Tag Archives: stark law

Tuomey Healthcare System Ordered to Pay a Reduced $238 Million in Damages for Allegedly Violating Stark Law and False Claims Act

LOL Blog Label 2Lance O. Leider, J.D., The Health Law Firm and George F. Indest III, J.D., M.P.A., LL.M., Board Certified by The Florida Bar in Health Law

On September 30, 2013, a federal judge ordered Tuomey Healthcare System in Sumter, South Carolina, to pay $238 million in penalties and fines. The hospital system is accused of paying doctors to refer Medicare patients for treatments at the hospital, according to a number of media sources. The judge granted the government’s request to impose Stark law penalties and False Claims Act fines. The lawsuit against Tuomey was initially filed in 2005, by a whistle-blowing physician.

This corrected fine actually lowers the amount originally ordered by the federal judge, reducing it by $39 million. The original judgement was for approximately $277 million. The reduction in the damages was an acknowledgment that there was an error in the calculation of damages by the judge in the case, who awarded more than the government asked for.

Click here to read the entire ruling from the federal judge.

After the judge announced the fines, Tuomey began preparing to file an appeal, according to an article on Modern Healthcare. It is alleged that the hospital may be looking to settle.

Judge Ordered Hospital System to Pay Fines for Violating Stark Law and False Claims Act.

In a 2005 federal whistleblower or qui tam lawsuit, a Tuomey physician stated that a series of 19 deal contracts with specialty physicians in the area violated the federal ban on compensating doctors based on the volume and value of patient business they refer, according to Modern Healthcare. This is considered to be a financial conflict, illegal under federal laws.

The hospital has twice lost its case in U.S. District Court. A 2010, jury came to a $45 million split verdict that was overturned on appeal. In May 2013, a second jury found the hospital responsible for more violations than in the first trial, deciding that the hospital violated the Stark law and the False Claims Act.

It’s alleged that between 2005 and 2009, Tuomey collected $39 million in fraudulent Medicare claims.

To read the Modern Healthcare article, click here.

Open to Settlement.

According to WLTX, the CBS affiliate in Sumter, South Carolina, Tuomey is filing a notice of appeal. It is expected the hospital system is open to settle. According to a former attorney with the Department of Health and Human Services’ (HHS) Inspector General’s Office (OIG), it will be up to the government if they will settle. The former attorney also stated that with most of the civil litigation division on furlough it might take some time.

Complying with Stark and Other Anti-Fraud Laws.

The federal government has several tools in its toolbox to combat Medicare fraud. Among those are the Stark Act, Anti-Kickback laws, and Civil Monetary Penalty Laws. Each of these typically focuses on a particular type of behavior that is prone to abuse by health care providers.

Primarily, the Stark laws exist to combat the problems that can arise from physician self-referrals. Self-referrals are cases in which a physician orders a test or service and refers the patient to a provider in which the referring physician has a financial interest. This second provider will then bill Medicare for the service, essentially allowing the referring physician to cash in twice. Click here to read our previous blog on compliance with the Stark law.

Paying Kickbacks or Providing Things of Value in Exchange for Patient Referral Now Recognized as Basis for False Claims Act Cases.

U.S. v. Tuomey is just one of several different cases that has recently been decided that allows qui tam or whistleblower recoveries based on providing kickbacks for patient referrals. “Kickbacks” can include any thing or service of value. It can include, for example, tickets to ball games, free meals, sets of surgical scrubs, gift cards, appliances and free medical supplies. A “referral” can include an actual referral of a patient, a consultation to another physician, an order for x-rays, labs or other diagnostic testing, a prescription for medication, medical equipment or other supplies or services, an order for home health or nursing home services or other medical services.

It is the giving of something of value in exchange for the referral that violates the Stark Act and, many times, state laws. The theory is that this unnecessarily increases the amount of medical services that the government pays for without there being any actual medical need for them.

Now, under the decision in Tuomey and other cases, the claims for medical services (and equipment) that were submitted when the services (and equipment) were based on kickbacks, are considered to be false claims. Whistleblowers (qui tam plaintiffs or “relators”) can now file False Claims Act suits based on these theories and share in the government’s recovery. For example, and by way of demonstration only, if the person who filed the qui tam case in Tuomey received only 20% of the amount awarded to the government, that individual would receive approximately $47.6 million as their share. This is still big money to some of us.

Contact Health Law Attorneys Experienced in Handling Stark Compliance.

