The number of far-reaching and burdensome False Claims Act (FCA) decisions increases by the day. In an August 14, 2015 order by the U.S. District Court for the Middle District of Florida, a whistleblower’s complaint survived a motion to dismiss based upon some rather attenuated allegations. Since this matter was decided at the pleadings stage, the facts may ultimately dictate a different outcome; nevertheless, the cost and burden of defending the case may result in a costly settlement precipitated by this decision.
In the case, U.S. ex rel. Bingham v. BayCare Health System, the claim is that BayCare’s construction of medical office buildings, common areas, walkways and garages on the campus of a BayCare hospital (St. Anthony’s Hospital), provided a benefit to referring physicians sufficient to constitute prohibited remuneration under the Stark law. The medical office building was constructed by an entity called “St. Pete MOB, LLC”, which is not described as having ownership by referring physicians. Although the facts are not clear, it appears that the allegedly improper benefit to physicians took the form of BayCare providing a “non-exclusive parking easement” to St. Pete MOB. Continue reading Another far-reaching FCA decision
The Stark Law, 42 U.S.C. 1395nn, places restrictions on lease arrangements between physician groups and hospitals for equipment owned by the physicians, leased to the hospitals and then used by the same physicians to treat patients at the hospital. Under the Stark Law, such leases are prohibited unless the arrangement complies with the equipment rental exception, 42 U.S.C. 1395nn(e)(1)(B).
One requirement of the equipment rental exception, which is both statutory and regulatory (42 C.F.R. 411.357(b)), is that the rental charges be “set in advance.” In a recent case from the D.C. Circuit Court of Appeals, Council for Urological Interests v. Burwell, the court considered whether a “per-click” or “per-use” fee could be considered “set in advance” and otherwise meet the criteria for the exception. In an oddly constructed opinion, the court struck down a regulatory prohibition on per-click arrangements, but remanded under terms that would permit the restriction to be re-instated. Continue reading “Per-click” fees OK but don’t count on it
The Medicare Part B appeal process is lengthy and cumbersome, typically requiring full exhaustion of administrative remedies, including an administrative request for reconsideration, an ALJ hearing and Departmental Appeals Board review. The process is especially frustrating when the appeal involves a challenge to a Local Coverage Determination (“LCD”), likely to have spawned several individual appeals of the same decision.
The Medicare Act does provide a shortcut to a legal review by way of 42 U.S.C. § 1395ff(f)(3) which provides that a Medicare recipient “may seek review [of an LCD] by a court of competent jurisdiction without … otherwise exhausting other administrative remedies.” This direct access to court review applies only if “there are no material issues of fact in dispute, and the only issue of law is the constitutionality of a provision of this subchapter or that a regulation, determination or ruling by the Secretary is invalid.” Continue reading California Medicare Appeal Applies Strict Standing Rules
An orthopedic surgeon agreed on two separate occasions to an on-call coverage contract with a local hospital in which he warranted that no portion of his compensation was in exchange for referrals. When the contracts were terminated by the hospital after the surgeon invested in a competing surgery center, the surgeon brought a whistleblower False Claims Act action against the hospital, alleging that the contract was intended to induce his referrals.
The U.S. District Court for the Eastern District of Pennsylvania, in Cooper v. Pottstown Hospital Co., LLC, et al., dismissed the surgeon’s complaint. The district court’s description of the failure of the complaint illustrates the characteristics of on-call contracts that make them a permissible relationship between hospitals and physicians. Continue reading On-call coverage contracts are OK
In healthcare, companies often hire consultants to review billing and coding, privacy and security and a host of other technical issues that regular staff does not have the time or expertise to pursue. A recent discovery ruling in federal court in the Eastern District of Pennsylvania holds that communications with such outside consultants are privileged from discovery if they are made for the purpose of assisting the company in securing legal advice or making legal decisions.
In Smith v. Unilife Corporation, a whistleblower brought an action under Sarbanes-Oxley and Dodd-Frank alleging shareholder fraud and failure to comply with certain FDA requirements. The plaintiff sought discovery of two non-lawyer consultants regarding drafts of the company’s SEC Form 10-K filing. The Court’s decision to deny the plaintiff’s motion to compel was based on the “functional equivalent” doctrine, a principle already adopted in the 8th, 9th and D.C. Circuits, but not yet in the 3rd Circuit.
