defendants.
           UNITED STATES v. CONSUMER HEALTH FOUNDATION                3
                                   I

   Bondy commenced this action against the successors of Group
Health Association (collectively "GHA") in December 1998, alleging
in two counts that GHA, as an HMO, submitted false claims to Medi-
care for the years 1988 through 1994 by failing to give Medicare
credits on "cost reports" submitted to Medicare for reimbursement
that GHA received from its patients’ private insurers. He claimed that
by receiving double payment for health care services rendered — one
payment from Medicare and one from the private insurers — GHA
violated regulations requiring that GHA give Medicare credit for pri-
vate insurance reimbursements and defrauded the United States by
submitting false claims for reimbursement. The complaint alleged in
the third count that GHA terminated Bondy’s employment in retalia-
tion for investigating the claim. The United States declined to take
over the case, and Bondy has pursued it individually.

   At the close of discovery, the district court granted summary judg-
ment in favor of GHA on all three counts. With respect to the false
claim counts, the court concluded that Bondy had "not made out a
case for GHA’s liability under the False Claim Act" because he "ha[d]
no evidence that GHA submitted false claims, nor ha[d] he identified
what those claims are." Specifically, the court found that two methods
of accounting for third-party insurer payments were available and
Bondy could not exclude the possibility that GHA had used one of
those methods properly. With regard to the third count for retaliatory
termination, the court concluded that it was barred by res judicata.

   To treat its Medicare patients, GHA entered into a contractual
arrangement with the Health Care Financing Agency ("HCFA"), the
agency charged with administering Medicare. Under the arrangement,
GHA was paid a fixed monthly fee for each of its Medicare patients.
But at the end of the year, GHA was required to account for its actual
costs incurred in treating the Medicare patients during the year by fil-
ing "costs reports." If GHA incurred more expenses than it received
through the payment of fixed fees, HCFA would reimburse GHA that
amount. On the other hand, if GHA incurred less expenses, it would
refund the excess fees to HCFA.

   As part of the cost reports, GHA had to give HCFA credit for sums
received by GHA on behalf of its patients from third-party private
4          UNITED STATES v. CONSUMER HEALTH FOUNDATION
insurers. Bondy contends that in accounting to HCFA, GHA did not
give HCFA credit for approximately $38 million worth of payments
received from private insurers on behalf of GHA’s Medicare patients.

   Gary Donner, who was a GHA consultant and who was designated
as GHA’s expert witness, testified that there are two acceptable meth-
ods for accounting to HCFA for the third-party payments, and he
stated that "either method is acceptable to Medicare." Both involved
calculation of an "apportionment statistic" which divides costs attrib-
utable to Medicare and non-Medicare patients. In this case, Donner
indicated that GHA had employed the second method.

   Bondy contended that neither method was appropriate and that the
accounting for third-party payments must be included on the face of
the cost reports submitted to Medicare and not buried within constitu-
ent calculations.

   Because GHA was suffering from financial difficulties in the early
1990s (and unrelated to the present dispute), HCFA initiated an inde-
pendent audit of GHA’s cost reports for the years 1988 through 1994.
With respect to the reports covering the years 1988 through 1991, the
independent auditor’s report states:

    There are several revenue accounts that [GHA] is not prop-
    erly offsetting against expenses, as required by the Provider
    Reimbursement Regulations. In addition, [GHA] does not
    maintain records that detail the sources of these revenue
    accounts that would allow them to be directly offset against
    the related expenses. These third-party accounts include . . .
    Third Party COB [coordination of benefits] Reimbursement.

                            *     *      *

    We did not propose an adjustment to [GHA’s] expenses for
    these offsets because our test indicated that such an adjust-
    ment would not significantly alter reimbursable costs.

Thus, the auditor found some problems with GHA’s accounting meth-
ods but did not believe those problems warranted any formal adjust-
           UNITED STATES v. CONSUMER HEALTH FOUNDATION                5
ment. As a result of the independent audits, HCFA and GHA signed
a settlement agreement based on the final reimbursement figures for
those years.

