Free Redacted Document - District Court of Delaware - Delaware

Case 1:04-cv-01258-SLR

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EXHIBIT F

Case 1:04-cv-01258-SLR
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IN THE UNITED STATES DISTRJCT COURT FOR THE DISTRICT OF DELAWARE McKESSON INFORMATION SOLUTIONS, LLC, ) )
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PLAINTIFF, )
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-vs-

) No. 04-1258 SLR

) THE TRIZETI'O GROUP, INC., 8 )

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DEFENDANT. )
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DEPOSITION OF: ROBERT HERTENSTEIN, M.D.

12 13 The deposition of ROBERT HERTENSTEIN, M.D., 14 called as a witness pursuant to notice and pursuant to 15 the provisions of the Federal Rules of Civil Procedure; 16 taken before BRENDA KAY LAUNIUS, CSR, RPR, a Notaiy 17 Public in and for the County of LaSalle, State of 18 Illinois, at 1928 War Memorial Drive, Peoria, Illinois, 19 commencing at the hour of 9:45 a.m., on the 13th day of 20 September, 2005. 21

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EXHIBITS (Cont'd.) Exhibit No. 122 marked Exhibit No. 123 marked Exhibit No. 124 marked Exhibit No. 125 marked Exhibit No. 126 marked Exhibit No. 127 marked Exhibit No. 128 marked Exhibit No. 129 marked Exhibit No. 130 marked Exhibit No. 131 marked Exhibit No. 132 marked Exhibit No. 133 marked Exhibit No. 134 marked Exhibit No. 135 marked Exhibit No. 136 marked Exhibit No. 137 marked Exhibit No. 138 marked Exhibit No. 139 marked Exhibit No. 140 marked Exhibit No. 141 marked Exhibit No. 142 marked

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I APPEARANCES: 2 SKADDEN, ARPS, SLATE, MEAGHER & FLOM, LLP Attorneys at Law

3 BY: MR. DAVID W. HANSEN
525 University Avenue, Suite 1100

4 Palo Alto, California 94301
(650) 470-4500

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appearing on behalf of the PlaintifI

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GIBSON, DUNN & CRUTCHER Attorneys at Law BY: MR. JEFFREY T. THOMAS 4 Park Plaza, Suite 1400 Irvine, California 92614-8557 (949) 451-3800
appearing on behalf of the Defendant.

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ALSO PRESENT: GREG CLEMONS, Videographer INDEX PAGE 14 WITNESS: 15 ROBERT HERTENSTEIN 16 Direct Examination by Mr. Thomas 4
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EXHEBITS:

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ExhibitNo. 115 marked Exhibit No. 116 marked Exhibit No. 117 marked Exhibit No. 118 marked Exhibit No. 119 marked Exhibit No. 120 marked Exhibit No. 121 marked
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THE VIDEOGRAPHER: All right. I'm Greg Clemons, videographer working for Barkley Court Reporters in California, Irvine, California. Today is September 13th, 2005. It is 9:45 in the morning. We are at the Marriott in Peoria, Illinois. This is McKesson Information Solutions, LLC, Plaintiff, versus The Trizetto Group, Incorporated, Defendant, Civil Action Number 04-1258 SLR, and this is the deposition of Dr. Robert Hertenstein. Present we have Jeffrey Thomas, Gibson, Dunn and Crutcher, and David Hansen with Skadden, Arps, Slate, Meagher & Flom, LLP. Our court reporter is Brenda Launius. And, Brenda, if you could swear in the witness. ROBERT HERTENSTEIN, called as a witness herein, upon being first duly sworn on oath, was examined and testified as follows: (Witness sworn.) DIRECT EXAMINATION BY MR. THOMAS: Q Good morning, Dr. Hertenstein.

A Morning.

65 68 77 80 84

22 Q My name is Jeff Thomas, and I represent The 23 Trizetto Group, who is the defendant in this lawsuit that 24 we are here to talk about today. You understand that the 25 lawsuit that you're here about today is a patent case
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that has been filed by McKesson against Trizetto?
2 3 Q Have you had your deposition taken before? 4 A Yes. I understand you were deposed some years 5 Q Okay. 6 ago in the litigation between HPR and GMIS? 7 A That's correct. Q Have you been deposed on additional occasions? 8 9 A Yes, I have, but not on this subject. 10 Q Okay. How many depositions have you given in

A Yes.

Q You are represented here today by Mr. Hansen; is that correct?
A That's correct.
Q Is there any reason because of illness or medication or otherwise that you don't feel able to give complete testimony today?

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A Not that I know of.
Q Okay. Other than meeting with Mr. Hansen, did you do anything else to prepare for today's deposition?

A No, not really.
Q Okay. Did you review any documents in preparation for today?

your life?

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A Perhaps three or four.
Q Let me go over just a couple of the ground rules here today, although you may already be familiar with them from your past experience. The oath that the court reporter just gave you is the same oath that you would take in a court of law if you were testifying in court, and therefore carries with it the same obligation to give complete and accurate testimony. Do you understand that?

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A I had -- did review very briefly the patent application. I hadn't looked at that for a long time. I didn't read it thoroughly though.
Q Anything else?

A No,Ididn't.
Q Sir, as I understand it, you graduated from medical school in 1957?

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A That's correct.

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Q And you then did an internship and some 22 residencies? Q Now, the court reporter will take down eveiything that's said in the room today and prepare it23 A Yes. into a booklet called a transcript, which will be made 24 Q And following completion of your residencies, 25 did you then go into private practice? available for your review, and at that time you can
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A Yes.

correct the transcript if you think that's necessary.

A Yes.
Q And in what area?

2 What's important for today though is that if you do make
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changes to your transcript, that could be commented on at

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A General surgery.

4 the trial in this case, and that might affect your
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credibility. And so it is important that you give us complete -- as complete and accurate testimony here today as possible. Do you understand that?

after Q And for how long were you -- completion of your residency, how long were you in private practice in general surgery?

A Sixteen years.

A I understand, yes.
Q Okay. I may ask bad questions today,
ambiguous, confusing questions. If I do, just ask me to clarify or change my question, and I'll be happy to do so. If you answer a question without asking for a clarification, the assumption will be that you understood the question before you answered it. Do you understand that? MR. HANSEN: Your assumption will be that. BY MR. THOMAS: Q Do you understand that, sir?

Q Until what year?

A 1981.

Q And at that point, is that when you joined the Caterpillar company?

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A I understand, yes.
Q As we discussed before we got started, this is

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A That's correct.

Q Prior to joining Caterpillar in 1981, had you -- was it part of your occupation to review in any way claims for payment by physicians or hospitals? A No. Q So Caterpillar was your first experience with that?

A Correct.
Q And you stayed at Caterpillar for how long,
sir?

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not an endurance contest of any kind. If you'd like to 22 take a break for any reason, to speak with your counsel, 23 stretch your legs, whatever, please just let us know, and 24 we'll take a break. 25 A Very well.
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A Thirteen years. Q Until 1994? A Yes. Q Did you retire at that point?
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A Yes.
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development of CodeReview?

Q Have you been working in any way during your retirement?

A Yes.
Q Other than that work and serving on the board

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A For four years after that I was a mayor of my city, but-- if you call that working.
Q I'm sure it was. Anything -- any other occupation or work since
1994?

