United States of America et al v. Trihealth, Inc. et al

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION
UNITED STATES OF AMERICA ex
rel. DR. SET SHAHBABIAN,
Plaintiff,
v.
TRIHEALTH, INC., et al.,
Defendants.
Case No. 1:20-cv-67
JUDGE DOUGLAS R. COLE
OPINION AND ORDER
Relator Dr. Set Shahbabian brings this False Claims Act (FCA) suit on behalf
of the United States against a group of hospitals and a neurosurgery physician group.
He says those hospitals and the physician group entered a quid pro quo arrangement:
the physician group agreed to refer its patients to the hospitals and, in return, the
hospitals agreed to refer their patients to the physician group and also offered various
other items of value. And because, according to Shahbabian, that quid pro quo
violated 	federal 	law, 	he 	alleges 	that 	every 	reimbursement 	claim 	Defendants
submitted to the United States for patients treated downstream of that agreement
was a false claim under the FCA.
Defendants moved to dismiss on several different grounds. (Docs. 38, 40, 42,
45). Their first avenues of attack were to claim that the FCA’s qui tam provisions
violate Article II’s Appointments Clause and Take Care Clause and that Shahbabian
lacked Article III standing. (Docs. 38, 39, 45, 46). But the Court rejected those
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arguments in an earlier decision, (Doc. 66), and the Sixth Circuit declined to hear an
interlocutory appeal (Doc. 67), so that is no longer at issue.
But that still leaves two arrows in the Defendants’ quiver. First, they argue
that the FCA’s first-to-file rule bars this action, as Shahbabian 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). (Docs. 38, 39, 45, 46).
Separately, Defendants argue that Shahbabian failed to state a claim under Rule
12(b)(6) and failed to allege fraud with the particularity Rule 9(b) demands. (Docs. 40,
41, 42, 43). Additionally, and somewhat more recently, Shahbabian filed a motion to
consolidate this case with Murphy, (Doc. 68), which Defendants opposed, (Doc. 70).
So, as things stand, those three items are on the Court’s plate.
Taking them in order, the Court first finds that the FCA’s first-to-file rule does
not bar the complaint. Turning to the merits, the Court concludes that Shahbabian
fails to state a claim under the FCA and so GRANTS Defendants’ Rule 12(b)(6)
motions to dismiss. (Docs. 40, 42). Because that dismissal is on pleading grounds,
though, it is WITHOUT PREJUDICE. In connection with that, the Court GRANTS
Shahbabian thirty days to seek leave to file an amended complaint, attaching that
proposed complaint. If Shahbabian declines to do so, the Court will terminate this
matter. Finally, given the dismissal, the Court DENIES Shahbabian’s motion to
consolidate, (Doc. 68), as MOOT at this time. Should the Court grant Shahbabian
leave to file an amended complaint, he is free to renew the motion to consolidate then.
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BACKGROUND 1
“The False Claims Act ‘prohibits submitting false or fraudulent claims for
payment to the United States, and authorizes qui tam suits, in which private parties
bring civil actions in the Government’s name.’” United States ex rel. Rahimi v. Rite
Aid Corp., 3 F.4th 813, 822 (6th Cir. 2021) (quoting Schindler Elevator Corp. v. United
States ex rel. Kirk, 563 U.S. 401, 404 (2011)). Relator Dr. Set Shahbabian is one such
private party. He brings this qui tam action against TriHealth, Inc., Good Samaritan
Hospital of Cincinnati, Ohio (Good Samaritan), Bethesda Hospital, Inc. (Bethesda
North), and the Mayfield Clinic, Inc. (Mayfield). (Doc. 9, #1063). As TriHealth, Inc. is
a corporate partnership between Good Samaritan and Bethesda North (the two
hospital defendants), the Court uses “TriHealth” as the collective moniker for those
three defendants. (Id. at #1065). Mayfield, on the other hand, “is the largest
independent neurosurgery group practice in the Cincinnati Tristate area,” meaning
it is a group of doctors. (Id. at #1066). As explained in greater detail below,
Shahbabian alleges that TriHealth and Mayfield engaged in an illegal referral
scheme with one another, violating the False Claims Act (FCA), 31 U.S.C. §§ 3729–
3733. (Id.).
1 Because this matter comes before the Court on various motions to dismiss under Rule
12(b)(6) and Rule 12(b)(1), the Court must accept the well-pleaded allegations in the
complaint as true. Bassett v. Nat’l Collegiate Athletic Ass’n, 528 F.3d 426, 430 (6th Cir. 2008).
But the Court reminds the reader that they are just that—allegations.
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A. 	TriHealth and Mayfield Enter into Two Agreements.
Shahbabian is a board-certified neurosurgeon licensed in Ohio. (Id. at #1065).
He says Defendants’ unlawful referral scheme greatly harmed his practice in recent
years. But his relationship with some of the defendants goes back much further—he
first began conducting neurosurgeries at Good Samaritan in the late 1960s. (See id.
at #1065, 1082). During the intervening decades, Shahbabian averaged some 400 to
600 surgeries per year at that hospital. (Id. at #1082).
But that relationship began to morph in 2014, when TriHealth approached
Shahbabian about purchasing his medical practice and making him a TriHealth
employee. (Id.). TriHealth did so in anticipation of Shahbabian’s upcoming retirement
(he was 76 at the time) and based on its desire to retain Shahbabian’s surgical
practice in house. (Id. at #1082–83). Shahbabian agreed to the deal. So, effective
January 2014, both parties signed an employment agreement that had a five-year
term, with an option for renewal. (Id. at #1083). Under that agreement, Shahbabian
was to continue practicing high volume neurosurgery at Good Samaritan, and now as
a formal employee, could do so nowhere else. (Id.). The agreement included a
noncompete, and it tied his compensation to the amount of revenue he produced. (Id.).
A few months later he also sold his medical practice’s assets to TriHealth. (Id.).
But, according to Shahbabian, TriHealth had ulterior motives. TriHealth was
plotting to “involuntarily transition[]” Shahbabian’s practice, which included a
“physician referral base and extensive surgical practice,” to the physicians in
Mayfield’s 	neurosurgery 	practice. 	(Id.). 	To 	that 	end, 	shortly 	after 	securing
Shahbabian’s practice and employment, in June 2014, TriHealth also formalized a
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separate agreement (the co-management agreement) with Mayfield. (Id.). That
agreement marked the start of a partnership that forms the basis of this case.
The co-management agreement primarily called for Mayfield to provide certain
services to TriHealth and its patients. (Id. at #1084). Specifically, Mayfield agreed to
provide 	“expanded 	comprehensive 	neurosurgery 	services” 	to 	patients 	in 	the
TriHealth system, including patients at both Good Samaritan and Bethesda North
Hospitals. (Id.). TriHealth paid Mayfield $80,417 per month to provide on-call
services and an additional $175,000 per year if Mayfield met certain quality initiative
targets. (Id.). TriHealth and Mayfield’s agreement also included appointing Dr.
Ringer, a Mayfield shareholder, as the Medical Director of Neurosurgery for the
TriHealth Surgical Institute at Good Samaritan. (Id.). One more feature bears
mention—the arrangement required TriHealth to exclusively refer all of Good
Samaritan’s and Bethesda North’s emergency room and unassigned neurosurgery
patients to Mayfield physicians for treatment. (Id.). That is central to the case here
for two reasons: (1) this case is about allegedly illegal referrals, and (2) the provision
meant that Shahbabian—whose pay depended on his personal patient volume—lost
the opportunity to treat these unassigned patients. (Id.).
TriHealth and Mayfield later entered an amendment detailing services that
Mayfield doctors would provide. (Id. at #1084–85). Yet despite Mayfield receiving
cash compensation for those services, “[n]o fair market value determination was
conducted.” (Id. at #1085).
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The next year, 2015, TriHealth underwent a management change, hiring a new
chief executive and new chief operating officer. (Id.). The new leadership sought to
deepen its relationship with Mayfield. Mark Clement, the new CEO, had a “vision”
to exponentially increase TriHealth’s neurology department business. (Id.). Key to
that expansion was “consummat[ing] the business relationship between Mayfield and
TriHealth.” (Id.). That entailed TriHealth continuing to “take affirmative steps to
transition 	Shahbabian’s 	physician 	referral 	base 	to 	Mayfield 	for 	the 	400+
neurosurgeries 	a 	year 	performed 	by 	[Shahbabian]” 	in 	return 	for 	Mayfield
“redirect[ing] surgical patients from other hospitals in the greater Cincinnati area to
TriHealth facilities.” (Id. at #1085, 1125–26).
In 2016, the arrangement continued to evolve. TriHealth’s new COO, Gail
Donovan, retained a third-party consultant to assist TriHealth’s neurosurgical
services expansion. (Id. at #1085). Before its expansion, TriHealth was not a leader
in the neurosurgery field, employing only Shahbabian and one other neurosurgeon.
