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Quoting Proverbs, Judge Edenfield denies Memorial’s motions, and directs attorney to stop wasting the court’s time

By Lou Phelps, Savannah Business Journal

November 7, 2014 – In the United States of America vs. Memorial Hospital, Inc. et al, Judge B. Avant Edenfield of the U.S. District Court Southern District in Savannah, ruled Wednesday to deny various motions filed by Memorial hospital’s new attorneys, Alston & Bird of Atlanta, and instructed the attorneys to stop wasting the court’s time.

The hospital, and a number of boards and executives of the hospital and its subsidiaries, have been charged by the U.S. government with overcharging the federal Medicare and Medicaid systems by overcompensating physicians under contract with the hospital, and other violations of the Stark and Anti-Fraud laws.  

The case potentially impacts every taxpayer in Chatham County because the County owns the land and many of the buildings of the hospital system which secure the hospital’s financial bonds. That borrowing, with a current balance of approximately $163 million, provides the money for the hospital to both operate and invest in capital improvements.  

The hospital potentially faces millions in fines and penalties – cash it does not have. Further, the Justice Dept. has alleged that Memorial is a “repeat offender,” having done the same thing in the past. 

In 2008, Memorial paid $5 million to settle a case involving the same allegations, and signed documents assuring the Federal government they would cease the extraordinarily high rates of annual compensation contracts with many of the hospital’s physicians. The U.S. Justice Dept. alleges that Memorial and its Board of Directors, as well as the board of the Provident system (which legally employees many of the physicians), did not cease the practice from 2008 into 2011.  

Memorial’s CEO at the time of the $ 5 million payment was Bob Colvin, who was fired shortly afterwards, though Memorial did not admit guilt. After a national search, Memorial hired Phillip Schaengold as CEO who quickly determined that the hospital was still violating a number of federal laws, and set out over an extended period to convince Memorial’s board to correct its practices. Instead, the board removed him and other Memorial executives from negotiating with the physicians, and then voted to fire him on Jan. 5, 2011.  

After he filed a wrongful dismissal lawsuit, and sought to receive the money owed him under the terms of his three year contract, the U.S. Justice Dept. took over his case, and brought an additional case, transforming Schaenfold into a whistleblower.  Based on evidence he has provided, according to court documents, he will potentially also receive one third of whatever fines Memorial pays.

This past summer, Memorial secured new outside counsel to handle the current case, Alston & Bird of Atlanta, and ended representation by Atty. Miles Fleming of Hunter McLean in the matter.

Schaengold has alleged that Fleming was in conflict of interest in handling the physicians contract matters because his wife was one of the physicians involved in the compensation contracts under investigation. Schaengold had urged the Memorial board to get outside counsel to review federal compensation rate guidelines, and advise them, which they declined to do.

The Justice Dept filed the new case on August. 8, this past summer, after two years of investigation.  Memorial has been served a number of subpoena's to produce documents. 

Memorial had 60 days to answer the charge brought by the Justice Dept; Alston & Bird filed a motion on Oct. 8, asking the court for a Protective Order regarding what they termed inadvertent disclosure of what they believe was a privileged document between Atty. Fleming and Memorial which Fleming did not mean to provide, and to also eliminate several charges in the case.

They also asked to have portions of the evidence in the case sealed from public view.

Judge Edenfield denied all motions this week, on Wednesday.

The document in question was a draft of a powerpoint presentation that Memorial produced - in response to a government subpoena for the case - provided by “prior counsel” Fleming, according to the judge’s decision.

“Defendents state that their ‘executive officers’  had provided Prior Counsel with a copy of the draft document for the purpose of obtaining Prior Counsel’s legal advice. And on advice of counsel, removed some language from the final powerpoint” used, presumably with the board of directors or a subcommittee of the hospital’s board discussing the hospital’s contracts with physicians.  

Judge Edenfield ruled that there was insufficient evidence to prove that the powerpoint had, in fact, been treated in a confidential manner, among the points outlined in his 11-page decision, and he denied Alston & Bird’s motion to remove portions of the governments charges in the case that use information contained in the powerpoint.

“The Court finds that Defendants have failed to meet their burden of establishing that the material and communications referenced in the Government's and Relator's Complaints (Schaengold) is privileged. Further, even if the Draft Document referenced in the Government's Complaint is privileged, the Court finds that Defendants have failed to meet their burden of establishing that the protections of Federal Rule of Evidence.  Additionally, if the Draft Document is privileged, based on the totality of the circumstances, the Court finds that there is no injustice in finding a waiver of that privilege. Accordingly, the Court concludes that the attorney-client privilege does not protect the materials and communications referenced in the Government's and Relator's Complaints.

Therefore, the Court denies Defendants' Motion to Strike Paragraphs 67,68, and 69 of the Government's Complaintin Intervention, ECF No. 78, andDefendants' Motion to Strike the SecondSentence of Paragraph 93 of Relator's FirstAmended Complaint, ECF No. 82. Further,

absent a showing of privilege, the Court finds that no "good cause" exists for issuance of a protective order, and denies Defendants’ Motion for Protective Order Regarding Inadvertent

Disclosure of Privileged Document,” Judge Edenfield writes.

“What is left is a cautionary tale to guide this litigation going forward. While disfavored, there are circumstances where motions to strike are warranted. However, Defendants' naked, conclusory arguments were nothing but "time wasters." Defendants' dilatory motions diverted the

Court from the merits of this significant litigation. In reaching this conclusion, the Court has thought carefully about whether to invoke its discretion to strike material from the Government's and Relator's Complaints. Going forward, Defendants would do well to do the same before filing such motions, lest they "returneth to [their] folly." Proverbs 25:11,  Judge Edenfield concludes.

© Copyright by 2014, a digital publication of Coastal Empire News, Savannah, GA. All Rights Reserved.

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