Discuses how violation of the anti-kickback statute or Stark can result in the basis for a False Claims Act case.

1. NEWSLETTER
SOHA
Society of Ohio Healthcare Attorneys
SOHA Volume 8, Issue 2 Summer 2008
Officers and
Board OHA Luncheon a Success; AHLA Meeting Approaching
2008 Thank you to all of the SOHA members Krugh, Robison, Curphey & O’Connell;
who recently participated in the OHA An- Chet Porembski, OhioHealth; Darrell
President: Rob Gerberry, nual Meeting and the SOHA Luncheon. Ranum, OHIC/The Doctors Company;
Summa Health System, Ak-
ron Special thanks to Jim Flynn, Allen
Vice President: Susan Blasik
SOHA Board Mem- Mark Your Calendar Now: Killworth, Cath-
bers Rhonda erine Ballard,
Miller, Freund, Freeze & Ar- √ AHLA Annual Meeting
nold, Dayton Comer, Nationwide Diane Signoracci,
Secretary: Jeff Kapp, Jones Children’s Hospital June 30-July 2, Mike Gire, Mark
Day, Cleveland and Pat Jacobson, San Francisco Marriott Chilson and Karen
Immediate Past President: Stark & Knoll, who √ SOHA Fall Conference Smith of Bricker &
Tim Krugh, Robison, Curphey put together a con-
& O’Connell, Toledo Sept. 18-19, Eckler; Jim King,
structive and informa- Jones Day; and
District Representatives: Hilton Easton, Columbus
tive panel discussion Steve Eisenberg
Northeast: entitled, “Never Say and Chris Swift,
Patricia Jacobson, Stark & Never: Quality, Risk and Payment Issues Baker Hostetler. View handouts for each
Knoll Co., LPA, Akron of ‘Never Events.’” Participating on the session at ww.ohanet.org/annualmeeting/
Tom Onusko, Vorys, Sater, panel were SOHA Member Frank Pan- handouts-08.asp.
Seymour & Pease, Cleveland
dora, OhioHealth, along with Barry Mali-
Northwest: nowski, Medical Director for Anthem, and And be sure to join SOHA at the Ohio
Gary Sommer, Watkins, Richard McClead, MD, Nationwide Chil- breakfast at this year’s AHLA Annual
Bates & Carey, LLP, Toledo dren’s Hospital. Meeting in San Francisco. SOHA Board
Julia Smith Wiley, Robison, member Tom Onusko will lead the group
Curphey & O’Connell, Toledo Other SOHA members who presented at in a state health law discussion on Tues.
Southwest: the OHA Annual Meeting include: Rob July 1 from 7:00 a.m.—8:00 a.m. in Si-
Geoff Walker, Good Samari- Gerberry, Summa Health System; Tim erra A at the San Francisco Marriott.
tan Hospital, Dayton
Theresa Zimmerman, Catho- Interface Among AKS, Stark and False Claims Act
lic Healthcare Partners, Nor-
ton Recently, the United States District Court
for the Southern District of Ohio unsealed One of the whistleblower’s claims ties fraud
Central: and abuse laws to the
a whistler-blower suit
Rhonda Comer, Nationwide naming The Christ federal False Claims
Children’s Hospital, Colum-
Hospital, The Health “Violation of the anti-kickback Act.
bus
Alliance of Greater statute is a sufficient basis for an
Allen Killworth, Bricker & Eck- Cincinnati and The Attached to this issue
ler, LLP, Columbus action under the False Claims
Ohio Heart Health of SOHANews is an
Center as defendants. Act.” analysis of the inter-
OHA Representatives: face among the Medi-
Mary Gallagher, Vice Presi- The Department of Justice, after conduct- care and Medicaid
dent & General Counsel ing an investigation by the U.S. Attorney’s Anti-Kickback Statute, Stark II Law and the
Rick Sites, General Counsel Office in Columbus, announced it has in- federal False Claims Act by SOHA mem-
and Senior Director of Health tervened in the lawsuit. See the DOJ ber William Mack Copeland, Esq., FACHE.
Policy Press Release at www.usdoj.gov/usao/
ohs/Press/04-01-08-Wash.pdf.

2. Page 2 SOHA News
Physician’s Credentialing Documents Protected
The Stark County Court of Appeals re- by the physician and by the hospital, the
cently considered a trial court’s order of the court reviewed the statutory peer review
disclosure of privileged peer review docu- protection of Ohio Rev. Code Sec.
ments in a medical malpractice and negli- 2305.252, which had recently been found
gent credentialing case. Huntsman v. constitutional by the appellate court. The
Aultman Hosp., Case Nos. 2006 CA court reversed the trial court with respect
00316, 2006 CA 00331 (Ohio Ct. App., to documents prepared by the physician
May 27, 2008). and provided to health care entities for
purposes of peer review processes for
The case, Huntsman v. Aultman Hosp., accreditation, credentialing and privileges,
has an extensive history of discovery dis- finding those documents protected by
putes. In 2005, the appellate court re- Ohio Rev. Code Sec. 2305.252.