(Id. at #1086). And Mayfield, despite providing call coverage under the 2014
agreement, used TriHealth hospitals for only a select number of cases. (Id.). Indeed,
at the time, some 80% of Mayfield’s neurosurgical procedures were performed at UC
Health. (Id.). Donovan sought to change that, so he began to explore building on
TriHealth’s partnership with Mayfield. (Id.).
By 	April 	14, 	2016, 	TriHealth 	and 	Mayfield 	moved 	forward 	with 	what
Shahbabian calls “a quid pro quo kickback scheme.” (Id. at #1087). TriHealth offered
to transition Shahbabian’s physician referral base and his attendant surgical practice
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to Mayfield—that is, the hospital agreed to refer patients to the physician group. (Id.).
And “[i]n exchange, Mayfield agreed to redirect to TriHealth medical facilities
thousands of Mayfield patient surgeries anticipated to be performed at UC Health.”
(Id.). In other words, Mayfield was providing referrals to TriHealth (patients
Mayfield otherwise would have sent to UC Health) for TriHealth’s agreement to refer
patients to Mayfield. But to move forward, Mayfield also had some additional
demands. (Id.). Those included (1) Dr. Norberto Andaluz obtaining hospital privileges
at Good Samaritan, (2) TriHealth disclosing the potential size of its financial
investment 	into 	neurosurgery 	facilities, 	and 	(3) a 	commitment 	from 	TriHealth
regarding the transition of Shahbabian’s surgical practice. (Id.). TriHealth agreed to
those terms, and the parties began drafting a formal written plan. (Id. at #1088–89).
As finally implemented, the plan included: (1) Mayfield hiring a neurosurgeon
replacement to assume Shahbabian’s practice at Good Samaritan, (2) TriHealth
promoting the use of that replacement surgeon to Shahbabian’s existing physician
referral base, and (3) TriHealth agreeing to invest “in brick and mortar, capital,
equipment, and staff.” (Id.). Beyond that, TriHealth continued to solicit Mayfield’s
participation in crafting a new 2017 co-management agreement. (Id.). Importantly,
on September 12, 2016, the parties met and discussed the number of patients
Mayfield 	planned 	to 	redirect 	from 	UC 	Health 	to 	TriHealth 	as 	part 	of 	what
Shahbabian characterizes as the kickback scheme. (Id. at #1094).
By January 9, 2017, TriHealth’s executive leadership received an email
outlining some of the details relating to that “scheme.” (Id. at #1117–19). That email
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discussed the following: (1) that Neurosciences Strategic Plan investments would cost
an estimated $47.6 million; (2) that TriHealth would assume various responsibilities
under the co-management agreement, including paying fees to Mayfield for on-call
service, paying Mayfield physicians fees to serve in administrative positions, and
paying Mayfield a fee for what Shahbabian calls a “Sham Quality Initiative Program
Development;” (3) an anticipated increase in patient volumes (on a doctor-by-doctor
basis) that would result from redirecting surgical patients from UC Health to
TriHealth; and (4) that Dr. Tempel would assume most of Dr. Shahbabian’s surgical
cases and transition them to TriHealth. (Id.).
So, according to Shahbabian, when Clement (TriHealth’s CEO) approved the
kickback scheme on January 10, 2017, TriHealth was aware of the following:
(1) Mayfield agreed to redirect thousands of surgeries from UC Health
to TriHealth as a quid pro quo kickback;
(2) TriHealth agreed to transition Dr. Shahbabian’s surgical practice to
Mayfield and Tempel;
(3) TriHealth had budgeted expenditures of $46 million in capital and
operating 	expenses 	for 	Good 	Samaritan 	and 	Bethesda 	North 	to
accommodate Mayfield’s redirection of UC Health surgical cases;
(4) TriHealth would pay over $2,000,000 a year to Mayfield under a new
Clinical Co-Management Agreement that had not been evaluated for
fair market value; and
(5) TriHealth agreed to refer to Mayfield physicians all unassigned
patients presenting themselves at TriHealth facilities for inpatient
procedures including but, not limited to, cranial and spine surgeries.
(Id. at #1120).
On May 2, 2017, TriHealth executed the next step in the scheme, informing
Shahbabian that his employment contract would not be renewed after it expired in
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April 2019. (Id. at #1121). Unbeknownst to Shahbabian, that transition also involved
Dr. Tempel and Mayfield taking over all future surgeries from Shahbabian’s referring
and employed physicians within TriHealth. (Id.). A week later, TriHealth and
Mayfield finally entered the renegotiated 2017 co-management agreement, formally
consummating what Shahbabian calls the kickback scheme. (Id.).
One 	week 	after 	that, 	TriHealth 	forced 	Shahbabian 	to 	stop 	performing
neurosurgeries by threatening to initiate internal review processes and report him to
the Ohio State Medical Board for “alleged quality of care issues.” (Id.). His scheduled
surgeries were transferred to other physicians, and when Dr. Tempel arrived that
July, TriHealth directed Shahbabian’s referring physicians to send their neurological
cases to Tempel. (Id.). Unaware of the agreement TriHealth made to transition his
practice 	to 	Mayfield 	(and 	Dr. 	Tempel), 	Shahbabian 	reluctantly 	resigned 	his
privileges. (Id.).
B. 	Alleged False Claims Act Violation.
Shahbabian pins his claims here on various alleged violations of the FCA, a
federal law that prohibits medical providers from submitting false or fraudulent
claims for payment to the United States. Rahimi, 3 F.4th at 822. As a general matter,
complaints in such actions must provide specific examples of such charges. To clear
that hurdle here, Shahbabian points, for example, to the treatment of “JM,” a
Medicare beneficiary and TriHealth/Mayfield patient. (Id. at #1122). JM arrived at
Good Samaritan as an unassigned neurosurgical patient. Under the agreement
described above, Good Samaritan referred JM to Mayfield for testing and possible
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medical procedures. (Id.). Mayfield physician Dr. McPherson subsequently performed
a cranial biopsy on JM at Good Samaritan, billing Medicare for $7,151.00. (Id.).
Medicare paid Mayfield $1,425.05 for the procedure. (Id.). TriHealth also submitted
several claims to Medicare for the services it provided in connection with the cranial
biopsy: (1) $42,500.50 for the inpatient stay, of which Medicare paid $26,356.19,
(2) $659.60 for an MRI, of which $219.53 was paid, and (3) an additional $612.00
related to the inpatient stay, of which $273.03 was paid. (Id. at #1123). Third-party
providers submitted another six claims to Medicare for JM’s care. (Id. at #1123–24).
And, while JM is the only patient specified in the complaint, Shahbabian alleges that
he was not the only such Medicare beneficiary for whom TriHealth and Mayfield
submitted false claims. 2 (Id. at #1124).
The reason Shahbabian maintains that the claims submitted for JM, as well
as other unnamed patients, were false is simple—the treatment was the result of
illegal referrals. But his theory as to why the referrals were in fact illegal is a bit
more complicated.
First, 	Shahbabian 	contends 	that 	TriHealth 	and 	Mayfield’s 	arrangement
described above violated the Anti-Kickback Statute (AKS), 42 U.S.C. § 1320a-7b(b).
The AKS prevents medical providers from offering or soliciting referrals in exchange
for remuneration. While the complaint itself could be clearer on which referrals were
offered for what remuneration, the scheme he describes appears to be something
2 According to Shahbabian, “every procedure performed at a TriHealth facility by a Mayfield
physician is tainted by their unlawful conduct, and the amount paid by a government insured
medical plan to TriHealth and Mayfield for those claims is recoverable by the United States.”
(Doc. 9, #1126).
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along these lines. TriHealth offered to do six things to benefit Mayfield: (1) transfer
Shahbabian’s surgical practice and referral base to Mayfield, (2) pay Mayfield for
services it performed under the 2017 co-management agreement, (3) expend millions
of dollars to upgrade Mayfield’s neurosurgery facilities, (4) credential Dr. Andaluz,
(5) grant Mayfield physicians Tier 1 referral status, and (6) refer all unassigned
neuroscience patients at TriHealth facilities to Mayfield physicians. (Doc. 9, #1125–
26). In return, Mayfield promised to refer its patients, which it had been sending to
UC Health and other facilities, to TriHealth hospitals. This meant that TriHealth
would receive the hospital revenues associated with those patients. (Id.). And given
that alleged AKS violation, Shahbabian contends that any claims arising from the
referrals in either way directly violate the FCA.
Shahbabian separately alleges that Defendants submitted false claims because
the claims arose from service provided downstream of violations of the Stark law,
42 U.S.C. § 1395nn(a). The Stark law prohibits, subject to various exceptions, medical
providers with a financial relationship from referring patients to one another. Id.
Shahbabian says that ten Mayfield physicians had such a financial relationship with
TriHealth because they received compensation from TriHealth under the 2014 and
2017 co-management agreements during the same period in which they referred their
patients to TriHealth facilities. (Doc. 9, #1127–28). TriHealth in turn made claims for
payment for services rendered by those physicians, also in violation of Stark. (Id.).
And not only does Shahbabian say the quid pro quo referral scheme was
unlawful on both these grounds, he also says multiple individuals at TriHealth knew
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of the scheme and its illegality. Those include Steve Gracey, the attorney responsible
for regulatory compliance at TriHealth, Clement, the CEO, and Donovan, the COO.
