Case 2:20-cv-11234 Document 1 Filed 12/10/20 Page 1 of 31 Page ID #:1
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`
`MICHAEL J. KHOURI, ESQ. [CASBN 97654]
`Email: mkhouri@khourilaw.com
`BEHZAD VAHIDI, ESQ. [CASBN 320067]
`Email: bvahidi@khourilaw.com
`KHOURI LAW FIRM, APC
`2222 Martin, Suite 215
`Irvine, California 92612
`Telephone: (949) 336-2433
`Fax:
`
`(949) 387-0044
`
`
`Attorneys for Plaintiffs, THE VANGUARD CLINIC, LLC; NOVA
`INTEGRATED HEALTH, PC; GOSSETT GLOBAL HEALTH SOLUTIONS,
`PC; MICHAEL GLICKERT, D.C.; TAYLOR VANDEN WYNBOOM, D.C.; and
`TOMMY GOSSETT, D.C.
`
`
`
`
`DEMAND FOR JURY TRIAL
`
`
`
`
`COMPLAINT
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`UNITED STATES DISTRICT COURT
`FOR THE CENTRAL DISTRICT OF CALIFORNIA
`
`Case No. 2:20-cv-11234
`
`COMPLAINT FOR:
`1) BREACH OF FIDUCIARY
`DUTY;
`2) FRAUD: INTENTIONAL
`MISREPRESENTATION;
`3) FRAUD: NEGLIGENT
`MISREPRESENTATION;
`4) FRAUD: CONCEALMENT;
`5) CONSTRUCTIVE FRAUD (Cal.
`Civ. Code § 1573);
`6) RESCISSION (Cal. Civ. Code §
`1692);
`7) CONVERSION;
`8) UNLAWFUL BUSINESS
`PRACTICES (Cal. Bus. & Prof.
`Code, § 17200, et seq.).
`
`Plaintiffs,
`
`THE VANGUARD CLINIC, LLC, a
`limited liability company; NOVA
`INTEGRATED HEALTH, PC, a
`professional corporation; GOSSETT
`GLOBAL HEALTH SOLUTIONS,
`PC., a professional corporation;
`MICHAEL GLICKERT, D.C., an
`individual; TAYLOR VANDEN
`WYNBOOM, D.C., an individual;
`and TOMMY GOSSETT, D.C., an
`individual;
`
`
`
`
`
`NATIONAL BILLING INSTITUTE,
`LLC, a limited liability company;
`RESONANT SPECIFIC
`TECHNOLOGIES, INC., a
`corporation; and KAREO, INC., a
`corporation;
` Defendants.
`
`
`
`
`
`
`vs.
`
`

`

`Case 2:20-cv-11234 Document 1 Filed 12/10/20 Page 2 of 31 Page ID #:2
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`Plaintiffs THE VANGUARD CLINIC, LLC (“Vanguard Clinic”), NOVA
`INTEGRATED HEALTH, PC (“Nova Integrated”), GOSSETT GLOBAL
`HEALTH SOLUTIONS, PC (“Gossett Clinic”), MICHAEL GLICKERT, D.C.
`(“Dr. Glickert”), TAYLOR VANDEN WYNBOOM, D.C. (“Dr. Vanden
`Wynboom”), and TOMMY GOSSETT, D.C. (“Dr. Gossett”), (collectively
`Vanguard Clinic, Nova Integrated, Gossett Clinic, Dr. Glickert, Dr. Vanden
`Wynboom, and Dr. Gossett, are “Plaintiffs”), respectfully allege as follows:
`I.
`INTRODUCTION
`1.
`This Complaint for Breach of Fiduciary Duty, Intentional
`Misrepresentation, Negligent Misrepresentation, Concealment, Constructive Fraud,
`Rescission, Conversion, and Unlawful Business Practices, arises out of defendants
`NATIONAL BILLING INSTITUTE, LLC (“NBI”), RESONANT SPECIFIC
`TECHNOLOGIES, INC. (“RST”), and KAREO, INC.’s (“Kareo”) (collectively
`NBI, RST, and Kareo are “Defendants”) repeated misrepresentations to Plaintiffs,
`and concealment of material facts from Plaintiffs, in relation to Medicare coverage
`and lawful billing of treatments involving RST-Sanexas neoGEN-Series medical
`device (“Sanexas”), and related subcutaneous injections.
