Case 2:12-md Document 1197 Filed 03/21/14 Page 1 of 8 PageID #: 15863

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1 Case 2:12-md Document 1197 Filed 03/21/14 Page 1 of 8 PageID #: UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA CHARLESTON DIVISION IN RE: AMERICAN MEDICAL SYSTEMS, INC., PELVIC REPAIR SYSTEMS PRODUCTS LIABILITY LITIGATION Civil Action No. 2:12-md MDL No Honorable Joseph R. Goodwin United States District Court Judge THIS DOCUMENT APPLIES TO ALL CASES REPLY IN SUPPORT OF DANIEL J. CHRISTENSEN AND MEDSTAR FUNDING, LC S MOTION TO QUASH OR MODIFY SUBPOENAS ISSUED BY DEFENDANT AMERICAN MEDICAL SYSTEMS, INC. Following the arguments and accusations that American Medical Systems, Inc. ( AMS ), has leveled against Daniel J. Christensen ( Christensen ) and MedStar Funding, LC (collectively with Christensen, MedStar ) takes a nimble mind. This saga began with allegations by AMS s paid consultant, Dr. Andrew Cassidenti ( Cassidenti ), against Otto Fisher ( Fisher ) and Christensen to the effect that Fisher, with some vague involvement by Christensen, tried to recruit Cassidenti to perform unnecessary mesh revision surgeries and to prepare medical records containing false statements dictated by Fisher. 1 Fisher and Christensen but not Cassidenti have been deposed. Between both Christensen and Fisher, the defendants have questioned Fisher and Christensen for almost 20 hours. 2 Additionally, MedStar and Fisher have produced 1 Even Cassidenti s affidavit stated that Mr. Christensen repeatedly denied any such desire to dictate to any doctor what to put in his or her medical records. 2 On February 5, 2014, the defendant manufacturers deposed Fisher for over seven hours. Then, on February 1, 2014, the defendant manufacturers, not including AMS, deposed Christensen for over eight hours. In between these depositions, AMS s counsel in the Texas disqualification proceedings questioned Christensen in Texas state court for over three more hours.

2 Case 2:12-md Document 1197 Filed 03/21/14 Page 2 of 8 PageID #: hundreds of pages of records in their possession relating to this alleged insidious scheme. Yet, no evidence to support AMS s allegations has been uncovered. Now, apparently, the target has moved. AMS s latest charge is thatmedstar is running up the damages claimed by plaintiffs in this MDL by buying the receivables of treating physicians and attempting to collect more for those receivables than it paid for them. This argument is simply illogical. Everyone in this litigation knows if they ask what the plaintiff s doctor charged for medical services and what is being claimed as damages. If the doctor s charges are not consistent with usual and customary charges for the services provided, 3 then surely AMS will produce evidence that the charges are out of line with truly usual and customary amounts charged in the relevant market. Also, if AMS wants to know what the doctor was paid when the receivable was purchased, that information is not found in MedStar s records. MedStar purchased all the receivables at issue from Physicians Surgical Group ( PSG ). PSG, however, had acquired the receivables from One Point, a billing service for doctors, through the efforts of Fisher. In short, MedStar does not pay the doctor at all, and it does not have any information indicating what the doctor or One Point was paid when the receivable was sold to PSG. 4 In sum, MedStar does not seek to protect either piece of information that AMS claims that it needs. Everybody already has the price charged by the doctor and claimed by the patient. The amount of the payment that the doctor received when he sold the receivable to Fisher and One Point is only know by the doctor, Fisher and/or One Point, but it is not known by MedStar. Neither of these numbers is what MedStar seeks to protect. What MedStar does seek to protect with this motion is only this: (a) the price it pays PSG for the receivable and (b) any indication 3 As explained below, MedStar s contract to purchase a receivable requires that the amount charged be the usual and customary charge and provides remedies to MedStar if a receivable is not consistent with the usual and customary charges. 4 Moreover, it appears that AMS already has this information. On page 2 of its response, it details two bills by where it has (a) the face amount charged by the doctor and (b) the amount paid to the doctor by Fisher or One Point. 2

