KELLEY WOODRUFF, M.D.; and HAWAII CHILDREN'S BLOOD AND CANCER GROUP, Plaintiffs-Appellants/Cross-Appellees,
HAWAI'I PACIFIC HEALTH; KAPI'OLANI MEDICAL SPECIALISTS; KAPI'OLANI MEDICAL CENTER FOR WOMEN AND CHILDREN; ROGER DRUE; FRANCES A. HALLONQUIST; NEAL WINN, M.D.; and SHERREL HAMMAR, M.D.; Defendants-Appellees/Cross-Appellants, and DELOITTE & TOUCHE LLP; and DENNIS M. WARREN, ESQ., Defendants-Appellees and JOHN DOES 1-99; JANE DOES 1-99; DOE ENTITIES 1-20; and DOE GOVERNMENTAL UNITS 1-10, Defendants
NOT FOR PUBLICATION IN WEST'S HAWAII REPORTS AND PACIFIC REPORTER
APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT (CIVIL NO. 02-1-0090).
Arleen D. Jouxson Rafael G. Del Castillo (Jouxson-Meyers & Del Castillo, AAL, LLLC) for Plaintiffs-Appellants
Kenneth S. Robbins John-Anderson L. Meyer Sergio Rufo (Robbins & Associates, AAL, ALC) Patrick H. Jones Sarah O. Wang Melanie Mito May (Marr Jones & Wang, ALLLP) Douglas Ross (Davies Wright Tremaine LLP) Charles Robert Ching for Defendants-Appellees Hawai'i Pacific Health, Kapi'olani Medical Specialists, Kapi'olani Medical Center for Women and Children, Roger Drue, Frances A. Hallonquist, Neal Winn, M.D. and Sherrel Hammar, M.D.
Melvyn M. Miyagi Gregg M. Ushiroda Karen Y. Arikawa (Watanabe Ing LLP) for Defendant-Appellee Deloitte & Touche LLP
John S. Nishimoto Michael J. Van Dyke (Ayabe, Chong, Nishimoto, Sia & Nakamura, ALLLP) for Defendant-Appellee Dennis M. Warren, Esq.
Nakamura, Chief Judge, and Fujise and Reifurth, JJ.
This case arises out of events surrounding the termination of Kelley Woodruff, M.D. (Dr. Woodruff) from her employment with Kapi'olani Medical Specialists (KMS) and Kapi'olani Medical Center for Women and Children (KMCWC). Dr. Woodruff is a pediatric hematologist/oncologist.
In 1999, Kapi'olani Health (KH), the parent corporation for KMCWC and KMS, entered into a Corporate Integrity Agreement (Integrity Agreement) with the federal government to ensure KH's compliance with federal health care programs. The Integrity Agreement obligated KH to report any material deficiencies or overpayments it discovered relating to its billing practices. KH retained the accounting firm of Deloitte & Touche LLP (D&T) to investigate certain billing practices, and it hired attorney Dennis Warren (Warren) to assist in the investigation. Based on the investigative findings, KH provided a voluntary disclosure submission to the federal government which reported that Dr. Woodruff had submitted "invalid claims to KH's Central Billing Office for payment by third party payors."
After the voluntary disclosure submission was provided, Dr. Woodruff's employment with KMS and KMCWC was terminated. Dr. Woodruff then joined with Robert W. Wilkinson, M.D. (Dr. Wilkinson) in forming the Hawaii Children's Blood and Cancer Group (HCBCG).
Dr. Woodruff and HCBCG (collectively, "Plaintiffs") sued: (1) KH's successor, Hawai'i Pacific Health (HPH),  KMS, KMCWC, and their employees Roger Drue (Drue), Frances A. Hallonquist (Hallonquist), Neal Winn, M.D. (Dr. Winn), and Sherrel Hammar, M.D. (Dr. Hammar) (collectively, "HPH Defendants"); (2) D&T; and (3) Warren. In their second amended complaint, Plaintiffs asserted fifteen counts, including counts alleging defamation, breach of Dr. Woodruff's employment contract, and anti-competitive and unfair practices.
The HPH Defendants, D&T, and Warren (collectively, "Defendants") filed multiple motions for summary judgment. Through a series of orders, the Circuit Court of the First Circuit (Circuit Court) granted summary judgment in favor of Defendants on all counts raised in Plaintiffs' second amended complaint.
On appeal, Plaintiffs argue that the Circuit Court committed various errors in granting summary judgment in favor of Defendants. As explained below, we are not persuaded by the arguments raised by Plaintiffs on appeal, and we therefore affirm the Circuit Court's grant of summary judgment in favor of Defendants.
