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Deprivation of Rights
Medicare
VERDICT: $12 million.
CASE/NUMBER: Calexico Hospital Management Group,
LLC v. State of California, et al. / L-00074.
COURT/DATE: Imperial Superior/March 20, 2006.
JUDGE: Hon. Christopher W. Yeager.
ATTORNEYS: Plaintiff – Dan Lawton, Joseph C. Kracht
(Lawton Law Firm, San Diego).
Defendant – David Taglienti, Michael P. Cayaban
(State Attorney General, San Diego).
TECHNICAL EXPERTS: Plaintiff – Dana A. Basney,
C.P.A., economics, San Diego; Steve Rousso, R. N., Medicare
certification procedures, Oakland; Becky Carroll, R. N., Medicare
certification procedures, Oakland.
Defendant – Phil Dalton, hospital administration
and management, El Segundo; Perter J. Leeson, D.O., licensing and
certification procedures, Arroyo Grande; John Hagerty, DHS policies and
procedures, Sacramento.
FACTS: In November 1996, plaintiff CHMG,LLC
contracted with the Heffernan Memorial Hospital District to manage
Calexico Hospital. In June 1997, after finding it met all requirements
for state licensure, the State of California Department of Health
Services (DHS) issued Calexico Hospital a license to operate as a
general acute care hospital. In 1997, Medicare certification was
controlled by the federal government through the Health Care Financing
Administration (HCFA), a federal agency.
In August 1997, during a Medicare certification
survey, DHS officials found he facility failed to meet eight Conditions
of Participation under the Code of Federal Regulations and recommended
to HCFA, its principal, that the hospital’s application for Medicare
certification be denied. Without Medicare certification, Calexico
Hospital could not obtain reimbursement for most of the services it was
providing to Medicare and MediCal patients, and lost revenue. By January
1998, seven months after first receiving its license, CHMG and the
hospital had run out of money, and CHMG closed the hospital.
PLAINTIFF’S CONTENTIONS: CHMG alleged that
defendants – current and former DHS officials- violated the federal
civil rights statute (42 U.S.C. Section 1983) by refusing to certify
Calexico Hospital as a Medicare provider after DHS conducted a Medicare
certification survey of the hospital in August 1997, and by failing to
return to Calexico Hospital to perform another certification survey,
even after promising to do so within three-to-four weeks. Plaintiff also
contended that defendants falsified reports, destroyed documents, and
had a hidden agenda to close Calexico Hospital by any means necessary.
DEFENDANTS’ CONTENTIONS: The defendants contended
that Calexico Hospital failed to meet the requirements for participation
in the Medicare program by failing the August 1997 certification survey
with eight Conditions of Participation unmet; the implementation of a
new form implemented by the federal government in the summer of 1997 and
applicable to the requested second survey in the fall of 1997, was not
completed by the provider and approved by the providers’ fiscal
intermediary, Blue Cross. Because the form was not approved pursuant to
HCFA guidelines, a second survey tentatively scheduled by DHS for Dec.
17, 1997 had to be canceled consistent with HCFA directives.
DAMAGES: The plaintiff sought compensation for lost
profits for the term of its management agreement with the hospital
district.
JURY TRIAL: Length, eight weeks; Deliberation,
seven hours.
SETTLEMENT DISCUSSIONS: On the eve of trial, the
Hon. Richard J. Haden (Ret.) presided over a settlement conference. CHMG
demanded $9 million. Defendants offered $25,000. Discussions ended.
RESULT: The jury found in favor of plaintiff and
awarded it $12 million.
OTHER INFORMATION: The plaintiff’s motion for an
award of attorney’s fees and costs (per 42 U.S.C. Section 1988) is
pending.
The defense has filed a motion for Judgment
Notwithstanding the Verdict and a motion for a new trial and, if the
motions are denied, intends to file an appeal.
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