U.S. ex rel. Heesch v. Diagnostic Physicians Group (Summary)

FALSE CLAIMS ACT

U.S. ex rel. Heesch v. Diagnostic Physicians Group, No. 11-0364-KD-B (S.D. Ala. May 22, 2014)

The U.S. District Court for the Southern District of Alabama granted in part and denied in part a motion to dismiss the United States’ Complaint in intervention filed by a health system, its clinic and its clinic subsidiaries in a False Claims Act suit.

The health system created a clinic in order to acquire physician practices and to establish clinic subsidiaries. The clinic established two clinic subsidiaries. With the approval of the health system and its board, the clinic entered into contractual agreements with individual physicians and physician groups to provide physicians to the two clinic subsidiaries. Allegedly, both clinic subsidiaries subsequently entered into agreements with a physician group whereby the subsidiaries billed Medicare for testing and designated health services that were referred by group physicians, and often performed by subsidiary personnel on subsidiary equipment. The payments made to the group allegedly were in turn paid to the referring physicians, and thus resulted in group physicians receiving payment for referral of designated health services, some of which group physicians did not personally perform, in violation of the Stark Law.

The court held that the government had pled facts with sufficient particularity against the subsidiary clinics and denied the motion to dismiss with regard to them. However, the court held that the government’s generalized allegations that (1) the health system created the clinic and the clinic in turn created the subsidiaries; (2) there was an overlap among officers, executives and employees within all organizations involved; and (3) some of the shared leadership knew about the improper arrangement were insufficient to support a claim for vicarious liability against the health system and clinic.