On January 8th, a United States District Court in the Middle District of Florida granted in part, denied in part summary judgment in favor of Halifax Hospital Medical Center and certain other defendants (collectively, Halifax Hospital) in connection with the non-intervened claims brought by Relator Elin Baklid-Kunz (Relator) under the False Claims Act (FCA). As reported in our November 18, 2013 Health Headlines Newsletter, the court previously ruled on certain of Relator’s claims in which the government has elected intervened. At issue in this order was whether a triable issue of fact existed as to Relator’s non-intervened claims based on the allegations that Halifax Hospital: (i) violated the Anti-Kickback Statute (AKS) by paying neurosurgeons, oncologists, and psychiatrists for referrals, (ii) admitted certain patients whose inpatient admissions were not medically necessary, (iii) violated the Stark Law by submitting claims for designated health services (DHS) referred by two psychiatrists and a medical director with whom the hospital had financial relationships, and (iv) conspired with other defendants to violate the FCA.
With respect to Relator’s AKS claim, the court held that Relator failed to raise a fact issue regarding the applicability of the AKS bona fide employment exception of the AKS to Halifax Hospital’s financial arrangements with the neurosurgeons, oncologists, and psychiatrists. Relator contended that these physicians were independent contractors of Halifax Hospital, rather than employees. However, applying the common law agency test for employment, the court concluded that “[n]one of the evidence on which the Relator attempts to rely suggests (a) that these physicians were actually controlled by Halifax Staffing rather than Halifax Hospital or (b) that they were otherwise independent contractors.” The court also found that Relator’s failure to identify any referrals by the medical director with whom Halifax Hospital had an improper financial relationship in violation of the Stark Law was grounds for dismissal of that claim as well. As a result, the court granted summary judgment in favor of Halifax Hospital on Relator’s AKS claims and Stark Law claim related to the medical director.
The court, however, concluded that Relator’s remaining claims should survive Halifax Hospital’s motion for summary judgment. First, as to Relator’s improper inpatient admissions claim, the court held that Relator’s expert’s report provided sufficient evidence to establish the existence of a genuine issue of material fact as to the medical necessity of at least some of the inpatient admissions at issue in the case.
Second, the court held that Halifax Hospital’s employment arrangement with the two psychiatrists, from whom Halifax Hospital admitted that it had received DHS referrals, did not qualify for protection under the Stark Law’s bona fide employment exception. Although the court found that the psychiatrists’ employment was for identifiable services and that the psychiatrists’ compensation was commercially reasonable and fair market value, the court, with little explanation, held that the psychiatrists’ incentive payments—equal to 100 percent of the hospital’s gross collections less the amount of their salary and Halifax Hospital’s cost for billing—took into account the volume or value of referrals. The court reasoned that “[t]his arrangement would have allowed [the psychiatrists] to increase their incentive payments by making additional referrals for DHS to Halifax Hospital. Because the remuneration would vary with the amount of referrals, the Bona Fide Employment Exception to the Stark Law would not apply to these compensation agreements.” As a result, the court refused to dismiss Relator’s Stark Law claim related to the psychiatrists.
Lastly, the court found that Relator’s conspiracy claim should continue to trial because Relator’s underlying improper inpatient admissions and Stark Law claims as to the psychiatrists survived summary judgment.
The court’s order may be read here.
Reporter, Adam Robison, Houston, + 1 713 276 7306, arobison@kslaw.com.
