Libby clinic files for bankruptcy following $6 million judgment over false asbestos claims

The Center for Asbestos Related Disease in Libby filed for bankruptcy in federal court Monday, just months after a jury ruled that it had submitted hundreds of false claims on behalf of patients.

The Chapter 11 filing will allow the clinic, which is often referred to by its acronym, CARD, to continue to operate and serve its patients, according to board Chair LeRoy Thom.

“To the best of my understanding, it protects CARD funds so we can continue to operate and take care of our patients and prevent the railroad from cleaning us out,” Thom said in a phone conversation Wednesday with The Western News.

When asked if the board was considering any action, such as termination, against any CARD employees, Thom said, “We don’t micromanage.

"I think everything will continue as it has," Thom said. "The court will rule on our plan and the railroad may dispute it, but our attorney sounds hopeful.”

The board decided July 28 to authorize Executive Director Tracy McNew to retain the Billings firm of Patten, Peterman, Bekkedahl and Green to represent it in the bankruptcy.

Attorneys will also represent the clinic in a hearing later this month to determine if an ombudsman is required to monitor the quality of patient care and to represent the interests of patients of the health care business.

The hearing is set for 9 a.m., Aug. 30 in the bankruptcy courtroom in the Russell Smith Courthouse in Missoula in front of U.S. District Judge Benjamin Hursh.

Also, a meeting of creditors, in which a CARD representative must be present, is set for 10 a.m., Sept. 14

CARD has been battered over the last month or so after a federal jury ruled it submitted 337 false patient claims making people eligible for Medicare and other benefits they shouldn’t have received. The jury said 246 violations occurred before Nov. 2, 2015 and 91 after that date.

BNSF Railway, on behalf of the U.S. government, brought the suit in 2019 under the False Claims Act. The act allows private parties to sue on behalf of the federal government.

BNSF, which is itself a defendant in hundreds of asbestos-related lawsuits, argued the center submitted claims on behalf of patients without sufficient confirmation they had asbestos-related disease.

Then, in July, U.S. District Judge Dana Christensen ruled CARD must pay nearly $6 million in damages and penalties. Christensen ordered that the clinic must award the government $3.2 million in damages and imposed $2.5 million in penalties. BNSF is eligible for 25% of the total proceeds.

Following that, the firm representing BNSF in the suit against CARD, Knight Nicastro MacKay of Missoula, filed a motion against the clinic for nearly $1.8 million in legal fees and costs it says it is owed. According to the False Claims Act, a court must award attorney fees to any prevailing or substantially prevailing party when appropriate.

CARD filed an appeal on July 20 that it is contesting the jury’s verdict and all adverse rulings in the matter to the Ninth Circuit Court of Appeals.

There are other creditors listed in the bankruptcy filing, including a software company in California, an Idaho company that rents mobile stage equipment and a local bank.

Thom and McNew have previously said the clinic’s defense was hampered by a ruling that barred testimony from former U.S. Sen. Max Baucus of Montana. Baucus helped craft a provision in the Affordable Care Act that made Libby asbestos victims eligible for government benefits. He has said that the clinic was acting in line with that law.

"CARD is disappointed in the judgment, especially since the judge issued an order blocking CARD from finding out the bases of the 337 false claims," McNew said. "Based on the number, CARD can guess what the jury determined were false claims, but CARD does not even have definitive answers about what the jury found to be false claims. Based on what CARD thinks the likely bases of the false claims were, it has changed the process of filling out EHH forms to qualify people for Medicare. CARD has also appealed the verdict and the trial court’s rulings. It comes down to interpretation of the Affordable Care Act’s Libby provision. The judge and subsequently the jury interpreted the ACA differently than CARD has. Since 2010, CARD’s implementation of the ACA provisions has remained constant. Prior to this lawsuit, CARD’s implementation of the ACA provisions had never been at issue. CARD’s granting agency, ATSDR, testified at trial that it agreed with CARD’s implementation of the law.”

McNew also said in a previous interview with The Western News that the clinic has received funding for the new grant year which will run from September 2023 through August 2024.

In terms of those currently receiving benefits, "It is CARD’s understanding that the government has no intention of taking away anyone’s existing benefits," McNew said before.

The Libby area was declared a Superfund site two decades ago following media reports that mine workers and their families were getting sick and dying due to hazardous asbestos dust.

Health officials have said at least 400 people have been killed and thousands sickened from asbestos exposure in the Libby area.

The clinic has certified more than 3,400 people with asbestos-related diseases and received more than $20 million in federal funding, according to court documents.

Asbestos-related diseases can range from a thickening of a person’s lung cavity that can hamper breathing to deadly cancer. Exposure to even a minuscule amount of asbestos can cause lung problems, according to scientists. Symptoms can take decades to develop.

The Associated Press contributed to this report.

The original story follows below:

BILLINGS, Mont. (AP) — A health clinic in a Montana town plagued by deadly asbestos contamination has filed for bankruptcy protection after a judge ordered it to pay the government almost $6 million in penalties and damages for submitting false medical claims.

The federal bankruptcy filing, submitted Tuesday, will allow the Center for Asbestos Related Disease clinic in the small town of Libby to continue operating while it appeals last month's judgment, said clinic director Tracy McNew.

A seven-person jury in June found the clinic submitted 337 false claims that made patients eligible for Medicare and other benefits they shouldn't have received. The federally-funded clinic has been at the forefront of the medical response to deadly pollution from mining near Libby that left the town and the surrounding area contaminated with toxic asbestos dust.

The $6 million judgment against it came in a federal case filed by BNSF Railway under the False Claims Act, which allows private parties to sue on the government's behalf. The clinic has denied any intentional wrongdoing and its attorneys have appealed the jury's verdict to the 9th U.S. Circuit Court of Appeals.

BNSF is itself a defendant in hundreds of asbestos-related lawsuits. It alleges the center submitted claims on behalf of patients without sufficient confirmation they had asbestos-related disease.

U.S. District Judge Dana Christensen awarded BNSF 25% of the total proceeds in the false claims case, as allowed under the False Claims Act.

Federal prosecutors previously declined to intervene in the matter, and there have been no criminal charges brought against the clinic.

The Libby area was declared a Superfund site two decades ago following media reports that mine workers and their families were getting sick and dying due to hazardous asbestos dust.

Health officials have said at least 400 people have been killed and thousands sickened from asbestos exposure in the Libby area.

The clinic has certified more than 3,400 people with asbestos-related diseases and received more than $20 million in federal funding, according to court documents.

Asbestos-related diseases can range from a thickening of a person's lung cavity that can hamper breathing to deadly cancer.

Exposure to even a minuscule amount of asbestos can cause lung problems, according to scientists. Symptoms can take decades to develop.