The opinion of the court was delivered by: Judge Conner
This is a qui tam action filed under the False Claims Act ("FCA"), 31 U.S.C. §§ 3729-3733, by relator Ted D. Kosenske ("Kosenske"). Kosenske alleges that defendant Carlisle HMA, Inc. ("Carlisle HMA") and its parent company, defendant Health Management Associates, Inc. ("HMA"),*fn1 submitted false claims to Medicare in violation of kickback and physician referral laws. He predicates this case on the FCA qui tam provisions, 31 U.S.C. § 3730(b)-(d), which allow private individuals to bring civil enforcement suits against those who have submitted false claims to the federal government. The FCA grants the government the right to intervene in qui tam actions, 31 U.S.C. § 3730(b), but the government has declined to do so in the instant case. (Doc. 5 at 1.)
Presently before the court are the parties' cross-motions for summary judgment (Docs. 43, 45). For the reasons that follow, the defendants' motion (Doc. 43) will be granted, and the plaintiff's motion (Doc. 45) will be denied.*fn2
I. Statement of Facts*fn3
This case finds its roots in 1992, when Kosenske and several other anesthesiologists at the Carlisle Hospital*fn4 in Carlisle, Pennsylvania founded a practice under the professional name of Blue Mountain Anesthesia Associates, P.C. ("BMAA"). (Doc. 44, Ex. B. at 7; Doc. 44, Ex. D at 16; Doc. 48 ¶¶ 1-2; Doc. 54 ¶¶ 1-2.) On December 31 of that year, BMAA entered into a contract ("1992 agreement") with Carlisle Hospital and Health Services ("CHHS"), the predecessor of Carlisle HMA and former operator of the Carlisle Hospital. (Doc. 44, Ex. D at 17; see generally Doc. 44, Ex. A.) The 1992 agreement granted BMAA the exclusive right to provide around-the-clock anesthesiology services at the hospital. (Doc. 44, Ex. A ¶ 1.I, 7.) CHHS also agreed to provide office space, supplies, equipment and personnel for BMAA's use when administering anesthesiology services to patients. (Id. ¶¶ 2.A, 2.B.)
A. Pain Management Services and the Pain Management Clinic
Approximately fifteen months after the signing of the 1992 agreement, Kosenske and a hospital nurse began administering pain management services in additional to traditional anesthesia. (Doc. 44, Ex. D at 33; Doc. 48 ¶ 9; Doc. 54 ¶ 9.) BMAA had not widely practiced pain management until that time. (Doc. 44, Ex. D at 33-35; Doc. 48 ¶ 8; Doc. 54 ¶ 8.) Pain management differs from anesthesia in that the latter involves sedation of patients for surgery while the former refers to the treatment of a patient's pain symptoms outside of the surgery context. (Doc. 46 at 3; Doc. 47 ¶¶ 7-8; Doc. 49 ¶¶ 7-8.) Pain management services may, but need not, involve the administration of medication through injection, epidural catheter, or other means to aid the patient in coping with pain. (Doc. 44, Ex. B at 71; Doc. 44, Ex. E at F-11 to -12.) Some cases require only consultation about methods to handle symptoms. (Doc. 44, Ex. B at 71.) One need not be an anesthesiologist to administer pain management, and non-anesthesiologists often perform it in both hospital and office settings. (Doc. 44, Ex. B at 73; Doc. 44, Ex. D at 24, 32; cf. Doc. 44, Ex. E at F-11.)
The 1992 agreement delineates BMAA's anesthesiology duties and responsibilities. (Doc. 44, Ex. A ¶ 1.I.) It describes BMAA's pain management responsibilities less thoroughly. It states that BMAA will use hospital facilities "solely for the practice of anesthesiology and pain management," (see Id. ¶ 1.B), but the agreement never imposes an explicit obligation on BMAA to perform the latter. It does, however, prohibit CHHS from allowing other anesthesiologists to do so unless BMAA "is not qualified or is otherwise unable to render services." (Id. ¶¶ 7, 7.A.)
Kosenske initially shared treatment facilities with the hospital's gastrointestinal endoscopy unit. (Doc. 44, Ex. B at 12; Doc. 44, Ex. D at 33-34.) In 1998, CHHS opened a dedicated pain management clinic at the newly constructed Carlisle Regional Surgery Center ("Surgery Center"), an outpatient surgical and pain treatment facility. (Doc. 44, Ex. D at 36; Doc. 53, Ex. 2 at 63.) CHHS offered BMAA the opportunity to provide exclusive pain management services at the Surgery Center in accordance with the 1992 agreement, and BMAA accepted the invitation. (Doc. 44, Ex. A. ¶ 7.B; Doc. 53, Ex. 2 at 65-66.) CHHS and BMAA never executed a new contract with respect to the pain management clinic. They simply continued to operate under the provisions of the original 1992 agreement. (Doc. 44, Ex. D at 56; Doc. 53, Ex. 2 at 69-70.)
