Achieving the Trifecta of Healthcare Fraud and Abuse: United States v. BayCare Health System

​​​Can a hospital violate the Stark Statute and the Anti-kickback statute, and therefore the False Claims Act, when it provides free parking to physicians in return for Medicare patient referrals? According to the Middle District of Florida, such a “financial relationship” between a hospital and a physician may result in the imposition of liability under the Stark Statute, the Anti-kickback statute, and the False Claims Act. 

The Stark Statute prohibits physicians from referring Medicare patients to a hospital if they have certain “financial relationships” with that hospital, and it also prohibits that hospital from making Medicare-reimbursement claims for services it provides to those patients. A financial relationship exists between a physician and a hospital where the physician receives compensation based on the volume or value of referrals brought to the hospital. Further, in addition to the STARK violation, the Anti-kickback statute (“AKS”) makes it a felony for a hospital to knowingly and willfully offer compensation to induce a physician to refer a patient for medical services that are paid through “a Federal health care program.”

Under the False Claims Act (“FCA”), a hospital is held liable if it knowingly presents a fraudulent claim for payment or “knowingly makes, uses, or causes to be made or used, a false record or statement material to a . . . fraudulent claim.” Since compliance with both statutes is required for Medicare payments, a violation of either STARK or AKS is sufficient for liability under the FCA.

The primary issue here was whether the claimed “financial relationship” between BayCare and the referring physicians was sufficient to withstand a motion to dismiss.
BayCare owned St. Anthony’s Hospital, land attached to the Hospital that was leased to St. Pete MOB to build a medical office building, and a second medical office building that was leased to SC Physicians. To generate more referrals to St. Anthony’s Hospital, BayCare created an easement permitting St. Pete MOB’s referring physicians to park in the hospital’s parking garage. The lease also allowed “referring physicians, their staff and patients, to use Baycare’s [sic] parking facilities at no charge,” which created more than $10,000 in savings per year for each referring physician. Similarly, both St. Pete MOB’s and SC Physicians’ referring physicians were provided with complimentary valet services.  Further, BayCare applied its tax exemptions for non-exempt property to both medical offices to encourage each office to refer patients. These exemptions provide each company with hundreds of thousands of dollars in property tax savings.

BayCare presented claims to Medicare for payment for services rendered on behalf of the patients that were referred by St. Pete MOB and SC Physicians. To request such payment, BayCare ultimately maintained that it complied with STARK and AKS by signing the Medicare Provider Application and Agreement. Supporting these claims, the complaint provides an aggregate number of Medicare patients both medical offices referred to St. Anthony’s Hospital from 2009 to 2011.

An unrelated relator uncovered the financial scheme, and brought it to the attention of the federal government. The United States and the relator filed a claim in the Middle District of Florida alleging that BayCare violated STARK and AKS by using its financial relationship with physicians, at St. Pete’s and SC Physicians’, to induce Medicare patient referrals and that BayCare violated the FCA by submitting claims from those referrals to the federal government. BayCare filled a motion to dismiss on the grounds the plaintiffs’ complaint did not comply with Rule 9(b) because it failed to allege a single false claim billed to the government.

The Court held that the alleged financial relationship between the hospital and the referring physicians was sufficient to withstand BayCare’s motion to dismiss. The Court reasoned that these fraudulent claims mainly rely on the improper relationship between the referring physicians and the hospital rather than particular fraudulent billing data. 

Further, the Court reasoned that the free parking, valet services, and tax exemptions that BayCare offered to physicians who referred Medicare patients established a financial relationship subject to the restrictions under STARK and AKS. Additionally, the Court stated that BayCare’s signing of the Medicare Provider Application and Agreement, coupled with the aggregate number of Medicare referrals that the physicians provided to the hospital, sufficiently displayed its knowledge of submitting fraudulent claims to Medicare for payment. An allegation complete with the evidence that BayCare knowingly submitted claims in violation of STARK and AKS is sufficient to establish liability under the FCA.

Since this is a District Court case, its precedent is only persuasive for other federal District Courts. However, it is likely that the holding here will be affirmed at the appellate level, especially because the value of the parking benefits and tax exemptions can be considered. All in all, hospitals should refrain from financially inducing physicians to refer patients that utilize federal benefits.

Full decision available at:
United States v. BayCare Health Sys., 8:14-CV-73-T-23EAJ, 2015 WL 4878456 (M.D. Fla. Aug. 14, 2015).

Tobin Klusty is a current student at DePaul University College of Law in Chicago. Mr. Klusty has an interest in the intersection of health care and civil rights, and plans to practice as a litigator after graduation.​​​