MIAMI (CN) – Depending on who you ask, a case on appeal Friday in the 11th Circuit is either the latest chapter in a saga of brazen health care fraud by Hospital Corporation of America or the work of an overzealous whistleblower looking to capitalize on the company’s past misdeeds.
In the 11th Circuit’s Miami division, whistleblower Thomas Bingham wants to resurrect his claims that HCA, a publicly traded company with a portfolio of more than 170 hospitals, surreptitiously greased the palms of physician tenants at an office building on HCA’s Centerpoint hospital campus in Independence, Missouri.
He claims the company schemed to continue its entrenched kickback practices even after a historic Medicare fraud investigation, which included separate physician kickback allegations, yielded $1.7 billion in criminal penalties and civil fines against it more than 15 years ago.
In his case, Bingham claims HCA gave the Centerpoint building owner a sweetheart-deal ground lease and had the owner pass the savings on to physicians through cash-flow sharing and other incentives like free parking. HCA was expecting millions of dollars worth of extra referrals from the doctors in exchange, Bingham claims.
“All of this came to the doctors for free because it was given to the [building owner] for free,” the whistleblower’s attorney Jeremy Friedman told the 11th Circuit panel Friday.
Bingham says he noticed the suspicious real estate structuring while working as an appraiser for nonparty Holladay Properties, a real estate firm that had been enlisted by HCA. Among other supposed irregularities, he characterized a so-called “burnoff lease,” whereby HCA rented open space in the building, as a way to improve cash flow for the owner and direct more money to the physicians.
Bingham sued under the False Claims Act, a federal law that covers fraud against the U.S. government and rewards whistleblowers by granting them a share of fines on wrongdoing they uncover.
He touts a past success in a similar qui tam case involving HCA, in which he alleged that doctors in Largo, Florida, improperly received partnership payments in exchange for referrals to HCA facilities.
That case produced a $16 million settlement, according to Bingham.
During oral arguments Friday, Bingham’s attorney acknowledged that HCA consulted with outside counsel and valuation experts on the Missouri dealings to avoid running afoul of anti-kickback laws in the aftermath of the historic 2003 fines. But he said the outside counsel warned that allowing physicians to receive cash-flow sharing interests could be legally problematic.
Friedman said “you can’t just give freebies to doctors” with the expectation of referrals.
HCA bit back by pointing to expert testimony in the district court record indicating that the doctors didn’t receive anything cushier than fair market value lease rates, even when deducting for the perks.
The cash-flow sharing that the doctors enjoyed from the medical office building owner was standard operating practice for long leases, HCA argued.
“It’s undisputed that the cash flow participation [contracts] were in exchange for the tenants agreeing to a 10-year lease … which is a huge commitment,” HCA’s attorney Scott Ballenger of Latham and Watkins argued.
While Ballenger conceded that doctors who had cash-flow sharing interests made substantial profits when the building owner sold the property in 2012, he maintained that the earnings arose from “the lucky fact that the building appreciated” over time.
“There is no triable case on scienter,” he told the panel, arguing the company had no advance knowledge of any illegal activity alleged in the case.
HCA said Bingham and Holladay’s own appraisal work found that lease rates offered to the tenants were within the fair market value.
The company also took issue with the whistleblower’s characterization of its interaction with outside counsel.
“The email on which [Bingham] purports to rely, written by HCA’s outside counsel, actually explained that although a transaction without physician investors is the simplest way to ensure it complies with regulatory requirements … HCA made the deal compliant by requiring that no physicians participate in cash flow until after the burn off lease expired,” HCA’s brief to the 11th Circuit states.
The 11th Circuit panel meanwhile pressed the whistleblower on whether he could provide more concrete evidence to tie incentives given to the Missouri doctors to increased referrals.
“Where is the quid pro quo?” asked Senior U.S. Circuit Judge John Walker Jr., sitting by designation from the Second Circuit.
Walker was joined on the panel by U.S. Circuit Judges Stanley Marcus and Susan Black. It is unclear when the judges will issue a ruling in the case.
The case is on appeal from the Southern District of Florida, where a federal judge in 2016 found that Bingham failed to demonstrate that the doctors received undue compensation under the federal Anti-Kickback Statute.
Granting summary judgment, the lower court further put the kibosh on Bingham’s Stark Act claims, finding that he did not establish a connection between the amount of compensation the doctors received and their volume of referrals, evidence required under the Act.
Bingham’s appellate brief argued the district court’s decision incorrectly “put the burden of disproving HCA’s affirmative defenses” on him.
Though the Missouri dealings took center stage during Friday’s oral arguments, Bingham also accuses HCA of violating kickback laws with respect to its Biscayne Boulevard hospital complex in Aventura, Florida.
The lower court granted a motion to dismiss the Aventura claims in part on the procedural ground that Bingham improperly brought allegations based on material uncovered after the fact, during the discovery process.