$25.5 Million Technicality: Intermountain Health Care

August 31, 2013Health Law, Litigation

$25.5 Million Technicality: Intermountain Health Care

By Wayne Kinkade
Saafeld Griggs PC

Intermountain Health Care Inc. recently agreed to pay the United States $25.5 million to settle largely technical Stark Law and the False Claims Act violations.

According to Intermountain, which operates a large health system in the state of Utah, the violations mainly involved things such as expired, but otherwise fair market value, physician office leases and service agreements. Intermountain reported that approximately two-thirds of the $25.5 million settlement stems from a failure to update leases for physician office spaces at Cassia Regional Medical Center in Burley, Idaho (leases to 16 physicians) and a lease at Sevier Valley Medical Center in Richfield, Utah (space leased to 2 physicians).

As can be true with many practices, Intermountain explained that sometimes it took up a significant amount of time to get expired leases renewed. Importantly, while the leases had all technically expired, the doctors were still making payments. In a statement, Intermountain noted that “none of these issues adversely affected in any way the quality, appropriateness, or cost of patient care at Intermountain hospitals and clinics.”

Even though approximately 1/3 of the settlement did relate to non-technical Stark violations (for example, certain compensation arrangements contained bonus structures that may have taken into account the volume of value of referrals), the case illustrates the genuine risk of maintaining financial relationships that are not properly documented.

Notably, this is a case where Intermountain submitted a voluntary disclosure of potential violations under the Stark Law in 2009. The voluntary submissions were made under the Office of Inspector General’s so-called Provider Self-Disclosure Protocol and it took the parties nearly four years to resolve the case.

While the $25.5 million penalty seems high, believe it or not, it could have been worse for Intermountain. In consideration of voluntary disclosure of these violations, the government did not seek to exclude Intermountain from Medicare, Medicaid, or other federal health care programs and it did not impose a Corporate Integrity Agreement.

“People should expect that hospitals and doctors care more for their patients than their bottom line profits,” said Gerald Roy, Special Agent in Charge for the Department of Health and Human Services Office of Inspector General for the U.S. region including Utah. “So I applaud Intermountain for recognizing their liability and coming forward to self-disclose these violations.” Must have been a light “golf clap”?

Intermountain was “applauded” for the self-disclosure, then wrote a check for $25.5 million. The government commentary is perhaps unfair given the nature of the violations; however, it illustrates the government stance in these cases (arguably, but for these regulations, time spent complying with signature requirements and leasing rules could be better spent on patient care). Fortunately, the mistakes made by Intermountain are avoidable. www.sglaw.com 503-399-1070

As providers are well aware by now, the Stark Law restricts certain financial relationships between referring physicians. Under the Stark Law, “intent” is not an element of a violation. As a result, an “inadvertent” expiration of a contract is treated the same as a compensation arrangement designed to reward volume of referral business. The statute gives the government no authority to concede minor or “technical” violations.

Contrast the Stark Law with the Anti-Kickback Statute (AKS), which is intent-based and requires that the party “knowingly and willfully” engage in the prohibited conduct. The federal AKS is a criminal statute that prohibits the exchange (or offer to exchange), of anything of value, in an effort to induce (or reward) the referral of federal health care program business.

To avoid the possibility of a penalty or repayment obligation, providers should consider adopting the following practices:

1. Annual Contract Reviews. During your annual meeting, review all financial arrangements and contracts. Annual review will identify potential Stark Law violations early so that repayment obligations will not be compounded. Intermountain’s violations occurred over the course of 9 years without detection. In particular, examine payments to providers and look for unsigned agreements and expired contracts. Also, confirm that your agreements fit within the applicable Stark exception (for example, confirm that lease payments made are fair market value).

2. Calendaring System. Adopt a system whereby all applicable agreements can be tracked and monitored. Your calendaring system should be designed to notify you well in advance of the expiration of any agreement.

3. Compliance Plan. Adopt a Compliance Plan now and schedule regular staff compliance training regarding your policies and procedures. Not only will the adoption and implementation of a Compliance Plan soon be mandatory for all providers, it can help you avoid inadvertent violations of federal health care regulations.

While the Intermountain case involved a large health system, there are lessons here for all providers.

Contact Wayne Kinkade at Saalfeld Griggs for more information about Stark and Anti-Kickback compliance or for help in adopting a Compliance Plan to help guard against these kinds of costly technical violations.