Holland & Hart Healthcare Law Blog

IOWA HOSPITAL COUGHS UP $4.5M TO FEDS TO SETTLE STARK CLAIM THAT IT OVER COMPENSATED EMPLOYED DOCS.

In 2005 a group of physicians from Cedar Valley Medical Specialists in Cedar Valley, Iowa raised concerns with Sen. Charles Grassley, then Chairman of the Senate Finance Committee and with the IRS that Covenant Medical Center in Waterloo, Iowa was over compensating some of its employed physicians. According to 990s filed by Covenant with the IRS orthopedic surgeons Dr. Gary Knudson and Dr. Richard Naylor were paid $2.4 Million and $1.00 Million respectively for their services in 2002.  Dr. Victor Lawrinenko received $2.1 Million.

GENERAL COUNSEL LIABILITY IN HEALTH CARE ETHICS AND COMPLIANCE OVERSIGHT.

It is not easy being General Counsel for a health care system and growing more difficult with the advent of Corporate Integrity Agreement and Public Securities Obligations.  It is also dangerous and unwise to accept responsibility for Chief Compliance Officer as well as Chief Legal Officer. The ongoing travails of Christi R. Sulzbach, Esq. former Executive Vice President and General Counsel and Chief Compliance Officer of Tenet Healthcare Corporation is a case in point. Ms.Sulzbach, who resigned her position at Tenet in 2003, settled a case brought against her by the Securities Exchange Commission. arising out of a Tenet scheme to defraud Medicare by over reporting its costs so as to increase Medicare payments under its enhanced payment program for “Outlier” patient conditions.  Tenet settled for 10 Million Dollars several years ago. 

Exclusive Anethesia Arrangement Fails Personal Services Exemption Under Stark.

Normally, anesthesia services contracts do not receive a lot of scrutiny with respect to Stark or Anti-kickback Statute ("AKS") compliance. Recently, the federal 3rd Circuit Court of Appeals had a chance to review and reverse a summary judgment granted in favor of a hospital and its anesthesia providers who claimed that they were protected by the "personal services" exemption from Stark and the AKS. The Plaintiff in the Qui Tam lawsuit, United States  ex. rel. Kosenske v. Carlisle HMA, Inc., 3rd. Cir.,No. 07-4616, 2009), was a member of the anesthesia group which entered into an exclusive contract with the Carlisle Hospital for anesthesia services. The hospital provided free space and services to the anesthesia group, which is not an uncommon practice because that is generally considered part of the "arms length"negotiation price for the anesthesia services.

Physician Recruitment Fraud

There appears to be a growing trend toward the fraudulent inducement by some hospitals of physicians to relocate their practices and move to a new hospital cachement area based upon false representations as to the assistance the hospital can or will provide to establish the physician in the community, the "pent up need" for the physician's services in the community and the existence of a favorable payer mix in the community.  Many of these representations are made by head hunters out to score a "head" at all costs.  A physician with a useful specialty for the hospital moves or starts his or her practice in the community and frequently finds that he or she is treated pretty much an employee without the security of a salary.  The hospitals use the inducement of an "income guarantee" for the first year to help jump start the practice.  The income support usually runs for a year and then disappears.  The amount advanced in the first year is then converted into a loan with the balance to be forgiven over the next three years if the physician continues to practice in the community.

Pathology Joint Venture Opinion Underscores Differences in Stark and Anti-kickback Statute Compliance.

Last month the Office of Inspector General issued OIG Advisory Opinion No. 04-17 concerning a proposed pathology joint venture whereby a company affiliated with an operating pathology laboratory would undertake to set up "turn key" pathology laboratories for physician groups specializing in urology, gastro-interology and dermatology. The venture anticipated that up to five separate and fully functioning laboratories would be set up in a single office building with pathologists and technical personnel floating from one to another.

Referrals, Kickbacks, Cabbages and Kings.

The audience in Chicago attending the Physician Agreements and Ventures Conference on November 11 and 12 eagerly anticipated the keynote address of Carol C. Lam, U.S. Attorney for the Southern District of California. Ms. Lam, who graduated from Yale University with a degree in philosophy and Stanford University with a degree in law, has developed a flair for indicting health care executives and hospital systems for fraud.

CMS Issues Stark II, Phase II Regulations buried in 94 pages of Bureaucratise.

On March 26, 2004, after 15 years in the making, CMS quietly slipped the Stark II, Phase II regulations into the Federal Register. Congress passed the original Stark physician referral prohibition legislation in 1989 and has provided a near career lifetime of opportunity for lawyers in practice since then, including the undersigned. Following an amendment to the statute in the Mid-90s, CMS began work on the implementing regulations that propose to micromanage the process of physician referrals and making the simplest of transactions the practical equivalent of three dimensional chess.

STARKII, Part II Coming Soon To A Theater Near You.

WASHINGTON, DC (Medical Newswire) Physicians and other health care providers who have been anxiously awaiting the second phase of the Stark II law could soon find the wait is over.

Proposed Rule to eliminate Stark exception for Specialty Hospitals and to redefine imaging services as DHS.

The May 27, 2003 issue of the FR contains a listing of proposed new rules set for July by CMS. Included is a rule removing the "whole hospital" exception for physician owned specialty hospitals. This proposed action by CMS echoes the Hospital Investment Act introduced by Rep. Stark to proscribe what he apprently sees as a major "loophole" in his previous bills. CMS also proposes amending the defination of designated health services to cover a broader range of imaging services. The Specialty Hospital industry is lobbying heavily against both initiatives. The passage or adoption of such a prohibition could alter the course of development of this rapidly evolving restructuring of the hospital industry.

Physician Referral Prohibition (Stark Statute) Phase 1

Introduction On January 4, 2001, three years after publishing the proposed rule, HCFA has begun to issue a final rule implementing the federal statute prohibiting certain physician referrals.