Judge: Halifax Violated Stark Law With Bonuses to Oncologists

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A federal judge issued a summary judgment Wednesday that found Daytona Beach, Fla.-based Halifax Health's contracts with six oncologists violated Stark Law.

The oncology contracts are one part of a 2009 whistle-blower lawsuit filed by Elin Baklid-Kunz, who currently works at Halifax as director of physician services. The Department of Justice joined the case in 2011, supporting some of Ms. Baklid-Kunz's allegations against the public health system.

Ms. Baklid-Kunz and her attorneys continue to pursue separate allegations Halifax physicians improperly admitted patients and performed unnecessary back procedures.

On Wednesday, U.S. District Judge Gregory Presnell ruled on only a portion of the allegations, as there are also claims Halifax improperly paid three neurosurgeons. The summary judgment focused exclusively on one aspect of the oncology case: the Stark Law. Judge Presnell did not provide a decision on allegations Halifax violated the False Claims Act. The Daytona Beach News-Journal has posted the judge's order.

The court decided to leave the issue of damages to the jury. The government expects the amount to total at least $27 million, according to an Orlando Sentinel report. 

In 2005, Halifax entered into agreements with the six oncologists so they would receive bonuses from an equitable portion of an incentive compensation pool, which was equal to 15 percent of the operating margin for the medical oncology program. The bonus payment amounts would be based on each individual oncologist's personally performed services.

Halifax has argued the arrangement met an exception under Stark Law, since the oncologists were employed. The government contends the requirements for this exception were not met because the incentive bonus allegedly varied based on the physicians' referrals for designated health services. The government also claimed the incentive pool (15 percent of the operating margin of the medical oncology program) included money from services that were not personally provided by the oncologists, such as outpatient prescription drugs.

"Thus, revenue from referrals made by the medical oncologists would flow into the incentive bonus pool, and additional referrals would be expected to increase the size of the pool," the judge wrote in his decision. When Halifax argued the bonus pool was divided based on each oncologist's personally performed services, the judge said that argument was not enough to bring the incentive bonus within the bona fide employment exception.

The judge made a small but important distinction in his decision: The bonus was not based on services personally performed by the oncologists. Rather, the bonus was divided up based on services personally provided. "The bonus itself was based on factors in addition to personally performed services — including revenue from referrals made by the medical oncologists for designated health services," Judge Presnell wrote.

Halifax released a statement, saying it is disappointed by the judge's decision. It said the bonus program was "designed to retain mission-critical cancer specialists."The system also said both inside and outside legal counsel reviewed the arrangement and found the bonus program to comply with Stark Law.

Adam Schwartz, an attorney representing Halifax, emphasized Wednesday's judgment is the first piece of the legal proceeding. "The quality of care has never been questioned. The cost of care has never been questioned. This is a technicality about an agreement," he said.

Marlan Wilbanks, an attorney representing the whistle-blower, has claimed the system knew it was not in compliance with Stark Law, according to a Daytona News-Journal report.

Judge Presnell did not resolve whether Halifax knowingly violated Stark, and that issue will be left for the jury to decide.

Potential damages and penalties in the case could top $1 billion for the allegations that Halifax submitted more than 74,000 false claims to Medicare. Halifax has already spent more than $15 million on its legal defense.

The case is scheduled to go to trial in federal court in Orlando in March.

More Articles on Halifax Health:

Halifax Health's Legal Defense Bills to Top $15M
Whistleblower Attorneys Claim Halifax Health Destroyed Records
Potential Damages in Halifax Health Lawsuit Could Hit $1B

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