United States ex rel. Shahbabian v. TriHealth, Inc., No. 1:20-cv-67, 2026 WL 3030389 (S.D. Ohio Oct. 9, 2026) | United States ex rel. Murphy v. TriHealth, Inc., No. 1:19-cv-168, 2025 WL 2104279 (S.D. Ohio July 28, 2025) | United States ex rel. Martin v. Hathaway, 63 F.4th 1043 (6th Cir. 2023)

Healthcare / False Claims Act · Anti-Kickback Statute (remuneration) · Stark Law (personal services exception) · First-to-File · Rule 9(b)

Introduction and Executive Summary

Co-management agreements between hospitals and physician groups whose physicians practice there are often targets for relators who probe the relationships and agreements for violations of the Anti-Kickback Statute (AKS) or the Stark Law. In the Sixth Circuit, the AKS path narrowed in 2023, when United States ex rel. Martin v. Hathaway, 63 F.4th 1043 (6th Cir. 2023) (Hathaway), held that “remuneration” required a payment or transfer of value, not simply any act that may be valuable to another. On October 9, 2026, in United States ex rel. Shahbabian v. TriHealth, Inc. (Shahbabian), the U.S. District Court for the Southern District of Ohio applied Hathaway to a qui tam challenging a Cincinnati hospital system’s arrangement with the region’s largest independent neurosurgery group. In July 2025, the same court had allowed a companion qui tam against the same hospital system, United States ex rel. Murphy v. TriHealth, Inc. (Murphy), to proceed. This time it dismissed without prejudice, giving the relator 30 days to seek leave to amend, and made three rulings. First, the FCA’s first-to-file bar did not apply, because the earlier complaint was legally infirm when this one was filed. Second, the relator had not pleaded any form of remuneration the AKS reaches, and referrals exchanged for referrals did not violate the AKS under Hathaway. Third, although the Stark Law’s personal services exception was an affirmative defense, the relator still had to plead specific facts showing that the compensation exceeded fair market value or was tied to referrals, and he did not.

Background Facts

The co-management agreements and the parties

TriHealth, Inc., the corporate parent of Good Samaritan Hospital and Bethesda North Hospital in Cincinnati, entered co-management agreements in 2014 and 2017 with Mayfield Clinic, Inc., an independent neurosurgery group. TriHealth paid Mayfield for on-call coverage, medical director services, and quality initiatives—$80,417 a month for call coverage under the 2014 agreement, $95,417 a month under the 2017 agreement, and more than $2 million a year in all under the 2017 agreement—and referred its unassigned neurosurgery patients to Mayfield physicians. Shahbabian at *2, *4, *18.

The 2014 agreement required Mayfield to provide “expanded comprehensive neurosurgery services” across the TriHealth system, named a Mayfield shareholder as Medical Director of Neurosurgery for the TriHealth Surgical Institute at Good Samaritan, and provided that TriHealth would pay Mayfield an additional $175,000 a year if Mayfield met quality initiative targets. It also required TriHealth to refer all emergency and unassigned neurosurgery patients at both hospitals to Mayfield physicians. A later amendment detailed Mayfield’s services; the complaint alleged that no fair market value determination was done. Both agreements expressly prohibited compensation tied to “the volume or value of referrals or other business generated” for TriHealth. Id. at *2–3, *18.

Dr. Set Shahbabian, a neurosurgeon who had operated at Good Samaritan since the late 1960s and became a TriHealth employee in 2014, alleged in his qui tam complaint that the arrangements were a quid pro quo. He alleged that TriHealth transitioned his practice and referral base to Mayfield, invested more than $46 million in neurosurgery facilities and elevated Mayfield’s referral status, and that Mayfield, in return, moved thousands of procedures it had been performing at UC Health to TriHealth hospitals. He filed this qui tam on January 27, 2020. Id. at *2, *5–6.

The alleged exchange

According to the qui tam complaint, new TriHealth leadership set out in 2015 and 2016 to grow its neurosurgery business. At the time, TriHealth employed only two neurosurgeons, and about 80% of Mayfield’s procedures were done at TriHealth’s competitor, UC Health. In April 2016, the complaint alleged, TriHealth offered to transition Dr. Shahbabian’s referral base to Mayfield in exchange for Mayfield redirecting its cases, and Mayfield asked for hospital privileges for one of its surgeons, disclosure of TriHealth’s planned investment, and a commitment to the transition. A January 2017 email to TriHealth executives laid out an estimated $47.6 million in strategic-plan investments, the co-management fees and projected case volumes by physician. Id. at *3–4.

