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Congress Examining Stark Law Reform This Year

On July 12, 2016, the US Senate Finance Committee held a hearing to “examine ways to improve and reform the Stark Law” as a follow up to releasing a white paper on June 30 titled Why Stark, Why Now? Suggestions to Improve the Stark Law to Encourage Innovative Payment Models. The white paper summarizes comments and recommendations gathered during a roundtable discussion held by the Senate Finance Committee and the US House Committee on Ways and Means in December 2015 as well as written comments submitted by roundtable participants and other stakeholders on topics taken up by the roundtable in the weeks following the meeting. Senate Finance Committee Chairman Senator Orrin Hatch commented in a press release that “[t]he health care industry has changed significantly since Stark was first implemented, and while the original goals of the Stark law were appropriate, today it is presenting a real burden for hospitals and doctors trying to find new ways to provide...

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The ‘Practice Losses’ Theory as an Enterprise Risk

Three recent, significant FCA settlements with hospitals involving Stark law allegations may also have unexpected governance implications. To varying degrees in these settlements, the Department of Justice (DOJ) appears to advance the highly controversial position that the Stark law is violated when a health system pays employed physicians more than the net professional income the physician generates. While DOJ has in the past expressed skepticism regarding health system tolerance for practice losses, the formal pursuit of such an enforcement theory could be fundamentally problematic to the continued operation of an integrated delivery system. Thus, this enforcement theory is precisely the type of information that would benefit from disclosure to system leadership through the board’s enterprise risk management process. Read the full article from Bloomberg BNA Health Care Fraud Report™.

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Health System Practice ‘Losses’ Make Headlines, Plaintiffs Make New Stark ‘Law’

Health systems routinely employ physicians, either directly or through corporate affiliates. Media reports and anecdotal evidence suggest such practices routinely, perhaps uniformly, result in net practices losses for the system when measured solely based on physician practice revenues. Does this fact have any legal import under the Stark Law? Read the full article from Bloomberg BNA Health Care Fraud Report™.

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Ten Years Later — The End of Tuomey’s Journey

In October 2005, Dr. Michael Drakeford filed his qui tam against Tuomey Healthcare System alleging Stark Law and False Claims Act violations. After ten years of investigation and litigation, including two jury trials, two trips to the Fourth Circuit U.S. Court of Appeals, and a staggering judgment of $237 million, on October 16, 2015, the Department of Justice announced that it reached a settlement with Tuomey to pay $72.4 million before its sale to Palmetto Health. Dr. Drakeford received a 25 percent share ($18.1 million) plus an additional $2.5 million payment for attorneys' costs and fees. We have previously analyzed the Fourth Circuit’s July decision affirming the 2013 jury verdict and judgment here, and the Tuomey litigation in great detail here. Consistent with DOJ’s policy announced in the Yates Memorandum (see post), the settlement agreement only releases Tuomey, and does not release any corporate officers, directors or employees. Moreover, the...

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A Post-Tuomey Future: Huge Stark Law Hospital Settlements

After the federal government’s victory against Tuomey Healthcare System Inc., we have seen an increasing number of large False Claims Act settlements with hospitals involving Stark Law allegations. Relators are even citing, as evidence of ongoing recklessness, that hospital executives have been emailing articles about the Tuomey case to their staff. Given the Stark Law’s intricate requirements, it is unsurprising that many hospitals are presented with Stark Law compliance questions. However, the U.S. Department of Justice has not shown much leniency in its treatment of these cases, as shown by two recent settlements. Read the full article from Law360.

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Huge Stark Law Hospital Settlements and Physician Culpability – The New Normal Post-Tuomey?

After the federal government’s victory against Tuomey Hospital, we have seen an increasing number of large False Claims Act (FCA) settlements with hospitals involving Stark Law allegations. Despite the intricacies of Stark Law compliance, the U.S. Department of Justice (DOJ) has not shown much leniency in its treatment of these cases, as shown by two recent settlements involving Columbus Regional Healthcare System and North Broward Hospital District. This On the Subject explores some “lessons learned” from these settlements as well as DOJ’s emerging interpretation of the Stark Law that may put vertically integrated health systems’ physicians arrangements at risk for scrutiny. Read the full On the Subject.

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Huge Stark Law Hospital Settlements and Physician Culpability – The New Normal Post-Tuomey?

After the federal government’s victory against Tuomey Hospital, we have seen an increasing number of large False Claims Act (FCA) settlements with hospitals involving Stark Law allegations. Relators are even citing, as evidence of ongoing recklessness, that hospital executives have been e-mailing articles about the Tuomey case to their staff. Given the Stark Law’s intricate requirements, it is un-surprising that many hospitals are presented with Stark Law compliance questions. However, the U.S. Department of Justice (DOJ) has not shown much leniency in its treatment of these cases, as shown by two recent settlements. First, there is the settlement with Columbus Regional Healthcare System (Columbus) and Dr. Andrew Pippas to resolve two separate qui tams filed by a former Columbus executive, Richard Barker, in the Middle District of Georgia. Mr. Barker alleged both billing and Stark Law misconduct in his complaints. While the first complaint largely focused on...

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Adventist Health System Settles Stark Law & FCA Matters

Adventist Health System (Adventist) entered into a settlement agreement with the United States and with the states of Florida and North Carolina on September 21, 2015, resolving Stark Law issues that Adventist disclosed regarding a certain physician employment compensation model and certain other financial arrangements.  The settlement agreements also fully resolve the allegations in two separate qui tam actions, discussed below. Adventist’s settlement agreement with the United States does not require that it enter into a Corporate Integrity Agreement with the Office of the Inspector General (OIG).  Adventist paid $115 million to the United States as part of the settlement. In December 2012, three Adventist employees filed a qui tam action under seal (later amended), on behalf of the United States, Florida, Georgia, Illinois, North Carolina, Tennessee and Texas, alleging violations of the Stark Law and other federal and state laws. In January 2013, Adventist...

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

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...

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Can Satisfying A Regulatory Requirement Now Equate To Providing Illegal Remuneration?

Defending False Claims Act litigation is often a costly budget item. The disposal of weak cases by the government through the intervention decision making process has always been a critical safety valve for non-culpable defendants. Two of the more concerning trends in False Claims Act litigation, however, are (1) the increasing likelihood of relators pursuing factually and legally weak allegations after the government declines to intervene, and (2) courts allowing such cases to survive a Rule 9(b) motion to dismiss. A recent case in the Middle District of Florida involving the unintended consequences of a health system’s adherence to a local zoning obligation serves as a prime example of these troubling trends. On August 14, 2015, in U.S. ex rel. Bingham v. BayCare Health System, the court denied the defendants’ motion to dismiss relator’s claim that BayCare Health System (BayCare) and an independent third party real estate developer, St. Pete MOB, LLC (St....

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