(Id. at #1130–32). Similarly, he alleges that Mayfield’s director, Mark Farrington,
knowingly violated the law. (Id. at #1132–33).
Based on all that, Shahbabian brings four distinct counts under the FCA on
behalf of the United States. The first two can be categorized as direct claims—they
allege that TriHealth, Good Samaritan, Bethesda North, and Mayfield directly
violated § 3729(a)(1)(A) and § 3729(a)(1)(B) of the FCA by presenting false claims,
and by making false statements, respectively, to the United States Government in
connection with seeking payment. (Id. at #1136–38). His third claim is collateral to
the first two—he contends that Defendants violated § 3729(a)(1)(C) of the FCA by
conspiring with each other to submit those false claims. (Id. at #1138). And his final
claim is that Defendants violated § 3729(a)(1)(G) by failing to return money received
from the United States illegally because of the false claims. (Id. at #1139). As the
description suggests, all four claims rely on the alleged underlying AKS and Stark
violations to show falsity.
In terms of relief, Shahbabian requests that Defendants be enjoined from
submitting any more false claims, that the Court award damages in favor of the
United States in an amount equal to three times the amount of every false claim
Defendants made, and that he, as relator, receive the maximum amount allowed
under 31 U.S.C. § 3730, as well as costs and attorney fees. (Id. at #1140–41).
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C. 	Procedural History.
Shahbabian initiated this suit on January 27, 2020, more than six years ago.
(See Doc. 1). But his legal efforts against TriHealth date back even further. In late
2018, after he lost his practice to Mayfield and saw his employment earnings clawed
back, Shahbabian sued TriHealth and Mayfield, alleging breach of contract, age
discrimination, disability discrimination, and fraud. (See Compl., Shahbabian, M.D.
v. TriHealth, Inc., No. 1:18-cv-790 (S.D. Ohio Nov. 14, 2018), Doc. 1). Shahbabian’s
claims in that action were different from the ones he raises here: he alleged that
TriHealth and Mayfield conspired to force him out, claiming that he was too old to
perform surgery. (Id.). At summary judgment (and after Shahbabian filed this case),
this Court (through a different judge) dismissed those claims and found that instead,
he must return $679,711.61 of his earnings to TriHealth for failing to meet the
requirements of his employment contract—i.e., not conducting enough surgeries.
Shahbabian v. Trihealth, Inc., No. 1:18-cv-790, 2021 WL 3110073, at *13–18 (S.D.
Ohio July 22, 2021). The Sixth Circuit affirmed that decision on appeal. Shahbabian
v. TriHealth Inc., No. 21-3762/22-3479, 2023 WL 2424603, at *6 (6th Cir. Mar. 9,
2023).
And there is yet another case related to the allegations above. Roughly ten
months before Shahbabian sued, Timothy Murphy, TriHealth’s former Physician
Practices Chief Financial Officer, brought a separate FCA qui tam action against
TriHealth, TriHealth Hospitals, and TriHealth Physicians alleging somewhat similar
AKS and Stark Act violations. (Compl., United States ex rel. Murphy v. TriHealth,
Inc., No. 1:19-cv-168 (S.D. Ohio Mar. 4, 2019), Doc. 1). Aside from sharing defendants,
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Murphy and this case share a similar (but, as discussed below, not identical) claim:
that TriHealth paid Mayfield physicians in exchange for referrals. (See id. at #9–13).
As the two cases proceeded, the United States declined to intervene in either. (Notice,
Doc. 17; see Notice, Murphy, No. 1:19-cv-168 (S.D. Ohio May 6, 2024), Doc. 23).
Eventually, the TriHealth Defendants and Mayfield 3 moved to dismiss both
this case and Murphy on several different grounds in several different motions. (Docs.
38, 40, 42, 45; Murphy, No. 1:19-cv-168, Docs. 64, 66). While filing separate motions,
TriHealth and Mayfield largely made the same arguments. In both cases, Defendants
argued that the FCA’s qui tam provisions violate Article II’s Appointments Clause
and Take Care Clause and that the relators, Shahbabian and Murphy, lack Article
III standing. (Docs. 38, 39, 45, 46; Murphy, No. 1:19-cv-168, Docs. 64, 65). Defendants
also argued that this action is barred by the FCA’s first-to-file rule because Murphy
filed his complaint first. (Docs. 38, 39, 45, 46). Finally, Defendants argued in both
cases that both relators failed to state a claim under Rule 12(b)(6) and failed to state
fraud to the particularity demanded by Rule 9(b). (Docs. 40, 41, 42, 43; Murphy, No.
1:19-cv-168, 	Docs. 	66, 	67). 	Because 	of 	the 	overlap, 	Murphy 	moved 	for 	joint
determination of related issues with this case, which the Court granted in part.
(Murphy, No. 1:19-cv-168, 2/24/2025 Not. Ord.).
The Court ruled in both cases on the same day. In Murphy, the Court denied
the defendants’ motions to dismiss on all grounds. United States ex rel. Murphy v.
TriHealth, Inc., No. 1:19-cv-168, 2025 WL 2104279, at *18 (S.D. Ohio July 28, 2025).
3 Mayfield is not a defendant in Murphy.
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However, rather than allowing that case to proceed to discovery, the Court certified
a constitutional question for interlocutory appeal (i.e., whether the FCA’s reliance on
a qui tam relator violates the Appointments and Take Care Clauses) and stayed the
case in the meantime. (Id.).
In this case, the Court took a narrower approach. 4 The Court ruled against
Defendants on their identical-to-Murphy constitutional and standing arguments and
stayed this case as well pending the interlocutory appeal. (Doc. 66, #2381). But,
because of that, the Court declined at that time to reach the 12(b)(6) (and 9(b))
argument and the first-to-file issue. (Id.).
Since then, the Sixth Circuit declined to take up the constitutional question.
(Doc. 67 (denying Defendants permission to appeal)). So, the stay is over. Murphy has
proceeded to discovery, (see Calendar Order, Murphy, No. 1:19-cv-168, Doc. 86), and
this case’s pending motions to dismiss are once again ripe. 5 However, once the stay
lifted, Shahbabian filed his own request: that the Court consolidate his case with
Murphy. (Doc. 68). Defendants oppose that motion. (Doc. 70).
4 The Court reached all of Defendants’ arguments in Murphy because the Court decided the
question which prompted the stay, the FCA’s constitutionality, last as a matter of
constitutional avoidance. Murphy, 2025 WL 2104279, at *3 (citing United States v. Elkins,
300 F.3d 638, 647 (6th Cir. 2002)). As the Court explained in its opinion, this case, by contrast,
warranted a different approach for two reasons. (See Doc. 66, #2369). For one, the Court for
all intents and purposes had already ruled on the constitutionality issue, so saving it for last
would have little import. (Id.). Second, the Court had no option to save it for last, as deciding
whether the Murphy complaint was “legally infirm” in the first-to-file analysis would
necessarily require the Court to answer that same constitutional question. (Id. at #2369–70).
5 Shahbabian recently filed additional authority opposing Defendants’ motion to dismiss
under the first-to-file rule. (Doc. 72). There, he cites several cases decided while this motion
was held in abeyance and briefly repeats some of his arguments.
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Below, the Court addresses those pending motions. Ultimately, the Court
grants Defendants’ motions to dismiss on Rule 12(b)(6) grounds, making the motion
to consolidate moot, at least for now.
LEGAL STANDARD
To survive a Rule 12(b)(6) motion to dismiss, a plaintiff must allege “sufficient
factual matter … to state a claim to relief that is plausible on its face.” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (cleaned up). While a “plausible” claim for relief does
not require a showing of probable liability, it requires “more than a sheer possibility
that a defendant has acted unlawfully.” Id. The complaint must allege sufficient facts
to allow the Court “to draw the reasonable inference that the defendant is liable.” Id.
“In reviewing a motion to dismiss, [the Court] construe[s] the complaint in the light
most favorable to the plaintiff, draw[s] all reasonable inferences in [his] favor, and
accept[s] all well-pleaded allegations in the complaint as true.” Keene Grp., Inc. v.
City of Cincinnati, 998 F.3d 306, 310 (6th Cir. 2021). But that does not mean the
Court 	must 	take 	everything 	a 	plaintiff 	alleges 	at 	face 	value, 	no 	matter 	how
unsupported. The Court may disregard “naked assertion[s]” of fact, “formulaic
recitation[s] of the elements of a cause of action,” and “mere conclusory statements.”
Iqbal, 556 U.S. at 678 (cleaned up). Additionally, the Court may grant a motion to
dismiss “on the basis of a dispositive issue of law.” Neitzke v. Williams, 490 U.S. 319,
326 (1989) (citations omitted).
A court analyzing a motion to dismiss under Rule 12(b)(6) generally must
confine its review to the pleadings. Armengau v. Cline, 7 F. App’x 336, 343 (6th Cir.
