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Exclusive Anethesia Arrangement Fails Personal Services Exemption Under Stark.

By Greg Piche'

Normally, anesthesia services contracts do not receive a lot of scrutiny with respect to Stark or Anti-kickback Statute ("AKS") compliance. Recently, the federal 3rd Circuit Court of Appeals had a chance to review and reverse a summary judgment granted in favor of a hospital and its anesthesia providers who claimed that they were protected by the "personal services" exemption from Stark and the AKS. The Plaintiff in the Qui Tam lawsuit, United States  ex. rel. Kosenske v. Carlisle HMA, Inc., 3rd. Cir.,No. 07-4616, 2009), was a member of the anesthesia group which entered into an exclusive contract with the Carlisle Hospital for anesthesia services. The hospital provided free space and services to the anesthesia group, which is not an uncommon practice because that is generally considered part of the "arms length"negotiation price for the anesthesia services.

The problem was that the contract was negotiated in 1992 and continued without amendment to include the provision of services at a new pain clinic facility owned by Carlisle.  During the period since 1992, the anesthesia group expanded into providing pain management services where they developed their own clientele capable of being referred to the hospital. the group was no longer a pure utility, but a referral source with a compensation relationship with the hospital.

The court held that the physician services exception to Stark, 1395nn(e)(3)(A) did not apply because the only written contract was drafted before the pain facility was in existence, there was no evidence of fair market value or any specific consideration given for the free use of the pain clinic and the right to practice medicine there.

Dr. Kosenske brought his claim under the Federal False Claims Act, which requires proof of the submission of a claim, which is false or fraudulent, knowing that it was false or fraudulent. The court remanded the case to see if Dr. Kosenske could prove intent on the part of the defendants. Possibly, being on the in side of the group,  he raised some objections to the practice in the past that would give rise to evidence of intent to violated the statute.

Given the internecine competition between radiologists, anesthesiologists  and others to supplement their income with pain management or other clinical services, hospitals and these medical groups should review their contracts carefully to reflect the reality that they may be in a position to make hospital referrals thereby leaping into that dark pool of Stark and AkS liability.

Full post as published by Healthcare Law Blog on February 03, 2009 (boomark / email).