Pediatria PC v. Diopsys Incorporated

Filing 57

ORDER granting 44 Motion for Summary Judgment. The clerk of court shall enter judgment dismissing plaintiff's complaint with prejudice. (See document for further details). Signed by Judge H Russel Holland on 2/21/14. (LAD)

WO
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA

PEDIATRIA P.C., an Arizona professional
company,

)
)
)
Plaintiff,
)
)
vs.
)
)
DIOPSYS, INC., a New Jersey corporation,
)
)
Defendant.
)
__________________________________________)

No. 2:12-cv-1949-HRH

ORDER
Motion for Summary Judgment
Defendant moves for summary judgment.1 This motion is opposed.2 Oral argument
was requested and has been heard.
Facts
Plaintiff is Pediatria, P.C. Plaintiff, through Dr. Jaime Balderrama, offers primary
care for children ranging from newborn to eighteen years of age.

1

Docket No. 44.

2

Docket No. 49.
-1-

Defendant is Diopsys, Inc. Defendant manufactures the Enfant Pediatric Vision
Testing System, which is a visual evoked potentials (VEP) machine. The VEP technology
“evaluates [a person’s] response to an external stimulus along the entire visual pathway
from the lens of the eye to the visual cortex of the brain.”3
In 2008, Dr. Balderrama received a publication entitled “Pediatric Coding Alert”,4
which suggested that “[i]f you want to test nonverbal patients for visual impairments, you
may want to consider a visual evoked potentials machine that insurers often cover per test
from a low of $30 to a high of $160.”5 The Coding Alert stated that “[a]lthough payment
for vision screening ... can prove hard to come by, reimbursement is much more
straightforward for VEP test code 95930....”6 The Coding Alert contained a testimonial
from Dr. Richard Lander, a “pediatrician at Essex-Morris Pediatric Group in Livingston,
N.J.”, who stated that “[i]t is a good screening test for amblyopia [lazy eye] that is able to
test kids as young as 6 months old.”7 The Coding Alert mentioned the Enfant Pediatric

3

Enfant Brochure, Exhibit 6 at 3, Plaintiff’s Separate Statement of Facts [etc.], Docket

No. 50.
4

The Coding Alert was prepared and distributed by the Coding Institute.

5

Pediatric Coding Alert at Pediatria00691, Exhibit 3, Defendant’s Motion for
Summary Judgment, Docket No. 44.
6

Id.

7

Id.
-2-

Vision Testing System as a an example of a VEP machine.8 The Coding Alert also contained
statements by Diane C. Fulton, “director of insurance/medical coding and billing” for
defendant.9 Fulton stated that “[i]t’s just not practical to send every child to a specialist for
a test that the patient’s pediatrician can do.... This test makes a difference in children’s
lives by catching vision problems that could affect their development at a time when they
are most receptive to treatment.”10 Fulton also stated that “[i]nsurers reimburse the test 80
percent of the time, depending on your payer mix and geographic area[.]”11 As for insurers
which would not reimburse the test, Fulton stated that they do so because “[t]he insurer
doesn’t want to add the code to its capitation exceptions,... [o]r, the payer requires a
specialist to perform the test based on antiquated intra-operative VEP guidelines.”12 The
Coding Alert stated that “[c]ommercial plan payments range from $60 to $160“ and Fulton
stated that “Aetna sets the ‘gold standard’ of medical policies when it comes to VEP[,]”
presumably because it “recognizes the importance of early vision testing during a well

8

Id.

9

Id.

10

Id.

11

Id. at Pediatria00692.

12

Id.
-3-

check.”13 The Coding Alert further stated that “[m]ost state Medicaid plans cover VEP.
Ohio Medicaid pays the code at a low of $30, with many other state Medicaid plans paying
about $90.”14 The Coding Alert advised that “[s]ome plans may have outdated VEP
policies. For instance, Oxford’s guidelines limit VEP coverage to the operating room or
certain specialists.”15 Lander advised that “[i]f an insurer states it is not a covered service,
the patient has the option to pay at the time of service[.]”16 The Coding Alert suggested
that doctors “[m]ake a chart of your payers’ VEP policies focusing on noncovered versus
covered. Fulton follows VEP reimbursement trends across the country and can help
facilitate this process....”17 The Coding Alert advised that
[y]ou’ll get paid the first time around for VEP tests if you use
the payer-required V code and switch to a problem code when
you should. ... Because physicians often perform VEP during
a preventative medicine service, you’ll link 95930 ... to one of
two V codes.... Most insurers cover the test during the well
check with the preventative medicine service diagnosis.
“Many commercial plans, as well as Aetna, accept V20.2 on the

13

Id.