The complaint alleged that what followed was part of the same plan. On May 2, 2017, TriHealth told Dr. Shahbabian that his employment agreement would not be renewed when it expired in April 2019, a step the complaint described as the next stage of the scheme. A week later, TriHealth and Mayfield signed the 2017 co-management agreement, which the complaint said formally consummated the scheme. A week after that, according to the complaint, TriHealth forced Dr. Shahbabian to stop operating by threatening internal review and a report to the Ohio State Medical Board over alleged quality-of-care issues, transferred his scheduled surgeries to other physicians, and, after Dr. Tempel of Mayfield arrived that July, directed Dr. Shahbabian’s referring physicians to send their cases to Dr. Tempel. Unaware of the arrangement with Mayfield, he reluctantly resigned his privileges. Id. at *4.

To comply with Rule 9(b)’s requirement to plead fraud with particularity, the complaint identified one Medicare beneficiary, an unassigned patient referred to Mayfield under the agreement, and listed the physician, hospital, and third-party claims submitted for that patient’s care, with amounts billed and paid. It pleaded four counts under 31 U.S.C. §3729(a)(1)(A), (B), (C) and (G), each resting on the alleged AKS and Stark violations for falsity. Id. at *4–5.

The related litigation

Before filing this qui tam, Dr. Shahbabian sued TriHealth and Mayfield in his personal capacity in 2018, alleging breach of contract, age and disability discrimination, and fraud, on the theory that they had conspired to force him out because of his age. In that case, a different judge dismissed his claims on summary judgment and held that he had to repay TriHealth $679,711.61 of his earnings for failing to meet the surgical-volume requirements of his employment agreement. Shahbabian v. TriHealth, Inc., No. 1:18-cv-790, 2021 WL 3110073, at *13–18 (S.D. Ohio July 22, 2021), aff’d, Nos. 21-3762, 22-3479, 2023 WL 2424603, at *6 (6th Cir. Mar. 9, 2023).

Murphy, the companion qui tam, was filed in March 2019 by Timothy Murphy, TriHealth’s former Physician Practices Chief Financial Officer, against TriHealth and two TriHealth affiliates. It alleged similar AKS and Stark violations, claiming TriHealth paid Mayfield physicians in exchange for referrals. Mayfield was not named as a defendant in Murphy. The government declined to intervene in both cases, and at the relator’s request in Murphy, the court decided related issues in the two cases together. On July 28, 2025, the court denied the defendants’ motions to dismiss in Murphy 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), and certified for interlocutory appeal the question whether the FCA’s qui tam provisions violate the Appointments and Take Care Clauses. The same day, in Shahbabian, it rejected the same constitutional and standing arguments, stayed the case, and put off the remaining motions. After the Sixth Circuit declined to hear the interlocutory appeal, Murphy moved into discovery, and Dr. Shahbabian moved to consolidate the two cases. Shahbabian at *5–7.

Legal Analysis

1. The first-to-file bar

• The court measured the earlier complaint as it stood when this suit was filed. The defendants argued that Murphy, filed ten months earlier and still pending, barred this case under the FCA’s first-to-file rule, which provides that once a qui tam is filed, “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). Under Sixth Circuit authority, though, an earlier complaint bars a later one only if it is not legally infirm—that is, only if it satisfies Rule 9(b). Shahbabian at *8 (citing United States ex rel. Poteet v. Medtronic, Inc., 552 F.3d 503, 516 (6th Cir. 2009), abrogated in part on other grounds by United States ex rel. Rahimi v. Rite Aid Corp., 3 F.4th 813 (6th Cir. 2021), and Walburn v. Lockheed Martin Corp., 431 F.3d 966, 972–73 (6th Cir. 2005)). Dr. Shahbabian argued that the bar didn’t apply because the Murphy complaint failed Rule 9(b) and, independently, because it didn’t allege the same essential facts. Id. That raised a threshold question: which Murphy complaint counted? The court had already upheld Murphy’s current, second amended complaint, so if that pleading counted, the infirmity argument would fail. Dr. Shahbabian argued that the relevant pleading was the original Murphy complaint on file when he sued. The court agreed with him, holding that the first-to-file analysis looks to the facts as they existed when the later action was brought. Id. at *9 (citing United States ex rel. Cestra v. Cephalon, Inc., No. 14-01842, 2014 WL 5038393, at *3 (E.D. Pa. Oct. 9, 2014)).
• The original Murphy complaint did not satisfy Rule 9(b). Measured against that original complaint, Dr. Shahbabian’s Rule 9(b) argument succeeded. Under United States ex rel. Owsley v. Fazzi Associates, Inc., 16 F.4th 192, 196–97 (6th Cir. 2021), a relator alleging a fraudulent scheme must either identify a representative claim actually submitted for payment, or allege facts, based on personal knowledge of billing practices, supporting a strong inference that particular identified claims were submitted, with dates and amounts. Shahbabian at *9–10. The original Murphy complaint made only generalized assertions, such as that “TriHealth physicians submitted thousands of CMS 1500 forms to CMS.” Id. at *9. The court noted that the relator in Murphy later attached specific claims to an amended complaint. Id. at *10. Because the original complaint was legally infirm, the bar didn’t apply, and the court didn’t reach whether the two complaints shared the same essential facts. Id. at *8, *10.

