On June 25, the U.S. Court of Appeals for the Eighth Circuit affirmed the dismissal with prejudice of a qui tam False Claims Act (FCA) suit alleging certain physician compensation arrangements at Trinity Health violated the Anti-Kickback Statute (AKS) and Stark Law.

The relator, a former surgeon at one of Trinity’s hospitals, alleged the following:

  1. Trinity paid five of its highest-earning physicians above fair market value by compensating them in excess of 90th percentile compensation for their specialties at levels not justified by their personal productivity.
  2. The high compensation generated practice losses for Trinity absent taking into account the physicians’ downstream referrals to the health system.
  3. As a result of the physicians’ compensation methodology, they performed unnecessary surgeries to inflate their compensation.
  4. Trinity opted not to renew the relator’s contract because he complained about these allegedly-unnecessary surgeries.

The relator argued that the compensation arrangements violated the AKS and Stark Law, and thus, any claims submitted by Trinity to the federal healthcare programs associated with procedures performed by these physicians violated § 3729(a)(1)(A) of the FCA, and any provider agreements and cost reports certifying compliance with AKS and Stark violated § 3729(a)(1)(B) of the FCA.  He also claimed that Trinity’s decision not to renew his contract violated the FCA’s anti-retaliation provisions.

Following declination by the United States, Trinity, represented by Bass, Berry & Sims, obtained full dismissal with prejudice of the relator’s FCA and retaliation claims.  The district court held that because the relator had neither identified any representative examples of false claims submitted by Trinity for the these physicians nor exhibited any direct connection to or personal knowledge of Trinity’s billing practices, he failed to satisfy Rule 9(b)’s pleading requirement of showing that any false claims had actually been presented to the government.  The district court also held that the relator’s complaints about other surgeons’ clinical decisions, including the necessity of their procedures, did not amount to “protected activity” under the FCA because his complaints made no reference to fraud or improper billing by Trinity.

On appeal, the relator argued that because about 29% of Trinity’s annual revenue came from Medicare reimbursements and any claims submitted for services by the five physicians he identified in his complaint would be tainted by the alleged AKS and Stark violations, it was “more likely” than not that Trinity submitted “at least some” tainted claims to the government.  The Eighth Circuit disagreed, holding that this sort of “general inference” based on the theory that “every” claim submitted for some practitioners’ services was false did not satisfy Rule 9(b)’s particularity requirement for pleading a violation of the FCA.  The Eighth Circuit also agreed that the relator’s complaints regarding the medical propriety and ethical ramifications of other surgeons’ practices was not protected activity under the FCA because the relator had drawn no connection to any concerns over improper billing or the submission of false claims to the government, much less informed Trinity of any such concerns.  Accordingly, the Court of Appeals affirmed the dismissal in its entirety.

For a summary of other recent developments regarding FCA pleading standards, subscribe to Inside the FCA, contact a member of the Bass, Berry & Sims Healthcare Fraud Task Force, or download our Healthcare Fraud & Abuse Annual Review.