14

Id.

15

Id.

16

Id.

17

Id.
-4-

vision screening and on the preventative medicine service,”
says Diane C. Fulton....[18]
Dr. Balderrama testified that he had never considered VEP testing until he read the
Coding Alert.19 Dr. Balderrama testified that he then had a staff member contact defendant
to request more information about the VEP machine.20
Defendant sent plaintiff written material about the Enfant VEP testing system. One
brochure stated that the reimbursement code for VEP tests was 95930, that “[m]ost
insurance plans cover the test during a child’s well visit”, that “[c]ommercial plan
payments range from $60 - $160 per test” but that “[c]ommercial reimbursement varies by
payer[,]” and that “Diopsys has a full-time Insurance/Medical Coding and Billing Group
to assist your business staff with reimbursement.”21 Also included in the material was a
“Billing and Coding Bulletin for Optometrists”, which discussed the use of the 95930 code.
The bulletin stated that “Medicare’s allowable for global, bilateral CPT 95930 ranges from
$77.04 to $152.51,” that “[c]ommercial plan payments range from $60 to $160[,]”and that

18

Id. at Pediatria00693.

19

Deposition of Jaime A. Balderrama, M.D., at 7:20-23, Exhibit 2, Defendant’s Motion
for Summary Judgment, Docket No. 44.
20

Id. at 13:20-24.

21

Enfant Brochure, Exhibit 4 at Pediatria00044, Defendant’s Motion for Summary
Judgment, Docket No. 44.
-5-

“Diopsys monitors commercial allowables throughout the country and approximates the
average at $79.68 based on payment trends.”22
Dr. Balderrama then asked his staff to call the AHCCCS23 insurance plans to see if
they would cover VEP tests.24 Dr. Balderrama testified that he instructed his staff to ask if
the VEP test would be covered if it were done as part of a well-child visit.25
Brenda Mena was a Pediatria staff member who called AHCCCS plans to see if VEP
testing would be covered. She testified that Dr. Balderrama “wanted [her] to look into the
Medicaid plans themselves to find out if they covered the vision, if the testing was covered

22

Exhibit 6 at Pediatria00002, Plaintiff’s Separate Statement of Facts [etc.], Docket No.

50.
23

AHCCCS stands for Arizona Health Care Cost Containment System, which is
Arizona’s Medicaid agency. “[A]pproximately 80-85% of [p]laintiff’s patients had a health
insurance plan with [AHCCCS] through six (6) of its affiliated insurance companies/plans
– Mercy Care, Care First, Health Choice, Phoenix Health Plan, APIPA, and Maricopa....”
Declaration of Dr. [Jaime] Balderrama at 1, ¶ 6, Exhibit 18, Plaintiff’s Separate Statement
of Facts [etc.], Docket No. 50.
24

Jaime Balderrama Deposition at 17:21-25, Exhibit 2, Defendant’s Motion for
Summary Judgment, Docket No. 44.
25

