Adam M. Cole (SBN 145344 )

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Adam M. Cole (SBN 145344 ) Chief Counsel Richard Krenz (SBN 59619) Assistant General Counsel GeneS. Woo (SBN 119302) Antonio A. Celaya (SBN 133075) Senior Staff Counsel CALIFORNIA DEPARTMENT OF INSURANCE 45 Fremont Street, 21st Floor San Francisco, CA 94105 Telephone: (415) 538-4117 Facsimile: (415)904-5490

Attorneys for Dave Jones, Insurance Commissioner of the State of California and the California Department of Insurance

William Bernstein (SBN 065200) Robert J. Nelson (SBN 132797) Kristen Law Sagafi (SBN 222249) Nimish R. Desai (SBN 244953) Marc A. Pilotin (SBN 266369) LIEFF CABRASER HEIMANN & BERNSTEIN, 275 Battery Street, 29th Floor San Francisco, CA 94111-3339 Telephone: (415) 956-1000 Facsimile: (415)956-1008

LLP

Attorneys for Relator RockvUle Recovery

SUPERIOR COURT OF THE STATE OF CALIFORNIA

COUNTY OF SACRAMENTO

STATE OF CALIFORNIA, ex rel ROCKVILLE RECOVERY ASSOCIATES LTD.,

Plaintiffs,

V.

MULTIPLAN INC., et al..

Defendants.

CaseNo. 34-2010-00079432

PLAINTIFFS' OPPOSITION TO SUTTER DEFENDANTS' MOTION FOR SUMMARY JUDGMENT ON SPECIFIC INTENT ELEMENT OF PLAINTIFFS' CAUSE OF ACTION

Date: Time: Dept: Judge:

June 27, 2013 9:00 a.m. JAMS Hon. William L. Bettinelli

Trial Date: November 4, 2013 Complaint Filed: Febmary 5, 2009

REDACTED 1084894.9

PLAINTIFFS' OPPOSITION TO SUTTER'S MOTION FOR SUMMARY JUDGMENT ON "SPECIFIC INTENT

TABLE OF CONTENTS

2 Page

3 INTRODUCTION 1

STATEMENT OF FACTS 3

ARGUMENT 6

I. Legal Standard 6

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6 A. To obtain summary judgment, Sutter must show that no reasonable jury could conclude that it acted vvith knowledge that its claims are

7 false, fraudulent, or misleading, which is typically a question of fact 6

B. To avoid summaiy judgment, Plaintiffs need only show through „ circumstantial evidence that Sutter knew of facts showing that its

anesthesia billing was false, fraudulent, or misleading 7

10 1. In this civil action, Plaintiffs need not show Suiter's specific intent to defraud 8

' ' 2. Even if Plaintiffs have to show specific intent to defraud, • 2 Sutter can be held liable if it willfully submitted false,

fraudulent, or misleading claims to obtain benefits to which 2 it was not enfitled 9

II. Sutter's motion fails because there are numerous triable issues of fact as to 14 Sutter's knowledge ofthe falsity of its anesthesia billing practices 10

A. Sutter knows that it is false, fraudulent, and misleading to bill chronometric "anesthesia services" charges if no Sutter employee

g provides that sei"vice throughout the billed time 10

B. Sutter knows that the equipment and supplies it bills under 37x are 17 also billed as part of the OR 19

. J, C. If in fact Sutter bills for anesthesia inhalation gases as part of the 37x charge, it has submitted thousands of double bills by separately

J billing for these gases under 25x 24

D. Sutter knows that its "anesthesia services" charges are misleading 20 and intended to deceive 25

2j E. Sutter's self-serving declarations need not and should not be credited, and by no means outweigh the evidence obtained through

22 discovery 28

III . There is no specific intent to defraud requirement, and even if there were, 23 Plaindffs have safisfied it 31

2. IV. Sutter's "good faith" affirmative defense is not applicable, and even if it were, it poses highly fact-intensive questions not resolvable on summaiy judgment 32

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CONCLUSION 35

1084894.9

PLAINTIFFS' OPPOSITION TO SU ITER'S MOTION FOR SUMMARY JUDGMENT ON "SPECIFIC INTENT"

1 TABLE OF AUTHORITIES

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CASES

Aguilar v. Atl. Richfield Co., 25Cal.4th826 (2001) 6,7

^ Bahl V. Bank of Am., ^ 89 Cal.App:4th 389 (2001) 6

Benavidez v. San Jose Police Dep't, 71 Cal.App.4th 853 (1999) 20, 28

Q Boyle V. CerlainTeed Corp., ^ 137 Cal.App.4th 645 (2006) 7

Brown V. Ransweiler, 171 Cal.App.4th 516 (2009) 28

Cf People ex rel. Allstate Ins. Co. v. Muhyeldin, ' 112Cal.App.4th604(2003) 9

Cont 7 Airlines, Inc. v. McDonnell Douglas Corp., 216 Cal.App.3d 388 (1989) 7

. ^ Cuminings v. Fire Ins. Exch., 202 Cal.App.3d 1407 (1988) 7

Gemini Aluminum Corp. v. Cal. Custom Shapes, Inc., 95 Cal.App.4th 1249 (2002) 34

, g Global-Tech Appliances, Inc. v. SEB S.A., 131 S.Ct. 2060 (2011) 8,29

Hindo V. Univ. of Health Scis., 65 F.3d 608 (7th Cir. 1995) 11, 32

Hope Int'l. Univ. v. Sup. Ct., ^ ' 119CaI.App.4th719(2004) 28

In re Jorge M., 23 Cal.4th 866 (2000) 9

^ . Int'l Shortstop, Inc. v. Rally's Inc., 939 F.2d 1257 (5th Cir. 1991) 7

Levy V. Irvine, 134 Cal. 664(1901) 8

Locke V. Warner Bros., 57CaI.App.4th354(1997) 7

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TABLE OF AUTHORITIES (continued)

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3 Martinez v. Chippewa Enter., \ 121 Cal.App.4th 1179 (2004) 6

4 People V. Benson,

5 206 Cal.App.2d 519 (1962) 7

6 People V. Blick, 153 Cal.App.4th 759 (2007) 9, 10, 31, 34

7 People V. Booth,

8 48 Cal.App.4th 1247 (1996) 8, 10,31

9 People V. Duarte, 24 Cal.4th 603 (2000) 28

10 People V. Gregory,

n 217 Cal.App.3d 665 (1990) 8, 34

12 People V. Leach, 15 Cal. 3d 419 n.l5 (1975) 28

13 People V. Louie,

14 158 Cal. App. 3d Supp. 28 (1984) 34

15 People V. Neidinger, 40 Cal.4th67(2006) 32

16 People V. Perez,

17 62 Cal.2d 769(1965) 7

18 People V. Prince, 40 Cal.4th 1179 (2007) 7

19 People V. Scofield,

20 17 Cal.App.3d 1018(1971) 10,31

21 Sheriff, Clark Cnty. v. Spagnoki, 101 Nev. 508 (Nev. 1985) 34

22 Smith V. Selma Cmty. Hosp.,

23 188 Cal.App.4th 1,36(2010) 7

24 U.S. ex rel. Carter v. Halliburton Co., No. l:08cvl 162 (JCC), 2009 U.S. Dist. LEXIS 63649 (E.D. Va. Jul. 23, 2009) I I , 33

25 U.S. ex rel. Davis,

26 766 F.Supp.2d 679 (E.D. Va. 2011) 11

27 U.S. ex rel. Swaffordv. Borgess Med. Ctr., 98 F.Supp.2d 822 (W.D. Mich. 2000) 33, 34

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1084894.9 - i i i -

PLAINTIFFS' OPPOSITION TO SUTTER'S MOTION FOR SUMMARY JUDGMENT ON "SPECIFIC INTENT"

TABLE OF AUTHORITIES (continued)

^ Page

3 United Slates ex rel. Coined v. Beth Isr. Med. Ctr.. 785 F. Supp. 2d 303 (S.D.N.Y. 2011) 34

4 United Slates ex rel. Conner v. Salina Reg'I Health Ctr., Inc..

5 543 F.3d 1211 (10th Cir. 2008) 33

6 Uniled States ex rel. Hochinan v. Nackman, 145F.3d 1069 (9th Cir. 1998) 33

7 United Stales v. Akpan,

407 F.3d 360 (5th Cir. 2005) 19, 33

9 United States v. Custodio, 39F.3d 1121 (10th Cir. 1994) 33

10 United States v. Jewell,

1 1 532 F.2d 697 (9th Cir. 1976).

