Bingham v. BayCare Health System

Filing 54

ORDER denying 37 --motion to dismiss. Signed by Judge Steven D. Merryday on 8/14/2015. (BK)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
UNITED STATES OF AMERICA
and STATE OF FLORIDA,
ex rel. THOMAS BINGHAM,
Plaintiffs,
v.

CASE NO. 8:14-cv-73-T-23EAJ

BAYCARE HEALTH SYSTEM,
Defendant.
____________________________________/

ORDER
The qui tam relator, Thomas Bingham, sues (Doc. 32) BayCare Health System
under the federal False Claims Act and the Florida False Claims Act. BayCare
moves (Doc. 37) to dismiss under Rules 9(b) and 12(b)(6), Federal Rules of Civil
Procedure.1
BACKGROUND2
BayCare is a Florida non-profit corporation that owns St. Anthony’s Hospital,
Inc., and St. Anthony’s Professional Buildings and Services, Inc. The relator alleges

1

Rule 9(b) requires a party alleging fraud to “state with particularity the circumstances
constituting fraud.” Rule 12(b)(6) states that a party may move to dismiss a complaint for “failure to
state a claim upon which relief can be granted.”
2

For the purpose of resolving BayCare’s motion, the allegations of the amended complaint
(Doc. 32) are accepted as true.

that BayCare in violation of the Stark Statute and the Anti-kickback Statute
“deliberately obscured remuneration it paid physicians to induce them to refer
patients” and that BayCare in violation of the False Claims Act and the Florida False
Claims Act submitted claims from those referrals to the government.3 (Doc. 32 ¶¶ 1,
2, 4)
The relator, who is a “Certified General Real Estate Appraiser” residing in
Nashville, Tennessee, claims no relationship with BayCare, St. Anthony’s Hospital,
or St. Anthony’s Professional Buildings and Services. Instead, the relator “employed
his skills and experience as a commercial real estate appraiser in uncovering the
schemes alleged in [the] Complaint.” (Doc. 32 ¶ 8)
1. False Claims Act
“The False Claims Act is the primary law on which the federal government
relies to recover losses caused by fraud.” McNutt ex rel. United States v. Haleyville Med.
Supplies, Inc., 423 F.3d 1256, 1259 (11th Cir. 2005). Under 31 U.S.C. § 3729(a)(1)
and (a)(2), the False Claims Act imposes liability on any person who “knowingly
presents, or causes to be presented, a false or fraudulent claim for payment or
approval” or “knowingly makes, uses, or causes to be made or used, a false record or
statement material to a false or fraudulent claim.” Because compliance with the

3

Because “the Florida False Claims Act mirrors the federal False Claims Act and is subject
to the same pleading standard,” United States v. All Children’s Health Sys., 2013 WL 1651811,
at *5 (M.D. Fla. Apr. 16, 2013) (Whittemore, J.), this order focuses on the federal False Claims Act.

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Stark Statute and the Anti-kickback Statute is a prerequisite for Medicare payments, a
violation of either of these statutes can form the basis of liability under the False
Claims Act.
2. Stark Statute
Generally, the Stark Statute, 42 U.S.C. § 1395nn, “prohibits doctors from
referring Medicare patients to a hospital if those doctors have certain specified types
of ‘financial relationships’ with that hospital” and “prohibits that same hospital from
presenting claims for payment to Medicare for any medical services it rendered to
such patients.”4 United States ex rel. Mastej v. Health Mgmt. Assocs., 591 Fed. Appx.
693, 698 (11th Cir. 2014) (Hull, J.). A “financial relationship,” as defined by
Section 1395nn(a)(2)(B), is a “compensation arrangement” between a physician and
a hospital. Under the regulations implementing the Stark Statute, a “compensation
arrangement” is “any arrangement involving any remuneration,” and
“remuneration” is “any payment or benefit, made directly or indirectly, overtly or
covertly, in cash or in kind.” 42 C.F.R. §§ 411.351, 411.354(c).
The Stark Statute prohibits forms of direct and indirect compensation
arrangements. A direct compensation arrangement “exists if remuneration passes
between the referring physician . . . and the [hospital] without any intervening
persons or entities.” 42 C.F.R. § 411.354(c)(1). An indirect compensation

4

To be prohibited under the Stark Statute, a referral must be “for the furnishing of
designated health services,” which are listed in Section 1397nn(h)(6).