Id. at 21:13-15. A visual examination is part of a well-child visit and is usually done
in accordance with the Snellen test, which involves the use of a eye chart to determine a
patient’s visual acuity. Dr. Balderrama Declaration at ¶ 9, Exhibit 18, Plaintiff’s Separate
Statement of Facts [etc.], Docket No. 50. For babies and toddlers who cannot read yet, Dr.
Balderrama stated that he could only manually examine their eyes for an abnormality. Id.
at ¶ 10.
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under their plan.”26 She testified that she “asked if the CPT code, the 95930, was covered
under the well-care. And the plans told us if it’s in the primary care physician’s office, yes,
it is covered.”27 Mena testified that she recalled telling some of the plans that plaintiff was
considering buying a VEP testing machine and that it “need[ed] to know if it’s covered
under their plan, if it requires a prior authorization.”28
Cynthia Sukung was another Pediatria staff member who “call[ed] the insurance
plans to verify if this code [95930] would be covered within the PCPs office.”29 Sukung
testified that she believed that she called Mercy Care and Care First and that Care First said
that prior authorization would be required.30
Dr. Balderrama testified that he had his staff call more than once to verify that VEP
test would be covered by the AHCCCS plans and that he also had them check with “some
of the commercial plans ... and all of them say yes, it was covered. So if this was a blanket

26

Deposition of Brenda Mena at 6:23-25, Exhibit 5, Defendant’s Motion for Summary
Judgment, Docket No. 44.
27

Id. at 8:7-10.

28

Id. at 8:22-9:2.

29

Deposition of Cynthia Sukung at 8:18-20, Exhibit 6, Defendant’s Motion for
Summary Judgment, Docket No. 44.
30

Id. at 14:6-9.
-7-

yes, it really looked that it could be appropriate and advisable for us to perform the test,
we were thinking about it quite seriously from there on.”31
Dr. Balderrama testified that plaintiff then contacted defendant and found out that
the price of the Enfant VEP testing system was $35,000.32 Dr. Balderrama testified that at
this point in time, he was in contact with defendant’s sales representative in California, Don
Fellows, and that Fellows was calling him and asking him when he was going to purchase
a testing system.33
Dr. Balderrama testified that defendant gave him the names of two physicians who
were using the Enfant VEP testing system and that he contacted one of them, a doctor in
New Jersey.34 The doctor told Dr. Balderrama that defendant’s machine was “pretty good”,
which Dr. Balderrama said meant “that it was working for him and he was billing and he
was being paid and he didn’t have apparently any other issues with I would assume

31

Jaime Balderrama Deposition at 23:24 - 24:9, Exhibit 2, Defendant’s Motion for
Summary Judgment, Docket No. 44.
32

Id. at 24:11-17; Jaime Balderrama Deposition at 26:5-14, Exhibit 1, Plaintiff’s
Separate Statement of Facts [etc.], Docket No. 50.
33

Jaime Balderrama Deposition at 26:15-24, Exhibit 1, Plaintiff’s Separate Statement
of Facts [etc.], Docket No. 50.
34

Jaime Balderrama Deposition at 34:17-23, Exhibit 2, Defendant’s Motion for
Summary Judgment, Docket No. 44.
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Medicaid from New Jersey.”35 Dr. Balderrama testified that the doctor stated that he was
using defendant’s VEP machine during well-child exams and that “he specifically said that
the Medicaid plan in New Jersey was paying for the tests[.]”36
Defendant also sent plaintiff a cash flow analysis for leasing an Enfant VEP testing
system.37 The cash flow analysis showed that if a practice did 10 VEP tests per day, based
on 21 working days per month, the practice would earn a 5-year net profit of $793,852.80.38
Defendant advised that the “[c]ash flow analysis is not a guarantee of profitability, rather
a projection based on current pricing and assumptions provided by you.”39
Dr. Balderrama avers that “[d]efendant’s representatives specifically advised [him]
to use the System to conduct tests during well-child examinations and to submit claims to
AHCCCS under ... Code 95930.”40

Dr. Balderrama also avers that “[d]efendant’s

representatives represented to me during oral communications that AHCCCS had
confirmed that claims submitted by [p]laintiff to AHCCCS relating to the use of the System

35

Id. at 34:23-35:3.

36

Id. at 35:8-19.

37

Exhibit 8, Plaintiff’s Separate Statement of Facts [etc.], Docket No. 50.

38

Id.

39

Id.

