Last year’s $85 million settlement by Halifax Hospital Medical Center in Florida still holds lessons for hospitals and health systems regarding compliance with the Stark Law. The noteworthy amount has prompted an increase in Stark settlements.
The Violations Were Reported To The Government By The Hospital’s Compliance Officer Through A Qui Tam Lawsuit.
Physician Arrangements Are Being Scrutinized More Closely Now That Hospitals Are Acquiring Physician Practices In Greater Numbers.
Federal Prosecutors Are Taking A Hard Line On Stark Violations.
The $85 million settlement last year by a Florida hospital accused of violating the Stark law continues to yield lessons, notably an aggressive approach from federal prosecutors to allegations of false claims.
Prosecutors are increasingly pursuing Stark Law cases, even those that are not clear cut, says attorney Wayne J. Miller, JD, of the Compliance Law Group in Los Angeles. The complexity of the Stark Law has resulted in prosecutors picking their targets carefully, but Miller says they have been emboldened by the Halifax case.
“Nevertheless they still focus on the areas where their success rates have been highest,” Miller explains. “Those would include compensation cases, particularly with physician employees of hospitals. There are so many of those now, with physicians acquiring practices and continuing to employ doctors, so prosecutors see that as a ripe area to focus on.”
In March 2014, Halifax Hospital Medical Center in Daytona Beach, FL, agreed to pay $85 million to settle a lawsuit filed by its compliance officer in 2009. According to court documents, the compliance officer alleged it knowingly violated Stark Law by entering into certain arrangements with medical oncologists and neurosurgeons, which resulted in submitting false claims under the federal False Claims Act (FCA).
The hospital deliberately violated the law by executing contracts with six medical oncologists that provided an incentive bonus, the government claimed. These incentives inappropriately covered the value of prescription drugs and tests that the oncologists ordered and Halifax billed to Medicare. (For more on the Halifax settlement, see the story in this issue.)
This settlement raised many legal questions under the Stark Law and FCA that compensation cannot take into account the volume of referrals and that compensation must be within fair market value, Miller says. There has been a steady rise in reported Stark Law settlements as well as increased interest in self-disclosing possible violations of the law since the Halifax settlement, he notes.
The settlement has led to several trial court rulings on key issues, such as the court’s conclusion that a violation of the Stark Law can lead to FCA liability for claims covered by Medicaid, Miller explains. The Office of Inspector General and Department of Justice still are pursuing high profile cases alleging Stark Law violations despite the complexity of the law.
Recent prosecutions and settlements have involved agreements that had expired and were not renewed, and bonuses not based on personal production but on overall department experience, including not just personally performed work but referrals.
“Some of these recent ones are bellwether cases in which hospitals are being warned that issues that you didn’t think the government would go after, now they are willing to pursue those,” Miller says. “They are challenging fair market value, how bonuses are being paid, whether services rendered are reasonable and needed between the physician and the hospital.”
Leases and independent contractor service arrangements also are starting to emerge in settlements, he says. While the Stark Law is complex, determining compliance sometimes can be as straightforward as checking the specific standards that must be present for an arrangement to be legal, he notes. Prosecutors are realizing that they can go down the list until they find an element that is not checked off, and there is a case to prosecute.
The coming together of hospitals and physicians also increases the potential size of settlements, Miller notes.
“If you have a facility with a large number of physician contracts, it’s easy to come up with a pretty big number if all of them are not being paid fair market value,” Miller says.
Wayne J. Miller, JD, Compliance Law Group, Los Angeles. Telephone: (805) 230-2320, Ext. 101. Email: [email protected].