The HPH Defendants also filed a notice of appeal from the purported "deemed denial" of their motion for costs, which they assert was caused by the Circuit Court's failure to rule on their motion within ninety days. We hold that Plaintiffs' notice of appeal divested the Circuit Court of jurisdiction to decide the HPH Defendants' motion for costs. Therefore, the motion for costs is still pending before the Circuit Court and there is no ruling on the motion for costs for this court to review.
Dr. Woodruff is board certified in pediatric Hematology and Oncology. In 1993, Dr. Woodruff entered into private practice with Dr. Wilkinson, focusing on pediatric Hematology and Oncology. Drs. Woodruff and Wilkinson utilized KMCWC, where they both held medical staff privileges, in treating their patients.
In 1995, KMCWC hired Dr. Wooodruff as the Medical Director of its Pediatric Ambulatory Unit (PAU). The PAU Medical Director was required to be a member of the faculty at the John A. Burns School of Medicine (Burns Medical School), and Dr. Woodruff also became an assistant professor at the Burns Medical School. After assuming these new positions, Dr. Woodruff continued to maintain her private practice with Dr. Wilkinson.
In August of 1997, KMS hired Dr. Woodruff as a physician in its Hematology/Oncology Division. KMS also hired Dr. Wilkinson as the Medical Director of the Hematology/Oncology Division. Dr. Woodruff treated patients in collaboration with other members of the KMS Hematology/Oncology Division, which included Darryl Glaser, M.D., Wade Kyono, M.D., and Desiree Medeiros, M.D., and an oncology nurse practitioner, Diane Fochtman (Nurse Fochtman), who was assigned to the PAU.
KH was the parent corporation for KMCWC and KMS. On December 20, 2001, KH merged with Straub Clinic & Hospital and the Wilcox Health Systems to form HPH.
In the mid-1990's, KH was the subject of an investigation by the Office of the Inspector General of the United States Department of Health and Human Services (OIG) into violations for false billing claims. In August of 1999, as part of a settlement agreement with the federal government, KH entered into the Integrity Agreement with the OIG. The purpose of the Integrity Agreement was to "ensure compliance by [KH's] subsidiaries . . ., physicians with staff privileges, employees, contractors and third parties . . . with the requirements of Medicare, Medicaid and all other Federal health care programs[.]"
The Integrity Agreement required that KH retain an independent review organization, which has:
expertise in the reimbursement and billing requirements of the Federal health care programs, to review and audit on an annual basis the billing policies, procedures and practices of KH to verify that KH's submissions for reimbursement comply with all applicable [standards] and to identify any and all instances where claims fail to meet these standards.
(Emphasis added.) To comply with this requirement, KH retained the D&T accounting firm.
The Integrity Agreement obligated KH to conduct compliance training and education programs regarding proper billing practices for its employees. KH was required to conduct training that included a discussion of "the submission of accurate bills for services rendered to Medicare and/or Medicaid patients"; polices and procedures applicable to documentation of medical records; the obligation of individuals involved in the billing process to ensure accurate billings; reimbursement rules and statutes; legal sanctions for improper billings; and "examples of proper and improper billing practices."
The Integrity Agreement further obligated KH to self-report any overpayments or material deficiencies it discovered. KH was required to notify the payor of "any billing, coding or other policies and/or practices that resulted in an overpayment" within thirty days of discovering the overpayment and to take remedial measures within sixty days of discovery. KH was also required to notify the OIG within thirty days of discovering a "material deficiency." As part of its obligation to self-report material deficiencies, KH was required to submit a report to the OIG that included: (1) a complete description of the material deficiency including relevant facts, the people involved, and any legal authority on the matter; (2) the actions taken to correct the material deficiency; and (3) any further plans to prevent the reoccurrence of the material deficiency.
The threshold imposed by the Integrity Agreement for KH to self-report a material deficiency was low. KH's self-reporting obligation was triggered if KH "has reason to believe [conduct] may violate criminal, civil, or administrative law related to any Federal health care program!, ]" such as "Federal health care program statutes, regulations, or directives issued by relevant agencies . . . ."
KH was subject to significant penalties if it failed to comply with the Integrity Agreement, including exclusion from participation in Federal health care programs.
In 1998, KH's Central Billing Office (Billing Office) assumed responsibility for billing claims submitted for KMS's physician services. Generally, claims for KMS physician services were submitted using Health Care Financing Administration (HCFA) 1500 forms, which physicians completed and submitted to the Billing Office. According to this form, the signing physician must certify that the services listed were (1) "medically indicated and necessary for the health of the patient, " and (2) "were personally furnished by me or were furnished incident to my professional service by my employee under my immediate personal supervision, except as otherwise permitted by Medicare or CHAMPUS regulations."
