In Carlisle HMA, the Third Circuit ruled in favor of Ted D. Kosenske, M.D., an anesthesiologist, in his False Claims Act action against Carlisle Hospital and Health Services (the Hospital), relating to patient referrals to the Hospital from a competitor, Dr. Kosenske’s former anesthesiology practice, Blue Mountain Anesthesia Associates PC (BMAA). In its decision, the court found that the personal services exception to the Stark Law no longer applied to a 17-year-old agreement between the Hospital and BMAA (the Agreement) for anesthesiology services.

Under the Agreement, the Hospital granted BMAA the exclusive right to provide anesthesiology and pain management services at the Hospital and committed to provide BMAA office space, supplies, equipment and personnel for serving Hospital patients. In turn, BMAA committed to providing 24-hour-a -day, seven-day-a-week anesthesia service coverage at the Hospital and agreed not to practice anesthesiology or provide pain management services anywhere but the Hospital. The Agreement provided for in-kind consideration, and no cash payment, between BMAA and the Hospital. BMAA and the Hospital each submitted claims directly to Medicare for reimbursement for their respective professional and facility fees. The Agreement also stated that the Hospital “shall offer BMAA the opportunity to provide exclusive anesthesiology and pain management services” at any new facility of the Hospital that provides such services.

In the 17 years following the execution of the Agreement in 1992, several events occurred that the Third Circuit found relevant to the relationship between the Hospital and BMAA relationship and Dr. Kosenske’s qui tam claims. First, approximately 15 months after the Agreement was signed, BMAA began providing around-the-clock pain management services to Hospital patients, but the Agreement was never amended to reflect the new services provided. Second, in 1998, the Hospital built a new stand-alone facility that included both an ambulatory surgery center and a pain clinic (the Pain Clinic). BMAA provided pain management services to patients of the Pain Clinic on the same terms under the Agreement as those applicable to the anesthesiology services it provided at the Hospital. The Agreement was never amended to include BMAA’s services at the Pain Clinic. Finally, in June 2001, the Hospital was sold in an asset transaction to its current owner, Hospital Management Associates, Inc. (HMA). Although there was no explicit assignment of the Agreement as part of the transaction, HMA and BMAA continued to abide by its terms.

Dr. Kosenske brought his qui tam claim under the False Claims Act on the theory that a violation of the Act occurs when a person or entity falsely certifies compliance with laws, including the Stark Law and Anti-Kickback Statute, by signing a claims form. If an underlying arrangement violates the Stark Law, Anti-Kickback Statute or other applicable law, then this false certification violates the False Claims Act.