B. Transfer of the Hospital from CHHS to Carlisle HMA
In 2001, Carlisle HMA purchased the hospital, Surgery Center, and certain other assets from CHHS. (Doc. 48 ¶ 19; Doc. 53, Ex. 2 at 32; Doc. 54 ¶ 19.) The two entities structured the transaction as an asset purchase rather than a merger, with Carlisle HMA assuming fewer than all of CHHS's assets and liabilities. (Doc. 48 ¶ 19; Doc. 53, Ex. 2 at 32; Doc. 54 ¶ 19.) Medicare regulations allowed Carlisle HMA to continue to use CHHS's Medicare provider number, but they also required it to accept liability for overpayment of Medicare claims made to CHHS.*fn5 (See generally Doc. 63-4.) After the asset purchase, HMA, the parent company of Carlisle HMA, installed a new management team at the Carlisle Hospital. These executives, who remained on HMA's payroll, controlled the actions of Carlisle HMA and oversaw its compliance with Medicare regulations. (Doc. 53 at 20; Doc. 53, Ex. 2 at 9-10; Doc. 53, Ex. 10 at 6; Doc. 53, Ex. 11 at 11-12.)
CHHS did not execute a formal written assignment of its contractual rights and obligations under the 1992 agreement for the benefit of Carlisle HMA. Nevertheless, after the sale, Carlisle HMA and BMAA conducted their relationship as if the agreement remained in effect. (Doc. 53, Ex. 2 at 34; Doc. 53, Ex. 6 at 34.)Kosenske continued his association with BMAA until 2005, when he left to open an independent pain management practice. (Doc. 44, Ex. B. at 41.)His current professional practice actively competes with Carlisle HMA's pain management clinic. (Doc. 1 ¶ 134; Doc 16. ¶ 134.)
BMAA has never reimbursed CHHS, Carlisle HMA, or HMA for the rental of office space, nor was it obligated to do so under the 1992 agreement. (Doc. 44, Ex. B at 22-23, 34-35; Doc. 47 ¶ 25; Doc. 49 ¶ 25.) It did not pay compensation for its exclusive provider status or for the cost of hospital equipment, personnel, or supplies. (Doc. 47 ¶ 25; Doc. 49 ¶ 25.) Nor has CHHS, Carlisle HMA, or HMA ever compensated BMAA for the anesthesiology and pain management services provided at Carlisle Hospital and the Surgery Center.*fn6 (Doc. 53, Ex. 6 at 37-38.) Rather, BMAA and Carlisle HMA (and previously CHHS) each submitted claims directly to Medicare and other third-party payors for their respective professional and facilities costs. (Doc. 47 ¶ 29; Doc. 49 ¶ 29; Doc. 53, Ex. 2 at 143; see also Doc. 46-3 col. C; Doc. 46-4 col C.) In the circumstances of the present case, Medicare regulations allow Carlisle HMA and BMAA to segregate their billing into separate components. (Doc. 46 at 23 n.2; MSJ Hr'g Tr. 6-7, Oct. 2, 2007.) BMAA physicians submitted claims under this billing arrangement for the professional services they provided, and Carlisle HMA submitted separate claims for the cost of maintaining the facilities used by the physicians in rendering treatment. (Doc. 48 ¶ 17; Doc. 54 ¶ 17; Doc. 53, Ex. 2 at 150-51; Hr'g Tr. 25.)
C. Relator's Contentions and Procedural History
The crux of this suit involves Carlisle HMA's alleged non-compliance with the Stark Act, 42 U.S.C. § 1395nn, and Anti-Kickback Act, 42 U.S.C. § 1320a-7b, when submitting its claims for facilities costs to Medicare. These statutes prohibit a health care provider from paying physicians any form of compensation to induce them to refer patients to the provider. They also restrict a physician's ability to own a financial stake in a health care entity to which the physician refers patients. If a health care entity submits a claim to Medicare which derives from a prohibited referral source, it becomes a false claim to which FCA liability may attach. See United States ex rel. Schmidt v. Zimmer, Inc., 386 F.3d 235, 243 (3d Cir. 2004) (reversing district court dismissal of action under FCA because allegations that defendant violated Stark and Anti-Kickback Acts were sufficient to state claim under it).
