The Department of Justice's recent complaint filed against Erlanger Health System and Medical Center for Stark law violations present several compliance concerns, according to an Aug. 14 report in JDSupra.
The complaints –– filed against Murphy (N.C) Medical Center , doing business as Erlanger Western Carolina Hospital and Chattanooga-Hamilton County (Tenn.) Hospital Authority doing business as Erlanger Health System and Medical Center –– allege that Erlanger employed and received referrals from physicians that did not meet any Stark law exceptions.
The complaint also stems from past allegations. In 2005, Erlanger paid $40 million to resolve Stark law violation allegations and entered into a 5-year corporate integrity agreement with the Office of Inspector General. The most recent complaint alleges that Erlanger’s pay model shifted from the primarily base clinical compensation model used during the years the agreement was in effect.
Here are three key compliance takeaways from the complaint, according to JDSupra:
1. Medicine directorships are under increased scrutiny
A focus of the complaint was Erlanger’s use of medical directorships to attract and reward high-revenue generating physicians, alleging that the health system did not require medical directors to document their time spent serving to substantiate that payments made to physicians were services actually provided.
"This serves as a good reminder that medical directorships are often under increased scrutiny," the report said. "While the Stark law does not require that health systems obligate medical directors to submit timesheets in order to be paid, documenting accurately the work done by medical directors to substantiate payments made to medical directors reduces Stark law risks."
2. Physician contracting review committees are an important tool to ensure Stark law compliance
The complaint is also notable as many of the allegations are premised on pay changes after Erlanger's five-year corporate integrity agreement expired. The agreement required Erlanger to establish a formal written review and approval process for all arrangements with physicians to ensure they do not violate Stark law. They also typically require a physician contracting review committee along with a process for documenting the business rationale, fair market value assessment and legal review of all physician contracts.
The complaint alleges that Erlanger changed its physician contracting process after the agreement expired and stripped its physician contracting committee of much of its authority.
The DOJ and the whistleblowers in the suit "allege that these changes led to decisions that resulted in physicians being compensated in excess of fair market value, in violation of the Stark law." according to the report.
This serves as a reminder for health systems to "carefully review changes to their physician contracting procedures, and to ensure that sufficient controls are in place to protect against allegations of Stark law noncompliance."
3. Directed referral requirements are permissible but do not waive Stark law requirements
The complaint also raised concerns about Erlanger tracking employed physician referrals outside of the system to combat leakage. According to the complaint, Erlanger employed more physicians and expected their employed physicians to treat their patients at Erlanger’s facilities and to refer their patients to other medical providers employed by Erlanger.
While Stark law permits health systems to contractually require employe physicians to exclusively refer in-network, the complaint "serves as a reminder that the Stark law's requirements for directed referrals are technical, and compliance with the directed referral requirements do not waive the Stark law requirement that employed physicians’ compensation must be consistent with fair market value."