This case began its life in the Western District of Virginia, and was one of several matters transferred to this Court for consolidated and coordinated pretrial proceedings as part of a multi- district litigation. That litigation has seen some 30 lawsuits come through this Court, which have lasted ten years and spawned thousands of court filings. Only two of these cases remain, and this is one. Today the Court resolves all outstanding motions, dismissing some claims and granting summary judgment as to others. As this case is now almost ready for trial, the Court will order the submission of a joint pretrial statement and will schedule a pretrial conference, in an effort to help this case reach the point where it can be returned to the court from whence it came for trial.

Act against Columbia/HCA Healthcare, its former subsidiary, Indian Path Hospital, Summit
Home Health, and Horizon Mental Health Management, for allegedly inflating costs at Indian
Path Hospital and other HCA-affiliated hospitals in order to defraud the federal Medicare
program.

The allegations revolve primarily around the Indian Path Hospital in Kingsport,
Tennessee. Two of the original relators were doctors at Indian Path (\u201cIPH\u201d), while the third,
remaining relator, Chyrissa Staley, was a nurse there. As the year 1996 approached, IPH was

preparing to open a new unit in the hospital dedicated to the treatment of geriatric patients coping
with both mental and physical illness. This geriatric/psychiatric unit, known colloquially as the
\u201cgeropsych\u201d or \u201cGP\u201d unit, was in addition to the Indian Path Pavilion, an HCA-affiliated mental
health treatment facility that stood next to IPH.

IPH was to receive reimbursement from the federal Medicare program for patient-care
expenses at the GP unit under a special program known as \u201cTEFRA,\u201d after the piece of
legislation that spawned it, the Tax Equity and Fiscal Responsibility Act of 1982. The GP unit\u2019s
first year of operation ran from March 1, 1996 until February 28, 1997. For that first year, IPH
was to bill Medicare each time a patient was discharged, by sending a UB-92 form that stated
how many days the patient stayed at the GP unit. Medicare then reimbursed IPH at a per-day,
per-patient rate that the parties had previously negotiated.

achieving this goal was the principal task Horizon was brought in to accomplish. But there are legitimate reasons why IPH\u2019s officers would want to raise the TEFRA rate higher than where it was during the first part of the target period. It is quite possible that IPH was not adequately stocking the GP unit with supplies or making sure that it was incurring the necessary start-up costs or incurring the costs that it should reasonably expect to incur each year. If that state of affairs had been allowed to persist, the TEFRA rate would have failed to reflect the actual,

incurred at the GP unit for the year. Medicare would then reimburse IPH for all costs reflected in
the report that had not yet been captured. Most importantly, the cost report for the first year of
operation would set the \u201ctarget amount,\u201d \u201ctarget rate,\u201d or \u201cbase\u201d rate at which IPH would be
reimbursed, per-day and per-patient, in future years, with periodic upward adjustments. In its
most basic terms, the cost report would report all costs, which would then be divided by the
number of patient days, which would yield the new rate at which Medicare would reimburse IPH,
per-patient and per-day, in future years. The total cost of running the GP unit during the first
year would be treated as the average cost. \u201cUnder this system, hospitals were obligated to absorb
operating costs in excess of their target amounts, but they received bonuses if their operating
costs were less than their targeted amounts.\u201dSacred Heart Medical Center v. Sullivan, 958 F.2d
537, 540 (3d Cir. 1992) (summarizing operation of the TEFRA program).

According to the allegations in the Amended Complaint \u2013 the evidence in support of
which is discussed more fullyinfra \u2013 the GP unit at Indian Path was halfway through the TEFRA
base period when it was determined that the TEFRA rate was too low. A scheme was hatched, or
so it is alleged, to improperly inflate the TEFRA rate through a number of devices. IPH made
use of a management services company called Horizon, whose employee, Cynthia Culberson, set
up shop in the GP unit as its director. There she became a central player in the effort to raise the
TEFRA rate. Culberson, allegedly acting with the knowing cooperation of Robert Bauer, Indian