On Monday the United States Supreme Court declined to hear Danny Smart’s appeal of the Fifth Circuit’s rejection of his attempt to share in the proceeds of a $5 million settlement of a False Claims Act suit brought by another whistleblower against Texas hospital chain Christus Health.

In 2005 Danny blew the whistle on Christus for renting office space to physicians at below-market rates.  His theory was that the low rent was remuneration and therefore a violation of the Stark and Anti-Kickback Statutes.  The suit was made public in January 2008.

In February 2008 Cecilia Guardiola filed her own whistleblower suit against Christus.  She alleged that Christus violated the False Claims Act by sending inpatient bills for procedures that should have been billed as outpatient.

In June 2010 Christus settled Danny’s suit for $2.1 million, plus $4.1 million in administrative penalties.  Danny walked away with a cool $1,572,000.  He was feeling pretty good until he learned that Christus had settled Cecilia’s suit for about $5 million.

So Danny did what whistleblowers do:  he filed a lawsuit demanding a share of the $5 million.  His theory: Cecilia wouldn’t have been suspicious of Christus if she hadn’t heard about his lawsuit.

The District Court rejected Danny’s claim, noting that his lawsuit hadn’t involved the overbilling that Cecilia alleged.  The Fifth Circuit agreed with the lower court.  Then Monday Danny reached the end of the line when the Supreme Court refused to hear his appeal.

The lesson for hospitals lies in Danny’s original suit.  From the perspective of anti-referral laws, renting office space to doctors at below-market rates is the same as giving them cash.  So hospitals need to (a) document the market level and (b) keep their rents at that level or higher.