[00:00:01] Speaker 01: Good morning and may it please the court, Jonathan Tico, for the appellant. [00:00:04] Speaker 01: I'd like to reserve three minutes. [00:00:08] Speaker 01: This case is about how anesthesiology services are paid for by the government. [00:00:14] Speaker 01: Medicare and the other government health care programs rely on a series of codes and modifiers that are used in claims for payment [00:00:24] Speaker 01: to describe both what services were provided and who provided those services. [00:00:30] Speaker 01: The payors, those are the Medicare administrative contractors, the MACs, they rely on those codes and modifiers to process that claims and to determine how much of the government's money to disperse in response to those claims. [00:00:46] Speaker 01: Those codes and modifiers, which number into the thousands, they cover every possible type of medical procedure available in the healthcare system, those are not statutes or regulations. [00:00:58] Speaker 01: They are simply a shorthand way of conveying factual information about the medical procedures and for which providers the payment is sought. [00:01:12] Speaker 01: The modifiers in particular can be thought of as little functions that go into the longer equations that the MACs use to process the claims and determine how much to pay. [00:01:24] Speaker 01: The defendant's position in this case amounts to the claim that it does not matter how the government or the MACs or the providers themselves interpret those modifiers. [00:01:36] Speaker 01: If a judge in a single litigated case [00:01:39] Speaker 01: and without the benefit of a factual record arrives at a different understanding. [00:01:47] Speaker 03: striking in the guidelines is very careful about distinguishing between medically supervised and medically directed. [00:01:56] Speaker 03: And the QC code modifiers explanation says CRNA anesthesiology or anesthesiologist assistant service without medical direction. [00:02:12] Speaker 03: So how is that an instruction that you can't use QC, QZ if you have a CRNA with medical supervision? [00:02:21] Speaker 03: Because it doesn't meet the text. [00:02:23] Speaker 01: Right. [00:02:23] Speaker 01: Of course, that is the crux of the matter on appeal, Your Honor. [00:02:27] Speaker 01: And I will explain to you why the district court's conclusion about that and why the defendant's position is actually wrong. [00:02:34] Speaker 01: But the broader question here is, should that be an issue that is decided on a motion to dismiss by a judge? [00:02:41] Speaker 01: where the factual allegation is that the actual parties to the contemporaneous transaction, both the providers and the MACs, have a different understanding. [00:02:52] Speaker 01: And I have to admit, right at the beginning, the actual factual understanding of that modifier... But in your position that if there's a regulation that says this is how the billing is to be done, [00:03:03] Speaker 03: But in the real world, everyone treats the regulation as if it has the word not in it and does the opposite, that it's a false claim to follow the rule as written? [00:03:14] Speaker 01: That would be a different situation, Your Honor, because you used the word regulation. [00:03:18] Speaker 01: And that's the word that the district court used over and over again. [00:03:22] Speaker 03: But still, this is a billing guideline. [00:03:23] Speaker 03: It's the only sort of guidance as to what the code means in some sort of [00:03:31] Speaker 01: That's actually, I'm sorry, I didn't mean to interrupt. [00:03:34] Speaker 01: Go ahead. [00:03:34] Speaker 01: When you say it's the only guidance, that is not correct, Your Honor. [00:03:37] Speaker 01: There is lots of other guidance out there. [00:03:40] Speaker 01: And the actual industry understanding of how to bill for medically supervised CRNA-provided anesthesiology, because that's what we're talking about, right? [00:03:52] Speaker 01: We're talking about a situation where the nurse was in the operating room, [00:03:57] Speaker 01: providing the anesthesiology with medical supervision, but not medical direction by an MD, right? [00:04:03] Speaker 01: So that's the factual circumstance we're dealing with here. [00:04:06] Speaker 01: The understanding, and again, we allege this in the second amendment complaint, that this was actually PST's understanding, that the correct way to bill for that is not with QZ. [00:04:19] Speaker 01: All right, the correct way to bill for that is with QX, even though QX talks about medical direction, and, and this is important, and with AD, because the claim has to account for both the