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2001). That said, “a court may consider exhibits attached to the complaint, public
records, 	items 	appearing 	in 	the 	record 	of 	the 	case, 	and 	exhibits 	attached 	to
defendant’s motion to dismiss, so long as they are referred to in the complaint and
are central to the claims contained therein, without converting the motion to one for
summary judgment.” Gavitt v. Born, 835 F.3d 623, 640 (6th Cir. 2016) (citations
omitted).
LAW AND ANALYSIS
Defendants seek to dismiss Shahbabian’s claims on multiple grounds. The
Court has already ruled against Defendants on their Rule 12(b)(1) arguments as to
Shahbabian’s Article III standing and the FCA’s constitutionality under Article II.
(Doc. 	66, 	#2364 	(denying 	Defendant’s 	Rule 	12(b)(1) 	motions 	(Docs. 	38, 	45))).
Remaining are Defendants’ first-to-file and Rule 12(b)(6) arguments. The Court
addresses both, finding against Defendants on the first, but for them on the second.
The first-to-file argument fails because the operative complaint in Murphy at the time
Shahbabian filed this action was legally infirm. But dismissal is still warranted as
Shahbabian’s complaint fails to state a claim under Rule 12(b)(6). That is because he
fails to plausibly allege an underlying violation of either the AKS or the Stark law,
meaning that there were no false claims to violate the FCA under any of his theories.
And, because that warrants the dismissal of this matter, the Court dismisses
Shahbabian’s pending motion to consolidate as moot.
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A. 	The First-To-File Rule Does Not Bar This Suit as the Original Murphy
Complaint Was Legally Infirm.
Before turning to the merits of the Rule 12(b)(6) motion, the Court must first
decide whether the still-pending Murphy action bars Shahbabian’s FCA suit. That is
because the FCA has a built-in jurisdictional bar designed to prevent duplicative
“parasitic lawsuits.” United States ex rel. Poteet v. Medtronic, Inc., 552 F.3d 503, 516
(6th Cir. 2009), abrogated in part on separate issue by United States ex rel. Rahimi,
3 F.4th at 829 (quotation omitted). This rule, known as the first-to-file bar, provides
that “[w]hen a person brings an action under [the FCA], no person other than the
government may intervene or bring a related action based on the facts underlying the
pending action.” 31 U.S.C. § 3730(b)(5). So, because Murphy was filed first, it bars
this case if they are based on the same underlying facts. To decide whether two cases
are based on the same facts, a court must compare the two complaints and decide
whether both allege the same “essential” or “material” facts. Poteet, 552 F.3d at 516.
But there is an “important caveat to this first-to-file rule.” For an earlier qui
tam complaint to bar a later one, the earlier complaint cannot be legally infirm. Id.
And a complaint is “legally infirm” if its allegations are insufficient under Rule 9(b).
Walburn v. Lockheed Martin Corp., 431 F.3d 966, 972–73 (6th Cir. 2005).
Shahbabian argues that the first-to-file rule does not bar this action for two
separate reasons: (1) first, relying on the caveat above, he argues that the relevant
Murphy complaint (more on that below) does not satisfy Rule 9(b), and (2) he says the
Murphy complaint does not allege all the essential facts of this case. (Resp., Doc. 56,
#2081). Because the Court agrees with the former, it does not reach the latter.
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To answer the first-to-file question, the Court must first decide which version
of the Murphy complaint matters to the analysis. That is because the Court has
already ruled that Murphy’s Second Amended Complaint (the current operative
complaint) is legally sound. (Op. & Order, Murphy, No. 1:19-cv-168, Doc. 77 (denying
Defendants’ Rule 12(b)(1) and 12(b)(6) motions to dismiss)). So, if that is the
complaint that counts, Shahbabian’s argument about legal infirmity seems doomed
to fail. Shahbabian, though, says not so fast; he says the Court should look at the
operative Murphy complaint at the time Shahbabian initiated this action. (Doc. 56,
#2086, n.3). And that would be the original complaint in Murphy. (Doc. 1; see Compl.,
Murphy, 	No. 	1:19-cv-168, 	Doc. 	1). 	And 	on 	this 	score, 	the 	Court 	agrees 	with
Shahbabian—for purposes of the first-to-file rule, the Court must look to the facts as
they existed at the time the later action was brought. United States ex rel. Cestra v.
Cephalon, Inc., No. 14-01842, 2014 WL 5038393, at *3 (E.D. Pa. Oct. 9, 2014)
(collecting cases).
Then, based on that original Murphy complaint, Shahbabian mounts only one
line of attack to prove legal infirmity—that its allegations do not satisfy Rule 9(b).
The attack at least starts on sound footing. The claims here, and in Murphy, arise
under the FCA, meaning they sound in fraud. Accordingly, “[c]omplaints alleging
FCA violations must comply with Rule 9(b)’s requirement that fraud be pled with
particularity because ‘defendants accused of defrauding the federal government have
the same protections as defendants sued for fraud in other contexts.’” Chesbrough v.
VPA, P.C., 655 F.3d 461, 466 (6th Cir. 2011) (quoting Yuhasz v. Brush Wellman, Inc.,
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341 F.3d 559, 563 (6th Cir. 2003)). “To satisfy Rule 9(b), a complaint of fraud, at a
minimum, must allege the time, place, and content of the alleged misrepresentation
on which [the plaintiff] relied; the fraudulent scheme; the fraudulent intent of the
defendants; and the injury resulting from the fraud.” United States ex rel. Marlar v.
BWXT-Y-12, L.L.C.¸ 525 F.3d 439, 444 (6th Cir. 2008) (citation modified). Applied to
the FCA context, that means that a relator asserting a fraudulent scheme “must
provide ‘examples of specific false claims submitted to the government pursuant to
that scheme.’” United States ex rel. Ibanez v. Bristol-Myers Squibb Co., 874 F.3d 905,
914 (6th Cir. 2017).
Shahbabian says Murphy’s original complaint does not plead any false claims
with specificity. (Doc. 56, #2094). Ultimately the Court agrees. Under Sixth Circuit
case law, Murphy could have supplied the requisite specificity in one of two ways.
United States ex rel. Owsley v. Fazzi Assocs., Inc., 16 F.4th 192, 196 (6th Cir. 2021).
Most straightforwardly, he could have simply “identif[ied] a ‘representative claim
that was actually submitted to the government for payment.’” Id. (quoting United
States ex rel. Ibanez, 874 F.3d at 915). “Alternatively, a claimant ‘can otherwise allege
facts—based 	on 	personal 	knowledge 	of 	billing 	practices—supporting 	a 	strong
inference that particular identified claims were submitted to the government for
payment.’” Id. (quoting United States ex rel. Prather v. Brookdale Senior Living
Communities, Inc., 838 F.3d 750, 771 (6th Cir. 2016)).
The relevant Murphy complaint does not satisfy the first path to specificity.
Murphy points to no specific claims that were submitted to the government for
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payment. True, Murphy alleges a false scheme; but his original complaint makes only
generalized assertions about false claims such as “TriHealth physicians submitted
thousands of CMS 1500 forms to CMS,” “TriHealth Defendants submitted claims to
Medicaid,” and “Defendants[] knowingly or in reckless disregard presented false
claims for approval.” (Doc. 56, #2094). That is not enough.
Nor would such allegations suffice under the second method. To satisfy that
approach, Murphy would still need to allege the particulars of specific treatments and
claims—meaning dates and amounts charged. See Owsley, 16 F.4th at 197 (finding
that, despite allegations of “personal knowledge of billing practices” and specific
instances of upcoding on patient forms, plaintiff failed to identify claims with
specificity because there were no dates or amounts alleged).
Indeed, reviewing the original Murphy complaint shows it does not satisfy Rule
9(b)’s purpose: “provid[ing] the defendant with notice of a specific representative
claim that the plaintiff thinks was fraudulent.” Id. (citation omitted). And it is
perhaps noteworthy that Murphy himself later amended his complaint to include
specific claims, attaching them as an exhibit. (See Ex. 8, Murphy, No. 1:19-cv-168,
Doc. 50-8). So, because the original Murphy complaint was “legally infirm” at the time
Shahbabian filed this action, the first-to-file rule does not bar this case.
B. 	Shahbabian Fails to State a Violation of the FCA Because He Does Not
Plead Any Underlying AKS Or Stark Law Violations.
But 	apart 	from 	the 	first-to-file 	rule, 	both 	Mayfield 	and 	the 	TriHealth
Defendants also move to dismiss on the merits. (Docs. 40, 41, 42, 43 (Rule 12(b)(6)
motions to dismiss and supporting memoranda)). So that is the issue to which the
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Court turns next. In doing so, the Court notes that Defendants have a tough hill to
climb on this issue. This Court already found in Murphy—a case involving similar
facts and a similar cast of characters—that the relator stated a viable FCA claim. But
despite the difficulty of Defendants’ task, they have convinced the Court that the
allegations that Shahbabian puts forward in his complaint here are insufficient. In
particular, Shahbabian does not point to a viable theory of remuneration to sustain
an AKS violation, nor does he plausibly allege that TriHealth compensated Mayfield
above fair market value in violation of the Stark law. And without plausibly alleging
a violation of some underlying law, all of Shahbabian’s FCA claims fail.
