Opinion ID: 4438745
Heading Depth: 1
Heading Rank: 3

Heading: the stark act and the false claims act

Text: The Stark Act protects the public fisc from Medicare and Medicaid fraud. The Act and its regulations broadly bar Medicare claims for many services referred by doctors who have a financial interest in the healthcare provider. But the statute creates dozens of exceptions and authorizes the Department of Health and Human Services to make even more exceptions for financial relationships that “do[ ] not pose a risk of program or patient abuse.” 42 U.S.C. § 1395nn(b)(4). 1. Forbidden conduct. The Stark Act opens with a broad ban. It forbids submitting Medicare claims for “designated health services” provided under a “referral” made by a doctor with whom the entity has a “financial relationship.” Id. § 1395nn(a)(1). Understanding this ban requires exploring 11 these three quoted terms, each of which has statutory and regulatory definitions. The Stark Act lists several categories of designated health services, including inpatient hospital services. Id. § 1395nn(h)(6)(K). And inpatient hospital services include bed and board, interns’ and residents’ services, nursing, drugs, supplies, transportation, and overhead. 42 C.F.R. §§ 409.10(a), 411.351. A referral is a doctor’s request for a designated health service. 42 U.S.C. § 1395nn(h)(5)(A); 42 C.F.R. § 411.351. That definition is broad, but it has an important exception: services that a doctor performs personally do not count. 42 C.F.R. § 411.351. That makes sense; ordinarily, one cannot refer something to oneself. And the exception’s boundaries also follow: it does not cover services by a doctor’s associates or employees, or services incidental to the doctor’s own services. Id.; Medicare Program; Physicians’ Referrals to Health Care Entities with Which They Have Financial Relationships (Phase II); Interim Final Rule, 69 Fed. Reg. 16054, 16063 (Mar. 26, 2004). Finally, financial relationships come in two forms: (1) ownership or investment interests and (2) compensation arrangements. 42 U.S.C. § 1395nn(a)(2). This case turns on the latter. The statute defines compensation arrangement to mean “any arrangement involving any remuneration between” a doctor and a healthcare provider. Id. § 1395nn(h)(1)(A). And remuneration “includes any remuneration, directly or indirectly, in cash or in kind.” Id. § 1395nn(h)(1)(B). 12 2. Exceptions. On its face, the Stark Act’s ban sweeps in lots of common situations. To separate the fraudulent wheat from the innocuous chaff, Congress and the Department of Health and Human Services have created many exceptions. Here, the Medical Center argues that exceptions for four types of compensation arrangements could apply here: bona fide employment; personal services; fair-market-value compensation; and indirect compensation. See id. § 1395nn(e)(2), (e)(3); 42 C.F.R. § 411.357(l), (p). All four exceptions have two elements in common. First, the doctor’s compensation must not “take[ ] into account (directly or indirectly) the volume or value of” the doctor’s referrals. 42 U.S.C. § 1395nn(e)(2)(B)(ii); accord id. § 1395nn(e)(3)(A)(v); 42 C.F.R. § 411.357(l)(3), (p)(1)(i). Second, the doctor’s compensation must not exceed fair market value. 42 U.S.C. § 1395nn(e)(2)(B)(i), (e)(3)(A)(v); 42 C.F.R. § 411.357(l)(3), (p)(1)(i). In litigation, these exceptions are affirmative defenses. So once a plaintiff proves a prima facie violation of the Stark Act, the burden shifts to the defendant to prove that an exception applies. United States ex rel. Kosenske v. Carlisle HMA, Inc., 554 F.3d 88, 95 (3d Cir. 2009). 3. No built-in cause of action. The Stark Act forbids the government to pay claims that violate the Act. 42 U.S.C. § 1395nn(g)(1). It demands restitution from those who receive payments on illegal claims. Id. § 1395nn(g)(2). And it creates civil penalties for submitting improper claims or taking part in schemes to violate the Act. Id. § 1395nn(g)(3), (4). But it gives 13 no one a right to sue. United States ex rel. Drakeford v. Tuomey, 792 F.3d 364, 374 n.4 (4th Cir. 2015). So the Stark Act never appears in court alone. Instead, it always come in through another statute that creates a cause of action—typically, the False Claims Act.
Under the False Claims Act, any person who “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval” is civilly liable to the United States. 31 U.S.C. § 3729(a)(1)(A). A Medicare claim that violates the Stark Act is a false claim under the False Claims Act. Kosenske, 554 F.3d at 94. The False Claims Act also makes liable anyone who “knowingly makes, uses, or causes to be made or used, a false record or statement material to” a false or fraudulent claim. 31 U.S.C. § 3729(a)(1)(B), (G).