False Claims Act Case Settled for $72 Million
The side of righteousness: Cody Arven’s odyssey
Cody Arven had to fight from the day he was born, which is hard to do when you can’t walk, talk, see or hear your mother’s voice when she says, “I love you.”
His parents did the fighting for him, though. They battled doctors who denied responsibility for the brain injury that occurred during his mother’s labor, when a severe infection wasn’t diagnosed. They sparred with lawyers who rejected the family’s claims for restitution, and they took on the government-created insurance funds in two states that refused to pay their promised share of Cody’s medical care costs.
After nearly two decades of exhausting legal battles and catastrophic medical expenses that drained their bank accounts but never their hope, the Arven family and attorney Scott Austin of Gentry Locke forced the two insurance funds to settle lawsuits for nearly $72 million.
Just as importantly, the lawsuits prompted major changes in the ways two states, Virginia and Florida, manage their funds that are supposed to pay expenses for children with birth-related injuries but had often passed costs off on Federal taxpayers. The insurance funds were created to help children like Cody, but instead were often used to protect doctors and the hundreds of millions of dollars in the funds themselves.
“This is why you become a lawyer, to help people like this,” Austin said of the Arven family’s perseverance. “It’s a powerful story.”
A mother knows when something is wrong, and Roni Arven knew that something wasn’t right as she went into labor at a Roanoke hospital in 2003.
Roni told attending nurses that she had terrible abdominal pain and a serious migraine, neither of which was related to being in labor, she knew. Even worse, she had a fever. Nurses took her temperature at regular intervals for eight hours. The result kept rising … 102 degrees … 103 … 104 … and stayed elevated.
Later, it would be learned that Roni had developed a bacterial infection in her amniotic fluid, the liquid that surrounded her child in the womb. Roni’s infection was never treated — she was never given antibiotics or other medicine. Amniotic fluid usually protects a baby before birth, but in Cody’s case, the infected liquid destroyed half his brain.
His chance to live a normal life ended at his birth.
“Cody was destined to have a life where he would never climb a tree or read a book,” Austin said. “Never see his mother’s face or hear her say the words that she loved him.”
His tragic birth also ushered in the beginning of a crushing, years-long legal and medical odyssey for his parents, Roni and Ted, to get the assistance that Cody was owed. Their quest left the family destitute, until, with Austin’s help, they finally scored legal victories that would change the system.
The Arvens initially sought money from the Virginia Birth Injury Fund (VBIF) —now the Virginia Birth-Related Neurological Injury Compensation— a no-fault insurance system that is supposed to cover expenses for victims of birth-related accidents. The General Assembly created the program in 1987 as a tort-reduction effort designed to keep malpractice lawsuits out of courts and cap awards for plaintiffs. The fund pays claimants directly with money that comes from premiums paid by doctors and hospitals that enroll in the VBIF program. (More about that later.)
But the Arvens’ claims were initially denied by VBIF, whose own team of attorneys and consultants aggressively fought Cody’s admission into the program. It became obvious to the Arvens and Austin early on that VBIF saw its role as denying claims, not helping children. VBIF’s witnesses said that Cody’s physical handicaps were not the fault of doctors, nurses or the hospital where he was born.
Along the way, VBIF representatives made a series of outrageous claims to deny paying the Arvens their due compensation. They claimed that Roni’s high temperature was not due to an infection, but rather to the fact that she drank coffee the morning she went into labor.
At another hearing, a physician consultant said that no infection was found in the placenta. But when Austin pointed out to the witness that the placenta had been destroyed at the hospital and never sent for a pathological examination, the consultant admitted that she had missed that fact in the report. Even so, she said, she just assumed that no infection was evident.
“The casual cruelty of not letting him into the program got to me,” Austin said.
“They said and did things that were borderline sanctionable and absurd. They were trying to protect the fund, rather than benefit the children.”
It took four years before Cody was admitted into the program. The legal odyssey did not end, however.
Shortly after one of the hearings, Austin received a call from Richmond attorney Ann Jones, who specializes in medical malpractice cases and had followed the Arvens’ hearings. She told Austin about some of her own cases against VBIF and she invited him to look over the fund’s audited financial reports the next time he was in Richmond.
When Austin examined those reports, he discovered the numbers did not add up. The fund didn’t seem to be paying for participants’ medical expenses. Costs for hospitalizations were not rising, even though the program added children. The premiums doctors and hospitals paid into the fund had not risen in nearly 30 years. Austin later heard that the fund had even stopped collecting premiums from some doctors.
If the VBIF wasn’t paying for the medical expenses for birth-injured children, Austin wondered, who was? The answer: Medicaid.
VBIF, which had well over $100 million in its coffers, was forcing participants to file claims with Medicaid before seeking money from the birth-injury fund. Only after Medicaid covered some costs did the VBIF then pay off the balance — even though Medicaid, the government-funded insurance program for low-income people, is supposed to be the payer of last resort for people who don’t have other insurance. VBIF, though, should have been the primary insurance provider, not Medicaid.