`II. THE PARTIES
`2.
`Vanguard Clinic is a limited liability company organized and existing
`under the laws of the State of Missouri, with its principal place of business in Saint
`Louis County, Missouri. At all times relevant to the events described in this
`Complaint, Vanguard Clinic was an integrated chiropractic/medical practice
`specializing in chronic pain treatment.
`3.
`Nova Integrated is a professional corporation organized and existing
`under the laws of the State of Iowa, with its principal place of business in Polk
`County, Iowa. At all times relevant to the events described in this Complaint, Nova
`Integrated was an integrated chiropractic/medical practice specializing in
`peripheral neuropathy and chronic pain treatment.
`
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`4.
`Gossett Clinic is a professional corporation organized and existing
`under the laws of the State of Illinois, with its principal place of business in
`Champaign County, Illinois. At all times relevant to the events described in this
`Complaint, Gossett Clinic was an integrated chiropractic/medical practice
`specializing in peripheral neuropathy and chronic pain treatment.
`5.
`Dr. Glickert is an individual and citizen of the United States of
`America, residing in Saint Louis County, Missouri. At all times relevant to the
`events described in this Complaint, Dr. Glickert was a chiropractic physician
`licensed by the Missouri Board of Chiropractic Examiners, and a managing
`member of Vanguard Clinic.
`6.
`Dr. Vanden Wynboom is an individual and citizen of the United
`States of America, residing in Story County, Iowa. At all times relevant to the
`events described in this Complaint, Dr. Vanden Wynboom was a chiropractor
`licensed by the Iowa Board of Chiropractic, and the president of Nova Integrated.
`7.
`Dr. Gossett is an individual and citizen of the United States of
`America, residing in Maricopa County, Arizona. At all times relevant to the events
`described in this Complaint, Dr. Gossett was a chiropractic physician licensed by
`the Illinois Medical Licensing Board, and the president of Gossett Clinic.
`8.
`NBI is a limited liability company organized and existing under the
`laws of the State of Florida, with its principal place of business in Palm Beach
`County, Florida. At all times relevant to the events described in this Complaint,
`NBI was a medical insurance billing and consulting company offering its services
`to healthcare providers nationwide, including multiple providers in southern
`California.
`9.
`RST is a corporation organized and existing under the laws of the
`State of Nevada, with its principal place of business in Clark County, Nevada. At
`all times relevant to the events described in this Complaint, RST was the creator of
`Sanexas, and distributor of Sanexas to healthcare providers nationwide, including
`
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`Case 2:20-cv-11234 Document 1 Filed 12/10/20 Page 4 of 31 Page ID #:4
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`multiple providers in southern California.
`10. Kareo is a corporation organized and existing under the laws of the
`State of California, with its principal place of business in Orange County,
`California. At all times relevant to the events described in this Complaint, Kareo
`provided medical billing services by means of an online medical billing and
`electronic medical records (“EMR”) platform to healthcare providers and insurance
`billing companies nationwide, including NBI.
`11. At all times relevant to the events described in this Complaint, there
`existed a profit-sharing relationship among Defendants, whereby RST sold
`Sanexas to Plaintiffs and referred them to NBI for billing services. NBI in turn
`provided billing services to Plaintiffs by billing Sanexas to Medicare and other
`insurance plans through Kareo’s billing platform. Plaintiffs did not have an
`independent agreement with Kareo, nor had access to the medical billing portion of
`Kareo’s platform. Instead, use of Kareo’s platform was embedded into Plaintiffs’
`agreement with NBI, and NBI alone had access to the medical billing portion of
`Kareo’s platform. It is Plaintiffs’ understanding that there is a contractual
`agreement between RST and NBI, and NBI and Kareo.
`12. Accordingly, at all times relevant to the events described in this
`Complaint, on information and belief, each Defendant in this action was the agent,
`authorized representative, joint venturer, or partner of each other Defendant, and in
`engaging in the conduct alleged in this Complaint, did so jointly and for a common
`purpose, within the course and scope of its agency, representation, joint venture, or
`partnership, in order to further its own, and each other’s financial interests.
`Defendants, and each of them, acted with the knowledge, notification, consent, and
`ratification of each of the other Defendants. All the acts taken by any employees or
`agents of any of the Defendants were in fact ratified and adopted by the managing
`personnel of each named Defendant.