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arrangement exists if (1) remuneration passes through an “unbroken chain” between
the referring physician and the hospital; (2) the “referring physician . . . receives
aggregate compensation . . . that varies with, or takes into account, the volume or
value of referrals or other business generated by the referring physician for the
[hospital];” and (3) the hospital “has actual knowledge of, or acts in reckless
disregard or deliberate ignorance of, the fact that the referring physician . . . receives
[the described] aggregate compensation.” 42 C.F.R. § 411.354(c)(2).
However, not every compensation arrangement constitutes a prohibited
financial relationship under the Stark Statute. For example, “indirect compensation
arrangements do not constitute a ‘financial relationship’ if the compensation is
(1) equal to the ‘fair market value for services and items actually provided’; (2) ‘not
determined in any manner that takes into account the volume or value of referrals or
other business generated by the referring physician’ for the hospital; and
(3) ‘commercially reasonable.’” United States v. All Children's Health Sys., 2013 WL
6054803, at *4 (M.D. Fla. Nov. 15, 2013) (Whittemore, J.) (quoting 42 C.F.R.
§ 411.357(p)); see also 42 C.F.R. § 411.357(a) (describing a lease permitted under the
Stark Statute).
3. Anti-kickback Statute
Under the Anti-kickback Statute, 42 U.S.C. § 1320a-7b(b), a hospital commits
a felony by financially inducing a physician to refer a Medicare patient. Specifically,
42 U.S.C. § 1320a-7b(b)(2) prohibits “knowingly and willfully offer[ing] or pay[ing]
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any remuneration (including any kickback, bribe, or rebate) directly or indirectly,
overtly or covertly, in cash or in kind to any person to induce such person . . . to refer
an individual to a person [for medical services] for which payment may be made in
whole or in part under a Federal health care program.” The exceptions to the Antikickback Statute closely parallel the exceptions to the Stark Statute. See 42 C.F.R.
§ 1001.952(b) (describing a lease permitted under the Stark Statute).
4. Violations of the Stark Statute and Anti-kickback Statue
The alleged scheme in this qui tam action “involve[s] construction of medical
office buildings, common areas, walkways and garages on the St. Anthony’s Hospital
campus, and the leasing arrangements between Baycare proxies (the
Developer/Landlord) and the referring physicians occupying the medical office
buildings.” (Doc. 32 ¶ 3) Specifically, on January 27, 2005, BayCare leased land at
St. Anthony’s Hospital to St. Pete MOB, LLC, and agreed that St. Pete MOB would
build a medical office building (the Heart Center). To satisfy “zoning and other
governmental requirements,” the lease grants a non-exclusive parking easement to
St. Pete MOB. (Doc. 32 ¶¶ 71, 73) Due to the parking easement, St. Pete MOB
incurred neither “the expense of leasing additional land” for a garage “nor the
$3.6 million cost of constructing the required 240 parking spaces[] nor the costs of
garage maintenance, insurance and taxes.” (Doc. 32 ¶ 74) “One purpose of
Baycare’s arrangement was to have St. Pete MOB pass some or all of the millions of
dollars in savings to physician tenants to encourage them to make or increase
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referrals.” (Doc. 32 ¶¶ 74, 81) Further, in 2013, the lease was amended to allow
“referring physicians, their staff and their patients, to use Baycare’s parking facilities
at no charge,” which resulted in an estimated “annual parking benefit per referring
physician” of more than $10,000. (Doc. 32 ¶¶ 79, 81) St. Pete MOB “executed the
easement,” and the easement “was not signed by any of the referring physicians who
benefit from it.” (Doc. 32 ¶ 77)
Also, BayCare provides a rent concession to the referring physicians at the
Heart Center by claiming a tax exemption for non-exempt property and annually
saves St. Pete MOB about $140,000 in real property taxes. (Doc. 32 ¶¶ 87, 92)
Similarly, after constructing a second medical office building (the Suncoast Medical
Clinic) and leasing the building to SC Physicians, LLC, BayCare in early 2013
“bestowed its valuable tax-exempt status on SC Physicians and its referring
physicians.” (Doc. 32 ¶¶ 94, 95, 105) This rent concession “eliminated SC
Physicians’s proportionate share of the $377,855 ad valorem real property tax liability
as well as its $38,341 2013 personal property tax liability.” (Doc. 32 ¶ 105)
Finally, BayCare paid “Other Remuneration,” including “valet services on the
St. Anthony’s Hospital campus,” to the referring physicians at the Heart Center and
the Suncoast Medical Center. (Doc. 32 ¶ 108)
2. Violations of the False Claims Act
BayCare “violated the False Claims Act by submitting claims for payment to
Medicare, Florida Medicaid, and other federally-sponsored health care programs for
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services provided to patients referred unlawfully.” (Doc. 32 ¶ 4) In other words,
violations of the Stark Statute and Anti-kickback Statute allegedly “tainted” each
claim submitted as a result of unlawful referrals. (Doc. 32 ¶¶ 184, 192)
BayCare “knowingly” certified compliance with the Stark Statute and the
Anti-kickback Statute by signing a “Medicare Provider Application and Agreement
as well as hospital cost reports.” (Doc. 32 ¶ 152) Also, BayCare “presented or
caused to be presented Medicare and Medicaid claims based on referrals from
physician-tenants.” (Doc. 32 ¶ 137) To support this allegation, the complaint
provides financial information reported by BayCare in 2013 for inpatient (as well as
some outpatient) Medicare claims and charges. (Doc. 32 ¶¶ 114, 115) Also, the
complaint lists the names of referring physicians at the Heart Center and the Suncoast
Medical Clinic along with the aggregate number of Medicare patients each physician
referred to St. Anthony’s from 2009 to 2011. (Doc. 32 ¶¶ 114, 115, 118) Thus,
BayCare “billed the government” and the government “paid for claims based on
referrals from tenant physicians who received remuneration from BayCare, at least in
part, for these referrals.” (Doc. 32 ¶ 138)
The relator’s suit against BayCare comprises three counts. Counts I and II
allege that violations of the Anti-kickback Statute (Count I) and violations of the
Stark Statute (Count II) “tainted” claims submitted to the government. (Doc. 32
¶¶ 184, 192) Specifically, Counts I and II each allege that, “[f]rom at least January
2005, Defendant presented or caused to be presented false or fraudulent claims to the
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United States for payment or approval” and that, “[f]rom January 2005, Defendant
knowingly made, used or caused to be made or used, false records or statements that
were material to false or fraudulent claims for payment . . . by the United States.”
(Doc. 32 ¶¶ 183, 188, 191, 196) Count III alleges that the same actions underlying
Counts I and II create liability under the Florida False Claims Act. BayCare moves
(Doc. 37) to dismiss and argues that the relator fails to comply with Rule 9(b)’s
particularity requirement and fails to state a claim under Rule 12(b)(6).

