A Review of OIG Self Referral and Antikickback Cases: 6 Categories of Non-compliant Physician Relationships and 8 Recent Cases

From 2001-2010, there were nearly 100 different HHS' Office of Inspector General physician self referral and kickback settlements. In just the last two years (2008-2010) there were more than 20 such settlements. At the same time, there has been an upswing of interest by hospitals and other healthcare entities to align more closely with physicians. Many of these 20 or so more recent settlements involve alleged improper attempts at aligning with physicians. Thus, a review of these settlements demonstrates a number of the tactics that hospitals and other groups are currently using to align with physicians.

1. The settlements can roughly be divided into settlements that are for less than $100,000 and those that are more than $100,000.

2. The settlements that are less than $100,000 generally have several things in common. They often reflect technical issues, they were often self reported, and they often involve situations in which there is little implication of illegal intent. For example, this type of settlement may involve technical violations, a failure to sign some sort of document or some other single error.

3. The settlements of more than $100,000 may or may not be self reported. They also often seem to demonstrate a clear intent to help physicians and suggest an intent to generate and strengthen business relationships.

4. Among settlements that demonstrate intent to strengthen relationships with physicians, there are six general categories of kickback and self referral relationships. They are as follows:

• The first category involves the provision of free services or staff to a practice of physicians. This may include administrative assistants, physicians assistants, athletic trainers or information technology.
• A second category includes paying for services not really needed. This may include paying for medical directorships, paying for vice presidents or providing part-time employment. In many situations, these can be wholly proper relationships. It is those relationships that are entered into that don't have a true purpose other than to reward physicians for referrals which are problematic.
• A third category includes situations where one is paying too much for a service such as for leased space or medical directorships or for other assets.
• A fourth type includes providing discounts on things such as insurance or other items, such as leased space.
• A fifth category involves paying physicians under contract different amounts than are contracted. For example, a hospital may contract a physician at a fair-market rate for a medical directorship but then actually compensate the physician at a higher rate.
• Finally, a sixth set of claims involves recruitment arrangements which are not structured to fully comply with recruitment exceptions in the Stark statute or found to have improper intent in regards to the Antikickback Statute.

5. Nearly all of these categories of relationships have appeared in recent OIG cases and/or settlements. A few examples of some of the larger cases include:

• Spartanburg Regional Healthcare System (Spartanburg, S.C.). In this case, the government alleged that the hospital provided IT technology resources to 10 different non-employed practices without billing the practices for the service. Because the hospital was providing the services for free without a contract with the physicians, the services allegedly served as a kickback to the physicians. The hospital settled for $780,000.
• Tuomey Hospital (Sumter, S.C.). This case involved the providing of a number of part-time employment arrangements which were found to have no more purpose than to induce referrals. In essence, the hospital paid physicians for part-time employment services that were not needed. A federal jury found the hospital guilty of violating the Stark Act for the contracts, which it began offering to physicians in 2004. Here, the hospital faces nearly $45 million in damages for its Stark violation.
• St. Joseph Medical Center (Towson, Md.). This case involves a situation where a large hospital in Maryland, St. Joseph, was attempting to more strongly align with the largest cardiology group in the area, MidAtlantic Cardiovascular Associates. Here, the group was deemed to control $70-$80 million in business. The government's investigation intended to examine if any improper financial relationships existed between the hospital and the practice. Specifically, the government was looking into the hospital's hiring of two of the practice's physicians, which resulted in the withdrawal of a nearly $25 million offer from competing Union Memorial Hospital in Baltimore to acquire the practice. The investigation led to three of the top executives of St. Joseph resigning from the system, and the hospital settled with the government in July 2009 to resolve the allegations without admitting liability in order to, according to the hospital, avoid litigation costs.
• University of Medicine and Dentistry (Newark, N.J.). Here, the government alleged the hospital illegally paid kickbacks to cardiologists in exchange for referring patients to the hospital thereby causing the submission of false claims to Medicare. The government alleged that the hospital experienced a drop in certain cardiac procedures that jeopardized the hospital's Level 1 Trauma Center status. As a result, the hospital allegedly provided local cardiologists contracts for part-time employment, which the government alleged only served as vehicles to provide illegal kickbacks. Here, the hospital settled with the government in Sept. 2009 for $8.3 million, and a number of individual cardiologists have also settled with the government for accepting the kickbacks.. The basic concept was the hospital employed physicians at various compensation rates for services that were essentially unneeded.
• Covenant Medical Center (Waterloo, Iowa). In this case, Covenant was alleged to have overcompensated five physicians in return for referrals. The hospital settled for $4.5 million. Although the physicians were not named as part of the settlement, they were said to be some of the most highly paid physicians in the country.
• King’s Daughters' Hospital and Health Services (Madison, Ind.). Here, the hospital self-disclosed its conduct involving contracts for employed physician bonuses based on services they were not personally performing. The OIG alleged that the hospital's contracts did not fully comply with the Stark Act. As a result, the hospital settled for $391,500.
• Oswego Hospital (Oswego, N.Y.). In this case, the hospital self-disclosed its conduct to the OIG and agreed to pay more than $2.1 million for allegedly violating Stark requirements in agreements with more than 20 physicians. The agreements included recruitment arrangements, office leases, professional service arrangements and the provision of discounted employee benefit plan premiums to non-employed physicians.
• Ivinson Hospital (Laramie, Wyo.). Ivinson Hospital was alleged to have provided kickbacks to physicians by providing free rent, equipment and furnishings; leases at less than fair-market-value; medical director services in excess of fair-market-value; and reimbursement at rates more than the requirements of an income-guarantee agreement. Here, the hospital also self-disclosed its behavior and agreed to pay $635,000 to the government.

These cases highlight both the increased interest by hospitals to more closely align with physicians and the increased scrutiny by the OIG to ensure these relationships comply with applicable health and anitkickback laws. Hospitals and other entities that enter into such relationships must be careful to ensure their agreements are compliant.