TULLIO EMANUELE v. MEDICOR ASSOCIATES, INC. et al
MEMORANDUM OPINION re 298 Second MOTION To Exclude The Report and Testimony of Kathy McNamara filed by THE HAMOT MEDICAL CENTER OF THE CITY OF ERIE PENNSYLVANIA. Signed by Chief Judge Joy Flowers Conti on 3/21/2017. (smc)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
U.S. ex rel. Tullio Emanuele,
Medicor Associates, et al,
C.A. No. 10-245 Erie
Conti, Chief District Judge
The Hamot Medical Center of the City of Erie (“Hamot”) filed a second motion to
exclude the report and testimony of Kathy McNamara (“McNamara”). (ECF No. 298.) In the
underlying matter, plaintiff/relator Tullio Emanuele (“plaintiff”) contends that Hamot and
Medicor Associates, Inc. (“Medicor” and together with Hamot, the “defendants”) entered into a
series of medical directorship arrangements that violated the Stark Act, 42 U.S.C. § 1395nn, and
the Anti-Kickback Act, 42 U.S.C. § 1320a-7b. Both the Stark Act and the Anti-Kickback Act
prohibit a health care entity from submitting claims to Medicare based upon referrals from
physicians who have a “financial relationship” with the health care entity, unless a statutory or
regulatory exception or safe harbor applies. 42 U.S.C. §§ 1395nn(a)(1); 1320a-7b(b). One of
the critical issues to be determined at trial is whether the arrangements fall within the scope of
the fair market value exception, 42 C.F.R. §411.357(l), or the personal service arrangements
exception, 42 C.F.R. § 411.357(d)(1).
The parties conducted extensive discovery concerning the applicability of those statutory
exceptions. In McNamara’s report, she examined the financial relationship between Hamot and
Medicor and concluded that each of the medical directorship arrangements at issue was not
commercially reasonable within the meaning of the fair market value and personal service
arrangements exceptions because: (1) the parties failed to maintain adequate records to insure
that they were receiving fair value for their services; (2) Hamot frequently pre-paid for services
without obtaining adequate recourse protections; and (3) the agreements describing the
arrangements were not in writing or were allowed to expire or lapse. (McNamara Report (ECF
No. 235-1) at 6-7.)
McNamara based her conclusions on her “29 years of experience in
healthcare consulting” and her review of “hundreds of healthcare valuations including those of
physician practices, ambulatory surgery centers, dialysis clinics, medical director arrangements,
professional service agreements, physician employment agreements, on-call agreements,
management service agreements, medical billing services, pharmacy services, mobile radiology
services and medical leasing arrangements.” (Id. at 2-3.)
During McNamara’s deposition, defense counsel attempted to probe her prior consulting
work to determine whether any of those consultations involved medical directorship
arrangements that were similar to those between Hamot and Medicor. (McNamara First Depo.
(ECF No. 235-2) at 43-45.) McNamara refused to disclose any facts about her prior work,
explaining that she had spent the bulk of the past ten years consulting for the Department of
Justice (“DOJ”) and that she was subject to binding confidentiality agreements with the
government that prevented her from revealing the names of any other hospitals that she had
recently examined. (Id. at 44-45.) Nevertheless, she continued to rely on those consultations, as
well as her broad experience in the industry, as the basis for her expert opinion. (Id. at 126, 148.)
Hamot filed a motion to exclude McNamara’s expert report and testimony, arguing that
McNamara’s refusal to answer questions about her prior consultations precluded Hamot from
being able to effectively challenge and explore the foundation of her expert opinion. (ECF No.
234.) Hamot also asserted that McNamara’s report contained impermissible legal opinion and
was not based on a valid and testable methodology. (Id.) Following a Daubert hearing, the court
granted Hamot’s motion in part and denied it in part, as follows:
McNamara will not be permitted to provide factual testimony concerning
factual matters not otherwise entered into the record, corroborate
evidence, or opine as to the credibility or veracity of other witnesses.
