United States ex rel. Drakeford v. Tuomey Healthcare System Inc.
Subscribe to United States ex rel. Drakeford v. Tuomey Healthcare System Inc.'s Posts

Overview of Recent Stark Law Developments

There has been a flurry of judicial and administrative activity regarding the Stark Law in recent weeks, bringing both promises of reprieve for the health care industry in complying with the technicalities of the law, and reminders of the need for executive vigilance when evaluating and approving transactions with referring physicians.

  • On July 15, 2015, the Centers for Medicare & Medicaid Services (CMS) issued a notice of proposed rulemaking to amend the Stark regulations and to solicit comments from the health care industry on whether the Stark Law is a barrier to health care reform. Among other proposed amendments, CMS proposes: (1) to add two new compensation exceptions, (2) to expand the grace period for the signature requirement of various exceptions in some instances, and (3) to extend the six-month holdover provision of various exceptions. CMS also made several agency policy statements, including clarifying that signed writings do not need to be formal agreements and that the one-year term requirement of certain exceptions is satisfied when an arrangement in fact lasts for at least one year.  For a detailed overview of the proposed rule and its implications, see the Special Report. CMS’s proposals to relax the technical requirements of various Stark Law exceptions, if implemented, would be a welcome reprieve to the health care industry by addressing the potentially draconian consequences of such seemingly innocent situations as a late signature on an agreement with a referring physician.  Comments on the proposed rule are due September 8, 2015.
  • On July 2, 2015, the U.S. Court of Appeals for the Fourth Circuit upheld a $237 million False Claims Act judgment based on Stark Law violations related to part-time employment contracts between a hospital system and referring physicians in United States ex rel. Drakeford v. Tuomey, rejecting the defendant’s request for a new trial based on multiple errors by the trial court and its constitutional challenges to the trial court’s award of damages and penalties. We previously posted about this decision. (For more details, see here.) The ruling raises questions related to the advice of counsel defense and scienter, and the meaning and application of the Stark Law’s “volume or value” standard.
  • On June 12, 2015, the U.S. Court of Appeals for the District of Columbia Circuit struck down CMS’s regulatory prohibition on “per-click” equipment rental arrangements with referring physicians, but upheld CMS’s prohibition on “under arrangements” transactions. We previously posted about this decision. As we noted in that post, while it is not clear how CMS will respond to the ruling, if at all, per-click equipment rental arrangements still face scrutiny by the Office of the Inspector General (OIG) under the federal anti-kickback statute.  The OIG has not taken the position that such per-click equipment rentals automatically create liability under the anti-kickback statute, but the risk of such potential liability under the federal anti-kickback statute (as well as state anti-kickback statutes) should be carefully considered.
  • [...]

    Continue Reading



Recent Appellate Developments in “Implied Certification”

We have previously written several articles regarding the circuit courts’ application of the so-called “implied certification” theory of liability under the False Claims Act (FCA). That theory is the subject of a petition for certiorari in the case of United States v. Triple Canopy, on which we have previously reported.

Under the implied certification theory, a government contractor submits a false claim to the government by impliedly misrepresenting compliance with a legal obligation, upon which the government conditions payment.  Contractors do not affirmatively represent compliance with said legal obligation, but they are deemed to be aware of all legal obligations that condition payment upon their compliance. In February, the Fourth Circuit formally adopted the implied certification theory for the first time in United States v. Triple Canopy, Inc. It also joined the First and D.C. Circuits in rejecting defendants’ arguments that conditions of payment be “expressly stated.” The Fourth Circuit’s holding has demonstrated the difficulty in evaluating the existence of “implied” conditions of payment through at least one district court decision.

By contrast, in June, the Seventh Circuit decided United States v. Sanford-Brown, Ltd., becoming the first court of appeals to reject implied certification as a viable theory of falsity altogether, concluding that implied certification was inconsistent with the primary purpose of the FCA: curbing fraud against the government.

In the face of these inconsistencies, the losing parties in both Triple Canopy and Sanford-Brown have now sought further appellate review. Triple Canopy petitioned for certiorari on June 8, 2015.  The relator in Sanford-Brown, meanwhile, has petitioned for rehearing en banc, arguing that the panel’s decision should be reversed because no other court has rejected implied certification. The United States has signed onto the relator’s petition, filing an amicus brief in support of rehearing on July 9, 2015. A decision on both petitions is pending.

If the Supreme Court does take up Triple Canopy’s certiorari petition, we could see the Supreme Court speak to the viability and scope of implied certification for the first time. The significance of any Supreme Court pronouncement on this issue is massive. For example, FCA cases are often based upon allegations that health care providers have provided medically unnecessary care to Medicare and Medicaid beneficiaries (a theory of relief rooted in implied certification). Whether an FCA plaintiff can succeed in such a case is dependent on the validity of the implied certification theory – and whether and how courts conclude that a legal obligation is a condition of payment.

A Supreme Court ruling on implied certification could also impact FCA claims arising out of alleged Stark Law and alleged Anti-Kickback Statute (AKS) violations. As we noted last week in our discussion of the Tuomey case, implied certification cases relying on the Stark Law can result in astronomical damages calculations. And as we noted last month in our discussion of the government’s settlement with Hebrew Homes Health Network, Inc., the same is true for cases based upon AKS violations.

We will continue [...]

Continue Reading




Fourth Circuit Upholds Judgment of Over $237 Million against Tuomey Healthcare System

On July 2, 2015, the U.S. Court of Appeals for the Fourth Circuit affirmed the U.S. District Court for the District of South Carolina’s judgment of $237,454,195 in damages and penalties against Tuomey Healthcare System in United States ex rel. Drakeford v. Tuomey Healthcare System, Inc. (No. 13-2219).  The judgment followed a rare False Claims Act (FCA) trial, after which the jury found Tuomey liable for submitting 21,730 false claims to Medicare.  While the Fourth Circuit’s Tuomey decision addressed many claims of error advanced by Tuomey on appeal, this post highlights the court’s response to Tuomey’s challenges based on the “advice of counsel” defense and on the computation and size of the judgment.

Tuomey was alleged to have entered into part-time employment contracts with physicians that violated the Stark Law.  After one of the physicians expressed compliance concerns about the structure of the proposed arrangement, Tuomey sought Stark Law compliance advice about the contracts from several attorneys – one of whom, Kevin McAnaney, indicated that the contracts raised “red flags” under the Stark Law.  McAnaney was jointly retained by Tuomey and the physician, Drakeford, after Tuomey received a legal opinion from its longstanding counsel that the contracts were Stark compliant.  Despite McAnaney’s advice, Tuomey elected to move forward with the contracts.  Drakeford subsequently filed an FCA qui tam lawsuit against Tuomey, and the extensive litigation ensued. (more…)




BLOG EDITORS

STAY CONNECTED

TOPICS

ARCHIVES