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Stark law fine a warning on informal hospital-doctor deals

A $25 million settlement shows the government's willingness to go after health systems that deal with physicians on a handshake basis.

By — Posted April 15, 2013

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Intermountain Healthcare of Salt Lake City is paying a $25.5 million fine to the federal government as a result of an investigation into financial arrangements with some doctors.

The physicians involved were not found to have committed any wrongdoing as part of the Justice Dept. probe, launched in 2009 when Intermountain self-reported possible Stark law and anti-kickback violations. However, doctors can risk sanctions if they either work with hospitals without a written contract or fail to renew a deal formally.

“It's not a good thing for doctors to get scrutinized,” said Michael Schaff, a Boston-based health care attorney at Wilentz, Goldman & Spitzer. “They will look at everything you do.”

It's likely the government would end up finding something, he said. “It doesn't matter how conscientious you are, you can't do everything 100% right.” Schaff cautioned employed physicians to make sure their agreements would pass regulatory muster as well.

Intermountain issued a statement that highlighted the difficulty of doing everything right. It blamed its issues in part on the “complexity of nearly 300 pages of federal regulations and commentary governing relationships between hospitals and physicians that have evolved and changed over time.”

However, Intermountain said it “should have monitored this situation more closely. We are embarrassed that these issues occurred and regret that our controls at the time were inadequate to properly monitor these matters.”

Intermountain, which settled its case April 3 without admitting wrongdoing, self-disclosed to the government possible violations to laws that seek to prevent hospitals from paying physicians for referrals. In the settlement agreement, the Justice Dept. stated that the hospital, through its Intermountain Medical Group subsidiary, “compensated certain employed physicians using a bonus formula that may have improperly taken into account the volume and value of the physicians' patient referrals to Intermountain.”

The agreement said that the hospital system rented office space to physicians in two separate buildings “without written and executed leases for the entire term and/or where there might have been fair market value issues with the leases.” Finally, the agreement said that Intermountain had financial arrangements with other physicians that had not been written into a contract for the full period of the arrangement.

Intermountain said in its statement that the issues were “primarily technical” and involved “lack of proper paperwork.” The company said the physicians did nothing wrong, and quality, appropriateness and cost of care were not affected.

Advice for doctors

Schaff said that while the physicians were not drawn into the investigation personally, doctors should protect themselves and learn about laws that apply in cases like this, including Stark, anti-kickback laws and the False Claims Act.

The Office of the Inspector General's website has an overview of these laws, but states may have their own laws, Schaff said.

If physicians find themselves named as part of an investigation, they should go over their business contracts and other dealings to make sure they have done everything correctly. Schaff said if they find any issues, it's best to admit them to the proper authorities.

“You need to address it right away,” he said. “You have to deal with it and not ignore it.”

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External links

Roadmap on fraud and abuse laws, Office of the Inspector General (link)

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