Cooper v. Pottstown Hosp. Co. – March 2015 (Summary)

FRAUD AND ABUSE

Cooper v. Pottstown Hosp. Co., Civil Action No. 13-01137 (E.D. Pa. Mar. 13, 2015)

The United States District Court for the Eastern District of Pennsylvania dismissed an Anti-Kickback Statute violation claim brought by a surgeon against a hospital, holding that the surgeon was trying to manufacture an Anti-Kickback Statute violation.

While employed as an independent contractor at the hospital, the surgeon entered into a contract to provide on-call services at the hospital. Subsequently, the surgeon obtained a financial interest in a competing surgical facility. The hospital terminated the surgeon’s on-call contract after he refused the hospital’s requests for him to divest his interest in the facility. Soon after, the hospital entered into another on-call contract with the surgeon that allowed him to retain his financial interest in the surgical facility, as long as he did not gain employment with another hospital within 30 miles. That same month, the hospital terminated the surgeon’s employment contract due to his financial interest in the competing surgical facility. The surgeon secured new employment at another hospital within the 30-mile radius, so the hospital terminated his second on-call contract. The surgeon brought suit, claiming that the hospital’s on-call contracts were covert ways of inducing exclusive referrals to the hospital, in violation of the Anti-Kickback Statute.

The court dismissed the surgeon’s claims, stating that the surgeon failed to plead facts to show that the hospital’s on-call contracts were not just business arrangements, but instead were intended to induce referrals. The surgeon’s compensation was never in exchange for the referral of patients to the hospital or above fair market value. Furthermore, the second on-call contract allowed him to retain his financial stake in the competing surgical facility, which is inconsistent with the surgeon’s theory that the hospital intended to induce the surgeon to refer patients to it exclusively.