“They were cost-shifting from VBIF to Medicaid,” Austin said. “They’d been sloughing off a greater amount of their expenses every year.”
In other words, Virginia taxpayers (and taxpayers from other states since Medicaid is a Federal program) were paying for children’s medical expenses that were supposed to be covered by a doctor-supported insurance fund.
Austin and the Arvens filed a qui tam case, which is basically a whistleblower lawsuit against entities that make false claims that deprive the Federal government of money. In this case, Austin argued that VBIF had forced the Arvens to make a false claim when they sent paperwork to Medicaid stating that they had no other source of payment for medical expenses, when, in fact, VBIF should have been paying.
“VBIF caused our client to file false claims, and that made them subject to False Claims Act violations,” Austin said.
After the Arvens’ case was directed to a Washington, D.C. court, VBIF decided to settle.
“They knew the jig was up,” Austin said.
In late 2018, more than 15 years after Cody was born, VBIF paid $20.7 million to the U.S. government, which had launched its own investigation into the program. The Arvens, who had been financially ruined by medical expenses, received a portion of the settlement.
After the case against VBIF ended, Austin wondered if other states were doing the same thing Virginia had been doing.
Austin discovered that Florida had a birth-injury program called the Neurological Injury Compensation Association (NICA), which had even been modeled after Virginia’s birth-injury program. Also, like Virginia, Florida’s program seemed to be shifting costs to Medicaid rather than paying claims for participants, Austin found.
Austin filed suit in Miami in 2019 to get Medicaid money back for the Federal government, with the Arvens represented as relators to the case, meaning they would receive a portion of a settlement should the government win. But battling an army of Florida lawyers proved to be a considerably more difficult task than winning the Virginia case.
“NICA took a very hardline view,” Austin said. “They went all in.”
Florida’s main defense was that it claimed NICA was a part of the state government and therefore could not be sued. Virginia initially made a similar claim, before Austin successfully argued that the VBIF was basically a private insurance fund and not a state agency.
NICA claimed that premiums paid by medical professionals were taxes, which meant that the fund was an arm of the state. Austin argued that NICA was basically a private insurer started by the state, but that it had no power to tax, had no governor-appointed board of directors or any other feature of a state agency. He even noted that the statute that created NICA explicitly stated that the program was not a state entity.
NICA filed to have the case dismissed, but a judge rejected the motion, agreeing with plaintiffs that the program was not a government agency. NICA appealed immediately to the 11th Circuit Court of Appeals, which also ruled against its motion to dismiss. The case could proceed to trial.
NICA’s days of refusing to pay children’s medical bills and shifting costs to taxpayers was about to end. Its lawyers quickly sought a settlement.
“They acted like jerks for three years, and then they said, ‘We can work something out,’” Austin said.
Last fall, NICA paid $51 million to settle the case.
That money, a portion of which also went to Cody’s family, was Federal funds that the government sought, about 61 percent of the total amount NICA had improperly used. The other 39 percent of the misused money came from Florida taxpayers, an amount the state will never get back due to terms of the settlement.
Later, Austin would learn that NICA officials knew all along that a potential massive lawsuit hung over their heads “like the Sword of Damocles,” according to one of them, especially after the Virginia settlement.
Documents turned over by NICA to reporters for the Miami Herald who were investigating the fund’s finances also revealed that NICA staffers knew that the fund was defrauding taxpayers, even though NICA had a nearly $1 billion trust fund.
“There were a lot of bad actors,” Austin said. “They knew what they were doing was improper.”
The cases didn’t just bring financial awards for the plaintiffs, they initiated real changes at the state government level. In Virginia, the General Assembly passed legislation that makes VBIF buy health insurance plans for its participants and the fund can no longer force claimants to send claims to Medicaid.
Florida went even further. The state legislature made significant changes to NICA, added oversight and even paid $100,000 to every plan participant. Like Virginia, the Florida fund is forbidden from forcing participants to submit initial claims to Medicaid.
Cody Arven is nearly 20 years old now, and he will require constant care the rest of his life. Now, his family has the resources to pay for that care.
Roni and Ted divorced, and Ted moved to South Carolina, where he later learned that he had terminal cancer. He died in 2018, just a few weeks after the first settlement was reached, so he got to know that his son would be taken care of.
Roni still lives and works in the Roanoke area. She has a young daughter who says she wants to be a lawyer, perhaps inspired by her family’s experience, and ultimate success, with the legal system.
“Roni is just the nicest person you’ll ever meet,” Austin said. “She had a horrible thing happen, and she spent 20 years to get help.”
Austin said that after years of mediating between large companies that haggle over amounts of money that are ultimately insignificant to the bean counters’ bottom lines, helping the Arvens was a fulfilling, at times demanding, experience.
“There are just a few times in a career when you get to help someone who truly needs it,” Austin said. “We were on the side of righteousness.”