Court Denies Whistleblowers Motion for Summary Judgment Finding Agreements Specific Enough to Meet Anti-Kickback Statute Safe Harbors

by King & Spalding

On October 29, 2012, the federal District Dourt for the Middle District of Florida denied a whistleblower’s summary judgment motion alleging that certain agreements failed to meet the safe harbors established under the Anti-Kickback Statute.  United States ex rel. Armfield v. Gills, No. 8:07-cv-2374, 2012 WL 5340131 (M.D. Fla., Oct. 29, 2012).  At issue in the case were space and equipment leases and a services agreement between the defendants, St. Luke’s Cataract and Laser Institute and St. Luke’s Surgical Center, and a physician, who provides preoperative examinations at St. Luke’s. 

In the motion for summary judgment, the qui tam whistleblowers contended that the agreements between the defendants and the physician failed to meet the specificity requirements of the Anti-Kickback Statute safe harbors.  The safe harbors for space and equipment leases and service agreements require that the agreements, among other things, are in writing, are for a period of not less than one year, are signed by the parties, and specify the equipment or space leased or service provided and the duration of the agreement.  In addition, the safe harbors require that rental charges be set in advance in a manner consistent with fair market value in arms-length transactions without regard to referrals and that the space or equipment rented be reasonably necessary to accomplish the commercially reasonable business purpose of the rental. See 42  C.F.R. § 1001.952.

The court determined that the agreements were sufficiently specific to meet the safe harbor requirements.  The space and equipment lease agreement at issue provided an address for the premises covered by the lease and defined space as the “exclusive use of private office space sufficient for physician and office manager; exclusive use of an examination area…[and] exclusive use of an area for the storage of medical records….”  The lease further specified the contract value, monthly payments, and “1021.66 SQ Feet @ $20.00” as the premises rented.  In addition, the definition of “Medical & Office Equipment” in the agreement covered “certain furniture, supplies, and equipment ‘as mutually agreed upon by the parties as appropriate for the assessment and diagnosis of disease.’”  The agreement also contained a calculation of the fair market value and useful life of each item.  Finally, “Non-Medical Personnel” in the services agreement included “receptionists, medical records staff, clerical support staff, and others necessary to assist…in [the] provision of medical services.”  The court explained that the regulations setting out the safe harbors require no more specificity than that provided in the agreements, noting that the goal of the safe harbor is to provide transparency and verifiability.  Because the agreements clearly identified the space, equipment, and services provided, the court found that no more specificity was required.  Accordingly, the court denied the whistleblowers' motion for summary judgment.  The opinion may be read here.

Reporter, Paige Fillingame, Houston, +1 713 615 7632,

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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