12 Uniled Slates v. Lipids, 770 F.2d 1447 (9th Cir. 1985) 33

13 Uniled States v. Patient Trathsfer Serv., Inc.,

14 413 F.3d 734 (8lh Cir. 2005) 33

15 United States v. Prahhu, 442 F. Supp. 2d 1008 (D. Nev. 2006) 34

16 Visueta v. Gen. Motors Corp.,

17 234 Cal.App.3d 1609(1991) 20,28

Jg STATUTES AND REGULATIONS

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California Code of Cival Procedures § 437c(e) 28

California Welfare & Institutions Code § 14107 34

Insurance Code § 1871.7(c) 2,9

Penal Code § 550 passim

Penal Code § 550(a) 7, 8

Penal Code § 7(5) 7

TREATISES

Assem. Com. on Judiciary, Analysis of Sen. Bill No. 465 (1995-1996 Reg. Sess.) June 7, 1995 .9

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INTRODUCTION

The Superior Court mled that there are triable issues of fact regarding the "falsity" of

Sutter's anesthesia charges. Sutter now seeks summary judgment on the even more fact-intensive

scienter issue, i.e., whether it knowingly submitted "false" claims.

There should be little doubt that Sutter knowingly submitted false, fraudulent, or

misleading anesthesia charges. At minimum, the considerable evidence presents triable issues of

fact regarding Sutler's scienter. Sutter has always known that the service it provides the surgeiy

patient is the operating room itself ("OR"), and lhat the OR charge under revenue code 36x

includes the OR, and OR setup, equipment, supplies, staff, and overhead. Sutler knew lhat the so-

called "anesthesia service" it was charging for under revenue code 37x was no service at all,

demonstrated mosl prominently by the fact lhat no Suiter einployee is actually providing that

anesthesia service, least ofall the "anesthesia technicians," who have nothing lo do with the case

for the billed period of time, and who briefly service countless anesthetizing locations throughout

the hospital simultaneously. § 11.A, infra.

Sutter also knew lhat the so-called anesthesia equipment and supplies that it contends are

part of the 37x charges are simply OR overhead and already billed under the 36x charge. Indeed,

Sutler's Charge Description Master Director, Cathy Meeter, who manages Sutter's chargemaster

and charging practices systemwide, expressly stated as such. Her admissions match those of

olher Sutter personnel, including Michael Laidlaw and a surgical sei-vices director at a Sutter

facility, as well as Sutter's intemal guidelines, which acknowledge that everything in the OR is

billed under the OR charge. § II.B, infra. Likewise, Sutter knows that by claiming to bill gases

under 37x, some of its facilities are plainly double billing by also billing the same gases

separately under revenue code 25x. § II.C, infra. Finally, Sutter knew and knows today that none

of the items it purports to bill for under 37x bears any reladonship to the billed period, and that

the charge - i.e., a time based charge for "anesthesia services" - is described and structured to

conceal the emptiness of the charge, and to imply the provision of an actual sei-vice beyond the

OR, making the charge fundamentally misleading as well. § II.D, infra. Sutler's knowledge is

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1 demonstrated direcdy through its own admissions and billing practices, including its billing

2 practices for anesthesia both in and outside the OR, ils billing practices for personnel and

3 equipment, and its use of timed charges.

4 This evidence by itself creates triable issues of fact on Sutter's knowing submissions.

5 Sutler's attempt to escape liability rests on two flawed defenses. First, it insists that the Court

6 must impose a criminal specific intent requirement on Plaintiffs' civil IFPA claim. There is no

7 legal basis lo do so. The .specific intent requirement appears nowhere in the IFPA and is not

8 generally referenced in Penal Code section 550, the statute IVom which the IFPA's prohibitions

9 are borrowed. The fact that some courts have implied that standard in criminal prosecutions has

10 no bearing on this c;vi7 action that expressly cannot be punitive or criminal in nature. Ins. Code

11 § 1871.7(c). Even if specific intent were required, however, Sutter's brief is notably silent on the

12 showing needed. That is because courts assume the existence of specific intent whenever a

13 defendant knowingly submits a false claim. This makes perfecl sense—a defendant who

14 knowingly submits a false claim necessarily does so with the intent to obtain a benefit to which it

15 is not entitled, which is all that is meant by "specific intent." Plaintiffs can readily establish that

16 requirement should it be imposed in this civil action. See §§ I.B., 111.

17 Sutter's second defense, for which it carries the burden, is weaker still. Suiter asks to be

18 absolved of its knowing misconduct on the grounds that it acted in "good faith." Needless to say,

19 courts do not countenance this defense where, as here, the defendant's liability is predicated on

20 allegations of double billing and billing for services not rendered, rather than on the interpretation

21 of contractual or regulatory provisions. Sutter relies only on cases where the latter type of falsity

22 was at issue; yet, those cases offer no guidance here. Moreover, even if this argument applied, it

23 is an affirmative defense for which Sutter bears the burden, and even if Sutter had properly

24 moved forjudgment on its defense, the juiy, not the Court, must evaluate Sutter's good faith. In

25 doing so, the jury will weigh the evidence Plaindffs have presented against Sutler's offering. In

26 support of its motion, however, Sutter presented arguably the weakest form of evidence it

27 could—its own executives' self-serving declarations, including one witness who attaches and

28 discusses conimunications in which she had no contemporaneous involvement, and about which

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PLAINTIFFS' OPPOSITION TO SUITER'S MOTION FOR SUMMARY JUDGMENT ON "SPECIFIC INTENT"

1 she knew (and knows) nothing. At the summary judgment stage, the Court simply cannot credit

2 those declarations over the admissions and docunients Plaintiffs present. §§ II.E., IV.

3 In summary. Sutler's molion must be denied because ihe facts readily demonstrate

4 Sutler's knowing false submissions as well as its intent to defraud (assuming the latter is even

5 required), and because the rather ineffectual evidence of "good faith" Sutler presents, even if it

6 were relevant, al best creates triable issues when weighed againsl Plaintiffs' evidence. Afler three

7 demurrers and now ils third summaiy judgment motion, the time for Sutler's challenges has come

to an end, and the dme for the pardes lo prepare this case for the jury has come. Plaintiffs

9 respectfully request that the Court deny Sutler's modon in its entirely.

10 STATEMENT OF FACTS'

11 1. Suiter uses charge codes lo bill for each item or service provided to a patient. The

12 complete schedule of those charges is called a charge description master ("CDM" or

13 "chargemaster"). Ex. 1, Laidlaw PMK Dep. at 49:15-50:22. A patient's charges are used to

14 generate a claim, which is submitted on one-page "UB" forms. Ex. 2 (sample); Ex. 3 (redacted).