In March 1999, the Billing Office instituted a new billing policy to clarify confusion over whether certain procedures could be billed to a third party payor if performed by a nurse practitioner. The new policy covered four invasive procedures being performed in the pediatric Hematology/Oncology Department: (1) "Chemotherapy into CNS [(Central Nervous System)]"; (2) "Bone Marrow Aspiration"; (3) "Bone Marrow Biopsy"; and (4) "Lumbar Puncture, Diagnostic." At that time, a majority of these invasive procedures were being performed by Nurse Fochtman, who was employed by KMCWC, and not by KMS. Questions were raised concerning whether Nurse Fochtman's performance of the invasive procedures could be billed by KMS physicians.
The new billing policy required that "patient charts must contain evidence that a physician, not a [nurse practitioner], personally performed the [invasive] [p]rocedures in question in order for a claim to be submitted to a third party payor." Meetings were held between the Billing Office and PAU physicians, including Dr. Woodruff, where the new policy was discussed. According to the HPH Defendants, these meetings made clear to the physicians that the physicians could not bill third party payors for the four invasive procedures if the procedures were performed by Nurse Fochtman.
Apparently, there was resistence by Drs. Woodruff and Wilkinson to the Billing Office's new policy and disagreement over how it should be applied and interpreted. Both Drs. Woodruff and Wilkinson reported their concerns regarding the new billing policy to KH compliance officials. On February 11, 2001, Dr. Wilkinson called KH's compliance hotline. The compliance hotline report states:
Dr. Wilkinson stated charges for bone marrow and spinal taps have been inconsistent in the Children's Blood and Cancer Center. Dr. Wilkinson stated when a doctor performs these Procedures, the patient is billed, however, when these Procedures are performed by a nurse practitioner, the patient is not billed, which is actually a discount (details withheld). Dr. Wilkinson believes these discounts are amounting to approximately $40, 000 a year, and have been occurring since 1997 (exact date unknown). Dr. Wilkinson stated when he realized what was occurring, he felt it was best to report the issue before the OIG found the department to be inconsistent.
On February 21, 2001, Dr. Woodruff sent an email to KH Compliance Officer Bob Ching. In her email, Dr. Woodruff suggested that KMS hire Nurse Fochtman so that KMS physicians could bill for Nurse Fochtman's performance of invasive procedures. Dr. Woodruff stated, "[t]he problem is, is that when [Nurse Fochtman] does these procedure [sic], the doctors cannot charge for these services. We all understand that the doctors could charge for these services if she were an employee of the doctors (KMS)."
Dr. Woodruff also sent an email to Dr. Winn, KMS's Chief Medical Officer, on April 5, 2001, suggesting that KMS hire Nurse Fochtman in order to address the employment requirement. Dr. Winn, however, determined that KMS's hiring of Nurse Fochtman would not resolve the billing issue. Dr. Winn explained that "[e]ven though the PAU was an outpatient kind of an arrangement, it was still within the hospital confines, and so the feeling of our compliance group and our [Billing Office] was that it wouldn't be a billable service, even if [Nurse Fochtman] work[ed] for [KMS]."
In May 2001, KH requested that D&T conduct an investigation and audit concerning the billing practices of the Hematology/Oncology Department. D&T's investigation focused on the physician billing practices for the four invasive procedures. Warren was also retained by KH to assist in the investigation.
As part of its investigation, D&T examined two separate time periods: (1) February 1997 to September 1999 (the 1997 period); and (2) January 2000 to May 2001 (the 2000-01 period). In its investigation, D&T reviewed patient files and resultant billing claims submitted by KMS physicians; reviewed invasive procedure schedule logs kept by Nurse Fochtman, which logged the procedures she performed in the Hematology/Oncology Department; and interviewed medical staff, including Dr. Woodruff, Dr. Wilkinson, and Nurse Fochtman.
D&T created reports that summarized its findings regarding each time period. The report relating to the 1997 period determined that claims for invasive procedures were billed in error by Hematology/Oncology physicians where they were documented as "[p]erformed by a [nurse practitioner] with either no documented attending physician supervision and/or no physician documentation[.]" This report found that these billings were in error based on Medicare regulations, which the report found did not permit the Hematology/Oncology physicians to bill for invasive procedures performed by a nurse practitioner, whom they did not employ, in the hospital setting of the PAU. The report relating to the 2000-01 period determined that Nurse Fochtman performed 314 invasive procedures from January 2000 through May 2001; Hematology/Oncology physicians submitted claims for 101 of these 314 procedures; of the 101 claims submitted, 85 were submitted by Dr. Woodruff; and that the 85 claims submitted by Dr. Woodruff resulted in approximately $22, 500 in billings.
After reviewing D&T's findings, Warren recommended to KH that a self-disclosure be made to the OIG pursuant to the Integrity Agreement. Warren prepared a Voluntary Disclosure Submission (VDS) on behalf of KH and sent it to the OIG on September 4, 2001. The VDS incorporated and ...