nurse and for the MD. [00:04:34] Speaker 03: So if, so you're saying that if they use a CRNA and it's medical supervision but not medical direction, they should submit a bill that says QX, even though QX [00:04:49] Speaker 03: in the written guidance says CRNA service with medical direction and they didn't have, it's not with medical direction. [00:04:56] Speaker 03: So this is my hypothetical where you're basically adding the word not to the written guidance. [00:05:04] Speaker 01: Like I said, I have to concede that your reading of the definition of the modifiers in the manual, because that's where that definition comes from. [00:05:11] Speaker 01: It's not in the regulations, it's not in the statutes, it's in the manual. [00:05:13] Speaker 01: Your reading would be a perfectly fine, plain-meaning reading if we were talking about a statute or a regulation. [00:05:20] Speaker 01: But what matters in this context is not what reading you would give or what reading I would give. [00:05:25] Speaker 01: That's not what matters. [00:05:27] Speaker 01: What matters is what was the understanding of the providers and the MACs, because if they had a different understanding, then the claim was false, factually false, okay? [00:05:37] Speaker 01: And to address what you're saying more directly, that understanding that the correct way to bill for it is using QZ cannot be right. [00:05:46] Speaker 03: And let me demonstrate why that is. [00:05:48] Speaker 03: This isn't like some private party's manner. [00:05:50] Speaker 03: This is CMS's own manual, correct? [00:05:53] Speaker 01: Yes, they are the author of that MAC. [00:05:55] Speaker 03: And it has no authoritative significance at all? [00:05:59] Speaker 01: Well, let me put it this way. [00:06:01] Speaker 01: If PST submitted a claim using QZ for medically supervised CRNA procedure and the MAC denied the claim, they would not be able to go back to the MAC and say, yeah, yeah, yeah, but the modifier says you have to pay it. [00:06:17] Speaker 01: The MAC would say, no, you submitted the claim wrong. [00:06:21] Speaker 01: You don't get paid, and they would have no claim because the manual is not a binding law. [00:06:26] Speaker 01: It's not a rule. [00:06:27] Speaker 01: It's not a regulation. [00:06:28] Speaker 01: It's not something that they can sue on. [00:06:30] Speaker 01: But also, let me get to a deeper point here, Your Honor, which is that their understanding, the defendant's position, their litigated position, not their actual position, by the way, because in the complaint, we allege that PST's actual understanding [00:06:45] Speaker 01: is that they have to bill that service using AD and QX. [00:06:51] Speaker 01: That they have to account for both the doctor and the nurse, and that's the way that they have to bill it. [00:06:55] Speaker 01: That was their understanding. [00:06:57] Speaker 01: That's what the complaint alleges. [00:06:59] Speaker 01: And we're entitled to [00:07:01] Speaker 01: to the truth of that allegation. [00:07:03] Speaker 01: But let me show you why they cannot be right. [00:07:06] Speaker 01: The prime directive for paying anesthesia, this comes out of the regulations, the actual law, 42 CFR 414.46B. [00:07:18] Speaker 01: This is the prime directive from CMS to the max. [00:07:22] Speaker 01: The fee schedule amount [00:07:24] Speaker 01: That's the defined term. [00:07:25] Speaker 01: The fee schedule amount is the maximum amount that the government will ever pay for an anesthesia service. [00:07:32] Speaker 01: What is the fee schedule amount? [00:07:34] Speaker 01: It is determined based on the number of units. [00:07:37] Speaker 01: What are units? [00:07:38] Speaker 01: Each type of anesthesia procedure that has a unique CPT code, that has a certain number of base units. [00:07:45] Speaker 01: And then for every 15 minutes of the procedure, one additional time unit is added. [00:07:50] Speaker 01: Okay, so that, the number, you add up those number of units, that tells you what the maximum amount is that the government will pay. [00:07:58] Speaker 01: And that is law. [00:07:59] Speaker 01: That is law. [00:08:00] Speaker 01: That is CMS's legal direction to the MACs. [00:08:03] Speaker 01: Now, if in this situation, PST is allowed to build supervised anesthesia using QZ, only one of two things can possibly happen. [00:08:13] Speaker 01: Either the MAC doesn't know that a doctor was involved, [00:08:17] Speaker 01: in which case they assume it's CRNA independent practice and they will pay 100% of the units to the CRNA. [00:08:24] Speaker 01: They will pay the maximum. [00:08:27] Speaker 01: Or they find