`
`///
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`COMPLAINT
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`III. JURISDICTION AND VENUE
`13. The Court has subject matter jurisdiction to all claims alleged in the
`Complaint pursuant to 28 U.S.C. § 1332, as the parties are completely diverse in
`citizenship and the amount in controversy exceeds $75,000.
`14. The Court has personal jurisdiction over Kareo, as it is incorporated in
`California, and has its principal place of business in Orange County California.
`The Court also has personal jurisdiction over RST and NBI as they regularly and
`continuously avail themselves of the privilege of conducting business in the State
`of California, thereby invoking the benefits and protections of California law.
`Furthermore, all of Plaintiffs’ billings for Sanexas treatments are performed by
`NBI through Kareo’s platform in Orange County, California.
`15. Venue is proper in this District under 28 U.S.C. § 1391(b)(2), as a
`substantial part of the material events—billing for Sanexas treatments—occurred
`through Kareo in Orange County, California. Alternatively, venue is proper in this
`District under 28 U.S.C. § 1391(b)(3), because there is no other appropriate venue
`under 28 U.S.C. §§ 1391(b)(1) or (b)(2), and at least one Defendant is subject to
`the Court’s personal jurisdiction in this District.
`IV. THE MEDICARE PROGRAM
`16. Title XVIII of the Social Security Act, 42 U.S.C. §§ 1395, et seq.,
`establishes the Health Insurance for the Aged and Disabled Program, commonly
`referred to as the Medicare Program (the “Medicare Program” or “Medicare”).
`17. The Medicare Program is comprised of four parts: A, B, C, and D.
`18. Medicare Part B provides federal government funds to help pay for,
`among other things, physician services. See generally 42 U.S.C. §§ 1395j –
`1395w-5.
`19. Medicare Part B is funded by insurance premiums paid by enrolled
`Medicare beneficiaries and by contributions from the federal treasury. Eligible
`individuals may enroll in Part B to obtain benefits in return for payments of
`
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`COMPLAINT
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`monthly premiums as established by the United States Department of Health &
`Human Services (“HHS”). See 42 U.S.C. §§ 1395o, 1395p, 1395q, 1395r, 1395s.
`20. The Secretary of HHS administers the Medicare Program through the
`Centers for Medicare & Medicaid Services (“CMS”), an operating division of
`HHS.
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`21. CMS, in turn, contracts with Medicare Administrative Contractors
`(“MACs”) to administer, process, and pay Part B claims from the Federal
`Supplementary Medical Insurance Trust Fund (the “Medicare Trust Fund”). In this
`capacity, MACs act on behalf of CMS.
`22. The Medicare Program, through the MAC, pays a significant portion
`of every claim. The Medicare beneficiary, or his or her supplemental insurance
`carrier, is required to pay the balance owed the provider. The beneficiary’s
`payment is sometimes referred to as a “co-payment.” Beneficiaries also pay
`deductibles.
`23. Medicare Part C provides for private Medicare Advantage Plans,
`allowing eligible participants to opt out of traditional Medicare and instead obtain
`Medicare benefits from private Medicare Advantage Organizations (“MAOs”). See
`generally 42 U.S.C. §§ 1395w-21 – 1395w-28.
`24. Private health plans wishing to participate in the Medicare Advantage
`Program as a MAO contract with CMS, and CMS pays the MAO a fixed payment
`for each enrollee.
`25. Pursuant to this contract, the MAO must provide the Medicare
`enrollees all benefits available under traditional Medicare enrollment. The MAOs
`must also abide by all Medicare requirements and standards, as well as all
`applicable CMS rules, including rules governing payments to providers. See 42
`U.S.C. § 1395w-22(a)(1)(A); 42 C.F.R. § 422.504(a)(6).
`26. All healthcare providers must comply with applicable statutes,
`regulations, and guidelines in order to be reimbursed by Medicare.
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`27. Services that are not “reasonable and necessary for the diagnosis or
`treatment of illness or injury or to improve the functioning of a malformed body
`member” are specifically excluded from coverage under Part A and Part B of the
`Medicare Program. 42 U.S.C. § 1395y(a)(1)(A).
`28. Medicare regulations also exclude from payment services that are not
`reasonable and necessary for an enumerated purpose (e.g., the diagnosis or
`treatment of illness or injury or to improve the functioning of a malformed body
`member). 42 C.F.R § 411.15(k)(1)-(16).