versed the trial court’s order of discovery of
a list of documents from the hospital’s peer However, the appeals court upheld the
review and credentialing files, finding them disclosure order for documents submitted
privileged. However, the court found the to non-hospital entities such as the Na-
documents were discoverable from original tional Practitioner Data Bank, the Joint
sources and remanded the case to the trial Commission, the Foundation of State
court for further proceedings. Medical Board’s Physician Disciplinary
Data Bank and the Ohio State Medical
On remand, the plaintiff sought discovery Board. The record did not establish those
of the documents directly from the defen- filings were submitted to entities with peer
dant physician and from several health in- review committees. In addition, those
surance and professional liability insurance documents are not privileged merely be-
carriers. The subpoena requested incident cause they are “of a type that usually
reports, applications for medical privileges makes up a peer review committee file.”
at hospitals, National Practitioner Data
Bank filings, Ohio State Medical Board fil- Finally, the court determined the order re-
ings, Joint Commission filings, applications quiring various health and professional
for professional liability coverage, health liability carriers to produce documents was
insurance credentialing applications, and not a final, appealable order because it
other documents. The trial court ordered ordered in camera review. Therefore, the
production of the documents for in camera court declined to consider that assignment
inspection. of error.
In companion cases considering appeals
Plaintiff’s Treatment Records Discoverable
The Fifth District Court of Appeals of Ohio prescription drugs while on the job, among
recently ordered a doctor to disclose infor- other claims. To support its defenses and
mation regarding a patient and the treat- counterclaims, the defendant requested
ment the patient received. In a unanimous records relating to Banks’ previous medi-
decision, the court held that disclosure of cal services and treatments for chemical
privileged information was permitted when dependency.
the claim was originally filed by the plaintiff
to whom the information pertains. Banks v. The appellate court agreed with the trial
Ohio Physical Medicine & Rehabilitation, court, holding that privileged information
Inc., 2008 WL 1970832 (Oh. Ct. App. 5th relevant to a case may be discovered in a
Dist., 2008). civil action if a medical claim or any type of
civil action is filed by a patient, personal
Mark Banks was terminated from his posi- representative of a patient, or patient’s
tion at Ohio Physical Medicine and Reha- guardian as long as the information is rele-
bilitation, Inc., and he sued the company vant to the subject matter of the pending
for unlawful termination. The defendant case. The court permitted the defendant
countersued and alleged that Banks was to acquire Banks’ medical records pertain-
terminated because he used and abused ing to his drug-related treatment.

3. SOHA News Page 3
OHA Weighs In on Negligent Credentialing Case
OHA and the Ohio Osteopathic Hospital viously been found responsible for injuries
Association filed an amici curiae brief in a due to substandard care.
case pending before the Ohio Supreme
Court. The case, Schelling v. Community Oral argument in the case will be held later
Hospitals of Williams County, involves negli- this year and a decision can be expected
gent credentialing lawsuits and is an appeal early next year. SOHA members Catherine
from the Williams County appellate court. Ballard and Anne Marie Sferra of Bricker &
Eckler, Columbus, represent OHA in the
The appellate court ruled that a plaintiff may
case. View the brief on the OHA Web site
sue a hospital for negligent credentialing,
even when the allegedly negligent physician at http://www.ohanet.org/med-
is not a party to the lawsuit and has not pre- mal/resources/050709amicus.pdf
Objective, Not Subjective Expert Testimony Permitted
The Second District Court of Appeals of to provide evidence showing Dr. Liesner’s
Ohio recently considered the role of expert actions fell below the standard of care
testimony in a medical malpractice case. In owed.
Moore v. Kettering Memorial Hospital, 2008
WL 1921642 (May 2, 2008), the court held a The court of appeals disagreed with the trial
patient was permitted to use expert testi- court’s reliance on a subjective opinion to
mony to show that a physician’s actions fell determine the standard of care. In Ohio, in
below the standard of care. order to establish medical malpractice, it
must be shown that the injury was caused
Before labor, Dr. Liesner failed to inform the by the actions of the defendant physician,
patient that in addition to inducing labor, the actions that other physicians of ordinary
option of performing a caesarean section to skill would not reasonably commit under
deliver the baby existed. Due to the induced similar circumstances, and that the injury
labor, the child was born with a birth defect, was directly caused by such actions. The
and the patient sued arguing the doctor court remanded the case holding that the
negligently delivered the baby and negli- jury should have used the expert’s objective
gently failed to offer the option of a c- testimony stating doctors should offer alter-
section. The trial court relied on an expert’s native birthing methods, such as c-sections,
subjective testimony, that he too would have rather than his subjective testimony on the
induced labor even though a c-section was method he would personally use in a given
available, to determine that the patient failed situation.