3 Case 2:12-md Document 1197 Filed 03/21/14 Page 3 of 8 PageID #: of the price MedStar may receive (including percentage of the face amount). AMS is correct insofar as it argues that the scope of the motion is overbroad by including entities other than PSG. 5 As to PSG, however, this information comprises MedStar s critically sensitive commercial trade secrets and is utterly irrelevant to this litigation. ARGUMENT AMS s first argument against MedStar s Motion is that there is a wide disparity in the amount billed versus the amount that was actually paid for a mesh revision surgery, and the corresponding difference in any potential damages claim renders MedStar s proprietary information relevant and discoverable, despite its importance as the basis for MedStar s profitability as a business. Response, p. 2. As just noted in the introduction, the protected information does not include either item identified by this argument: the amount billed and the amount actually paid for a mesh revision surgery. It is limited to the amount paid by MedStar to PSG for the receivable and the amount MedStar is contractually allowed to receive for the receivable. Thus, AMS s arguments are logically flawed. MedStar s purchase of the receivable cannot drive up the price that has already been fixed. Nor can its purchase affect the price already paid to the surgeon. 5 MedStar s motion included other subpoenas issued to doctors and surgical centers because those subpoenas clearly sought the protected information. MedStar, however, has satisfied itself that these other subpoena recipients do not have the protected information in their possession. It therefore withdraws the motion as it relates to any entity other than PSG. This obviates the need to address AMS s arguments regarding waiver of confidentiality. As noted in the motion, however, PSG is contractually obligated to protect the confidentiality of this information, and this motion represents the third time MedStar has raised the issue of protecting this information before this Court. By casting a wide net in the motion, MedStar sought only to insure that the toothpaste did not leave the tube through an unknown leak. Likewise, this eliminates the need to address AMS s argument that MedStar disclosed its trade secrets to third parties. Regardless, AMS s argument is that MedStar disclosed such information through the Notice of Sale and Assignment attached to AMS s Response as Exhibit A. Id. at p. 5. This is flatly incorrect the Notice of Sale and Assignment states the full amount of the receivable, not the amount MedStar paid therefor. See Notice of Sale and Assignment, Doc. No

4 Case 2:12-md Document 1197 Filed 03/21/14 Page 4 of 8 PageID #: Moreover, the fact that a wide disparity exists between the face amount of a debt and the amount the creditor is willing to sell the right to collect that debt is not relevant at all to this litigation. The doctor or practice rendering treatment is under no compulsion to sell anything. If they wish to collect the debt, they may do so and keep every penny of it. The decision to sell a debt is based on the creditor s cash flow needs and assessment of the likelihood of collection within an acceptable period of time. The fact that MedStar purchased the right to collect the debt at a discount does not mean the face amount of the bill is not the usual and customary charge. 6 If AMS thinks a medical bill does not reflect the usual and customary charge for a service, it must base that belief on the face amount of the debt regardless of the number of times collection rights are bought and sold. 7 And, it can challenge the face amount of the debt based on readily 6 "Factoring" is the business of "buying of accounts receivable at a discount. The price is discounted because the factor (who buys them) assumes the risk of delay in collection and loss on the accounts receivable." BLACK'S LAW DICTIONARY 630 (8th ed. 2004). Factoring is a financing tool that reduces the amount of working capital a business needs by reducing the delay between the time of sale and the receipt of payment. Houston Lighting & Power Co. v. City of Wharton, 101 S.W.3d 633 (Tex. App. Houston [1st Dist.] 2003). Factoring has essentially been in existence since the beginning of trade and commerce. It can be traced back to the period of a Mesopotamian king Hammurabi. However, the first widespread, documented use of factoring occurred in the American colonies before the American Revolution. During this time raw materials like cotton, furs, tobacco and timber were shipped from the colonies to Europe. Merchant bankers in London and other parts of Europe advanced funds to the colonists for these raw materials, before they reached the European Continent. This enabled the colonists to continue to harvest their new land, free from the burden of waiting to be paid by their European customers. The practice was very beneficial to the colonists, as they didn t have to wait for the money to begin their harvesting again. See, 7 The amount for which a hospital is willing to sell and a third party is willing to buy an account receivable appears to be a function of the seller s need or desire for immediate payment, both buyer s and seller s evaluation of the likelihood of payment either out of the plaintiff s recovery or directly from plaintiff in the event the litigation is unsuccessful, and the buyer s and seller s willingness to assume the risk of nonpayment. The amount paid in such a transaction would have little, if any, bearing on the value of the services rendered to the patient. Rojas v. Romero, 2009 WL (5 th App. Dist. CA 2009) The fact that Valley Hospital was willing to take such a substantial discount or that, conversely, the medical finance companies were only willing to invest a fraction of the value of the total bills, may speak to their overall assessment of risk in collecting the full amount of damages, but it does not change the underlying value of the medical procedures received by the Millers. Miller v. J-M Manufacturing Co., Inc., 2008 U.S. Dist. LEXIS 9392 (D. Or. 2008). The fact that a hospital or doctor, for administrative or economic convenience, decides to sell a debt to a third party at a discount does not reduce the value of the services provided in the first place. Moreover, the bills are not inflated due to MedFin s involvement. MedFin has no control over what the providers charge 4

