From Stark law violations to the overturning legal precedents, several significant legal developments occurred within healthcare fraud enforcement in the third quarter of 2024.
The rulings and allegations emphasize the importance of regulatory adherence and also bring to light emerging constitutional concerns within the False Claims Act.
Here are the three cases:
1. In July, the Justice Department filed a legal complaint against two medical centers for Stark law violations that led to physician compensation that exceeded fair market value and submitting false Medicare claims.
The complaints –– filed against Murphy (N.C.) Medical Center, doing business as Erlanger Western Carolina Hospital, and Chattanooga-Hamilton County (Tenn.) Hospital Authority, doing business as Erlanger Health System and Medical Center –– alleged that Erlanger employed and received referrals from physicians that did not meet any Stark law exceptions. Chattanooga-Hamilton County Hospital Authority runs Erlanger Health System.
The complaints presented several compliance concerns, according to an Aug. 14 report in JDSupra. The complaint illustrates that medicine directorships are under increased scrutiny, physician contracting review committees are an important tool inensuring Stark law compliance and directed referral requirements are permissible, but do not waive, Stark law requirements.
2. A federal judge in Florida dismissed a whistleblower lawsuit accusing a medical practice of inflating Medicare reimbursements, citing constitutional concerns over the False Claims Act's qui tam provisions. The lawsuit, initially filed by former physician Clarissa Zafirov, MD, accused her former employer, Ocala-based Florida Medical Associates, of submitting fraudulent claims by encouraging unnecessary medical visits.
On Sept. 30, U.S. District Judge Kathryn Kimball Mizelle of the Middle District of Florida ruled that the FCA's qui tam provisions violate Article 2. This ruling marks the first time a federal court has found the qui tam provisions of the False Claims Act unconstitutional.
3. A district court ruled that a false claims lawsuit filed against Thomas Health System cannot be resolved without parties' briefs on the U.S. Supreme Court's recent overturning of the Chevron deference. A former nurse filed the suit in November 2020 alleging Thomas Health violated Stark law by employing physicians through compensation arrangements that took referrals into account, among other violations.
In July, the Supreme Court overturned the 40-year-old legal precedent known as Chevron deference, which said during disputes over regulation of an ambiguous law, judges should defer to federal agency interpretations within reason.
Because the ruling requires the judge "carefully consider the regulations without blindly referring to any agency interpretation," Mr. Goodwin said in the ruling, parties are required to file supplemental briefings by Oct. 4.
"Over time the Stark law (and accompanying regulations) has evolved into a labyrinth of multipart compliance requirements where the exception-to-the-exception is the norm," he said. "...That deference is no longer required; indeed, that deference is no longer acceptable."