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Stark Law concerns surface amid changing False Claims Act landscape

Federal enforcement continues to target physician compensation, while Washington pushes for state FCA renewal

Stark Law litigation is becoming a primary concern for healthcare providers following recent high-priced settlements involving physician compensation agreements, according to a report by Bloomberg BNA.

In September, Adventist Health System and North Broward Hospital district paid a combined $190 million to resolve claims tied to physician compensation and inpatient referrals. Attorney Kevin McAnaney told Bloomberg BNA that providers are unsure about how the government views financial arrangements with employed physicians.

Although an Office of Inspector General fraud alert last year indicated the agency had a renewed interest medical directorships that go above fair market value, or arrangements that account for the volume of patient referrals, recent enforcement has added a new layer of concern. Previous reports have also highlighted physician pay as a primary concern in the coming year, and Friday, a Southern California hospital agreed to pay more than $3.2 million for Stark Law violations, including physician agreements that had expired or were missing signatures, acccording to the Department of Justice.

"The government and relators have taken very aggressive positions regarding what it means to 'take into account' referrals in establishing compensation and the courts have gone along at least for purposes of motion practice," said McAnaney, according to Bloomberg BNA.

Pending FCA litigation could have additional rippling effects on enforcement as the Supreme Court prepares to hear an FCA case involving "implied certification" that has been the impetus for a number of whistleblower lawsuits. The court will decide whether regulatory violations can result in FCA claims. Should the court rule that FCA liability only applies to regulations labeled as a condition of payment, a large percentage of False Claims Act cases will be ended, Philadelphia attorney Joseph E.B. White, with Nolan Auerbach & White PA, told Bloomberg BNA.

Meanwhile, Washington is contending with its own FCA concerns following a finalized report calling for the Legislature to renew the state's Medicaid Fraud FCA, which is set to expire in June. On Tuesday, the Everett Herald published an opinion piece highlighting the 28 percent increase in FCA civil recoveries under the law, with a 3-1 return on investment.

To learn more:
- read the Bloomberg BNA report
- see the DOJ announcement
- here's the Washington State report
- read the Everett Herald opinion piece

Related Articles:
Fraud trends: FCA cases, physician pay will loom large in 2016
OIG fraud alert targets physician compensation agreements
Supreme Court to hear FCA case on 'implied certification'
Health systems cough up stiff settlements for overpaying docs