DISCUSSION
Under United States ex rel. Clausen v. Laboratory Corp. of America, 290 F.3d 1301
(11th Cir. 2002), a False Claims Act complaint must comply with Rule 9(b)’s
particularity requirement. The requirement is satisfied if the complaint alleges “facts
as to time, place, and substance of the defendant’s alleged fraud, specifically the
details of the defendants’ allegedly fraudulent acts, when they occurred, and who
engaged in them.” Hopper v. Solvay Pharm., Inc., 588 F.3d 1318, 1324 (11th Cir.
2009). BayCare argues that the relator “failed to allege the circumstances of the
alleged fraud with particularity, including a failure to identify a single allegedly false
statement, record or claim that was made or submitted to or paid by any government
entity as a result of the schemes Relator has devised based on what appears to be little
more than his review of a publicly recorded summary of a ground lease.” (Doc. 37
at 4) Thus, this order addresses (1) the sufficiency of the relator’s allegations that
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BayCare violated the False Claims Act and (2) to the extent that BayCare asserts this
argument, the sufficiency of the relator’s allegations that BayCare violated the Stark
Statute and the Anti-kickback Statute.
1. The sufficiency of the relator’s allegations that BayCare violated the False
Claims Act
BayCare argues that the complaint fails to satisfy Rule 9(b) because the relator
“does not allege one single illegally-referred patient was treated by the Hospital or
that a false claim exists or was submitted for that patient’s care.” (Doc. 37 at 10)
However, as the relator correctly responds, unlike the fraud alleged in many actions
for violations of the False Claims Act, the fraud alleged in this action “does not
depend as much on the particularized billing content of any given claim.” (Doc. 38
at 7) According to the relator, “improper relationships with referring physicians
taint[] every claim submitted as a result of those referrals.” (Doc. 38 at 8) Thus, the
relator argues that the “circumstances constituting fraud” in this action “relate[] to
the provision of kickbacks . . . and entry into financial relationships . . . by virtue of
[BayCare’s] parking and tax schemes” and that the relator has pleaded those
circumstances “with more than adequate specificity.” (Doc. 38 at 8)
Under Clausen, 290 F.3d at 1311, the submission of a false claim to the
government for payment is “the sine qua non of a False Claims Act violation.”
However, “Rule 9(b) exists to prevent spurious charges and provide notice to
defendants of their alleged misconduct, not to require plaintiffs to meet a summary
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judgment standard before proceeding to discovery.” U.S. ex rel. Kunz v. Halifax Hosp.
Med. Ctr., 2011 WL 2269968, at *8 (M.D. Fla. June 6, 2011) (Persnell, J.). Thus,
“there is no per se rule that a[ False Claims Act] complaint must provide exact billing
data or attach a representative sample claim.” United States ex rel. Atkins v. McInteer,
470 F.3d 1350, 1358 (11th Cir. 2006). Rather, the complaint must provide some
“indicia of reliability . . . to support the allegation of an actual false claim for payment
being made to the Government.” Clausen, 290 F.3d at 1311. Whether a complaint
contains sufficient “indicia of reliability” to satisfy Rule 9(b) requires a “case-by-case”
determination. Atkins, 470 F.3d at 1358. “At a minimum, a plaintiff-relator must
explain the basis for [the] assertion that fraudulent claims were actually submitted.”
Mastej, 591 Fed. Appx. at 704.
After alleging violations of the Stark Statute and the Anti-kickback Statute, the
relator relies on information from the Centers for Medicare & Medicaid Services to
allege that BayCare submitted claims for unlawfully referred Medicare patients.
Specifically, the relator alleges for representative years (1) BayCare’s revenue from
inpatient (and some outpatient) Medicare claims and (2) the names of referring
physicians at the Heart Center and the Suncoast Medical Clinic along with each
physician’s aggregate number of Medicare patient referrals to St. Anthony’s Hospital.
Cf. United States ex rel. Osheroff v. Tenet Healthcare Corp., 2012 WL 2871264, *6
(S.D. Fla. July 12, 2012) (Huck, J.) (finding sufficient “indicia of reliability” that

