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Stepford Hospital is a large tertiary nonprofit hospital in an affluent, well-insured community. While not a true university-owned academic medical center (e.g., GW), it nevertheless sponsors a number of residency programs and has an active clinical research institute. Maximillian Ego, MD is a nationally prominent invasive cardiologist at Stepford. In addition to his very active and lucrative private practice, Dr. Ego is employed part-time by Stepford to run its cardiac catheterization laboratory (cath lab). Dr. Ego and his cardiology group practice are virtually responsible for much of Stepford’s bottom line each year, given the highly lucrative nature of their invasive cardiology procedures.
Stepford holds a research grant from Pretty Good Medical Devices, Inc. (“PGMD”), on which Dr. Ego is denominated the principal investigator (“PI”), for the conduct of a clinical trial on PGMD’s latest drug-eluding coronary stent, the Whizbang II®. The device itself is reimbursed by Medicare as a Category B (investigational, nonexperimental) device. Also, under its national coverage determination, Medicare will pay for the routine costs of care (room and board, normal ancillary expenses) associated with a Medicare beneficiary hospitalized as part of the clinical trial. The clinical protocol requires that patients undergo a rapid CT of the heart every month for the first year after insertion of the Whizbang II®. Because of this, the grant from PGMD itself covers all costs associated with these monthly CT scans.
When patients return to the hospital each month for the follow-up CT scan, Dr. Ego bills his regular professional fee for interpretation of the CT results. In addition, because the scans are a hospital outpatient service, Dr. Ego forwards a charge slip to the hospital in order for it to bill its own portion (the hospital facility charge) for the scan. The hospital then routinely bills third-party payers, including Medicare and Medicaid, for the scan.
One day, Dr. Ego’s nurse, Connie Q. Tam, confronts him with a question: “Doctor, I attended a seminar last week on how to prevent and detect fraud and retire before 40. One of the speakers on clinical research warned against double billing for anything covered by a research sponsor. If the hospital bills these follow-up CTs to Medicare when they’re also receiving reimbursement for them under the grant, isn’t that a problem?” Dr. Ego responds, “Not my problem, Connie, and not yours either. The geniuses over in hospital billing can figure this out, that’s what they’re paid to do. I have no idea how they bill their portion and could care less.” When the hospital billing staff receives the charge information for the scans, they bill it to Medicare and all other payers, just as they would for any outpatient service. The billing staff have no clue that these scans are actually part of an ongoing clinical protocol, much less that they are reimbursed by the sponsor (PGMD).
a. Does Nurse Q. Tam have a possible cause of action under the federal Civil False Claims Act? Justify your position.
b. If so, would the hospital, Dr. Ego, or both be liable? Why?
c. Does Nurse Q. Tam’s “knowledge” have an impact on her ability to bring a whistleblower action?
d. In your answer, address the state of “knowledge” of both Dr. Ego and the hospital with respect to hospital billing for the CT scans.
a. If you were representing Stepford Hospital, what would you argue to the government’s investigators in defense of the hospital?
b. In addition to the facts above, assume that Dr. Ego also uses a high percentage of other PGMD devices in his cardiology practice and 3 years ago entered into a consultant arrangement with PGMD under which he is paid $50,000 a year for participating in periodic product development seminars sponsored by PGMD. Does this raise any additional concerns?

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