4 of directors, did you have any other role with HPR?
A After IIPR became a functioning business, I did 6 once or twice a year help with the upgrading of codes 7 because of the changes in CPT-4, the manual, each year. 8 Q That's CPT-4? 9 A Yes. 10 Q It's all caps.
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A No.
Q Now, you're familiar with a company by the name
of HPR?

Okay. Thank you. Anything else that you did
at I-IPR?

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A Correct.

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13 Q Okay. What affiliation have you had in the 14 past with HPR? 15 A I became involved with IIPR after my involvement 16 with the Health Policy Institute of Boston University, 17 starting with the Health Policy Institute in about 1982 18 or -3. HPR was not a company until approximately 1987, I '9 think, and at that time I served on the board of 20 directors. 21 Q Were you ever an employee of HPR? 22 A No. 23 Q Did you ever receive any sort of compensation 24 for your work at HPR?

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A Not that I remember.
-Q Now, did you become a or did you remain a shareholder of HPR after the initial public offering?

Q And for how long did you remain a shareholder? A I think that at the time that IIPR was purchased '9 by HBO, I still maintained some stock in the company. 20 Q At the time of the sale to HBO, do you know
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A Yes.

what percentage of the HPR stock you owned?

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A I own stock in the company, but I did not
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A There were multiple dilutions of the stock as it went along, and I really couldn't quantify a percent 24 of the total. 25 Q Do you know what percentage of the stock you
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receive a salary. Q Did you go onto the board of directors at FIPR when it was first formed?

received initially when HPR was first formed?

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A Yes.
Q What was that? A 15 percent.
Q And did you sell some of your HPR stock before Q In addition to being on the board of directors
of HPR, were you also an officer of the company?

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A Yes.
Q And how long did you remain a member of the

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6 board of directors? 7 A Until just before it went public, and I can't 8 remember the exact date of that.
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6 it was acquired by HBO? 7 A Yes, I did.
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Q Was that the initial public offering?

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A Yes.

Q Other than serving on the board of directors,
did you do anything else for HPR?

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Q Is it fair to say that your primary role at HPR was to assist in creating and updating the database for 16 CodeReview? 17 A Yes, I think. 18 A Correct. Q Did you have any role or responsibilities on 19 the business side in terms of creating business plans, Q And I believe that by the time it was actually 20 brought to market that system was called CodeReview; is 20 doing marketing, that sort of thing? 21 that right? 21 A Only with the general discussions we had in our

A Yes. I was extensively involved with the 14 formation of a computer system to evaluate medical
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A Originally I had a title as vice-president, but later that -- it never really had any responsibilities, 12 direct responsibilities, and as the company grew, I no 13 longer held that post.
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claims. Q And that was a computer system that was later marketed by HPR?

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A That's right.
Q
That's the system that you're referring to?

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A Yes.
Q Okay. So you helped extensively in the
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22 board meetings. 23 Q And how often were board meetings held? 24 A About every four months, I believe. 25 Q Do you know if minutes of those board meetings
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A I don't know.
Q Were any documents created in connection with those board meetings in terms of agendas or presentations or minutes that you recall?

A I think in my group I probably knew more than the other three members of my group. They kind of left me--that responsibility to me. I can't judge what
their knowledge was. Q Did -- was it your understanding that most hospitals and physician groups had somebody whose responsibility it was to know the details of the CPT system?

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A Usually there was an agenda before the meetings that we received, but what they developed afterwards I don't know. Q And you mentioned CPT-4 codes. Before you went
to work for Caterpillar in 1981, were you familiar with CPT-4 codes?

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A Yes.
Q And how so?

A I'm aware of several instances where their billing clerk did the assignment of the codes instead of 11 a physician. 12 Q So is it -- was it your understanding that some
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A It was used in the billing of our surgical group. CPT-4 codes were used when you'd submit your bill to the insurance company, so I had to be familiar with what procedures you performed. Q And for how many years prior to 1981 had your
surgical group been using CPT codes in your bills?

hospitals and groups had physicians who were doing it, and others had clerks who were doing it?

A Yes.

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A Well, it was required by the insurance companies. I don't know what year that began, but it was 22 a fair length of time before I left general practice. 23 Q Was it common practice as you understand it for 24 physician groups and hospitals in the '70s to use CPT 25 codes in their billing?
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Q Other than what you learned about CPT codes as a result of being in private practice and having -- and 18 managing your group, did you receive any special training 19 or education of any kind in the CPT code system? 20 A In private practice? 21 Q Yes, sir.
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ANo.
Q

Okay. Now, in 1981 when you joined

24 Caterpillar, what was your job? 25 A Initially I was a physician in the general
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A Yes, it was required.
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Q And so did you have a working knowledge of the
CPT codes prior to coming to Caterpillar?

A In the area in which I was involved, I did,
yes.

Q In the surgical area you mean?
A Yes. Q And when you were in private practice, who was

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it that decided which codes would go onto a particular bill?

industrial medicine section of Caterpillar for about six months before I became the medical director of insurance. Q And during those six months what were your responsibilities? A Part of my time was spent helping the payment 6 center with claims that they didn't understand. 7 Q And how did you go about doing that? 8 A I examined the claims. 9 Q Now, you left -- this was a full-time job 10 beginning in 1981?
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12 13 medicine and your management responsibilities in your group, you had a thorough understanding of the CPT codes 14 in the surgical area? 15 16 A I believe so. 17 Q And did that include knowledge as to which 18 codes were included in other codes? A Yes. 19

A I did. I was the manager of our group. Q So as a result of your private practice of

A Yes.
Q So you left private practice entirely?

A Yes.

Q Now, in -- about six months into your work at Caterpillar, you became the medical director?

A Of insurance.
Q Medical director of insurance? A Yes, which was not with the industrial medicine portion. It was with a compensation department of Caterpillar. Q And what does the compensation department do? A That was the term that oversaw the pensions and the medical benefits and dental benefits for Caterpillar

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Q And that also included a knowledge as to what was the appropriate code to assign to a particular type 22 of surgical procedure? 23 A Yes. 24 Q And do you believe that other surgeons had a 25 similar type of knowledge?
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24 employees and retirees. 25 Q And did that include reviewing, correcting if
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A They reported to me.

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necessary and paying claims for payment that came in from doctors and hospitals?

Q Did the clerks report to them?

A Yes. We, of course, had a large group of
clerks who originally took the claims as they came in, and then we had a system by which we evaluated the claims depending upon their level of expertise. Q That group who reviewed these claims, did it have a name of any kind?

A It was a rather loose arrangement. I'm not

4 sure they did. They weren't directly responsible to
5 them, but they cooperated with them, of course. 6 Q Now, did these surgical technicians have any 7 background with the CPT code system? 8 A They were trained mostly after they went to 9 work for Caterpillar. 10 Q What kind of training did they receive in that 11 area?

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A Just the payment center, but I don't -- no, it

did not have a specific name, no. 11 Q Was there someone who was in charge of this 12 group?

A Iwas.

Q When you became medical director?

A Yes. The group was not present before I became 16 medical director. The level of payment of the claims, we 17 improved the quality of evaluation during that period of 18 time and the years after, too.
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A Well, mostly this came from myself, and it was an informal training. It was not a rigid form of 14 training, but they were exposed every single day to 15 claims and CPT-4 codes until they became quite proficient 16 at them.
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Q When did this process to improve the processing of the claims begin?

