Qui Tam Case Against Physicians and Hospital Advances on What May Have Been a Technical Oversight

A U.S. District Judge found that two agreements between a set of doctors and a University of Pittsburgh Medical Center-owned hospital ran afoul of the Stark Law and the False Claims Act, the former of which prohibits a physician from referring Medicare patients for designated health services to an entity with which the physician (or immediate family member) has a financial relationship, and the latter of which prohibits the filing of a claim with a federal health insurance program that arises from a violation of law or is founded on fraud. Cardiologist Tullio Emanuele initiated a qui tam lawsuit in 2010 in which he alleged that the hospital and a group of doctors created sham medical directorships and submitted false claims for unnecessary procedures. Dr. Emanuele accused the doctors of, among other things: misrepresenting the severity of stenosis in their patients, using a procedure that was not medically accepted and scheduling asymptomatic patients for catheterizations to justify admissions to the hospital. 

In order to defend against alleged violations of the Stark Law, individuals and entities must demonstrate that their arrangements fall squarely within one of the allowable exceptions. The exceptions cited by the defendants share in common a requirement that the agreement be in writing and signed by the parties. The Judge acknowledged that most of the arrangements in question appeared to fall within an exception; however, certain written agreements between the parties had lapsed and were subsequently backdated and signed. As the Judge deemed those arrangements to have failed the “in writing” requirement of the exceptions, the case will proceed to trial. The referral and compensation arrangements between the parties may have qualified for an exception to the Stark Law’s prohibition, but because the arrangements allegedly persisted after two of the written agreements lapsed, this may be a cautionary tale of parties simply neglecting to keep their agreements up-to-date.  

Doctors and hospitals often focus on the Stark Law’s exception requirements that appear to be the most substantive, i.e., fair market value, but this case demonstrates that the “in writing” requirement is as essential as any other component of the applicable exception. To minimize the risk of liability under the Stark Law and other Federal and State laws and regulations pertaining to the provision of health care services, agreements between doctors and entities to which they refer must be carefully planned, drafted, executed and monitored for continued compliance. With potential ramifications that include, but are not limited to payment denials, civil monetary penalties and program exclusion, an ounce of prevention may be worth a pound of cure.