15 Charges are reported under broader "revenue code" categories. The approximately 100 revenue

16 code categories, each with a limited number of subcategories, are listed and explained in the

17 Official UB-04 Data Specifications Manual, published by the National Uniform Billing

18 Committee ("NUBC"). Ex.4.

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26 ' Unless otherwise staled, all exhibits cited herein are attached to the Desai Declaration. Pursuant to the parlies' agreement prompted by the Special Master's suggestion. Plaintiffs are not

27 preparing and filing a separate statement of facts listing all ofthe facts discussed in this brief Plaindffs will promptly prepare and file one should the Special Master or Court require it.

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5. Revenue code 036x is for "Operating Room Services." This revenue code is for

"charges for services provided to patients by specifically trained nursing personnel who assist

physicians in the performance of surgical and reialed procedures during and immediately

following surgery." Ex. 4 at SH 892325. Revenue code 36x also includes OR overhead,

including OR equipment and supphes. 12/3/12 Declaradon of Dr. Heniy Miller al Y\] 24-27;

Ex. 8; Ex. 9 at SH 2085381

Revenue code 037x includes "Charges for anesthesia services." Ex. 4 at SH

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892325. For all payors, Sutter assigns charges titled "CPLX GENRL ANES," "STND GENRL

ANES," "REG/MAC," and "CS" to the 37x code. Ex. 5, Meeter Dep. at 86:18-87:8; Ex. 12.

Tliough not explained ou die chargemasters, this uomenclatiue stands for Complex General

Anesthesia, Standard General Anesthesia, Regional Anesthesia/Monitored Anesthesia Care, and

Conscious Sedation, respectively. These charges aie time-based, with an initial 30-miniite charge

and subsequent 15-minute chaiges. Exs. 12, 13-15.

8. Sutter does not employ anesthesiologists or muse anesthetists who provide

anesthesia sei-vices in its operating rooms. Anesthesiologists who perfoi-m anesthesia semces for

Sutter pafients bill those patients directly. Ex. 21, Hunter Dep. at 85:7-14.

1084894.9 - 5 -

PLAINTIFFS" OPPOSmON TO SUTTER'S MOTION FOR SUMMARY JUDGMENT ON • SPECfflC INTENT'

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ARGUMENT

Legal Standard

A. To obtain summary judgment, Sutter must show that no reasonable jury could conclude that it acted with knowledge that its chiims arc false, fraudulent, or misleading, which is typically a question of facf.

Summary judgment is a drastic measure that deprives the losing party ofthe right to a juiy

trial and so must be u.sed with caudon. Bahl v. Bank of Am., 89 Cal.App.4th 389, 395 (2001).

Sutter, as the moving party, "bears the burden of persuasion that there is no genuine issue of

material fact and that [it] is entitled to judgment as a matter of law." AguUar v. Atl. Richfield Co.,

25 Cal.4th 826, 845 (2001). Courts must constme all inferences against the moving party and

view all evidence in a light most favorable to the nonmoving party. Martinez v. Chippewa Enter.,

121 Cal.App.4th 1179, 1184 (2004).

To prevail, therefore, Sutter "must present evidence that would require a reasonable trier

of fact not to find''' that Sutter had knowledge that its billing for anesthesia was false, fraudulent,

or misleading. Aguilar, 25 Cal.4th at 851 (emphases added). Sutter "must present evidence and

may not simply point out through argument that the plaintiff lacks needed evidence." Boyle v.

CerlainTeed Corp., 137 Cal.App.4th 645, 652 (2006). It is only under these circumstances that

Sutter is entitled to summary judgment. Aguilar, 25 Cal.4tli at 851.

1084894.9 - 6 -

PLAINTIFFS' OPPOSITION 'TO SUTTER'S MOTION FOR SUMMARY JUDGMENT ON "SPECIFIC INTENT"

1 Suiter's latest summary judgment modon focuses exclusively on its slate of mind, which

2 is a quintessential question of fact that should be resolved by a jury. Smith v. Selma Cmty. Hosp.,

3 188 Cal.App.4th 1, 36 (2010) (inquiry into state of mind poses a question of fact); Cuminings v.

4 Fire Ins. Exch., 202 Cal.App.3d 1407, 1417 (1988) (knowledge of falsity "is a quesdon of fact.");

5 Int'l Shortstop Inc. v. Rally's Inc., 939 F.2d 1257, 1265 (5th Cir. 1991) (discussing scienter

6 element in Federal False Claims Act: "we have emphasized repeatedly that cases which turn on

7 the moving party's slale of mind are not well-suited for summary judgment").

8 "The juiy may rely upon circumstantial evidence . . . to establish the intent ofthe

9 defendant." People v. Prince, 40 Cal.4th 1179, 1260 (2007) (citadon omitted); Locke v. Warner

10 Bros., 57 Cal.App.4th 354, 368 (1997) ("Fraudulent intent must often be established by

11 circumstantial evidence"); Cont'l Airlines, Inc. v. McDonnell Douglas Corp., 216 Cal.App.3d

12 388,41 1-12 (1989) (citations and quotation omitted) ("It is well established California law that

13 since direct proof of fraudulent intent is often impossible, the intent may be established by

14 inference from acts of the parlies."); People v. Benson, 206 Cal.App.2d 519, 529 (1962) overruled

15 on other grounds in People v. Perez, 62 Cal.2d 769, 776 (1965) ("[IJntention to defraud [under

16 former Insurance Code secdon 556, predecessor to section 550] is inferable from all the facts of

17 the case and need not be substantially proved.").

18 Plaintiffs offer considerable direct and circumstantial evidence - all of which must be

19 constmed in the light most favorable to Plaintiffs - in opposition to Suiter's motion.

20 B. To avoid summary judgment. Plaintiffs need only show through circumstantial evidence that Sutter knew of facts showing that its anesthesia

21 billing was false, fraudulent, or misleading.

22 Plaindffs' IFPA claims are based on Sutter's violations of the standards in Penal Code

23 section 550(a) and (b). Both subsections (a) and (b) proscribe conduct done "knowingly" or with

24 knowledge of certain facts. See Penal Code § 550(a)(1), (5)-(8); id. § 550(b)(l)-(2). Even under

25 the criminal law, the "tenn 'knowingly' imports only a knowledge that the facts exist which bring

26 the act or omission within the" relevant statute (Penal Code § 7(5); it "does not require any

27 knowledge of the unlawfulness of such act or omission." Id.; People v. Gregory, 217 CaI.App.3d

28 665, 681 (1990) (section 7(5) narrows "the common definition of'knowingly' by excluding

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PLAINTIFFS' OPPOSITION TO SU ITER'S MOTION FOR SUMMARY JUDGMENT ON "SPECIFIC INTENT"

knowledge of the unlawfulness of an act").

2 Such knowledge incorporates the concept of "conscious avoidance" and "deliberate

3 ignorance." See, e.g, Global-Tech Appliances, Inc. v. SEB S.A., 131 S. Ct. 2060, 2068-69 (2011);

4 United States v. .lewell, 532 F.2d 697, 700 (9lh Cir. 1976) (discussing "willful blindness" and

5 concluding that "deliberate ignorance and positive knowledge are equally culpable"); Levy v.

6 Irvine, 134 Cal. 664, 672 (1901) (noting that "willing ignorance is to be regarded as equivalent to

7 actual knowledge"). Defendants cannot escape liability under a statute requiring knowledge "by

deliberately shielding themselves from clear evidence of critical facts that are strongly suggested

9 by the circumstances." Global-Tech Appliances, 131 S. Ct. at 2068-69.

10 Sutter's conduct thus fiills within the IFPA's scope if it had knowledge of facts showing

11 lhat its anesthesia billing was false, fraudulent, or misleading.

