The Intersection Between the False Claims Act and the Federal Stark Law, Part II

The Intersection Between the False Claims Act and the Federal Stark Law, Part II

In yesterday’s post, we explored the important partnership between the federal False Claims Act “(FCA”) and the Stark Law – a lesser-known, equally-vital statute enacted to combat healthcare fraud in the form of unfair kickbacks and referral fees. The FCA and the Stark Law are often used in conjunction with one another as more private citizens come forward with allegations of kickbacks in their place of employment. The Stark Law contains provisions prohibiting doctors from referring patients to any facility in which he holds a direct or indirect financial interest, while the FCA provides whistleblower plaintiffs the incentive of receiving up to 30 percent of any recovery.

In today’s follow-up post, we explore several Stark Law cases. Cases involving the Stark Law are historically sparse, but appear to be gaining in popularity. Successful Stark cases are those that not only punish the doctor-facility kickback scheme, but deter other physicians from contemplating a similar scenario.

Tuomey Health Care

In a highly-publicized Stark Law case, a federal judge ordered South Carolina-based Tuomey Health Care to pay $277 million in damages for violating the Stark Law and False Claims Act. The case was commenced under the FCA by a physician who alleged 19 contracts were executed with certain doctors offering compensation and bonuses based on the volume and value of patient referrals.

United States v. Rogan

The 2006 case United States v. Rogan resulted in a $64 million verdict and involved an elaborate scheme by the defendant to attempt to conceal certain financial ties between his hospitals and select physicians. The defendant concocted elaborate and nearly-untraceable connections between its teaching hospital and certain doctors, uncovered through the observations of one of Rogan’s employee-physicians.

United States ex rel. Kosenske v. Carlisle HMA, Inc.

As is usually the theme with kickback schemes, the defendants in this case had orchestrated an elaborate and complex network between their medical center and several physicians, seemingly in an attempt to evade detection by Stark-savvy employees and auditors. In this case, the Third Circuit confirmed the plaintiffs’ position that false certification of compliance with the Stark Law is actionable under the FCA, and therefore subject to enhanced penalties and a potential whistleblower reward.

U.S. ex rel. Singh v. Bradford Regional Medical Center

In this Stark Law case, the relator alleged improper arrangements between a hospital facility and its practicing physicians. The defendants motioned for summary judgment, arguing that its guarantee of a buyout on leased medical equipment did not amount to a “direct or indirect financial relationship” as defined by the Stark Law and therefore did not constitute an improper financial relationship between the hospital and physicians.

The Court held, however, “[b]ased on the evidence a fact-finder could believe that when the parties entered into the preliminary sublease and the Equipment Sublease, it was apparent, or should have been apparent, [that defendants] wanted to lease the GE Camera in order to obtain [certain physicians’] referrals it had lost….” The Court thereafter declined to issue the summary judgment.

Conclusion

The above cases present evidence of an increasing trend to create complex business schemes in order to evade detection under the Stark Law. However, this does not preclude the average person from perceiving what seems to be an unlawful relationship between doctors, facilities and hospitals. If you are aware of a scheme similar to any of those described above, we encourage you to contact a whistleblower attorney today.

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By |2019-05-14T10:32:18-04:00January 7th, 2014|False Claims Act Information|