`29. CMS develops National Coverage Determinations (“NCDs”) which
`contain a “determination by the Secretary with respect to whether or not a
`particular item or service is covered nationally.” 42 U.S.C. § 1395ff(f)(1)(B).
`30.
`In addition, MACs develop Local Coverage Determinations
`(“LCDs”), which are defined as a determination of whether or not a particular item
`or service is covered on a contractor-wide basis. 42 U.S.C. § 1395ff(f)(2)(B).
`31.
` Services that are not considered medically necessary for a particular
`purpose under applicable NCDs and LCDs are not covered by Medicare Part B.
`32.
` Similarly, MAOs only cover services provided to Part C
`beneficiaries that meet the MAOs’ medical necessity determinations, established
`pursuant to 42 C.F.R §422.112(6), and consistent with applicable NCDs and
`LCDs.
`V.
`FACTUAL ALLEGATIONS
`
`A. Overview of Defendants’ Fraudulent Scheme
`33. At all relevant times alleged in this Complaint, RST marketed and
`advertised Sanexas as an electrical stimulation device that had been cleared by the
`Food and Drug Administration (“FDA”) for treating various ailments, namely
`peripheral neuropathy and chronic pain.
`34. The treatment protocol promoted by RST involved first injecting
`patients with a nutria-pharmaceutical blend of vitamins and minerals (“Multi-
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`Case 2:20-cv-11234 Document 1 Filed 12/10/20 Page 8 of 31 Page ID #:8
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`Vitamin Blend”)—initially sold by RST—followed by placing the Sanexas device
`on areas of the patient’s body suffering from chronic pain.
`35. Relevant to the present action, RST, acting through RST’s sales and
`marketing director Keith Day (“Day”), RST’s de facto president Richard Sorgnard
`(“R. Sorgnard”)1, and other RST representatives and affiliates including NBI,
`represented that Sanexas treatments were considered to be medically necessary for
`treating, inter alia, peripheral neuropathy and chronic pain, and thus covered by
`Medicare and other insurance plans.
`36. Due to the relative novelty of Sanexas, RST referred Providers to NBI
`and its president Michael Evans (“Evans”), holding them out as medical billing
`experts who have been successfully billing Sanexas treatments to Medicare and
`other health plans. Indeed, RST’s marketing material for Sanexas included an
`example showing up to $583,200 revenue from Sanexas treatments per year, based
`on insurance claims submitted by NBI on behalf of providers.
`37. By way of example, the informational packet provided by RST to new
`or interested healthcare providers included a document entitled “INSURANCE &
`MEDICARE REIMBURSEMENT.” This document stated that “RST has entered
`into a professional affiliation with the National Billing Institute to assist physicians
`with optimizing third-party insurance reimbursements and Medicare.” The
`document also boasted about NBI’s success in billing Sanexas, stating:
`The National Billing Institute has developed the methodology
`and correct coding for the RST-Sanexas electric cell signaling
`device in treating all forms of chronic pain. Our clients are
`reimbursed by both private insurance and Medicare. Let us do
`the same for your practice so that you can start generating
`revenue within weeks of getting started.
`
`1 While R. Sorgnard’s wife, Lisa Sorgnard, is identified as RST’s president with
`the Nevada Secretary of State, it is Plaintiffs’ understanding that she is president in
`name only. Upon information and belief, Lisa Sorgnard was named RST’s
`president because R. Sorgnard is legally prohibited from holding such a position
`due to prior legal actions against him. Indeed, all of Plaintiffs’ communications
`with RST were with R. Sorgnard, Day, or R. Sorgnard’s daughter Morhea
`Sorgnard (“M. Sorgnard”), who was RST’s FDA compliance and training director.
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`COMPLAINT
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`38. Plaintiffs are informed, believe, and on that basis allege that RST is
`compensated by NBI for referring providers, pursuant to an agreement between
`RST and NBI.
`39. NBI, acting through Evans and other NBI representatives and
`affiliates, held itself out as a medical billing expert with more than 23 years of
`experience, and an expert in billing Sanexas to Medicare and other insurance
`companies. Pertinently, NBI represented that it had developed a “proprietary”
`billing method for Sanexas treatments—including the Multi-Vitamin Blend
`injections, which complied with all relevant Medicare laws and regulations.