If you are involved in referring or providing DHS it is crucial that your arrangements are reviewed for compliance with Stark and other anti-fraud laws.

Violations of these laws can carry severe financial and criminal penalties. One of the best ways to avoid these sanctions is to have your current or potential arrangement reviewed by an attorney who is experienced in these matters.

The Health Law Firm routinely advises healthcare providers on Stark compliance issues for practitioners and providers of all types of DHS. We can advise you on the legality of a particular arrangement and can assist with remedying any perceived compliance issues.

To contact The Health Law Firm, please call (407) 331-6620 or (850) 439-1001 and visit our website at www.TheHealthLawFirm.com.

Comments?

What do you think of this ruling? Please leave any thoughtful comments below.

Sources:

Calson, Joe. “Out-of-Court Settlement for Tuomey may be in te Works Following Ruling Against the System.” Modern Healthcare. (October 1, 2013). From: http://bit.ly/15Lj2uF

United State of America ex rel Michael L. Drakeford, M.D. vs. Tuomey d/b/a Tuomey Healthcare System, Inc. Case Number 3:05-cv-02858-MBS. Federal Judge Order and Opinion. September 30, 2013. From: http://www.thehealthlawfirm.com/uploads/Toumey%20Case.pdf

Santaella, Tony. “Tuomey Healthcare Ordered to Pay $276 Million.” WLTX. (October 1, 2013). From: http://www.wltx.com/news/story.aspx?storyid=251321

About the Authors: Lance O. Leider is an attorney with The Health Law Firm, which has a national practice. Its main office is in the Orlando, Florida, area. www.TheHealthLawFirm.com The Health Law Firm, 1101 Douglas Avenue, Altamonte Springs, Florida 32714, Phone: (407) 331-6620.

George F. Indest III, J.D., M.P.A., LL.M., is Board Certified by The Florida Bar in Health Law. He is the President and Managing Partner of The Health Law Firm, which has a national practice. Its main office is in the Orlando, Florida, area. www.TheHealthLawFirm.com The Health Law Firm, 1101 Douglas Ave., Altamonte Springs, FL 32714, Phone: (407) 331-6620.

 “The Health Law Firm” is a registered fictitious business name of George F. Indest III, P.A. – The Health Law Firm, a Florida professional service corporation, since 1999.
Copyright © 1996-2012 The Health Law Firm. All rights reserved.

New York-Based MRI Company to Pay $3.57 Million Settlement to Resolve False Claims Act Allegations in Whistleblower/Qui Tam Case

6 Indest-2008-3By George F. Indest III, J.D., M.P.A., LL.M., Board Certified by The Florida Bar in Health Law

On August 27, 2013, the Department of Justice (DOJ) announced a settlement between the government and New York-based Imagimed LLC, its former owners and its former chief radiologist. This $3.57 million settlement resolves whistleblower/qui tam allegations of false reimbursement claims for radiology scans. The payment also settles accusations that the company violated the Stark Law and the Anti-Kickback Statute.

Click here to read the press release from the DOJ.

Imagimed owns and operates 15 magnetic resonance imaging (MRI) facilities under the name Open MRI.

MRI Company Accused of Not Following Proper Safety Precautions and Committing Health Care Fraud.

According to the DOJ, from July 2001 through April 2008, Imagimed, the company’s former owners and the former chief radiologist submitted claims to Medicare, Medicaid and TRICARE for MRI scans performed with a contrast dye without the direct supervision of a qualified doctor, as required by federal regulations.

The DOJ also alleges that from July 2005 to April 2008, Imagimed also had sham on-call arrangements with, and gave improper gifts to referring physicians, which is in violation of the Stark Law and the Anti-Kickback Statute.

Local Radiologist Blew Whistle and Receives a Cut of the Settlement.

According to the Associated Press, a local radiologist filed the lawsuit against Imagimed under the False Claims Act. The radiologist will receive $565,500 for coming forward. To read the Associated Press article, click here.

Whistleblowers stand to gain substantial amounts, sometimes as much as thirty percent (30%), of the amount the government recovers under the False Claims Act (31 U.S.C. Section 3730). Such awards encourage employees and contractors to come forward and report fraud. To learn more on whistleblower cases, read our two-part blog. Click here for part one, and click here for part two.

Most Qui Tams Filed by Doctors, Nurses and Employees.