'2 1. In this civil action. Plaintiffs need not show Sutter's specific intent to defraud.

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Sutler insists that, unless Plaintiffs can prove that it acted with specific intent lo defraud, it

cannot be held liable for its knowing submissions of false, fraudulent, or misleading anesthesia

claims under 37x. This is incorrect. The IFPA does not require specific intent to defraud; the

statute requires only that Sutter had knowledge of facts showing that its billing for anesthesia

services was false, fraudulent, or misleading. Out ofall of the section 550 standards, only the

conduct proscribed by secdon (a)(8)—not in play here—expressly requires "an intent to defraud."

Further, the tenn "knowingly" does not incorporate an intent to defraud. Gregory, 217

Cal.App.3d at 677 (finding no authority that " 'knowingly' be inteipreled to include 'with intent

to deceive'"); People v. Booth, 48 Cal.App.4th 1247, 1254 (1996) ("undoubtedly true that one can

'knowingly' present a false claim without specific intent lo defraud.").

To avoid liability in this civil case, Sutler seeks to import a specific intent requirement

from criminal cases that do not involve the IFPA. In these cases, courts implied a specific intent

requirement not found in the text of section 550. People v. Blick, 153 Cal.App.4th 759, 774

(2007) (citing criminal cases in which specific intent implied as element of crime). However,

they did so because of policy reasons unique lo criminal prosecutions: "the requirement that, for a

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1 criminal conviction, the prosecudon prove some fomi of guilty intent, knowledge, or criminal

2 negligence is of such long standing and so fundamental to our criminal law that penal statutes will

3 often be constmed to contain such an element despite their failure expressly to stale il." In re

4 Jorge M., 23 Cal.4th 866, 872 (2000) (citation omitted); Blick, supra at 771.

5 Here, Plaindffs obviously do not seek lo hold Sutter criminally liable. The IFPA imposes

6 civil liability and civil penaldes. The Legislature made clear that civil enforcement of IFPA is nol

7 intended to "preclude, nor be precluded by, a criminal prosecution/or the same conduct.'" Ins.

8 Code § 1871.7(c) (emphasis added). Civil IFPA penaldes "are intended to be remedial rather

9 than punitive," and the Court "shall reduce" the penalties imposed by tlie jury lo the extent such

10 are deemed punidve in nature. 1871.7(c). The Legislature specifically intended to contrast civil

11 IFPA actions from criminal fraud prosecudons, seeking to avoid triggering the Double Jeopardy

12 Clause ofthe U.S. Constitudon. See, e.g., Assem. Com. on Judiciary, Analysis of Sen. Bill No.

13 465 (1995-1996 Reg. Sess.) June 7, 1995. Because of these intended distinctions, the addidonal

14 specific intent element courts imply in section 550 criminal prosecutions does not apply to IFPA

15 civil acdons. Cf People ex rel. Allstate Ins. Co. v. Muhyeldin, 112 Cal.App.4th 604, 610 (2003)

16 (in IFPA case, declining to apply "high degree of proof demanded in criminal cases") (citation

17 omitted). To conclude otherwise would merge civil IFPA liability and criminal Section 550

18 liability, which would contravene the Legislature's intent to distinguish the two.

19 As a result, the IFPA does not require specific intent to defraud, only knowledge of facts

20 showing lhat ils billing for anesthesia was false, fraudulent, or misleading.

21 2. Even if Plaintiffs havc to show specific intent to defraud, Sutter can be held liable if it willfully submitted false, fraudulent, or misleading

22 claims to obtain benefits to which it was not entitled.

23 Even i f civil liability under the IFPA requires proof of specific intent to defraud, which it

24 does not, this does not present an additional element to Plaintiffs' claims. By willfully seeking

25 "benefits to which [it] would nol be entitled" through the knowing submission of false,

26 fraudulent, or misleading bills, Sutter necessarily acted with intent to defraud. Blick, 153 Cal.

27 App. 4th at 772. In other words, by presenting information known to be false to obtain payment

28 of a claim, a defendant demonstrates a "specific intent lo defraud." Booth, 48 Cal.App.4lh at

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1254 n.3 (discussing § 550); People v. Scofield, 17 Cal.App.3d 1018, 1026 (1971) (one "who

willfully submits a claim, knowing it to be false, necessarily does so with intent to defraud"). If

Sutter presented claims for payment knowing that they were false, fraudulent, or misleading,

which it did, a juiy can reasonably infer that Sutter acted with specific intent to defraud.

II. Sutter's motion fails because there are numerous triable issues of fact as to Sutter's knowledge of the falsity of its anesthesia billing practices.

The Court has ruled there are triable issues of fact regarding the "falsity" of Sutter's

anesthesia charges. 1/31/13 Order by Special Master; 4/18/13 Order by Superior Court. Sutler

now argues that it had no knowledge, or reason to know, that its 37x charges in the OR are false,

fraudulent, or misleading. In fact, Sutter not only knew and understood the underlying facts for

which it will be held liable, it further knew and understood the false, fraudulent, and/or

misleading nature of its billing scheme. This knowledge is demonstrated through its own

admissions and billing practices, including anesthesia billing in and outside the operating room,

billing for personnel and equipment, and ils use of timed charges.

A. Sutter knows that it is false, fraudulent, and misleading to bill chronometric "anesthesia services" charges if no Sutter employee provides that service throughout the billed time.

The Court has already ruled that "there are disputed issues of material fact as to whether

the billing for anesthesia technicians would constitute double billing, or billing for sei-\'ices not

provided and thereby violate the IFPA." 1/31/13 Order on Falsity MSJ at 9; 4/18/13 Order

affirming Falsity Order at 4. This is because, as Plaindffs previously demonstrated, the

technician is neither present for the procedure nor has any ongoing obligalion or responsibilities

to the padent during the billed period. Falsity Opp. at 11-12. There are also times when the

technician has zero involvement in a case, and at all times, each technician is simultaneously

covering numerous operating rooms, as well as olher catheterization, diagnostic imaging, labor

and delivery, and all other aneslhedzing sites. Falsity Opp. at 11-12; Ex. 18,

1084894.9 10

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Tlius, even as Sutter

disingenuously contends that the technician is a "key aud important" part ofthe pmported

anesthesia service is providing the patient as the umses

a "key component" ofthe 36x ^ 'S ^ |||[||||[||||||||||^^ Sutter has not and

caimot deny these teclmicians' muiimal to nonexistent participation in the procediue, and iu fact

concedes it. Hunter Decl. at *| 7.

As the Court mled, this is a straightforward foi-m of firaud that is actionable under the

IFPA. Falsity Order at 9; see also Hindo v. Univ. of Health Scis., 65 F.3d 608, 613 (7th Cir.

1995) ("[A]n example ofa false statement in an invoice in a similar context is the repieseutadon

that a resident worked five days a week at a hospital when he worked only thiee."); United States

ex rel. Carter v. Halliburlon Co., No. l:08cvl 162 (JCC), 2009 U.S. Dist. LEXIS 63649, *19

(E.D. Va. Jul. 23, 2009) ("[a]n allegafion that a defendant 'tried to get paid for work it had not

done' is a claim that can be brought straiglit-forwardly imder the FCA") (internal cites and quotes

omitted); United Slates ex rel. Davis v. Prince, 766 F.Supp.2d 679, 680 (E.D. Va. 2011)

(allegations regarding false time).

