U.S. ex rel. Schubert v. All Children’s Health Sys., Inc. (Summary)
FALSE CLAIMS ACT – STARK LAW
U.S. ex rel. Schubert v. All Children’s Health Sys., Inc., No. 8:11-cv-01687-T-27EAJ (M.D. Fla. Nov. 15, 2013)
The United States District Court for the Middle District of Florida granted in part and denied in part a motion to dismiss filed by a number of related corporate entities in a health system in a False Claims Act suit brought by a former director of operations (“relator”) of the health system’s physician staffing entity. The relator alleged that the health system aggressively recruited pediatric physicians and physician groups by paying them above fair market value (over the 75th percentile salary range as determined by averaging a number of nationwide salary surveys). According to the relator, this violated the Stark Law and, in turn, violated the False Claims Act when the health system submitted claims to Medicare and Medicaid for services performed by the physicians.
The health system filed a motion to dismiss the relator’s third amended complaint, first arguing that the Stark Law does not apply to Medicaid claims. The court disagreed, holding “[c]ertifying compliance with the Stark Amendment to ensure that CMS [makes Medicaid payments to the States] for Medicaid claims that violate the Stark amendment would be a violation of the False Claims Act in the same manner that certifying compliance for full reimbursement under Medicare would be.” The court also concluded that the relator alleged with significant particularity that the physicians’ compensation was in excess of fair market value. According to the court, “[r]elator endeavored to create a fair market value benchmark by drawing from the median of three nationwide salary surveys and creating a competitive salary range. She then uses that information to allege a fair market value benchmark for all subspecialists identified in the complaint, and alleges that the salaries identified in the complaint exceed that benchmark.” However, the court dismissed the relator’s claim against one of the individual physicians, noting that there were no allegations that supported the claim that his productivity bonus violated the Stark Law. According to the court, “[t]here is…nothing inherently improper with volume based compensation arrangements, as long as they do not take into account the volume or value of referrals and the procedures are personally performed by the physician.”