   Bondy was a staff physician at GHA from 1975 until 1992, and in
1991 he was named GHA’s physician of the year. In addition to his
employment with GHA, Bondy maintained a medical practice on the
side, which GHA permitted within certain limitations. In September
1992, Bondy received a memorandum from GHA directing that
Bondy send GHA a payment that Bondy had received from Blue
Cross/Blue Shield for treating a patient who Bondy contended was
part of his private practice. As a result of this memorandum and sub-
sequent discussions with GHA, Bondy began to suspect that GHA
was double billing HCFA for work done by its physicians. GHA, on
the other hand, suspected that Bondy was diverting patients to his pri-
vate practice, in violation of his arrangement with GHA. Based on
this violation, GHA terminated Bondy’s employment on December
29, 1992.

   Bondy filed an action against GHA for wrongful termination in
violation of the Age Discrimination in Employment Act, 29 U.S.C.
§§ 621-34. Because of his failure to respond to a motion for summary
judgment, however, judgment was entered against Bondy in that
action.

   Despite his termination, Bondy continued his investigation into
GHA’s billing practices for seven years, talking with several former
GHA employees and requesting documents from the United States
under the Freedom of Information Act, 5 U.S.C. § 552. The district
court considered all of the testimony, documents, and other informa-
tion collected by Bondy in ruling on cross-motions for summary judg-
ment filed by the parties. In connection with Bondy’s claims under
the False Claims Act, the court concluded that Bondy had failed to
advance facts sufficient to establish that GHA had made false claims
to Medicare. And in connection with Bondy’s claim that his employ-
ment was terminated in retaliation for his investigation, the court con-
cluded that Bondy’s prior suit for age discrimination barred his filing
another action for wrongful termination. This appeal followed.
6          UNITED STATES v. CONSUMER HEALTH FOUNDATION
                                    II

   Bondy contends first that the district court erred in entering sum-
mary judgment against him on his claims under the False Claims Act
because he advanced sufficient facts, which, if resolved in his favor
at trial, would entitle him to relief under the False Claims Act.2 Our
examination of the record, however, leads us to the same conclusion
reached by the district court.

   First, neither of Bondy’s two expert witnesses — Phil Hefner and
Dave Cotton — was able to advance Bondy’s case because neither
was able to testify that GHA had actually submitted false claims to
Medicare. Hefner testified in his deposition that he had never filed a
Medicare cost report on behalf of an HMO, audited a cost report, or
reviewed the audit of a cost report. He also conceded that he is not
an expert in cost reporting or in how third-party reimbursements
impact cost reporting. Finally, he admitted that, without reviewing
more of GHA’s claims, he could not state that GHA’s Medicare
reporting was false or illegal. Cotton was similarly unhelpful to
Bondy’s case. Cotton’s expert report stated that he only reviewed
HCFA regulations and Bondy’s amended complaint (with attach-
ments) in drawing his conclusions. Thus, he was working with a lim-
ited understanding of how GHA prepared its cost reports. He testified
during his deposition that it was unclear from GHA’s cost reports
whether or not it had offset third party revenue properly, but he did
not testify that GHA had not done so. Furthermore, Cotton testified
that he could not determine from his examination of the cost reports
whether there was any double billing and that he could not offer an
opinion as to whether GHA had actually engaged in double billing.
    2
    GHA challenges our jurisdiction to consider Bondy’s claims under the
False Claims Act, arguing that (1) the claims are based on "public disclo-
sures," and (2) Bondy was not the "original source" of the information.
31 U.S.C. § 3730(e)(4). It argues that information that Bondy obtained
through FOIA amounts to "public disclosures." FOIA information, how-
ever, is not among the items listed in § 3730(3)(4)(A) as "public disclo-
sures" and therefore does not operate as a jurisdictional bar. See United
States ex rel. Eberhardt v. Integrated Design & Constr., Inc., 167 F.3d
861, 870 (4th Cir. 1999) (holding that the list of sources in § 3730(c)(4)
is "exclusive").
           UNITED STATES v. CONSUMER HEALTH FOUNDATION               7
   Second, Bondy’s three main fact witnesses were similarly unable
to testify that GHA had submitted false claims to HCFA because none
of them were involved with, nor had any concrete knowledge of, the
preparation of GHA’s final submissions to HCFA. Cynthia Wilson
was the former assistant supervisor in GHA’s coordination of benefits
unit. She testified at her deposition that GHA would receive refund
checks "two to three" times a week from third-party insurers and
rather than sending them to the "Medicare section" that handled Med-
icare third-party reimbursement, the checks were deposited into
GHA’s general account. When Wilson raised a question about this
with her supervisor, Ted Weinberger, Weinberger told her, "Do as
you are told. I am your boss." Although unexplained, the deposit of
third-party checks in the general account does not suggest they were
not accounted for, and this evidence does not advance Bondy’s
claims. His claims depend on the truthfulness of GHA’s accounting
to HCFA and Wilson’s testimony does not go to that issue.