`40. NBI’s promotional material contained a document entitled “GET
`PAID $$ BY INSURANCE & MEDICARE FOR RST SANEXAS
`TREATMENTS!” This document provided in pertinent part as follows:
`1.
`Do you own or lease the RST Sanexas for treating
`chronic pain and Neuropathy?
`
`
`2. Have you been told to charge patients cash only because
`insurance and/or Medicare did not pay
`for
`the
`treatments? Or were you given wrong billing codes and
`getting low or no reimbursement? Or worse, fined by
`Medicare for non-compliance or use of wrong billing
`codes?
`
`
`3. Do you want a quick and easy turn-key solution that will
`set up your practice to get paid by Medicare and most
`insurance companies for your Sanexas Treatments?
`
`
`4. Do you want to drastically increase your revenue while
`helping your patients ease their chronic pain?
`
`
`5. Do you want to get reimbursed for your services up to
`$7500.00 from insurance companies?*
`
`
`If you answered YES to any one of those questions, then you
`MUST call National Billing today to discuss our turn-key
`solution to start getting paid for treating chronic nerve disorder
`pain. Our solution can generate reimbursement of up to
`$7500.00
`from private
`insurance* and $4200.00
`from
`Medicare** for a 12-week 24 treatment program!
`
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`COMPLAINT
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`National Billing developed the methodology and correct
`coding for the Sanexas unit and has been billing for these
`services for over 2 years with clients getting reimbursed by
`both private insurance and Medicare. Let us do the same for
`your practice so you can start generating revenue within weeks
`of getting started. We charge a low flat fee of collected
`reimbursement for our complete turn-key solution.
`
`We provide your office with all the tools to get started quickly;
`including access to the billing, Free EMR module, Free note
`templates, Free personalized training as well as premium
`support that provides a live support agent for help and more.
`Let National Billing focus on getting you paid while you focus
`on easing your patient’s pain!
`
`41. The billing and EMR module referenced in the aforementioned
`document was Kareo’s cloud-based EMR and medical billing platform, included in
`NBI’s consultancy and billing service agreement with healthcare providers. In
`practice however, healthcare providers were only given access to the EMR portion
`of the platform. All medical billings for Sanexas and the Multi-Vitamin Blend
`injections—including the specific items, procedures, and number of units billed—
`were submitted to insurance companies on the medical billing portion of Kareo’s
`platform, which was under the exclusive control of NBI and Kareo.
`42. Healthcare providers were tasked with inputting the relevant patient
`information into the EMR portion of Kareo’s platform. With regards to the
`healthcare providers’ services, NBI gave the providers specific codes—referred to
`as “Macros” –which would identify the treatments and products provided to the
`patient (i.e. Sanexas treatment with Multi-Vitamin Blend injection, Sanexas
`treatment without Multi-Vitamin Blend injection, etc.).
`43. NBI would use these Macros to prepare the actual medical bills on
`behalf of the providers using Kareo’s billing platform. Notably, the particular
`billing codes used for Sanexas and the Multi-Vitamin Blend injections were
`selected by NBI, and were not disclosed to the healthcare providers on whose
`behalf the medical bills were being prepared.
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`44. Kareo would then generate the claims for reimbursement based on the
`medical bills prepared by NBI, and would submit the claims to Medicare and other
`insurance companies on behalf of the treating healthcare providers. The treating
`providers did not have access to the submitted claims, or the medical billing
`portion of Kareo’s platform. Instead, the act of billing Sanexas and the Multi-
`Vitamin Blend injections to Medicare and other insurance companies was
`performed by NBI and Kareo, which solely and exclusively had access to, and
`possession of, all medical bills, insurance claims, and explanation of benefit forms
`(“EOB”).
`Plaintiffs’ Dealings with RST, NBI, and Kareo
`B.
`45. At all times relevant to the allegations in this Complaint,
`communications with Plaintiffs were through: Dr. Glickert acting on behalf
`Vanguard Clinic; Dr. Vanden Wynboom acting on behalf of Nova Integrated; and
`Dr. Gossett acting on behalf of Gossett Clinic.
`46.
