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United States ex rel. Howze v. Sleep Centers of Fort Wayne, LLC

United States District Court, N.D. Indiana, Fort Wayne Division

February 1, 2017

UNITED STATES OF AMERICA, STATE OF INDIANA, ex rel. YORK HOWZE, Relator, Plaintiffs,
v.
SLEEP CENTERS OF FORT WAYNE, LLC, Defendant.

          REPORT AND RECOMMENDATION.

          Susan Collins, United States Magistrate Judge.

         Before the Court is a motion for judgment on the pleadings filed on April 27, 2016, by Defendant Sleep Centers of Fort Wayne, LLC (“Sleep Centers”). (DE 145). Sleep Centers filed a brief and exhibit in support of its motion. (DE 146). Plaintiff York Howze (“Howze”) filed his response in opposition to the motion on May 19, 2016. (DE 147). Sleep Centers filed a reply brief in support of its motion for judgment on the pleadings. (DE 149). Sleep Centers also moved to strike Howze's response, on grounds that it was filed untimely three days late. (DE 148). Howze filed a response to Sleep Centers' motion to strike, stating that he had 28 days to file his response brief to Sleep Centers' motion for judgment on the pleadings pursuant to Local Rule 56-1(b)(1)(A). (DE 150). Sleep Centers' motion for judgment on the pleadings, along with its motion to strike Howze's response brief, were referred to the undersigned for a report and recommendation pursuant to 28 U.S.C. § 636(b)(1)(B). (DE 154). For the following reasons, I will RECOMMEND that Sleep Centers' motion to strike (DE 148) be DENIED and that Sleep Centers' motion for judgment on the pleadings (DE 145) be GRANTED IN PART and DENIED

         IN PART.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         Howze is a black board-registered sleep technician, who worked at Sleep Centers from 2007 until 2010. (DE 4 ¶¶ 1, 6, 15). Howze's initial job description as Operations Manager was identical to that of Farren Klopfenstein, in that they were supposed to co-manage the center in Fort Wayne with equal responsibilities, although Klopfenstein's description was “weighted toward Human Resources, Finance, [and] Scoring Records” while Howze's job description was more “weighted toward Operations and facilities management.” (DE 4 ¶ 6).

         In May 2007, Amy Clevenger, an employee of Tri-State Medical Group (“TSMG”), the company that Sleep Centers hired to handle its credentialing with the Centers for Medicare and Medicaid Services (“CMS”), began a Medicare provider application for Sleep Centers. (DE 4 ¶ 7). Clevenger emailed Stephen Smith, the CEO of Sleep Centers, with a list of questions regarding the corporate structure and how the center should be credentialed under Medicare and Medicaid. (DE 4 ¶ 7). Smith forwarded the email to Howze and Klopfenstein, asking that they answer Clevenger's questions; Howze never received the email. (DE 4 ¶ 7). Klopfenstein did receive the email, and she responded to Clevenger by answering most of the questions, although she did not know the answer to Clevenger's questions regarding Medicare and Medicaid or her questions regarding whether the center was an independent diagnostic testing facility (“IDTF”) or a group practice. (DE 4 ¶ 7). Howze also did not know the answers to these questions. (DE 4 ¶ 7).

         Clevenger called CMS for guidance regarding the application. (DE 4 ¶ 8). Clevenger then “knowingly credentialed the Sleep Center incorrectly using the incorrect application form and incorrectly designating the Center as being part of a ‘Group Practice' when the Center should have been classified using the CMS 855B application form and designated as an ‘Independent Diagnostic Testing Facility.'” (DE 4 ¶ 8). Howze had no involvement with the credentialing process. (DE 4 ¶ 8). Clevenger sent the application to Smith for his review and signature, and she then forwarded the application to CMS. (DE 4 ¶ 8). Clevenger's actions “led to a negligently submitted Medicare provider application which prompted some 1500 fraudulent claims submitted to CMS between 2007-2009.” (DE 4 ¶ 7).

         In January 2009, Howze's job description changed from Operations Manager to the position of Compliance Officer/Finance Manager. (DE 4 ¶ 11). Howze perceived this change in roles to be a demotion based on his race, and he later filed an EEOC complaint in March 2010. (DE 4 ¶ 6).

