Stark Settlement Dominoes Beginning to Fall in the Aftermath of Tuomey

Stark Settlement Dominoes Beginning to Fall in the Aftermath of Tuomey


In the last two weeks the practical effects of Tuomey have become clear with the Department of Justice announcing two record-breaking False Claims Act settlements related to Stark Law violations. 

First, on September 15,  DOJ announced that the North Broward Hospital District agreed to pay $69.5 million to settle FCA liability for Stark Law violations related to compensation paid to nine employed physicians that exceeded the fair market value of their services. 

Then, less than two weeks later, DOJ announced that Adventist Health System agreed to pay $115 million to settle FCA allegations based on Stark Law violations related to improper bonuses paid to employed physicians.  While the settlement also resolved allegations that Adventist used certain improper coding modifiers, the size of the settlement suggests that the vast majority of it related to the alleged Stark violations.

These seeds were planted long ago with Tuomey’s first defeat at the trial court level. The Fourth Circuit’s upholding of that $237 million verdict only confirmed that the Stark Law’s onerous requirements will be read literally with potentially disastrous results.  The result of that is that few providers will be willing to risk FCA trebling and penalties at trial when they can resolve these cases for significantly less, even when those resolutions reach into the nine figures.  Sophisticated providers will also recognize that compliance audits, coupled with disclosures of potentially improper arrangements under CMS’ Stark Self Disclosure protocol will allow these matters to be resolved for potentially pennies on the dollar.    

One final note: both these settlements were the result of qui tams filed by whistleblowers – or “relators” as they are called under the FCA.  Those individuals and their attorneys will profit handsomely from the bounty paid to them.  That will not go unnoticed by future potential realtors and their counsel who will be on the lookout for potential Stark violations which could underpin a qui tam.  The potential for these individuals within an organization make the need for compliance and, if problems are found, quick disclosure. 

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