McNamara will also not be permitted to offer legal argument, attempt to
explain legal provisions of the Stark Law or Anti-Kickback Statute, or
offer an opinion as to how the law should be interpreted. Finally,
McNamara cannot offer an ultimate opinion as to whether a particular
agreement is commercially reasonable or complies with the Stark Law
and Anti-Kickback Statute.
McNamara may testify about common practices and industry standards
within the health care industry, her own experiences within that industry,
and the steps that hospitals and health care institutions typically take
when entering into similar financial relationships. She may also testify
about what kinds of guidance are available to hospitals seeking
compliance with federal regulations.
(Order (ECF No. 254) at 1-2.) The court ordered the parties to provide supplemental briefing on
McNamara’s failure to answer questions concerning her background and experience. (Id. at 2.)
At a second Daubert hearing held on May 3, 2016, defense counsel explained the type of
information that defendants sought from McNamara:
Now, in her deposition we sought to find out how it is she has experience
in these types of relationships, establishing a cardiac center of
excellence, the number of medical directorship agreements in place, the
kind of medical director agreements, the record keeping requirements for
these kinds of medical director agreements.
We asked her, how is it that you know whether or not this type of an
arrangement is appropriate? What is it in your experience as an
accountant – remember, she didn’t work as an administrator at hospitals
– as an expert accountant, what is it in your experience that lets you
opine about these specific kinds of relationships? And it was on all of
those questions that we were stopped.
So we don’t know, for example, in those consulting cases whether she
looked at cases involving a small hospital in a rural area, a large hospital
in an urban area, a liver center, a cardiac center, a cancer center; whether
those situations involved one medical director agreement or 20. And all
of those things are relevant to knowing whether she knows whether these
particular types of arrangements at a cardiac center of excellence at a
place like Erie are industry standard.
(Daubert Hearing Transcript (ECF No. 270) at 11-12.) The court agreed that McNamara’s
inability to answer these types of questions was problematic:
How do you give an opportunity for fair cross-examination if I can say, I
have done something for ten years and I have a confidentiality agreement
in every case and I can tell you that I have come across similar situations
and based on my exposure to those situations they’re similar and,
therefore, this is my opinion?
So you have to – you can’t just say, trust me on this, and that is the
problem I am having here. She has to actually be able to have sufficient
description about what she did, the kinds of cases that she looked at in
order to be fair to the other side to be able to probe were they similar
I don’t think it is a question of knowing the name of the hospital. It is
knowing the nature of the hospital and the nature of the agreements that
were being looked at. … [T]here has to be something in a balance where
she doesn’t disclose the hospital or the advice that she gave, but can
describe what she looked at, and it is my understanding that you need to
know something about the sizes of the hospital, the nature of the
agreements. So there has to be something more than just, I looked at
agreements. Well, what were the nature of those?
There has to be a way to provide an opportunity for the Defendant to
prove this. Otherwise, she can’t – she just can’t get up there and say,
these are similar circumstances. Well, what were the circumstances?
That’s what she has to answer to.
(Id. at 22-26.) See United States v. Mitchell, 365 F.3d 215, 245 (3d Cir. 2004) (noting that the
ability to test the foundation of an expert’s opinion by way of meaningful cross-examination is a
basic element of the submission of expert evidence). Hamot was given an opportunity to redepose McNamara for the limited purpose of exploring her background and experience with
respect to the consultations she performed on behalf of the DOJ. (Id. at 18, 32-33.)
Defense counsel’s questioning during McNamara’s second deposition focused heavily on
whether any of her prior consultations for the DOJ had involved hospitals that were designated
as “cardiac centers of excellence.” (McNamara Second Depo. (ECF No. 299-3) at 58, 60 64, 67,
70.) McNamara testified that at least four of the hospitals that she had analyzed had been
designated as cardiac centers of excellence, but explained that her opinions were based on
industry-wide standards applicable to all health care institutions, irrespective of whether they
have earned a designation of excellence in a specialty area.
(Id. at 38, 54, 64, 70, 150.)
McNamara answered questions concerning the geographical location of each of the four
identified hospitals, whether they were located in urban or rural areas, whether they were larger
or smaller than Hamot, the kind of medical directorship arrangements that were in place at those
hospitals, the record-keeping requirements in place in those hospitals, and whether she had
ultimately concluded that those arrangements were commercially reasonable. (Id. at 80-122.)