From our review of qui tam cases that have been unsealed by the government, it appears most of these are filed by physicians, nurses or hospital staff employees who have some knowledge of false billing or inappropriate coding taking place. Normally the government will want to see some actual documentation of the claims submitted by the hospital or other institution. Usually physicians, nurses or staff employees have access to such documentation. Whistleblowers are urged to come forward as soon as possible. In many circumstances, documentation that shows the fraud “disappears” or cannot be located once it is known that a company is under investigation.

Contact Health Law Attorneys Experienced with Qui Tam or Whistleblower Cases.

Attorneys with The Health Law Firm also represent health care professionals and health facilities in qui tam or whistleblower cases both in defending such claims and in bringing such claims. We have developed relationships with recognized experts in health care accounting, health care financing, utilization review, medical review, filling, coding, and other services that assist us in such matters. We have represented doctors, nurses and others as relators in bringing qui tam or whistleblower cases, as well.

To contact The Health Law Firm, please call (407) 331-6620 or (850) 439-1001 and visit our website at www.TheHealthLawFirm.com.

Comments?

Individuals working in the health care industry often become aware of questionable activities. Often they are even asked to participate in it. In many cases the activity may amount to fraud on the government. Has this ever happened to you? Please leave any thoughtful comments below.

Sources:

Department of Justice. “MRI Diagnostic Testing Company, Imagimed LLC, and Its Former Owners and Chief Radiologist to Pay $3.57 Million to Resolve False Claims Allegations.” Department of Justice. (August 27, 2013). From: http://www.justice.gov/opa/pr/2013/August/13-civ-958.html

Associated Press. “Federal Authorities Settle MRI Case for $3.75M.” The Wall Street Journal. (August 29, 2013). From: http://online.wsj.com/article/APcf5d7d677786468bb9d446b6c3082e5d.html?KEYWORDS=medicare

About the Author: George F. Indest III, J.D., M.P.A., LL.M., is Board Certified by The Florida Bar in Health Law.  He is the President and Managing Partner of The Health Law Firm, which has a national practice.  Its main office is in the Orlando, Florida, area.  www.TheHealthLawFirm.com  The Health Law Firm, 1101 Douglas Ave., Altamonte Springs, FL 32714, Phone:  (407) 331-6620.

“The Health Law Firm” is a registered fictitious business name of George F. Indest III, P.A. – The Health Law Firm, a Florida professional service corporation, since 1999.
Copyright © 1996-2012 The Health Law Firm. All rights reserved.

Department of Justice Seeks up to $600 Million in Whistleblower Case Against Halifax Health in Daytona Beach, Florida

1 Indest-2008-1By George F. Indest III, J.D., M.P.A., LL.M., Board Certified by The Florida Bar in Health Law

The U.S. Department of Justice (DOJ) is asking for between $350 million and $600 million in damages and penalties from Halifax Health Medical Center in Daytona Beach, according to The Daytona Beach News-Journal. A Halifax employee filed the whistleblower lawsuit in 2009, accusing the hospital of illegal kickbacks to doctors, improper admissions and unnecessary spinal surgeries. The DOJ joined the case in 2011. Click here to read a previous blog on the DOJ joining the lawsuit.

If the government wins this case, it would amount to the largest whistleblower case of its kind in the nation.

Claims Against Halifax.

Halifax is accused of overbilling Medicare by inappropriately admitting patients and having financial arrangements with some of its doctors that violated a federal anti-kickback law.

The federal Stark Law prohibits Medicare and Medicaid payments for hospital services that are prescribed by doctors who have profit-sharing agreements with the hospital. The law was made to ensure that referrals are made for medical reasons only, without financial motives. However, according to the lawsuit, Halifax had agreements with its doctors that gave them a financial incentive to generate hospital revenues.

The whistleblower was recently interviewed in an Orlando Sentinel article. She claims neurosurgeons at Halifax allegedly received illegal kickbacks tied to their performance. The whistleblower claims a similar pattern existed with six of the hospital’s oncologists. The suit also alleges one surgeon performed spinal fusion surgeries that were not medically necessary.

To read more from the whistleblower in an Orlando Sentinel article, click here.

Halifax Denies All Claims.

Halifax denies all of the DOJ’s allegations. The hospital has filed two motions to dismiss the case. However, both have been denied. According to The Daytona Beach News-Journal, the case is set for trial in November 2013. Click here to read the entire article from The Daytona Beach News-Journal.

Whistleblowers Who Report Fraud and False Claims Against the Government Stand to Receive Large Rewards.

