On Appeal From the United States District Court For the Middle District of Pennsylvania, (D.C. Civil Action No. 05-cv-02184), District Judge: Hon. Christopher C. Conner.
The opinion of the court was delivered by: Stapleton, Circuit Judge
BEFORE: SLOVITER, STAPLETON and TASHIMA,*fn1 Circuit Judges
Appellant Ted D. Kosenske brought this qui tam action under the False Claims Act, 31 U.S.C. § 3729, et seq., against Carlisle HMA, Inc. ("HMA"), and its parent company, Health Management Associates, Inc. The complaint alleged that they submitted outpatient hospital claims to the Medicare program and other federal healthcare programs, falsely certifying that such claims were in compliance with the Stark Act, 42 U.S.C. § 1395nn ("the Act"), and the Anti-Kickback Act, 42 U.S.C. § 1320a-7b. The parties filed cross-motions for summary judgment. The District Court granted the defendants' motion and denied the plaintiff's motion. This appeal followed.
This appeal presents two principal issues. First, we must decide whether the exclusive service arrangement between Kosenske's former practice, Blue Mountain Anesthesia Associates, P.C. ("BMAA"), and defendants, in which BMAA provided pain management services at an outpatient HMA clinic, triggered the restrictions placed by the Stark and AntiKickback Acts on the submissions of claims for services rendered following "referrals" by a physician having a "financial relationship" with the service provider.We conclude that the Stark and Anti-Kickback Acts were implicated. Second, we must determine if the arrangement between BMAA and HMA satisfied the personal service exception to the Stark Act and the substantially identical safe harbor provision of the Anti-Kickback Act.We conclude that it did not. It follows that summary judgment was wrongly awarded to HMA. Accordingly, we will reverse and remand to the District Court for further proceedings consistent with this opinion. Because the parties agree that, in the context of this case, the requirements of the Anti-Kickback Act and its implementary regulations are indistinguishable from those of the Stark Act, we refer only to the latter in the following analysis.
BMAA, a group of four physicians that practiced anesthesiology, engaged in negotiations with Carlisle Hospital and Health Systems ("CHHS"), culminating in an Anesthesiology Services Agreement ("the Agreement") dated December 31, 1992. Kosenske was a member of that group.
The purpose of the Agreement was to establish an exclusive service arrangement under which BMAA would provide all anesthesia services required by the Hospital's patients at CHHS's hospital in Carlisle, Pennsylvania (the "Hospital"). While no pain management services were being performed by BMAA physicians at the Hospital in 1992, the Agreement contemplated that such services might be rendered in the future. The Agreement essentially provided that (1) BMAA would provide anesthesia coverage for Hospital patients on a 24/7 hour/day basis; (2) the Hospital would provide at no charge the space, equipment and supplies reasonably necessary and economical for BMAA to provide these anesthesiology services; (3) BMAA would use the personnel, space, equipment and supplies provided by the Hospital solely for the practice of anesthesiology and pain management for the Hospital's patients; (4) the Hospital would not allow anyone other than BMAA physicians to provide anesthesia or pain management services at the Hospital; and (5) BMAA physicians would not practice anesthesia or pain management at any location other than "the Hospital and . . . such other facilities and locations as may be operated by Hospital and Carlisle Hospital & Health Services ("CHHS"), the entity which owns Hospital." JA at 2.
It is helpful to note at the outset two limitations on the obligations of BMAA under the carefully drafted Agreement. First, as the section of the Agreement we have just quoted suggests and as the remainder of the Agreement confirms, "Hospital" refers only to the "Carlisle Hospital located at 246 Parker Street, Carlisle, Pennsylvania." JA at 1. Thus, the patients that BMAA committed itself to provide 24/7 hour/day anesthesia services for were the patients in the existing facility of the Carlisle Hospital. While it is true that the Agreement contains a few provisions that contemplated the possibility of BMAA services being performed elsewhere, those provisions only confirm that BMAA's commitment under this Agreement to provide services was limited to that facility. Section 7B, for example, provides as follows:
In the event that Hospital or CHHS obtains, opens, or operates another facility or location at which anesthesiology or pain management services are required or offered, Hospital and CHHS shall offer BMAA the opportunity to provide exclusive anesthesiology and pain management services at such new facility or location under the same terms and conditions as provided in this agreement, to the fullest extent that the Hospital and/or CHHS is able to contract with BMAA to provide such services on the same terms and conditions as set forth herein. Should Hospital and/or CHHS be unable, for any lawful reason, to enter into a contract with BMAA to provide such services on the same terms and conditions as set forth herein, then Hospital and/or CHHS shall offer BMAA the first opportunity to provide exclusive anesthesiology and pain management services at such new facility or location on whatever terms Hospital and/or CHHS and BMAA may negotiate and, in the event that the parties are not able to negotiate an agreement for the provision of such exclusive services by BMAA, BMAA shall have the right of first refusal for any proposal or contract entered, offered, or made by Hospital and/or CHHS with any other person or entity to provide anesthesiology or pain management services at such new facility. Hospital and/or CHHS shall not enter into any agreement with any other provider without first offering to BMAA the opportunity and right to provide such exclusive services at such facility or location on identical terms offered to or negotiated with such other provider.