Continue reading Consultants’ Communications Privileged from Discovery
Health systems attempting to fulfill the mandate of integrating hospitals and physicians may find themselves accused of going too far. Although the Affordable Care Act, shared savings, gainsharing and other alternative payment methodologies have made integration of physicians, hospitals and other providers an operational goal, success in reaching that goal may be challenged by private antitrust actions.
In a recent Florida federal court decision, the antitrust complaint of “several of Southern Brevard County’s physicians and physicians practice groups” was held to have stated a monopolization claim against Health First, Inc. and three of its wholly-owned subsidiaries — an insurer, a hospital and a physician practice group. Essentially, by fully integrating its business, and incentivizing in-network referrals and managed care pricing, Health First became vulnerable to claims of tying, exclusive dealing, price discrimination and monopolization.
Continue reading Health System Integration and Antitrust Laws on Collision Course
On December 23, 2014, the Commonwealth Court of Pennsylvania logged another frustrating mile down the confused and confusing road of property tax exemption for purely public charities. In Fayette Resources, Inc. v. Fayette County Board of Assessment Appeals, the Court overturned a lower court finding that an operator of group homes for intellectually disabled adults satisfied the requirements for tax exemption as a “purely public charity.” The Commonwealth Court held that Fayette Resources failed to show that it satisfied the second requirement of the so-called HUP test (declared in Hospital Utilization Project v. Commonwealth, 487 A.2d 1306 (Pa. 1985)) — that it donate or render gratuitously a substantial portion of its services.
While this opinion may be viewed simply as Fayette Resources failing to make an adequate record below, the case also illustrates the confusion created by the Pennsylvania Supreme Court’s decision in the 2012 Mesivtah case, Mesivtah Eitz Chaim of Bobov, Inc. v. Pike County Board of Assessment Appeals, 44 A.3d 3 (Pa. 2012), which held that non-profit entities must satisfy both the statutory requirements of the Purely Public Charity Act (“Charity Act”), codified at 10 P.S. 371-385, and the court-established HUP test. Continue reading Real Estate Tax Exemption Issue Muddied Again
Although whistleblowers benefit from strong public policies protecting the means by which they assert and support their False Claims Act (FCA) allegations, a recent decision highlights a possible counterclaim theory that empowers defendants to assert claims against the whistleblower. In U.S. ex rel. Notorfransesco v. Surgical Monitoring Association, Inc. et al., (E.D. Pa.), the whistleblower was a former employee of the defendant, and the defendant asserted a counterclaim based on the former employee’s taking and disseminating confidential information from the former employer, including using that information in the qui tam complaint. The counterclaim asserted breach of contract, implied contract and promissory estoppel theories.
The district court denied the whistleblower’s motion to dismiss the counterclaim, holding that the counterclaim raised claims that were independent of the FCA allegations and therefore were not against public policy. The court also held that the defendant had plausibly asserted that it could be entitled to injunctive relief and damages. Continue reading False Claims Act Defendants May Have Possible Counterclaims Against Whistleblowers
Physicians acting as investigators for a clinical trial testing a new therapy are required to present to each patient or study subject a consent form, indicating that the patient understands the risks, benefits and alternatives of participating in the trial and voluntarily elects to do so. Federal law imposes several specific items to be included in the consent form. Where all pertinent risks, benefits and alternatives have been disclosed, and the patient signs the form, the patient is said to have given “informed consent.”
A patient injured in a clinical trial studying a new therapy for Parkinson’s Disease sued the manufacturer of the equipment used in the procedure. In addition to a claim of negligent design and manufacture of the equipment itself, the patient asserted that the manufacturer, as the sponsor of the clinical trial, was negligent in drafting and approving the informed consent documents that the patient signed to participate in the clinical trial. Can a manufacturer be liable for an improperly drafted consent form? Continue reading Clinical trial sponsors can be liable for inadequate consent forms
My partner Seth Goldberg and I just published an article in the Legal Intelligencer describing the ethical dilemmas faced by lawyers who have clients who may embark on business ventures that involve medical marijuana in Pennsylvania and other jurisdictions where the law and the norms are still being formulated. You can read the full text here.