out that there was a doctor involved. [00:08:29] Speaker 01: Now how would they find that out? [00:08:31] Speaker 01: I don't know. [00:08:32] Speaker 01: Somebody would have to tell them. [00:08:34] Speaker 01: But if they found out that the doctor was involved, they would pay less than that under most operating room circumstances. [00:08:40] Speaker 02: Can you explain to me, so what's the, I guess, the false certification, what's the rule, what's the law that you're saying that was violated here? [00:08:51] Speaker 02: What specifically are you saying was violated here? [00:08:54] Speaker 01: That by billing CRNA medically supervised procedure, as if it was CRNA independent, [00:09:04] Speaker 01: They were making a factually false statement to the government payer that resulted in them being paid more money than the government would have paid had the government known what actually occurred in the operating room. [00:09:18] Speaker 02: And their reliance on the manual's literal definition is incorrect? [00:09:25] Speaker 01: It is incorrect. [00:09:27] Speaker 01: And PST, the actual company, knows that, as we allege in the complaint. [00:09:31] Speaker 01: They know that it's incorrect. [00:09:33] Speaker 01: Their position here in the court is that it is correct, applying the sort of plain meaning of the modifier rule. [00:09:40] Speaker 01: But remember what the modifiers actually are. [00:09:42] Speaker 01: This is really crucial. [00:09:44] Speaker 01: The modifiers are just little functions that go into the computer systems that the Macs used to pay. [00:09:50] Speaker 01: What does the QZ modifier mean? [00:09:52] Speaker 01: It means allocate 100% to the CRNA. [00:09:56] Speaker 01: What does QX mean? [00:09:57] Speaker 01: QX means allocate 50% to the CRNA. [00:10:01] Speaker 01: So what is the correct function to use in a situation where you have a medically supervised CRNA? [00:10:09] Speaker 01: The correct function, and we all agree a bit on this. [00:10:11] Speaker 01: I don't think the defendants dispute this. [00:10:13] Speaker 01: The correct function is pay the CRNA 50% and then pay the doctor, the MD, an amount that is subject to the three or four unit cap. [00:10:25] Speaker 01: And again, that three or four unit cap, that comes directly out of the regulations. [00:10:28] Speaker 01: That is law. [00:10:29] Speaker 01: The doctor cannot be paid for more than four units. [00:10:31] Speaker 03: In the medically directed situation, what are the two codes that are used? [00:10:34] Speaker 03: QX for the CRNA, and what code is used for the doctor? [00:10:42] Speaker 01: QK is medical direction by an ND. [00:10:46] Speaker 03: OK, so it would be QX and QK in medically directed, and that would be 50% [00:10:54] Speaker 01: each gets 50% correct right and this isn't this is the other important thing factual thing to remember where you have both a doctor and a nurse involved there has to either be two separate claims or there has to be one claim with two separate lines [00:11:09] Speaker 01: I mean, we talk about claims and lines. [00:11:11] Speaker 01: This is all just done electronically. [00:11:12] Speaker 01: But effectively, what the MAC gets is two different claims, one for the doctor and one for the nurse. [00:11:18] Speaker 01: And they have to submit both. [00:11:20] Speaker 01: I mean, this is the other part of our allegations that the district court just totally ignored. [00:11:25] Speaker 01: The district court focused only on the QZ modifier without recognizing that the other part of our allegation was that they had failed to disclose the involvement of the doctor. [00:11:35] Speaker 01: And the involvement of the doctor is what affects payment. [00:11:38] Speaker 03: So what would happen if they submitted both QZ and AD? [00:11:43] Speaker 01: Well, one of two things could happen in practice, Your Honor. [00:11:46] Speaker 01: And I have to say, I'm going to tell you something that's outside the record, because this is not alleged in the complaint. [00:11:51] Speaker 01: But one of two things would happen. [00:11:53] Speaker 01: Either the MAC would recognize that, and it would be denied for what are called edits, which just means you submitted the codes wrong. [00:11:59] Speaker 01: Try again. [00:12:01] Speaker 01: Or the MAC would not recognize that these were the same procedures, and they would end up paying more than 100%. [00:12:06] Speaker 01: In other words, they would violate the prime directive. [00:12:11] Speaker 01: They would pay more of the government's money than they're supposed to because they were misled about who was involved. [00:12:16] Speaker 