The Court acknowledges at the start that, at this stage of the litigation, “the
Court must construe the complaint in the light most favorable to the plaintiff, accept
all factual allegations as true, and determine whether the complaint contains enough
facts to state a claim to relief that is plausible on its face.” United States ex rel.
SNAPP, Inc. v. Ford Motor Co., 532 F.3d 496, 502 (6th Cir. 2008) (citation modified).
But, as noted above, because these are FCA claims, that analysis includes the
heightened standard of Federal Rule of Civil Procedure 9(b). United States ex rel.
USN4U, LLC v. Wolf Creek Fed. Servs., Inc., 34 F.4th 507, 513–14 (6th Cir. 2022). To
comply with Rule 9(b), the relator “at a minimum, must ‘allege the time, place, and
content of the alleged misrepresentation on which [the government] relied; the
fraudulent scheme; the fraudulent intent of the defendants; and the injury resulting
from the fraud.’” United States ex rel. Bledsoe v. Cmty. Health Sys., Inc., 342 F.3d 634,
643 (6th Cir. 2003) (quoting Coffey v. Foamex L.P., 2 F.3d 157, 161–62 (6th Cir. 1993)).
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“When a relator ‘alleges a complex and far-reaching fraudulent scheme, then that
scheme must be pleaded with particularity and the complaint must also provide
examples of specific fraudulent conduct that are representative samples of the
scheme.’” USN4U, 34 F.4th at 514 (quoting United States ex rel. Prather, 892 F.3d at
830) (cleaned up).
The FCA aims to stop fraud on the government. Universal Health Servs., Inc.
v. United States, 579 U.S. 176, 181–82 (2016). To that end, the FCA provides that:
[A]ny person who—
(A) knowingly presents, or causes to be presented, a false or fraudulent
claim for payment or approval;
(B) knowingly makes, uses, or causes to be made or used, a false record
or statement material to a false or fraudulent claim;
(C) conspires to commit a violation of subparagraph (A), (B), (D), (E), (F),
or (G);
…
(G) knowingly makes, uses, or causes to be made or used, a false record
or statement material to an obligation to pay or transmit money or
property to the Government, or knowingly conceals or knowingly and
improperly avoids or decreases an obligation to pay or transmit money
or property to the Government,
is liable to the United States Government for a civil penalty … plus 3
times the amount of damages ….
31 U.S.C. § 3729(a)(1).
Shahbabian, acting as a relator on behalf of the government, brings direct
claims under subparagraphs (A) and (B), conspiracy claims under (C), and reverse
claims under (G). 31 U.S.C. § 3730(h). By statute, each of those theories requires
falsity, meaning some form of fraudulent claim. And the sole theory on which
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Shahbabian relies to show such fraud is that the Defendants submitted claims in
violation of both the AKS and Stark law. (Doc. 9, #1134–35). But as the Court
describes below, he fails to plausibly plead a violation of either statute. And without
that foundation all of his claims fail.
1. 	Shahbabian 	Fails 	to 	Plead 	That 	Defendants 	Exchanged
Remuneration for Referrals as the AKS Requires.
The AKS establishes criminal and civil liability for “knowingly and willfully
solicit[ing] or receiv[ing] any remuneration (including any kickback, bribe, or rebate)
directly or indirectly, overtly or covertly, in cash or in kind in return for referring an
individual to a person for the furnishing … of any item or service” reimbursable under
a federal healthcare program. 42 U.S.C. § 1320a-7b(b)(1). Liability flows the other
way too, as “knowingly and willfully offer[ing] or pay[ing] any remuneration … to
induce [a] person” to make any such referrals is prohibited as well. Id. § 1320a-
7b(b)(2). And key for Shahbabian, “a claim that includes items or services resulting
from a violation of [the AKS] constitutes a false or fraudulent claim for purposes of
[the FCA].” Id. § 1320a-7b(g). “Resulting from” means claims submitted to federal
healthcare programs that would not have been submitted but for the alleged
kickbacks. 6 United States ex rel. Martin v. Hathaway, 63 F.4th 1043, 1052–55 (6th
Cir. 2023).
So what must Shahbabian show to make a prima facie case for an AKS
violation? Shahbabian must allege that Defendants (1) “knowingly and willfully”
6 As the Court explained in Murphy, but for causation is likely only required for FCA claims
under subparagraph (A). 2025 WL 2104279, at *6–7.
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(2) “solicit[ed] or receive[d],” or, the reverse, “offer[ed] or pa[id],” “any remuneration”
(3) in return for, or to induce, referrals for “any item or service” reimbursable under
a federal healthcare program. 42 U.S.C. § 1320a-7b(b)(1)(A), (b)(2)(A); Hathaway, 63
F.4th at 1048 (citation omitted). Both Mayfield and TriHealth contest only 7 whether
any of the exchanged benefits constitute “remuneration” as the statute uses that
term, so that is where the Court focuses its efforts, as well. (See Doc. 41, #1880–87;
Doc. 43, #1918–1924). That focus makes sense, as there is no question that TriHealth
and Mayfield voluntarily entered into several agreements with one another to provide
medical services, received federal reimbursement for those services, and referred
patients to one another. So this claim turns on remuneration. On that issue, though,
the Court sides with Defendants: Shahbabian fails to plead a viable theory of
remuneration, meaning he cannot establish an AKS violation.
“The [AKS] does not define remuneration.” Hathaway, 63 F.4th at 1048. In
common parlance, though, the word usually indicates some form of payment or
compensation. 	See, 	e.g., 	Remunerate, 	D ICTIONARY.com, 	https://www.dictionary.
com/browse/remunerate 	[https://perma.cc/2ZGX-F4FK]. 	So 	what 	constitutes 	a
“payment” in the medical referral context? The Sixth Circuit in Hathaway provided
extensive guidance on that topic. In a detailed decision that painstakingly explored
dictionaries, other uses of remuneration throughout the statutory landscape, and
context, the court explained that remuneration as used in the AKS requires a
7 While Defendants elsewhere contest whether Shahbabian alleged the requisite scienter
under the FCA, they do not contest the “knowingly and willfully” element of the AKS. (See
Doc. 43, #1918 n.1).
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“payment” or “transfer” of value, and does not broadly extend to “any act that may be
valuable to another,” as the relator and the government had argued. 63 F.4th at
1048–52 (“While the word remuneration may be broad, it customarily requires a
payment or transfer of some kind.”). So that is the definition Shahbabian must meet.
Recall the basic structure of the deal. Mayfield (the physician group) would
redirect its patients to TriHealth facilities. These redirected patients ultimately
generated 	between 	$99,920,632 	and 	$119,172,063 	in 	facility 	fee 	revenue 	for
TriHealth. (Id. at #1125). TriHealth promised six things in return: (1) the transition
of Dr. Shahbabian’s surgical practice and referral base to Mayfield physicians, which
amounted to some 270 to 300 procedures per year; (2) payments made to Mayfield
physicians for services, which totaled in excess of $2,000,000 a year under the 2017
co-management 	agreement; 	(3) the 	expenditure 	of 	over 	$46,000,000 	into
neurosurgery facility upgrades at TriHealth facilities; (4) TriHealth credentialing Dr.
Andaluz, a Mayfield doctor; (5) TriHealth changing the status of Mayfield physicians
to Tier 1 referral status; and (6) the referral of all unassigned neurosurgical patients
by TriHealth to Mayfield physicians for procedures to be performed at TriHealth
medical facilities. (Id. at #1125–26). And remember, the AKS prohibits both paying
and receiving remuneration for referrals, so if any of the above listed benefits
constitute remuneration as pleaded, Shahbabian has adequately shown that all
Defendants violated the AKS. Ultimately, though, the Court finds that, on the facts
alleged, none of the benefits are the types of remuneration prohibited by the statute
as Hathaway defines that term.
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Start with two easy ones: the doctor’s credentialing and facility upgrades. Dr.
Andaluz’s “credentialing” is not remuneration. (Id. at #1125). As best as the Court
can tell from the complaint, that credentialing meant granting Dr. Andaluz’s
admitting privileges at TriHealth hospitals. (Id. at #1088). That is not a payment or
transfer. While it undoubtedly may have value to Dr. Andaluz (and by extension
Mayfield), credentialing strikes the Court as simply one example of an “act that may
be valuable to another” that Hathaway rejected as remuneration. 63 F.4th at 1048.
Indeed, if a hospital granting a doctor privileges constitutes remuneration under the
AKS, an AKS violation would seem to arise any time a hospital did so, as presumably
the newly credentialed doctor would be bringing along (i.e., referring) at least some
number of patients to receive care at that hospital.
