Court Opinion

ID: 9498272
Source: CourtListenerOpinion
Date Created: 2023-08-05 17:13:08.59838+00
Date Added: 2024-06-11T17:58:43.916370
License: Public Domain

COOK, Circuit Judge,
dissenting.
Because I conclude that the billing practices challenged here did not cause Medicare to overpay Battle Creek, I respectfully dissent.
As both parties’ experts acknowledged, Medicare reimburses Battle Creek based on the hospital’s costs, not its charges to patients. (J.A. at 519, 529, 686.) And Medicare audits Battle Creek’s cost reports at the end of each year so that, as Battle Creek’s expert admitted, “at the end of the day,” Medicare will not overpay for patients’ anesthetics. (J.A. at 734.)
But Plaintiff Schell contends that Battle Creek violated the FCA despite these audits, because Medicare made excessive interim reimbursement payments to Battle Creek before the audits occurred, essentially giving Battle Creek interest-free loans. This argument fails, however, because Schell offers no evidence that Battle Creek submitted materially false claims to Medicare.
As the majority observes, Medicare based its interim payments to Battle Creek on a “cost-to-charge ratio.” This ratio was determined by comparing costs to patient charges in a prior calendar year. Thus, for example, if in Year One Battle Creek’s actual costs were 30% of the amount charged to patients, then Medicare would base its interim payments in Year Two on the same ratio.
Under this system, it does not matter to Medicare if hospitals “overcharge” patients for anesthetic. Medicare is understandably indifferent to whether, as here, hospitals charge patients for an entire bottle of anesthetic for each dose administered. All that matters is whether Battle Creek uses the same billing methods from year to year — that is, whether it only increases its charges proportionate to its *543costs — so the cost-charge ratio remains the same. If it does, then over- or underpayment by Medicare is unlikely. But if, for example, in Year One, Battle Creek charged patients only for the anesthetic they actually consumed, but in Year Two charged patients for an entire bottle for every dose received, then the drastic change in the cost-to-charge ratio ivould cause Medicare to overpay, and Battle Creek might violate the FCA.
Here, however, the record shows that Battle Creek’s billing practices remained consistent throughout the relevant time period. Indeed, Schell’s complaint alleges that Battle Creek overcharged “all patients” in the same manner “from 1991 through 1999.” (J.A. at 50.) And Schell does not challenge Battle Creek’s expert’s conclusion that the cost-to-charge ratio barely changed through the 1990s and may have even caused Medicare to underpay Battle Creek. (J.A. at 1343-1344.)
Schell points to his expert’s testimony that Medicare made excessive interim payments from 1994 through 1999 as evidence of government damages. (Schell Br. at 29.) But this expert essentially admitted that he could not conclude, based on the information before him, that Battle Creek had distorted the cost-charge ratio through disproportionate charge increases — that is, that the overpayments were the product of fraud against the government. (J.A. at 769-71.)
Schell also points to Battle Creek’s lack of reimbursement payments to Medicare after auditing as evidence of government damages. (Schell Br. at 37.) To the contrary, however, this only emphasizes that Medicare did not suffer damages — instead, Medicare underpaid in its interim payments to Battle Creek (when one considers not only anesthetics, but also other costs for which Medicare reimburses Battle Creek), such that Medicare owed Battle Creek money “at the end of the day.”
The majority opinion appears to agree with much of this analysis, but nonetheless reverses the district court’s grant of summary judgment. In doing so, it relies on an argument Schell has never made: that Battle Creek may not have had consistent billing practices during the relevant time period, because record evidence suggests Battle Creek may have submitted Medicare payment requests reflecting “multiple charges for the same anesthesia medication rather than a single flat-fee charge.” But nothing in the record supports the view that this practice, if it occurred, distorted the cost-to-charge ratio. Again, undisputed record evidence shows that the cost-to-charge ratio remained consistent through the years. Thus any alleged excessive charges to patients, including those the majority cites, are immaterial.
Mr. Schell fails to appreciate how the cost-to-charge ratio works, and why it causes no fraud. One can understand his indignant reaction to seeing multiple patients charged for the same bottle of anesthetic — indeed, Battle Creek may have wrongfully overcharged patients. The False Claims Act, however, proscribes only the presentation of false claims to the federal government — and Schell presents no evidence that this occurred here.
I therefore would affirm the district court.