Third Circuit Decides Stark Exception Case in Qui Tam Context


The Third Circuit Court of Appeals has rendered a provocative decision in the qui tam case, United States of America ex rel. Ted D. Kosenske, M.D. v. Carlisle HMA, Inc., which opinion was filed on January 21, 2009 and which is available at the link below. 

This qui tam action alleges improper billing by CarlisleHospital (now CarlisleRegionalMedicalCenter due to its acquisition by HMA in 2001), based upon the fact that the hospital lacked an agreement which would comply with the Stark personal services exception. Anesthesia services at the hospital were being provided by Blue Mountain Anesthesia Associates under an exclusive service agreement starting in 1992. In 1998, the hospital added a new free-standing facility which included a pain management clinic and Blue Mountain Anesthesia began providing the exclusive pain management services at the new clinic.

The qui tam case was based upon the fact that the 1992 agreement did not cover the new facility and services commenced in 1998.

The decision was simply a remand of the case back to the District Court for further proceedings, but the aspect of the decision indicating that a new contract specifically covering the new services is necessary for Stark compliance is important. Even more significant could be the language in the opinion that “free use of the pain clinic facilities and apparently the exclusive right to practice pain management” should be considered when evaluating fair market value for purposes of the Stark exception.

Note that local Pittsburgh counsel, Andrew M. Stone from the Stone Law Firm was involved in representing the qui tam relator.