A When I became medical director of the medical insurance. Q Thatwasinl98l?

A '82.

Q '82, okay. And when you took over in 1982, how
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Q And when you say they became quite proficient, do you mean they became quite proficient in determining whether the code or codes on the claim were appropriate 20 for the procedure that had been performed? 21 A That's correct. 22 Q And the training that they received in that 23 area was based on your background and experience with the 24 codes that you had received in private practice? 25 A Well, it was -- no, it was expanded far beyond
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many people -- how many Caterpillar employees were involved in reviewing claims, processing claims?

A Oh, I would guess -- I can't tell you the exact
Q And were these folks all clerks, or did any of

4 number, but we had a large section in a separate
building. There must have been at least 40.

7 them have any sort of medical training?
8 A When I arrived at Caterpillar, they were all 9 clerks, but I hired surgical technicians who had a direct 10 knowledge of surgery and the general medical care more
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what I knew in private practice. I became familiar with all the areas of the CPT codes. Q You mean outside the surgical area?

A Yes.
Q So you -- did you educate yourself in the CPT
coding for areas outside of surgery so that you understood those other areas like you already did for the surgical area?

A Yes.

Q And then you passed along that knowledge to the 11 technicians that you had hired? specifically than any of the clerks I had. And I hired them because of their knowledge and the fact that I could 12 A As they were able to be utilized in certain 13 specialized areas. There was usually always claims that train them. They understood the terminology. 14 14 they couldn't handle, too, and they were brought to me, Q And when did you start hiring these surgical 15 technicians? 15 so... 16 16 A In 1982. Q Now, did -- was there some process in place to 17 17 determine what claims the technicians would look at? Q How many technicians did you hire? 18 18 A Three. A Well, they -- they filtered from the most And what sort of background did these people 19 19 inexperienced payor to a more sophisticated to the Q 20 have? 20 supervisor, and then the supervisor would in turn, who 21 21 couldn't handle the claim or didn't understand the claim A They had all worked in the operating rooms for 22 at least ten years prior to their switching to doing what 22 completely or had questions about it, would refer it to 23 they did at Caterpillar. 23 the surgical technicians. And then after them, if they 24 24 had questions about it, then I reviewed them myself. And Q And when they were hired by Caterpillar, what 25 were their responsibilities? 25 I reviewed claims almost every day, so...
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document bearing control numbers MCKI 19901 through 911. (Whereupon, Exhibit No. 118 2 was marked for 3 4 identification.) BY MR. THOMAS: 5 6 Q Sir, this is entitled Savings From Accurate 7 Coding of Surgical Claims, the Caterpillar Method, and it 7 8 appears to have been authored by Don Holloway, yourself 8 9 and Richard Egdahl. Is this, in fact, an article that 9 10 the three of you wrote? 10
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Q Is it true that when this article was written, you were working with the Health Policy Institute on artificial intelligence software?
A No, it was not artificial intelligence. Q Okay. What were you working on with -- in the
way of software with the Health Policy Institute when this article was written? A We had -- had explored the possibility of being

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A Oh, I don't know. I had several articles during that time. I assume so if it says so on the cover. Q Do you recall submitting an article for
publication in Business and Health in 1987?

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A I don't recall that. It's been 17 years ago,
so...

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Q Ifyou'd turn to the first page, please, of the article, under the heading Abstract, and the third sentence reads, Caterpillar has achieved significant savings using a unique system for assigning accurate codes to surgeons' claims.
A Yep.
Q Do you see that?

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able to present a software program or system that could be used with a computer to utilize the system that we had been doing manually, and we did in the beginning have a consultant from -- on artificial intelligence from MIT to explore the possibility of this being done. And so this was early in the -- when we were just beginning to think about it and discovered after a short period of time that artificial intelligence was not a workable solution to this problem. So this was very, very early in our attempt to develop such a system. Q Now, just a moment ago you said you were

A Yes.
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20 discussing the idea of using a computer to do what you 21 were doing as part of your manual process; is that right? 22 A To transfer the manual process to a computer 23 system. 24 Q To try to get the same results you were getting 25 from your manual process using a computer?
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AYes.
Q

Q That's a true statement, isn't it?
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A Essentially, yes. Q Now, if you would turn over, please, to the
fifth page of the article, which in the lower right-hand corner has the number ending 906. Do you have that, sir? There is a heading there, number two, A surgeon controls the processing of surgeons' claims?

And the unique system is the system that you

4 put into place beginning in 1982? 5 A Yes, and matured over a period of time then. 6 Q Dropping down, going down one paragraph, it 7 reads, The Health Policy Institute is working with the 8 surgeon reviewers at Caterpillar to make this system 9 available to other corporations through the use of an 10 expert system shell, an artificial intelligence software 11 that allows the surgeon reviewers rules of thumb to be 12 made available to claims processors. Do you see that?
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A Yes.
Q And it states, since 1983, the surgeon reviewers employed by Caterpillar to review claims have reviewed thousands of surgeons' claims. Based on this experience, they have developed rules of thumb for when codes can be accepted or changed based on available information or when an operative report must be used. Is that a true statement? A Yes. I don't know that for sure -- the term
rules of thumb is a little awkward, but we have developed a system, yes, that we have discussed earlier. Q And that -- you had been using that system
since 1983?

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A I didn't catch that.
Q Okay. I'm sorry.

A There's no paragraph. It's all the same 20 paragraph here.
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A On the background or where?
Q It's still under the abstract.

A Oh,okay.
Q The heading, Abstract.

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A Yes. I guess it took that long to get the 21 system. just one sentence down from where we Q Right, 22 were looking before, the sentence that begins, The Health 22 Q And if you'd turn over, please, to the second 23 Policy Institute is working with the surgeon reviewers at 23 to the last page of the article, there is a heading there
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24 Caterpillar?
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A Yes. Okay.
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24 that says, Discussion. Do you see that? 25 A Yes.
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THE VIDEOGRAPHER: All right. We're going off the record at 11:55. (Whereupon, a lunch break was taken.) THE VIDEOGRAPHER: All right. We are going back on the record. It's 1:02. BY MR. THOMAS: Q Dr. Hertenstein, I'm going to show you what we'll mark as Exhibit 119, which is an article entitled, 10 Doc's Knowledge Translates to Cost Reduction, has control 11 number CATO861. 12 (Whereupon, Exhibit No. 119 was marked for 13
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made at Boston University about upcoding and unbundling?

A Yes.
Q Over in -- the third column over, the second
to process those companies' future claims. Caterpillar is not in that business. But he was intrigued by an idea brought forth by a Boston University staff member who suggested that Hertenstein's mental rule book for evaluating claims be put on computer and sold to other companies. Do you see that?

4 full paragraph, it says, Hertenstein declined a request 6 7
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A Urn-hum.
Q Is that what happened? Did someone from Boston
University approach you after your presentation with that idea?

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A Yes, the Caterpillar Post is a company 20 magazine -- or paper.
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identification.) BY MR. THOMAS: Q Sir, this at least appears to be an article that appeared in a Caterpillar publication of some kind; is that right?

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A Well, the, urn, group contacted Egdahl after the conference, and then they talked to me after that, so... Q Had -- before you made this presentation at
Boston University, had you had any discussions with BU or HPI about putting your system onto a computer?

