In the likely event that the settlement is finalized, the nonprofit health system plans to back away from its pending petition.
Intermountain Healthcare says it has reached a settlement in principle with the cardiologist who filed a False Claims Act lawsuit seven years ago against the Salt Lake City–based nonprofit health system.
Intermountain had asked the U.S. Supreme Court to review the dispute, seeking relief from the long and costly slog of discovery proceedings at the District Court level. Once the settlement is finalized, however, Intermountain plans to ask the Supreme Court to dismiss its pending petition, thereby dropping its claim that the FCA's qui tam provisions are unconstitutional.
The health system's legal team revealed the plan in a letter late last month to the Supreme Court clerk. Intermountain asked the court to defer its consideration of the case until September to give the parties sufficient time to consummate an agreement.
"At present, Intermountain does not know how long it will take to obtain the government's necessary approval and to finalize and execute the relevant settlement documents," M. Miller Baker of the firm McDermott Will & Emery wrote.
The letter—which has not been published in the online docket but which HealthLeaders obtained from the court—says the possibility that this settlement will fall through is unlikely.
A spokesperson for Intermountain said Friday afternoon that the system is unable to provide additional information at this time. The relator and his attorney did not immediately respond Friday afternoon to a request for comment.
Warnings Ignored 'For The Money'?
The cardiologist who filed the 2012 lawsuit, Gerald Polukoff, MD, alleged that Intermountain Medical Center and St. Mark's Hospital in Salt Lake City, had knowingly participated in a scheme to perform unnecessary heart surgeries and bill government payers for the procedures.
Polukoff said cardiologist Sherman Sorensen, MD, routinely closed a small hole in a patient's heart, even in cases when such procedures are widely viewed as medically unnecessary, and he accused Intermountain of being complicit in the lucrative practice, as Polukoff's legal team explained in a brief filed last month with the Supreme Court.
"Sorensen did not act alone," the brief states. "Indeed, surgeons almost never act alone: they need somebody to provide them with a suitable venue, supplies, and support staff to make the surgeries happen."
Polukoff alleges that Intermountain was reckless since at least 2006, when published industry guidelines made clear that Sorensen's surgeries were unnecessary. Intermountain's administration had furthermore been warned repeatedly about Sorensen's practices, he alleges.
"Intermountain ignored these warnings for the money," the brief states.
Polukoff argues that Intermountain acknowledged the misbehavior when it changed its policies in 2011, audited Sorensen's practice, and revoked his privileges. (Notably, St. Mark's didn't join in Intermountain's request for Supreme Court review.)
How We Got Here
In 2017, Polukoff lost at the District Court level. But the Tenth Circuit reversed on appeal in 2018, directing Intermountain to return to the District Court level for discovery proceedings.
This year, rather than submitting to discovery, Intermountain filed its petition for the Supreme Court to review the matter, arguing that Polukoff's allegations were insufficient in their particularity and that the FCA's qui tam provisions violate the Appointments Clause of Article II of the U.S. Constitution.
Polukoff and the U.S. Department of Justice, which had declined to intervene in the case, initially said they would not file a formal response to Intermountain's petition.
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Rand Nolen, an attorney with Fleming, Nolen & Jez LLP, who is co-counsel with Polukoff's attorney, told HealthLeaders in February that a formal response was not necessary because the team believed the justices would "swiftly" deny the petition.
"After reviewing Intermountain's petition for writ of certiorari, we don't believe that the Supreme Court is likely to grant the petition," Nolen said in an email. "The constitutionality of the False Claims Act is well settled in in the federal circuits and there is no circuit split on the issue."
The court requested that the parties submit formal responses anyway. Polukoff and the DOJ each did so on April 24. Intermountain's letter to the clerk signaling an expected settlement came five days later.
Potentially Costly Implications
The American Hospital Association (AHA) and Federation of American Hospitals (FAH) had urged the Supreme Court to grant Intermountain's petition.
"For healthcare providers, whether settled early or litigated to a conclusion, questionable and meritless FCA cases divert enormous resources away from providers' core responsibility: caring for patients," the hospital groups wrote in an amicus brief that argues most qui tam suits are meritless.
In fiscal year 1988, there were just five new HHS-related qui tam FCA cases filed, according to data released by the U.S. Department of Justice. Thirty years later, in fiscal year 2018, there were 446 such new cases. And that was by no means an outlier.
This proliferation of these lawsuits is especially noteworthy because the DOJ intervenes in only about 20% of these cases.
A spokesperson for AHA declined to comment Friday, and a spokesperson for FAH did not immediately respond.
Steven Porter is an associate content manager and Strategy editor for HealthLeaders, a Simplify Compliance brand.
KEY TAKEAWAYS
The health system asked the Supreme Court to defer its consideration of the case, so the settlement can be consummated.
Hospital groups had urged the justices to take up the case because healthcare organizations are strained by 'questionable and meritless' FCA litigation.