On March 25, 2019 the Department of Justice released a statement that it would be filing a complaint under the False Claims Act against a West Virginia hospital, a management company, and the CEO. The allegations evolve around improper financial arrangements with employed and independent physicians. Presumably, these improper arrangements implicate the Stark Law as well as the Anti-Kickback Statute.
Wheeling Hospital is at issue in this case located in Wheeling, West Virginia. Wheeling is a city of approximately 30,000 (150,000 in the area) and was the first state capital of West Virginia. The hospital itself has been around since the 1850s and according to its web page, has approximately 240 beds and 275 physicians. In context, this is a large operation.
First, according to the complaint, there was significant documentation which tied together referrals and compensation. For example, the CFO allegedly wrote that there was a need to keep an employed cardiovascular surgeon happy because of the revenues generated. Another allegation related to an OBGYN in which the COO wrote that he would not amend the compensation for the individual due to the significant downstream revenue. The Stark Law does not allow any direct or indirect influence from downstream revenue to impact compensation.
Second, there were various arrangements alleged that related to both employed and independent physicians. For example, one arrangement with an independent pain management physician appeared to compensate the physician at double the normal rate. In short potentially allowing compensation to exceed the 90th percentile. Further, the employed physicians received net revenue related bonuses or incentives which it is alleged were based upon their downstream revenue.
Finally, the allegations appear to highlight an overall scheme to pay physicians high levels of compensation in order to increase net revenue to the hospitals. Many health systems over the past decade have acquired physician practices to coordinate care, including management of referral plans by providers. This is not inconsistent with the industry. However, the allegations in this complaint appear to highlight an effort at the leadership level that created risk under these laws.
While this complaint only represents allegations, the case does highlight a few key points hospital leaders should be aware of. First, ensure your organization has a legally defensible compensation assessment and payment process. In the event allegations are made with respect to physician compensation, it becomes a legal issue that needs defensibility. In my current practice, I advise you have an attorney who specializes in physician compensation to assist in the development and approval of all compensation for physicians. Second, organizations need to continue to focus on risk mitigation tactics related to communication. The Stark Law and Anti-Kickback Statute prevent organizations from choosing levels of compensation based upon referrals. Therefore, organizations need to ensure that any conversations about referrals are squarely separate from the compensation process. Finally, in the event organizations do find problematic arrangements, they should be addressed quickly. Under these allegations it appears multiple issues were raised without resolve. I will make sure to keep everyone updated on this case.