40

Dr. Balderrama Declaration at ¶ 14, Exhibit 18, Plaintiff’s Separate Statement of
Facts [etc.], Docket No. 50.
-9-

during well-child examinations would be paid by AHCCCS.”41 Sukung testified that prior
to plaintiff leasing the Enfant VEP testing system, Fulton told them that the time to do the
test was during a well-child exam.42 She also testified that she thought Fulton told her that
defendant had called the AHCCCS plans and had been told that the code was billable
through AHCCCS, “that it is covered service through AHCCCS and we should not have
any problems billing for this code.”43
Fulton testified that she did not personally contact AHCCCS or the AHCCCS plans
to check if a VEP test would be covered if performed during a well-child exam.44 But, she
testified that around November 17, 2008, she had her assistant contact the insurance plans
that had been provided by Dr. Balderrama “to confirm if the service was payable to the
pediatrician, at what amount and under what diagnostic codes.”45 Fulton testified that
most of the plans confirmed that they would pay for the service.46

41

Id. at ¶ 15.

42

Sukung Deposition at 17:6-24, Exhibit 7, Plaintiff’s Separate Statement of Facts
[etc.], Docket No. 50.
43

Id. at 28:7-21.

44

Deposition of Diane C. Fulton at 50:25-51:15, Exhibit 4, Plaintiff’s Separate
Statement of Facts [etc.], Docket No. 50.
45

Fulton Deposition at 123:3-16, Exhibit 9, Defendant’s Motion for Summary
Judgment, Docket No. 44.
46

Id. at 123:17-23.
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On October 31, 2008, plaintiff signed a Sales Order with defendant for an Enfant
Pediatric VEP Vision Testing System at the cost of $25,000.47 On November 7, 2008, plaintiff
entered into a financing and lease agreement with Affinity One Business Finance that
allowed plaintiff to make monthly installment payments on the Enfant Pediatric VEP
Vision Testing System in the amount of $798.00 per month.48 The parties’ agreement also
required plaintiff to pay defendant $10.00 for each test performed by plaintiff.49
Sometime after plaintiff signed the Sales Order, defendant provided plaintiff with
a document entitled “Visual Evoked Potential Reimbursement Information: Arizona.”50
In this document, Fulton stated that defendant
support[s] the use of [its] equipment and reimbursement to
your practice by monitoring insurance payment trends.
Therefore, we are requesting that you provide us with your
practice’s Insurance Payor Mix and EOBs that reflect your
practice’s specific insurance allowables and denials.[51]
The document provided some coding examples, but stated that “[m]edical [p]olicies vary
by insurance. Coding suggestions are based on testing experience and may not be accepted

47

Exhibit 7 at 1, Defendant’s Motion for Summary Judgment, Docket No. 44.

48

Exhibit 8, Complaint, attached to Notice of Removal, Docket No. 1.

49

Sales Order at 1, Exhibit 7, Defendant’s Motion for Summary Judgment, Docket

No. 44.
50

Exhibit 8, Defendant’s Motion for Summary Judgment, Docket No. 44.

51

Id. at 2.
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by all insurance plans. Please communicate any coding concerns to Diopsys.”52 In the
document, defendant recommended “test[ing] all children 6 months to 8 years of age.”53
Fulton testified that defendant did not have plaintiff’s “payor mix” prior to plaintiff
leasing the Enfant VEP testing system.54 Fulton advised Fellows that she was not pleased
that the machine had been installed for plaintiff prior to getting this information.55
Plaintiff began performing VEP tests in November 2008. Between November 20,
2008 and August 10, 2010, plaintiff billed AHCCCS for 2,947 VEP tests for which it was
paid $222,323.85.56 Mena testified that someone from defendant physically came to
plaintiff’s office to train the staff on billing for the VEP tests.57
About one year after plaintiff began using the Enfant VEP testing system, Health
Choice, one of the AHCCCS plans, began denying plaintiff’s claims for VEP tests.58 On

52

Id. at 3.

53

Id. at 9.

54

Fulton Deposition at 100:19-101:2, Exhibit 4, Plaintiff’s Separate Statement of Facts
[etc.], Docket No. 50.
55

Id. at 104:7-23.

