Health Dimensions Rehabilitation, Inc., et al. v. RehabCare Group Inc.

Filing 601

MEMORANDUM AND ORDER Based upon the parties' filings and the arguments made at the final pretrial conference in this case held on the record on September 17 and 18, 2013, and for the reasons stated at the pretrial conference, the Court sets forth the following rulings on the parties' motions in limine: (see order for further details). Signed by District Judge Audrey G. Fleissig on 9/23/13. (KXS)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION

UNITED STATES OF AMERICA ex rel.
HEALTH DIMENSIONS
REHABILITATION, INC.,
Plaintiff,
vs.
REHABCARE GROUP, INC.,
REHAB SYSTEMS OF MISSOURI,
HEALTH SYSTEMS, INC., and
REHABCARE GROUP EAST, INC.,
Defendants.

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Case No. 4:12CV00848 AGF

MEMORANDUM AND ORDER
Based upon the parties’ filings and the arguments made at the final pretrial
conference in this case held on the record on September 17 and 18, 2013, and for the
reasons stated at the pretrial conference, the Court sets forth the following rulings on the
parties’ motions in limine:
A. Motions of RehabCare Group East, Inc. and Rehabcare Group, Inc.
(“RehabCare”)
Doc. No. 462: SEALED MOTION in Limine to Exclude Evidence and Innuendo
of Allegedly Unnecessary Healthcare and Changes in Resource Utilization Group
(“RUG”) Distributions is GRANTED in part and DENIED in part. Based on the
discovery responses, Plaintiffs shall not be permitted to offer evidence or suggest that the
therapy services were medically unnecessary, excessive, or harmful. Plaintiffs shall be
permitted to offer evidence of discussions related to the transaction regarding the potential

of increases in RUG rates, evidence of the increase in such rates, and discussions between
RehabCare and RSM related thereto. In light of Plaintiffs’ discovery responses, Plaintiffs
shall not be permitted to offer testimony from any witnesses that any such increases in
RUG categories were unnecessary or unjustified.
Doc. No. 463:

SEALED MOTION in Limine to Exclude Testimony of Expert

Mark Danielson. RehabCare seeks to prevent Danielson from providing an opinion as to
the profit allegedly realized by Rehab Systems of Missouri on its subcontract with
RehabCare. Counsel have not addressed this motion, and the Court shall reserve ruling
pending brief argument by the parties.
Doc. No. 464: SEALED MOTION in Limine to Exclude Evidence of
RehabCare’s Proposed 2003 Acquisition of RSM is DENIED. For the reasons stated at
the hearing, Defendants have not met their burden to establish that the probative value of
this evidence is outweighed by any prejudicial impact. However, Plaintiffs may not
characterize the 2006 transaction as “the same transaction,” absent obtaining leave of court
to do so.
Doc. No. 465: SEALED MOTION in Limine to Exclude Expert Testimony of
Jeffrey Castle is GRANTED in part and DENIED in part. The Court notes that
Defendants Rehab Systems of Missouri (“RSM”) and Health Systems, Inc. (“HSI”) join in
this motion. As stated at the final pretrial conference and discussed further below,
regarding Doc. No. 479, the Court finds more persuasive the case law upon which the
United States relies for the proposition that in a False Claims Act case based on allegations
of violations of the Anti-Kickback Statute (“AKS”), the Government may recover the full
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amount billed for the therapy services that allegedly violated the Anti-Kickback Statute,
and is neither limited to – nor required to present evidence of – the amount by which the
amount billed exceeded the fair market value of the services provided. See United States
v. Rogan, 517 F.3d 449, 453 (7th Cir. 2008). But this ruling does not extend so far as to
permit damages based on the full amount of the Part A claims, in which the therapy
services were included with other services, where, as here, no effort has been made
reasonably to estimate the amount of such billings attributable to the therapy services.
Plaintiffs argue that it is impossible to break out the therapy services, because they
are included with other services and charged per diem. They further contend that because
Defendants knew that Part A was billed in this fashion, the Defendants – as wrongdoers –
should bear the risk of having the entire claim counted as damages which the Government
sustained. In support of this proposition, Plaintiffs cite Bigelow v. RKO Radio Pictures,
327 U.S. 251, 264-65 (1946), and Story Parchment Co. v. Paterson Parchment Paper Co.,
282 U.S. 555, 565-66 (1931). The Court in Bigelow found that the jury “may make a just
and reasonable estimate of the damage based on relevant data.” Bigelow, 327 U.S. at 264.
And as between the two, “the wrongdoer shall bear the risk of the uncertainty which his
own wrong has created.” Id. at 265. The Court did not, however, suggest that a plaintiff
is somehow relieved of its burden to make a reasonable estimate whenever it claims the
defendant is a wrongdoer.
Nor does the Court accept the assertion of the United States that it is impossible to
estimate the billings attributable to the therapy. To the contrary, there are numerous ways
Plaintiffs could have estimated the parts attributable to the therapy services at issue, for
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example, through application of formulas or by resort to RehabCare’s billings, but
Plaintiffs made no effort, whatsoever, to do so. Their suggestion that Defendants knew
how the services would be billed to Medicare does not relieve them of their obligations as
plaintiffs to provide at least a reasonable estimate of the damages. As such, the expert,
Castle, shall not be permitted to offer the opinion that the full amount of the Part A billings
represent the loss or damages under the FCA.
Doc. No. 466: SEALED MOTION in Limine Regarding Number of Allegedly
False Claims. At the pretrial conference, the parties represented that they would attempt
to reach an agreement on whether the number of claims, or what constitutes a claim, would
be determined by the Court. As such, the Court shall defer ruling until such time as the
parties advise the Court of any such agreement.
Doc. No. 468: MOTION in Limine Regarding Joint Defense Agreements is
GRANTED in part and DENIED in part. For the reason stated in the opposition brief
of the United States, the United States may establish the existence of any such agreement
with parties to the agreement, as evidence of possible bias, but shall not be entitled to
inquire into the terms or details of the agreement.
Doc. No. 469: MOTION in Limine to Exclude Advisory Opinions and Other
Publications issued by the Office of the Inspector General (“OIG”). The Court is unable,
based on the parties’ filings, to make a determination of this issue. Before offering any
such OIG opinions or publications, Plaintiffs shall first advise the Court of what it seeks to
offer, and the purpose for which it is offered.

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Doc. No. 470: MOTION in Limine Regarding the source of funding for Medicare,
the impact of this case on healthcare costs, or any reference to the expense of healthcare in
the U.S. is GRANTED in part and DENIED in part. Plaintiffs may explain how the
Medicare program operates and the purpose of the AKS, but may not make arguments
related to public funding from tax dollars or in any manner appeal to the jurors as
taxpayers.
Doc. No. 471: MOTION in Limine to Exclude Evidence of RehabCare’s Annual
Revenue is GRANTED. Plaintiffs may seek leave of Court should they believe such
evidence becomes relevant.
Doc. No. 473: SEALED MOTION in Limine to Exclude Rebuttal Experts Mark
Essling (CEO of Relator) and Kevin Besikoff (an accountant) from the United States’ case
in chief is GRANTED in part and DENIED in part as moot. The portion of the motion
relating to Besikoff is DENIED as moot in light of the parties’ agreement that Plaintiffs
will not offer Besikoff if Lewis, Defendants’ expert, does not testify. The portion of the
motion related to Essling is GRANTED. If Lewis does not testify, Essling may not offer
opinion testimony or testimony based upon his specialized experience in the industry, as
Essling was specifically designated as a rebuttal expert and Plaintiffs did not make timely
the disclosures under Fed. R. Civ. P. 26(a)(2)(C). Essling may, however, testify as a fact
witness and relate the events and what steps he took in connection with the filing of the
lawsuit.