03: But in this case, they just submitted nothing for the doctor and just submitted the QZ for the CRNA. [00:12:21] Speaker 01: Oh, yes, absolutely. [00:12:22] Speaker 01: That's the allegation, and I don't think that's disputed even. [00:12:26] Speaker 01: I'd like to reserve the rest of my time, unless you have other questions for me right now. [00:12:30] Speaker 03: All right. [00:12:31] Speaker 03: Thank you, Counselor. [00:12:32] Speaker 03: All right, then we will hear now from Ms. [00:12:35] Speaker 03: Ellsworth. [00:12:43] Speaker 00: Good morning and may it please the Court, Jessica Ellsworth for Appellee PST Services. [00:12:49] Speaker 00: We think this appeal is straightforward to resolve for the reasons outlined in your questions, Judge Collins. [00:12:57] Speaker 00: Ms. [00:12:57] Speaker 00: O'Neill's False Claims Act theory against PST services asserted that it was fraudulent to bill anesthesia care by a CRNA if there was any physician involvement using the CZ modifier and that physician involvement mandated using the QX modifier. [00:13:16] Speaker 03: Well, but if you read these codes literally and as they're reflected in the manual, [00:13:23] Speaker 03: and you're not an expert in this field, you would think that the right thing to do is to submit both the QZ and the AD. [00:13:32] Speaker 03: And the manual doesn't say what happens in that situation. [00:13:36] Speaker 03: It does say what happens if you do the QX and the QK together, but it doesn't say what would happen if you did QZ and AD together. [00:13:47] Speaker 03: What would happen? [00:13:48] Speaker 00: So I agree that that is not in the record, and I think that does happen because as we point out in our brief. [00:13:55] Speaker 03: But here's the part of your position that just doesn't make any sense, which is that if you have a doctor who is personally participating in the anesthesia procedure, so it's medically directed, and is assisting in that intensive way, the CRNA, [00:14:16] Speaker 03: You submit both, they only get 50%. [00:14:20] Speaker 03: But if the medical doctor, rather than being intensively involved in that, is loosely supervising four or more, then you would submit the CRNA and you get 100% and in theory you'd submit both and you'd get more. [00:14:38] Speaker 03: How can it be that providing less service gets more reimbursement? [00:14:44] Speaker 03: It makes no sense. [00:14:46] Speaker 00: Well, Your Honor, I don't think that there is a world in which anyone is getting more than 100 percent, so I just want to... Well, because you don't put down the A.D. [00:14:54] Speaker 03: code. [00:14:55] Speaker 03: You just... [00:14:56] Speaker 00: I think if there is an AD code, so if we have, for example, a CRNA who is employed by the hospital and an anesthesiologist who's employed by a separate practice, and so two claims go in, they're not always going to be on the same claim. [00:15:10] Speaker 00: And the appellants agree with this. [00:15:12] Speaker 00: The reason to have the AD code available is because sometimes the CRNA or the assistant will not be submitting through the same employer. [00:15:22] Speaker 00: They'll have different employers. [00:15:23] Speaker 03: So they both need to get paid. [00:15:26] Speaker 03: If they are through different, so okay, now let me understand now. [00:15:31] Speaker 03: Suppose they're from different employers, but it's medically directed. [00:15:37] Speaker 03: Do they still get hair cut at 50% each? [00:15:40] Speaker 00: They would each get the 50% because the physician would use the medically directed code for physicians, the CRNA would use the medically directed code for CRNAs, and they would each get paid 50%. [00:15:52] Speaker 03: Okay, but if the outside doctor, who's with a different practice and is submitting a different bill, is loosely supervising four or more, so it's medically supervised rather than medically directed, [00:16:06] Speaker 03: They will in fact get more payment because they're not going to get haircut it down to 50%. [00:16:10] Speaker 03: You're going to get 100% on the CNN, see NRA and 100% on that. [00:16:16] Speaker 03: That makes no sense. [00:16:17] Speaker 00: Well, your honor, I don't think there's any allegation that that is what would happen. [00:16:21] Speaker 00: Of course, here they were not coming from different employers. [00:16:24] Speaker 03: So that's I understand that. [00:16:26] Speaker 03: We have to realize what are the implications of what we're buying and reading this manual. [00:16:32] Speaker 03: And that seems to follow from your position, that if you provide less service in