   Bondy relies heavily upon the statements of Margaret Gary who
was also a former GHA supervisor in its coordination of benefits unit.
Sometime during 1996 or 1997, Bondy telephoned Gary at home,
secretly tape-recording the conversation.3 During the conversation,
Gary stated that GHA received payments from Medicare as well as
from fee-for-service third-party insurers but did not inform Medicare
that GHA had received the second payment, believing this to be a
"double charge." She also stated that she had raised this issue with
Weinberger. At her deposition, however, Gary repudiated these state-
ments, stating she was intoxicated when she made them. Moreover,
while the statements, taken alone, suggest the possibility of wrongdo-
ing, there is no evidence to support actual wrongdoing. The district
court found that Gary was not involved with the preparation of the
cost reports and did not know how third-party payments were
included in those reports. Thus, she did not have any first-hand infor-
mation about how GHA billed Medicare or apportioned its revenue.

  Bondy’s third fact witness, Arun Potdar, who was an accountant in
charge of preparing GHA’s original cost reports for the years 1988
  3
   GHA argues that this conversation was inadmissible hearsay. Because
we find that this conversation does not help Bondy’s case, we do not
reach the hearsay issue.
8          UNITED STATES v. CONSUMER HEALTH FOUNDATION
through 1991, testified that when he saw Donner’s revised reports, he
"had a suspicion." The revised reports submitted for those years did
not contain third-party offsets even though the original versions of
those reports explicitly showed them. He believed that the revised
method of preparing the cost reports "was like adding $4 to $6 million
to [GHA’s] annual reimbursement" and that this result "surprised"
him. He testified that the only way to change the reimbursement fig-
ure from what he had originally included in the cost reports was to
"manipulate[ ] the numbers." Although the revised cost reports raised
Potdar’s suspicions, Potdar was unable to testify that GHA submitted
any false or fraudulent information to Medicare. Indeed, Potdar did
not work in GHA’s accounting department when the revised cost
reports were prepared. Although Potdar’s testimony, like that of Wil-
son and Gary, may raise some question about GHA’s reporting meth-
ods, he could not testify as to any specific fraudulent activity or claim
by GHA. He was not involved with the preparation of the revised cost
reports for 1988 through 1991 nor with the cost reports submitted for
1992 through 1994, and he offers no testimony or documentary evi-
dence that disputes GHA’s statement that GHA effectively used the
"apportionment statistic" method for accounting for the third-party
payments, even though it did not reveal an explicit offset.

   In addition to the testimony of these five witnesses, Bondy
presented substantial documentary evidence in support of his claims,
notably the original and revised cost reports. It is undisputed that
there was a difference between those two reports of several million
dollars and that this difference arose from the offsetting of third-party
revenue by GHA. The issue that remains, however, is whether GHA
properly offset or included the third-party revenues in their calcula-
tion of Medicare reimbursements. The defendants posit that their cal-
culation of the "apportionment statistic" properly accounted for those
revenues. They also state in their brief that HCFA "approved" of the
calculation method chosen by GHA.

   The record, however, is devoid of any statements by HCFA that
specifically approved of GHA’s methods or, for that matter, anything
that documents GHA’s methods. The only explicit reference in the
record that HCFA approved of GHA’s methods were statements by
Donner who both worked and testified as an expert witness for GHA.
The burden in this case, however, is not on GHA to show that HCFA
           UNITED STATES v. CONSUMER HEALTH FOUNDATION               9
approved of GHA’s apportionment statistic method but on Bondy to
show that HCFA disapproved of that method or that the method cho-
sen was not in accordance with HCFA’s established procedures. As
the district court concluded, he cannot do either.

   The independent auditor who reviewed GHA’s revised reports for
1988 through 1991 did conclude that GHA "is not properly offsetting"
some revenue and that GHA did not "maintain records that detail the
sources of these revenue accounts" that would permit for proper off-
setting of that revenue. But the auditor did not propose any adjust-
ment based on those failures. For the 1992 through 1994 cost reports,
the auditor initially recommended an adjustment but, upon receipt of
some documentation from GHA, withdrew that recommendation. Fur-
thermore, GHA and HCFA entered into a binding settlement agree-
ment based on the final reimbursement figures. Bondy does not
present any evidence that would indicate why this settlement agree-
ment should not permit a reasonable inference that HCFA approved
of GHA’s methods.