To this, Sutter responds that it did not know tliat it was false, fi-audulent, or misleading to

bill tliroughout the procedme even tiiough no Sutter employee was providing a service tliroughout

that period, and it asks to be absolved on that basis. At the outset, no reasonable jiuy would

believe this assertion. In and of itself, billing minute by minute for an anesthesia service while

knowing and admitting that no one was present to provide the service is enough to defeat Sutter's

motion as the cases above make clear. Nor does the knowledge element requiie that Sutter know

the illegality of its conduct, versus the knowledge ofthe miderlyiug facts for which liability may

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attach. § I , supra. Equally important, Sutter and its executives cannot credibly argue that they

did not know it was false, fraudulent, or misleading lo bill for nonexistent personnel, as

demonstrated below by ils own admissions and pracdces, including with regard to 37x charges.

Sutler's knowledge is demonstrated through its 37x charges for conscious .sedation, a

form of anesthesia. Sutler's knowledge is evident in ils billing for 37x charges related lo

conscious or moderate sedadon ("CS"). Sedation is a form of anesthesia. Ex. 22, SH 148133

(describing the continuum of anesthesia and sedation). I l uses much of the same equipment as

other forms of anesthesia (and exactly the same equipment as in monitored anesthesia care and

regional anesthesia), because the sedated patient must undergo physiologic monitoring, as must

any anesthetized patient. Ex. 16, Petmzzella Dep. at 107:18-108:4; Ex. 5, Meeter Dep. at 260:7-

261:2; 275:19-276:5.

Sutter knows "a separate charge" for anesthesia services under 37x should apply only

For this reason. Plaintiffs do not allege that the timed CS charges are false, fraudulent, or misleading, because a trained nurse employed by Sutter is present throughout the procedure.

1084894.9 12

PLAINTIFFS' OPPOSITION 'TO SUTTER'S MOTION FOR SUMMARY JUDGMENT ON "SPECIFIC INTENT'

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when it provides some separate service, as il does with CS charges. Cridcally, Sutler knows this

lo be tme in the operating room selling, as well.

This is an important admission. The same OR equipment is used,

but there is no 37x charge, only a 36x charge. A jury Iherefore can easily infer, based on Sutler's

knowledge of billing under revenue code 37x for CS, that Sutter knows it is billing in a false,

fraudulent, and misleading manner for the GENRL ANES and MAC/REG charges al issue here.

Sutter's knowledge is demonstrated through its 37.x charges in other hospital settings.

Those L&D patients

sometimes require anesthesia in the form of epidurals, and would require physiological

monitoring, just like a padent receiving anesthesia in an OR. Yet, when an independent

anesthesiologist, who bills the padent separately, provides that epidural,

even though the anesthesia equipment will be in use.

Ex. 5, Meeter Dep. at 243:7-244:8. By contrast, i f a Suiter-employed certified registered nurse

anesthetist (CRNA) provides the epidural,

Ex. 5, Meeter Dep. at 237:5-22; 245:18-246:6.

In other words, Sutter knows that it must provide some addidonal sei-vice beyond the OR

or L&D room to generate an additional service fee under 37x. As Kathy Johnson, Director of

Billing Compliance & Revenue Quality stated bluntly in an exchange with Ms. Meeter, when

Sutter facilides were previously applying a timed anesthesia charge to L&D patients even though

the facilities were not providing an addidonal staff person to provide an additional sei-vice, m

- a point with which Ms. Meeter agreed.

Ex. 26, SH 1210351 (emphasis added). Or, as Ms. Meeter put it in a different exchange, where

Sutter is not providing the staff to actually provide an additional anesthesia sei-vice, an addidonal

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Ex. 27, SH 485099. This, of course, is because the L&D patient is

(1) already being billed hourly charges for the L&D room and all of its equipment/overhead (just

as the OR patient is aheady being charged by minute for the OR and all its equipment/overhead),

and (2) is also being separately billed by the anesthesiologist (just as the padent is in the OR

setting). In other words, Sutter knows that only the muse anesthetist, not the fixed L&D or OR

equipment or supplies, constitutes the separate "sei-vice" that can justify a separate 37x anesthesia

sei-vice charge, because Sutter is already billing a timed charge for the room. Just as in L&D,

Sutter knows that it o ' fi^^ same service when it bills for the

OR under 36x, and then bills again for an anesthesia service under 37x when there is no

additional muse caring for the patient.

Sutter's knowledge is demonstrated through its misrepresentatioits to patients. Sutter

know it is billing for a sei-vice not provided, and it knows that its practice is not defensible to

patients, paxTicularly those who have knowledge of hospital billing, and the time and resources to

spend months seeking a straight answer on the basis for the 37x charges.

1084894.9 14

PLAINTIFFS" OPPOSmON TO SUTTCR'S MOTION FOR SUMMARY JUDGMENT ON •SPECIFIC INTENT"

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Sutter's representations evince ils

knowledge that the timed anesthesia charge can only be applied when a nurse or other Sutler

professional is providing a service to the patient, and has no basis otherwise. Of course, Suiter

does not provide that service in the OR; the patient pays a doctor to provide it. These are the

representations and admissions ofa defendant that realizes the false, fraudulent, and misleading

nature of its OR anesthesia charges.

Sutter's knowledge is detnonstrated through its operating room practices. Sutler

understands its misconduct on a more general level, as reflected in its charging practices for siaff

on standby. For certain heart procedures outside the OR, Sutler keeps an OR room and OR staff

on standby in case the padent goes into cardiac arrest and needs immediate surgery. Ex. 5,

Meeter Dep. at 193:10-194:12.

The OR-related examples continue. If a blood transfusion lakes place in the OR during a

surgical procedure, it is performed by a private anesthesiologist (Ex. 5, Meeter Dep. at 319:14-

3 1 9 : 2 4 ) | | | | | | | | | y | | | | | | | | | | | | [ | | B | | | | | | | | | | | | | | | [ | | | | | | ^ ^ Only when a

Sutler employee perfonns the transfusion the O R | | m | | m U | m U | m i H m

IEX. 5, Meeter Dep. at 318:9-17; Ex. 37. In that case, the service reflected

Ex. 5, Meeter Dep. at 314:8-16. As explained by Steve Jalala, who served as surgical

services director for Sutter Auburn Faith and Sutter Roseville (Ex. 19, Jalala Dep. at 23:22-24;

^ ''' ' ) 'HHIUmHli^HHiHIHHHlHBBHHHI operating

room procedure for which the patient is already being billed by the minute. Id. at 153:10-16;

l l l l l i m i m The same, of course, is tme for anesthesia. It is always related to the underlying

operadng room procedure and takes no addidonal staff by Sutter to perform. Id. at 156:2-13; 1084894.9 16

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159:5-7. If anything, Sutter's separate anesthesia charge is made all the more egregious because,

unlike transfusion, the patient pays a separate bill to the doctor for that anesthesia service.

Thus, Sutter knows that i f it is billing a padent on a time basis for an anesthesia sei-vice,

and that the charge is being applied above and beyond a limed charge for the OR in which the

anesthesia takes place, that i l should be providing some additional service beyond providing that

OR. Yet, as to the claims al issue in this lawsuit, there is simply no one at Sutler who provides

that "service" - there is only the anesthesiologist who separately bills for his or her dme.

Finally, Sutler knows the so-called "services" il purports lo bill for under 37x are

inseparable from the provision of the OR itself, which it already bills under 36x.

^ Even outside the OR, Sutter knows that the services il bills necessarily involve the provision of those services by some Sutter personnel - particularly for chronometric charoes.

Plaintiffs' expert. Dr. Miller, refertcd to Sutter's practice as a misleading form of unbundling. 12/3/12 Miller Decl., II 31.

1084894,9 17

PLAINTIFFS' OPPOSITION 'TO SUTTER'S MOTION FOR SUMMARY JUDGMENT ON "SPECIFIC INTENT

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In sum, the anesthesia technicians are part of the OR staff managed by the surgical

services department and share responsibility over the singular task and service of maintaining and

preparing the OR.

