A federal court recently dealt a victory to a health care provider over whistleblower allegations that free parking and valet service at a medical office building violated the Stark Law and the Anti-Kickback Statute. 

In Bingham v. BayCare Health System (No. 8:14-cv-73, M.D. Fla.), a federal district judge adopted the report and recommendation of a magistrate judge that judgment be granted to the provider, BayCare.  The plaintiff, Bingham, is a real estate appraiser in Tennessee with no affiliation with BayCare.  It has been reported that Bingham has filed several whistleblower-type cases in the past and has received substantial settlements.

BayCare is a non-profit corporation which operates a hospital.  BayCare entered into a ground lease with a real estate developer to construct a medical office building on the hospital campus.  The tenants of the building are limited liability companies that employ physicians who have practices in the building.  The building is classified as tax-exempt.

Bingham alleged that BayCare violated federal law by providing the following remuneration to the physicians in the building in order to induce the physicians to refer patients to BayCare:

  1. Free parking for the physicians, their staffs, and their patients;
  2. Free valet parking for the physicians, their staffs, and their patients; and
  3. Tax savings which allowed the physicians to benefit from BayCare’s tax exemption.  Bingham also claimed that BayCare submitted false claims to Medicare and Medicaid for services provided to the patients who were allegedly referred illegally.

The ground lease is between BayCare as landlord and the developer as the tenant.  The ground lease granted parking rights to the “Tenant and Tenant’s subtenants and Invitees”.  The subtenants are the tenants of the building, i.e. the limited liability companies.  BayCare provided valet services at the building through a contract with a third-party vendor.

The Stark Law forbids a physician from referring Medicare or Medicaid patients to a hospital if he or she has a “financial relationship” with the hospital.  No remuneration can be given directly from the hospital to the physician for referrals.

The issue in this case was whether a financial relationship existed between BayCare and the physicians who work in the building where the parking and valet services are provided.  Bingham claimed that a direct financial relationship existed between BayCare and the physicians because, in his view, the subtenants are the physicians and the invitees are their patients. 

However, the judge ruled that the subtenants and the physicians are not parties to the ground lease and that the tenants have separate office leases with the tenant-developer through which the parking rights are conferred.  That means the physicians receive parking benefits through their employers, the limited liability companies.  It also means there is not a direct compensation arrangement between BayCare and the doctors.

The judge also found that while valet parking was available and BayCare paid the third-party vendor for those services, there was no evidence the physicians in the building actually used the service.  And, there was no evidence that patients who used the valet service were referred to BayCare by physicians in the building.

The judge went on to find that there also was no indirect compensation arrangement between BayCare and the physicians, because the physicians’ employment agreements with their employers are based on salary and productivity factors, neither of which are based on referrals.  In addition, the office leases between the developer and the subtenants provide that rent is calculated in part on square footage, which means higher rent for bigger spaces.  There was no evidence that physicians receive compensation from their employers based on the volume of patient referrals.

For some of the same reasons, the court also dismissed Bingham’s claims regarding the Anti-Kickback Statute, which prohibits a hospital from providing remuneration to induce patient referrals.  Also, much of the court’s discussion was fact-intensive, finding that there was no evidence that BayCare, the tenant, nor the subtenants had the requisite intent to induce the doctors to refer patients, even if parking and valet services were available free of charge at the medical office building.

This decision is instructive because the leasing arrangements involved in this case are not uncommon.  But, because whistleblowers have the opportunity to benefit financially by bringing cases under the Stark Law and the Anti-Kickback Statute, there will likely be no shortage of ways plaintiffs will frame their claims.

Source: Blue Ink Blog