Hathaway also imposes a hurdle for Shahbabian’s theory that TriHealth’s
expenditure of $46,000,000 to update TriHealth hospitals to accommodate the
relocated UC Health surgical cases is “remuneration.” (See Doc. 9, #1126). In
Hathaway, the Sixth Circuit pointed to the example of a hospital upgrading its
facilities and equipment to attract doctors and referrals as an act that was not
remuneration. 63 F.4th at 1050. And the court’s reasoning makes sense—a hospital
investing in its own facilities to improve patient care is not a transfer or payment to
other doctors, even if those doctors might sometimes use those facilities to treat their
own 	patients. 	Perhaps 	the 	Court 	can 	imagine 	a 	point 	where 	upgraded
accommodations for referring doctors begin to look more like individual perks (e.g.,
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handing out designer lab coats for free) that could constitute a “transfer,” but
Shahbabian does not allege facts such as that here.
But with those out of the way, some harder questions remain. Start with this
one—did the cash payments from TriHealth to Mayfield under the 2014 and 2017 co-
management agreements plausibly constitute remuneration? (Doc. 9, #1084, 1090,
1120–21, 143–44). Defendants admit that under both co-management agreements
there were “actual transfers of funds,” which certainly could fall within Hathaway’s
definition of remuneration. (Doc. 41, #1885; Doc. 43, #1923). But such transfers are
problematic only if they occur in exchange for referrals, instead of for some other,
permissible reason. See 42 U.S.C. § 1320a-7b(b)(1)(A), (b)(2)(A).
In sum, the question is whether the complaint plausibly ties the compensation
TriHeath paid (and Mayfield received) to the referrals. Defendants argue that those
payments were in return for legitimate services provided, not referrals. And the
complaint itself acknowledges that the 2017 co-management agreement, for instance,
was for Mayfield’s provision of “On-call, Medical Director, and … Quality Initiative
Services.” 	(Doc. 	9, 	#1120–21). 	Defendants 	also 	make 	much 	of 	the 	fact 	that
Shahbabian included in the complaint an email from TriHealth’s general counsel
during the negotiations over the 2017 co-management agreement, which expressed
the need for metrics and compensation to “not [be] related to volume/value of
physician referrals.” (Doc. 41, #1887 (discussing Doc. 9, #1105); Doc. 43, #1923).
While concededly a close call, the Court finds that Shahbabian does not allege
sufficient details for the Court to infer that the compensation paid under these two
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agreements was for referrals (as opposed to for services). True, if Mayfield was in fact
compensated above market rate, or was not actually performing the contracted-for
work, the payments could constitute forbidden remuneration. See United States ex
rel. Bookwalter v. UPMC, 946 F.3d 162, 171 (3d Cir. 2019) (“Compensation for
personal services above the fair market value of those services can suggest that the
compensation is really for referrals.”). But Shahbabian’s conclusory allegations on
that front provide no basis for the Court to reasonably infer that is happening. He
asserts, repeatedly, that the deals were entered without “any valid fair market value
determination,” 	and 	instead 	constituted 	payments 	taking 	“into 	account 	the
anticipated volume and value of referrals between TriHealth and Mayfield.” (Id. at
#1121; see also id. at #1084). But he alleges no actual facts supporting either of those
conclusions beyond his also-conclusory allegation that the quality initiatives Mayfield
was to create were a “sham.” (Id. at #1118). For example he points to no aspect of the
doctors’ compensation that suggests that this compensation will (or did) fluctuate
based on referral volume, nor does he provide any support or reason suggesting why
the co-management agreements are not fair market value. The complaint merely
states 	the 	rates 	TriHealth 	paid 	Mayfield 	for 	the 	various 	services 	under 	the
agreements. (See, e.g., Doc. 9, #1084 (stating that TriHealth compensated Mayfield
$80,417 per month for on-call services and $175,000 per year for the achievement of
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quality initiative targets)). But it does not allege any facts suggesting why those rates
might constitute above-market payment for those services. 8
The 	closest 	Shahbabian 	comes 	to 	establishing 	some 	connection 	between
Mayfield’s 	transfer 	of 	patients 	and 	compensation 	under 	the 	co-management
agreement is when he points to a 2016 email from a third-party consultant to
TriHealth 	executives 	outlining 	“core 	assumptions” 	for 	a 	pro 	forma 	agreement
between TriHealth and Mayfield. (Doc. 9, #1103; Doc. 9-22). That email lists on one
page, as a core assumption, the projected volume of UC cases that specific Mayfield
doctors will be performing at the TriHealth hospitals. (Doc. 9-22, #1341). Then, listed
on the next, is the core assumption that the partnership with Mayfield will include a
new co-management agreement, as well as “commitments for additional Mayfield
neurosurgical activity.” (Doc. 9-22, #1342). That email, and the facts Shahbabian
alleges around it, do suggest a larger plan between Defendants to deepen their
relationship. That broader scheme, as alleged, included both transitioning patients
to TriHealth hospitals and entering a co-management agreement, the latter of which
included compensation. But that still does not fix the complaint’s problem: the lack
of 	non-conclusory 	allegations 	showing 	that 	compensation 	paid 	under 	the 	co-
management agreement was to induce those referrals. The email discussing both
agreements in the same place does not change that. To find in Shahbabian’s favor,
8 Perhaps Shahbabian could set forth a theory that while the co-management agreements are
for a fair market rate, they constitute remuneration because that business would not have
been generated for Mayfield but for the promise to supply referrals. Or, in other words, that
Mayfield won the contract over competitors because TriHealth sought to induce referrals.
The Court reserves the question of whether that might constitute remuneration, as
Shahbabian does not make that argument.
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the Court would need to adopt an interpretation of the AKS that bars a doctor who is
receiving compensation from a hospital from referring patients to that hospital, even
absent any allegations that the compensation is for, or intends to induce, those
referrals. The Court declines to do so.
Finally, the Court finishes by considering the remaining forms of potential
remuneration 	that 	Shababian 	alleges: 	the 	facility-fee 	revenue 	generated 	by
Mayfield’s redirection of patients to TriHealth hospitals, the transition of Dr.
Shahbabian’s surgical practice and referral base to Mayfield physicians, the referral
of all unassigned neurosurgical patients at TriHealth hospitals to Mayfield, and the
change of Mayfield physicians to Tier 1 referral status. (Doc. 9, #1125–26). These four
theories of remuneration share a potential defect: in each, the only thing of value that
changed hands was, at its core, a referral.
Start with the facility fees. True, the fees themselves are monetary payments.
But Mayfield is not paying fees to TriHealth; rather, TriHealth is generating fees
from others (i.e., insurers, including federal programs) because of Mayfield referring
and treating patients. 9 Likewise, the transition of Dr. Shahbabian’s practice to
Mayfield physicians is, at bottom, about referrals—TriHealth simply redirected
patient flow that would otherwise have gone to Shahbabian toward Mayfield instead,
9 Defendants do not contest whether Mayfield physicians moving procedures they themselves
perform to TriHealth hospitals constitutes a “referral” as the AKS uses that term. Regardless,
the Court finds that the practice constitutes a referral, as, aside from the facility-fee revenue
generated, some of the “items or services” connected to the procedure were undoubtedly
performed by various TriHealth staff. And generally, other courts have defined “referral”
broadly in the AKS context. See, e.g., United States v. Patel, 778 F.3d 607, 612–13 (7th Cir.
2015) (holding that a physician “refers” a patient under the AKS by certifying or authorizing
care, even without personally directing the patient to a particular provider).
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presumably resulting in Mayfield receiving reimbursements that otherwise would
have gone to him. Likewise, the value of TriHealth’s policy changes—elevating
Mayfield to Tier 1 status and steering unassigned patients to Mayfield—lies entirely
in the increased likelihood of future referrals and the revenues they generate. (Id. at
#1099 n.3 (describing the Tier 2 to Tier 1 change)).
As to each of these, then, the Court must decide a common question: can
referrals themselves, unaccompanied by any other payment or transfer, constitute
remuneration under the AKS? Put differently, does the AKS reach a purely referral-
for-referral arrangement between two providers?
Shahbabian (briefly) says yes. (Doc. 9, #1071 (“Patient referrals from one
medical provider to another are a form of remuneration.”)). He finds some support in
an out-of-circuit district court case, State v. MedImmune, Inc., 342 F. Supp. 3d 544,
552 (S.D.N.Y. 2018), which found that patient information used to generate referrals
“could constitute a form of remuneration” under the AKS—reasoning that traces back
to Southern District of New York’s observation in United States ex rel. Kester v.
Novartis Pharmaceuticals Corp., 41 F. Supp. 3d 323, 326 (S.D.N.Y. 2014), that patient
referrals themselves are “a form of remuneration.”
But in this circuit, Hathaway—at least in dicta—seems to say no. 63 F.4th at
1051. Recall that Hathaway adopted a narrower reading of remuneration, declining
to embrace an “anything-of-value” definition. Id. at 1048–52. Applying that narrower
reading, the Hathaway court held that a hospital’s decision not to hire an in-house
ophthalmologist at the behest of a competitor did not constitute remuneration, even
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though the decision preserved a stream of referrals flowing to, and from, that
competing provider. Id. at 1051. There, as here, referrals were the only thing of value
either party offered. The ophthalmologist offered a “general commitment to continue
sending surgery referrals to [the hospital],” while the hospital only acted to prevent
its referrals from being sent in house. Id.