She reiterated that her conclusions were based on her entire body of experience, including
industry periodicals, hours of continuing education, and her review of “1,200-plus medical
directorship agreements.” (Id. at 38, 54.)
Following McNamara’s supplemental deposition, Hamot filed the instant second motion
to exclude her report and testimony. Hamot contends that McNamara’s report lacks foundation
because her deposition testimony “disclaimed all of the very experience that she refused to
discuss at her first deposition, the same experience that underpinned the opinions in her Expert
Report.” (Hamot’s Brief in Support of its Second Motion to Exclude the Report and Testimony
of Kathy McNamara (“Hamot’s Brief in Support”) (ECF No. 299) at 1)) (emphasis in original).
Hamot also revives two arguments that have been previously addressed by the court: that
McNamara’s testimony should be excluded for lack of a testable methodology, and that her
testimony constitutes impermissible legal opinion. (Id.) As discussed below, none of these
arguments warrants granting Hamot’s motion.
II. Hamot’s Arguments
A. Prior Consulting Work
Hamot first contends that McNamara “wholly disavowed her experience as a DOJ
consultant and therefore the methodology disclosed in her Report” when she revealed that her
knowledge of industry standards is partially derived from industry guidelines, industry
periodicals, and attendance at continuing education courses. (Hamot’s Brief in Support (ECF
No. 299) at 4-5.) This contention is inaccurate. McNamara has always maintained that her
expert opinion was based upon her knowledge of industry standards and her application of those
standards to particular health care arrangements. (McNamara Second Depo. (ECF No. 299-3) at
54, 56.) She testified that her understanding of industry standards derives from her extensive
work within the health care industry for the past thirty years, while her application of those
standards is influenced by the facts underlying each particular arrangement that she has
evaluated. (Id.) McNamara explained that she relied on both of these elements in reaching her
And you’re not relying on your experience in consulting with
the DOJ in rendering your opinions in this case. You said that
in response to Ms. Bennett’s questions; correct?
I am relying on some of my experience, not solely on the
experience – my DOJ experience. I’m relying on the
experience of my team. I’m relying on the experience of
industry standards that I have studied for twenty years and
continue to study and changes that are occurring in the
industry. I’m relying on that whole body of knowledge . . . to
form the opinions in my report.
(Id. at 170.)
Rather than disavowing her experience with the DOJ, McNamara supplied much of the
precise information at her second deposition that she did not provide at her first deposition. She
testified that at least four of the hospitals that she analyzed for the DOJ were cardiac centers of
excellence. (Id. at 80-125.)
She indicated whether each was larger or smaller than Hamot,
located in a rural or metropolitan area, the titles of some of the medical directorship agreements
in place, the time frame of her consultation, the competitive market for the hospital’s services,
the typical manner in which payments were submitted and processed, whether the hospitals
required signed agreements, whether they kept contemporaneous time records of services
provided, and whether she had ultimately concluded that the arrangements were commercially
reasonable. (Id.) These answers satisfied the court’s directive to supply “enough specificity to
allow meaningful cross-examination . . . without revealing identifying information concerning
those hospitals that she reviewed subject to a confidentiality agreement with the Department of
Justice.” (Order (ECF No. 267) at 1.) Hamot’s dissatisfaction with the content of McNamara’s
testimony goes to the weight of her expert opinion, rather than its admissibility.
B. Reconsideration of Prior Rulings
Hamot’s remaining arguments are most accurately characterized as a request for
reconsideration. The purpose of a motion for reconsideration is “to correct manifest errors of
law or fact or to present newly discovered evidence.” Max’s Seafood Café v. Quinteros, 176
F.3d 669, 677 (3d Cir. 1999).
A motion for reconsideration under Federal Rule of Civil
Procedure 59(e) must therefore rely on one of three grounds: (1) an intervening change in the
law; (2) the availability of new evidence; or (3) the need to correct clear error of law or prevent
manifest injustice. N. River Ins. Co. v. CIGNA Reinsurance Co., 52 F.3d 1194, 1218 (3d Cir.