56

Report of Investigation at 6, Exhibit 10, Defendant’s Motion for Summary
Judgment, Docket No. 44.
57

Mena Deposition at 10:7-11:18, Exhibit 13, Plaintiff’s Separate Statement of Facts
[etc.], Docket No. 50.
58

Mena Deposition at 17:24-18:14, Exhibit 5, Defendant’s Motion for Summary
(continued...)
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February 17, 2010, Health Choice’s compliance officer contacted AHCCCS about the
alleged improper use of the 59530 code for VEP tests done during well-child exams.59 On
March 25, 2010, AHCCCS advised plaintiff that it was investigating its alleged improper
use of the 59530 code.60
AHCCCS completed its investigation on August 10, 2010 and concluded that
plaintiff had improperly billed Code 95930 for VEP testing during well-child
examinations.61 This conclusion was based, in part, on the opinion of Dr. Marc Leib,
AHCCCS’s chief medical officer. Dr. Leib
stated that CPT Code 95930 ... is not a visual exam code.
Nothing about this test provides any information regarding
visual acuity, refractions or the need to refer to an ophthalmologist/optometrist for a refraction.... There is no reason a
general pediatrician should be performing this test as part of
a well-child EPSDT exam.... It also should not be used as a
screening exam to identify kids that may need referrals to a
peds neurologist.[62]

58

(...continued)
Judgment, Docket No. 44.
59

Report of Investigation at 3, Exhibit 10, Defendant’s Motion for Summary
Judgment, Docket No. 44.
60

Case Initiation at 1, Exhibit 12, Defendant’s Motion for Summary Judgment, Docket

No. 44.
61

Report of Investigation at 4, Exhibit 10, Defendant’s Motion for Summary
Judgment, Docket No. 44.
62

Id. at 3.
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At his deposition in this case, Dr. Leib testified that a VEP test is “a test to be used by
specialists who treat multiple sclerosis.”63 He testified that he could not “think of a reason
why a family practice or general pediatrician would purchase a relatively expensive piece
of equipment to do a test that’s only done on a small segment of the population suspected
of having a rare disease.”64
In September 2010, Dr. Leib, on behalf of AHCCCS, issued a statement about VEP
tests and well-child exams. The statement read:
A recent review of claims data revealed that a few physicians
appear to be performing a visual evoked potential exam as part
of nearly every well-child EPSDT exam. Our review of this
relatively recent development suggests that at least one
manufacturer of the equipment used to perform this service
(CPT code 95930 ...) has marketed this equipment to pediatricians and family practice physicians along with the advice that
these services are covered and should be claimed using this
CPT code.
VEPs are not routine screening exams for all infants and
children. Where there is a clinical indication that this type of
exam may be necessary to determine whether a specific
ophthalmologic or neurologic abnormality exists, a VEP exam
may be one of the indicated testing procedures. Ordinarily
these tests would be performed by an ophthalmologist,
neurologist, pediatric ophthalmologist, pediatric neurologist or
an optometrist trained to provide these testing procedures.

63

Deposition of Marc Leib at 88:5-7, Exhibit 3, Plaintiff’s Separate Statement of Facts
[etc.], Docket No. 50.
64

Id. at 88:13-17.
-14-

These tests are not appropriate for routine visual acuity
screening, such as the use of a Snellen chart.
In addition, age-appropriate routine screening exams are
included in the EPSDT exams. Therefore, if VEPs were
considered appropriate routine screening for visual acuity or
other visual problems, no separate payment would be made
for those exams. That is not the intent for AHCCCS. When
performed for appropriate, medically necessary indications,
physicians may be paid for performing VEP exams. However,
the routine use of this test as a screening exam is not medically
necessary.[65]
Dr. Leib testified that it would be contrary to AHCCCS’s overall policies to pay for
a VEP test as a part of a well-child exam and that he did not know on what basis anyone
at AHCCCS would have told someone differently.66
On November 23, 2010, Dr. Balderrama entered into a settlement with AHCCCS.
Dr. Balderrama agreed to pay $100,000 for the overpayments and $2,000 for investigative
costs.67
On August 9, 2012, plaintiff commenced this action. In its complaint, plaintiff asserts
fraud in the inducement and negligent misrepresentation claims.
Defendant now moves for summary judgment on plaintiff’s claims.

65

Exhibit 16, Plaintiff’s Separate Statement of Facts [etc.], Docket No. 50.