To be sure, part of the Sixth Circuit’s reasoning in Hathaway turned on the
fact that the hospital was not offering anything new—it was simply declining to act.
Id. 	That 	distinction 	might 	leave 	room 	for 	a 	plaintiff 	to 	plead 	a 	referrals-as-
remuneration theory where the complaint alleges a specific, new stream of referrals
being offered, rather than the mere preservation of an existing one. But, in dicta, the
Hathaway court went further, observing that “[e]ven under an anything-of-value
definition of remuneration, moreover, it is doubtful that the [plaintiffs] allege[d] a
cognizable referrals-for-referrals scheme.” Id. That statement is telling. It suggests
the Hathaway court viewed the anything-of-value definition—the very definition it
declined to adopt—as a necessary precondition to a viable referrals-for-referrals
theory. Strip away that broader definition, as Hathaway’s holding requires, and a
pure referral-swap theory seemingly has nothing left to stand on.
This Court agrees with that reading. 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’s remuneration element. No party holds a definite,
existing interest in a potential patient that could be “transferred” to another; there is
only the prospect, or hope, of a future referral. Accordingly, all four of the remaining
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theories—the facility-fee revenue, the transition of Shahbabian’s practice, the Tier 1
status change, and the unassigned-patient referral policy—fail as a matter of law,
because each rests entirely on the value of referrals themselves and nothing more.
In short, Shahbabian fails to allege any viable theories of remuneration, so
there can be no underlying violation of the AKS.
2. 	Shahbabian Fails to Plead a Violation of the Stark Law Because
on the Face of the Complaint, the Personal Services Exception
Applies.
Shahbabian fares no better at alleging an underlying Stark law violation. The
Stark law broadly bans healthcare entities from submitting Medicare claims for
payment when that entity has a financial relationship with the referring doctor,
subject to various exceptions. United States ex rel. Daugherty v. Bostwick Lab’ys, No.
1:08-cv-354, 2012 WL 6593804, at *6 (S.D. Ohio Dec. 18, 2012) (citing 42 U.S.C.
§ 1395nn). Defendants do not dispute their financial relationship, instead arguing
that they fall into one such exception.
Recall that, to allege an FCA violation, Shahbabian must plausibly allege
falsity. See supra Part B.1. As just described, the Court concludes that he has not
shown falsity based on an AKS violation. So his remaining option is to plausibly allege
a Stark violation. Other circuits have held, and Defendants do not contest, that a
Medicare claim that violates Stark is a “false claim” for purposes of the FCA. E.g.,
Bookwalter, 946 F.3d at 169; United States ex rel. Pogue v. Diabetes Treatment Ctrs.
of Am., 565 F. Supp. 2d 153, 159 (D.D.C. 2008).
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To make a prima facie case for a Stark Law violation, Shahbabian must allege:
(1) a referral for designated health services, (2) a financial relationship, and (3) a
Medicare claim for the referred services. Bookwalter, 946 F.3d at 169. Under Stark,
a 	financial 	relationship 	includes 	a 	compensation 	arrangement 	involving 	“any
remuneration, directly or indirectly, overtly or covertly, in cash or in kind” between
physician and the entity providing the referred services. 42 U.S.C. § 1395nn(a)(2),
(h)(1)(B). Because the remuneration does not have to induce, or be for, the referred
services, Shahbabian avoids the problem the Court described above as to his AKS-
based theory. And with that out of the way, the 2014 and 2017 co-management
agreements constitute a financial relationship for Stark purposes, which Defendants
do not dispute. Indeed, Defendants largely do not dispute the prima facie elements at
all; instead they argue that the “personal services” exception applies. (Doc. 41, #1888–
91; Doc. 43, #1924–30).
“On its face, the Stark Act’s ban sweeps in lots of common situations,” and so
it contains many exceptions to preserve common relationships in the medical field.
Bookwalter, 	946 	F.3d 	at 	169. 	One 	such 	exception 	is 	for 	“[p]ersonal 	service
arrangements.” See 42 U.S.C. § 1395nn(e)(3). That exception allows referrals when
an 	entity 	has 	entered 	a 	more 	than 	year-long 	arrangement 	with 	a 	physician
compensating that physician for specific services performed. Id. So Defendants are
off to a strong start—the basis for the alleged Stark violation is TriHealth agreeing
to compensate Mayfield physicians for specific services performed under both the
2014 and 2017 co-management agreements. (Doc. 9, #1127). However, the exception
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has another element—that the compensation be for “fair market value” and not
determined in a manner that takes into account the “volume or value of any
referrals.” 42 U.S.C. § 1395nn(e)(3)(A)(v). Just as he did in the AKS context,
Shahbabian says that the arrangement here stumbles on this latter step.
Before discussing Shahbabian’s allegations more fully, the Court pauses to
address a procedural issue related to reliance on Stark law exceptions at the pleading
stage. As the Court discussed in Murphy, there is some question whether an exception
to the Stark Law should be treated as an affirmative defense. 2025 WL 2104279, at
*11. The question is one of burden shifting—whether the burden is on plaintiffs to
plausibly allege that the exception does not apply, or whether the burden instead is
on defendants to prove, at some later point in the litigation, that it does. United States
v. Williams, 70 F.4th 359, 364 (6th Cir. 2023) (“The burden of proving affirmative
defenses rests with the defendant … [t]hat reality stretches from criminal law to civil
law, and from Blackstone to the present.”). At least one other circuit, the Third,
addressing the question in a reported decision, has treated Stark exceptions as
affirmative defenses. See Bookwalter, 946 F.3d at 177. Here, Shahbabian argues that
the personal service exception is an affirmative defense, (Doc. 9, #1074), and at least
one of the defendants appears to concede as much, (Doc. 41, #1889). Moreover, that
seems 	right. 	As 	the 	Third 	Circuit 	explained, 	the 	statutory 	structure—which
separates out the exceptions—supports that reading. Bookwalter, 946 F.3d at 169.
And, as that court also observed, it would be a lot to ask of an FCA plaintiff to plead
around all possible exceptions. See id. at 177 (noting that “[i]t is thus the defendants’
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burden to plead a Stark Act exception, not the relators’ burden to plead that none
exists”). So the Court concludes it must treat the exception as an affirmative defense.
Understood that way, the burden of “proving” that the personal service
exception applies falls on Defendants. That is typically a tall order at the motion to
dismiss stage. After all, at this point in the case, the only facts Defendants can point
to in their efforts to establish the exception’s elements are those that Shahbabian
supplied in his complaint. So, while it may be true that “[t]here is no reason not to
grant a motion to dismiss where the undisputed facts conclusively establish an
affirmative defense as a matter of law,” Est. of Barney v. PNC Bank, Nat’l Ass’n,
714 F.3d 920, 926 (6th Cir. 2013) (quoting Hensley Mfg. v. ProPride, Inc., 579 F.3d
603, 613 (6th Cir. 2009)), here the allegations do not allow Defendants to clear the
conclusively-establish hurdle. To put a point on it, the key issue as to whether the
exception applies here is the question of whether the compensation that the hospital
agreed to provide reflects only the “fair market value” of the services for which the
hospital is paying. Shahbabian’s allegations certainly do not “conclusively establish”
that is the case. Indeed, he alleges that exactly the opposite is true—that the hospital
is paying the doctors in excess of market value.
One might think that is the end of the story. The personal services exception
is an affirmative defense, and the allegations in Shahbabian’s complaint do not
conclusively establish that the Defendants meet it here. That suggests that the
Defendants lose. But the Court concludes that is not the case. Recall that Shahbabian
is pursuing a False Claims Act claim, a cause of action that requires some form of
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underlying fraud. That means two pleading principles come into play. First, under
Rule 9(b) he must plead fraud with particularity. And second, under Iqbal and
Twombly, his allegations must make it at least plausible that such fraud occurred.
So, while Shahbabian is by no means required to plead around the personal services
exception (and all of the other exceptions), he is still required to provide the Court
some reason, grounded in specific facts, to believe that the compensation agreement
here is not on the up and up. After all, presumably the run-of-the-mill compensation
arrangement between hospitals and physicians is not serving as a cover for a
fraudulent pay-to-play referral scheme. So Shahbabian needs to provide some reason
to plausibly suggest that the agreement here is the fraudulent, illegitimate needle in
the legitimate-hospital-physician-contract haystack.
Take Bookwalter as an example. There, as the Court noted above, the Third
Circuit concluded that Stark law exceptions are affirmative defenses, and that a
plaintiff need not plead around them. But that did not mean that the court allowed
the complaint at issue there to move forward merely because the plaintiff had shown
the three elements of the prima facie case for a Stark law violation. To the contrary,
the court noted that the complaint had specified in “great detail” facts suggesting
fraud:
Dozens of [the complaint’s] paragraphs go into great detail about specific
physicians’ Work Units and pay levels. The complaint compares those
figures 	at 	length 	with 	industry 	benchmarks, 	medians, 	and 	90th
percentiles. It alleges specific ways that surgeons padded their bills, by
for 	instance 	falsely 	reporting 	unperformed 	work 	assisting 	other
surgeons or physically supervising residents and interns.
