Deconstructing Tuomey: 25 Years on, Is It Time for Congress to Revisit the Stark Law?

By and on September 14, 2015

In 1989, Congress enacted the Ethics in Patient Referrals Act. Twenty-five years later, in United States ex rel. Drakeford v. Tuomey, the Fourth Circuit upheld the largest False Claims Act (FCA) judgment predicated on Stark Law violations to date: $237 million. Writing in concurrence, Judge Wynn summarized the situation as “[a]n impenetrably complex set of laws and regulations that will result in a likely death sentence for a community hospital in an already medically underserved area,” concluding that “even for well-intentioned health care providers, the Stark Law has become a booby trap rigged with strict liability and potentially ruinous exposure—especially when coupled with the False Claims Act.”

The court’s opinion did not quarrel with this assessment: “we do not discount the concerns raised by our concurring colleague regarding the result in this case. But having found no cause to upset the jury’s verdict in this case and no constitutional error, it is for Congress to consider whether changes to the Stark Law’s reach are in order.”

This is not the first time that serious concerns have been raised about the breadth, complexity, and inscrutability of the Stark Law as currently implemented. As part of the Balanced Budget Act (BBA) of 1995, Congress voted to repeal the Stark Law as applied to compensation arrangements, but the BBA was vetoed by President Bill Clinton. More recently, the law’s namesake, former Representative Fortney “Pete” Stark, has urged its repeal.

This article is not intended to summarize all the facts of Tuomey or its extended procedural history, which have been recounted elsewhere. Rather, we seek to comment on three key aspects of the case: (1) the defendant’s advice of counsel/ scienter defense; (2) the court’s application of the “takes into account” prong to Tuomey’s physician employment agreements; and (3) certain inherent tensions in the Stark Law that the Tuomey odyssey underscores.

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Daniel H. MelvinDaniel H. Melvin
Daniel H. Melvin counsels clients on Stark, Anti-Kickback and Medicare compliance issues such as physician compensation matters, and assists clients in investigating and addressing potential or alleged violations, including self-disclosures and defense of Stark- and Anti-Kickback-related qui tam actions. He also works with hospitals and physicians on coordinated care and other alternative service delivery models, including bundled payment and cost savings models, providing regulatory and transactional counsel and support. Read Daniel H. Melvin's full bio.


Eric B. Gordon, MDEric B. Gordon, MD
Eric B. Gordon advises clients on fraud and abuse and compliance issues and health care transactions. He is partner-in-charge of the California Health Industry Practice Group. Eric represents a wide range of clients, including proprietary and tax-exempt hospital systems, medical groups, academic medical centers and faculty practice groups, pharmaceutical companies and medical device manufacturers, and group purchasing organizations. Read Eric B. Gordon's full bio.

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