SOHA, OSHRM, OHA Web Resources Available
Have you checked the SOHA, OSHRM or health care providers. The latest edition
OHA Web sites lately? consists of more than 900 pages organized
into eleven chapters with approximately 950
Previous issues of SOHANews are archived health care statutes and regulations current
at www.ohanet.org/societies/soha. to January 1, 2008. More than 70 new provi-
sions were added and the index was ex-
Also check out the page for the Ohio Soci-
panded, ranging from quot;abandoned babyquot; to
ety for Healthcare Risk Managers. OSHRM
quot;x-ray.quot;
posts a quarterly newsy message and
keeps a list of Ohio Supreme Court opinions Handbook purchasers will also receive a
of interest to health lawyers. copy of an OHA bulletin listing almost 75
(www.ohanet.org/societies/oshrm) hospital reporting obligations under Ohio
laws.
And don’t forget about the OHA Hospital
Law Handbook! Available for just $75 for
Ordering information and regular updates to
SOHA members, the Handbook is a com-
the Handbook are available at
pendium of Ohio statutes and regulations
www.ohanet.org/med-mal/.
applicable to hospitals, physicians and other

4. Page 4 SOHA News
Common Sense Nurse Staffing Bill Enacted
The common sense nurse staffing bill was ing assessments of a unit’s patients
signed by Gov. Ted Strickland and will take and nursing staff; and
effect Sept. 10, giving hospitals months to √ The hospital’s policy for additional
prepare for the new requirements. nurses who can provide care when
patients’ needs exceed the planned
The act requires hospitals to create hospi- workload for the direct care staff.
tal-wide nursing care committees, charged
with developing recommendations for writ- The hospital must provide the nursing staff
ten nursing care staffing plans. Direct care and others a copy of the staffing plan upon
nurses representing all types of nursing request.
services offered by the hospital, as well as
chief nursing officers, will serve on the The Ohio Hospital Association worked with
committees. the Ohio Nurses Association on the legis-
lation, House Bill 346, sponsored by Jim
Each hospital also must develop a staffing
Hughes (R-Columbus). OHA will continue
plan, giving significant regard to the com-
to work with the ONA to implement the
mittee recommendations. The plan must
law, while working against proposals of-
address:
fered by other organizations which would
√ Whether the hospital has competent jeopardize the ability of hospitals to meet
nurses with specialized skills to meet patient and community needs.
patient care needs in accordance with
evidence-based safe nursing stan- More information on nurse staffing can be
dards; found on the OHA Web site at
√ Complexity care of care, assessment www.ohanet.org/advocacy/state/issues/
on patient admission, volume of patient nursestaffing.htm. To ease the implemen-
admissions, discharges and transfers, tation burden, OHA and the Ohio Organi-
evaluation of the patient’s problems, zation of Nurse Executives (OONE) devel-
ongoing physical assessments, plan- oped an initial resource packet
ning for a patient’s discharge, assess- (www.futurethink.org/resources/
ment after a change in patient condi- draftstaffingresources5-28-08.pdf) to give
tion and assessment of the need for nurse administrators the information they
patient referrals; need to initiate conversations about nurse
√ Patient acuity and the number of pa- staffing at their hospitals. It also provides
tients receiving care along with ongo- an outline of the requirements of HB 346.
Grieving Parents Act Signed into Law
Gov. Ted Strickland June 11 signed into law The act, sponsored by Sen. Kevin
the Grieving Parents Act, which addresses Coughlin (R-Cuyahoga Falls), specifies
medical situations where fetal death has that sections of the bill concerning a hos-
occurred prior to 20 weeks gestation. pital or doctor notification requirement
about miscarriage do not apply in the
The act requires hospitals to notify a woman case of an abortion. A substitute version
who presents herself at a hospital as a re- of the bill added that if a father applies for
sult of a fetal death prior to 20 weeks gesta- a fetal death certificate, he must also sub-
tion with information about the hospital pro- mit a signed and notarized document
cedure for disposing of the product of hu- from the mother attesting she voluntarily
man conception as well as the right of the provided a copy of a hospital or physician
woman to apply for a fetal death certificate. statement confirming the miscarriage.
Current law does not authorize either death The substitute also added a provision that
certificates or burial permits for fetal deaths the cause of death is not to be listed on a
occurring prior to the 20th week of gesta- certificate for fetal death that occurs prior
tion, although some parties ignore existing to 20 weeks of gestation. A memo outlin-
law in order to accommodate the wishes of ing various negotiated provisions can be
the grieving woman or family. found at http://www.ohanet.org/advocacy/
state/issues/resources/sb175memo.pdf.

5. SOHA News Page 5
Governor Signs Maternity Licensure Bill
Gov. Ted Strickland held a public bill sign- year licenses and tri-annual inspections.
ing on Monday, June 2nd to pen his ap- The act also permits random and additional
proval of legislation that will reduce regula- scheduled inspections, consistent with ac-
tory burden, lower costs and enhance ma- creditation standards. A new maternity ad-
ternal and newborn care in Ohio. House visory council has been created to assist the
Bill 331, sponsored by Sen. Mark Wagoner Ohio Department of Health (ODH) in prom-
(R-Toledo), will take Sept. 1. ulgating rules that are evidence-based and
reflect best practices.