5 Case 2:12-md Document 1197 Filed 03/21/14 Page 5 of 8 PageID #: available information without consideration of the amount for which the debt holder is willing to sell the right to collect it. 8 However, any challenge to the face amount of the charges for medical services should only be undertaken in the individual cases with notice to those people most affected: the individual plaintiffs, who rely on such bills for proof of their special damages. AMS also misses the mark when it asserts that these sales are not arm s length sales because the commitment to buy the receivable is made before it is incurred. This concept really is not explained by AMS, but the error in it is clear. Nothing stops arm s length negotiations from occurring before the debt is incurred. The medical provider is under no compulsion to offer the receivable, when incurred. It may, at its election, keep the receivable and collect the full amount owed. And, while MedStar may perform its due diligence before the treatment, MedStar is under no compulsion to buy the bill for that treatment. Furthermore, MedStar takes steps to insure that the resulting purchase is not subject to the abuses that AMS alleges, such as erroneous, fraudulent or excessive billing practices. For example, the Healthcare Accounts Receivable Purchase Agreement between MedStar and PSG lists 18 criteria that render a receivable unacceptable for purchase by MedStar. These include: (1) Fraud; (2) Charges that are excessive or unreasonable pursuant to the applicable fee schedules, customs, or guidelines; (3) Charges for unnecessary medical care; and, (4) Charges that exceed 120% of the cost estimate supplied by [PSG] in advance of the procedure. for their services, which are billed out at the usual and customary rates. Katiuzhinsky v. Perry. 152 Cal. App. 4 th 1288, 1298 (3 rd App. Dist. 2007). 8 Generally, the amount of a debt is based on the Usual, Customary and Reasonable ( UCR ) rates for the services provided, which are generally based on geographic region, the specific service provided, whether the physician is in network or out of network on one s insurance, and possibly the Medicare UCR rates which Medicare publishes. See, e.g., Donna Sternberg, Understanding your Insurance Plan: Usual, Customary and Reasonable Charges, CancerConnect.com, available at (accessed March 18, 2014). All of the bills purchased from PSG fall into the very desirable category of % of the 90 th percentile of charges for such services in the State of Florida, as reported by Optum Coding (formerly Ingenix), the industry leader in analyzing and reporting on medical service charges by CPT codes. 5

