Whistle-blower suit shows need for vigilance
A California hospital's recent settlement of a whistle-blower lawsuit reinforces the need for risk managers to be vigilant about preventing and seeking out sweetheart deals for physicians that may violate Medicare's anti-kickback statute, say attorneys familiar with the case.
The Tulare (CA) Regional Medical Center and its parent, the Tulare District Healthcare System, recently agreed to pay more than $2.4 million to settle a federal lawsuit claiming that the hospital and health care system had provided physicians with office rent and land sales far below fair- market value. The lawsuit also alleged that the hospital and health system had a policy of forgiving debts in exchange for referring patients to the hospital.
U.S. Attorney Thomas P. O'Brien, JD, in Los Angeles, whose office helped investigate the case, says Tulare agreed to pay the settlement without admitting any wrongdoing. Patric Hooper, JD, the Los Angeles attorney who represented the hospital district, issued a statement saying the district has taken steps to ensure any arrangement with physicians complies with federal law. The alleged violations occurred under the watch of previous health district managers, and the new managers have cooperated fully with the federal investigation, Hooper says.
The allegations involved 20 physicians, one doctor's group, and one laboratory, but the lawsuit did not name them. The alleged violations came to light in 2008, when the hospital district's former chief financial officer, Maria Lucy Reimche, filed a whistle-blower lawsuit filed in U.S. District Court in Los Angeles. Reimche was CFO from 1997 to 2006, the period during which most of violations were said to have occured. Reimche will receive approximately $500,000 from the settlement, according to O'Brien.
The settlement also includes a five-year corporate integrity agreement.
Documentation can make difference
Bryan Moser, a director in Grant Thornton International's forensic accounting and investigative services group in Chicago, says the Tulare case highlights the need for good record keeping. The former CEO of Tulare indicated during the litigation that he thought some of the charges could have been refuted if the health system had kept better records.
"Documentation becomes crucial in making a determination of what happened months or years after the fact," Moser says. "The task becomes especially difficult when certain employee positions experience turnover. Key players may no longer be around to describe what happened or, more importantly, why things happened."
Sometimes in an investigation certain facts provide an initial appearance of impropriety before one is able to understand all of the facts and circumstances, he says. After some lengthy and costly digging, one might find that a different situation existed than what was suspected initially.
"The risk of such a misconception occurring can be lessened by companies having adequate documentation and internal controls in place. For example, in this matter, there may have been disagreement about whether certain property was leased or sold at fair-market value. Sometimes judgments regarding fair-market value reflect unique circumstances," Moser says. "If those judgments and the unique circumstances are not documented, it can be difficult to go back after the fact and demonstrate a conclusion that appears inconsistent with other information."
Moser says adequate documentation of why certain actions are taken and why certain amounts are recorded in the accounting system can result in a better outcome for the organization. If the allegations are true, better documentation may have resulted in impropriety becoming clear early on to key people across the organization, including internal audit, general counsel, and others, which may have resulted in corrective action being taken to resolve the situation, he says.
The current leaders of Tulare reportedly have been cooperative with authorities, but Moser says the situation might have been resolved more quickly and with less cost if the organization had discovered the problem itself and self-reported.
"If the allegations are unfounded, the entire situation may have been prevented had the documentation more clearly pointed to the facts as they occurred," he says. "Even if the government investigation had proceeded, had all of the areas in question been well documented, the hospital may have had the ability to refute the allegations without spending millions of dollars more."
Of course, documentation by itself does not replace adequate internal controls, Moser notes. The new management of Tulare reportedly has put in place measures to ensure that agreements with physicians do not violate federal law.
"One would hope such measures would have already been in place," Moser says. "This is certainly a wake-up call for any hospitals that have not done so already."
Marcella Auerbach, JD, a partner with the law firm Nolan & Auerbach, based in Fort Lauderdale, FL, sees useful lessons in the Tulare case. First, she says, it shows that whistle-blower cases can hit relatively small hospitals Tulare has 112 beds just like they hit the big players in health care. Secondly, she says, the case underscores the need for a good corporate compliance program.
"Nobody wants an investigation or the associated expense, but good business practices of documentation and internal controls can be very cost-effective compared to the expense of an investigation," she says.
The government tends to have substantial evidence before it brings such charges against a health care provider, Auerbach says, so defending the charges can be an uphill climb. Sweetheart deals for physicians are not unusual in health care, she says, and she has seen many cases in which providers stepped over the line into fraud while trying to entice doctors.
"It's something I've seen before. There are hospitals that, in their interest in getting referrals from doctors to the hospital, have worked out deals that are just like the details alleged in this case," she says. "And this is how those cases can end up."
If a risk manager suspects, or confirms, such fraud, self-disclosure may be the best way out of a dangerous situation, she says. Auerbach points out, however, that the feds usually do not prosecute a single instance of such fraud or minor forays into forbidden territory.
"These kinds of cases come up when there are a lot more than a few physicians involved with the hospital in these arrangements, and the arrangements are known within the hospital or the system itself. They are not a surprise revelation to anyone involved," she says. "The federal government tends not to pursue one or two mistake; rather they go after situations where this is the culture within the hospital system. These fraud violations are usually pretty recognizable to the people who are supposed to be keeping an eye on these things."
Sources
For more information on whistle-blower lawsuits, contact:
Bryan Moser, Director, Forensic Accounting and Investigative Services Group, Grant Thornton International, McLean, VA. Telephone: (703) 847-7586. E-mail: [email protected].
Marcella Auerbach, JD, Partner, Nolan & Auerbach, Fort Lauderdale, FL. Telephone: (800) 372-8304.
A California hospital's recent settlement of a whistle-blower lawsuit reinforces the need for risk managers to be vigilant about preventing and seeking out sweetheart deals for physicians that may violate Medicare's anti-kickback statute, say attorneys familiar with the case.You have reached your article limit for the month. Subscribe now to access this article plus other member-only content.
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