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claims for payment were submitted where the relator relied on the defendant’s public
filings that showed revenue from Medicare and on an exhibit that contained
examples of claims).
Also, the relator (1) alleges that BayCare “knowingly” certified compliance
with the Stark Statute and the Anti-kickback Statute by signing “provider applications
and cost reports and submitt[ing] them to the U.S. Government” and (2) identifies
statements contained in those submissions. (Doc. 32 ¶ 152); Cf. United States ex rel.
Osheroff v. Tenet Healthcare Corp., 2013 WL 1289260, at *3 (S.D. Fla. Mar. 27, 2013)
(Huck, J.) (“The Court holds that the representations Tenet made in its Medicare
Provider Application and Agreement as well as the hospital cost reports are enough
to ground a claim under the False Claims Act.”). Thus, rather than rely on
speculation, the relator provides sufficient “indicia of reliability” that BayCare
submitted claims to the government for payment.
2. The sufficiency of the relator’s allegations that BayCare violated the Stark
Statute and the Anti-kickback Statute
The relator alleges that the claims BayCare submitted to the government for
reimbursement were false because BayCare violated the Stark Statute and the Antikickback Statute. To plead a violation of the Stark Statute, 42 U.S.C. § 1395nn(a)(1),
the relator must allege (1) a “financial relationship” between BayCare and a
physician, (2) a referral from the physician to BayCare for “designated health
services,” and (3) a claim “present[ed] or caus[ed] to be presented” by BayCare to an
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entity for “designated health services furnished pursuant to a referral.” As earlier
discussed, the relator provides “indicia of reliability” that physicians at the Heart
Center and the Suncoast Medical Clinic referred Medicare patients to BayCare and
that BayCare submitted claims to the government for those referrals. The complaint
alleges that the referrals “include ‘designated health services.’” Under
Section 1395nn(h)(6), “designated health services” include “[i]npatient and
outpatient hospital services.”
The relator alleges that “BayCare had both direct and indirect compensation
arrangements with the referring physicians” and that those compensation
arrangements constitute prohibited financial relationships under the Stark Statute.
(Doc. 32 ¶ 139) Specifically, the relator alleges that BayCare provided the referring
physicians with free parking,5 rent concessions, and valet services. The relator
complies with Rule 9(b) by alleging “facts as to time, place, and substance” of the
compensation arrangements. Clausen, 290 F.3d at 1310. Also, to demonstrate that
the free parking, the rent concessions, and the valet services each constitute
remuneration, the relator calculates the fair market value. Thus, the relator pleads a
violation of the Stark Statute.