6 Case 2:12-md Document 1197 Filed 03/21/14 Page 6 of 8 PageID #: Healthcare Accounts Receivable Purchase Agreement at 2 (attached as Exhibit A). MedStar s purchase of any medical receivables, whether related to transvaginal mesh cases or not, are subject to these terms and conditions. If MedStar is sold a receivable that meets any of these negative criteria, the contract provides MedStar with several avenues of relief so that it does not have to try to collect it. 9 So rather than inflate the price charged by doctors a price it cannot affect if it wanted to MedStar protects itself from the prospect of attempting to collect a receivable that does not represent a usual and customary charge. In reality, because the amount MedStar pays for receivables is based upon a percentage of full billed charges, MedStar has no incentive to encourage the provider to inflate the billing. The higher the provider s bills, the more it costs MedStar. And, the more MedStar is forced to invest in any one individual case, the more risky the investment. It is much better for MedStar if the bills are smaller and MedStar is able to spread its risk across more, solid cases. Finally, AMS s assertion that factors cause for fat to be put in a bill to allow it to be bought and sold repeatedly is just silly. This is a highly competitive market, and such fat would be quickly eliminated by (a) the seller increasing his price or (b) a competitive buyer lowering his price. It especially makes no sense when the entities investing in these particular receivables are assessing the likelihood that the patient will recover in a contested lawsuit in which she must prove (while the defendant is attempting to disprove) that the amount of the bill is usual and customary. 9 If MedStar determines, in its sole judgment, before purchasing a receivable that the receivable does not meet the above criteria, MedStar may, at its discretion, refuse to purchase the receivable. If MedStar determines, in its sole judgment, after purchasing a receivable that the receivable does not meet the above criteria, it may, at its discretion, require Medical Provider to (1) replace that receivable with another of equal or greater value within five (5) days, or (2) repay MedStar all funds that MedStar paid to Medical Provider and any other person or entity plus any monies that MedStar otherwise expended to purchase that receivable within five (5) days. Id. at 3. 6

7 Case 2:12-md Document 1197 Filed 03/21/14 Page 7 of 8 PageID #: CONCLUSION AMS is engaged in the sideshow to end all sideshows. If it can do either of two things that it must do win its case on the merits or prove that the initial price charged by the doctor is not the usual and customary amount for such services in the relevant market then this entire controversy goes away. Nothing in the factoring process drives up the price charged by the doctor on his initial invoice, which is claimed by the plaintiff. Likewise, nothing after the first purchase changes the price paid to the doctor, and MedStar did not make that payment. As has been explained to the Court on multiple occasions, what MedStar seeks to protect as Highly Confidential under the agreed protective order and what it has redacted from the documents produced to AMS are the price it pays for a receivable and the price it receives for a receivable, either as dollar amount or a percentage of the receivable. Based on the foregoing, MedStar respectfully requests that this Court grant its Motion to Quash or Modify the Subpoenas and order the redaction of any Proprietary Information before documents are produced to AMS. Dated: March 21, 2014 Respectfully Submitted, s/ James S. Crockett, Jr. Alexander Macia (WV State Bar No. 6077) James S. Crockett, Jr. (WV State Bar No. 9229) David A. Bosak (WV State Bar No ) Spilman Thomas & Battle, PLLC 300 Kanawha Boulevard East Charleston, West Virginia Phone: Fax:

8 Case 2:12-md Document 1197 Filed 03/21/14 Page 8 of 8 PageID #: UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA CHARLESTON DIVISION IN RE: AMERICAN MEDICAL SYSTEMS, INC., PELVIC REPAIR SYSTEMS PRODUCTS LIABILITY LITIGATION Civil Action No. 2:12-md MDL No Honorable Joseph R. Goodwin United States District Court Judge THIS DOCUMENT APPLIES TO ALL CASES CERTIFICATE OF SERVICE I, James S. Crockett, Jr., do hereby certify that on March 21st, 2014, I electronically filed the foregoing Reply in Support of Daniel J. Christensen and MedStar Funding, LC s Motion to Quash or Modify Subpoenas Issued by American Medical Systems, Inc. with the Clerk of the Court using the CM/ECF System which will send notification of such filing to the CM/ECF participants registered to receive service in these MDLs. /s/ James S. Crockett, Jr. James S. Crockett, Jr. (WV State Bar No. 9229)