U.S. ex rel. Kosenske v. Carlisle HMA, Inc., 3rd Cir., Jan. 21, 2009

DO NOT POST UNTIL REVIEWED.  NEWSLETTER, Health Care Compliance Letter, Vol. 12 Issue 6, March 24, 2009, FCA case proceeds after exception to Stark Law denied FCA case proceeds after exception to Stark Law denied The district court improperly concluded that an arrangement between a hospital and a physicians' group to provide pain management services was within the scope of the "personal service arrangements "exception of the Stark law because it did not meet the exception requirement that such an arrangement be in writing, according to the Third Circuit Court of Appeals. Therefore, the court reversed the opinion and remanded the case to the district court to determine whether a physician, who alleged that the arrangement between the hospital and physicians' group violated the False Claims Act (FCA), could satisfy the remaining elements of his FCA claims. The case arose from a qui tam action in which the physician charged that a hospital's arrangement with a physicians' group to provide pain management services violated the FCA because the hospital falsely certified that claims submitted to Medicare and other health care programs were in compliance with the Stark law and the anti-kickback statute. The district court dismissed the FCA claims after it found that the arrangement was within the scope of the personal services exception of the Stark law. The physician appealed. The arrangement. The physicians' group previously had entered into a written arrangement with the hospital to provide anesthesia services. Several years later the hospital opened a free-standing outpatient surgical center and pain management clinic. The physicians provided pain management services at the clinic and referred patients to the hospital for diagnostic tests. The written agreement, however, was never amended to include pain management services at the clinic. The law. Under the Stark law and the anti-kickback statute, a physician may not make a referral to an entity for health services if he or she has a financial relationship with the entity, which includes a compensation arrangement. An exception to the prohibition may exist for "personal service arrangements," if the arrangement is in writing, signed by the parties, for a period of at least one year, specifies and covers all the services provided, and provides for compensation that does not exceed fair market value. In this case, there was no signed, written contract regarding the pain clinic, the court said. Even if the previous hospital agreement could be read as reflecting the parties' future arrangement at the pain clinic, that agreement said nothing about the provision of free office space, equipment, and staff, nor could the parties have engaged in arm's length negotiations regarding current fair market value of pain management services at the time of the original agreement, the court concluded. Burden not met. Because the referral of pain management patients to the hospital for diagnostic tests implicated the self-referral prohibitions the hospital had the burden of demonstrating its right to an exception. The court found that this burden was not met. Because the arrangement did not fit into the personal services exception, the FCA challenge related to false certification of was remanded to the district court to determine specifically whether the hospital knew its certifications were false. U.S. ex rel. Kosenske v. Carlisle HMA, Inc., 3rd Cir., Jan. 21, 2009, Health Care Compliance Letter, ¶800,610