Health Law Daily Wrap Up, FALSE CLAIMS ACT—S.D. Ohio: Relator failed to allege that there was anything illegal about referral exchange, (Oct 14, 2026)

By Justin Marcus Smith, J.D.

None of the benefits alleged between the providers were the types of prohibited kickback “remuneration” as defined in Sixth Circuit caselaw.

A qui tam relator failed to plead enough specific facts to show that a group of health care providers facially violated either the Anti-Kickback Statute (AKS) or the Stark law, found the federal district court in Columbus, Ohio, in holding for dismissal of the relator’s False Claims Act (FCA) complaint. Because AKS or Stark law violations were the relator’s only basis for asserting that the providers submitted false reimbursement claims to the United States, the relator’s FCA claims all failed. As an initial matter, the court held the FCA first-to-file rule did not bar the complaint. The court then proceeded to analyze how the Sixth Circuit has declined to adopt a definition of remuneration broad enough to have encompassed the disputed exchange of physician referrals. The relator did not plead enough non-conclusory facts for the court to infer that exchange of referrals was for more than fair market value or that compensation paid under a co-management agreement was for the purpose of inducing referrals. The relator failed to allege any viable theories of remuneration under Sixth Circuit caselaw, so there could be no underlying violation of the AKS. Without underlying AKS or Stark law violations, the relator did not have a basis for proceeding to discovery on the FCA claims. Other claims deriving from the FCA claims, like conspiracy, also failed. The court accordingly granted the providers’ R. 12(b)(6) motion to dismiss, without prejudice. The court gave the relator thirty days to seek leave to amend. Last, the court denied a motion to consolidate with a similar pending matter as moot (U.S. ex rel. Shahbabian v. TriHealth, Inc., No. 1:20-cv-67 (S.D. Ohio Oct. 9, 2026)).

Background. In 2020, an Ohio neurosurgeon qui tam relator brought a False Claims Act (FCA) suit on behalf of the United States against a group of hospitals and a neurosurgery physician group. The relator alleged the hospitals and the physician group entered into a quid pro quo that, among other things, greatly harmed his practice in recent years. The physician group allegedly referred its patients to the hospitals. In return, the hospitals agreed to refer their patients to the physician group and allegedly offered various other items of value. The relator alleged every patient reimbursement claim submitted to the United States as a result of the purported quid pro quo was a false claim under the FCA.

The relator ultimately asserted four distinct FCA counts on behalf of the U.S. The court characterized the first two as direct claims alleging that the providers directly violated the FCA, § 3729(a)(1)(A) and § 3729(a (1)(B), by presenting false claims, and by making false statements, respectively, to the federal government in connection with seeking payment. The third claim was collateral to the first two; the relator contended the providers violated § 3729(a)(1)(C) of the FCA by conspiring with each other to submit false claims. The fourth, reverse false claim was that the providers violated § 3729(a)(1)(G) by failing to return money received from the United States illegally.

Crucially, all four claims relied on the alleged underlying AKS and Stark violations to show falsity. The relator asked the court to enjoin the submission of any more false claims and to award treble damages in favor of the United States with the maximum amount allowed to him under 31 U.S.C. § 3730, plus costs and attorney fees.

The providers moved to dismiss on several different grounds. First, they said the FCA qui tam provisions violate the Article II Appointments Clause and Take Care Clause and the relator lacked Article III standing. The court rejected those arguments in an earlier decision, and the Sixth Circuit declined to hear an interlocutory appeal about them.

The providers also argued the FCA first-to-file rule barred this action insofar as the relator filed his initial complaint on the heels of another similar case, United States ex rel. Murphy v. TriHealth, Inc., No. 1:19-cv-168 (S.D. Ohio Mar. 4, 2019). Separately, the providers also argued the relator failed to state a claim under Fed. R. Civ. P. 12(b)(6) and failed to allege fraud with R. 9(b) particularity. More recently, the relator moved to consolidate this case with Murphy. The providers opposed consolidation.

The plaintiff in Murphy, meanwhile, brought a separate FCA qui tam action against some of the same providers alleging somewhat similar AKS and Stark Act violations. The U.S. declined to intervene in either Murphy or the instant action. The Murphy defendants made largely the same arguments for dismissal in both cases, and the court granted in part a motion for joint determination of related issues.

The court ruled in both cases on the same day. In Murphy, the court denied the providers’ motion to dismiss on all grounds but certified the Appointments and Take Care Clauses arguments for interlocutory appeal and stayed the case in the meantime. In the instant matter, the court ruled against the providers on their identical-to-Murphy constitutional standing arguments and stayed this case as well as the pending interlocutory appeal. Insofar as the Sixth Circuit declined to take up the constitutional question, the stay ended, Murphy went to discovery, and the instant pending motions to dismiss were again ripe.

