United States: Florida Hospital To Settle Stark Law Case For $85 Million: Tentative Settlement Between Halifax Hospital Medical Center And United States Will End Much-Watched Case Alleging Violations Of False Claims Act

The Department of Justice and Florida's Halifax Hospital Medical Center have reached a tentative $85 million settlement in a case alleging violations of the federal physician self-referral law (commonly known as the "Stark Law") and the federal False Claims Act (the "FCA"). The tentative settlement was announced on March 3, 2014, as the parties were preparing to select a jury for trial of the case. A final settlement on the claims in which the federal government intervened is expected by March 10, 2014.

The case, United States ex rel. Baklid-Kunz v. Halifax Hospital Medical Center and Halifax Staffing, Inc., was filed in June 2009 by a whistleblower who had served as Halifax's director of physician services. The government intervened in the case in September 2011. The case alleged, among other things, that Halifax's arrangements with medical oncologists and neurosurgeons violated the Stark Law, and that Medicare claims submitted by Halifax based upon referrals from these physicians violated the FCA.

The Stark Law prohibits physicians from referring Medicare patients for "designated health services" to entities with which the physician or the physician's immediate family members have a financial relationship, unless the relationship meets one of the detailed exceptions set forth in the law and accompanying regulations. Likewise, the Stark Law prohibits an entity from submitting Medicare claims based upon such prohibited referrals and requires entities to refund amounts received for items or services provided pursuant to prohibited referrals. Sanctions for violating the Stark Law include denial of payment, civil monetary penalties of up to $15,000 per claim submitted, and exclusion from the federal health care programs. Knowingly submitting claims based upon prohibited referrals, and retaining sums paid on such claims, constitute violations of the FCA. The FCA provides for treble damages and civil penalties between $5,500 and $11,000 per claim.

The tentative settlement is notable for its size. The government alleged that the prohibited referrals in this case resulted in the submission of 74,838 claims and an overpayment of $105,366,000. Given the possibility of treble damages and civil penalties, Halifax faced a possible damage award in excess of $1.1 billion.

The case involved many important legal questions arising under the Stark Law and FCA. The parties and the court focused on two key elements common to many frequently-used Stark Law exceptions – that compensation cannot take into account the volume or value of referrals and that compensation must be within fair market value. The settlement leaves in place a number of trial court rulings on these and other issues, including the court's conclusion that a violation of the Stark Law can lead to FCA liability for claims covered by Medicaid, that the Stark Law exceptions are affirmative defenses in FCA cases on which the defendant bears the burden of proof (rather than elements of the FCA cause of action on which the government bears the burden of proof), that damages can be proved through health care providers' own claim forms rather than by detailed claim-by-claim proof based upon review of medical records, and that the attorney-client privilege provides only limited protection for communications between health care providers and their attorneys regarding the financial arrangements at issue in Stark Law/FCA cases.

The government argued that Halifax's arrangements with the medical oncologists failed to comply with a Stark Law exception because those arrangements took into account the volume or value of the physicians' referrals. The arrangements with the medical oncologists provided for a base salary and participation in a bonus pool equal to 15% of the operating margin of the medical oncology program at Halifax. The bonus pool was allocated among the physicians in proportion to their personally performed services. Because the bonus pool included revenues for designated health services referred by the physicians (i.e., services not personally performed by the physicians), the government argued that the arrangement took into account the volume or value of the physicians' referrals, regardless of how the bonus pool was allocated among the individual physicians. In a ruling prior to trial, the court agreed with the plaintiffs and found that as a matter of law these arrangements violated the Stark Law. This ruling meant that the only issue at trial related to the medical oncologist arrangements was the amount of damages to be awarded to the government.

The government argued that Halifax's arrangements with the neurosurgeons failed to comply with a Stark Law exception because those arrangements resulted in compensation in excess of fair market value. Those arrangements provided for a base salary, benefits, call pay, and a bonus equal to the difference between the base salary and the physician's collections. According to the government's expert witness, these arrangements resulted in compensation to the neurosurgeons in amounts over twice the compensation paid to neurosurgeons at the 90th percentile of their specialty, despite producing below the 90th percentile. Halifax argued that a number of factors justified the levels of compensation paid to the neurosurgeons. In a pretrial ruling, the trial court found that whether the arrangements resulted in compensation that fell within fair market value was a disputed issue of fact to be resolved by the jury at trial.

The settlement will largely bring to an end a case that demonstrates the high stakes involved in FCA cases arising out of alleged violations of the Stark Law, and the many difficult and unsettled legal issues that health care providers face in this area.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.