Two recent False Claims Act settlements underscore the DOJ’s continued focus on Stark Law and Anti-kickback Statute violations

Take note of these two cases because even the new Stark and Anti-Kickback Final Rules do not change the “golden rule” of compensation not being determined in any manner that takes into account the volume or value of the physician’s referrals to the entity.

The Department of Justice (DOJ) recently announced that for Fiscal Year 2020, which ended on September 30, 2020, that it recovered $2.2 billion as a result of False Claims Act cases. Of that amount, health care fraud in civil cases (not including Medicaid) amounted to over $1.8 billion and $1.6 billion was due to whistleblower qui tam suits. Not surprisingly cases involving Stark Law and Anti-Kickback Statute (AKS) violations were included in the report.

Two cases, which settled in July 2020 and December 2020 are particularly notable for two reasons: (1) illegal financial incentives based on volume or value in violation of Stark and AKS; (2) the amounts of the settlements; and (3) despite the new Stark and AKS Final Rules that were published in the Federal Register on December 2, 2020 and became effective January 19, 2021, the prohibition on referrals based on volume or value, with the exception of a target population defined within a legal Value-Based Enterprise (VBE), remains unchanged.

In July 2020, the Oklahoma Center for Orthopaedic and Multi-Specialty Surgery (OCOM), along with its management company and other entities, agreed to pay $72.3 million to resolve allegations that between 2006 and 2018 it violated the Stark Law, AKS, False Claims Act, and Oklahoma Medicaid False Claims Act for “[o]ffering illegal financial incentives to physicians in return for patient referrals[.]” The key take-aways from this case are as follows:

• The DOJ and Oklahoma’s Attorney General wanted to send a message of deterrence – the settlement amount and the five-year Corporate Integrity Agreement;
• The improper remuneration occurred in the following ways:
  • Free or below-fair market value office space, employees, and supplies;
  • Compensation in excess of fair market value for the services provided by one of the entities and certain physicians;
  • Equity buyback provisions and payments for select physicians that exceeded fair market value (emphasis added); and
  • Preferential investment opportunities in connection with the provision of anesthesia services (emphasis added). 

The conduct which led to the settlement was premised upon the submission of false and fraudulent claims for services provided to the illegally referred patients.

In December 2020, the U.S. Attorney’s Office for the Eastern District of Texas settled a qui tam False Claims Act casewith Texas Heart Hospital of Southwest LLP, a hospital partially owned by physicians in Plano, Texas and its management company THHBP, for $48 million to resolve claims in violation of the Stark Law, AKS, and False Claims Act. In this case, an exception was not met under Stark nor was a safe harbor met under the AKS. The key take-aways from this case are as follows:

1. The DOJ continued to emphasize that physicians need to act in the best interest of the patients and not their own financial interests;
2. The whistleblowers (relators) were two physicians; and
3. Requiring physician owners to satisfy the Heart Hospital’s yearly 48 patient-contact requirement in order to maintain ownership in the hospital violated both the Stark Law and AKS.

Overall, these cases highlight that compliance with both the Stark Law and the AKS are critical to avoiding liability under the False Claims Act. Since the AKS has both civil and criminal provisions and providers attest to their compliance with Stark and AKS on their Medicare Enrollment Applications (CMS Form 855), this is one area not to ignore, even with the new safe harbors and exceptions which were released in December 2020.

_{About the Author}

_{Rachel V. Rose, JD, MBA, advises clients on compliance and transactions in healthcare, cybersecurity, corporate and securities law, while representing plaintiffs in False Claims Act and Dodd-Frank whistleblower cases. She also teaches bioethics at Baylor College of Medicine in Houston. Rachel can be reached through her website, www.rvrose.com.}