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ANo.

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Q And do you recall this article appearing in the Caterpillar magazine?

Q And who -- who from Boston University first
approached you after that presentation on that idea?

A No, but I see it was there.
Q Okay. It -- do you see in the beginning it says, When Caterpillar hired Dr. Robert Hertenstein to
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A I believe it was Holloway probably. Q Don Holloway?

A Urn-hum.
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help with problem medical claims, the company perhaps got

2 more than it bargained for?
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A Yes.
Q And then it goes on to discuss your work doing
claims review. And dropping down to the last paragraph there in the left-hand column, it says, Caterpillar's cost savings success in claim review went largely unnoticed outside the company until 1986 when Hertenstein attended a meeting at Boston University. Representatives from several Fortune 500 companies had shown up to discuss concerns over healthcare costs. During a presentation, Hertenstein showed examples of upcoding and unbundling, two practices he had encountered, that if undetected, result in higher than actual medical fees. Do you see that?

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MR. THOMAS: Let me mark as Exhibit 120 a document that bears control numbers MCK1 19610 through 623. (Whereupon, Exhibit No. 120 was marked for identification.) BY MR. THOMAS: Q Dr. Hertenstein, this is an HPI document. In the lower left corner you see it says, Draft 6, 3/17/86?

A Yes.
Q And the first -- under part one, Current Status
and Recommendations to Proceed, it says, The Februaiy 12th meeting in Peoria with Hertenstein and other Caterpillar representatives was most positive, and then it goes on to discuss something called health bills. Do you recall having discussions with HPI in February of 1986 on a collaboration regarding your claim review

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A Well, that would be the HP! meeting, and as I said earlier, I wasn't sure whether it was early '87 or 21 late '86 that that occurred, so... 22 Q Okay. And was that -- is this a PEW conference
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A Yes.
Q Do you recall making such a presentation in 1986 at Boston University?

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process?

A Yes. This was before the IIPI PEW representation. One of the individuals in the

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or some other kind of meeting?

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A No, that was a PEW conference.
Q And was that the first presentation you had
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compensation department had talked to -- because they knew that we had saved an appreciable amount of money 22 using our more close review of claims, and perhaps that 23 might be something that they could propose to other 24 companies if we -- if we processed their claims. 25 Q Okay. So before you made this presentation at
Page 80

20 (Pages 77 to 80)
ROBERT HERTENSTEIN, M.D.

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Document 426-3 2
3 5

Filed 06/22/2006

Page 9 of 42

A To see whether or not the process that we used

claims contained appropriate CPT-4 codes?

2 at Caterpillar had the same savings that the other
3

A Yes.
Q And where you determined that the CPT-4 codes

4
5 6 7 8 9
10

companies perhaps were overlooking. Q And as I understand it -- we'll get to this in
a minute or two -- but as I understand it, the first group of claims from outside Caterpillar that you looked at were from the Sun Company that were being processed by Aetna; is that right?

4 were not appropriate, did you make changes?

A Yes. A Yes.
Q Did Aetna or Sun pay anything to have you
perform this process on these claims?

6 Q And in doing that, did you analyze the claims 7 for unbundling and upcoding?
8

A I think that was the case, yes.

9
10
11

Q Now, before you actually sat down and used your 11 system to review those claims, did -- did HPI do anything 12 to study your system or to better understand what it was 13 you were doing?
14 15 16 17 18 19

A I believe that the fee from lIP! was something like $12,000 to do that, but that's been a long time ago. 13 But my memory was that that is what it was, something
12 14 like that. 15 Q Do you know where that money came from? Did it 16 come from Aetna or Sun or -17 A No, it came from Sun.

A No. They just simply wanted to know the comparison.
Q Were you told that one of the reasons why they wanted you to look at these other claims was to determine whether the pro- -- your process could potentially be sold to other companies?

20
21

A That using my -- our process, if it saved
money, was it feasible then to think about starting a business that would process other people's claims.

22
23 25

Q Was that why they wanted you to review these 24 other claims?

A Yes.
Page 93

Q Okay. And as a result of doing this claim, it appears that you determined that had Aetna used your 20 Caterpillar process, less money would have been paid on 21 these claims? 22 A Correct. 23 Q And what happened next after you completed this 24 review? You reported your results back to HPI? 25 A Yes.
18 19
Page 95

MR. THOMAS: Let's mark as Exhibit 123 a document with control number MCK1 13281. (Whereupon, Exhibit No. 123 4 was marked for 5 identification.) 6 BY MR. THOMAS: 7 Q Sir, this has your name in the lower left 8 corner on January 6, 1987. Would you take a look at it 9 and tell me if this is a memo that you wrote at that 10 point?
2 3
11

Q Okay. Do you know what they did with it?

2 3 4 5 6 7 8 9
10
11

A Well, they wanted to see if this could be replicated with the other people who had made a request. Chrysler was one, as mentioned in this memo, and I remember Iramco was one, and then Weyerhauser Insurance. I don't know how many we did, but I know of at least those four.
Q And did you do those other reviews -A Early in 1987. Q Okay. And I assume you followed the same
process we just talked about?

A Yes, urn-hum.
Q And the first paragraph states, We have completed our first study of Health Bills' potential savings. Boston University withdrew 135 consecutive procedural medical claims that were processed and paid by Aetna at their Reading, Pennsylvania, payment center for Sun Oil Company. Do you see that?

12
13

14 15 16

Q So by January of 1987, you had completed this 20 review of these claims from Aetna?
21

17 18 19

A Yes. A Yes.
Q And did you review those claims using the same rules and process that you used at Caterpillar?

12 13 14 15 16 17 18 19

A Yes.
MR. THOMAS: Could you mark as Exhibit 124 a document with control numbers MCK1 19935 through 946. (Whereupon, Exhibit No. 124 was marked for
identification.) BY MR. THOMAS: Q Sir, this is entitled, Final Report to Caterpillar, Inc., and Sun Company on Evaluation of Negotiated Surgeon Claims. Were you aware in early 1987 that HPI was preparing a report for Aetna and Sun on the work that you had done?

20
21

22
23

22
23

24
25

A Yes.
Q And did that include analyzing whether the
Page 94

24
25

A Yes.
Q And this says final report to Caterpillar,
Page 96

24 (Pages 93 to 96)
ROBERT HERTENSTEIN, M.D.