Since the Halifax whistleblower filed her action under a federal law, she is entitled to recoup fifteen percent (15%) to twenty-five percent (25%) of the damages. Similarly, individuals working in the health care industry, whether for hospitals, nursing homes, medical groups, home health agencies or others, often become aware of questionable activities. Often they are even asked to participate in it. In many cases the activity may amount to fraud on the government.

In a two-part blog, I explain types of false claims, the reward programs for coming forward with a false claim, who can file a whistleblower/qui tam lawsuit and what is needed to be a successful whistleblower. Click here for part one, and click here for part two.

Contact Health Law Attorneys Experienced with Medicaid and Medicare Qui Tam or Whistleblower Cases.

In addition to our other experience in Medicare, Medicaid and Tricare cases, attorneys with The Health Law Firm also represent health care professionals and health facilities in qui tam or whistleblower cases. We have developed relationships with recognized experts in health care accounting, health care financing, utilization review, medical review, filling, coding, and other services that assist us in such matters.

To learn more on our experience with Medicaid and Medicare quit tam or whistleblower cases, visit our website.

To contact The Health Law Firm, please call (407) 331-6620 or (850) 439-1001 and visit our website at www.TheHealthLawFirm.com.

Comments?

What do you think of this qui tam/whistleblower lawsuit? Please leave any thoughtful comments below.

Sources:

Swisher, Skyler. “Justice Department Seeks up to $600 Million in Lawsuit Against Halifax.” The Daytona Beach News Journal. (June 3, 2013). From: http://www.news-journalonline.com/article/20130603/NEWS/306039975/1040?p=1&tc=pg

Jameson, Marni. “Halifax Hospial Whistleblower at Forefront of $200M Alleged Fraud.” Orlando Sentinel. (April 15, 2013). From: http://articles.orlandosentinel.com/2013-04-15/news/os-halifax-hospital-whistleblower-20130415_1_marlan-wilbanks-illegal-kickbacks-halifax-health

About the Author: George F. Indest III, J.D., M.P.A., LL.M., is Board Certified by The Florida Bar in Health Law. He is the President and Managing Partner of The Health Law Firm, which has a national practice. Its main office is in the Orlando, Florida, area. www.TheHealthLawFirm.com The Health Law Firm, 1101 Douglas Ave., Altamonte Springs, FL 32714, Phone: (407) 331-6620.

 

 

“The Health Law Firm” is a registered fictitious business name of George F. Indest III, P.A. – The Health Law Firm, a Florida professional service corporation, since 1999.
Copyright © 1996-2012 The Health Law Firm. All rights reserved.

Hospitals Allegedly Enforcing Questionable Practices to Increase Bottom Line

1 Indest-2008-1By George F. Indest III, J.D., M.P.A., LL.M., Board Certified by The Florida Bar in Health Law

Doctors and hospitals around the country seem to be butting heads. In the past month, an article in The New York Times and a segment on the television “magazine” show 60 Minutes shed light on some questionable practices being enforced by hospitals on physicians working for them.

I previously wrote a blog on this structural shift in the practice of medicine. Click here to read that blog.

The effects of this trend are examined in these two news stories. Doctors and former employees from a number of hospitals around the country were interviewed and all seem to be dealing with the same issues. The biggest concerns addressed were: pressure to order unnecessary tests, admitting patients to fill hospital quotas and drive hospital profits, and the feeling of being controlled by hospital executives and administrators instead of practicing effective medicine.

Doctors Allegedly Pressured to Fill Emergency Room Beds to Increase Profits.

On December 2, 2012, 60 Minutes aired an investigative segment on one of the largest for-profit hospital chains in the country. Former employees and physicians alleged this hospital system thrived by buying urban-area hospitals and turning them into profit centers by filing empty beds from emergency rooms. A former emergency medicine doctor stated that the hospital in which he worked required an admission rate of twenty percent (20%) for patients seen in the ER and fifty percent (50%) for patients who were 65 years old and older (most of whom are Medicare patients) seen in the ER.

A former hospital system employee interviewed by 60 Minutes claimed he was in charge of auditing the hospital chain in question. He stated that he was convinced that doctors were under an extraordinary amount of pressure to fill hospital beds. He stated that he personally audited hospitals in Texas, Florida and Oklahoma, and concluded there were hundreds of thousands of dollars submitted to Medicare and Medicaid for hospital stays that did not meet standards for reimbursement, including medical necessity.

Doctors interviewed for The New York Times article had similar stories. They stated in interviews that hospital administrators created quotas for how many patients should be admitted, because more admissions allegedly meant more money. Doctors who met or exceeded quotas were rewarded with increased compensation, while doctors who did not felt in danger of losing their jobs.

