In a recent case, a qui tam plaintiff alleged that an anesthesiology group, which had an exclusive contract with Carlisle Regional Medical Center ("the Hospital"), had a compensation relationship that violated the Stark law. The plaintiff, a former member of the anesthesiology group, argued that the Hospital's written contract with the anesthesiology group terminated when Carlisle Hospital and Health Services ("CHHS") sold the Hospital's assets to Carlisle HMA, Inc. ("CHMA"). CHMA was not a party to and did not expressly assume the anesthesiology agreement from CHHS. As a result, the plaintiff claimed that CHMA failed to satisfy the Stark personal services exception because no written agreement existed.
The succession and assignment provision in the anesthesiology agreement provided that the rights and obligations of CHHS inured to the benefit of and were binding upon the successors and assigns of CHHS, provided that neither party could assign its rights or obligations without the other party's written consent. Under Pennsylvania law, the court held that CHMA was a successor rather than an assignee to CHHS based upon CHMA's continuation of the Hospital's business. The court also found that CHMA intended to succeed to CHHS's interest under the written agreement based upon the parties' continued performance under the anesthesiology agreement after the sale.
The court found that the existence of the succession and reassignment clause supported CHMA's succession to CHHS's interests under the anesthesiology agreement and that this was sufficient to satisfy the requirement of a written agreement for purposes of the Stark Law, despite CHMA's failure to sign the agreement. Consequently, designated health service providers should carefully consider the succession and assignment clauses included in agreements with physicians and their immediate family members.