The nurses and OR technicians have ongoing involvement with a given case and

document their involvement to justify their associated charges. The anesthesia technicians have a

far more fleeting and ministerial role in maintenance and preparation ofthe OR, and yet they are

now used by Sutter to justify a second timed charge in multiple, simultaneous operating room

procedures, not to mention other anesthetizing locations. Sutter knows that the 37x charge is not

related to how much dme anesthesia technicians spend in the OR working on behalf of pardcular

padents (Ex. 5, Meeter Dep. at 190:21-191:14), that anesthesia technicians are not present for the

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procedure and are in fact off setting up other rooms for other cases {Id. at 189:23-190:1), and that

no other member of Sutter staff is responsible for monitoring or caring for patients throughout the

dme that the 37x charges are billed. Id. at 192:4-7; 130:4-9.

Sutler's billing scheme is carried out purposefully and knowingly, and is a quintessential

form of false billing. United Stales v. Akpan, 407 F.3d 360, 371-72 (5th Cir. 2005) (billing for

services nol rendered). Its practice is, as Sutler well knows, "in essence, [] double charging for

the same service" - the OR. Compare Ex. 26, SH 1210351.

B. Sutter knows that the equipment and supplies it bills under 37.\ are also billed as part of the OR.

Sutter knows it is not providing a service for its 37x GENRL ANES and MAC/REG

charges, and that is why it is unable to identify anyone who actually provides that alleged service.

Instead, il now puiports to rely on the anesthesia equipment and "routine supplies" as being the

basis for the charge. Motion at 16. However, these items are part and parcel of the operating

room overhead and are billed as part ofthe 36x charge. As explained above, this is all a part of

the OR service it provides the padent. Even if these items were not part of the OR charge,

Sutter's charges are nevertheless misleading in that they falsely imply the provision of an

additional anesthesia service provided by Sutter, beyond providing the OR and its fixed

equipment and routine supplies.

Sutter's CDM Director admits that anesthesia equipment is hilled under the 36x OR

charge along with all other OR overhead.

1084894.9 19-

PLAINTIFFS' OPPOSITION TO SU'ITER'S MOTION FOR SUMMARY JUDG.MENT ON "SPECIFIC INTENT

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Other Sutter personnel also admit that anesthesia equipment is billed under the 36x OR

charge.

it*

1084894.9 20

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1084894.9 21

PLAINTIFFS' OPPOSITION 'TO SUTTER'S MOTION FOR SUMMARY JUDGMENT ON "SPECIFIC INTENT"

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1084894.9 22

PLAINTIFFS' OPPOSITION TO SU ITER'S MOTION FOR SUMMARY JUDGMENT ON "SPECIFIC INTENT'

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In fact, the anesthesia

equipment must be part ofthe operating room, by regulation. 22 Cal. Code Regs. § 70227.

C. If in fact Sutter bills for anesthesia inhalation gases as part of the 37x charge, it has submitted thousands of double bills bv separately billing for these gases under 25x.

1084894.9 24-

PLAINTIFFS' OPPOSITION 'TO SUTTER'S MOTION FOR SUMMARY JUDGMENT ON "SPECIFIC INTENT'

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D. Sutter knows that its "anesthesia services" charges are misleading and intended to deceive.

Sutter knew that the so-called "anesthesia service" it provides has vii-hially nothing to do

with time, aud yet it knowingly and misleadingly shuctmed its charge to nm by the minute. This

is evident with the anesthesia technicians, the only personnel arguably providing a "service." H j

1084894.9 25

PLAINTIFFS' OPPOSmON TO SUTTER'S MOTION FOR SUMMARY JUDGMENT ON •SPECfflC INTENT'

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Bybee Dep. at 52:14-16 (same); Ex. 36, Wohn Dep. 154:7-14 (Alia Bates' CDM Liaison unaware

The same is tme of Sutler's anesthesia equipment "cost" - assuming Suiter could show it

is excluded from the charge for the operating room in which they penuanenlly reside. It is a one

time cost according to Sutter's own calculations and understanding. Thus, while Sutter contends

that it bills by the minute at an effective rate of several thousands of dollars an hour because of

this anesthesia equipment, its practices tell a different story.

The charge descripdons are also crafted to conceal that the charges are for a sei-vice nol

provided. No one could know by looking at the anesthesia services charge that it was f o i H H |

Sutter could have billed these pharmaceuticals under the 25x

Pharmacy charge, which would enable patients to know what they are billed for (both the drug

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and quandly), and for how much, ihereby facilitating informed decision making. Id. at 343:10-

345:11. Instead, it puiports to also bill the gases as part of some ambiguous, timed charge lhat

implies an addidonal service being provided, while simultaneously concealing the idendly,

quandly, and price ofthe particular dmg used. Likewise, as Ms. Meeter noted, a patient looking

al these generically-litled 37x charges would have no way to know the charge included the cost of

That is not true of these misleading anesthesia charges. Il is

by concealing their true nature, and by naming and stmcturing them in a way lo imply some

additional substandve service to the patient beyond the OR, that Sutter is able to turn

"Anestliesia" into such a revenue cenier, tripling its gross revenues following standardization. It

is no surprise that, at some facilities. Suiter's reported charge to cost ratios reach astronomical

heights. For example, at Modesto Memorial in 2006, Sutler reported negative direct costs for

Anesthesia, and yet $32 million in charges, for a charge to direct cost rado that is incalculable

because it is infinite. Even when overhead costs are added, the Anesthesia charge to cost ratio is

130:1, compared to a 4.2 to 1 ratio for the Operating Room, and a 6 toi ratio facility-wide. Ex.

55 at SH 007243 (negative direct costs), 007267 (indirect costs) 007268 (charges).

Ultimately, the 37x anesthesia services charge obscures that Sutter is not providing an

"anesthesia service" to justify a second timed charge on top of the 36x OR charge that is

admittedly for the operating room, and all OR setup, staff, supplies, and equipment. Once again,

at minimum, there are triable issues of feet as lo the misleading nature of Sutter's 37x anesthesia

1084894.9 -27

PLAINTIFFS' OPPOSITION TO SU'ITER'S MOTION FOR SUMMARY JUDGMENT ON "SPECIFIC INTENT"

Against the great volume of incriminating evidence outlined above, Sutter relies solely on

self-ser\'ing declarations from its execudves. The Court ought not lo credit them over Plaintiffs'

evidence in order to grant summary judgment. Certainly, these declarations need nol be credited

by the jury over the documentary and testimonial evidence above. However, even when

considered at face value, they do nothing to advance Sutter's defenses.

"[S]uimnary judgment may be denied in the discretion of the court. . . where a material

fact is an individual's state of mind, or lack thereof, and that fact is sought to be established solely

by the individual's affirmation thereof." Cal. Code Civ. P. § 437c(e). The Court should disregard

Suiter's affidavits insofar as they puiport to show lhat Sutler billed under 37x without knowledge

of falsity or intent to defraud. See Brown v. Raiu weiler, 171 Cal.App.4lh 516, 529 (2009)

(citation omitted) ("[Ajffidavits [for summai-y judgment] must cite evidentiary facts, not legal

conclusions or 'ultimate' facts."); Hope Int'l. Univ. v. Sup. Ct., 119 Cal.App.4th 719, 744 (2004)

("The general mle . . . is that conclusions of fact are not binding on a suminai-y judgment

motion.). Further, the evidence described herein shows that Sutter knows lhat its charges under

the 37x revenue code are false, fraudulent, and misleading, and it carries far more weight on a

summary judgment motion than Sutter's self-sei-ving declaration. Benavidez v. San Jose Police

Dep't, 71 Cal.App.4th 853, 860 (1999) (citation omitted) (". . . the trial court may, in its

discretion, give great weight to admissions made in deposition and disregard contradictot-y and

self-serving affidavits of the party."); Vi.weta v. Gen. Motors Corp., 234 Cal. App.3d 1609, 1613

(1991) ("Admissions or concessions made during the course of discovery govern and control over

contrary declarations lodged at a hearing on a motion for summary judgment."); People v.

