Eleventh Circuit Rules that Florida’s Patient Self-Referral Law Is Not Preempted by the Stark Law

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On January 10, 2013, the Eleventh Circuit issued an opinion holding that Florida’s patient self-referral law is not preempted by the federal Stark law.  The court also found that Florida’s law does not violate the Commerce or Due Process Clauses.  The provision at issue was the Florida law’s ban on physician self-referrals for patients with end-stage renal disease (ESRD).

Both the federal Stark law and Florida’s patient self-referral law regulate physician self-referrals.  In promulgating regulations to implement Stark, however, HHS created various exemptions from the physician self-referral ban, including an exemption for physician referrals to associated entities for clinical laboratory services related to the treatment of ESRD patients.  While Florida’s law originally contained a similar exemption, the Florida legislature repealed the ESRD exemption in 2002.

In Fresenius Medical Care Holdings, Inc. v. Tucker, several out-of-state corporations (appellants) that provide renal dialysis services in Florida to patients with ESRD filed suit to challenge Florida’s patient self-referral law.  Appellants wanted to use a vertically integrated business model in Florida, whereby all ESRD patients’ blood work would be referred to associated laboratories.  However, this model would require employee-physicians to violate Florida’s law because of their financial interests in appellants’ laboratories.  At the district court level, appellants argued among other things that the Florida law was preempted by the federal Stark law.  The district court granted summary judgment in favor of Florida, and appellants appealed to the Eleventh Circuit.

The Eleventh Circuit affirmed the district court’s opinion.  The court held that the Florida’s more restrictive self-referral law did not conflict with or frustrate the purpose of federal Stark law, and thus was not preempted by Stark.  The court found that any physicians employed by appellants who provided care to ESRD patients could comply with the Florida law without violating any federal obligations.  In addition, the court was not persuaded by appellants’ argument that the Florida law violates the dormant Commerce Clause.  The court found that the Florida law does not discriminate against out-of-state companies because the law prohibits vertical integration of renal dialysis clinics and laboratories regardless of whether the company is in-state or out-of-state.  The court also held that the law served a legitimate local interest (the protection of Florida patients).  Finally, the court found that Florida’s self-referral law did not violate the Due Process Clause because it was rationally related to legitimate goals of lowering healthcare costs and improving the quality of healthcare services.

The Eleventh Circuit opinion is available here.

Reporter, Jennifer S. Lewin, Atlanta, +1 404 572 3569, jlewin@kslaw.com.