No. 25-1507, — F.4th —-, 2026 WL 1595887 (4th Cir. June 4, 2026)

Executive Summary

In United States ex rel. Kyer v. Thomas Health System, Inc., the Fourth Circuit Court of Appeals affirmed the dismissal of a qui tam False Claims Act (FCA) suit brought by a former hospital nurse against a nonprofit health system, its two hospitals, its employed-physician group, and a former executive. The relator alleged that the defendants submitted Medicare claims tainted by violations of the Stark Law and the Anti-Kickback Statute (AKS), so that the system’s certifications of compliance rendered those claims false. Reviewing an 83-page amended complaint supported by roughly 30 pages of billing tables, the court held that the complaint failed to plead fraud with the particularity Rule 9(b) requires. At the heart of the decision is a clean legal line: paying physicians for their own productivity — measured in work relative value units (wRVUs) for services they personally perform — is not the same as paying them for referrals, and does not, by itself, create the prohibited financial relationship the Stark Law requires.

Why It Matters

This decision is a meaningful win for health systems, employed-physician groups, and the compliance teams that advise them. It confirms that widely used wRVU productivity compensation does not, standing alone, create Stark Law exposure, because the statute excludes a physician’s personally performed work from the definition of a “referral.” The ruling also cabins the Fourth Circuit’s landmark Tuomey decision — distinguishing ordinary productivity pay from a “collections” formula that captured the hospital’s facility fees — and it reaffirms rigorous Rule 9(b) gatekeeping: a relator cannot dump thousands of billing codes into an appendix and ask the court to find the fraud, but must connect those codes to Medicare’s “designated health services” and to a concretely pleaded self-referral or kickback scheme. For settlement counsel and neutrals, it is a useful marker of how pleading-stage vulnerabilities drive the realistic value of a healthcare FCA case.

Detailed Discussion of the Facts

Thomas Health System, Inc. is a nonprofit corporation in South Charleston, West Virginia, that owns two hospitals — Thomas Memorial Hospital and St. Francis Hospital — and controls THS Physician Partners, Inc. (THSPP), a multi-specialty group employing physicians and nonphysician providers such as physician assistants and nurse practitioners (who, under West Virginia law, generally must practice under physician supervision). The hospitals participate in Medicare and, on enrollment and in annual cost reports, must certify compliance with the Stark Law and the Anti-Kickback Statute. The relator, Liesa Kyer, was a former nurse at Thomas Memorial.

THSPP paid its physicians based on their wRVU totals — a work-based measure of the time, skill, and effort a procedure requires — with a minimum target to earn a base salary and a bonus that scaled with wRVUs above the target; some physicians also received credit for a share of the wRVUs generated by nonphysicians they supervised, and a handful were paid at or above the 90th percentile of national benchmarks. In early 2015, the system adopted a “provider-based billing” structure, converting certain physician offices into hospital departments. That change “unbundled” billing so that THSPP billed the professional-services component while the hospital separately billed a higher facility fee, leaving THSPP to run operating losses that the parent backfilled through transfers — while the integrated system captured more Medicare revenue overall.

Kyer filed her qui tam complaint under seal in November 2020; the government obtained five seal extensions over nearly three years before declining to intervene. Her March 2024 amended complaint asserted four counts — presenting false claims, false statements material to false claims, conspiracy, and a reverse false claim. Rather than sue to recover any overcharges itself, she pursued the claims on the government’s behalf. The district court (S.D. W. Va., Judge Goodwin) dismissed the complaint under Rule 9(b) and denied post-judgment vacatur and leave to amend; Kyer appealed both rulings, which the Fourth Circuit reviewed together as a single judgment.

Legal Analysis

The district court dismissed the complaint for failing to plead fraud with the particularity Rule 9(b) requires — a standard that, where FCA liability hinges on an underlying Stark or Anti-Kickback violation, demands that the underlying scheme itself be pleaded with particularity. The relator’s billing tables established the who, what, where, and when, but not the “how,” or indeed “whether,” any claim was actually false. Affirming, the Fourth Circuit detailed several key points:

• wRVU productivity is not referral-based compensation. The dispositive Stark element was the “financial relationship.” An indirect compensation arrangement requires physician pay that “varies with, or takes into account, the volume or value of referrals,” and wRVU compensation rewards the physician’s own personally performed work — which the statute expressly excludes from the definition of a “referral.” A formula “takes into account” referrals only if it includes referrals as a variable; a wRVU formula contains no such input.
• Distinguishing Tuomey. In Tuomey II, the unlawful formula was based on “collections” that included the hospital’s facility fees, tying physician pay directly to referral revenue. wRVUs, by contrast, track only the physician’s labor — so Tuomey does not sweep in ordinary productivity pay.
• Supervision credit and high pay did not bridge the gap. Crediting a physician for supervising nonphysicians rewards the physician’s own (legally required) work, not referrals. Pay above the 90th percentile, standing alone, does not show variation with referrals — by definition, ten percent of physicians exceed it — distinguishing Bookwalter, where compensation ran two-to-three times that benchmark with other red flags.
• The Anti-Kickback theories failed. The hospitals’ transfers covering THSPP’s operating deficit were at least as consistent with lawful explanations — maintaining unprofitable service lines or the accounting consequence of provider-based billing — as with a kickback, and facts equally consistent with lawful and unlawful conduct do not survive Rule 9(b). A $5,000 marketing stipend cut the other way entirely: it induced THSPP physicians to attract patients to their own practices, making them the inducers of outside referrals rather than parties induced to refer to the hospitals.
• The derivative counts collapsed. Because no claim was rendered false, there was no unlawful agreement to support the conspiracy count, and the reverse-false-claim count necessarily failed as well.
• Denial of leave to amend was no abuse of discretion. Having filed in 2020, amended in 2024 with the benefit of more than 500,000 pages of pre-amendment discovery and the roadmap of a motion to dismiss, and still offered no proposed cured complaint, the relator gave the district court ample basis to deny another round for undue delay and repeated failure to cure.

Holding

The Fourth Circuit affirmed, holding that the complaint failed to plead FCA fraud with Rule 9(b) particularity: it alleged neither a Stark Law violation — because wRVU-based productivity compensation is not compensation tied to the volume or value of referrals — nor a plausible Anti-Kickback Statute violation. The derivative conspiracy and reverse-false-claims counts failed with the substantive claims, and the district court did not abuse its discretion in denying post-judgment vacatur and leave to amend. The judgment was affirmed.

John Libby is a mediator and arbitrator focused on healthcare and commercial disputes, including False Claims Act, Stark Law, and Anti-Kickback matters. This summary is offered for general informational purposes and does not constitute legal advice.