Apr 02

Hospital settles Stark case

Reprinted from REPORT ON MEDICARE COMPLIANCE, the nation's leading source of news and strategic information on false claims, overpayments, compliance programs, billing errors and other Medicare compliance issues.

By Nina Youngstrom, Managing Editor (nyoungstrom@aispub.com)


Real estate deals that allegedly violated the Stark law are at the heart of Rush University Medical Center’s $1.5 million False Claims Act settlement, which grew out of a whistleblower lawsuit filed by Rush’s former director of real estate and an orthopedic surgeon.


The settlement, announced by the Department of Justice March 9, resolves allegations that Rush University Medical Center submitted false Medicare claims from 2000 to 2007 by entering into noncompliant office-space leasing arrangements with two physicians and three medical groups.


Rush allegedly made rent and other office-space concessions to an obstetrician/gynecologist between 1997 and 2002. Similar rent and office-space concessions allegedly were bestowed by Rush from 1999 through 2006 on “a certain internal medicine group and a certain solo practitioner obstetrician/gynecologist.”


Finally, between 2001 and 2007, “a certain solo practitioner obstetrician/gynecologist, a certain urology group and a certain neurosurgery group” did not have written, fully-executed leases with Rush or pay rent in a “timely and consistent manner,” the settlement alleges.


The government bootstraps Stark violations to the False Claims Act on the premise that Medicare claims are false if they stem from the referrals by physicians whose financial arrangements with the entities providing the services are not Stark-compliant.


Rush did not admit liability in the settlement.


The whistleblower lawsuit was filed by June Beecham, Rush’s director of real estate from 1996 to 2003, and Robert Goldberg, M.D., a board-certified orthopedic surgeon who has been on Rush’s medical staff since 1995. Their false claims complaint contains allegations unrelated to real estate, but DOJ did not pursue those in the settlement. However, the whistleblowers will push on. “These whistleblowers continue to pursue their additional allegations against the defendants, attempting to recover additional money for the United States and the State of Illinois,” according to a statement from the whistleblowers’ law firm, Goldberg Kohn in Chicago. “The whistleblowers’ remaining allegations involve claims about whether attending surgeons spent the required time supervising surgical residents in the operating room to justify billing the government.”


As for the real estate deals, it’s hard to know exactly what transactions meshed with the vague allegations described in the settlement, and the whistleblower attorney Frederick Cohn delined to comment on this aspect of the case.


The Rush settlement is striking because it shows that four potentially bad leases can trigger a fairly large settlement, says Denver attorney Jeffrey Fitzgerald, with Faegre & Benson. “Between one and three doctors and as few as four leases led to $1.5 million in penalties,” illustrating the perils of falling outside of an exception to the Stark self-referral ban, he says. Unlike many other false claims cases based on physician agreements gone awry, the Rush case is a Stark-only case, with no allegations of kickbacks, he notes.


While there is no evidence that the whistleblower in this case was an architect of the flawed lease plan, or even responsible for the real estate component of Stark compliance, Fitzgerald finds it disconcerting that one of the whistleblowers was involved in managing the medical center’s real estate business. “The most troublesome whistleblowers are the ones who have some direct responsibility for the conduct,” Fitzgerald says. “The leases were the problem and the whistleblower is the director of real estate. Wasn’t it her job to make sure the real-estate deals were compliant?”


Should Managers Profit by Blowing Whistle?


In an analogous case, Fitzgerald represented a hospital sued by a whistleblower over alleged failure to have proper physical-therapy documentation, when the whistleblower was the head of physical-therapy documentation. Whistleblowers with this profile will claim they tried in vain to get the hospital powers that be to fix the errors.


In a statement, Rush said it cooperated fully in the investigation. “The government found a limited number of technical violations involving a handful of doctors. The total sum of the benefits allegedly received by these doctors amounted to $547,000, about one-third of the total monetary penalty,” according to the statement. “The remaining portion of the [almost] $1.6 million settlement includes a multiplier of damages and a separate penalty for unsigned leases.”


Before receiving the government’s subpoena, Rush says it “initiated efforts to correct the problems raised in the government’s inquiry.” As a result, the HHS Office of Inspector General did not require any integrity agreement in the settlement.


The Stark law bans Medicare payments to entities for “designated health services” (e.g., hospital inpatient and outpatient services, labwork and radiology) referred by physicians who have a financial relationship with entities providing the designated health services, unless an exception applies. Leases between DHS entities, such as hospitals, and referring physicians run afoul of Stark unless they meet an exception, which requires a written lease signed by the parties, fair-market value payments and commercially reasonable terms.


“The Stark law is intended to ensure that a physician’s medical judgment is not compromised by improper financial incentives and is based solely on the best interests of the patient,” DOJ notes.

About Reed Tinsley, CPA

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