66

Leib Deposition at 94:5-11, Exhibit 2, Plaintiff’s Separate Statement of Facts [etc.],
Docket No. 50.
67

Settlement Agreement at 1, Exhibit 13, Defendant’s Motion for Summary
Judgment, Docket No. 44.
-15-

Discussion
Summary judgment is appropriate when there are no genuine issues of material fact
and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). The
initial burden is on the moving party to show that there is an absence of genuine issues of
material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). If the moving party meets
its initial burden, then the non-moving party must set forth specific facts showing that there
is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). In
deciding a motion for summary judgment, the court views the evidence of the non-movant
in the light most favorable to that party, and all justifiable inferences are also to be drawn
in its favor. Id. at 255. “[T]he court’s ultimate inquiry is to determine whether the specific
facts set forth by the nonmoving party, coupled with undisputed background or contextual
facts, are such that a rational or reasonable jury might return a verdict in its favor based on
that evidence.” T.W. Elec. Service, Inc. v. Pacific Elec. Contractors Ass’n, 809 F.2d 626, 631
(9th Cir. 1987).
Defendant argues that it is entitled to summary judgment on plaintiff’s fraud in the
inducement68 and negligent misrepresentation claims because there is no evidence that it

68

At times, the parties refer to this claim as a fraudulent misrepresentation claim and
cite authority that pertains to fraudulent misrepresentation claims. A fraudulent
misrepresentation claim requires proof of the same nine elements as a fraud in the
inducement claim. See Dillon v. Zeneca Corp., 42 P.3d 598, 603 (Ariz. Ct. App. 2002)
(listing elements of a fraudulent misrepresentation claim).
-16-

knowingly made a false representation. Under Arizona law, a claim for fraudulent
inducement requires proof of
“(1) a representation; (2) its falsity; (3) its materiality; (4) the
speaker’s knowledge of its falsity or ignorance of its truth; (5)
the speaker’s intent that it be acted upon by the recipient in the
manner reasonably contemplated; (6) the hearer's ignorance of
its falsity; (7) the listener’s reliance on its truth; (8) the right to
rely on it; and (9) his consequent and proximate injury.”
Meritage Homes Corp. v. Hancock, 522 F. Supp. 2d 1203, 1218 (D. Ariz. 2007) (quoting
Wells Fargo Credit Corp. v. Smith, 803 P.2d 900, 905 (Ariz. 1990)).
The elements of negligent misrepresentation in Arizona are: (1)
one who in the course of his business, profession or employment or in any other transaction in which it has a financial
interest, (2) supplies false information, (3) for the guidance of
others in their business transactions, which, (4) causes pecuniary damage (5) based on the other party’s justifiable reliance on
the information and (6) fails to exercise reasonable care or
competence in communicating the information.
Salgado v. America’s Servicing Co., Case No. CV–10–1909–PHX–GMS, 2011 WL 3903072,
at *4 (D. Ariz. Sept. 6, 2011) (citing McAlister v. Citibank, 829 P.2d 1253, 1261 (Ariz. Ct.
App. 1992)).
There is no evidence that any of defendant’s statements in the brochures that
plaintiff received were false and plaintiff does not seriously contend otherwise. Rather,
plaintiff focuses on its contention that defendant represented that it had contacted

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AHCCCS prior to plaintiff leasing the Enfant VEP testing system to confirm that the testing
would be covered.
There may be questions of fact as to whether defendant contacted the AHCCCS
plans prior to plaintiff leasing the Enfant VEP testing system. Sukung testified that she
thought Fulton told her that defendant had contacted the AHCCCS plans,69 and Dr.
Balderrama avers that he was told that defendant had confirmed with AHCCCS that VEP
testing would be covered.70 It is possible to infer that this information was given to Sukung
and Dr. Balderrama prior to plaintiff leasing the Enfant VEP testing system. Fulton,
however, testified that she did not have her assistant contact the AHCCCS plans until
November 17, 2008, 71 which was after plaintiff had signed the lease agreement. But, there
is no issue of fact as to what defendant was told when it did contact the AHCCCS plans.
Sukung testified that Fulton told her that the code was billable through AHCCCS, “that it
is covered service through AHCCCS and we should not have any problems billing for this

