In its January 21, 2009 opinion in Kosenske vs. Carlisle HMA, Inc. (no. 07-4616), the U.S. Court of Appeals for the Third Circuit overturned the dismissal of a whistleblower action filed under the False Claims Act. The case involved an exclusive arrangement between an anesthesiology group and a hospital that had been challenged under Stark and anti-kickback laws. In 1992, an anesthesia group had entered into a written contract with the hospital giving the group the exclusive right to provide anesthesiology services at the hospital. The hospital agreed to provide free office space, supplies, equipment and personnel to the group when providing anesthesiology services to patients. Although the 1992 agreement referenced pain management services, no such services were being provided at the time.
In 1998, the hospital built a new freestanding ambulatory surgical center and pain clinic where the anesthesia group was given rent-free space and equipment in the pain clinic as well as support personnel at no charge. No new written agreement was entered into between the hospital and the anesthesiology group and the existing written agreement was not amended to reference the new facility.
The Third Circuit Court, reversing the lower court’s dismissal of the whistleblower action, found that the provision of office space, medical equipment and personnel at no charge by the hospital to the anesthesiology group was a compensation arrangement under Stark.
Generally, arrangements between anesthesiologists and hospitals do not implicate Stark or the anti-kickback statute because there is no referral of patients by anesthesiologists to the hospital. When a pain management clinic is involved, however, patients may be referred to the hospital by anesthesiologists for tests or procedures. The Court found that there was no written agreement that covered the relationship between the hospital and the anesthesiology group for pain management services. The Court held that, even if it where to find that the 1992 Agreement did cover the pain management relationship, there was no specific reference in the agreement to free space, equipment and personnel. Additionally, the Court concluded that the hospital did not adequately demonstrate the fair market value of the compensation arrangement. The Court stated that, where parties are in a position to refer to one another, the mere contention that they engaged in “arms-length” negotiations, without evidence setting forth general market value, did not establish that fair market value compensation was given for the services provided.
This decision highlights the importance for health care providers to:
- thoroughly document compliance with Stark and anti-kickback laws,
- establish fair market valuation through some rational methodology, and
- make sure that contracts are updated to reflect important changes in an arrangement.
Kosenske vs. Carlisle HMA, Inc. (no. 07-4616), the U.S. Court of Appeals for the Third Circuit overturned the dismissal of a whistleblower action filed under the False Claims Act. The case involved an exclusive arrangement between an anesthesiology group and a hospital that had been challenged under Stark and anti-kickback laws. In 1992, an anesthesia group had entered into a written contract with the hospital giving the group the exclusive right to provide anesthesiology services at the hospital. The hospital agreed to provide free office space, supplies, equipment and personnel to the group when providing anesthesiology services to patients. Although the 1992 agreement referenced pain management services, no such services were being provided at the time.
In 1998, the hospital built a new freestanding ambulatory surgical center and pain clinic where the anesthesia group was given rent-free space and equipment in the pain clinic as well as support personnel at no charge.
No new written agreement was entered into between the hospital and the anesthesiology group and the existing written agreement was not amended to reference the new facility.
The Third Circuit Court, reversing the lower court’s dismissal of the whistleblower action, found that the provision of office space, medical equipment and personnel at no charge by the hospital to the anesthesiology group was a compensation arrangement under Stark
Generally, arrangements between anesthesiologists and hospitals do not implicate Stark or the anti-kickback statute because there is no referral of patients by anesthesiologists to the hospital. When a pain management clinic is involved, however, patients may be referred to the hospital by anesthesiologists for tests or procedures. The Court found that there was no written agreement that covered the relationship between the hospital and the anesthesiology group for pain management services. The Court held that, even if it where to find that the 1992 Agreement did cover the pain management relationship, there was no specific reference in the agreement to free space, equipment and personnel. Additionally, the Court concluded that the hospital did not adequately demonstrate the fair market value of the compensation arrangement. The Court stated that, where parties are in a position to refer to one another, the mere contention that they engaged in “arms-length” negotiations, without evidence setting forth general market value, did not establish that fair market value compensation was given for the services provided.
This decision highlights the importance for health care providers to
- thoroughly document compliance with Stark and anti-kickback laws,
- establish fair market valuation through some rational methodology, and
- make sure that contracts are updated to reflect important changes in an arrangement.
Due to the intense media scrutiny surrounding the bill, it is no secret that the Federal stimulus bill contained numerous provisions relating to electronic medical records. Less well covered, however, was the fact that the stimulus bill also made significant changes to the HIPAA privacy and security rules. The most significant changes by far concern business associate relationships. The stimulus bill amends HIPAA to require every business associate to comply with the privacy and security rules exactly as if the business associate is a covered entity itself. It should be expected that existing business associate agreements will need to be amended to comply with these new rules. In addition, the stimulus bill also requires covered entities to notify affected patients of any privacy or security breaches. Finally, the stimulus bill steps up HIPAA enforcement not only does the bill mandate tougher federal enforcement and significantly increased penalties, it also empowers state attorneys general to enforce HIPAA at the state level.
The stimulus bill directs the Department of Health and Human Services to promulgate regulations to enforce these amendments within eighteen months, so there is time to prepare for compliance. Houston Harbaugh is closely monitoring this process and will report on developments as they occur.