In a case of first impression, a federal court found that the federal physician self-referral law’s (Stark Law) requirement that financial arrangements with physicians be memorialized in a signed writing could be material to the government’s payment decision. This case raises troubling questions about applying the False Claims Act (FCA) to what many in the industry consider “technical” Stark issues, especially given the Supreme Court’s description of the materiality test as “demanding” and not satisfied by “minor or insubstantial” regulatory noncompliance.

United States ex rel. Tullio Emanuele v. Medicor Associates (Emanuele), in the US District Court for the Western District of Pennsylvania, involves Medicor Associates, Inc., a private medical group practice (Medicor), and Hamot Medical Center’s (Hamot) exclusive provider of cardiology coverage. Tullio Emanuele, a qui tam relator and former physician member of Medicor, alleged that Hamot, Medicor, and four of Medicor’s shareholder-employee cardiologists (the Physicians) violated the FCA and Stark Law because Hamot’s multiple medical director compensation arrangements with Medicor failed to satisfy the signed writing requirement in the Stark Law’s personal services or fair market value exceptions during various periods of time. The US Department of Justice declined to intervene in the case, but filed a statement of interest in the summary judgment stage supporting the relator’s position. Continue Reading Is the Stark Law’s “Signed Writing” Requirement Material to Payment: One Federal Court Says Yes

On June 16, 2016, the Supreme Court of the United States issued an important decision regarding the implied certification theory of liability under the False Claims Act (FCA) in which it vacated a decision of the US Court of Appeals for the First Circuit and remanded the case for further proceedings in accordance with the opinion.  A copy of the decision can be found here.

Because of McDermott’s ongoing role in this active matter, we will not be providing extensive public analysis at this time.  However, we are pleased that the Supreme Court has vacated the opinion of the First Circuit Court of Appeals ruling against Arbour Counseling Services. The Court expressly and unanimously “disagree[d] with” the lower court’s view and stated that “[t]he False Claims Act does not adopt such an extraordinarily expansive view of liability.” It is significant that the Court remanded to the lower court to reconsider the case under the new, rigorous standard of materiality stated by the Supreme Court.  Our client looks forward to litigating the case on remand and is confident of prevailing under the new Supreme Court standard.