2. The Anti-Kickback Statute: remuneration

• The case turned on a single element. All four of Dr. Shahbabian’s FCA counts depended on showing that the claims were false, and his only theory of falsity was that they resulted from AKS and Stark violations. Id. at *11. The AKS makes it a crime to knowingly and willfully offer, pay, solicit or receive “any remuneration” in return for, or to induce, referrals of items or services paid for by a federal health care program, 42 U.S.C. §1320a-7b(b)(1)–(2), and a claim “that includes items or services resulting from a violation” of the AKS is false for FCA purposes, id. §1320a-7b(g). Of those elements, the defendants contested only one: whether anything TriHealth and Mayfield exchanged was “remuneration.” They didn’t dispute the AKS’s “knowingly and willfully” element (although they challenged FCA scienter elsewhere), and the court observed that “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.” Shahbabian at *11 & n.7. Nor did the defendants dispute that Mayfield physicians moving their own procedures to TriHealth hospitals were making “referrals”; the court found that they were. Id. at *14 n.9. The statute doesn’t define “remuneration,” but in Hathaway the Sixth Circuit held that the term “customarily requires a payment or transfer of some kind,” rejecting the argument of the relator and the government that it reaches “any act that may be valuable to another.” Hathaway at 1048–52.
• Six alleged forms of remuneration. Reading the complaint, the court identified six things TriHealth allegedly gave Mayfield in exchange for Mayfield’s redirected patients, which generated between about $100 million and $119 million in facility fees for TriHealth: (1) the transition of Dr. Shahbabian’s practice and referral base, some 270 to 300 procedures a year; (2) more than $2 million a year in payments under the 2017 co-management agreement; (3) more than $46 million in neurosurgery facility upgrades; (4) hospital privileges for a Mayfield surgeon; (5) “Tier 1” referral status for Mayfield physicians; and (6) the referral of all unassigned neurosurgical patients to Mayfield. Because the AKS prohibits both paying and receiving remuneration, any one of these, if adequately pleaded, would have sufficed. The court held that none was. Shahbabian at *12.
• Hospital privileges and facility investment weren’t payments or transfers of value, and so weren’t remuneration. Granting a Mayfield surgeon admitting privileges might have had value to him and to Mayfield, but the court treated it as the kind of “act that may be valuable to another” that Hathaway excluded, observing that otherwise an AKS violation would seem to arise every time a hospital credentialed a doctor who brought patients along. Id. TriHealth’s investment of more than $46 million in its own neurosurgery facilities tracked Hathaway’s example of a hospital upgrading its facilities to attract doctors: a hospital investing in itself isn’t paying or transferring anything to the doctors, even if they use the facilities to treat their own patients. Id. at *12 (citing Hathaway at 1050). The court left room for a different case, in which upgrades begin to look like individual perks for referring physicians, such as free designer lab coats. Id.
• Cash under the co-management agreements could be remuneration, but only if tied to referrals. The defendants conceded that the co-management agreements involved actual transfers of funds, which could qualify as remuneration under Hathaway, but argued that the payments were for the services Mayfield provided, not for referrals. Id. at *13. Dr. Shahbabian alleged that the agreements were entered into without any valid fair market value determination and took into account the anticipated volume and value of referrals. Id. Calling it “concededly a close call,” the court held that the complaint didn’t plausibly tie the compensation to referrals. It alleged no facts showing that compensation fluctuated with referral volume or exceeded market rates, beyond conclusory assertions that no fair market value determination was done and that the quality program was a sham. Id. A consultant’s 2016 email that listed projected case volumes alongside a new co-management agreement showed a broader plan to deepen the relationship, but not that the compensation was paid to induce referrals; to hold otherwise, the court said, it would have to read the AKS to bar any doctor paid by a hospital from referring patients there. Id. at *14. The relator’s own exhibits included an email from TriHealth’s general counsel calling for metrics “not related to volume/value of physician referrals.” Id. at *13. In a footnote, the court reserved whether a fair-market-value contract awarded to a physician group in order to induce referrals might itself be remuneration, because the relator hadn’t argued that theory. Id. at *13 n.8.
• Referrals exchanged for referrals weren’t remuneration. That left four theories—the facility-fee revenue TriHealth earned on redirected cases, the transition of Dr. Shahbabian’s practice, Mayfield’s elevation to Tier 1 referral status, and the unassigned-patient referral policy—which shared what the court called a common defect: the only thing of value that changed hands was, at its core, a referral. Id. at *14. The question was whether referrals themselves, with no other payment or transfer, could be remuneration. Dr. Shahbabian said yes, relying on Southern District of New York decisions treating patient information and referrals as remuneration, State of New York v. MedImmune, Inc., 342 F. Supp. 3d 544, 552 (S.D.N.Y. 2018), and United States ex rel. Kester v. Novartis Pharmaceuticals Corp., 41 F. Supp. 3d 323, 326 (S.D.N.Y. 2014). The court instead followed Hathaway. There, the Sixth Circuit held that a hospital’s decision not to hire an in-house ophthalmologist, which preserved a stream of referrals to and from a competing provider, wasn’t remuneration, and observed in dicta that, “[e]ven under an anything-of-value definition of remuneration, . . . it is doubtful” that the plaintiffs had alleged a cognizable referrals-for-referrals scheme. Shahbabian at *15 (quoting Hathaway at 1051). The court acknowledged that Hathaway turned partly on the hospital’s inaction, which might leave room for a theory based on a new stream of referrals, but agreed with Hathaway’s dicta: because no one holds a definite, existing interest in a potential patient that could be “transferred,” a referral was too far removed from a payment or transfer to qualify. Id.

