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Doctors’ Self-Referrals Triggered the False Claims Act, Judge Says

A federal judge held that physicians violated the False Claims Act when they made referrals to a hospital that used a radiation imaging company in which the doctors had financial interests.

The scheme alleged in the case, U.S. ex rel. Bartlett v. Ashcroft, worked as follows:

  1. Physicians invested in Tri-County Imaging Associates, Inc., which performed radiation services, including CT scans, for Tyrone Hospital;
  2. The same physicians referred patients to Tyrone Hospital, which almost exclusively used Tri-County for CT scans; and
  3. Tyrone Hospital paid Tri-County, which, in turn, paid the same physicians their share of profits.

The whistleblowers in Bartlett, both former employees of Tyrone Hospital, filed a qui tam action against Tri-County, Tyrone Hospital, and the physicians, alleging violations of the Stark Act, the Anti-Kickback Statute, and the False Claims Act.

The Court found that the defendants could not show an applicable exception to the Stark Act and that the physicians had made “self-referrals” to Tyrone Hospital, which are prohibited under the Stark Act.

According to Judge Kim Gibson of U.S. District Court for the Western District of Pennsylvania, “compliance with federal healthcare law is a prerequisite to eligibility under the Medicare program, [so] Tyrone Hospital’s submission of Stark-tainted claims to Medicare constitute ‘false claims’ for purposes of the FCA.”

Summary judgment was granted in the Relators’ favor as to the Stark violations and the falsity requirement of the FCA, although the Court found a dispute of material fact exist as to the scienter requirement of the FCA and denied summary judgment on that issue.

The decision is important because in holding that claims which violate the Stark Act necessarily qualify as false claims under the FCA, it puts the emphasis of a false claims case where it belongs: the scienter requirement. The Court stressed the varying scienter standards under the FCA — actual knowledge, deliberate ignorance, and reckless disregard — and noted that “no specific intent to defraud” must be proven. “The crucial issue is whether Defendants knowingly assisted in the presentation of the claims,” the judge said.

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