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B. Motions of the United States and Relator
Doc. No. 409: SEALED MOTION for Order that Exhibit A and Other Documents
Relating to Kelly Phelps-Adam are not Protected by Attorney-Client Privilege is
DENIED, for the reasons stated in this Court’s separate Order (Doc. No. 574).
Doc. No. 477: SEALED MOTION in Limine No. 1 to Exclude Reference to
Communications between RehabCare and its Counsel or in the Alternative, for a Finding
of Waiver of Attorney-Client Privilege, is GRANTED in part. In light of the position
taken by Defendants during discovery, their objection to discovery related to discussions
with counsel, and their statements to the Court that they are not relying on an advice of
counsel defense, Defendants shall not be permitted to offer evidence that they discussed
the 2006 transaction with counsel. Defendants shall be permitted to testify that they did
not intend to violate the relevant federal statutes, but shall not be permitted to testify that
they “believed they were not violating the law” or “believed the transaction was lawful,” as
it would be manifestly unfair to permit Defendants to testify that they believed the
transaction was legal while denying Plaintiffs the ability fairly to cross-examine
Defendants or obtain discovery with respect to the basis of such belief. Consistent with
the proposal discussed by the Court at the pretrial conference, this ruling assumes and is
contingent upon Plaintiffs not presenting evidence of communications between
Defendants and their counsel in connection with the 2003 transaction.
Doc. No. 478: SEALED MOTION in Limine No. 2 to Exclude Reference to
Communications between RSM and HSI and its Counsel, or in the Alternative, for a

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Finding of Waiver of Attorney-Client Privilege, is GRANTED in part, for the same
reasons and to the same extent as the ruling on Doc. No. 477, above.
Doc. No. 479: MOTION in Limine No. 3 Regarding Damages Calculation
requesting that the Court decide as a matter of law that the proper measure of damages is
the full amount of each tainted claim rather than the amount the United States would have
paid had Defendants not engaged in kickbacks, and to prevent Defendants from arguing to
the jury that damages should be reduced by the value of therapy services provided, is
GRANTED in part and DENIED in part.
This Court adopts the reasoning of United States v. Rogan, 517 F.3d 449, 453 (7th
Cir. 2008), and concludes that the proper measure of damages is the full amount of each
tainted claim, rather than the amount the United States would have paid had Defendants not
engaged in kickbacks. As such, Defendants may not argue to the jury that damages
should be reduced by the value of therapy services provided. This ruling shall not
preclude Defendants from eliciting testimony that the services were in fact provided. As
set forth above, with respect to Part A claims, the Court concludes the United States may
only recover the portion of the billing attributable to the allegedly tainted therapy services
or a reasonable approximation of the portion of the billing attributable to the therapy
services provided.
Doc. No. 480: SEALED MOTION in Limine No. 4 to Exclude the Expert
Testimony of Brian Hickman other than Opinion F. Ruling is reserved pending brief
argument by the parties.
Doc. No. 481: MOTION in Limine No. 5 to Exclude References to the Fact that the
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Assistant United States Attorneys Prosecuting this Action are Based in Minnesota is
DENIED as moot based upon the parties agreement to avoid reference to the duty station
of the Assistant United States Attorneys involved in this case.
Doc. No. 482: MOTION in Limine No. 6 to Exclude Argument as to any Burden
of Proof other than a Preponderance of the Evidence is GRANTED, for the reasons stated
in the motion of the United States. When it amended the statute, Congress expressly
provided in 31 U.S.C. § 3731(d) that proof be by a preponderance of the evidence. The
Court follows the rulings of the other trial courts that have applied this burden to FCA
claims based on violations of the AKS. See United States v. Campbell, No. 08-1951, 2011
WL 43013, at *5 (D.N.J. Jan. 4, 2011); United States v. Rogan, 459 F. Supp. 2d 697, 716
n.12 (N.D. Ill. Sept. 29, 2006) (noting “the criminality of predicate offenses in an
underlying statute . . . does not mandate a higher burden of proof in a civil case”). See also
Sidema, S.P.R.L v. Imrex Co., 473 U.S. 479, 491 (1985) (applying preponderance standard
in civil RICO case); Fed. Crop Ins. Corp. v. Hester, 765 F.2d 723, 727-28 (8th Cir. 1980)
(applying preponderance standard prior to the amendment of the AKS to specify such a
burden of proof).
Doc. No. 483: SEALED MOTION in Limine No. 7 to Exclude References to the
similar case Relator filed in May 2006 in the Eastern District of Pennsylvania, including
the decision of the U.S. not to intervene therein is GRANTED in part and DENIED in
part. In the event that Mr. Essling testifies, he may be cross-examined with respect to the
filing of the May 2006 case, the events that prompted the filing, and the amount of time that
transpired between the time that he listened to a financial analyst and filed the May 2006
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case, as these matters may be relevant to Essling’s bias and credibility. Defendants are
precluded, however, from referencing the decision of the United States to decline to
intervene in the May 2006 case, to the length of time the cases were pending, or to any
implication that the case was dismissed and filed again in another district as a result of the
United States’ initial decision not to intervene.
Doc. No. 484: MOTION in Limine No. 8 Regarding Defendants’ Criminal
Non-Prosecution in connection with any of the allegations in this case is DENIED as moot
pursuant to the parties’ agreement that no party will refer to the non-prosecution in the
presence of the jury without first obtaining leave of Court to do so.
Doc. No. 485: MOTION in Limine No. 9 to Exclude any References to the Trebling
of Damages or the Imposition of Civil Penalties is DENIED as moot based upon the
parties’ agreement not to reference trebling of damages or the imposition of civil penalties
in the presence of the jury without first obtaining leave of Court to do so.
Doc. No. 486: SEALED MOTION in Limine No. 10 to Exclude References to
Discovery Sanctions is DENIED as moot based upon the parties’ agreement not to
reference discovery sanctions in the presence of the jury without first obtaining leave of
Court to do so.
Doc. No. 501: SEALED MOTION to Enforce Trial Subpoenas of Mark Bogovich,
Don Adam, and Kelly Phelps is GRANTED, for the reasons stated at the hearing on the
motion to quash the subpoenas.