Although hospitals are not licensed in
Ohio, hospital maternity units have a sepa- The act is the result of collaboration be-
rate licensure requirement, enacted in the tween the Ohio Hospital Association Mater-
1950s. Over 120 Ohio hospitals have ac- nity Licensure Task Force and ODH, and
tive maternity units. reflects the needs of large and urban hospi-
tals as well as small and rural facilities.
The act combines two current sets of ma-
ternity licensure requirements and moves Read the act at www.legislature.state.oh.us/
from annual maternity inspections to three- bills.cfm?ID=127_HB_331.
Hospitals Applaud Newly-Passed Energy Bill
Ohio’s hospital community supports the final SB 221 permits a utility and a commercial
version of Ohio’s comprehensive energy bill or industrial customer, or group of custom-
passed by the General Assembly, hopeful it ers, to file a special rate schedule with the
will improve reliability and help Ohio avoid Public Utilities Commission of Ohio. This
sharp increases in electricity rates begin- may provide an opportunity for hospitals
ning next year. Senate Bill 221, sponsored to obtain lower electric rates if they are will-
by Robert Schuler (R-Cincinnati) was ing, for example, to have their power inter-
signed into law by Gov. Ted Strickland May rupted during times of peak demand.
1. Overall, electric rates under the bill are
expected to increase moderately during the A detailed analysis of the bill is available at
next 2-3 years under electric security plans, http://www.ohanet.org/Bulletins/2008/08-
although FirstEnergy rates may increase 004.htm. Passage of SB 221 is considered
more significantly if it makes good on ear- a success because electric rates after this
lier statements that it planned next year to year were expected to increase, with the
go to high market-based electric rates. potential to jump dramatically as in states
with deregulated electric rates. OHA is a
The final bill also includes net metering lan- member of the Ohio Coalition for Affordable
guage that will enable Ohio hospitals with Power, which supported SB 221 in its advo-
appropriate electric generating equipment to cacy for a framework to ensure affordable
use on-site electric generating facilities in and reliable power. For more information,
times of peak demand to sell electricity back visit OHA’s energy Web page at http://
the utility's power grid. Another provision in www.ohanet.org/energy/.
ODH Issues Flu Reporting Survey Results
The Ohio Department of Health (ODH) is- reporting, including insufficient staff, time
sued the results of its 2007 survey of pro- constraints and lab or information technol-
posed rule changes that would require hos- ogy equipment deficiencies. ODH says it is
pitals to report lab-confirmed influenza- still working on the draft communicable
associated hospital admissions. disease rule changes, which are expected
to be circulated in the near future. View the
A majority of hospitals responding to the report at http://www.ohanet.org/flu/
survey agreed there is public health benefit doc/042508odh_survey.pdf and a cover
to such reporting, and most also agreed letter from State Epidemiologist Forrest
they are able to make such reports. About Smith, M.D. at http://www.ohanet.org/flu/
half of responding hospitals cited barriers to doc/042508flu_letter.pdf.

6. Page 6 SOHA News
SOHA Members in the News Message from the President
Congratulations to the following SOHA members and
health lawyers in the news:
Almeta Cooper has joined the Ohio State University
Medical Center Office of Health Sciences as Associate
Vice President and Associate General Counsel. Mel
Rutherford has joined ProAssurance’s West Chester of-
A s we inch closer to the up-
coming Presidential elec-
tion, many candidates con-
tinue to call for change in
our nation’s delivery of health care.
SOHA’s goal is to track and analyze pro-
posed and existing legislation to assist our
fice as a Senior Risk Management Consultant. Dan
membership with the opportunities and
Glessner has joined the Akron office of Brouse McDowell
challenges presented by these changes. As
in the Healthcare Practice Group. Shawn Lyden, Of
part of this effort, SOHA will continue to
Counsel to Brouse McDowell, has been named Executive
strive to interpret and shape the laws and regulations that
Vice President and General Counsel of Akron Children’s impact our profession.
Hospital. Jan Murray has been appointed Deputy Gen-
eral Counsel of the Cleveland Clinic Health System. Jeff As part of this mission, SOHA will be sponsoring several
Kapp, a partner in the Health Care Group of Jones Day upcoming events. SOHA hosted a luncheon presentation on
has moved from Columbus to the Cleveland office. Dan Tuesday, June 12 at the OHA Annual Meeting. The presen-
Hackett has been named General Counsel of the Mount tation, titled “Quality and Payment Issues involved with
Carmel Health System in Columbus. Don Antrim and fel- Never Events” included panelists from OhioHealth, OSU
low attorneys in the Columbus office of Buckingham Medical Center and Nationwide Children’s Hospital. In ad-
Doolittle have joined the Columbus office of Dinsmore & dition, on Tuesday July 1 at the AHLA Annual Meeting,
Shohl. Former OHA Staffer Jeff Klingler has been named SOHA will sponsor a breakfast meeting for all Ohio atten-
President and CEO of the new Central Ohio Hospital dees with an Ohio Case Law update presented by SOHA
Council. Board member Tom Onusko of Vorys, Sater. Finally, Allen
Killworth has been working with OSHRM to put together an
Welcome New SOHA Member excellent Fall Conference which will be held at the Hilton
Please join SOHA in welcoming the following new mem- Easton in Columbus on Thursday, September 18 and Fri-
ber: day, September 19.