Case 1:04-cv-01258-SLR
1

Document 426-3

Filed 06/22/2006

Page 10 of 42

Inc., and Sun Company. Was Caterpillar also -management at Caterpillar informed of what you --the 3 outcome of your review of the Aetna and Sun claims? 4 A It was just in our own department. A generic
2

receive any information about Aetna -- the recoding

2 system that Aetna had in place?
3

ANo.
Q Okay. Were you aware that Aetna had nurses and physicians who were involved in reviewing the codes that were on claims? A I -- well, we assumed that they would, but even

4
5 6 7 8 9

5 term, Caterpillar, I think there.
6

Q Ifyou would turn over to page four of the 7 report, there is a heading there that reads, Study 8 Design. Do you see that? It has page four at the top of

9 the page.
10
11

A Oh,yes.

with that assumption, we found that we had a significant amount of savings more closely scrutinizing the claims. 10 Q Do you know the extent to which in early 1987
11

Q And it says, The purpose of this study is to 12 compare the payments for surgical procedures authorized 13 by Aetna on Sun's behalf with the payments that would 14 have been authorized by the surgeon bill review program 15 implemented at Caterpillar. Do you had understand the 16 surgeon bill review program to be your system for 17 reviewing claims at Caterpillar? 18 A Yes. 19 Q Since we studied two questions in particular, 20 one, what is the savings due to applying Caterpillar's 21 regional negotiated fee schedules, assuming no changes to 22 Aetna's CPT-4 codes; and, two, what is the additional 23 savings due to physician-directed recoding of Aetna CPT-4 24 codes when appropriate, assuming the physician negotiated 25 fee schedule is applied. Were those the two things you
Page 97

upcoding? 20 A I really don't know. 21 Q After the report was given to Aetna on your 22 review of their claims, did Aetna or Sun then ask that 23 you do anything else for them?

12 13 14 15 16 17 18 19

or 1986, the extent to which Aetna was recoding claims before they were paid?

A Specifically with Aetna I couldn't say. I think as a general rule for the entire industry I could see that very few of them were closely correcting any coding errors. Q And do you know whether Aetna in 1986 was
recoding claims where it was discovering unbundling or

24
25

A We had a meeting at the Sun corporate offices in Philadelphia in which Sun Oil Company was a little bit
Page 99

were looking at when you reviewed these Aetna bills?

2 3

4
5

6 7
8

9
10
11

2 A No. I -- again, the -- HPI had several times wanted me to consider making part of this -- our program 3 4 a national fee schedule, and I told them I never wanted 5 anything to do with a fee schedule. That was too 6 difficult, and there was too much variation in the way fees -- the level of fees in different cities, that it 7 8 just couldn't be done. I told them to forget that. So I 9 don't know how they thought they were going to use it, 10 because I kept saying, no, I won't do it. Okay?
Q But the aspect of your system that you thought could be applied to other companies was your analysis of the coding? Q Ifyou'd turn over to page eight, please, there is a heading there at the top, Process?

irritated that -- what they had thought was Aetna had not closely scrutinized their claims, and they were a little bit irritated with them, and we had a meeting in which there was several comments made on that basis.
Q Once your study of the Aetna claims showed that your process could lead to additional savings, did you and HPI have further discussions about moving forward with a business?

12
13

14 15 16 17 18 19 21

A Of the coding, yes.

A Well, what it showed us was that the original business plan which was simply claims processing, other 11 people's claims, that we did have a significant savings 12 and that we could have a viable business entity, and we 13 didn't really have a business of any kind at that time to 14 offer to anybody and were conducting further studies to 15 see if this was replicated, so...
16 17 18 19

A Urn-hum.
Q And the second paragraph down, second sentence
reads, Aetna's claims processors review the physician's

Q Further studies, you mean to look at claims from other companies?

A Yes, urn-hum. Q And those further studies were done in early
1987?

20 submitted CPT-4 code and either accept the code, correct
the code or refer the claim to the cost containment unit 22 where a nurse, sometimes in consultation with a 23 physician, corrects the code. Do you see that? 24 A Yes. 25 Q Didyou -- as part of this process, did you
Page 98

20
21

A Yes.

22 Q And did they again show that if you used your 23 system, further savings could be achieved? 24 A Yes. 25 Q And at that point then did you and HPI discuss
Page 100

25 (Pages 97 to 100) ROBERT HERTENSTEIN, M.D.

Case 1:04-cv-01258-SLR
1

Document 426-3 2
3

Filed 06/22/2006

Page 11 of 42

2 3

We will calculate the potential savings from increased accuracy in coding of claims with and without the use of Auto Coder. Do you know what Auto Coder is?

bearing control numbers MCK 120112 through 122. (Whereupon, Exhibit No. 127 was marked for

4
5

A I have a general idea what it does. Q What does it do, or what did it do back in

4
5

6 1987? 7 A You typed in a diagnosis, and it gave you a 8 code that corresponded with it 9 Q A CPT-4 code?
10
11 13

6 7 8 9
10
11

identification.) BY MR. ThOMAS: Q Sir, this is entitled, Proposal to Aetna Life and Casualty Insurance Company for Evaluating Potential Savings for Increased Accuracy in CPT-4 Coding, and it's dated July 1987. Do you see that?

AYes.

A Yes.
Q And do you recall a proposal being made to Aetna in the summer of 1987?

Q And would it also tell you whether a CPT-4 code

12 was actually a valid code that was in the AMA manual?

12
13

A I thiuk it only had the CPT codes in it

A I don't think I was involved with that It
might have been HP!. Q Turn to the third page, control number 120114.

14 Q And so if you typed in a code that didn't 15 exist, that was not a valid CPT-4 code, would it tell you 16 that? 17 A I don't know. 18 Q Did Caterpillar ever use Auto Coder? 19 ANo. 20 Q Now, going back up to the paragraph above where 21 it says, Coding audits are our first step toward building 22 clinical decision rules, what do you understand clinical 23 decision rules to be?

14
15

In the first paragraph, it says, In May 1987, the Health Policy Institute of Boston University, in cooperation with Aetna Life and Casualty Insurance Company, completed a study for Sun Company and Caterpillar, Inc., that 20 evaluated the potential savings from increased accuracy 21 of CPT-4 codes on physician claims for surgery and all 22 other invasive procedures. That's the study that you 23 performed that we have already discussed, right?
16 17 18 19

24 A I think it probably could mean different things 24 25 25 to different people.
Page 105

A Yes.
Q And then turn over to page two, the next page,
Page 107

1

2
3

4
5

6 7
8 9 10
11

12
13

14 15 16 17 18 19 21

excuse me, the document says, This proposal is designed MR. HANSEN: As used in this letter or generally? 2 to answer these questions and provide the basis for the MR. THOMAS: What does he -- does he have an 3 Health Policy Institute to submit a follow on proposal understanding based on his background and expertise as to 4 for assisting and improving the accuracy of CPT-4 coding. what clinical decision rules are. 5 Based on preliminary results, we anticipate that this MR. HANSEN: Again, as used in this letter or 6 will involve the Health Policy Institute in building 7 clinical decision rules for software that will assist the generally? MR. THOMAS: Generally. 8 claims processing units in, one, assigning accurate codes 9 to the combination of procedure codes on a claim; and, MR. 1-IANSEN: Object to the form. THE WITNESS: I would say professional input into a 10 two, deciding when it is cost effective to request an 11 operative report. Do you understand the reference to code or the audit. 12 codes here being CPT-4 codes? BY MR. THOMAS: 13 A Yes. Q Professional input into whether the code was 14 Q And were you aware in July of 1987 that HIPI was appropriate? 15 talking to Aetna about creating software that would A Yes. 16 assign accurate codes to the combination of proper codes Q And that's one of the things that you did at 17 on a claim? Caterpillar, right?
Q
Does it mean anything to you?

A Yes. Q It goes on to say, for building clinical

20 decision rules for software that will assist the claims
processing units in assigning codes using all available

22 information. Do you understood codes to be a reference 23 to CPT-4 codes? 24 A Yes. 25 MR. THOMAS: Let's mark as Exhibit 127 a document 25 be used to perform your process had been disclosed to
Page 106

Q And the idea that a computer and software could 20 be used for that purpose had been disclosed to Aetna by 21 July of 1987? 22 A That the possibility of having that was 23 possible. We didn't have that, of course. 24 Q But the concept, the idea that a computer could
Page 108

18 19

A Yes, that was their plan.

