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District Court Rejects Physician’s Whistleblower Suit Against Hospital

By Anne Sumpter Arney

It will be no surprise to the healthcare community that the relationship between doctors and hospitals is not always a friendly one. Nonetheless, physicians and hospitals seldom seek to resolve their disputes in the court room. This reluctance of physicians to resort to litigation to resolve their disputes is one of the things that makes a recent Tennessee case brought by a physician against University Medical Center (UMC) in Lebanon, Tennessee particularly interesting. In United States ex rel. Dennis v. Health Management Assocs., Inc., a physician on the hospital’s medical staff brought a qui tam, or whistle blower, suit against UMC, claiming that the hospital had violated the False Claims Act.   A qui tam lawsuit is not simply a claim by an individual who believes a contract has been breached or that rights have been damaged but is, rather, a claim that a federal law has been violated.  The individual who brings a qui tam lawsuit seeks to have the Office of Inspector General (or another governmental agency) join in the whistle blower’s suit and pursue damages on behalf of the government. If the government intervenes, the individual who brought the qui tam, in this case the physician, is entitled to receive a portion of the damages recovered by the enforcement action.  The recovery in qui tam actions can be substantial, and these cases are often brought by former employees of a healthcare provider but not usually physicians.

In this case, the physician claimed UMC had submitted claims to government insurers, such as Medicare, for services that had been provided in violation of the Anti-Kickback Statute and the Stark Law. The Anti-Kickback Statute and the Stark Law generally prohibit the payment for referrals of patients if the services are paid for by a government insurance program such as Medicare. Most hospitals carefully structure their recruitment arrangements to fall within an exception and not violate these laws. UMC appears to have had a typical recruiting agreement in which a hospital recruits a physician to an underserved area by underwriting a portion of their salary and expenses during the first years of practice. As is standard in most recruiting agreements, UMC required, among other things, that the recruited physician become a member of its medical staff.

In the lawsuit, the physician claimed, in part, that UMC’s recruiting agreements were a way for the hospital to pay the physician for referral because they required a recruited physician to maintain active staff membership at the hospital.  Further, as is also usual at most hospitals, in order to maintain his position on the medical staff, the physician was required to admit a certain number of patients to the hospital.

The physician’s claim against UMC was not successful, and on January 14, 2013, the District Court dismissed the suit with prejudice, finding that the claim did not give specific facts to find a False Claims Act violation. In rejecting the physician’s complaint, the District Court said “the only arena in which the relator (the physician) offers allegations of any specificity whatsoever, concern his own recruitment agreement with UMC.”   The Court recognized that the requirements of the recruitment arrangement at issue were not only standard practice but also specifically allowed under the law. The Center for Medicare and Medicaid Services has determined that in the context of recruitment a hospital may require, as a condition for receiving benefits, that the practitioner maintain staff privileges at the recruiting hospital. It is also a common practice for hospitals to classify their medical staff based in part on the number of admissions to the hospital per year.

The District Court’s conclusion is not as surprising. It is surprising that the qui tam lawsuit was brought by the physician and that the physician himself was party to the same recruiting agreement with UMC that was the basis for his lawsuit.  If the UMC recruitment agreement had been found to be a violation of the law, as a party to the recruitment agreement, the physician would himself have been guilty of violating the Anti-Kickback Statute and Stark Law.


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