1995). A motion for reconsideration is not properly grounded in a request for a district court to
rethink a decision it has already rightly or wrongly made. Williams v. Pittsburgh, 32 F.Supp.2d
236, 238 (W.D. Pa. 1998). Litigants are cautioned to “ʻevaluate whether what may seem to be a
clear error of law is in fact simply a point of disagreement between the Court and the litigant.’”
Waye v. First Citizen’s Nat’l Bank, 846 F.Supp. 310, 314 n. 3 (M.D. Pa. 1994) (quoting Atkins
v. Marathon LeTourneau Co., 130 F.R.D. 625, 626 (S.D. Miss. 1990).
reconsideration should not relitigate issues already resolved by the court and should not be used
to advance additional arguments which could have been made by the movant before judgment.
Reich v. Compton, 834 F.Supp. 753, 755 (E.D. Pa. 1993) aff’d in part, rev’d in part, 57 F.3d 270
(3d Cir. 1995).
The court already determined that none of the parties’ expert witnesses, including
McNamara, may offer legal analysis or conclusions with respect to the ultimate issue of the
commercial reasonableness of the medical directorship arrangements at issue. (Order (ECF No.
254) at 1) (“McNamara will also not be permitted to offer legal argument, attempt to explain
legal provisions of the Stark Law or Anti-Kickback Statute, … offer an opinion as to how the
law should be interpreted … , [or] offer an ultimate opinion as to whether a particular agreement
is commercially reasonable or complies with the Stark Law or Anti-Kickback Statute.”). The
court parsed McNamara’s expert report on a line by line basis and explicitly struck those
portions that ventured into the arena of legal analysis. (Daubert Hearing Transcript (ECF No.
263) at 27-59.) On the other hand, the court held that McNamara could testify about “common
practices and industry standards within the health care industry, her own experiences within that
industry, and the steps that hospitals and health care institutions typically take when entering into
similar financial relationships.” (Order (ECF No. 254) at 1.) Hamot did not offer any basis for
the court to reconsider these conclusions.
Hamot’s argument that McNamara’s expert report does not rely on a testable
methodology was also rejected:
Then there is another objection that she used impermissible methodology
when attempting to validate whether the parties’ obligations under the
medical directorship agreements were fulfilled. She wouldn’t explain
what validation meant in this context.
This is an experiential discussion of standards and practices, and I think
as we go through the opinion we will see what can come in and what is
not permissible and if it’s something she is relying on based on
experience, experiential background, that’s something that might be
appropriate. Even if there is not a particular methodology that one can
identify, if it’s based on experience and there is no other basis being
raised to show that there was an appropriate methodology that could be –
that should have been used, the Court would have to overrule that
[objection] on that type of basis.
ECF No. 263, at 26-27. This ruling was based on well-established precedent indicating that,
with respect to non-scientific expert testimony, the “relevant reliability inquiry concerns may
focus upon personal knowledge or experience,” Kumho Tire Co. v. Carmichael, 526 U.S. 137,
150-52 (1999), rather than “a testable methodology.” Carnegie Mellon Univ. v. Marvell Tech.
Group, Ltd., 286 F.R.D. 266, 272 (W.D. Pa. 2012) (citing Voilas v. General Motors Corp., 73
F.Supp.2d 452, 460 (D.N.J. 1999) (noting that “the Daubert factors do not always fit neatly into
or easily translate in the context of nonscientific testimony.”)). Such is the situation here, where
McNamara’s experienced discussion of standards and practices in the health care industry may
prove helpful to the average juror, “even if doing so does not require employing any particular
methodology but simply a straightforward review” of the pertinent standards. Id. at 271-72
(citing Voilas, 73 F.Supp.2d at 461).
Each of the arguments raised in Hamot’s second motion to exclude McNamara’s
testimony and expert report lack merit and there is no basis to reconsider rulings that were
already made. Hamot’s motion is denied.
By the court:
/s/ Joy Flowers Conti
Joy Flowers Conti
Chief United States District Judge
Dated: March 21, 2017
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