√ Shannon DeBra, Baker Hostetler, Cincinnati Through these educational events and networking within our
membership, SOHA members will continue to seek to improve
the health care system in Ohio by providing high quality
legal and policy counsel to health care entities throughout the
state.
Health Law Attorney Openings Rob Gerberry
Check out the following health law attorney opportunities:
Akron General Health System: Associate General Coun-
sel. http://www.akrongeneral.org/portal/page?
_pageid=153,171654&_dad=portal&_schema=PORTAL&j
ob_id=487694
Cincinnati Children’s Medical Center: Tax Compliance
Officer. http://sh.webhire.com/servlet/av/jd?
ai=361&ji=1957804&sn=I Society of Ohio
University Hospitals, Cleveland: Associate General
Counsel. http://www.uhhospitals.org/tabid/1280/
Healthcare Attorneys
Default.aspx 155 East Broad Street, 15th Floor
University Hospitals, Cleveland: Associate Chief Compli- Columbus, Ohio 43215-3260
ance Officer. http://www.uhhospitals.org/tabid/1280/ 614.221.7614•614.221.4771(fax)
Default.aspx www.ohanet.org/societies/soha/
Jones Day, Chicago & Washington, DC: Health Care As-
sociate. http://selfapply.jonesday.com/apply/ SOHA News
Mary L. Gallagher, Editor
redefault.aspx?FilterREID=2&FilterJobCategoryID=1 maryg@ohanet.org

7. NEWSLETTER
SOHA
Society of Ohio Healthcare Attorneys
THE INTERFACE AMONG THE MEDICARE AND MEDICAID
ANTI-KICKBACK STATUTE, STARK II
AND
THE FEDERAL CIVIL FALSE CLAIMS ACT
By William Mack Copeland, Esq., F.A.C.H.E.
R
ecently, the United States District Court for the is the primary prosecutor (although the relator still has input),
Southern District of Ohio unsealed a whistler- and the relator receives 15-25% of any recovery. If the
blower suit naming The Christ Hospital, The government does not intervene, the relator can still go forward
Health Alliance of Greater Cincinnati and The Ohio with the suit and, if successful, receives 25-30% of any
Heart Health Center as defendants. The recovery.
Department of Justice, which has
intervened in the lawsuit, has indicated it To prove a FCA violation, the relator must show
plans to file its own suit. “Violation of the that the defendant was responsible for a false claim
to the federal government. The relator initially
The federal False Claims Act (“FCA”) is a anti-kickback presents this evidence in a “disclosure statement,”
federal statute that prohibits, among other statute is a submitted to the government when the complaint is
things, anyone from presenting a false or sufficient basis for filed. This disclosure statement sets forth all of the
fraudulent claim for payment to the federal evidence the relator possesses regarding the false
an action under the
government, or causing the use of a false claim, and generally points the government to
record to get a claim paid by the federal False Claims Act.” additional persons or documents that would
government. In the health care context, substantiate the allegations.
this would include billing for work not performed,
upcoding, billing for unnecessary services, and even The false claim must be shown by the civil standard --
billing for services that were obtained in violation of preponderance of the evidence (more likely than not). It does
other regulations (such as the anti-kickback statute). not have to be shown by the criminal standard — beyond a
reasonable doubt. The relator does not have to show specific
The FCA provides a financial incentive for people with intent to defraud. The statute defines “knowingly” to include
knowledge of false claims against the federal acting with “deliberate ignorance” or “reckless disregard” of the
government to come forward. It does so by awarding a truth or falsity of the information.
successful relator (the plaintiff in a FCA case) with
between 15-30% of any recovery from a defendant. The 1986 amendments to the FCA clarified and relaxed these
burdens of proof, in part to prevent the ostrich or “head in the
The relator files a FCA suit (also called a “qui tam” sand” defense. For example, a physician signing off on a
suit) on behalf of the United States. It is filed under HCFA 1500 form would find it difficult to defend an FCA
seal (not a public document), along with a disclosure violation by claiming that he knew nothing of the billing
statement providing evidence to the government. practice and left it all to his staff.
