On November 13, U.S. District Court Judge Gregory A. Presnell of the Middle District of Florida partially granted the U.S. government’s summary judgment motion against Halifax Hospital Medical Center (“Halifax”). Judge Presnell ruled that Halifax failed to demonstrate that bonus compensation arrangements it made with medical oncologists satisfied a Stark Law exception. Judge Presnell found that neither party presented sufficient evidence to determine Stark Law liability regarding compensation arrangements with three neurosurgeons.
In 2009, the government joined this qui tam action filed by relator Elin Baklid-Kunz, which alleges that certain Halifax physician contracts violated the Stark Law because the compensation arrangements exceeded fair market value, were not commercially reasonable, and took into account volume and value of referrals and other business generated by the physicians for Halifax. The government argues that the contracts took into account volume or value of referrals because incentive and bonus compensation arrangements were calculated based upon the following criteria:
- Excess cash collections;
- The number of patients referred to physicians through hospital clinics;
- Physicians providing services to more than 1500 billable patients a month;
- A percentage of the operating margin of the department; and
- Any other reasonable compensation.
To support its claim that the oncologists’ arrangements exceeded fair market value, the government relied on the fact that a 2009 analysis of medical oncologists’ compensation revealed that at least one medical oncologist received compensation that exceeded fair market value. Halifax claimed that the medical oncologists’ contracts met the employment exception. However, the government argued that the contracts at issue did not fit within the employment exception because the pool from which the bonuses were drawn took into account the volume or value of DHS referrals by the medical oncologists. Judge Presnell agreed with the government, holding that although bonuses were allocated to the medical oncologists from the bonus pool based on services personally performed by the oncologists, the bonus pool was based on other factors including revenues from referrals made by the medical oncologists. The judge found this sufficient evidence to rule that these arrangements did not meet a Stark Law exception, and thus the arrangements violated the Stark Law.
The judge refused to determine the extent of the violations and denied the government’s motion for summary judgment on the False Claims Act claims. The relator alleges 74,838 false claims, allowing for potential damages between $400 million and more than $800 million. The government seeks $315 million in additional damages, which could result in a judgment over $1 billion. The False Claims Act claims and other Stark Law allegations regarding neurosurgeon compensation are still in contention. This case is scheduled to go to trial in March 2014.