First-to-file. The court held the first-to-file rule did not bar the instant suit because the original Murphy complaint was legally infirm under R. 9(b) pleading requirements. For an earlier qui tam complaint to bar a later one, the earlier complaint cannot be legally infirm.

The original Murphy complaint, not a later amendment to it, was what mattered here. The court agreed with the relator that, under Sixth Circuit case law, the original Murphy complaint did not point to any specific false claims submitted to the government for payment. It also did not support a strong inference, based on dates and amounts charged, that particular identified claims were submitted for payment. Because Murphy was infirm under R. 9(b), the first-to-file rule did not apply.

No AKS violations. The court held next that the relator failed to state a viable FCA claim, even though the instant court had previously found that Murphy did manage to plead one. The court noted that the instant relator did not point to a viable theory of remuneration to sustain an AKS violation. Without a plausible allegation satisfying R. 9(b) that the providers violated some underlying law, all of the relator’s FCA claims failed.

More specifically, the relator failed to plead that the providers exchanged remuneration for referrals as the AKS requires. The claim turned on remuneration, but none of the benefits alleged between the providers were the types of “remuneration” prohibited under the AKS.

Credentialing was not remuneration, nor was a hospital upgrading its facilities and equipment. Cash payments were a closer call, but they are problematic only if they occur in exchange for referrals, and the relator did not allege sufficient, non-conclusory details to infer that. There was no suggestion that the cash payments exceeded market value for various services.

An email that projected case volumes based on a “core assumption” that a partnership would include a new co-management agreement came closest to establishing a connection between providers. However, even that email did not fix the complaint’s lack of non-conclusory allegations showing that compensation paid under the co-management agreement was to induce referrals.

Last, facility-fee revenue, the transition of the relator’s surgical practice and referral base, status change, and the unassigned-patient referral policy, all failed as a matter of law. Those circumstances only showed referrals as the thing of value that changed hands. Nothing went facially beyond mere swapping of referrals. The court concluded that a referral, particularly the referral of a patient who has not yet sought care, is too far removed from a “payment” or “transfer” to satisfy the AKS remuneration element. The court explained that no party holds a definite, existing interest in a potential patient that could be “transferred,” there is only the hope of a future referral. The relator failed to allege any viable theories of remuneration, so there could be no underlying violation of the AKS.

No Stark violations. The court found the relator also failed to allege an underlying Stark law violation. The Stark law broadly bans health care entities from submitting Medicare claims for payment when the entity has a financial relationship with the referring doctor, subject to exceptions.

The providers did not dispute their co-management agreements constituted a financial relationship, but they argued the “personal services” exception applied. Under the personal services exception, which the court treated as an affirmative defense, which the providers bore the burden of pleading, referrals do not violate the Stark law if an entity has entered a more than year-long arrangement with a physician compensating the physician for specific services performed. However, the instant relator pleaded the compensation was above fair market value. If the complaint had been well-pleaded in that regard, the providers would have had difficulty establishing a Stark exception as an affirmative defense on a motion to dismiss. The relator did not need to plead around the affirmative defense, but he did not plead enough of a R. 9(b) fraud baseline for the court to find the co-management agreements involved a facially fraudulent pay-to-play referral scheme.

The court acknowledged that the relator did allege a financial arrangement that both exceeded fair market value and considered the volume or value of referrals, but again, he did not allege enough specificity to satisfy R. 9(b). The court found the relator’s assertions were conclusory. Nothing on the face of the co-management agreements suggested that rates exceeded fair market value, and the pleadings also showed the parties negotiated rates over the years. The most plausible inference was that the agreements were for fair market value.

The relator did not allege, certainly not with the specificity R. 9(b) requires, any facts giving rise to a plausible inference that the compensation arrangement between the providers was illicit in any way. Without that, there was no plausible allegation of a Stark violation.

Consolidation moot. The relator’s motion to consolidate his case with Murphy was moot, at least for now, insofar as the court dismissed all of the relator’s claims. The relator could make a new motion to consolidate after amending the complaint to cure all pleading deficiencies.

The case is No. 1:20-cv-67.

Judge: Cole, D.

Attorneys: Brandi Michelle McCarley, U.S. Attorneys Office, for the U.S. Maureen Allison Bickley (FBT Gibbons LLP) for TriHealth, Inc.

Companies: TriHealth, Inc.

MainStory: TopStory CaseDecisions AntikickbackNews FCANews GCNNews ProviderNews QuiTamNews StarkNews OhioNews