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Olson v. Fairview Health Services

United States District Court, D. Minnesota

March 16, 2015

PAUL ALLEN OLSON, Individually, and as Relator for the United States of America and State of Minnesota, Plaintiff,

Brian E. Wojtalewicz, Wojtalewicz Law Firm, LTD., Counsel for Plaintiff.

Douglas R. Peterson, Andrew W. Davis and Kristin Berger Parker, Stinson Leonard Street LLP, Counsel for Defendant.


MICHAEL J. DAVIS, Chief District Judge.

This matter is before the Court on Defendant's Motion to Dismiss. [Docket No. 27] The Court heard oral argument on October 24, 2014.

A. Factual Background

1. The Parties

Plaintiff Paul Allen Olson ("Olson") is a resident of Ramsey County, Minnesota. ([Docket No. 20] Second Amended Complaint ("SAC") ¶ 2.) Olson worked for the Minnesota Department of Human Services ("DHS") for twenty-nine years. (Id.) Most recently, he was Manager of Payment Policy and Rates Management. (Id.) In this capacity, Olson established payment rates for inpatient hospitals that provide services to Medical Assistance ("MA" or "Medicaid") patients. ( Id., Ex. D-5.)

Defendant Fairview Health Services of Minnesota owns and operates hospitals throughout Minnesota, including Defendant University of Minnesota Medical Center, Fairview ("UMMC"), formerly known as Fairview University Medical Center ("FUMC"). (Id. ¶¶ 3, 4.) The University of Minnesota Children's Hospital is the children's unit at UMMC, formerly known as Amplatz Children's Hospital ("Amplatz"). (Id.)

Non-party DHS is responsible for processing and paying MA billings. (Id. ¶¶ 11, 28.)

2. Medical Assistance

MA is a government program that provides medical care for indigent and disabled individuals. (Id. ¶ 11.) It is funded jointly by state and federal government in approximately equal shares. (Id.) In Minnesota, MA is administered by DHS. (Id.) The procedure for determining MA payment rates to hospitals is described in Minnesota Statute section 256.969. (Id. ¶ 12.)

a) MA Payment Protocol

Hospitals submit MA patient claims to DHS electronically via a "uniform billing claim form." (Id. ¶ 28.) Each claim includes patient data, services provided, and the "sticker price" of medical services rendered. (Id. ¶¶ 28, 35.) The "sticker price" is the top price: what an uninsured or non-MA patient might pay. (Id. ¶ 35.) MA patients pay substantially less because DHS reimburses the patient's hospital at a predetermined rate. (Id.)

To determine the MA reimbursement rate, DHS enters each MA claim into a payment computer system. (Id. ¶ 28.) Next, the claim is "priced." (Id.) Various laws, rules, and DHS price settings trigger adjustments to the total reimbursement that a hospital receives for providing services to an MA patient. (Id.)

b) 2011 Amendment to Minnesota Statutes Section 256.969

In July 2011, Governor Mark Dayton signed into law an amendment to Minnesota Statute section 256.969 ("the 2011 Amendment"). (Id. ¶ 12.) The purpose of the 2011 Amendment was to decrease government expenditures during a time of fiscal austerity by reducing MA reimbursements for hospital inpatient services by ten percent. (Id.) However, the 2011 Amendment excluded some children's hospitals from the reimbursement reduction:

Subd. 3c. Rateable reduction and readmissions reduction.
(a) The total payment for fee for service admissions occurring on or after September 1, 2011, through June 30, 2015, made to hospitals for inpatient services before third-party liability and spend down, is reduced ten percent from the current statutory rates. Facilities defined under subdivision 16, long-term hospitals as determined under the Medicare program, children's hospitals whose inpatients are predominantly under 18 years of age, and payments under managed care are excluded from this paragraph.
(b) Effective for admissions occurring during calendar year 2010 and each year after, the commissioner shall calculate a regional readmission rate for admissions to all hospitals occurring within 30 days of a previous discharge. The commissioner may adjust the readmission rate taking into account factors such as the medical relationship, complicating conditions, and sequencing of treatment between the initial admission and subsequent readmissions.
(c) Effective for payments to all hospitals on or after July 1, 2013, through June 30, 2015, the reduction in paragraph (a) is reduced one percentage point for every percentage point reduction in the overall readmissions rate between the two previous calendar years to a maximum of five percent.

