On December 20, 2019, the U.S. Court of Appeals for the Third Circuit granted in part a petition for rehearing filed by the University of Pittsburgh Medical Center (UPMC) in a False Claims Act (FCA) case that has generated considerable attention among hospitals and health systems due to its treatment of commonplace, productivity-based physician compensation models.  Ultimately, the Third Circuit vacated its original September 17, 2019 decision and issued a revised opinion reversing its holding that the relators could establish a problematic indirect compensation arrangement simply by alleging the employed neurosurgeons’ pay for personally performed services correlated with the volume or value of their referrals to UPMC’s facilities for the corresponding hospital services.

As discussed in our October 14 post, U.S. ex rel. Bookwalter v. UPMC involved employment arrangements between UPMC’s subsidiary physician practice entities and various neurosurgeons pursuant to which the physicians earned base salaries and potential incentive bonuses tied to their personally performed work relative value units (wRVUs).  The Third Circuit previously held – in reliance on a controversial construction of the Stark Law’s “volume or value” test – that the relators pleaded facts sufficient to demonstrate the surgeons’ compensation both varied with and took into account the volume or value of their designated health service referrals to UPMC’s hospitals, thereby creating an impermissible indirect compensation arrangement.Continue Reading Update: Third Circuit Allows Allegations of Improper Compensation under the Stark Law to Proceed, but Reverses Controversial “Varies with Volume or Value” Reasoning

The U.S. Court of Appeals for the Third Circuit recently issued a False Claims Act (FCA) decision calling into question productivity-based physician compensation structures under the Stark Law, in reliance on a controversial interpretation of the Stark Law’s “volume or value” standard.

The case, U.S. ex rel. Bookwalter v. UPMC, involved employment arrangements between the University of Pittsburgh Medical Center’s (UPMC) subsidiary physician practice entities and neurosurgeons who performed procedures at UPMC’s affiliated hospitals.  The decision is significant for hospitals and health systems in that the Third Circuit’s holding is contrary to guidance promulgated by the Centers for Medicare & Medicaid (CMS) and appears to call into question a common compensation methodology used by health systems to compensate physicians.Continue Reading Third Circuit Holds Allegations of Improper Compensation Methodologies under the Stark Law Survive Motion to Dismiss