the two-biller scenario, you provide less medical service, you get more money. [00:16:44] Speaker 00: So, Your Honor, I think the max would have to have a way to resolve that scenario because there is a requirement. [00:16:51] Speaker 03: Well, that suggests maybe you should have submitted both codes and found out what they would do with that. [00:16:56] Speaker 03: Instead, you withhold the second code and submit to get the full reimbursement, avoid the haircut. [00:17:02] Speaker 00: So your honor, I think if I could direct the court to look at paragraph 36 of the plaintiff's complaint, because it is a different argument than what your honor's premise, the premise of your question is here today. [00:17:15] Speaker 00: The relator's theory was that when you had both individuals involved, you had to combine the AD code, the medical direction, the medical supervision code for the doctor with the QX code, the medical direction for the CRNA, even though there was no medical direction. [00:17:32] Speaker 00: So their theory was not to combine the medical supervision of the doctor with the QZ code. [00:17:41] Speaker 00: That was not their theory, that you should have submitted both. [00:17:44] Speaker 00: It was that QZ could only be used in this circumstance. [00:17:48] Speaker 00: And I heard my friend tell you today that the MAC, we have to listen to what the MAC said on this. [00:17:54] Speaker 00: That is exactly what the district court did. [00:17:56] Speaker 00: If you look at SER114, [00:17:59] Speaker 00: It is a document that the district court took judicial notice of. [00:18:03] Speaker 00: It is from Neridian, the MAC that is in charge of California, and it's a question and answer. [00:18:10] Speaker 00: And the question is, are there instances when a CRNA would not use the QZ modifier? [00:18:18] Speaker 00: And the answer that Neridian provided was that a CRNA would not use the QZ modifier if [00:18:24] Speaker 00: There's medical direction, or there's something called monitored anesthesiology care, which is not at issue in this case. [00:18:30] Speaker 00: So the neridian's direction was the only time you don't use QZ for a CRNA is if you have medical direction. [00:18:39] Speaker 00: That's what the manual says. [00:18:40] Speaker 00: It's also, if we look beyond the manual, there is a regulation, 42 CFR [00:18:46] Speaker 00: It's cited on page six of our brief. [00:18:51] Speaker 00: It's the regulation that authorizes payment to CRNAs. [00:18:55] Speaker 00: And it likewise sets up two buckets, medically directed and not medically directed. [00:19:00] Speaker 00: This is consistent with the manual, with the regulation, with the MAC who is in charge of paying these claims. [00:19:07] Speaker 00: QZ, the line that CMS has chosen to draw for CRNAs is this. [00:19:14] Speaker 00: Is there medical direction? [00:19:15] Speaker 00: If so, we pay at one rate. [00:19:17] Speaker 00: If there's not medical direction for the CRNA, we pay at a different rate. [00:19:20] Speaker 00: For doctors, it's different. [00:19:22] Speaker 00: If a doctor wants to bill, there's more than those two buckets. [00:19:25] Speaker 00: And so a doctor's bill would have to comply with the modifiers that are available for doctors to use. [00:19:31] Speaker 00: based on the doctor's care, but for CRNAs, there are these two buckets, and the line that is drawn is this medical direction line. [00:19:39] Speaker 00: It's not an involvement of a doctor line. [00:19:43] Speaker 00: District court, I think, was exactly right in understanding that there is no legal falsity in using the QZ modifier under the terms that the manual says it can be used. [00:19:56] Speaker 00: And that is what the district court held. [00:19:58] Speaker 00: It was a very straightforward reading of the manual. [00:20:01] Speaker 00: The relator's argument required actually turning both QZ and QX into something other than what they said. [00:20:10] Speaker 00: And so for those reasons, the district court was correct to [00:20:13] Speaker 03: dismiss these claims at the... What's the relationship? [00:20:19] Speaker 03: Does the record or the manual or the materials say anything about the relationship of the rate of reimbursement if the QK medical direction code is used by the physician versus the AD code medical supervision by the physician? [00:20:40] Speaker 00: It has to do with how many units the physician can get paid for. [00:20:45] Speaker 00: So there is a difference. [00:20:47] Speaker 00: And at one point in time, CRNAs and doctors were not paid on the same fee schedule. [00:20:52] Speaker 00: So there was a lot of, I