Novel Recovery for Tortious Interference Based on Stark Violations
Earlier in the summer, a Florida jury determined that Millennium Labs (Millennium) violated the Stark Law and anti-kickback law by providing free point of care (POC) testing cups to physicians in exchange for referrals for specimen testing and ordered the company to pay the plaintiff, its competitor, nearly $15 million in damages. POC testing cups permit the physician to immediately read the results of the urine testing. The jury determined that the physicians’ agreement not to bill for the POC testing cups, which constituted remuneration, was offered in exchange for their referrals to Millennium in violation of the Stark Law and anti-kickback law. While Millennium never denied that it provided the cups free of charge to physicians, it contended that, because the physicians agreed not to bill for the cups, no remuneration was provided to them.
The federal district court disagreed with Millennium when it determined that the Stark Law and anti-kickback law were violated in two ways: (1) in many instances the physicians billed Medicare for chemical analyses, and the POC tests were not reimbursable for these same patients; and (2) in other instances the physicians could not receive reimbursement for the POC tests pursuant to its agreement with Millennium not to bill for such service. The court held that in both of these circumstances, the free POC testing cups constituted illegal remuneration paid by Millennium to the physicians. The competitor alleged the conduct violated the Stark Law and anti-kickback law, and such illegal activity constituted tortious interference with the competitor’s relationships.
The case highlights that, although there is no private right of action under the Stark Law and anti-kickback law, the laws may be used as predicate for innovative legal challenges by plaintiffs outside of the False Claims Act. In addition to the novel legal theory employed in the Millennium case, the lab industry continues to be a particular focus of the government with respect to anti-kickback law concerns, with the U.S. Department of Health and Human Services Office of Inspector General issuing a Special Fraud Alert in June regarding two recent trends in payments made by labs to referring physicians. The Special Fraud Alert identifies several factors that increase the potential for an anti-kickback law violation in two types of arrangements – compensation paid by labs to referring physicians for specimen collection, processing and packaging, and compensation paid to referring physicians for data reporting to registries.
These cases demonstrate that the federal fraud and abuse laws can be used in a variety of ways—from whistleblower plaintiffs in a False Claims Act to a competitor in a civil lawsuit with tort claims—and providers’ compliance efforts are more important than ever before. Providers not only need to structure new arrangements in compliance with the Stark Law and anti-kickback law but also need to review and take appropriate action on existing arrangements that may need restructuring before the government, a whistleblower or a competitor turn a refund or self-disclosure situation into litigation with potential False Claims Act damages and penalties.
Topics: Anti-Kickback Statute,
False Claims Act,
Fraud and Abuse,
Healthcare,
Healthcare Fraud,
Settlement,
Stark Law,
Whistleblowers
Published In:
Business Torts Updates,
Civil Procedure Updates,
Civil Remedies Updates,
Health Updates,
Labor & Employment Updates