Click here to read the entire New York times article.

Consequences of Ordering Unnecessary Tests.

The New York Times article looked at a number of lawsuits filed by former employees who allege the hospitals they worked for compensated doctors for ordering more tests than necessary.

The Department of Justice (DOJ) recently settled with a hospital group in Joplin, Missouri. According to the DOJ press release, the hospital system had to pay more than $9.3 million for rewarding doctors partly based on how many tests they ordered. This is in direct violation of the Stark Law and the False Claims Act.

Click here to read the entire press release from the DOJ.

I recently wrote an article for Medical Economics on the legal ramifications of ordering unnecessary tests. To read that article, click here.

If you want to know more on the Stark Law, click here.

Doctors Feel Controlled By Hospital Executives.

Doctors also stated they felt controlled by hospital executives. This was due, in part, to a corporate wide computer software system that was customized to automatically order an extensive battery of tests, some unnecessary, as soon as a patient walked into the hospital. It’s also stated that the software would prompt a physician to reconsider when he or she decided to send an emergency room patient home.

Most doctors interviewed were upset that the program also generated reports that evaluated each doctor’s performance and productivity.

To watch the segment from 60 Minutes, click here.

Hospitals Say They are Embracing the New Model of Health Care.

The hospital system in question by 60 Minutes maintains that these allegations are not correct. The executive vice president said that as a whole admission rates haven’t changed in four years and are near or below industry averages. The hospital systems believe that by consolidating they are embracing the new model of health care and state patient care comes first.

Contact Health Law Attorneys Experienced in Representing Health Care Professionals and Providers.

At the Health Law Firm we provide legal services for all health care providers and professionals. This includes physicians, nurses, dentists, psychologists, psychiatrists, mental health counselors, Durable Medical Equipment suppliers, medical students and interns, hospitals, ambulatory surgical centers, pain management clinics, nursing homes, and any other health care provider. We represent facilities, individuals, groups and institutions in contracts, sales, mergers and acquisitions.

The services we provide include reviewing and negotiating contracts, business transactions, professional license defense, representation in investigations, credential defense, representation in peer review and clinical privileges hearings, Medicare and Medicaid audits, commercial litigation, and administrative hearings.

To contact The Health Law Firm, please call (407) 331-6620 or (850) 439-1001 and visit our website at www.TheHealthLawFirm.com.

Comments?

Do you think there are constant battles between doctors and hospitals? As a health professional, have you experienced the pressure to admit patients, order unnecessary tests or refer a patient inside your network? Please leave any thoughtful comments below.

Sources:

Creswell, Julie and Abelson, Reed. “A Hospital War Reflects a Bind of Doctors in the U.S.” The New York Times. (November 30, 2012). From: http://www.nytimes.com/2012/12/01/business/a-hospital-war-reflects-a-tightening-bind-for-doctors-nationwide.html?pagewanted=all

Kroft, Steve. “Hospitals: The Cost of Admission.” 60 Minutes. (December 2, 2012). From: http://www.cbsnews.com/video/watch/?id=50136261n

Department of Justice. “Missouri Hospital System Agrees to Pay $9.3 Million to Resolve False Claims Act and Stark Law Violations.” DOJ. (November 5, 2012). From: http://www.justice.gov/printf/PrintOut3.jsp

About the Author: George F. Indest III, J.D., M.P.A., LL.M., is Board Certified by The Florida Bar in Health Law.  He is the President and Managing Partner of The Health Law Firm, which has a national practice.  Its main office is in the Orlando, Florida, area.  www.TheHealthLawFirm.com  The Health Law Firm, 1101 Douglas Ave., Altamonte Springs, FL 32714, Phone:  (407) 331-6620.

“The Health Law Firm” is a registered fictitious business name of George F. Indest III, P.A. – The Health Law Firm, a Florida professional service corporation, since 1999.

Copyright © 1996-2012 The Health Law Firm. All rights reserved.

The Importance of Complying with the Stark Law and Other Anti-Fraud Laws

By Lance O. Leider, J.D.

The federal government has several tools in its toolbox to combat Medicare fraud.  Among those are the Stark Act, Anti-Kickback laws, and Civil Monetary Penalty Laws.  Each of these typically focuses on a particular type of behavior that is prone to abuse by healthcare providers.