While under seal, the government investigates the Anyone with knowledge of the illegal conduct can bring an
allegations, and decides whether to intervene. During FCA suit. This is often a current or former employee of a
this period, the defendant may not even be aware of defendant.
the case. If the government intervenes, the government (Continued on page 8)

8. Page 8 SOHA News
another and if referrals (or the opportunity to provide
However, there are limits; the relator must bring the case goods and services) flow back, the potential for criminal
within six years from the date of the false claim, or within prosecution exists regardless of the presence of good
three years after the government knows or should have business reasons for the venture.
known of the false claim, but in no event later than ten years
after the false claim. In addition, if the allegations in the FCA Paying for referrals, directly or indirectly, overtly or
suit were already “publicly disclosed,” the relator has to be covertly, violates the Statute. Changing the form of the
the “original source” of the allegations who brought the payment will make it no less a violation.
information to the government before filing an action. One The Medicare and Medicaid Patient and Program
cannot bring an FCA suit where the allegations are already Protection Act of 1987 modifies the criminal provisions
the subject of a civil suit or administrative civil monetary of the Statute by requiring the promulgation of
penalty proceeding where the government is a party. regulations (the quot;Safe Harborsquot;) specifying those
The original 1863 False Claims Act provided for civil penalties payment practices that will not be subject to criminal
of $2,000 per claim. Adjusted for inflation, that is $41,000 in prosecution and that will not provide a basis for civil
2007 dollars. Currently, civil penalties are $5,500 to $11,000 monetary penalties or exclusion from the Medicare or
per false claim. Since 1986 when Medicaid programs.
Congress amended the False Claims Strict compliance with the criteria
Act, lawsuits under the False Claims for each applicable Safe Harbor is
Act have returned $20 billion to the necessary to obtain immunity
US Treasury, $2 billion in 2007. under these rules. In other words,
Whistle-blower lawsuits resulted in to comply with a Safe Harbor and
$1.45 billion of the 2007 amount. escape enforcement, one must
Health care fraud has become one of meet all criteria for the particular
the primary targets of FCA suits. Not Safe Harbor. However, it is
only has the number of FCA cases important to note that failure to
risen dramatically since 1986, but also comply fully with a Safe Harbor's
there is a distinct trend toward health criteria does not necessarily mean
care fraud cases. In 1994, only 18% that a particular practice or
of the cases involved health care arrangement violates the Statute.
fraud; of the current cases, in excess The OIG will evaluate activities
of 50% involve health care fraud. that fail to meet Safe Harbor
requirements on their own merits
The Medicare/Medicaid Anti-Kickback Statute for compliance with the Statute.
The Medicare/Medicaid Fraud and Abuse Anti-Kickback Please note that under the rules, payment is not the
Statute (the quot;Statutequot;) provides that the offer or payment, as important element. Intent to induce a referral is the
well as the solicitation or receipt, of quot;any remunerationquot; in key factor.
exchange for referrals of any good, facility, service, or item
for which payment may be made in whole or in part under It is very important to be sure one be in strict compliance
Medicare/Medicaid is prohibited. with the Anti-Kickback Safe Harbors that are appropriate
to the transaction. Failure to do so can result in
The prohibited activity is a two way street, and both the payer substantial legal penalties (including possible criminal
and the receiver are equally culpable. The definition of penalties) if the authorities decide to pursue an
remuneration, however, is a gray area. While the Statute investigation. In the Alvarado case in San Diego last
provides that remuneration includes quot;any kickback, bribe or year, the hospital and its CEO have had to bear the cost
rebate,quot; it does not define these terms. Further, there is a of two criminal trials and an exclusion action.
prohibition against remuneration quot;directly or indirectly, overtly
or covertly, in cash or in kind.quot; In addition, let us not forget civil monetary penalties: in
the March 2008 case of Hardeman County Memorial
Clearly, direct cash payments in exchange for referrals Hospital, Texas, referenced above, the hospital agreed
violate the Statute. What is less clear, however, is what to pay $398,230.56 to resolve its liability under the civil
constitutes quot;indirect payments.quot; monetary penalties provisions applicable to kickbacks.
The hospital leased space to a physician at a rate below
To date, the courts have interpreted the Statute in a very fair market value.
expansive manner. If remuneration flows from one party to (Continued on page 9)

9. SOHA News Page 9
[UHC] would supply a [practice guarantee] for the sharehold-
Violation of the anti-kickback statute is a sufficient basis for ers of these … corporations and also would supply [practice
an action under the False Claims Act. In the case of McLaren guarantees]” for other shareholders;
Regional Medical Center, Illinois, a whistleblower brought an
3) the advance of millions of dollars under the practice group
action under the Federal False Claims Act, alleging that arrangements. While these arrangements required repayment,
defendants, McLaren and Family Orthopedic violated the there was a tacit agreement that no payment was required.
Statute by disguising kickbacks for both physical therapy and There was no collection effort made to collect most amounts
occupational therapy as lease payments between the parties. paid;
The district court, while finding that the lease agreement was
4) improper recruiting packages where UHC “paid for the cost
an arms-length transaction and was consistent with fair of recruiting new physicians into the existing [practice plan
market value nevertheless held that violation of the Statute arrangements] of ‘loyal physicians’ as a reward and induce-
was basis for a False Claims Act case. ment to the existing [practice plan arrangement] physicians for
referring patients to UHHS facilities. These packages some-
Stark II times carried with them the promise of advances of at least
$250,000, paid by [University Hospital Health Services] or
The Referrals Act as amended, commonly referred to as quot;Stark UHC in order induce the recruited physician to join the
II,quot; creates a limitation on certain physician referrals and [practice plan arrangements]. The packages offered to re-
prohibits physicians from referring any Medicare and cruited physicians required them to refer all patients to
Medicaid patients to an entity in which the physician has a [University Hospital Health Services] facilities;” and
financial relationship. This includes referrals for the 11
5) phony directorships that paid a “director fee” for being a
specifically designated health services. “director” at UHC. These arrangements paid approximately
$150,000 annually for no substantial services performed.
