Becker's Hospital Review

43 FINANCE FINANCE e settlement resolved claims that the nonprofit health sys- tem paid bonuses to employed physicians based on a formula that improperly took into account the value of the physicians' referrals to Adventist hospitals. Adventist allegedly submitted false claims to the Medicare and Medicaid programs for services rendered to patients by the physicians who received the improper bonuses. e claims against Adventist were originally brought by three whistle-blowers who worked at an Adventist hospital in Hender- sonville, N.C., and one whistle-blower who worked at the system's corporate office. e Adventist settlement is the largest healthcare fraud settle- ment ever made involving physician referrals to hospitals. Takeaways for healthcare executives 1. The "halo over nonprofits" is gone. "Historically, there has been a little bit of a halo over nonprofits" concerning Stark Law enforcement, says Danielle Sloane, a member in the health- care practice group at Bass Berry & Sims in Nashville, Tenn. How- ever, that isn't the case anymore. Adventist Health System's recent settlement is an example of how the government is going aer nonprofits, but Adventist isn't the only nonprofit system that has been the subject of a Stark Law enforcement action. In 2014, Halifax Hospital Medical Center, a nonprofit system based in Daytona, Fla., agreed to pay the government $85 million to resolve allegations it violated the False Claims Act and Stark Law. e case centered on the relationship between Halifax Hos- pital and its employed medical oncologists, neurologists and psy- chiatrists. Among the allegations, the government claimed Hali- fax knowingly violated Stark Law by paying three neurosurgeons more than fair market value for their work. e trend of the government going aer nonprofit systems was also present in another case last year involving King's Daugh- ters Medical Center in Ashland, Ky. e nonprofit system agreed to pay the government $40.9 million to resolve allegations it acted in violation of the False Claims Act and Stark Law by engaging in improper financial relationships with physicians. e lawsuit spe- cifically alleged the system violated Stark Law by paying certain cardiologists salaries that were in excess of fair market value. 2. Employment agreements do not insulate hospitals from Stark Law enforcement. Several past settlements, such as the Halifax case and the settlement involving Sumter, S.C-based Tuomey Healthcare System, make it clear the government will not hesitate to bring an enforcement action over compensation for employed physicians. e Tuomey case evolved out of 19 part-time employment agreements that the health system entered into with specialists. In May 2013, a jury found Tuomey violated Stark Law and the False Claims Act by submitting $39 million in false claims to Medicare and compensating physicians for referrals. As a result, a $237 mil- lion judgment was entered against Tuomey. e system appealed the ruling, and the appeals court upheld the judgment. 3. Government focus on lack of physician practice profit. Although a lack of profit at physician practices doesn't always equate to a Stark Law violation, since hospitals can take a loss on practices without ulterior motives, it is clearly something hospitals need to consider when setting physician compensation. e recent Advocate and Broward Health cases both involve health systems operating physician practices at a loss. "It shouldn't be the expectation that the practice is going to continually operate at a loss," says Ms. Sloane. "It should be the exception rather than the rule." At Adventist, most or all of the physician practices operated at a loss, and Ms. Sloane says compensation should be set so that is not the norm. 4. Consider self-disclosure. Hospitals can self-disclose po- tential Stark Law violations through CMS' Self-Referral Disclo- sure Protocol. is is an attractive option for many hospitals due to the seemingly reasonable settlements that have resulted from self-disclosure. For example, Adventist self-disclosed its potential Stark Law violations less than one month aer it was hit with the first qui tam lawsuit alleging violations of the physician self-referral law. Although Adventist's $188.7 million settlement may not seem rea- sonable, the amount appears to be a better deal than the alterna- tive when the facts are considered. e Adventist settlement resolved allegations that the system's compensation arrangements with approximately 240 employed physicians violated Stark Law, whereas the Broward Health case only involved arrangements with nine physicians. e Adventist case "shows a systematic failure to follow the law," says Ms. Sloane, and it is possible self-disclosure allowed the system to settle for less than it would have had it not self-disclosed. n

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