The following focuses on the Stark law and what is prohibited by it.  Primarily, the Stark laws exist to combat the problems that can arise from physician self-referrals.  Self-referrals are cases in which a physician orders a test or service and refers the patient to a provider in which the referring physician has a financial interest.  This second provider will then bill Medicare for the service, essentially allowing the referring physician to cash in twice.

The concern is that if physicians are permitted to benefit from referring to an entity that they have a financial interest in, they will be prone to order tests and services that are not medically necessary. Our President and Managing Partner George F. Indest recently wrote an article on the legal ramifications of unnecessary tests, which was published in Medical Economics. Click here to read that article.

Know the History Behind the Stark Law.

There are essentially two Stark laws.  The first one is often referred to as “Stark I” and dealt primarily with physician referrals for clinical laboratory testing.  This law was in effect from January 1, 1992, to December 31, 1994.

The second Stark law, known as “Stark II,” took effect on January 1, 1995.  This law greatly expanded the types of prohibited referrals.  Instead of focusing on clinical laboratory testing, Stark II expanded the prohibition to “designated health services.”

A List of the Designated Health Services (DHS).

According to the Stark laws, designated health services (DHS) refers to the following services:

(i) clinical laboratory services;

(ii) physical, occupational, and speech-language pathology services;

(iii) radiology and certain other imaging services;

(iv) radiation therapy services and supplies;

(v) durable medical equipment and supplies;

(vi) parenteral and enteral nutrition and supplies;

(vii) prosthetics, orthotics, and prosthetic devices and supplies;

(viii) home health services;

(ix) outpatient prescription drugs; and

(x) inpatient and outpatient hospital services.

To see the complete statutory definition, click here.

It should also be noted that the regulation states that it only applies to DHS that are payable in whole or in part by Medicare.  While there are no Stark prohibitions on self-referral for non-Medicare reimbursed services, many states have their own laws that prohibit these referrals.

Stark Compliance.

Stark II compliance is a two-way street. Not only is the physician prohibited from referring to an entity in which he has a non-exempt financial interest, the provider receiving the referral is prohibited from accepting it.

Medicare conditions payment of a claim upon the certification by the claimant that it is in compliance with the Stark law.  What this means is that there is an obligation on the recipient of a referral to make sure that it is proper.

In the complicated world of healthcare business entities, it is incumbent upon the management of a supplier of DHS to know who all of its owners, investors, and stakeholders are so that it can remain in compliance and avoid any charges of impropriety.

Exceptions to the Rules.

Like many other regulatory frameworks, the Stark law have exceptions.  The law provides a number of exceptions to the rules which allow otherwise impermissible referral arrangements to pass muster.

Because the exceptions are numerous and often subject to change, it is highly recommended that any new  business arrangement, or substantial change to an existing one, is reviewed by a health law attorney experienced in the area of Stark law.

Contact Health Law Attorneys Experienced in Handling Stark Compliance.

If you are involved in referring or providing DHS it is crucial that your arrangements are reviewed for compliance with Stark and other anti-fraud laws.

Violations of these laws can carry severe financial and criminal penalties.  One of the best ways to avoid these sanctions is to have your current or potential arrangement reviewed by an attorney who is experienced in these matters.

The Health Law Firm routinely advises healthcare providers on Stark compliance issues for practitioners and providers of all types of DHS.  We can advise you on the legality of a particular arrangement and can assist with remedying any perceived compliance issues.

To contact The Health Law Firm, please call (407) 331-6620 or (850) 439-1001 and visit our website at www.TheHealthLawFirm.com.

About the Author: Lance O. Leider is an attorney with The Health Law Firm, which has a national practice. Its main office is in the Orlando, Florida, area. www.TheHealthLawFirm.com  The Health Law Firm, 1101 Douglas Avenue, Altamonte Springs, Florida 32714, Phone:  (407) 331-6620.

“The Health Law Firm” is a registered fictitious business name of George F. Indest III, P.A. – The Health Law Firm, a Florida professional service corporation, since 1999.Copyright © 1996-2012 The Health Law Firm. All rights reserved.

2010 District Ruling for $44.9 Million in Tuomey Overturned by U.S. Appeals Court

By George F. Indest III, J.D., M.P.A., LL.M., Board Certified by The Florida Bar in Health Law

Tuomey Reversed

The 4th U.S. Circuit Court of Appeals overturned a federal district judge’s 2010 decision for Tuomey Healthcare System on March 30, 2012. (U.S. ex rel. Drakeford v. Tuomey Health. Sys., Inc., 4th Cir., No. 10-1819 (Mar. 30, 2012)) The lower court’s decision ordered Toumey Healthcare System to pay $44.9 million for allegedly violating the Stark Law. (42 U.S.C. § 1395nn) The appeals court decided that the 2010 district ruling denied Tuomey its Seventh Amendment right to a jury trial. 

