Two New York state ophthalmology practices — Mark Fromer, doing business as Fromer Eye Centers, and Floral Park Ophthalmology — have agreed to pay a combined $2.3 million to resolve False Claims Act allegations tied to billing for transcranial doppler ultrasounds performed through an arrangement with a third-party testing company.
Under the settlements, New York City-based Fromer Eye Centers and the Fromer estate will pay $1.8 million and Floral Park (N.Y.) Ophthalmology will pay $500,000, with $384,000 of the total going to New York state for its share of Medicaid. The government alleged the practices billed Medicare and Medicaid for TCDs on thousands of patients who were flagged as having a qualifying diagnosis before their results came back, a diagnosis the Department of Justice said “nearly all” of those patients never actually had. The federal government also alleged Floral Park Ophthalmology received remuneration from the third-party testing company to induce referrals for the tests.
The case is the latest in a string of Justice Department settlements with ophthalmology practices over TCD billing arrangements with outside testing vendors, following prior resolutions with Brandon Eye Associates, Pinellas Eye Care and a group of five Florida practices tied to Clay Eye Holdings.
Health law firms tracking this enforcement wave point to a recurring structural problem of practices routing ancillary diagnostic testing through outside vendors rather than performing it in-house.
Why the arrangement trips Stark law
Regarding Gulfcoast Eye Care settlement, one of the earlier cases in this same TCD enforcement pattern, attorneys at the law firm Grubman Warner Berry said the practice’s arrangement ran afoul of the Stark law because it improperly referred patients to the TCD provider’s preferred radiology group for the TCD’s professional component, which constitutes a prohibited self-referral. The firm noted such violations “carry significant civil and administrative remedies, up to and including exclusion” from federal healthcare programs, separate from the Anti-Kickback Statute exposure created by any volume- or value-based payments to the outside TCD vendor.
That issue traces back to the Stark law’s in-office ancillary services exception, which is the primary safe harbor practices rely on when referring patients for diagnostic tests like TCDs. In a client alert on a proposed bill that would tighten that exception, attorneys at Frier Levitt said that it only protects referrals for services “furnished personally by the referring physician, or in the building of the referring physician or a group practice,” and billed “by the physician performing or supervising the service, by that physician’s group practice or by an entity that is wholly owned by such physician or such group practice.”
Arrangements with third-party testing companies that the physician or group doesn’t wholly own fall outside that ownership requirement, the firm noted, and, citing data from the Government Accountability Office, pointed out that self-referral arrangements of this kind have been linked to hundreds of thousands of additional advanced-imaging referrals and more than $100 million in added Medicare spending in a single year. Stark law penalties for arrangements that fall outside an exception start at $15,000 per violation, according to the firm.
The American Academy of Ophthalmology’s explainer on the Stark law for ophthalmologists underscores why that ownership detail matters so much in this specialty. The law is a strict-liability statute, meaning no intent is required for a violation to occur once a referral for a designated health service falls outside a protected exception. Several diagnostic tests common in ophthalmology — the AAO’s guidance lists ultrasound biometry, corneal pachymetry and intraocular lens power calculations as examples — are considered designated health services, which is the category TCDs would need to be evaluated under as well.
Stark compliance doesn’t cover Anti-Kickback risk
The Justice Department’s allegations against Fromer Eye Centers and Floral Park Ophthalmology cite both the Stark law and the Anti-Kickback Statute, a pairing health law firms have flagged as a compliance trap. In an alert on guidance from the HHS’ Office of Inspector General addressing fair market value arrangements, attorneys at Frier Levitt wrote that satisfying a Stark law exception provides no shield against Anti-Kickback Statute liability, because the two statutes are structured differently. Stark law is strict liability and focused narrowly on designated health service referrals, while the Anti-Kickback Statute is intent-based and reaches any arrangement that rewards or induces referrals to a federal healthcare program. The firm advised that referral relationships, including arrangements with outside testing vendors, need to be scrutinized under both statutes independently, since an arrangement that technically clears Stark law’s requirements can still run into Anti-Kickback Statute problems if referral volume factors into how the vendor pays, or is paid by, the referring practice.
The broader enforcement pattern
The Justice Department’s announcement noted that Fromer Eye Centers and Floral Park Ophthalmology have agreed to cooperate with its ongoing investigation of other participants in the alleged scheme, and pointed to its prior TCD-related settlements with Brandon Eye Associates ($1.3 million), Pinellas Eye Care/Gulfcoast Eye Care ($615,000), and the Clay Eye Holdings-affiliated practices (nearly $6 million) as part of the same enforcement effort. The qui tam whistleblower who filed the underlying lawsuit will receive approximately $132,000 from the Fromer Eye Centers portion of the settlement.
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