27 (Pages 105 to 108)
ROBERT HERTENSTE1N, M.D.

Case 1:04-cv-01258-SLR
Aetna?

Document 426-3
2 3 4 5 6 7 8 9
10
11

Filed 06/22/2006
A No, I don't.

Page 12 of 42

2
3

A I assume that that is what they interpret it
as. Q And these discussions were being had in
connection with the possibility of Aetna providing funding or ultimately purchasing that software?

Q In the first paragraph he writes, In order to
prepare for obtaining legal assistance, I am submitting this outline of the issues for structuring a deal with Aetna or other funding source for your consideration and feedback. This is what we were just talking about, right, that at this time HPI was looking for funding to develop the HPI project?

4
5

6 7 8 9
10
11

A I can't remember what that reasoning was behind that. Q As of July of 1987 were the Health Policy
Institute people looking for funding for this project?

A Yes.
Q Under product description, the document states,

A Yes.
Q And was Aetna one possible source of the
funding?

12
13

14
15

A I guess, but I know Caterpillar was also a
possibility.

We have a software product, paren, Medreview, close paren, and an annual subscription service for receiving 13 updates to Medreview. Was Medreview a name that was used 14 for what later became CodeReview?
12
15

A Yes.
Q And by September 14 of 1987, was there a software product in existence?

Q Okay. And I understand you had a heart attack 20 in the summer of 1987? 21 A Yes. 22 Q And was that -- did that contribute to 23 Caterpillar's interest?
24
25

16 17 18 19

Q Now, speaking of Caterpillar, in 1987 did it
become interested in getting software of this type?

16 17

A Yes.

18 A No. 19 Q Do you know what Mr. Holloway is referring to 20 when he says, We have a software product?
21

A I think what he should have said was, We will

A Yes.
Q

How come?
Page 109

22 have a software product. 23 Q Dropping down a little bit, he says, Medreview, 24 therefore, has four components. The first is a knowledge 25 base, a listing of the information required to review the
Page 111

I 2
3 5

A They didn't want to lose my expertise. Q So Cat -- when you had your heart attack,
Caterpillar became concerned that the claim review

appropriateness of each CPT-4 surgical procedure code,

2 paren, for example, other procedures assumed under the
3 5

given code, the allowed diagnosis, the accepted location you helped to develop?

4 process that you were performing, that the savings from
that might be lost?

4 of service, et cetera. This knowledge base, is this what
6

6 7
8

A Yes.
Q And so were they -- did they become interested in getting software that would replicate what you were doing?

A Yes, over the next several months after this

7 time, I spent a good bit of time giving them the
8 information they needed. 9 Q And the information that went into this 10 knowledge base was your expertise on what codes could be 11 combined with other codes? 12 A Yes, part of it.
13

9
10
11

A Yes. A Yes.

12
13

Q And is that what you and HPI set out to do was create software that would replicate your manual process?
MR. THOMAS: Let's mark as Exhibit 128 a document with control number 119729 through 736. (Whereupon, Exhibit No. 128 was marked for identification.) BY MR. THOMAS: Q Sir, this is a memorandum dated September 14, 1987, from Mr. Holloway to yourself and a couple of other gentlemen. Do you see that?

14
15

14
15

16 17 18 19

16 17
18

19

20
21

20
21 22 23

Q What else? A Well, there are many things. Place of service, as is stated above, appropriateness of coding two codes together, and then bundling codes that would fit into one that had been separately brought, whether or not a procedure could be performed in the setting that they submitted the bill from, et cetera. There were many facets to it. Q And these were -- these many rules were the
rules that you were using manually at Caterpillar?

22
23

A Yes.
Q Do you recall receiving this memorandum from Mr. Holloway?
Page 110

A Yes.
Q And you spent -- as I understand, you spent a great deal of time explaining and passing those rules on
Page 112

24
25

24
25

28 (Pages 109 to 112)
ROBERT HERTENSTEIN, M.D.

Case 1:04-cv-01258-SLR
to the HPI people?

Document 426-3 2
3

Filed 06/22/2006

Page 13 of 42

A Yes. I estimated a thousand hours between then and the next fall of '8- -- what, '88. 4 Q And as I understand it, most of that time was
2 3
5

of some type. Q Do you know whether they did that?

A

Yes.

4
5 6

spent with Dr. Goldberg?

yes. Q Okay. Did you -- and you understood that they 9 were compiling all of these rules to go into the 10 knowledge base?
8

6 7

A He was the knowledge engineer as we called him,

7
8

9
10
11

A Yes, they were finding out how they could 12 submit these rules and the knowledge base into a computer 13 system. 14 Q And by the time you got all done providing all
11

12
13

14
15

of this information to HP!, was it your understanding 16 that there were literally thousands of these rules?
15

17

A Yeah. The estimate was 45,000 rules, yes.

18 Q Now, did you understand that once this 19 knowledge base was completed, that it would be accessed 20 by using a computer and software? 21 A Yes. 22 Q Did you have any input at all into the software 23 itself?

16 17 18 19

20
21

I guess is the name of it. Q Did they, Aetna I mean, purchase that software from GMIS as you understand it? A My impression was GMIS was owned by Aetna. Q Prior to September of 1987, do you know whether HP! disclosed the idea that it would be possible to develop this kind of software to anyone else in addition to Aetna? MR. HANSEN: Can you read it back? I missed the beginning. Sony. (Record read.) MR. HANSEN: Object to the form. THE WITNESS: I'm not sure, you know, precisely -what we presented to Aetna was just a concept of a product at the time, and I don't remember anybody else having a discussion with us on that.

Q What did they develop, if you know? A A system called GMIS, that Code Check

24
25

A No, I did not.
Q Your input was on the knowledge base side?
Page 113

22 BY MR. THOMAS: 23 Q By September of 1987, you had performed 24 analysis of claims for these other companies you
25

mentioned, Chrysler, Iramco, Weyerhauser, right?
Page
115

2
3

4
5

A Yes. Q And this Medreview software that's being discussed here that would include the knowledge base, this was the type of software that was being discussed with Aetna?

2
3

4
5

A Yes. Q Do you know whether the concept that a computer could be used to replicate your process was discussed with any of those companies?

6 A I don't -- I didn't understand what the 7 computer system was, so I couldn't answer that as -- I
8

A No, it was not.

don't know for sure.

Q Well, was -- the software that was being 10 discussed with Aetna in the summer of 1987, it's the same 11 thing we're talking about now, right, with the knowledge 12 base?
13

9

6 Q Do you know why it was discussed with Aetna but 7 not those other companies? 8 A No, I don't. MR. THOMAS: Let's mark as Exhibit 128 -9
10
11

THE REPORTER: 129.

12
13

A Except there was no software at that time.

14

Q 15 was being discussed is the software that would include a 16 knowledge base and software to access it? 17 A Yes. 18 Q Do you know whether Aetna ultimately elected to 19 fund the creation of the software, or purchase it?

