According to minutes filed in the U.S. District Court for the Middle District of Florida, Halifax Hospital Medical Center (Halifax) and the U.S. Department of Justice (DOJ) have reached a settlement in the pending False Claims Act case in which Halifax is accused of entering into financial relationships with medical oncologists and neurosurgeons in violation of the Stark Law. You can read more about the Halifax case in our December 12, 2013, and January 23, 2014, issues of the Health Law Update. While neither party has officially commented on the settlement, a number of sources are reporting the settlement amount will be around $85 million. The settlement in the Halifax case, which was originally brought by a whistleblower on behalf of the government, will follow on the heels of the judgment against Tuomey Healthcare System, Inc. (Tuomey) for Stark violations that exceeded $230 million in September. See the October 3, 2013, issue of the Health Law Update.
The Halifax court granted partial summary judgment in favor of the DOJ in November, finding that the incentive bonuses paid to medical oncologists took into account the volume or value of the physician’s referrals to the hospital for designated health services (DHS) because fees for DHS were included in the bonus pool. The jury trial set to begin this week would have decided three things: (1) whether Halifax’s employment agreements with three neurosurgeons violated the Stark Law on fair market value and commercial reasonableness grounds; (2) the amount of damages under the Stark Law related to the prohibited financial relationships with the medical oncologists and the neurosurgeons, if applicable; and (3) whether Halifax had the requisite intent to establish a False Claims Act violation. The settlement likely will not resolve another set of allegations raised by the relator against Halifax relating to unnecessary inpatient admissions. The DOJ did not intervene in this portion of the relator’s case, which is set for a jury trial in July.
Hospitals across the country have wisely been taking note of the new high-stakes world of False Claims Act cases predicated on the Stark Law in light of Tuomey.