   In sum, although the documentary evidence, like the testimonial
evidence, may have created some suspicion about GHA’s accounting
methods, Bondy was unable to provide the district court with evi-
dence sufficient to carry his burden of showing that GHA submitted
a false claim to Medicare or even to rebut the inference to be drawn
from HCFA’s acceptance of GHA’s accounting. None of his evidence
can move beyond "mere speculation." See Beale v. Hardy, 769 F.2d
213, 214 (4th Cir. 1985) (holding that, for purposes of defeating a
motion for summary judgment, a party "cannot create a genuine issue
of material fact through mere speculation or the building of one infer-
ence upon another"). Therefore, we affirm the district court’s order
grating summary judgment for GHA on the first two counts of
Bondy’s complaint.

                                  III

   Bondy also contends that the district court erred in entering sum-
mary judgment on his retaliation claim, filed under 31 U.S.C.
§ 3730(h). The court found that claim barred by res judicata.

   The three elements of res judicata are well established. See Shoup
v. Bell & Howell, 872 F.2d 1178 (4th Cir. 1989). First, the parties in
10         UNITED STATES v. CONSUMER HEALTH FOUNDATION
the prior litigation and the subsequent litigation must be the same or
in privity with each other. Id. at 1179. Second, the claims in the sub-
sequent litigation "must be substantially the same as those in the prior
litigation." Id. Third, the prior litigation must have "resulted in a judg-
ment on the merits." Id.

   The parties in Bondy’s claim of age discrimination against GHA
filed in 1995 are the same or are in privity with the parties in this
case. In the present case, the defendants are Consumer Health Foun-
dation, Humana Group Health Plan, Inc., and Kaiser Permanente, Inc.
In the prior litigation, the defendants were GHA and Humana; Con-
sumer Health and Kaiser are successors-in-interest to GHA. There-
fore, the parties are in privity with each other. Bondy argues that the
parties are not the same for the purposes of res judicata because in
a qui tam action, the real party-in-interest is the United States. But 31
U.S.C. § 3730(h) authorizes claims based on retaliatory terminations
by employees themselves, not by the United States on behalf of the
employees. Thus, Bondy, as an employee, not the United States, is the
real party-in-interest.

   The claims in the two suits are also "substantially the same."
Although age discrimination and retaliatory termination suits are
based on different statutory violations, the inquiry is whether the two
suits "‘arise[ ] out of the same transaction or series of transactions.’"
Keith v. Aldridge, 900 F.2d 736, 740 (4th Cir. 1990) (quoting Hartnett
v. Billman, 800 F.2d 1368, 1373 (4th Cir. 1986)). In this case, the
same transaction is involved — Bondy’s termination — and res judi-
cata bars relitigation not only of every claim actually presented in the
prior litigation but also "every claim that might have been presented."
In re Varat Enters., Inc., 81 F.3d 1310, 1315 (4th Cir. 1996). There
can be no question about Bondy’s right to have asserted the retaliation
claim in 1995, as he had already begun investigating GHA’s billing
practices when he was terminated.

   Finally, the prior judgment against Bondy was "on the merits."
Bondy contends otherwise. In the earlier age discrimination suit, the
district court granted summary judgment for the defendants because
Bondy failed to submit a response to the defendants’ motion for sum-
mary judgment. While a careful examination of Bondy’s claim on the
merits may not therefore have occurred, the judgment was neverthe-
           UNITED STATES v. CONSUMER HEALTH FOUNDATION              11
less on the merits. It is well settled that grants of summary judgment
are considered "on the merits" for the purposes of res judicata. Shoup,
872 F.2d at 1181. Indeed, for purposes of res judicata, default judg-
ments are considered to be "on the merits." Credit Alliance Corp. v.
Williams, 851 F.2d 119, 122 (4th Cir. 1988).

   Because the three elements of res judicata are met here, we affirm
the district court’s grant of summary judgment for the defendants on
Bondy’s third count.

  For the reasons given, the judgment of the district court is

                                                         AFFIRMED.