         In early September 2009, another employee who worked at Sleep Centers gave an article to Howze from a conference that the employee had attended. (DE 4 ¶ 12). The employee informed Howze that everyone at the conference had been concerned about a sleep lab in Texas that had been investigated by CMS for not being properly credentialed. (DE 4 ¶ 12). Howze read the article, which recommended that all sleep centers ensure that they were “properly credentialed” with CMS either as an IDTF, a group practice, or as a hospital. (DE 4 ¶ 12).

         On September 3, 2009, Howze emailed Clevenger to ask her whether the center was credentialed as an IDTF. (DE 4 ¶ 12). Clevenger responded, “No, and it could be the reason why I am having trouble getting reimbursed for Medicaid.” (DE 4 ¶ 12). Clevenger also stated to Howze that “she had not kept up with changes in Medicare/Medicaid in years . . . .” (DE 4 ¶ 12).

         While both Howze and Klopfenstein were familiar with the rules that applied to hospital-based sleep centers, they were unaware that the IDTF rules and standards were applicable to the center, because they had not been provided with the necessary training. (DE 4 ¶ 13). On September 8, 2009, Clevenger told Howze that the center had “the ‘option' of filing as an IDTF.” (DE 4 ¶ 14). Howze was “skeptical” of this being just an “option, ” and he therefore “continued to ask [via email] whether they should still bill Medicare for patients while the [center was] knowingly improperly credentialed.” (DE 4 ¶ 14).

         Under the business plan approved by the Board before the opening of the center, Howze was to provide for proximate supervision, in that he was supposed to work nights, while Klopfenstein worked days. (DE 4 ¶ 15). However, Smith changed this by ordering Howze to work primarily on days in order to assist Klopfenstein. (DE 4 ¶ 15). On September 10, 2009, Howze was informed that the method of remote viewing by computer links that Sleep Centers was using “did not qualify as ‘proximate supervision' per Medicare/Medicaid criteria which required a Board of Registered Polysummographic Technologist to supervise the studies.” (DE 4 ¶ 15). Howze then began scheduling meetings with Sleep Centers' board-registered technicians in order to inform them that they had the responsibility to cover and train technicians at night. (DE 4 ¶ 15). After Howze had one such meeting, he was “abruptly removed as Operations Manager and the untrained Klopfenstein was installed in Howze's place.” (DE 4 ¶ 15). Klopfenstein then told Howze that she was not going to continue having meetings with the registered technicians, nor would she require them to provide coverage for non-registered technicians. (DE 4 ¶ 15).

         Also on September 10, 2009, Smith emailed Howze, Klopfenstein, and Clevenger regarding Clevenger's alleged reasoning for credentialing the center as a group practice, stating that this was done because the “Neurology Division of [Allied Physicians Incorporated] was in the business of billing for the facility component of our leased beds at Lutheran and St. Joe, ” so Clevenger filed the application as a group practice since the same doctors were involved. (DE 4 ¶ 16). Smith also stated in the email that “Klopfenstein tells me she raised the point that we were an IDTF back in 2007.” (DE 4 ¶ 16). Howze, however, had only had conversations with Klopfenstein in which she denied that the center should have been an IDTF. (DE 4 ¶ 16). Howze was particularly concerned about this because Klopfenstein had turned away an inspector from CMS who came to do a mandatory inspection of the center in January 2008 while Howze was on vacation. (DE 4 ¶ 16). Howze asked why, if Klopfenstein had “known all along, ” would she would turn away an inspector for a mandatory inspection. (DE 4 ¶ 16). He received no reply. (DE 4 ¶ 16).

         Later in September 2009, Smith and Klopfenstein pressured Howze to verify that he had been providing supervision that met compliance standards during the time period that he had been removed from supervising at night. (DE 4 ¶ 15). Smith threatened to tell the Board that Howze was not doing his job, since they “[had] no other choice but to say [Howze] covered nights, ” since he was “salaried, so there is no way to say” that Howze did not cover nights. (DE 4 ¶ 15). Klopfenstein and Smith also told Howze that the complaints filed against him during the night shifts were proof that proximate supervision was present. (DE 4 ¶ 15). Additionally, Klopfenstein tried to get Howze and other staff members to say that she worked nights to cover, although she “rarely if ever supervised night staff.” (DE 4 ¶ 15).