A physician initiated a qui tam or whistle-blower suit against Toumey under the False Claims Act in 2005. The suit was later picked up and prosecuted by the U.S. Department of Justice. In the False Claims Act complaints filed in the U.S. District Court in Columbia, S.C., the whistle-blower and the U.S. Department of Justice (DOJ) alleged that Tuomey had contracts with physicians that were illegally overpaid by Tuomey. This was alleged to be in exchange for their exclusively referring patients to Tuomey’s hospital, thus violating the Stark Law. Billings for referrals from those physicians allegedly constituted false claims as a result of this.

Novel Theory Used to Obtain Large Recovery

This was a novel theory to pursue in a qui tam or whistle-blower case because it was not based directly on submission of false claims. Instead it put forth the theory that the claims were false because they violated the anti-referral provisions of the Stark Act.

In March 2010, a jury found that Tuomey had not violated the False Claims Act but did find Tuomey guilty of committing Stark Law violations. (Note: The Stark Act does not establish a private cause of action for plaintiff to recover civil damages.) This jury verdict was set aside by the judge and a new trial regarding the False Claims Act allegations was granted. Under the lower court’s decision, Tuomey was still required to repay the government $44.9 million in Medicare payments that were allegedly received through physician contracts that violated the Stark Law.  This was the part of the verdict that was not set aside by the trial court.

However, according to the opinion of the appeals court, when the district court set aside the jury’s verdict, it specifically ordered that the new trial would encompass the whole False Claims Act matter, including whether Tuomey had violated the Stark Law. This nullified the jury’s interrogatory answer (part of the verdict it returned) regarding the Stark Law. Thus, when the district court ordered Tuomey to repay the government for violating the Stark Law, it denied Tuomey of its right to a jury trial.

Two Major Stark Issues Discussed

The appeals court also addressed two major Stark Law issues that were raised on appeal and are likely to recur on remand. The first issue is whether the facility component of the services performed by the physicians, for which Tuomey billed a facility fee to Medicare, constituted a “referral” within the meaning of the Stark Law. The court used the Health Care Financing Administration’s (now the Centers for Medicare and Medicaid Services) final rule on referrals (66 Fed. Reg. 856, 941, Jan. 4, 2001) to conclude that the facility/technical component of the physician’s personally performed services does constitute a referral.

The second issue was the correct standard to use. Having decided that the physicians were making referrals to Tuomey, the appeals court then examined if an arrangement that takes into account anticipated referrals violate the Stark Act’s “volume or value standards.” The “volume or value standards” require that compensation must be calculated in a way that does not take into account the volume or value of referrals between the parties.

Fair Market Value Standard

Additionally, Stark Act requires that whatever financial relationship exists reflects “fair market value.” Stark defines “fair market value” as compensation that “has not been determined in any manner that takes into account the volume or value of anticipated or actual referrals”(42 C.F.R. § 411.351). Thus, the court concluded that compensation based on the volume or value of anticipated referrals does implicate the volume or value standard. The court left it to the jury to decide if Tuomey’s contracts violated the fair market value standard.

$50 Million May be Returned to Tuomey

The government has 45 days from the date of the decision to request a rehearing. If it doesn’t, the matter goes back to the South Carolina federal district court where it was originally decided. Tuomey can then request the money that it had set aside to pay the government back, $50 million according to it, to be released to the health system.

Tuomey Issues Press Release

In a press release dated March 31, 2012 (Press Release), signed by Jay Cox, its President and Chief Executive Officer (CEO), Tuomey Healthcare System stated:

The 4th Circuit has issued an opinion in favor of Tuomey on our appeal. We are pleased that the 4th Circuit Court has decided that the District Court’s judgment violated Tuomey’s Seventh Amendment right to a jury trial, and vacated (reversed) the $50 million judgment against Tuomey Healthcare System.

*          *          *

As the Court of Appeals said in the opinion: “The whole case, including the issues of fact at the former trial is open for hearing and determination.” This includes the incorrect finding by the first jury that Tuomey violated the Stark Law. Again, we are pleased with this news and we will keep you posted as we learn more.

Setback to Plaintiff’s Qui Tam Bar?

