Potential FCA Liability Can Extend to Hospital Real Estate


Add real estate transactions to the list of issues that can cause hospitals to run afoul of the Stark physician self-referral law and the anti-kickback law.

Florida hospital chain BayCare Health System knows first-hand that violations of either can potentially lead to costly False Claims Act liability, a fate BayCare narrowly avoided with a litigation win on April 18 (United States ex rel. Bingham v. BayCare Health Sys., 2017 BL 126597, M.D. Fla., No. 8:14-cv-73, 4/18/17).

A whistle-blower accused BayCare of trying to induce Medicare referrals from physicians located in a medical office next to a BayCare hospital by allowing those physicians and their patients free use of a BayCare parking garage. The whistle-blower, real estate appraiser Thomas Bingham, also alleged BayCare bestowed certain tax exemptions from another BayCare-owned medical office building to another physician practice group in the form of rent concessions.

The U.S. District Court for the Middle District of Florida granted summary judgment to BayCare, though the case shows that Stark law issues aren’t confined to garden variety issues of direct physician compensation and employment contracts.

The Stark law is particularly unforgiving to providers due to its notoriously complex regulations and because it’s a strict liability statute. Any failure to adhere to the law’s provisions is a violation, intentional or not, and exposes the provider to potential FCA liability.

“Hospital real estate transactions, including the ownership and lease of medical office buildings, have always presented a number of complex regulatory compliance issues,” said Kelly Davidson, a shareholder with Baker, Donelson, Bearman, Caldwell & Berkowitz PC, who represented BayCare in the case. Davidson said real estate transactions are an area of complex regulations that could see increased scrutiny “as whistle-blowers seek to create novel theories of recovery” in FCA cases.

Davidson said hospital in-house counsel should be analyzing “potentially applicable Stark law exceptions and anti-kickback safe harbors” when structuring transactions between the hospital and other entities that may be patient referral sources. Davidson added that the use of these tools can reduce the potential for a whistle-blower FCA action cropping up, or make a favorable outcome more likely for the provider if one does.

To read more on the BayCare ruling, go to the full story here.

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