DOJ Scrutinizes Financial Arrangements of Florida Physician Practice

The U.S. Department of Justice (DOJ) announced in a Nov. 12, 2024, press release that an ophthalmology practice with offices located in West Central Florida (the Provider) entered into an approximately $1.3 million settlement agreement to resolve kickback allegations arising out of the Provider's billing for transcranial doppler ultrasounds (TCDs). This settlement highlights the government's enforcement priority in the state of Florida for unlawful financial arrangements in the healthcare space, no matter how large or small the amount of remuneration involved.

According to the press release, the illegal financial relationship involved a contractual arrangement between the Practice and a third-party vendor of turnkey mobile TCD services (the Third-Party Provider), whereby even before receiving the TCD result, the Practice and the Third-Party Provider identified the patient as having received a serious diagnosis that could qualify the patient for Medicare or Medicaid reimbursement of a TCD. However, nearly all patients who received TCDs never actually had the diagnosis, and therefore the diagnosis was not reflected in the patient's medical history or in the TCD results. The press release states that for each TCD procedure ordered for a Medicare patient, the Practice submitted reimbursement claims for the technical component of the procedure, paid the Third-Party Provider based on the volume or value of procedures ordered and referred the patient to the Third-Party Provider's preferred radiology provider for the professional component.

The DOJ alleged that as a result of the arrangement between the Practice and the Third-Party Provider, the Practice submitted or caused the submission of false claims to the Medicare and Medicaid programs for TCDs that were medically unnecessary, premised on false diagnoses, and resulted from violations of the Anti-Kickback Statute and the Stark Law. The majority of the settlement amount is to be paid to the United States, with a small fraction to go to Florida's Medicaid program.

There is a deep arsenal of federal and Florida laws that the government has at its disposal to protect the integrity of the Medicare and Medicaid programs by ensuring that providers and other players in the healthcare space do not misappropriate government funding that is meant to take care of the neediest populations. Here, the allegations involved violations of the federal False Claims Act (FCA) and an analogous Florida statute, with such violations alleged to have been based on the Practice's violation of the Stark Law and Anti-Kickback Statute.

The federal Stark Law and Anti-Kickback Statute generally prohibit financial arrangements (both payment and investment arrangements) that reward financial incentives instead of the best interests of patients, and such laws require those financial arrangements to be structured in a specific way in order to be immune, or "safe harbored," from prosecution. The government commonly uses the federal FCA to pursue violations of both laws, which enforcement may be initiated by qui tam whistleblowers (who can share in the recovery) and result in treble monetary damages (i.e., a 3x multiplier), in addition to other penalties and fines. The state of Florida has analogous laws as further described below.

The press release indicates that the Third-Party Provider provided "turnkey" mobile TCD services to the Practice through a contractual arrangement, with the Practice billing federal healthcare programs for the technical component of the TCD procedure and paying the Third-Party Provider based on the volume or value of TCD orders. The U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) – the federal agency that implements the Anti-Kickback Statute – has previously found similar "contractual joint ventures" among healthcare providers, laboratories and third-party vendors to be problematic. Such "contractual joint ventures" generally involve a healthcare provider contracting with a nonrelated company with specific service-area expertise to provide almost all aspects of the service, including taking on most of the business risk, while the provider bills for the service. Relatedly, the Stark Law, which was implicated here, prohibits certain payments for referrals of "designated health services," which includes most medical imaging services, unless the financial arrangement meets one of several exceptions. The Stark Law is a strict liability statute (i.e., intent is not required for a violation), and the Florida law corollary, referenced below, is implicated regardless of the payment source.

Within the government's healthcare fraud and abuse enforcement arsenal are the following authorities:

• Federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)), with the following Florida law corollaries:
  • Florida Anti-Kickback Statute (Fla. Stat. § 456.054)
  • Florida Medicaid Anti-Kickback Statute (Fla. Stat. § 409.920(2)(A)(5))
  • Florida Patient Brokering Act (Fla. Stat. § 817.505)
  • Florida Medical Practice Act (Fla. Stat. § 458.331(1)(i))
• Federal Stark Law (42 U.S.C. § 1395nn), with the following Florida law corollary:
  • Florida Patient Self-Referral Act (Fla. Stat. § 456.053)
• Federal False Claims Act (31 U.S.C. §§ 3729–3733), with the following Florida law corollary:
  • Florida False Claims Act (Fla. Stat. § 68.081, et seq.)

Penalties for violation of these laws and costs of litigation and remediation can be significant. Such penalties may include fines, criminal liability and exclusion from state or federal healthcare programs. There are several exceptions and safe harbors available under these laws that can help providers ensure compliance. In order to structure financial arrangements involving the provision of healthcare items or services in Florida in a compliant manner, healthcare counsel should be involved. Roger Handberg, the U.S. Attorney for the Middle District of Florida, echoed the following in the press release: "We will continue to pursue these actions against providers who exploit federal health care programs for personal gain."

Holland & Knight is available to assist in reviewing existing financial arrangements in the healthcare space and to structure new arrangements in innovative ways that meet the goals of the parties while remaining compliant with the wide assortment of fraud and abuse laws at play. For more information, contact the authors or another member of the firm's Healthcare Regulatory Compliance or Healthcare Transactions teams.