In the instant case, Kosenske alleges that BMAA physicians have a financial relationship with Carlisle HMA because it provides them with office space, supplies, equipment, personnel and other benefits without charge. (Doc. 46 at 13-21; Doc. 53 at 1.) Kosenske submits that these benefits constitute compensation given to induce referrals of patients from the pain management clinic to Carlisle HMA. The Stark and Anti-Kickback Acts allegedly prohibit Carlisle HMA from submitting claims for pain management services ordered by BMAA. (Doc. 46 at 28-29.) Kosenske alleges that Carlisle HMA nevertheless submitted numerous such claims, implicating "false claims" under the FCA. (Doc. 53 at 20-21.) HMA never directly submitted claims to Medicare; however, Kosenske contends that it controlled the actions of Carlisle HMA, including the subsidiary's billing practices. (Id.)
The parties have filed cross-motions for summary judgment on the issue of the defendants' compliance with the Stark Act and the Anti-Kickback Act. If the court finds a violation of either of these statutes, the parties also seek summary judgment on the issue of the defendants' liability under the FCA. The parties have fully briefed these matters, and the court heard oral argument on October 2, 2007.
Through summary judgment the court may dispose of those claims that do not present a "genuine issue as to any material fact," and for which a jury trial would be an empty and unnecessary formality. See FED. R. CIV. P. 56(c). It places the burden on the non-moving party to come forth with "affirmative evidence, beyond the allegations of the pleadings," in support of its right to relief. Pappas v. City of Lebanon, 331 F. Supp. 2d 311, 315 (M.D. Pa. 2004); FED. R. CIV. P. 56(e); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). This evidence must be adequate, as a matter of law, to sustain a judgment in favor of the non-moving party on the claims. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250-57 (1986); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-89 (1986); see also FED. R. CIV. P. 56(c), (e). Only if this threshold is met may the cause of action proceed. Pappas, 331 F. Supp. 2d at 315.
The court is permitted to resolve cross-motions for summary judgment concurrently. Cf. Assicurazioni Generali, S.P.A. v. Pub. Svc. Mut. Ins. Co., 77 F.3d 731, 733 & n.2 (3d Cir. 1996) (observing that district court may dispose of case through cross-motions for summary judgment); see also 10A CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE § 2720 (3d ed. 1998). When doing so, the court is bound to view the evidence in the light most favorable to the non-moving party with respect to each motion. FED. R. CIV. P. 56; United States v. Hall, 730 F. Supp. 646, 648 (M.D. Pa.1990).
Kosenske alleges that defendants submitted claims to Medicare in violation of the Stark Act, 42 U.S.C. § 1395nn, and the Anti-Kickback Act, 42 U.S.C. § 1320a-7b. Both statutes prohibit a health care entity from submitting to Medicare claims that derive from referrals ordered by physicians who receive compensation from the entity. See 42 U.S.C. §§ 1395nn(a); 1320a-7b(b). If the entity has paid compensation to a physician, the entity may submit claims connected to referrals made by the physician only if one of several exceptions to each statute applies. See generally id. § 1395nn(c)-(e) (listing statutory exceptions to the Stark Act); 42 C.F.R. § 411.357 (listing regulatory exceptions to the Stark Act, which provide guidance about application of exceptions listed in statute); 42 C.F.R. § 1001.952 (creating exceptions to Anti-Kickback Act).
A claim knowingly made in violation of either statute constitutes a "false claim" submitted to the federal government and is prohibited by the FCA. United States ex rel. Schmidt v. Zimmer, Inc., 386 F.3d 235, 243 (3d Cir. 2004); United States v. Rogan, 459 F. Supp. 2d 692, 717 (N.D. Ill. 2006) ("The submission of [claims] in violation of the Stark Statute constitutes a violation of the FCA."); United States ex rel. Barrett v. Columbia/HCA Healthcare Corp., 251 F. Supp. 2d 28, 32 (D.D.C. 2003) (holding that violation of Anti-Kickback Act implicates FCA liability). As a practical matter, the Stark and Anti-Kickback Acts govern the substantive analysis of Kosenske's allegations. A determination that defendants complied with the Stark and Anti-Kickback Acts necessarily resolves Kosenske's FCA claim in their favor.