think, calculation of how to [00:20:57] Speaker 00: how to submit these claims and how to calculate what the payment would be because the fee schedules were different. [00:21:04] Speaker 00: The fee schedules have changed over time so that the CRNA fee schedule and the physician fee schedule are now, there's more comparability among the two of them. [00:21:14] Speaker 00: But at the time that these codes were developed and that CRNA payment was put in place, that was not initially the situation. [00:21:22] Speaker 03: So how would the, so if you're the, [00:21:27] Speaker 03: Outside practice, say, that has the physician, if you have medical direction submit a QK versus if you have medical supervision submit an AD, what's the difference in payment? [00:21:43] Speaker 00: I believe one is 50% of the allocable units for that surgery and one is either three or four units, depending on whether the physician actually provides induction for the anesthesia. [00:21:57] Speaker 00: For all of these reasons, we think that the district court was exactly right in its ruling and its denial of reconsideration four years later. [00:22:05] Speaker 00: We would ask that this court affirm. [00:22:08] Speaker 03: All right. [00:22:08] Speaker 03: Thank you, Council. [00:22:09] Speaker 03: All right, we'll hear rebuttal. [00:22:15] Speaker 01: Thank you, just very briefly. [00:22:17] Speaker 01: So the supplemental excerpt of record site that was just discussed, I mean, we cited industry understanding to the contrary. [00:22:29] Speaker 01: If you look at docket 81 at page 23, that was our brief opposing the motion to dismiss. [00:22:35] Speaker 01: We cited a bunch of articles from anesthesiology groups and nursing groups saying that QZ cannot be used in the situation of medical supervision. [00:22:45] Speaker 01: But none of that needs to be resolved now. [00:22:47] Speaker 01: These are just factual disputes about what the understanding was about the code. [00:22:52] Speaker 01: We're just here on a rule 12b6 motion, and we allege that the industry understanding [00:22:57] Speaker 01: was that the correct way to code that was AD for the doctor because you have to account for the doctor and I still haven't heard the other side explain how you do that with a QZ code. [00:23:07] Speaker 01: You have to account for the doctor and you can't use both AD and QZ because that results in either an overpayment or a situation where there's two different prices for exactly the same procedure, neither of which makes any sense. [00:23:20] Speaker 01: CMS has not drawn a line. [00:23:23] Speaker 01: There is no line that CMS has drawn that says the only thing that matters is medical direction. [00:23:31] Speaker 01: The only place that that line emerges from is the definitions of the code, where they use the term medical direction to describe the two codes for nurses. [00:23:40] Speaker 01: Now, maybe what they mean by medical direction there is something different than what they mean by medical direction for the codes for the doctors. [00:23:47] Speaker 01: But again, this is just a factual question, and we allege something different than that. [00:23:52] Speaker 01: And I think all of the confusion that we're going through here, and this is confusing, it's a lot to keep straight, and the answers about how these things are paid do not emerge from the regulations. [00:24:03] Speaker 01: You cannot just read the regulations and know how these claims are paid. [00:24:06] Speaker 01: You can't even, as you point out, Your Honor, read the manual and understand how these codes are paid. [00:24:12] Speaker 01: The idea that the CRNA gets 100% of the units, [00:24:17] Speaker 01: If you submit the QZ code, where does that come from? [00:24:20] Speaker 01: That's not anywhere in the manual. [00:24:23] Speaker 01: It's a factual issue. [00:24:24] Speaker 01: It's a factual allegation of the complaint. [00:24:27] Speaker 01: And all of this just shows why it is dangerous for a judge to try to interpret these modifiers in the way that the district court did at the motion to dismiss stage. [00:24:39] Speaker 01: We could have a completely different discussion about this issue if we were here on summary judgment with a factual record, but we're not. [00:24:45] Speaker 01: And so our basic position is that the court's ruling was premature, that we were entitled to the truth of our allegations at the pleading stage, and that the court should reverse. [00:25:01] Speaker 01: Thank you very much. [00:25:02] Speaker 03: Thank you, counsel. [00:25:02] Speaker 03: The case just argued will be submitted, and we will stand in recess for five minutes.