February 23, 2009

A recent Federal appeals court decision just paved way for a qui tam whistleblower to proceed with a False Claims Act (“FCA”) case involving allegations of Stark and Anti-kickback Statute violations relative to an exclusive anesthesia coverage agreement and pain management services arrangement between an anesthesia group and a hospital. This case is noteworthy in many respects, and highlights how courts and enforcement officials may apply Stark to common anesthesia and pain management arrangements in the healthcare industry.

The whistleblower was a former partner of an anesthesiology group. The anesthesia group had entered into an exclusive anesthesiology services agreement with a hospital. The written agreement provided that:

• The group would provide 24/7 exclusive anesthesia coverage for hospital’s patients;
• The hospital, at no charge, would provide space, equipment, personnel and supplies necessary for the group to provide the anesthesia services to the hospital’s patients;
• The group would use the personnel, space, equipment, and supplies provided by the hospital solely for the practice of anesthesiology and pain management on the hospital’s patients; and 
• The group would not practice anesthesia or pain management at any location other than the hospital.

Approximately six years later, the hospital built a stand-alone facility, containing a pain clinic. Upon opening the pain clinic, the anesthesia group provided pain management services at the clinic and the hospital did not charge the group rent for the space and equipment, or a fee for the support personnel provided to the group. As with the anesthesia services, the group submitted claims for the professional pain management services and the hospital submitted claims for the facility component. There was not a separate written agreement between the parties for this pain clinic arrangement.

A Federal appeals court found that the hospital’s pain management arrangement with the group failed to meet the requirements of the Stark law, as the exclusive anesthesiology agreement did not cover the pain management services provided at the pain clinic.

Lessons Learned:

• Anesthesia groups should have their current arrangements reviewed for compliance with Stark and the Anti-kickback Statute, and remain attentive to future developments in this area. Notably, the whistleblower in the case was an anesthesiologist with the group, who previously benefited from the arrangement and brought the case in order to compete against his former partners.
• Anesthesia groups involved in arrangements similar to the one addressed in the case should ensure all of their arrangements are carefully detailed and documented, as courts and other enforcement officials will apply a strict interpretation of Stark.
• Exclusivity rights and use of office space, personnel, and equipment will likely be viewed as remuneration under Stark and must meet fair market value standards. Thus, parties to these arrangements should document all evidence supporting the arrangement’s fair market value.

if you have specific questions on how the Stark or Anti-Kickback laws may impact your relationships you can also email Abby Pendleton, Esq at apendleton@thehlp.com who contributed to this Alert.  Your feedback is always important to us. We invite you to send us questions and concerns; we will try to address those of general interest in future Alerts.

Sincerely,

Tony Mira
President and CEO