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United States v. Berkeley Heartlab, Inc.

United States District Court, D. South Carolina, Charleston Division

June 24, 2017

United States of America, et al., Plaintiffs, ex rel Scarlett Lutz, Plaintiffs-Relators,
Berkeley Heartlab, Inc., Defendants. Nos. 9:ll-cv-1593-RMG, 9:15-cv-2458-RMG


          Richard Mark Gergel United States District Court Judge

         This matter is before the Court on the United States' motion to exclude the opinions in Sections II and VI of Jessica Schmor's expert report proffered by BlueWave Healthcare Consultants, Inc., Floyd Calhoun Dent, III, and Robert Bradford Johnson (collectively, "the BlueWave Defendants"). (Dkt. Nos. 441, 441-1.) For the reasons set forth below, the motion to exclude is granted.

         I. Background

         The Government has filed a complaint in intervention against the BlueWave Defendants and Latonya Mallory alleging violations of the Anti-Kickback Statute ("AKS"), 42 U.S.C. § 1320a-7b(b), and the False Claims Act ("FCA"), 42 U.S.C. § 3729(a). (Dkt. No. 75.) The alleged FCA violations arise from BlueWave's marketing of laboratory tests for two laboratory companies, Health Diagnostic Laboratory, Inc. ("HDL") and Singulex, Inc. ("Singulex"), between 2010 and 2014. The Government has alleged that Defendants violated the FCA when they engaged in multiple kickback schemes to induce physicians to refer blood samples to HDL and Singulex for large panels of blood tests, many of which were medically unnecessary. For example, the Government alleges that Defendants offered and facilitated the payment of processing and handling ("P&H") fees to physicians to induce referrals, in violation of the AKS and FCA.

         II. Legal Standard - Daubert

         Under Rules 104(a) and 702, "the trial judge must ensure that any and all scientific testimony or evidence admitted is not only relevant, but reliable." Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 589 (1993). The trial court must ensure that (1) "the testimony is the product of reliable principles and methods, " (2) "the expert has reliably applied the principles and methods to the facts of the case, " and (3) the "testimony is based on sufficient facts or data." Fed.R.Evid. 702(b), (c), (d). "This entails a preliminary assessment of whether the reasoning or methodology underlying the testimony is scientifically valid, " Daubert, 509 U.S. at 592-93, and whether the expert has "faithfully appl[ied] the methodology to facts." Roche v. Lincoln Prop. Co., 175 F.App'x 597, 602 (4th Cir. 2006). To make this determination, Courts consider several factors, including "whether a theory or technique . . . can be (and has been) tested, " "whether the theory or technique has been subjected to peer review and publication, " the "known or potential rate of error, " the "existence and maintenance of standards controlling the technique's operation, " and whether the theory or technique has garnered "general acceptance." Daubert, 509 U.S. at 593-94; accord United States v. Hassan, 742 F.3d 104, 130 (4th Cir. 2014). However, these factors are neither definitive nor exhaustive, United States v. Fultz, 591 F.App'x 226, 227 (4th Cir. 2015), and "merely illustrate[] the types of factors that will bear on the inquiry." Hassan, 742 F.3d at 130.

         Courts have also considered whether the "expert developed his opinions expressly for the purposes of testifying, " Wehling v. Sandoz Pharms. Corp., 162 F.3d 1158 (4th Cir. 1998), or through "research they have conducted independent of the litigation, " Daubert v. Merrell Dow Pharms., Inc., 43 F.3d 1311, 1317 (9th Cir. 1995) (on remand), and whether experts have "failed to meaningfully account for . . . literature at odds with their testimony." McEwen v. Bait. Wash. Med. Ctr. Inc., 404 F.App'x 789, 791 (4th Cir. 2010).

         Rule 702 also requires courts "to verify that expert testimony is 'based on sufficient facts or data."' EEOC v. Freeman, 778 F.3d 463, 472 (4th Cir. 2015) (quoting Fed.R.Evid. 702(b)). Thus, "trial judges may evaluate the data offered to support an expert's bottom-line opinions to determine if that data provides adequate support to mark the expert's testimony as reliable." Id. The court may exclude an opinion if "there is simply too great an analytical gap between the data and the opinion offered." Id. (internal citations and quotations omitted). "The proponent of the [expert] testimony must establish its admissibility by a preponderance of proof." Cooper v. Smith & Nephew, Inc., 259 F.3d 194, 199 (4th Cir. 2001).

         The Court is mindful that the Daubert inquiry involves "two guiding, and sometimes competing, principles." Westberry v. Gislaved Gummi AB, 178 F.3d 257, 261 (4th Cir. 1999). "On the one hand, . . . Rule 702 was intended to liberalize the introduction of relevant expert evidence, " id., and "the trial court's role as a gatekeeper is not intended to serve as a replacement for the adversary system." United States v. Stanley, 533 F.App'x 325, 327 (4th Cir. 2013) cert. denied, 134 S.Ct. 1002 (2014). On the other hand, "[b]ecause expert witnesses have the potential to be both powerful and quite misleading, ' it is crucial that the district court conduct a careful analysis into the reliability of the expert's proposed opinion." United States v. Fultz, 591 F.App'x 226, 227 (4th Cir. 2015).

         III. Discussion

         The United States has disclosed expert reports from Kathy McNamara, opining on the commercial reasonableness of Defendants' offering P&H fees to physicians and the fair market value of P&H fees, and Eric Hines, calculating the damages to the United States resulting from the alleged false claims. The Blue Wave Defendants have proffered Jessica Schmor, a nurse and professional coder, to "examine [Hines's and McNamara's] implicit and explicit coding opinions." (Dkt. No. 473 at 1.) Schmor states that her expert opinion is limited to "coding, billing and reimbursement of the [Current Procedural Terminology] Code 99000 - handling and/or conveyance of specimen for transfer from the office to a laboratory." (Dkt. No. 441 at 3.) Specifically, she intends to testify as to the following four opinions:

(1) The non-payment of Code 99000 is a payment policy, and the costs are not included in the evaluation and management fee setting.
(2) Physicians are ultimately responsible for their claims submitted.
(3) Code 99000 billed by physicians should not have resulted in ...

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