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A Lancaster HMO that sued a chiropractic center and others for allegedly submitting hundreds of false claims has provided insufficient evidence to support a civil RICO claim, a federal judge has ruled. To bring a successful civil claim under the federal Racketeer Influenced and Corrupt Organizations Act, a plaintiff must show the court that a defendant “enterprise” engaged in a pattern of racketeering activity that resulted in injury to the plaintiff. But in an opinion Friday, U.S. Eastern District Judge Michael M. Baylson sounded confused about exactly which defendant or defendants the HMO, HealthGuard of Lancaster Inc., considered to be in control of the alleged enterprise. The judge pointed to what he called the HMO’s “contradictory” and “legally insufficient” definitions of the alleged enterprise provided in written briefs and at oral argument. Baylson also found that the HMO had presented no evidence of the defendants’ participation in racketeering activities or a conspiracy, and granted summary judgment in favor of the defendants. “Although the record contains evidence of fraud, the court concludes that plaintiff has been unable to connect the dots of fraud to the rigorous requirements of civil RICO,” Baylson wrote in HealthGuard of Lancaster v. Gartenberg. HealthGuard contended in its complaint that the defendants had submitted nearly $250,000 in false claims, engaged in a uniform practice of performing unnecessary tests and treatments, and charged inflated rates for medical and chiropractic services, according to the opinion. In addition to its RICO claim, HealthGuard asserted state law claims including insurance fraud, common law fraud and breach of warranty. Baylson also dismissed those claims on Friday, but he noted that the HMO could refile them in state court. For a plaintiff to turn a fraud case into a RICO claim, it must show that the fraud was carried out through the operation of a “superstructure,” which the RICO statute calls an “enterprise,” Baylson explained. In the HMO’s complaint and documents submitted to the court, it argued that the RICO scheme had been carried out through one of the defendants, Main Line Medical Services Inc., a management company that had solicited new patients for the other defendants, including the chiropractic business Greenfield Sports Medicine & Rehab, according to the opinion. HealthGuard argued that Main Line Medical had processed fraudulent insurance claims generated by the chiropractic and medical centers and mailed them to HealthGuard for payment, according to the opinion. Therefore, Main Line Medical operated as the alleged enterprise, according to the plaintiff’s court documents. HealthGuard also named as defendants Main Line Medical’s owner, Steven Gartenberg; Mark Tischler, a chiropractor for Main Line Medical and Greenfield; and Premier Sports Medicine & Rehab Center, which is not described in the opinion or in the plaintiff’s court documents. But at oral argument, HealthGuard’s lawyer, Robert Frankhouser of Hartman Underhill & Brubaker in Lancaster, identified the alleged enterprise differently from the way he had in court filings, Baylson said. Before the court, Frankhouser described the alleged enterprise as “a combination of individuals with professional corporations known as Greenfield Sports Medicine and Premier Sports Medicine . . . all of the individuals . . . and the two professional corporations . . . as well as the billing enterprise [Main Line Medical],” the opinion states. The defendants made up the enterprise, with each providing a “different piece,” the lawyer told the court. That is, the defendants and the enterprise were identical. In order to establish liability under federal case law, a RICO plaintiff must allege a “person” in control of the enterprise who is separate and distinct from the alleged enterprise, Baylson said. HealthGuard had not established liability because it had “completely blurred and ignored” the required distinction between a person in control of the alleged enterprise and the enterprise itself by asserting that the enterprise and the defendants were “identical,” Baylson wrote. Even if Baylson had allowed the case to proceed with HealthGuard’s original designation of Main Line Medical as the “enterprise,” insufficient evidence existed as to Main Line Medical’s activities to show that the other defendants had worked through it to conduct a pattern of racketeering activity, Baylson found. Baylson also said the plaintiff’s case lacked any firsthand testimony as to how the alleged enterprise – in either way it was defined – operated. The plaintiffs had provided affidavits of three physicians who had worked at Greenfield, but Baylson found that these did not establish a routine or common manner of treating patients or a pattern of racketeering activity, or identify those who allegedly participated in a conspiracy. Frankhouser said yesterday that he and his client are looking into the option of filing the non-RICO claims in state court. John W. Morris, a solo practitioner in Philadelphia, and Lawrence Tabas of Obermayer Rebmann Maxwell & Hippel represented the defendants. They did not return calls for comment yesterday. (Copies of the 25-page opinion in HealthGuard of Lancaster v. Gartenberg , PICS No. 04-0324, are available from The Legal Intelligencer . Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information. Some cases are not available until 1 p.m.)

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