In the latest installment of Health Care Enforcement Quarterly Roundup, we examine key enforcement trends in the health care industry that we have observed over the past few months. In this issue, we report on:

  • Practical applications of recent guidance from the US Department of Justice (DOJ)
  • A recent blow to DOJ’s effort to

During a July 17, 2018, hearing before the House Ways and Means Subcommittee on Health, United States Department of Health and Human Services (HHS) Deputy Secretary Eric Hargan testified about HHS’ efforts to review and address obstacles that longstanding fraud and abuse laws pose to shifting the Medicare payment system to a value-based, coordinated care

On June 25, 2018, the Centers for Medicare and Medicaid Services (CMS) published a request for information, seeking input from the public on how to address any undue regulatory impact and burden of the physician self-referral law (Stark Law) on value-based and other coordinated care arrangements designed to improve quality and lower cost. While

As first reported in the National Law Journal, the US Department of Justice (DOJ), Civil Division, recently issued an important memorandum to its lawyers handling qui tam cases filed under the False Claims Act (FCA) outlining circumstances under which the United States should seek to dismiss a case where it has declined intervention and, therefore, is not participating actively in the continued litigation of the case against the defendant by the qui tam relator.
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A hospital system in Missouri recently agreed to settle with the US Department of Justice (DOJ) for $34 million to resolve claims related to alleged violations of the Stark Law. On May 18, 2017, DOJ announced a settlement agreement with Mercy Hospital Springfield (Hospital) and its affiliate, Mercy Clinic Springfield Communities (Clinic). The Hospital and Clinic are both located in Springfield, Missouri. The relator’s complaint was filed in the Western District of Missouri’s Southern Division on June 30, 2015.

The complaint’s allegations center on compensation arrangements with physicians who provided services in an infusion center. According to the complaint, until 2009 the infusion center was operated as part of the Clinic, and the physicians who practiced at the infusion center shared in its profits under a collection compensation model. In 2009, ownership of the infusion center was transferred to Mercy Hospital so that it could participate in the 340B drug pricing program, substantially reducing the cost of chemotherapy drugs. The complaint alleges that the physicians “expressed concern about losing a substantial portion of the income they had received under the collection compensation model as a result of the loss of ownership of the Infusion Center.” In response, the Hospital allegedly assured them that they would be “made whole” for any such losses. While it doesn’t provide precise details, the complaint alleges that the Hospital addressed the shortfall by establishing a new work Relative Value Unit (wRVU) for drug administration in the infusion center, which now operated as part of the Hospital. The value of this new wRVU was allegedly calculated by “solving for” the amount of the physician’s loss and “working backwards from a desired level of overall compensation.” Physicians were able to earn the wRVU for the patients they referred to the infusion center. The complaint alleges that the drug administration wRVU rate was 500 percent of the comparable wRVU for in-clinic work. In its announcement of the settlement agreement, DOJ characterized the compensation arrangement as being “based in part on a formula that improperly took into account the value of [the physicians’] referrals of patients to the infusion center operated by [the Hospital].”
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This April, providers cheered when a federal district court in the Middle District of Florida found insufficient evidence to support a relator’s theory that a hospital had provided free parking to physicians, in violation of the Stark Law and Anti-Kickback Statute (AKS). In the Report and Recommendation for United States ex rel. Bingham v. BayCare Health Systems, 2017 WL 126597, M.D. Fla., No. 8:14-cv-73, Judge Steven D. Merryday of the Middle District of Florida endorsed magistrate judge Julie Sneed’s recommendation that Plaintiff Thomas Bingham’s Motion for Partial Summary Judgment be denied and that Defendant BayCare Health System’s Motion for Summary Judgment be granted. However, as we discussed in a previous FCA blog post regarding these allegations, this type of case encapsulates a worrying and costly trend where courts allow thinly pleaded relator claims in which the government opted not to intervene, to survive past the motion to dismiss stage into the discovery phase of the litigation.

Bingham is a serial relator who practices as a certified real estate appraiser in Tennessee and was unaffiliated with BayCare. In his latest attempt, Bingham alleged that BayCare Health System had violated the Stark Law and the AKS by providing affiliated physicians free parking, valet services and tax benefits to induce physicians to refer patients to the health system.
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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.
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On November 15, 2016, as part of its 2017 Medicare Physician Fee Schedule update, the Center for Medicare and Medicaid Services reissued its prohibition on certain unit-based rental arrangements with referring physicians, adopted updates to the list of CPT/HCPCS codes defining certain of the Stark Law’s designated health services and implemented a minor technical change

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