UNITED STATES OF AMERICA ex rel. TRILOCHAN SINGH, Plaintiff, v. PAKSN, INC. et al., Defendants Case No. 2:15-cv-09064-SB-AGR United States District Court, C.D. California Signed December 05, 2022 Counsel Karen Yumi Paik, Kent A. Kawakami, AUSA - Office of U.S. Attorney, Civil Division, Los Angeles, CA, Lindsey A. Roberts, Jessica M. Sarkis, Rohith Vikram Srinivas, Matthew J. Oster, U.S. Department of Justice, Fraud Section - Civil Division, Washington, DC, for Plaintiff United States of America. David Michael Medby, Stephen Michael Garcia, William M. Artigliere, Garcia and Artigliere, Long Beach, CA, Matthew M. Coman, Pro Hac Vice, Garcia and Artigliere, New Orleans, LA, for Plaintiff Trilochan Singh. Benjamin N. Gluck, Alexis A. Wiseley, Ashley D. Bowman, Naomi S. Solomon, Nicole R. Van Dyk, Shoshana E. Bannett, Bird Marella Boxer Wolpert Nessim Drooks Lincenberg Rhow PC, Los Angeles, CA, for Defendants Paksn, Inc., Prema Thekkek, Kayal, Inc., Nadhi, Inc., Oakrheem, Inc., Bayview Care, Inc., Thekkek Health Services, Inc., Aakash, Inc., Nasaky, Inc. Blumenfeld Jr., Stanley, United States District Judge ORDER DENYING MOTION FOR DISTRICT COURT REVIEW OF MAGISTRATE JUDGE'S OCTOBER 18, 2022 MINUTE ORDER [DKT. NO. 295] *1 In this action, the government alleges that Defendants[1] paid physicians to make patient referrals in violation of the Anti-Kickback Statute (AKS), 42 U.S.C. § 1320a-7b(b)(2), and the False Claims Act (FCA), 31 U.S.C. §§ 3729–3733. Dkt. No. 72 ¶ 2. The discovery dispute now before this Court involves the production of patient records that the government contends are relevant to show that Defendants received Medicare payments for medical services provided to patients who were transferred to SNF Defendants in violation of the AKS. Magistrate Judge Alicia Rosenberg ordered that those records be produced, and Defendants now seek review of that order. Dkt. No. 295.[2] The motion is denied. I. The government alleges that Defendants paid money to physicians to induce them to refer patients to the SNF Defendants following hospitalization. Dkt. No. 72 ¶ 2. The SNF Defendants would then provide patients with medical services and seek payment for those services by submitting claims to the Medicare program. Id. In seeking reimbursement, the SNF Defendants certified in their Medicare enrollment forms, claims for services rendered, and annual cost reports that they had complied with the AKS. Id. ¶¶ 141–51. The government alleges that claims for services provided to patients who were referred to the SNF Defendants through the illegal kickback scheme were false under the FCA and “ineligible for payment.” Id. ¶¶ 2, 149. The government has identified approximately 1,300 patients who were referred to SNF Defendants through this alleged scheme and seeks production of physician orders, certifications, and recertifications for those patients. Dkt. No. 291 at 2. Defendants object to production on the grounds that documents about patient care are irrelevant because the government failed to plead “a patient care theory” of referrals in its complaint. Dkt. No. 295 at 12–16. According to Defendants, the government only pleaded a “referral theory” of the case that focused exclusively on paying physicians to refer patients to Defendants' facilities. Dkt. No. 295 at 7. Defendants also argue that producing the disputed records imposes a substantial and unwarranted cost. In ordering the production of the patient records, Judge Rosenberg reasoned that “[t]he requested discovery is directly relevant to show the existence of a referral to a SNF Defendant by a physician who received an offer of remuneration or actual remuneration from a Defendant.” Dkt. No. 291 at 4. In reaching this conclusion, Judge Rosenberg examined a sample patient file that Defendants produced where a referring physician who allegedly received kickbacks ordered medical services. Judge Rosenberg found that the file contained information that “would be directly relevant to determine whether there was a referral” that would violate the AKS. Id. Judge Rosenberg also considered whether ordering production of the documents would be proportional to the needs of the case and whether there were less burdensome alternatives. Dkt. No. 291 at 4-5. She explained: *2 Through oral argument and briefing, the court has thoroughly explored whether there are any practicable alternatives to requiring search of the requested patient medical records and production of the requested documents. There is no indication that sampling is a viable alternative. The parties have not cited, and the court did not locate, any authority that the existence of referrals may be the subject of expert opinion and, even if so, what evidence such an expert would need to review. None of the parties submitted an expert declaration indicating that the existence of referrals could be established by sampling or other expert method. The court also requested that the parties explore whether a stipulation of facts would avoid the need for a search of the individual patient medical records. Counsel reported that they could not reach agreement on such a stipulation of facts. Id. Judge Rosenberg also considered but rejected the defense request that the production set be limited to files where a physician at issue is either the attending or operating physician at the hospital because this limitation would not reveal instances in which a physician, though not the attending or operating physician, persuaded a colleague to make an illicit