I understand, but the conceptual software that

14
15

MR. THOMAS: -- 129, excuse me, a document bearing control number MCK1 19737. (Whereupon, Exhibit No. 129 was marked for

identification.) BY MR. THOMAS: Q Sir, this appears to be a letter dated 18 September 22, 1987, from Dr. Egdahl at HPI to Richard 19 Wright at Caterpillar with a copy to you. Do you see 16 17

20
21 22 23

A No, they decided against it, so...
Q Do you know whether they developed or purchased some alternative kind of software?

20 that? 21 A Yes, urn-hum. 22 Q And Mr. Wright was in charge of the benefits

A Well, there wasn't any other software 23 department at Caterpillar? 24 available, so they couldn't have bought it, but I do know 24 A I'm sorry, would -- you asked what? 25 that they were interested in developing their own product 25 Q Yeah. Was Mi. Wright in charge of the benefits
Page 114
Page 116

29 (Pages 13 to 116)
ROBERT HERTENSTEIN, M.D.

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department at Caterpillar?

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1

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A Yes, urn-hum.

Page 14 of 42

2 3
5

A He had -- no. He had a supervisory role. I
don't know whether I'd say he was in charge of the
Q By the way, when you were medical director at

4 benefits department or not. 6 Caterpillar, who did you report to? 7 A The director of compensation.
8
Q And who was that?

2 Q As we just looked at, Dr. Egdahl said that the 3 software was in the early stages of development. Do you 4 know as of September22 1987 how far along that work was? 5 A Not very far, because I hadn't worked for six

6 weeks or so after that, and we had only done a very short 7 portion of it prior to the time I had my coronary, so...
Q Okay. So prior to the time that you had your 9 coronary, had you begun your work with HPI to help them
8

9
10

A There were

several of them. The last one was

Jerry Kenny (phonetic), but when this was going on it was 11 a man -- I can't think of his name right now. 12 Q Okay. Dr. Egdahl writes to Mr. Wright in this 13 letter, We appreciate your continued interest in the 14 development of a software package that would assist 15 claims processors in applying medical decision rules to 16 the selection of appropriate codes for surgeons' claims. 17 Again, do you understand the codes here to be CPT-4 18 codes?

10 build the knowledge base? 11 A Well, we really were trying to decide whether 12 or not they could transpose what I was saying into any 13 type of a useful product in a computer sense, and I don't 14 think we had established that exactly at that time, 15 because my initial impression was that it probably

16 couldn't be done, but... 17 Q By September 22, had enough work been done to
18 determine that it was feasible? 19 A Idon't know. 20 Q Now, in this work that you did to help them 21 build the knowledge base, you gave them very specific 22 information about -- code by code about which codes were 23 appropriate to be combined, correct? 24 A Well, I recalled instances where there was 25 improper coding with the codes in the -- on a code, so it
Page 119

19

20
21

A Yes, urn-hum. Q And he writes, Since the software is in the

early stages of development, we are preparing a proposal 22 to work with Caterpillar for your consideration. As of 23 this point, September 22, 1987, had there been some 24 discussions between HPI and Caterpillar about Caterpillar 25 funding or purchasing this software?
Page
117

A Yes. 2 3

Q

And when did those discussions start?

4
5

A After I had my coronary, so... Q And when was that exactly? A InJuneof--orJulyof'87.
And had HPI informed Caterpillar that they thought it would be possible to create this software?

6
7
8

Q

wasn't necessarily just which combining of codes. It was whether or not I saw someone had used a code to upcode in 3 order to enhance a payment and that sort of thing that I 4 had looked at over the years, which was quite a number of 5 claims. 6 Q So these rules, ifyou will, that you provided
2
7
8
to go into the knowledge base, these were based on your

A They wanted to have the funds to be able to 9 decide whether it was possible to develop it. 10 Q I assume that they told Caterpillar that they
11

actual

experience at Caterpillar in reviewing claims?

9
10

A By and large, yes, urn-hum.

thought if

they got sufficient funding, they could do it?

12
13 14

A
be the

They thought they

could, and Caterpillar would

Q Did you give them any rules that for any reason you would not have followed at Caterpillar as part of the 11 12 manual process?
13

beneficiary of the software program, so...

Q And so from HPI's end, the reason they were 15 talking to Caterpillar about creating this software was 16 to get funding from Caterpillar?
17

A Yes, and also to make sure that they agreed

14 15 16 17
18

A I don't understand that question. Q Yeah, that's a bad question. Were there
rules

any

that you provided them to go into the database that you felt would have been inappropriate for Caterpillar to use as part of the manual process?

that I could spend the time doing it, too. 19 Q Did Caterpillar accept HPI's proposal and 20 provide the funding?
18
21

A

No.

Because what you were trying to do was create a 20 knowledge base that replicated what you were doing?

19

Q

A Yes.

22 23
24 25

Q When did that happen? A In the fall. I'm not sure of the exact dates, but --

A Yes, and I would assume that we would be a 22 little more strict than some people might, so... 23 Q Did you have any discussions with the folks
21

24 25

Q

In the fall of 1987?
Page 118

from HPI about what would be involved in creating a software itself that would be used to access the
Page 120

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2
3

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE CIVIL ACTION NO. 04-125 8 SLR

1 APPEARANCES: 2 On behalf of the Plaintiff:
3

4
5

4
:
5 6 7 9 10
11

BERNARD SHEK, ESQ.
Skadden, Arps, Slate, Meagher & Flom, LLP 525 University Avenue, Suite 1100 Palo Alto, California 94301 (650) 470-4500 MICHAEL A. SITZMAN, ESQ. Gibson, Dunn & Crutcher, LLP One Montgomery Street Telesis Tower, Suite 31 San Francisco, California 94104-4505 (415)393-8221 BRENT TROUBLEFIELD, VIDEOGRAPHER

6 MCKESSON INFORMATION : 7 SOLUTIONS, LLC, 8 : Plaintiff,

8 On behalf of Defendant:

9 vs.
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:

10 THE TRIZETTO GROUP, INC.:
Defendant.
:

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-----A

Durham, North Carolina Friday, September 23, 2005

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VIDEOTAPE DEPOSITION OF KELLI A. DUGAN, 18 a witness herein, called for examination by counsel 18 19 for the Defendant, in the above-entitled matter, 19 20 pursuant to notice, the witness being duly sworn by 20 21 DARLENE M. BRYANT, Registered Professional Reporter 21 22 and Notary Public in and for the State of North 22 23 Carolina, taken at the offices of Interactive World, 23 24 1000 Park Forty Plaza, Suite 300, Durham, North 24 25 Carolina, at 8:06 a.m., September 23, 2005, and the 25
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proceedings being taken down

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by Stenotype by DARLENE M. BRYANT and transcribed under her direction.

C ON TENT S
EXAMINATION BY COUNSEL FOR Defendant Plaintiff 7, 180 177

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3 THE WITNESS 4 KELLI A. DUGAN: 5 By Mr. Sitzman:

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6 ByMr.Shek:
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EXHIBITS
PAGE NO.