69

Sukung Deposition at 28:7-21, Exhibit 7, Plaintiff’s Separate Statement of Facts
[etc.], Docket No. 50.
70

Dr. Balderrama Declaration at ¶ 15, Exhibit 18, Plaintiff’s Separate Statement of
Facts [etc.], Docket No. 50.
71

Fulton Deposition at 123:3-16, Exhibit 9, Defendant’s Motion for Summary
Judgment, Docket No. 44.
-18-

code,”72 and Fulton testified that most of the plans confirmed that they would pay for the
service.73 This is the exact same information that plaintiff’s staff had been told by the
AHCCCS plans. Thus, any factual dispute as to when defendant contacted the AHCCCS
is not material because defendant would have been given the same information, regardless
of when it contacted the AHCCCS plans, namely that the AHCCCS plans, or at least most
of them, would cover VEP testing. Any representation by defendant that AHCCCS or the
AHCCCS plans had said that VEP testing would be covered was not false at the time it was
made. Defendant had every reason to believe that the AHCCCS plans would pay for VEP
testing. Whether or not AHCCCS at some point changed its policy as to VEP testing, the
fact of the matter is that in 2008 the AHCCCS plans told both defendant and plaintiff that
VEP testing during well-child exams would be covered. Moreover, the AHCCCS plans
paid plaintiff for VEP testing for almost two years. Viewing the evidence in the light most
favorable to plaintiff, no reasonable jury could find defendant liable for fraudulent
inducement or negligent misrepresentation based on the fact that defendant may not have

72

Sukung Deposition at 28:7-21, Exhibit 7, Plaintiff’s Separate Statement of Facts
[etc.], Docket No. 50.
73

Fulton Deposition at 123:17-23, Exhibit 9, Defendant’s Motion for Summary
Judgment, Docket No. 44. Plaintiff’s contention that Fulton’s assistant did not ask the
correct questions is nothing more than speculation. Fulton testified that she had her
assistant “confirm if the service was payable to the pediatrician, at what amount, and
under what diagnostic codes.” Id. at 123:11-16.
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contacted the AHCCCS plans prior to plaintiff leasing the Enfant VEP testing system to
confirm that VEP testing would be covered.
Plaintiff also argues that defendant’s cash flow analysis for leasing an Enfant VEP
testing system was misleading. The cash flow analysis showed that if a practice did 10 VEP
tests per day, based on 21 working days per month, the practice would earn a 5-year net
profit of $793,852.80.74 Plaintiff argues that this information was misleading because Dr.
Leib testified that it would be unprecedented for any pediatrician to perform this many
VEP tests.75 However, at the time defendant made the representations in the cash flow
analysis it had reason to believe that most insurance plans would pay for VEP testing
during a well-child exam, given that physicians in other states were being reimbursed for
the VEP testing they were doing during well-child exams. No reasonable jury could find
defendant liable for fraudulent inducement or negligent misrepresentation based on the
representations in the cash flow analysis.
In sum, there are no genuine issues of material fact as to whether defendant made
any false representations to plaintiff about AHCCCS coverage for VEP testing.76 Defendant

74

Exhibit 8, Plaintiff’s Separate Statement of Facts [etc.], Docket No. 50.

75

Leib Deposition at 100:13-18, Exhibit 3, Plaintiff’s Separate Statement of Facts [etc.],
Docket No. 50.
76

Because there are no genuine issues of material fact as to whether defendant made
any false representations, the court need not consider defendant’s arguments as to
(continued...)
-20-

is entitled to summary judgment on plaintiff’s fraudulent inducement and negligent
misrepresentation claims.
Conclusion
Defendant’s motion for summary judgment77 is granted. The clerk of court shall
enter judgment dismissing plaintiff’s complaint with prejudice.
DATED at Anchorage, Alaska, this 21st day of February, 2014.
/s/ H. Russel Holland
United States District Judge

76

(...continued)
damages, mitigation of damages, the economic loss rule, and punitive damages.
77

Docket No. 44.
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