`In or about mid-2018, Dr. Glickert was introduced to Sanexas and
`NBI through Day and R. Sorgnard. Relying on representations made by RST and
`NBI, as set forth in paragraphs 33 to 40 above, Vanguard Clinic began providing
`treatments using Sanexas and the Multi-Vitamin Blend injections in or about
`October 2018, and retained NBI to provide consultancy and billing services.
`47. Dr. Vanden Wynboom and Dr. Gossett received the same
`representations from RST and NBI in early 2019 and late 2019 respectively.
`Relying on these representations—set forth in in paragraphs 33 to 40 above—Nova
`Integrated began treating patients with Sanexas and the Multi-Vitamin Blend
`injections in or about March 2019, and Gossett Clinic began treating patients with
`Sanexas and the Multi-Vitamin Blend injections in or about December 2019.
`Based on RST and NBI’s representations, Nova Integrated and Gossett Clinic also
`retained NBI to provide consultancy and billing services.
`48. Furthermore, Vanguard Clinic, Nova Integrated, and Gossett Clinic,
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`Case 2:20-cv-11234 Document 1 Filed 12/10/20 Page 12 of 31 Page ID #:12
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`each purchased multiple Sanexas devices from RST. The price for each Sanexas
`device was approximately $50,000. In addition, Vanguard Clinic and Gossett
`Clinic purchased a diagnostic device known as a TM Flow unit from RST. The
`price for each TM Flow unit was approximately $35,000. Plaintiffs’ decision to
`make such a substantial investment in Sanexas was entirely based on RST and
`NBI’s representations regarding the medical necessity of Sanexas in treating
`chronic pain, and its coverage by Medicare and other insurance companies. For a
`brief period, Vanguard Clinic, Nova Integrated, and Gossett Clinic also purchased
`the Multi-Vitamin Blend injections from RST, but began securing the blend
`elsewhere when RST stopped selling them.
`49. M. Sorgnard, acting on behalf of RST, visited Vanguard Clinic and
`Nova Integrated, where she trained each facility’s medical director and other
`qualified healthcare professional (i.e. Nurse Practitioner, Advanced Practice
`Registered Nurse, etc.) on RST’s treatment protocol, including how to provide the
`Multi-Vitamin Blend injections, and administer Sanexas. Essentially, the patient
`would first receive the injection, then a qualified healthcare professional would
`place the Sanexas device on the patient’s extremities that were suffering from
`chronic pain. The Sanexas device would provide electrical stimulation to the
`patient over a 15 to 30 minute period, during which the healthcare professional
`may leave the room and only check in every few minutes.
`50. Relying on the representations made by Evans on behalf of NBI, and
`NBI affiliates such as RST—as set forth in paragraphs 33 through 40 above,
`Vanguard Clinic, Nova Integrated, and Gossett Clinic, each entered into two
`agreements with NBI.
`51. The first agreement was a non-disclosure agreement (“NDA”),
`induced based on Evans’ claim that the billing codes and procedures utilized for
`billing Sanexas and the Multi-Vitamin Blend were developed by NBI, and thus
`constituted NBI’s “proprietary” and “confidential” information. Dr. Glickert
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`Case 2:20-cv-11234 Document 1 Filed 12/10/20 Page 13 of 31 Page ID #:13
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`executed the NDA on behalf of Vanguard Clinic on or about September 11, 2018;
`Dr. Vanden Wynboom executed the NDA on behalf of Nova Integrated on or
`about February 14, 2019; and Dr. Gossett executed the NDA on behalf of Gossett
`Clinic on or about October 24, 2019. The NDA also purported to give NBI the sole
`and exclusive right to bill Sanexas and the Multi-Vitamin Blend injections on
`behalf of Plaintiffs in perpetuity.
`52. The second agreement was a medical billing consultancy and service
`agreement (“Billing Agreement”), pursuant to which, NBI was authorized to bill
`Medicare and other insurance companies via Kareo’s billing platform, on behalf of
`Vanguard Clinic, Nova Integrated, and Gossett Clinic. In return, NBI would
`receive 8.0 % of all medical insurance receivables collected. Dr. Glickert executed
`the Billing Agreement on behalf of Vanguard Clinic on or about September 14,
`2018; Dr. Vanden Wynboom executed the Billing Agreement on behalf of Nova
`Integrated on or about February 14, 2019; and Dr. Gossett executed the Billing
`Agreement on behalf of Gossett Clinic on or about October 24, 2019.