Duarte, 24 Cal.4th 603, 611 (2000) (quoting People v. Leach, 15 Cal. 3d 419, 439 n.l5 (1975))

26 For the reasons expressed throughout, and in particular section ll.A.-D., Plaintiffs dispute Sutter Statement of Facts 6-8, and 11-18. Plaintiffs also dispute Sutter Statement of Fact 4, in

27 that the evidence adduced to date shows both inaccurate and inconsistent description of services tlirough Sutter's anesthesia charges.

28

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("As scholars have obsei-ved, 'a self-serving statement lacks trustworthiness . . . . " ' ) .

At best, Sutter's vague asserdons regarding the standardization period, and its reliance on

unsubstantiated claims from its c o n s u l t a n t 5 ^ ^ m m U | | | | m [ U | H (Ex. 21, Hunter Dep. at

106:24-109:6, 118:5-22), potendally creale triable issues when measured against Plaindffs'

evidence.' This is especially tme in light ofthe evidence described above, and because of

Sutler's powerftjl financial incentive to generate the tremendous revenues afforded by its scheme.

s t a n d a r d i z a t i o n m [ | | H [ H | ^ m U | | | | m i m i m i m m ^ as

highlighted al the standardizadon meedngs. Ex. 56 at SH 174386. While standardizing its

charges, including those for anesthesia. Sutler had thei

'^ Perhaps they also reveal a conscious disregard for the false, fraudulent, and misleading nature of its billing scheme. See, e.g., Global-Tech Appliances, Inc. v. SEB S.A., 131 S. Ct. 2060, 2068-69 (2011). Plaintiffs dispute Sutter Statement of Fact | 2 and | 9, given the lack of evidence suggesting any experdse the consultants had. Sutler's and/or their consultants' knowledge of industry pracdce, and because the facts presented throughout show a lack of concem with compliant billing. Likewise, Plaintiffs dispute 1 10, in that Sutter did not consider OSHPD or any other regulatory guidelines in conslmcdng these charges. Ex. 21, Hunter Dep., 141:6-8.

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Ms. Brendt's declaradon is even less credible, and the Coiut should disregard it and the

email she piuports to inteipret. Ms. Brendt discusses a Febmary 2, 2004 email between Jan

Cannan and Troy Donoviel—^neither of them Sutter employees—and asserts that it "reflects that

the payer's expert . . . recognized that the hospital's anesthesia time is for the time the hospital's

equipment is being used to deliver anesthesia." Brendt Decl. to Def. Mot. ^ 7; Ex. 57, Brendt

Dep. 113:20-114:5. Most teUing, of course, is what Ms. Brendt does not say. She fails to state

that a suigle person at Sutter relied upon, reviewed, considered, or even read fhe email exchange

for any puipose, let alone to consider whether Sutter's time-based anesthesia charges were false,

fiaudulent, or misleading. Ms. Brendt makes no assertion that this email is about the specific 37x

charges at issue in this case.

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PLAINTIFFS' OPPOSmON TO SUTTER'S MO'nON FOR SUMMARY JUDGMENT ON "SPECfflC INTENT"

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At best, Sutter's declarations are extraordinarily weak and incompetent evidence of its

supposed lack of knowledge, and simply cannot justify the grant of summary judgment,

especially when viewed alongside the evidence presented above.

Ml. There is no specific intent to defraud requirement, and even if there were. Plaintiffs have satisfied it.

As explained above, there is no specific intent requirement for an IFPA cause of action.

See § I.A., supra. But even if there were, it merely requires that the defendant seek a benefit to

which it is not entitled. Blick, 153 Cal. App. 4th at 722. In the context of false claims, presenting

claims with knowledge of their false or fraudulent or misleading nature necessarily evinces a

specific intent to defraud. See, e.g., Booth, 48 Cal.App.4lh al 1254; People v. Scofield,

17 Cal. App.3d 1018, 1026 (1971) (one "who willfully submits a claim, knowing it to be false,

necessarily does so with intent to defraud.").

Therefore, all ofthe evidence cited in Section II regarding Sutter's knowing submissions

also easily satisfies the specific intent requirement (assuming it applies). Moreover, there is little

doubt tliat Suiter submitted the claims vvith the intent to obtain a benefit to which il was not

entitled. The purpose of knowingly submitting a charge for a service not provided is to get paid

for that false charge.

These incentives affected the standardization project. Sutler recognized that it billed

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PLAIN'TIFFS' OPPOSITION TO SUTTER'S MOTION FOR SUMMARY JUDGMENT ON "SPECIFIC INTENT'

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Either way, Suiter clearly maximized its

charging opportunities with anesthesia, but it did so by obtaining enormous benefits to which it

was nol entitled. The results are striking. In 2001, before the standardization project,

Sutler's effort lo apply a criminal specific intent standard lo this civil IFPA case should be

rejected. However, even if it is accepted, the standard is readily sadsfied. At minimum. Plaintiffs

have established triable issues of fact that Suiter acted with specific intent, and summary

judgment must therefore be denied.

IV. Sutter's "good faith" affirmative defense is not applicable, and even if it were, it poses highly fact-intensive questions not resolvable on summary judgment.

Finally, Sutter argues that its false, fraudulent, and/or misleading claims should be

excused because it acted in "good faith." This argument also fails. At the outset, "good faith" is

an affinuative defense that Sutler has the burden to prove. See People v. Neidinger, 40 Cal.4th

67, 74 (2006). Because Sutter has not affinnatively moved for summary judgment as to this

"good faith" defense, it is not properly at issue in this motion. Certainly, Sutter has not offered

any evidence establishing that, as a matter of law, it acted in good faith.

Even if it proffered such evidence, this defense has no applicability in a case such as this,

which turns on straightforward fonns of double billing and billing for sei-vices not provided. See

Falsity Order at 6; Ex. 66, Smith Dep. at 155:8-16 (Sutter contracting personnel admitting it is

Ex.21,

Plaintiffs dispute Sutter Statement of Facts 1 5, given lliat the challenged charges did not and do not accurately reflect the services provided, and since revenue was the tme driving factor in their selecdon of one billing methodology over another.

1084894.9 32 PLAINTIFFS' OPPOSITION TO SUTTER'S MOTION FOR SUMMARY JUDGMENT ON "SPECIFIC INTENT

1 HunterDep. at 151:18-22

H m m ^ i m ^ j ^ m ^ ^ ^ ^ ^ ^ ^ m ^ ^ Seel-Hndov.Umv. of Health Sds.,

3 65 F.3d 608, 613 (7th Cir. 1995) ("[A]n example of a false statement in an invoice in a similar

4 context is the representation that a resident worked five days a week at a hospital when he worked

5 only three."); United Slates ex rel. Carter v. Halliburton Co., No. 1:08cv 1162 (JCC), 2009 U.S.

6 Dist. LEXIS 63649, *19 (E.D. Va. Jul. 23, 2009) "[a]n allegation that a defendant 'tried to get

7 paid for work il had nol done' is a claim lhat can be brought straight-forwardly under the FCA.")