Minn. Stat. § 256.969, subd. 3c. (emphasis added).

3. Olson's Interpretation of the Amendment

In his capacity as Manager of Payment Policy and Rates Management at DHS, Olson claims he drafted the language of the 2011 Amendment. (Id. ¶ 13.) He claims that the 2011 Amendment was designed to exempt the three well-recognized Minnesota children's hospitals from the MA reimbursement reduction, since they were known to rely disproportionately on MA revenue. (Id. ¶¶ 14, 25.) MA admission rates for the three well-known children's hospitals are as follows: Minneapolis Children's Hospital, 65%; St. Paul Children's Hospital, 48%; and Gillette Children's Specialty Healthcare 45%; compared to FUMC, with 27% MA admissions. (Id. ¶ 25.)

4. Statutory Definitions

The precise term "children's hospital" is not defined by any Minnesota statute. Instead, relevant Minnesota state statutes explain that "hospital" is "a facility defined in section 144.696, subdivision 3, and licensed under sections 144.50 to 144.58...." Minn. Stat. § 256.9686, subd. 6 (2011). In turn, section 144.696 defines "hospital" as "any acute care institution licensed pursuant to sections 144.50 to 144.5...." Minn. Stat. § 144.696 (2011). Section 144.50, subd. 2, states:

[h]ospital... shall mean any institution, place, building, or agency, in which any accommodation is maintained, furnished, or offered for five or more persons for: the hospitalization of the sick or injured; the provision of care in a swing bed authorized under section 144.562; elective outpatient surgery for preexamined, prediagnosed low risk patients; emergency medical services offered 24 hours a day, seven days a week, in an ambulatory or outpatient setting in a facility not a part of a licensed hospital; or the institutional care of human beings.


5. The Meaning of "Children's Hospital" in Relation to the Amendment

As author of the 2011 Amendment, Olson claims that he chose the particular "children's hospital" language so as to mirror the federal definition of children's hospital. (SAC ¶ 14.) According to Olson, the federal definition of "children's hospital" is "a hospital with patients that are under 18 years of age." (Id.) Olson states that DHS has not questioned the legal definition of children's hospital, with the age restriction language, since at least 1989. (Id. ¶ 14.) During the 1993 legislative session, Olson employed identical language to provide a nine percent increase in MA funds exclusively to the three well-known children's hospitals. (Id.)

Olson further claims that in order to be considered a children's hospital, a hospital must be separately licensed. (Id. ¶¶ 15, 24.) He explains that Amplatz is a "children's unit" within FUMC, but it is not a separately licensed hospital. (Id. ¶ 15.) Therefore, it is not a "children's hospital" under relevant statutes. (Id. ¶ 24.)

6. FUMC Approaches DHS

In approximately November 2011, FUMC representatives met with DHS to discuss several legislative issues, including the 2011 Amendment. ( Id., Ex. F-6.) During that meeting, then-Assistant DHS Commissioner Scott Leitz and Director of Purchasing & Service Delivery Mark Hudson discussed whether Amplatz could be exempt from the rate reduction. (Id.)

7. Hudson Approaches Olson

Sometime immediately before or after the November 2011 meeting with FUMC, Hudson asked Olson why Amplatz was not exempt from the ten-percent MA rate reduction. (Id. ¶ 17.) Olson recalls explaining to Hudson the relevant law and legislative history. (Id.) He informed Hudson that excluding Amplatz would require new legislation. (Id.)

8. Hudson Inquires a Second and Third Time

Olson alleges that Hudson confronted him about the Amplatz exemption again in January 2012, and once more on August 8, 2012. (Id. ¶¶ 17, 18.) Olson recalls that Hudson stressed that he was making the inquiry on behalf of Leitz and ...

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