`53. Despite the NDAs entered into by Vanguard Clinic, Nova Integrated,
`and Gossett Clinic, Plaintiffs were only granted access to the EMR portion of
`Kareo’s platform. Pertinently, Plaintiffs were not granted access to the EOBs or
`medical claims submitted on their behalf, which identified the particular insurance
`billing codes used by NBI and Kareo to bill Sanexas and the Multi-Vitamin Blend
`injections to Medicare and other insurance companies.
`54. Notwithstanding the importance of using proper billing codes on
`insurance claims, as discussed below, NBI and Kareo actively concealed the codes
`used to prepare and submit medical bills and claims on behalf of Plaintiffs.
`55. Whenever Plaintiffs would ask Evans for more information regarding
`the codes used by NBI, they were told that the codes were proprietary, the medical
`bills and claims were compliant with all applicable Medicare laws and regulations,
`and that NBI had confirmed with Medicare that Sanexas treatments—including the
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`Multi-Vitamin Blend injections—were covered by Medicare.
`56. By way of example, in or about March 2020, Dr. Vanden Wynboom
`received an EOB from a patient that contained multiple billing codes for injections.
`When Evans was asked about why NBI had billed multiple line items for the
`Multi-Vitamin Blend injection, he represented that proper billing procedures
`require each ingredient in the Multi-Vitamin Blend to be billed separately.
`57. As yet another example, Dr. Glickert learned that NBI and Kareo
`were submitting claims containing multiple different billing codes for treatments
`using the Sanexas device. Dr. Glickert came upon this information when he was
`inadvertently given partial access to the billing portion of Kareo’s platform in early
`2020. The use of multiple billing codes to bill for Sanexas was confirmed by Dr.
`Vanden Wynboom when Nova Integrated was audited by BlueCross BlueShield
`insurance in May, 2020. When asked, Evans justified the billings by stating that
`the Sanexas device has been cleared by the FDA for multiple treatments, and thus
`can properly be billed using multiple codes at the same time.
`58. As discussed below, the representations made by RST and NBI
`regarding Medicare coverage for Sanexas and the Multi-Vitamin Blend injections,
`as well as NBI’s “expertise” in lawfully and compliantly billing Sanexas and
`Multi-Vitamin Blend injections to Medicare and other insurance companies were
`false, and were designed to induce Plaintiffs’ decision to purchase the Sanexas
`device and enter into a billing agreement with NBI.
`C. NBI and Kareo’s Improper Billing Practices
`59. Current Procedural Terminology (“CPT”) codes are five-digit numeric
`codes established by the American Medical Association (“AMA”) for use on bills
`and claims submitted by healthcare professionals. Similarly, Healthcare Common
`Procedure Coding System (“HCPCS”) is a collection of standardized codes
`maintained and distributed by HHS for use by healthcare professionals on bills and
`claims. These codes describe to insurance companies and other payors in a uniform
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`manner the services and products provided by the healthcare provider, for which
`the provider is presenting a claim for reimbursement. When submitting claims to
`Medicare or other government funded insurance plans, healthcare providers are
`legally required to select the CPT or HCPCS codes that most accurately identify
`the services performed. See gen. 45 C.F.R. §162.1002.
`60. Submission of medical claims containing improper CPT or HCPCS
`codes expose healthcare providers to significant criminal and civil liabilities under
`both Federal and State law. See 18 U.S.C. § 1347; 31 U.S.C. § 3729; Cal. Penal
`Code § 550; and Cal. Ins. Code § 1871.7.
`61. Based on the limited information they have been able to obtain, it is
`Plaintiffs’ understanding that NBI and Kareo have been billing Sanexas to
`Medicare and other insurance companies using the following CPT codes: 97016,
`97032, and 97112. However, none of these codes are proper for electrical
`stimulation using the Sanexas device, because Medicare rules and regulations—
`including applicable NCDs and LCDs—only cover these codes for certain
`circumstances not applicable to Plaintiffs’ use of Sanexas.
`62. To illustrate, CPT code 97016 is used for application of
`vasopneumatic devices to one or more areas, not requiring direct (one-on-one)
`patient contact. Medicare only covers the use of vasopneumatic devices for the
`purpose of reducing edema or lymphedema. Furthermore, the treatment must be
`supported by documentation identifying the location of the edema on the body,
`measurements of the edema, an