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C. Motions filed by HSI and RSM
Doc. No. 488: SEALED MOTION in Limine to exclude deposition testimony of
James Lincoln regarding answers provided by Tom Hudspeth is DENIED. Based on the
Court’s review of the filings and the deposition testimony, Defendants have not rebutted
the presumption that Hudspeth is competent to testify. Further, the Court finds that
Defendants agreed to waive any hearsay objections by the United States. The Court will
review with the parties more specific objections to designations and any
counter-designations.
Doc. No. 489: SEALED MOTION in Limine to exclude evidence of settlement
negotiations, including the October 8, 2010 letter by defense counsel to the United States,
as protected by Fed. R. Evid. 408. The Court shall reserve ruling on this motion pending
brief argument by the parties.
Doc. No. 490: MOTION in Limine to exclude prejudicial testimony, namely, use
of the term “whistleblower” and testimony regarding Lincoln’s prior payday loan services
business is DENIED as moot in light of the parties’ agreement to refrain from the use of
either term in the presence of the jury without first obtaining leave of Court to do so.
Doc. No. 491: MOTION in Limine to exclude irrelevant argument and evidence
on damages is GRANTED in part and DENIED in part, as set forth above with respect
to Doc. No. 479. The Court concludes that the proper measure of damages is the full
amount of each tainted claim rather than the amount the United States would have paid had
Defendants not engaged in kickbacks. United States. v. Rogan, 517 F.3d 449, 453 (7th
Cir. 2008). With respect to the Part B component of the alleged loss, Defendants may not
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argue to the jury that damages should be reduced by the value of therapy services provided.
Plaintiffs may not argue to the jury that the Part A per diem is the full measure of its losses
with respect to the Part A component, as Plaintiffs may only recover the portion
attributable to the therapy services, or a reasonable approximation of same.
Doc. No. 493: SEALED MOTION to exclude undisclosed witnesses who are on
the United States’ witness list: Amy Brokaw; Chris Kanagwa; Ellen Jeffery; Barbara Snell;
Colleen Jones; Camille Cohen; an unidentified “Program Witness from Fiscal
Intermediary”; and an unidentified “Program Witness from CMS” is DENIED with
respect to Amy Brokaw pursuant to the parties’ agreement that she be deposed prior to
testifying. The ruling on the remainder of the motion is DEFERRED pending argument
by the parties.
Doc. No. 494: MOTION in Limine to exclude reference to RehabCare’s
contemplated 2003 acquisition of RSM is DENIED as set forth above.

________________________________
AUDREY G. FLEISSIG
UNITED STATES DISTRICT JUDGE
Dated this 23rd day of September, 2013.

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