8 (internal cites and quotes omitted) United States v. Akpan, 407 F.3d 360, 371-72 (5lh Cir. 2005)

9 (billing for services not rendered); United States v. Patient Transfer Serv., Inc., 413 F.3d 734, 741

10 (8th Cir. 2005) (defendant guilty of double billing even though "no regulation or statute explicitly

11 proscribes this type of falsity."); United States v. Custodio, 39 F.3d 1121, 1122 (10th Cir. 1994)

12 (affirming convicdon of defendant who "billed twice for some procedures"); United Slates v.

13 IJpkis, 770 F.2d 1447, 1452 (9th Cir. 1985) ("The false statement is the claim of entitlement to

14 payment where the sei-vices have already been paid for.")

15 Cases that consider the defendant's good faith typically deal with a disputed inteipretation

16 ofa contract or regulatory provision—legally false claims, as opposed to factually false claims

17 like those al issue here. See United States ex rel. Conner v. Salina Reg'1 Health Ctr., Inc., 543

18 F.3d 1211, 1217 (10th Cir. 2008). Indeed, each of the cases Suiter cites in its brief deals with

19 legal falsity, i.e. interpredng a specific contract or reguladon; those cases are not probative here.

20 The case on which Sutter relies most, United States ex rel. Hochinan v. Nackman, 145 F.3d 1069

21 (9lh Cir. 1998), epitomizes the flaw in Sutter's reasoning. Unlike here, the defendants in

22 Nackman were not accused of submitting multiple simultaneous charges for the same sei-vice, or

23 billing for services not provided. There was no allegation that the underlying charge was

24 described deceptively to escape scrutiny or even notice, like Suiter's chronometric charges for

25 "anesthesia services." Instead, the claims in Nackman that Suiter describes were based on the

26 interpretation of an "Affiliation Agreement." Id. at 1073, 1075.

27 The other cases upon which Sutter relies are also inapposite. United States ex rel.

28 Swafford v. Borgess Med Ctr, 98 F.Supp.2d 822 (W.D. Mich. 2000), involved the adequacy of

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PLAINTIFFS' OPPOSITION TO SUTTER'S MOTION FOR SUMMARY JUDGMEN'T ON "SPECIFIC INTENT"

1 certain claims under regulafions of physician supervision during venous ultrasounds. It

2 concerned a "dispute over the meaning ofthe tenns governing the delivery ofthe professional

3 component of physician services, rather than a factual claim as to whether defendants (at a

4 minimum) actually performed some work . . . ." Id. at 831-32. Here, of course, Sutter is

5 submitting claims for personnel who have virtually no role in the billed procedure at all.

6 Similarly, Uniled Stales v. Prahhu, 442 F. Supp. 2d 1008 (D. Nev. 2006), did not address

7 factually false claims, but only whether, under Medicare reguladons, a doctor could bill for

8 pulmonary stress tests when he performed pulmonai-y rehabilitation. The claims in United Stales

9 ex rel. Coined v. Beth Isr. Med. Ctr., 785 F. Supp. 2d 303 (S.D.N.Y. 2011), also mrned on

10 conlract inleipretadon. See id. al 314 ("Colucci does not, however, allege that BIMC submitted

11 the typical type of factually false claim . . . . Instead, Colucci's quarrel appears to be with the

12 rates used by BIMC in its claimed reimbursements, not the factual basis for those claims.").

13 Because the good faith defense has little applicability here, and because Sutter fails to cite

14 any evidence establishing, as a matter of law, that it so acted, summary judgment cannot be

15 granted on this basis. Even if the affinuative defense were at issue, it is inherently a question of

16 fact, not appropriate for resolution on summary judgment. Gemini Aluminum Corp. v. Cal.

17 Custom Shapes, Inc., 95 CaI.App.4lh 1249, 1263 (2002) ("good faith, or its absence, involves a

18 factual inquiry into ihe piaintifPs subjective state of mind."). Sutter's argument that nothing

19 specifically prohibited its conduct is, at most, evidence relevant to Sutter's knowledge and intent,

20 and a jury is endtled to hear it. Cf, People v. Gregory, 217 Cal.App.3d 665, 678-79 (1990) (On

21 appeal by physician convicted under Cal. Welf. & Inst. Code § 14107 of Medi-Cal fraud,

22 "question of the vagueness of the Medi-Cal mles was . . . properly at issue as a question of fact

23 probadve on the question of defendant's intent."); Sheriff, Clark Cnty. v. Spagnola, 101 Nev. 508,

24 512 (Nev. 1985) ("[Cjriminal intent in choosing to interpret [ambiguous guideline] in this manner

25 is a quesdon of fact for the jury."). This is tme of the two criminal cases Sutter cites in its brief

26 In bolh cases, the Court made clear that the jury was to hear evidence of good faith. See People v.

27 Louie, 158 Cal. App. 3d Supp. 28 (1984) (appeal of conviction of physician who claimed that

28 false cerdficadon of patient for disability benefits was good faith mistake); People v. Blick, 153

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Cal. App. 4th 759 (2007) (appeal by woman who claimed failure to disclose material fact to

workers' compensation board was good faith mistake).

As detailed at length above, a jury could easily infer from the evidence that Sutter's

decision to bill for anesthesia services, without providing any service at all, and to double bill for

the provision ofthe OR by billing it twice under 36x and 37x revenue codes, evinces both .

knowledge of falsity and the absence of good faith. § II. Sutter's conduct is explained when

-viewed in context of the enormous financial benefits associated with biUiog an additional several

thousands of dollars with each surgery. Together, this evidence well demonstrates the existence

of triable issues of fact on whether Sutter billed with knowledge of falsity, as Plaintiffs contend,

versus m good faith, as Sutter contends. The decision is therefore for the jury.

CONCLUSION

For the forgoing reasons, Plaintiffs respectfully request that the Court deny Sutter's third

Motion for Summary Judgment..

Dated: June 7,2013 CALIFORNIA DEPARTMENT OF INSURANCE

Dated: June 7, 2013

Richard Krenz • J

AdamM. Cole (SBN 145344) Chief Counsel Richard Krenz (SBISI59619) Assistant General Counsel GeneS. Woo (SBN 119302) Antonio A. Celaya (SBN 133075) Senior Staff Counsel 45 Fremont Street, 21st Floor San Francisco, CA 94105 Telephone: (415)538-4117 Facsimile: (415) 904-5490

Attomeys for Dave Jones, Insurance Commissioner of the State of Califomia and the Califomia Departrnent of Insurance

LIEFF CABRASER HEIMANN & BERNSTEIN, LLP

By 1 1084894.9

Robert J. Nelson

-35 PLAINTIFFS' OPPOSmON TO SUTTER'S MO'nON FOR SUMMARY JUDGMENT ON "SPECIFIC INTENT'

1 William Bernstein (SBN 065200)

2 Robert J. Nelson (SBN 132797) Kristen Law Sagafi (SBN 222249)

3 Nimish R. Desai (SBN 244953) Marc A. Pilodn (SBN 266369)

4 275 Battery Street, 29th Floor San Francisco, CA 94111-3339

5 Telephone: (415) 956-1000 Facsimile: (415)956-1008

HUGHES & NUNN LLP William D. Hughes (SBN 60370) E. Kenneth Purviance (SBN 126206) 350 Tenth Avenue, Suite 960 San Diego, CA 92101

9 Telephone(619)231-1661 Facsimile (619) 236-9271

10 JI Attorneys for Relator RockvUle Reccjvery Associates, Ltd.

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PLAINTIFFS' OPPOSITION TO SUTTER'S MOTION FOR SUMMARY JUDGMENT ON "SPECIFIC IN'TENT"

Documents

Adam M. Cole (SBN 145344 )