         On September 22, 2009, someone by the name of “Mattox, ” who is otherwise undefined in Howze's complaint, “answered questions as to whether or not the Sleep Center was indeed an IDTF and whether or not there was significant exposure to the Center for having violated Stark, anti-kickback, and Medicare/Medicaid laws due to the misfiling of the Sleep Center as a ‘Group Practice' as opposed to an ‘Independent Diagnostic Testing Facility.'” (DE 4 ¶ 17). At this apparent meeting with “Mattox, ” it was noted that repayment might be necessary. (DE 4 ¶ 17).

         On September 24, 2009, Smith sent an email to Sleep Centers' staff, informing them that the company was “committed to fully disclosing to the Centers for Medicare and Medicaid Services the nature of the Sleep Center's non-compliant state regardless of the cost, though he had been properly advised on how to handle the matter.” (DE 4 ¶ 18). Later that same day, Smith “changed this strategy, ” by placing the blame on CMS because it should have caught Clevenger's mistake, and further stating that Clevenger was following the advice of CMS to write in “Sleep Center” on the “other” space on the application. (DE 4 ¶ 19). Smith implemented a strategy to avoid full disclosure of all non-compliance issues by focusing only on the incorrect “clerical error” on the application. (DE 4 ¶ 20). Smith informed CMS that Sleep Centers had always been in compliance, even though he knew from Howze that over 800 studies were billed under “Group Practice, ” when the studies did not have appropriate supervision and were performed by under-qualified staff. (DE 4 ¶ 20). When Howze informed the Board, Smith, and Clevenger that CMS holds the provider responsible for the veracity of the information provided in an application, Howze was then removed as a point-of-contact for the credentialing process, and he was forbidden to call CMS. (DE 4 ¶ 20).

         Also on September 24, 2009, Sleep Centers suspended the performance of Medicare/Medicaid sleep studies. (DE 4 ¶ 21). Howze sent an email to the Medical Director that day, in which he voiced his concerns and oppositions to Smith's plan to rely on the clerical error as the only issue of non-compliance, instead of following the Board's plan to fully disclose all non-compliance issues. (DE 4 ¶ 22).

         The next day, on September 25, 2009, Howze sent an email to Smith to try to convince him not to continue his strategy of blaming CMS for the problems in the center's credentialing application. (DE 4 ¶ 23). Howze informed Smith “that the Center had already identified hundreds of studies that were performed by the Center that were non-compliant and should not have been billed to Medicare/Medicaid, ” and tried to convince Smith that a “clerical error” would not cover the violations of both the IDTF and state standards. (DE 4 ¶ 23). In response, Smith told Howze to “get with the program, ” threatened Howze's employment, and placed blame on Howze. (DE 4 ¶ 23).

         On October 30, 2009, Howze suggested via email to Smith that the center should not wait for a response from CMS for guidance, but rather should file a correct application. (DE 4 ¶ 24). “Smith's response alerted [Howze] to the continued false intentions of the Board and Smith to defraud the government by using a strategy that was designed to avoid paying back each and every study that the Center performed as a Group Practice.” (DE 4 ¶ 24). In November 2009, Sleep Centers gave up on waiting for a response from CMS. (DE 4 ¶ 25). Smith was informed by someone at CMS that he would be waiting for a long time for a response from CMS, and was further informed that CMS would not recognize anything other than a proper re-filing of the application. (DE 4 ¶ 25). Howze continued to work on the application to properly reapply. (DE 4 ¶ 25).

         In November 2009, Smith directed Howze to review the application with Clevenger. (DE 4 ¶ 26). Howze or Klopfenstein, as the co-managers, were the only authorized signees who could initial each page of the application. (DE 4 ¶ 26). Howze did not feel comfortable with the veracity of the application, so he refused to initial the pages. (DE 4 ¶ 26). Smith repeatedly threatened Howze over two days to try to get Howze to initial the pages. (DE 4 ¶ 26). Howze refused to sign it, and Klopfenstein was never asked or coerced to sign it the way that Howze was. (DE 4 ¶ 26). Later that month, Smith announced that there was an error in the application, because it did not identify the past or present billing arrangement with Fort Wayne Neurology. (DE 4 ...


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