In United States ex rel. Patel v. Catholic Health Initiatives, No. 18-20395, 2019 WL 6208665 (5th Cir. Nov. 20, 2019), the court affirmed dismissal of the relators' claims under the Anti-Kickback Statute (AKS), Stark Law and Texas Securities Act (TSA) for alleged misrepresentations. The health system that controlled the hospital (i.e., St. Luke's Health System) sought rescission under the TSA of the physician-relators' ownership interests in a partnership (i.e., St. Luke's Sugar Land Partnership LLP) that owned the hospital (i.e., St. Luke's Sugar Land Hospital), following enactment of the Affordable Care Act (ACA) provision, which prevented the hospital from expanding while preserving physician ownership. The relators alleged that the health system forced their partnership to offer rescission payments for the physicians' shares that were higher than the shares' actual value to induce the physicians to continue referring services for which Medicare made payment. In other words, the relators alleged the payments were kickbacks for referrals in violation of AKS. The court determined that the relators failed to tie the alleged inducement of referrals to payment for physicians' shares in the partnership. The court reasoned, "'If the AKS and FCA are interpreted to sanction this conduct, it is not clear what the System could have done to respond to Congress's new discouragement of physician ownership while complying with health care fraud statutes.'" The relators also argued that the rescission violated the Stark Law because it constituted an improper financial relationship between an entity and physicians. But an exception exists for an "isolated financial transaction" between an entity and the physician. The court ruled that the relators failed to show that remuneration for the transactions did not reflect their fair market value. Therefore, the relators failed to state a qui tam FCA claim under the AKS against the health system that controlled the hospital. The relators' final claim was that the health system made a false claim in violation of the FCA when it represented that, following the purchase of all but four physicians' shares and the termination of those four shares after a missed capital call, the system owned the entirety of the hospital. The court determined that the alleged falsity was not material as evidenced by the fact that even after the federal government knew the facts about the ownership of the hospital, it continued to pay claims submitted by the system.
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