JA at 8-9 (emphasis added).
Thus, understandably, BMAA was not committing itself to provide continuous 24/7 service at any new facility that the Hospital or CHHS might choose to open in the future. Rather, it insisted that if and when that happened they would either have to "offer BMAA the opportunity to provide exclusive anesthesiology and pain management services" in the new facility under the same terms and conditions or would have to provide BMAA with an opportunity to exercise a right of first refusal. In short, if BMAA were going to undertake the obligation of providing service beyond the patients of the then current facility, a new contract would be required.
Second, while BMAA committed itself to satisfying all of the anesthesiology needs of the patients at the Hospital, it did not similarly commit itself to provide pain management services. Not surprisingly, given that no pain management services were being provided when the Agreement was signed, BMAA only committed itself to "devote such time as necessary to provide anesthesia services to Hospital patients and provide anesthesiology consultation to other physicians in the Medical Staff as needed," including "reasonable emergency response on a 24 hour a day, 7 day per week basis."*fn2 JA at 2, 4.
The Agreement, while using the terms "anesthesiology" and "pain management" as distinct fields of practice, did not define these terms. In context, however, anesthesiology is used in the traditional sense -- the practice of administering anesthesia to patients undergoing a surgical procedure. Accordingly, it is a hospital- or surgery-center-based practice. The practice of "pain management," as commonly understood, involves the evaluation and management of pain symptoms. It can be, but is not required to be, hospital-based. This distinction between anesthesiology and pain management is relevant in the context of the Stark Act because it bears on the issue of referrals. As the Department of Health and Human Services ("HHS") has recognized, with traditional hospital-based practices like anesthesiology, "it is typically the hospitals that are in a position to influence the flow of business to the physicians, rather than the physicians making referrals to the hospitals." OIG Supplemental Compliance Program Guidance for Hospitals, 70 Fed. Reg. 4858, 4867 (Jan. 31, 2005). In such situations, HHS is primarily concerned with any remuneration flowing from anesthesiologists to the hospital. With respect to a pain management practice that is not a hospital-based practice, the concerns are different. Patients typically come to see pain management physicians for office visits, and the physicians frequently order tests or procedures at a hospital, lab, or other facility. Thus, in pain management, a physician in an outpatient facility is in a position to generate substantial business for a hospital. See id. at 4865 (noting that "[p]hysicians are the primary referral source for hospitals"). Therefore, HHS's concern would be with remuneration flowing from the hospital to the physicians in order to induce the physicians to provide business for the hospital.
Approximately fifteen months after signing the 1992 Agreement, Kosenske and a Hospital nurse began administering pain management services, in addition to traditional anesthesia, to Hospital patients. Because there was no dedicated space for pain management services, Kosenske saw these patients in space used for other hospital purposes.
In 1998, the Hospital built a new, stand-alone facility, containing an outpatient ambulatory surgery center and a pain clinic ("the Pain Clinic"), which was located about three miles away from the Hospital. From the day of its opening, BMAA provided pain management services to patients in the Pain Clinic, and the Hospital did not charge BMAA rent for the space and equipment, or a fee for the support personnel it provided to BMAA at the Pain Clinic. BMAA provided a physician to see patients in the Pain Clinic, and this physician when serving there did not have other anesthesiology duties at the Hospital. As with the anesthesia services, BMAA physicians submitted claims to Medicare for the professional services performed during these visits, and the Hospital submitted claims for the facility and technical component of the visits. No one other than BMAA provided pain management services at the Pain Clinic. However, the parties did not amend the 1992 Agreement or enter into a new agreement.
In June 2001, HMA purchased the Hospital from CHHS, as an asset purchase, and renamed it Carlisle Regional Medical Center. The 1992 Agreement was not assigned to HMA, but both HMA and BMAA acted as if the Agreement were still in effect at the Hospital. We will assume, ...