11 EXHIBIT NO.
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7-29-87, Holloway to Fager 2 10-14-87 Holloway to Fager
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53 55
66

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3 USPatent5,253,164

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103 4 Subpoena 5 Article, The Caterpillar Experience 105
6 Memo, 1-29-88, Holloway to Egdahl

108

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7 5-20-88, Holloway to Egdahl 122 8 RICS 9 Flow Charting Worksheet

121

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127

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10 Memo, To HPR Staff, 1-17-89
11 CRW, 1-25-89
12 1-26-89, Holloway To
14 12-12-89, Goldberg to

129

Bolz

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24 13 2-13-89, Don & Kelli To PDT

Dugan

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KELLI A. DUGAN

Case 1:04-cv-01258-SLR
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Document 426-3

Filed 06/22/2006

Page 26 of 42

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Q. All right. Well, let's just walk through this real quickly. A. Okay.
Q. Is it your belief and understanding that they would receive a medical claim?

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A. Yes.
Q. Was it your belief and understanding that one of the -- one of the things that they were to do is to find out if there were more than one service -- CPT-4

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code on that claim?

A. Yes.

Q. Okay. Was it your knowledge and understanding that they would also look at those codes when there 14 were more than one, to determine whether or not those 15 codes were mutually exclusive due to some nonmedical 16 criteria?
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A. I guess that's where I'm being tripped up, nonmedical criteria. It's -- I -- they don't my understanding is that -- for instance, this is an example. Yes, that they -- that Bob and/or Peggy, would look at certain claims that had more than one code, and perhaps they would deny any payment on a particular code because of its relation to the other one, or more, that appeared on that same claim.
Q. Okay. And then they would -- based on your
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A. Uh-huh. Q. -- and the databases -A. Yes. Q. -- were two separate things? A. Yes. Q. The software code that you developed in Dbase and then later Cliff developed in Clipper, or the Clipper compiler on top of Dbase -A. That we -- yes, that he and I worked with, yes. Q. -- was code that was designed simply to interact between the rule interact; use the rules and the database, and get them to function together; is that a fair assessment?

A. The computer code -- just one more time. Repeat.

Q. Okay. The computer code that was created -A. Yes. Q. -- first by you in Dbase --

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A. Uh-huh.
Q.

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A. -- with Clipper -Q. Right.

--then--

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A. --with Cliff-Q. -- was code that was designed simply to get
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knowledge and understanding, they would authorize

2 those codes that were not mutually exclusive?

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A. Yes, I believe so. Q. And they would reject those that were? A. Yes, I believe so. Q. Can you recall your early conversations with

7 Cliff Alper, and what the general task was that was

8 given to him? 9 A. In the beginning, I believe I wanted him to 10 make the user interface more user-friendly. My 11 prototype was a little bit rudimentary in terms of 12 user interface. So he did a lot of work on that, at 13 the beginning.
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the databases and the rules to work together. 2 MR. SI{EK: Objection; vague and ambiguous. 3 THE WITNESS: They were certainly not mutually 4 exclusive. There were certain aspects -- ofthe code, 5 I believe -- you're -- what you're explaining is 6 probably the primary function of the code; is to take 7 the information that was in the databases, and with 8 the information from the incoming claim, it would take 9 all of that information and the code would work 10 through the numbers to come up with an answer. BY MR. SITZMAN: (RESUMED.) 11 12 Q. Okay. Let me see if I understand this.
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A. Okay.
Q. I'm getting lost.

14 Q. Okay. At some point in time it sounds like 15 you then had him refine, maybe, the computer program 15

A. Okay.
Q. As I see CodeReview, it had three components?

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18 Cliffs work with the IIPR group, we moved from 19 strictly Dbase 3 to Clipper group. 20 Q. Right. 21 A. Which gained us a lot of speed and a lot of 22 more functionality in terms of user interface.
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A. Refine -- he -- yes, because with the onset of

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A. Okay. Q. It had rules, it had a database, and it had
software code. Am I missing something?

A. The-Q. All right. Let me -A. -- the database -- the rules aren't really a

Q. The code -- strike that. Let me see if I can

24 get back.
The rules that you and Don created -Page 94

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separate entity exclusive of either the database or the software code. Q. Okay. Okay. All right. So that's where
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24 (Pages 93 to 96) KELLI A. DUGAN

Case 1:04-cv-01258-SLR
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Document 426-3
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Filed 06/22/2006

Page 27 of 42

A. Yes.
Q. Page after page after page?

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A. Yes. A. Yes.

Q. CodeReview?

I didn't participate in the development of

Don's. Q. Is it safe to say that it's not yours? A. Yes, I think so.
THE VIDEOGRAPHER: We have about five minutes. MR. SITZMAN: Let's do one quickie, and then we'll -(The document referred to was marked KD Exhibit No. 17 for identification.) BY MR. SITZMAN: (RESUMED.) Q. Before I ask you any questions about KD-17, do you have any knowledge that KD-16, the application that we were just looking at, the big thick -- that this was abandoned, that the prosecution of this was abandoned before the Patent and Trademark Office?

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Q. And my name doesn't appear anywhere on the patent?

A. Uh-huh.

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Q. -- somebody who developed the code -A. Uh-huh. Q. -- somebody who is an inventor on the patent -20 A. Yes. 21 Q. -- and whose name does appear -22 A. Yes. 23 Q. -- what is Appendix D? What -- what -24 A. I believe that Appendix D is the -- the code, 25 uncompiled code from CodeReview.
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Q. So what I'm interested in -A. Uh-huh. Q. -- is from your prospective --

A. Yes. Q. -- somebody who did work on the code -A. Yes.

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A. I don't know.
Q. Okay. KD-17. I ask you to just take a brief look at that. Is that your signature on the last page, MCK198?

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A. Yes, it is.
Q. And do you recall reviewing and signing this document in connection with the filing of the patent application?
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2 CodeReview? 3 A. Correct. It's the code. 4 Q. It does not contain any of the information
5 that is in any of the knowledge bases, the knowledge

Q. You think it's the uncompiled code from

A. No, I do not.

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Q. You don't recall it?

A. No.
Q. Okay. On page MCK 197, the Power of

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Attorney--

6 base databases? 7 A. Correct. 8 Q. All right. So I think -- ifI gave this to a 9 computer programmer -Q. -- he could almost make CodeReview, but he 12 wouldn't have the database, the knowledge -- he 13 wouldn't have the information in the knowledge base 14 databases necessary to run CodeReview? 15 MR. SHEK: Objection; vague and ambiguous. 16 TFIE WITNESS: Correct. 17 BY MR. SITZMAN: (RESUMED.) 18 Q. I'd like to turn to the flow charts in the 19 back real quickly, for example, MCK1 84. 20 A. Okay. 21 Q. The handwriting is slightly different than the 22 flow charting I saw earlier. Can you -- do you 23 recognize this handwriting? 24 A. I -- could speculate that this is Don
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A. Uh-huh.

Q. -- a Jason Mirabito and Jason Honeyman; do you see that?
A. Uh-huh.
Q. Are those the la'ers that you can recall
meeting with, I think you testified earlier about two or three times, during the prosecution of the patent?

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A. Uh-huh.

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A. Yes.
MR. SITZMAN: Okay. All right. You want to
change tapes? THE VIDEOGR.APHER: This concludes Tape 3 of the deposition of Kelli Dugan. The time is 12:26 p.m. (\Vhereupon, at 12:26 p.m., a recess was taken until 12:34 p.m.) THE VIDEOGRAPHER: This is Tape 4 of the deposition of Kelli Dugan. The time is 12:34 p.m. FURTHER EXAMINATION BY CO