Prohibited financial relationships include (a) ownership and
investment interests and (b) compensation arrangements. University of Medicine and Dentistry of New Jersey
Ownership or investment interests may be through equity,
debt, or other means, and include indirect ownership interests
The United States Attorney for the Northern District of
through other entities. Under the regulations, New Jersey has brought an action
the definition of a compensation against two cardiologists, alleging they
arrangement, is extremely broad and were paid kickbacks by the University of
includes virtually any form of remuneration. Medicine and Dentistry of New Jersey for
The definition of “physician” includes patient referrals. The university, which
immediate family members of the physician. was subject to a deferred prosecution
agreement, was not charged. The univer-
Other cases involving the False Claims Act, sity has significantly restructured its car-
the Anti-Kickback Statute and Stark II diology program following disclosure of
include: the fraud two years ago.
University Hospitals of Cleveland Memorial Health University Medical
Center
In August 2006, University Hospitals of
Cleveland (“UHC”) agreed to pay
Memorial Health University Medical Cen-
$13,880,000 to settle a False Claims Act ter, Georgia Eye Institute and Provident
lawsuit alleging that the hospital entered into Eye Physicians, Savanna, Georgia, have
illegal financial arrangements with physicians agreed to pay $5,080,000.00 to settle a
in order to induce referrals from the False Claims Act case involving Stark
physicians to the hospital. The hospital also violations. According to the press re-
agreed to a corporate integrity agreement lease, the case involved specific viola-
monitored by the Department of Health and tions of the False Claims Act and Stark
Human Services Office of Inspector General (“OIG”). II, but no quality of care issues.
According to the complaint, the hospital allegedly entered into Beebe Medical Center
several illegal arrangements with physicians, including:
Beebe Medical Center in Delaware and two Delaware
1) financing physician practice expenses, which enabled physicians
physicians have agreed to pay $1 million to settle a
to avoid expenses involved in their own private practices;
False Claims Act suit alleging kickbacks to the physi-
2) practice plan arrangements where “certain doctors, usually the cians. According to the U.S. Attorney’s office, the dis-
clinical chairperson of a particular department would own outright pute involved an arrangement between the hospital and
the shares of a corporation organized for the practice of medicine. (Continued on page 10)

10. Page 10 SOHA News
the doctors to use the hospital rather than at a free- were not provided, or were worthless.” Thus, according to the
standing clinic the doctors owned to perform outpatient U.S. Attorney’s press release, the administrative services
procedures. The hospital agreed to pay the two doctors agreement amounted to nothing more than a patient referral
a fee in addition to the reimbursement the Medicare contract.
program paid for the services. According to the hospi-
tal’s president, the hospital received “incorrect legal McNutt
advice.”
In the McNutt case, a relator, a former employee of Haleyville
Edgewater Medical Supplies, Inc., filed a False Claims Act action against
Haleyville, alleging that it had submitted requests to Medicare
This case also involves alleged kickbacks disguised as for reimbursement knowing it was not eligible for payment.
consulting contracts. On September 29, 2006, the Fed- The complaint alleged that Haleyville had paid kickbacks cam-
eral District Court for the Northern District of Illinois or- ouflaged as rental payments to pharmacists and others in ex-
dered the former owner of Edgewater to pay $64.2 mil- change for referrals.
lion in damages and penalties for his role in developing
an elaborate kickback scheme that paid physicians and The government intervened, and pointed to the provider
others to admit patients for unnecessary care. agreement with the government. The government alleged that
under the terms of that agreement, Haleyville certified that it
Five others, including four physicians, went to federal would comply with all laws and regulations concerning proper
prison in a fraud investigation that effectively closed the practices of Medicare providers, including the Anti-Kickback
hospital. However, former owner was not criminally Statute. Compliance with that certification is a condition for
charged. The scheme involved luring homeless and receipt of payments from the Medicare program. The district
elderly people to the court denied defendants' motion
hospital for care they did to dismiss and asked the ap-
not need. According to peals court to determine the is-
the court’s order, the sue of whether a violation of the
complexity of the overall Anti-Kickback Act could serve as
scheme was enormous the predicate for a False Claims
and involved an elabo- Act action.
rate fabric of manage-
ment companies, trusts The Eleventh Circuit wasted no
and contract manage- time in resolving this issue
ment to hide the owner’s quot;When a violator of government
true involvement and regulations is ineligible to partici-
ownership interest. pate in a government program
and that violator persists in pre-
HealthSouth Corpora- senting claims for payment that
tion the violator knows the government does not owe, that violator
is liable under the Act, for its submission of those false claims:
HealthSouth Corporation agreed to pay $14.2 million to The False Claims Act does not create liability merely for a
settle allegations that the company submitted false health care provider's disregard of Government regulations or
claims to the government and paid illegal kickbacks to improper internal policies unless, as a result of such acts, the
physicians who referred patients for care in some of its provider knowingly asks the Government to pay amounts it
hospitals, outpatient rehabilitation clinics, and ambula- does not owe.quot;
tory surgery centers.
