$1 billion Stark case against Fla. hospital headed to trial

A federal judge ruled that Halifax Health Medical Center gave prohibited bonuses to at least six doctors in a case that could be a billion-dollar liability for the public hospital in Daytona Beach, Fla. A jury will decide the extent of the damages during a trial next spring, and the judge deferred to the jury on similar allegations in the same lawsuit involving another group of physicians.

The Halifax lawsuit, which was filed in 2009 by a compliance officer at the tax-supported hospital, claims that six oncologists and three neurosurgeons took home paychecks that increased when they referred more patients for treatments. The whistleblower, Elin Baklid-Kunz, also says the neurosurgeons were illegally overpaid.

“The encouraging thing for the hospital is that the judge recognized that we have evidence to support our defense—it is encouraging that he thinks it needs to go to trial,” said Halifax spokesman John Guthrie. “We took what we believed were responsible actions to secure compliance, and we didn't knowingly file any false claims.”

In two legal rulings this month, U.S. District Judge Gregory Presnell said the whistleblower—whose case was joined by the federal government in 2011—had proven in court records that the six oncologists' “productivity bonus” pay violated the federal Stark law's prohibition on paying doctors in ways that encourage them to refer Medicare patients for treatment.

But Presnell left it to a jury to decide how much Medicare oncology revenue was at issue and whether the violations were intentional, which could trigger punitive fines under the False Claims Act. Presnell also ruled that neither side has yet presented enough evidence to determine whether the three neurosurgeons' contracts violated the Stark law or False Claims Act, sending those issues to a jury as well.

Federal prosecutors have laid out a hair-raising upper limit on Halifax' potential damages in the case: as much as $1.1 billion, if a jury next March reaches a worst-case scenario for the hospital that 75,000 of its Medicare claims were tainted because they involve care provided by the nine doctors between 2005 and 2008.

The case has drawn national scrutiny because of the size of the potential damages and because the trial will come less than a year after a federal court in South Carolina rendered a potentially devastating $277 million judgment against Tuomey Health System in Sumter.

A judge ordered that damage amount after a jury ruled that Tuomey knowingly violated the Stark law and False Claims Act by submitting 21,000 tainted Medicare claims. The damages in that case exceed the hospital's total annual revenue, prompting fears the independent hospital would close or be sold if a settlement isn't reached.

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