3. The Stark Law: the personal services exception

• The court treated Stark exceptions as affirmative defenses. Dr. Shahbabian’s second theory of falsity was the Stark Law, which, subject to exceptions, prohibits a physician from referring Medicare patients for designated health services to an entity with which the physician has a financial relationship, and bars the entity from billing for those services. 42 U.S.C. §1395nn(a). He alleged that ten Mayfield physicians had such a relationship with TriHealth—compensation under the 2014 and 2017 co-management agreements—during the same period in which they referred patients to TriHealth facilities. Shahbabian at *5. The defendants didn’t dispute that a claim violating the Stark Law is false under the FCA, or that the co-management agreements created a financial relationship. Id. at *15–16. Instead, they invoked the personal services exception, 42 U.S.C. §1395nn(e)(3), which covers arrangements of at least a year compensating a physician for specified services, as long as the compensation is set in advance, doesn’t exceed fair market value, and isn’t determined in a manner that takes into account the volume or value of referrals. That raised a question that matters at the pleading stage: whether the relator must plead facts showing that the exception doesn’t apply, or the defendants must prove that it does. Dr. Shahbabian argued that the exception is an affirmative defense, and at least one defendant appeared to concede the point. Following the Third Circuit in United States ex rel. Bookwalter v. UPMC, 946 F.3d 162, 169, 177 (3d Cir. 2019), the court agreed, both because the statute separates the exceptions from the prohibition and because it would be a lot to ask a relator to plead around every exception. Shahbabian at *16–17. On that view, dismissal would be proper only if the complaint itself conclusively established the exception, and it didn’t; Dr. Shahbabian alleged the opposite. Id. at *17.
• Rule 9(b) and plausibility still required a factual reason to doubt the arrangement. One might think that ended the matter in the relator’s favor, the court said, but it didn’t. Because an FCA claim requires fraud, Rule 9(b) and the plausibility standard still required Dr. Shahbabian to give some reason, grounded in specific facts, to believe that this compensation arrangement was a cover for paying for referrals—that it was “the fraudulent, illegitimate needle in the legitimate-hospital-physician-contract haystack.” Id. The Bookwalter complaint had met that standard with detailed comparisons of specific physicians’ work units and pay against industry benchmarks, medians and 90th percentiles. Id. (citing Bookwalter at 176–77). This complaint offered only an allegation, on information and belief, that no fair market value determination was done, and a $2 million annual figure with no benchmark to compare it against. Id. at *17 (citing 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)).
• The contracts and the relator’s own exhibits pointed the other way. The court found the on-call rates not per se outrageous, noted that the parties had negotiated them over the years, and concluded that the most plausible inference was fair market value. Both agreements expressly barred volume- or value-based compensation, and the general counsel’s email called for metrics unrelated to referrals. Shahbabian at *18. In a footnote, the court also distinguished productivity-based earnings, which rise as doctors treat more patients, from compensation keyed to the number of patients moved from UC Health. Id. at *18 n.10.