“The government has alleged a valid claim against [Haleyville].
Mt. Vernon Hospital The government has alleged that [Haleyville] violated the Anti-
Kickback Statute; compliance with the Statute is necessary for
reimbursement under the Medicare program; and [Haleyville]
Mt. Vernon Hospital, New York, agreed to settle a case
submitted claims for reimbursement knowing that they were
involving alleged kickbacks disguised as administrative
ineligible for the payments demanded in those claims. This
service contracts for $2.65 million. In the complaint, the
allegation is not general or speculative: the government has
United States alleged Mt. Vernon entered into an illegal
identified as false numerous specific claims [Haleyville] made
patient referral scheme with a consulting firm under the
to the federal government.”
guise of an quot;administrative services agreement.quot; The
consultant was paid $60,000 per month to provide 22
separate administrative services to the hospital’s sub- Guthrie Clinic, P.C.
stance abuse treatment unit, including the referral of
patients. According to the complaint, other than patient On March 12, 2008, the U.S. District Court for the Middle Dis-
referrals, the administrative services “were not needed, (Continued on page 11)

11. SOHA News Page 11
trict of Pennsylvania denied a motion to dismiss a qui Rock Creek
tam action under the False Claims Act alleging false
claims based on illegal referrals violating the Stark Law The former CEO of a now closed psychiatric facility in Lamont,
and the Anti-Kickback Statute. The relator, a former Illinois, along with a contract physician at the facility, has been
general counsel for the defendant clinic, alleged that charged with participating in an alleged bribery and kickback
Guthrie Clinic, P.C. entered into various illegal financial scheme that involved making payments to physicians in ex-
agreements with Robert Packer Hospital in exchange change for referrals. That now brings the number of individuals
for referrals of large volumes of patients to the hospital. charged in the scheme to four.
The relator argued that every claim the hospital submit-
ted to the government for payment was the result of
According to a press release by the US attorney for the North-
these illegal referrals.
ern District of Illinois, the pay-
ments, totaling more than
Defendants moved to $565,000, were disguised as
dismiss for, among other employment compensation.
things, failure to plead
with particularly as re-
quired by Federal Civil Conclusion
Rule 9(B). The court said
that the allegation of vio- The lesson from all of these
lation of the Stark and cases is if you are going to en-
Anti-Kickback laws was gage in these activities, it is im-
a sufficient basis to meet perative that you play by the
the particularity require- rules. The San Diego case
ment. The court said,“… brings to mind the Kansas City
attachment of some or case of not too long ago. In that
all of the allegedly case, after a nine-week trial in
fraudulent claims would the federal district court, a jury
serve no further purpose found two physicians and two
consistent with Rule 9(b) because defendants are on hospital executives guilty of violating the Statute. The physi-
notice that the basis of the alleged fraud in each claim cians were members of a medical group that provided care to
is the relationship between defendants, not anything patients in nursing homes. Medicare covered most of these
unique to a particular claim … .” The court also held patients.
that the relator sufficiently pled a claim for conspiracy
under the FCA. I have seen a definite increase in ventures between parties
where there is a referral relationship. It is extremely important
Touro Infirmary that competent counsel practicing in the fraud and abuse area
review these ventures to ensure that no violation of the Statute
exists. Improper structure can have catastrophic conse-
According to a Department of Justice press release,
quences.
Touro Infirmary, a New Orleans Hospital, agreed to pay
the United States $1.75 million to settle allegations that
it submitted false claims to the Medicare program. The
government's allegations were that the hospital made
unlawful payments to a psychiatrist on staff in order to
induce her referrals of patients to the hospital.
It contended that a series of consultant and medical
director contracts constituted shams intended to dis- SOHA member William Mack Cope-
guise kickbacks as legitimate contractual payments. land, JD, PhD practices health care
The government also pursued criminal charges against law in Cincinnati. A graduate of
the psychiatrist, who was found guilty of 39 counts of Northern Kentucky University Salmon
healthcare fraud. P. Chase College of Law, Bill is a fre-
quent author and speaker on health
“Kickbacks are a blight on the health care system,” said law topics. Copeland is a member of
Jeffrey S. Bucholtz, Acting Assistant Attorney General the American Health Lawyers Asso-
for the Department’s Civil Division. “They corrupt physi- ciation, American, Ohio and Cincin-
cians’ medical judgment and lead to overutilization and nati Bar Associations and was
misuse of taxpayer dollars. We will continue to be vigi- awarded the American College of
lant in our efforts to combat this pernicious practice.” Health Care Executives Senior-Level
Healthcare Executive Regent’s Award
in 2007. www.wmcopeland.com