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Debartolo v. Health South Corp.

October 17, 2006

HANSEL DEBARTOLO AND THE H.M. DEBARTOLO, JR. M.D., S.C. PENSION PLAN AND TRUST, PLAINTIFFS,
v.
HEALTH SOUTH CORPORATION, SURGICARE OF JOLIET, INCORPORATED, AND JOLIET SURGICAL CENTER LIMITED PARTNERSHIP, DEFENDANTS.



The opinion of the court was delivered by: Judge James B. Zagel

MEMORANDUM OPINION AND ORDER

Plaintiffs Hansel Debartolo and the H.M. Debartolo, Jr. M.D., S.C. Pension Plan and Trust (collectively, "Debartolo"), have filed a claim for declaratory judgment and injunctive relief against Defendants HealthSouth Corporation, Surgicare of Joliet, Inc. and Joliet Surgery Center Limited Partnership (collectively, "HealthSouth"), alleging a violation of the Medicare anti-kickback statute and seeking to void an amendment in the limited partnership agreement. HealthSouth has now filed a motion to dismiss, arguing that the anti-kickback statute does not provide a private right of action that would allow Debartolo to obtain the requested relief. For the following reasons, HealthSouth's motion is granted.

FACTS

For the purposes of this motion the facts are as follows. HealthSouth Corporation, through its subsidiary, is the majority owner of the Joliet Surgical Center (the "JSC"), a licensed ambulatory surgical center. Debartolo has been a limited partner in the Joliet Surgery Center Limited Partnership ("JSCLP") for 25 years, and had privileges to perform surgical procedures at the JSC from 1981 to 2001. In 2000, the JSC did not grant Debartolo time to perform procedures and, as a result, his privileges lapsed in 2001. Debartolo did not seek to renew his privileges.

Although the partnership agreement did not originally contain a provision permitting the forced redemption of a limited partner's units, an amendment which added this provision came into effect on July 28, 2004. Through the amendment, the JSCLP sought to ensure compliance with the safe harbor provision of the Medicare anti-kickback statute, 42 U.S.C. § 1320(a)-7b. The statute provides, in part, that a person is guilty of a felony if he or she: knowingly and willfully solicits or receives any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind-

(A) in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal health care program . . . .

Id. The safe harbor provision Defendants sought to comply with provides an exception.

If all of the investors are physicians who are in a position to refer patients directly to the entity and perform procedures on such referred patients; group practices, as defined in this paragraph, composed exclusively of such physicians; or investors who are not employed by the entity or by any investor, are not in a position to provide items or services to the entity or any of its investors, and are not in a position to make or influence referrals directly or indirectly to the entity or any of its investors, all of the following seven standards must be met--

(i) The terms on which an investment interest is offered to an investor must not be related to the previous or expected volume of referrals, services furnished, or business otherwise generated from that investor to the entity;

(ii) At least one-third of each physician investor's medical practice income from all sources for the previous fiscal year or previous 12-months period must be derived from the physician's performance of procedures (as defined in this paragraph);

(iii) At least one-third of each physician investor's medical practice income from all sources for the previous fiscal year or previous 12-month period must be performed at the investment entity. . . . 42 C.F.R. § 1001.952(r)(3).

The partnership amendment in dispute includes a section which requires that all limited partners certify annually that one-third of his or her medical practice income is derived from performing outpatient surgical procedures, and that these procedures are conducted at the JSC. Another section provides for the forced redemption of a limited partner's units in the event that the limited partner no longer uses the JSC as an extension of his or her medical practice. Debartolo received a letter requesting that he complete his certification in the spring of 2005. He did not return the certification, as he no longer had privileges to perform procedures at the JSC. In January of 2006, Debartolo received a check and a letter informing him that the JSCLP had purchased his units. Debartolo rejected the offer and returned the check. Shortly thereafter, he requested to be placed on the surgical schedule and was told to submit a credentialing application. After submitting the application, Debartolo requested nullification of the buyback of his units. Debartolo received a letter from HealthSouth stating that he had not met the requirements for limited partners and denying his request to nullify the buyback.

On May 3, 2006, after HealthSouth denied Debartolo's request, Debartolo filed suit against HealthSouth seeking declaratory and injunctive relief. Plaintiffs allege two counts, (1) that the amendment be declared void because it violates the anti-kickback statute, and (2) that Defendants be enjoined from performing the forced buyback of ...


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