referral. Id.; Dkt. No. 72 ¶ 97. II. When a party objects to a magistrate judge's order on a discovery motion, the district court “must consider timely objections and modify or set aside any part of the order that is clearly erroneous or is contrary to law.” Fed. R. Civ. P. 72(a). Defendants have not shown that Judge Rosenberg's order should be disturbed under this standard. Defendants contend that the disputed records would only be relevant to a “patient care theory” of liability alleging referrals for medical treatment, and that the government elected instead to plead only a “referral theory.” The flaw in this contention is that it focuses on the allegations of the nature of the referral scheme and ignores the allegations about the illegal consequences of that scheme. Properly understood, the so-called “referral” and “patient care” theories are in fact two parts of the overall scheme. The “referral theory” is little more than a description of the alleged kickback scheme (i.e., paying physicians for transferring patients to SNF Defendants), and the “patient care theory” is little more than a description of the asserted illegality of that scheme (i.e., the submission of false claims that resulted in “ineligible” payment for patient care). In confusing this point, Defendants overlook the numerous allegations about the improper claim submissions for patient care. At the outset of the complaint, the government alleged: Defendants knowingly submitted and caused to be submitted thousands of false claims and statements to the United States, which resulted in millions of dollars of reimbursement to the SNF Defendants by the Medicare program for claims that were ineligible for payments because of Defendants' unlawful conduct. No. 72 ¶ 2. This allegation was repeated throughout the pleading. See, e.g., id. ¶ 46 (alleging that Defendants falsely certified that “the services provided in the cost report were billed in compliance with ... the AKS”); ¶ 148 (alleging that the SNF Defendants submitted “final claims for items and services provided to Medicare beneficiaries” based on false certifications in their annual cost reports); ¶ 149 (alleging that “[t]he SNF Defendants ... submitted ... thousands of Medicare claims for services rendered to specific patients that were false because they resulted from violations of the AKS”). The government also provided “examples of claims for SNF services ... that resulted from [illegal] referrals by physicians,” including information about the patient, the referring physician, the SNF entity, the claim date range, and the amount of Medicare reimbursement. Id. ¶ 151. The first claim for relief in the complaint relies in part on this allegation: *3 The SNF Defendants presented, and defendants Paksn and Thekkek caused to be presented, materially false and fraudulent claims for payment or approval to the United States, including claims to the Medicare program for reimbursement (examples of which are identified supra ¶ 151) of services rendered to patients that resulted from Defendants' knowing and willful violations of the AKS. Id. at ¶ 188. The second claim for relief similarly alleges that Defendants made false certifications “to get false or fraudulent claims paid and approved by the United States ... and that were material to the United States' payment of the false claims at issue in this case.” Id. at ¶ 192. The third claim for payment by mistake alleges that “[t]he United States paid the SNF Defendants for claims for services that resulted from knowing and willful violations of the AKS without knowledge of material facts, and under the mistaken belief that the SNF Defendants were entitled to receive payment for such claims.” Id. at ¶ 199. Against this pleading background, the documents sought by the government are plainly relevant. The government is seeking pertinent information about the patients who received treatment pursuant to the alleged kickback scheme—a scheme that included at its core the submission of Medicare claims for reimbursement for patient care based on false certifications of compliance with the AKS. Defendants have fallen far short of demonstrating that Judge Rosenberg clearly erred in ordering production of the 1,300 patient records. Nor have they shown error in Judge Rosenberg's assessment of the proportional burden of this discovery. As discussed, Judge Rosenberg sought ways to limit the burden of production before ordering turnover of the documents, yet Defendants failed to identify any practicable alternative. Dkt. No. 291 at 5. While the asserted cost of producing the disputed documents (i.e., $559,000) is substantial, it appears justified in a dispute involving more than $80 million. E.g. Clark v. City of L.A., No. CV 20-10768 CAS (PVC), 2021 WL 4731353, at *4 (C.D. Cal. Aug. 23, 2021). Moreover, Judge Rosenberg reasonably reserved judgment on shifting the costs of production to the government, denying Defendants' cost-shifting request without prejudice. Dkt. No. 291 at 6. Accordingly, Defendants' motion for review is DENIED. Footnotes [1] Defendants include several skilled nursing facilities (SNFs): Bay Point Health Care Center, Gateway Care and Rehabilitation Center, Hayward Convalescent Hospital, Hilltop Care and Rehabilitation Center, Martinez Convalescent Hospital, Park Central Care and Rehabilitation Center, and Yuba Skilled Nursing Center (together, SNF Defendants). [2] Defendants do not challenge that portion of Judge Rosenberg's order requiring them to turn over the patients' transfer documents.