5

The relator states that the “arrangement whereby physicians receive free parking for
themselves, their staff and their patients, as well as free maintenance, constitutes direct and indirect
compensation arrangements between BayCare and referring physicians.” (Doc. 32 ¶ 81) To support
the allegation of an indirect compensation arrangement, the relator alleges that the “value of the
easement” “varies with,” “takes into account,” or “otherwise reflects” the volume of referrals
“because larger practices with more patients can be expected to use more parking and other
easement facilities than smaller practices with fewer patients.” (Doc. 32 ¶¶ 141, 143–45)

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To plead a violation of the Anti-kickback Statute, the relator must allege that
(1) BayCare knowingly and willfully (2) offered or paid any remuneration (3) to
induce a physician to refer a patient for services that may be paid by a federal health
care program. See 42 U.S.C. § 1320a-7b(b)(2). As discussed, the relator alleges that
BayCare paid remuneration, including free parking, rent concessions, and valet
services, to physicians at the Heart Center and the Suncoast Medical Clinic. Also,
the relator alleges that BayCare paid the remuneration“knowingly and willfully”
because BayCare certified compliance with the Anti-kickback Statute by signing
“provider applications and cost reports.” (Doc. 32 ¶ 152); see United States v. Starks,
157 F.3d 833, 838 (11th Cir. 1998) (stating that a relator pleads remuneration was
paid “knowingly and willfully” if the relator alleges that a defendant acted “with
knowledge that his conduct was unlawful”).
Finally, the relator alleges that BayCare paid remuneration to physicians “for
the purpose of inducing or rewarding referrals of items and services to be paid for by
federal and state healthcare programs.” Although the Anti-kickback Statute fails to
define the term “induce,” “[c]ase law . . . consistently treats the [Anti-kickback
Statute’s] inducement element as an intent requirement.” United States ex rel. Parikh v.
Citizens Med. Ctr., 977 F. Supp. 2d 654, 665 (S.D. Tex. 2013) (Coasta, J.); see also
United States v. McClatchey, 217 F.3d 823, 835 (10th Cir. 2000) (Murphy, J.) (“[A]
person who offers or pays remuneration to another person violates the [Anti-kickback
Statute] so long as one purpose of the offer or payment is to induce Medicare or
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Medicaid patient referrals.”); United States ex rel. Schaengold v. Mem'l Health, Inc., 2014
WL 7272598, at *13 (S.D. Ga. Dec. 18, 2014) (Edenfield, J.) (finding that a relator
“sufficiently pleaded a violation” of the Anti-kickback Statute when the relator
alleged that the defendant “made kickbacks with the intent of inducing referrals”).
Thus, the relator has pleaded a violation of the Anti-kickback Statute.

CONCLUSION
Accordingly, BayCare’s motion (Doc. 37) to dismiss is DENIED.
ORDERED in Tampa, Florida, on August 14, 2015.

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