The original decision in Tuomey had encouraged plaintiff’s attorneys who take whistle-blower cases in health care matters and had alarmed health care systems across the country.  Although this does not eliminate the ability to use Stark Act violations as the basis for False Claims Act recoveries, it does indicate that the courts will require strict pleading, proof and procedural rules before it does allow this.

Sources Include:

Blesch, Gregg, “Appeals Court Overturns Order for S.C. Hospital to Pay $45 Million in Stark Case,” Modern Healthcare (Apr. 1, 2012). From:
http://www.modernhealthcare.com/article/20120401/NEWS/304019973/appeals-court-overturns-order-for-s-c-hospital-to-pay-45-million-in#

Cheung, Karen M., “Federal Appeals Court Overturns $45M Stark Ruling,” FierceHealthcare (Apr. 2, 2012). From:
http://www.fiercehealthcare.com/story/federal-appeals-court-overturns-45m-stark-ruling/2012-04-02

Cox, Jay, “Federal Case Update,” Tuomey Healthcare System Press Release (Mar. 31, 2012).

Cox, Jay, “Federal Case Update,” Tuomey Healthcare System Press Release (Mar. 31, 2012). From: http://www.tuomey.com/Articles/federal_case_update.aspx

Davis, Caralyn, “Stark Violations: Tuomey Healthcare in South Carolina Ordered to Pay $50 Million,” FierceHealthcare (June 9, 2012). From: http://www.fiercehealthfinance.com/story/stark-violations-tuomey-healthcare-s-c-ordered-pay-50-million/2010-06-09

HHS, “Medicare and Medicaid Programs: Physicians’ Referrals to Health Care Entities With Which They Have Financial Relationships,” 66 Fed. Reg. 856, 941 (Jan. 4, 2001). From:  http://www.gpo.gov/fdsys/pkg/FR-2001-01-04/pdf/01-4.pdf

U.S. ex rel. Drakeford v. Tuomey Health.Sys., Inc., 4th Cir., No. 10-1819 (Mar. 30, 2012). From: http://pacer.ca4.uscourts.gov/opinion.pdf/101819.P.pdf

About the Author: George F. Indest III, J.D., M.P.A., LL.M., is Board Certified by The Florida Bar in Health Law.  He is the President and Managing Partner of The Health Law Firm, which has a national practice.  Its main office is in the Orlando, Florida, area.  www.TheHealthLawFirm.com  The Health Law Firm, 1101 Douglas Ave., Altamonte Springs, FL 32714, Phone:  (407) 331-6620.

Halifax Whistleblower Claims Hospital Overbilled Medicare

The U.S. Department of Justice has joined a whistleblower suit filed against Halifax Hospital by the hospital’s director of physician services, according to the Daytona Beach News-Journal.

The U.S. Department of Justice filed its part of the lawsuit on Friday. It claims that Halifax Health defrauded the federal government by submitting thousands of false claims for Medicare and Medicaid payments worth millions of dollars. By filing, the U.S. Department of Justice hopes to recover millions of dollars in Medicare and Medicaid payments that it says were made in error to Halifax.

Elin Baklid-Kunz filed a lawsuit against Halifax in 2009. As a whistleblower, he could be awarded a percentage of whatever the government recovers. Generally, whistleblowers can be awarded 25 percent to 30 percent of the recovery. He claims Halifax overbilled Medicare by inappropriately admitting patients and had financial arrangements with some of its doctors that violated a federal anti-kickback law.

The federal Stark Law prohibits Medicare and Medicaid payments for hospital services that are prescribed by doctors who have profit-sharing agreements with the hospital. The law was made to ensure that referrals are made for medical reasons only, without financial motives.

However, according to the lawsuit, Halifax had agreements with its doctors that gave them a financial incentive to generate hospital revenues.

The Justice Department’s lawsuit focuses on doctors’ contracts, claiming that Halifax administrators “could not have reasonably concluded” the agreements to pay bonuses to doctors did not violate the Stark Law. Neurosurgeons at Halifax received generous incentive compensation that boosted their based salaries by hundreds of thousands of dollars. These neurosurgeons referred patients to Halifax and, between 2004 and 2010, Halifax charged Medicare more than $35 million for neurological services, the suit states. Each neurosurgeon individually generated over $2 million in profits for Halifax Hospital in 2009, according to the suit. The Justice Department claims a similar pattern existed with the hospital’s seven oncologists.

For more information on similar legal matters, visit www.TheHealthLawFirm.com.