A. The Policies of the Stark and Anti-Kickback Acts
The Stark and Anti-Kickback Acts ensure the quality of patient care and deter abuse of federal health care programs by proscribing certain conflicts of interest that arise when third-party payors cover the cost of treatment. The Stark Act prevents a physician's personal financial interests from influencing the type and quality of care that patients receive. See Joan H. Krause, A Conceptual Model of Health Care Fraud Enforcement, 12 J.L. & POL'Y 55, 77 (2003) (observing that the Stark Act was "designed to prohibit the referral of Medicare and Medicaid patients to health care providers with whom the referring physician has a financial relationship."). Congress enacted it in the late 1980s in response to studies showing an increase in physician referrals to laboratories when the physician owned an interest in the laboratory to which the referral was made. See id.; accord Physician Ownership of, and Referrals to, Health Care Entities that Furnish Clinical Laboratory Services, 57 Fed. Reg. 8588, 8589 (Mar. 11, 1992). The Act prohibits so-called "self-referrals" in which a physician orders a medically unnecessary treatment solely because of his or her financial interest in the entity providing that treatment. See McDonnell v. Cardiothoracic & Vascular Surgical Assocs., No. C2-03-0079, 2004 WL 3733404, at *9 (S.D. Ohio Aug. 3, 2004) ("Congress enacted Stark to address the strain placed on the Medicare Trust fund by the overutilization of certain medical services by physicians who, for their own financial gain rather than their patients' medical needs, referred patients to entities in which the physicians held a financial interest."); William M. Sage, Some Principles Require Principals: Why Banning "Conflicts of Interest" Won't Sold Incentive Problems in Biomedical Research, 85 TEX. L. REV. 1413, 1459 n.154 (2007) (stating that the primary purpose of the Stark Act was to ensure financial stability of Medicare and Medicaid against physician self-referrals); Jo-Ellyn Sakowitz Klein, The Stark Laws: Conquering Physician Conflicts of Interest?, 87 GEO. L.J. 499, 506 (1998) (recounting studies published at the time of the Stark Act's passage that found physicians were substantially more likely to refer patients for laboratory tests if the physicians owned a stake in the laboratory to which they referred the patients). Initially limited to laboratory referrals, the Stark Act has been amended to cover a variety of medical services, including inpatient and outpatient hospital services such as anesthesiology and pain management. See Maria A. Morrison, An Analysis of the Stark II Proposed Rule, 67 UMKC L. REV. 613, 613, 619 (1999); see also 42 U.S.C. § 1395nn(a), (h)(6)(K) (prohibiting health care entities from submitting claims for outpatient hospital services to Medicare if those claims derive from self-referrals); (Doc. 53, Ex. 2 at 72-74 (stating that Carlisle HMA submitted Medicare claims for services provided at pain management clinic as outpatient hospital services)).
The Anti-Kickback Act reinforces the policies underlying the Stark Act through criminal sanctions. It prevents "inappropriate financial considerations from influencing the amount, type, cost, or selection of the provider of medical care received by a federal health care program beneficiary." Thomas N. Bulleit, Jr. & Joan H. Krause, Kickbacks, Courtesies, or Cost-Effectiveness? Application of the Medicare Antikickback Law to the Marketing and Promotional Practices of Drug and Medical Device Manufacturers, 54 FOOD & DRUG L.J. 279, 282 (1999). Its anti- referral provisions bolster those of the Stark Act, prohibiting individuals and entities from "knowingly and willfully solicit[ing] or receiv[ing] any remuneration . . . in return for referring an individual . . . for . . . any item for service" if a claim will be submitted to Medicare. See 42 U.S.C. § 1320a-7b(b)(1)(A). By criminalizing self-referrals committed knowingly, the Act further discourages financial relationships between doctors and health care entities from metamorphosing into personal financial gains at the expense of patients and federal health programs. See Krause, supra, at 68 ("At core [sic], the statute seeks to limit the influence of financial incentives over health care decisions, demanding that such decisions be made solely on the basis of which products and services will best serve the interests of the patient."); Anne W. Morrison, An Analysis of Anti-Kickback and Self-Referral Law in Modern Health Care, 21 J. LEGAL MED. 351, 361-70 (2000) (describing types of kickbacks outlawed by the Anti-Kickback Act).
Despite the conflict-of-interest concerns underlying these Acts, Congress also recognized that certain business relationships between physicians and health care entities are both cost effective and beneficial to patient care. Physicians often find it efficient to refer patients to the health care entities that employ them, rent office space to them, or have some other type of economic relationship with them. These referrals benefit patients' treatment by giving them convenient access to essential services. Both statutes feature exceptions allowing physicians to refer patients to health care entities when those referrals do not implicate the concerns underlying the Stark or Anti-Kickback Acts.
Evaluation of this case under the Stark Act requires two inquiries. The court must determine whether a financial relationship exists between BMAA and defendants that triggers Stark Act prohibitions. If a financial relationship exists, the court must determine whether Carlisle ...