4. The derivative counts

• The conspiracy and reverse false claims counts fell with the direct counts. Dr. Shahbabian also pleaded a conspiracy count under §3729(a)(1)(C) and a “reverse false claims” count under §3729(a)(1)(G), which reaches a defendant that knowingly conceals or improperly avoids an obligation to pay money to the government, including by retaining an overpayment. Both depended on the same alleged false claims. The conspiracy count fell with the direct counts, and without adequately pleaded false claims, the court couldn’t infer an overpayment the defendants had a duty to repay. Id. at *18–19.

Holding

The court granted the defendants’ Rule 12(b)(6) motions and dismissed the complaint without prejudice, holding that the first-to-file bar didn’t apply, that the complaint didn’t plausibly allege remuneration under the AKS (including on a referrals-for-referrals theory), and that it didn’t plead, with the particularity Rule 9(b) requires, facts suggesting that the compensation fell outside the Stark Law’s personal services exception. The court gave the relator 30 days to move for leave to file an amended complaint, attaching the proposed pleading, and said that otherwise it would direct entry of judgment dismissing the action without prejudice. It denied the motion to consolidate with Murphy as moot, without prejudice to renewal if leave to amend is granted. Shahbabian at *19.

What to Watch

• The amendment window. Thirty days from October 9 falls on Sunday, November 8, so under Rule 6(a)(1)(C) a motion for leave to amend is due by Monday, November 9, 2026. As of October 28, the docket showed no motion for leave to amend. On October 19, both this case and Murphy were reassigned to a different district judge for all further proceedings, so a new judge will decide any motion to amend and will preside over Murphy going forward. To survive, an amended complaint would need what the court found missing: compensation benchmarks, facts tying pay to referral volume, or the inducement theory the court reserved in its footnote.
• Murphy, in discovery before the same court. The companion case survived dismissal against TriHealth (Mayfield isn’t a party), and discovery there may surface the kind of compensation and volume facts this complaint lacked. If leave to amend is granted, the consolidation request returns.
• Referrals for referrals beyond the Sixth Circuit. The court extended Hathaway’s dicta into a holding that a pure referral exchange isn’t remuneration, disagreeing with the Southern District of New York decisions. Hathaway appears to be the only court of appeals decision to address the question, and it did so in dicta; no other circuit appears to have decided it either way. A dismissal without prejudice isn’t yet an appealable vehicle, but a final judgment would put the question to the Sixth Circuit.
• The constitutional challenge. The court rejected the Appointments and Take Care Clause arguments, and the Sixth Circuit declined interlocutory review. The question remains live elsewhere, with United States ex rel. Zafirov v. Florida Medical Associates, LLC, No. 24-13581 (11th Cir. Sept. 1, 2026), on remand and United States ex rel. Penelow v. Janssen Products, LP, No. 25-1818, still pending in the Third Circuit.

What This Means for Resolving FCA Disputes

Co-management agreements are common, and this decision shows how much of the pleading fight turns on the paper trail. The contract terms barring volume-based compensation and a lawyer’s email calling for referral-neutral metrics—documents the relator himself attached—carried weight with the court at the pleading stage. For hospital systems and physician groups, the decision underscores the value of documented fair-market-value work and referral-neutral metrics. For relators, it underscores that benchmarks and compensation data, not characterizations, are what get an AKS or Stark theory past Rule 9(b).

For anyone evaluating these two cases together, the dismissal isn’t the end of the exposure. Murphy is in discovery before the same court, and Shahbabian may be revived by amendment. Parties weighing a resolution are assessing a case that survived and a case that may return, with the reach of Hathaway in the Sixth Circuit an open question that could narrow or widen the range of outcomes for both.

John Libby is an arbitrator, mediator, and settlement counsel with LibbyADR LLC. This post contains his own summaries of the decisions discussed, prepared for general informational purposes only. The summaries are not intended to be a complete statement of any court’s reasoning, nor should they be taken to indicate how he would rule as an arbitrator in any particular case. In addition, the summaries are not legal advice, nor should they be construed as legal advice. Readers should not act on these posts, but should review the decisions themselves and consult with legal counsel.