Bookwalter, 946 F.3d at 176–77.
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Contrast that with Shahbabian’s complaint here. True, he alleges that the
financial arrangement both (1) exceeds fair market value, and (2) takes into account
the volume or value of that doctor’s referrals. (Doc. 9, #1074). Indeed, he specifically
states that the terms “were not fair market value, but based upon the volume and
value [of referrals].” (See id. at #1128). And if he plausibly alleged either of those with
the specificity that Rule 9(b) requires, that undoubtedly would be enough. But he
doesn’t. Unlike the Bookwalter plaintiffs, he offers almost no factual allegations in
support of his conclusory assertions. Indeed, as to the lack of fair market value, the
only detail he provides is that, upon his information and belief, there was no fair
market value determination before either agreement was approved. (Id. at #1084,
1120). 	And, 	while 	he 	alleges 	that 	under 	the 	2017 	co-management 	agreement
TriHealth would pay over $2,000,000 a year to Mayfield, he includes no facts
suggesting why that would be an overpayment, let alone any relevant benchmarks
against which it should be compared. See United States ex rel. Dennis v. Health Mgmt.
Assocs., Inc., No. 3:09-cv-00484, 2013 WL 146048, at *13 (N.D. Tenn. Jan. 14, 2023)
(declining to find AKS or Stark law violations where relator offered no details on why
the compensation was in excess of fair market value); United States ex rel. Osheroff
v. Tenet Healthcare Corp., No. 1:09-cv-22253, 2012 WL 2871264, at *7 (S.D. Fla. July
12, 2012) (dismissing claims where the relator did not “allege a benchmark of fair
market value against which Defendants’ rents to physician-tenants can be tested,”
without which it was impossible to “infer whether Defendants’ rents to physician-
tenants fall sufficiently below the benchmark so as to constitute remuneration”).
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Certainly, nothing on the face of the agreements suggests that the rates exceed
fair market value. TriHealth paid $80,417 per month for on-call services from
Mayfield’s doctors under the 2014 co-management agreement, (Doc. 9-2, #1173), and
$95,417 per month for the same under the 2017 agreement, (Doc. 9-3). Depending on
the services provided, that is not per se outrageous. And again, Shahbabian has
alleged no facts that suggest comparable on-call neurosurgery services should have
commanded a lower fair-market price or that the parties colluded or engaged in price
fixing. Quite the opposite, the pleadings also show that the parties negotiated those
rates over the years. (See generally Doc. 9). With no other wider context about
industry, the Court concludes that the most plausible inference is that the contracts
are for a fair market value.
Admittedly, compensation under the agreements also cannot be based on the
value 	and 	volume 	of 	referrals 	Mayfield 	brought 	to 	TriHealth. 	42 	U.S.C.
§ 1395nn(e)(3). And Shahbabian again asserts that Mayfield physicians did in fact
receive bonuses and stipends based on the number of patients they brought to
TriHealth. But once again he alleges no facts suggesting that is the case. 10 (Doc. 9,
#1128). And as the Court discussed under the AKS analysis, the closest Shahbabian
comes to alleging an agreement tying pay to the volume of referrals is by pointing to
the 2016 email from the third-party consultant which listed the projected transfer of
10 These are patients that Mayfield doctors treated at TriHealth facilities. So presumably—
although Shahbabian does not allege this—doctors’ earnings increased as their patient
numbers grew—i.e., the more they worked. That is not the same as illicit compensation for
referrals, which would look more like TriHealth paying kickbacks based on the number of
patients transitioned from UC Health to TriHealth facilities.
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procedures from UC Health to TriHealth hospitals by fiscal year 2021. (Doc. 9-22,
#1341). So while the facts do support a plan between Defendants to refer patients to
TriHealth, that email discussion makes no mention of any bonuses or stipends tied
to that transition. Nor does it tie the compensation paid under the co-management
agreements—the “financial relationship” pointed to for Stark purposes—to those
figures.
The 2014 and 2017 contracts themselves contradict Shahbabian’s theory, with
each explicitly disallowing “compensation to any Physician in connection with … the
volume or value of referrals or other business generated by that physician for
TriHealth.” (Doc. 9-1, #1153; Doc. 9-3, #1188). Finally, as discussed earlier, the
complaint also includes an email from TriHealth’s legal counsel to another TriHealth
executive noting that the 2017 co-management agreement must include “appropriate
metrics that are not related to volume/value of physician referrals.” (Doc. 9, #1105).
The long and short of it is that Shahbabian has not alleged, and certainly not
with the specificity that Rule 9(b) requires, any facts giving rise to a plausible
inference that the compensation arrangement between TriHealth and the physician
group is illicit in any way. And absent that, he has not plausibly alleged a Stark law
violation.
3. 	Because Shahbabian Fails to Allege an Underlying Violation, All
His Claims Must Be Dismissed.
In sum, Shahbabian pleads neither an AKS nor a Stark violation, which in
turn means he has not pleaded that any false claims were submitted to the
government. That dooms all his claims under the FCA—either direct or indirect. As
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to the former—i.e., his direct claims under subparagraphs (A) and (B)—Shahbabian’s
only theory of “false claims” relied on the underlying violations, so without those, he
has nothing. But the lack of an underlying violation also dooms his conspiracy and
reverses claims under subparagraphs (C) and (G). Here’s why.
Start with conspiracy. Shahbabian’s conspiracy claim, alleging a violation
of 31 U.S.C. § 3729(a)(1)(C), is asserted in connection with his two counts alleging
violations 	of 31 	U.S.C. 	§ 3729(a)(1)(A) and (a)(1)(B). 	Meaning, 	he 	alleges 	that
Defendants conspired to knowingly submit false claims by doing the conduct that he
says constituted the direct violations. (Doc. 9, #1138). Since the Court has concluded
that Shahbabian fails to plausibly allege that the conduct violates the FCA, his
derivative FCA conspiracy claim is also dismissed. See United States v. Wal-Mart
Stores E., LP, 858 F. App’x 876, 879 (6th Cir. 2021) (citing 31 U.S.C. § 3729(a)(1)(C)
(finding that relator’s conspiracy claim fell along with the substantive FCA claims).
The reverse claims under subsection (G) have a similar problem. To state a
reverse claim, Shahbabian must allege that Defendants (1) knowingly (2) made, used,
or caused to be made or used false records or statements material to (3) an obligation
owed 	to 	the 	government, 	or 	alternatively, 	that 	Defendants 	(1) knowingly
(2) concealed or improperly avoided (3) an obligation owed to the government.
31 U.S.C. 	§ 3729 	(a)(1)(G). 	An 	“obligation” 	includes 	the 	“retention 	of 	any
overpayment.” Id. § 3729(b)(3). Shahbabian’s reverse claim is based on the allegation
that the United States overpaid Defendants as result of the false claims submitted.
(Doc. 9, #1139–40). But because Shahbabian fails to plead that any false claims were
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submitted, the Court cannot infer that there was any overpayment that Defendants
have an established duty to repay.
D. 	The Court Dismisses Shahbabian’s Motion to Consolidate as Moot.
That brings the Court to Shahbian’s request to consolidate his case with
Murphy. (Doc. 68). Because the Court is dismissing all of Shahbabian’s claims, that
request is now moot. That said, if Shahbabian successfully addresses the deficiencies
identified by the Court in his complaint by amendment, he is free to renew his motion
to consolidate.
* 	* 	*
Simply put, Shahbabian fails to specifically allege facts that allow the Court to
plausibly infer that Defendants violated either the AKS or the Stark law. Because
that is his only basis for asserting that Defendants submitted false medical claims to
the United States, his FCA claims all fail. That said, because the Court dismisses
based on pleading defects, it does so without prejudice. To that end, the Court grants
Shahbabian thirty days to seek leave to amend his complaint if he wishes to do so
and can address the pleading defects set forth above.
CONCLUSION
For the reasons discussed above, the Court GRANTS Defendants’ motions to
dismiss, (Docs. 40, 42). But because Shahbabian could cure the defects through new
allegations, the Court DISMISSES WITHOUT PREJUDICE. Accordingly, the
Court GRANTS Shahbabian thirty days in which to file a motion for leave to file an
amended 	complaint, 	attaching 	the 	proposed 	complaint. 	The 	Court 	will 	retain
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jurisdiction over this matter during that time. But, if he fails to do so, the Court will
DIRECT the Clerk to enter judgment dismissing this action without prejudice and
to 	TERMINATE 	this 	case 	on 	its 	docket. 	Additionally, 	the 	Court 	DENIES
Shahbabian’s motion to consolidate, (Doc. 68), as MOOT.
SO ORDERED.
October 9, 2026
DATE 	DOUGLAS R. COLE
UNITED STATES DISTRICT JUDGE
MOOT.
GLAS R.	R	R	R	R	R	R	R	R	R	R	R COLE
ED STATES DISTRICT J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	J	JU	U	U	U	U	U	U	U	U	U	U	U	U	U	U	U	U	U	U	U	U	U	U	U	U
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