Intermountain’s $25 Million “Stark Law” Medicine

Forty-four months ago, Intermountain Healthcare of Utah self-reported potential violations under the Stark Law to the government.

On April 3, 2013, the Department of Justice and the Office of Inspector General of the Department of Health and Human Services (OIG) reached a $25.5 million settlement with the largest health system in the state. The system is made up of 22 hospitals, Intermountain Medical Group, a subsidiary with more than 185 physician clinics, and an affiliated health insurance company called SelectHealth. Intermountain has over 33, 000 employees.

These issues were reportedly discovered after some executives attended a conference that included a presentation on Stark issues, and recognized that no one at Intermountain had systematically been reviewing contracts for technical Stark compliance. The violations were apparently largely “technical” in nature (e.g., expired agreements, missing signatures, and lack of written agreements). One portion of the settlement, reportedly relates to Intermountain’s failure to renew leases for office space rented to physicians over a 10-year period.

Assigned Responsibilities

The key takeaway of this high-dollar settlement, said former federal prosecutor Tom Beimers, now with the Faegre Baker Daniels law firm, is that it underscores the importance of having personnel who are assigned responsibility for monitoring technical Stark issues.

Reportable Conduct

According to an April 8 report from Arent Fox LLP, the settlement is based on financial relationships with physicians who referred patients to Intermountain as identified in Intermountain’s August 4, 2009 voluntary disclosure. Specifically, the settlement covers the following conduct from 2000 to 2009:

• 37 compensation arrangements with employed physicians and Intermountain Medical Group where the compensation arrangements contained bonus structures that may have taken into account the volume of value of referrals to Intermountain;
• 18 lease arrangements with physicians for office space at Cassia Regional Medical Center in Burley, Idaho and Sevier Valley Medical Center in Richfield, Utah without written and executed leases in effect during the entire period of the use of the office space and/or where the rental amount may not have been consistent with fair market value; and
• 154 financial arrangements with physicians for personal services that were not memorialized in a written and executed agreement during the entire time period that the services were provided.

Recommended Best Practices

The Arent Fox report says that providers should beware that voluntary disclosures may shield them from exclusion or the imposition of a CIA (Corporate Integrity Agreement), but the repayment responsibility may still be quite burdensome. To avoid the possibility of a large repayment, the law firm recommends that providers consider adopting the following best practices:

• Annually monitor all financial arrangements with physicians. Periodic monitoring will help providers identify any potential Stark Law violations early so that repayment obligations will not be compounded over time. Reviews should focus on, but not be limited to, the following: (i) payments without written contracts, (ii) unsigned agreements, and (iii) expired contracts where payments and services continue.
• Implement an automated repository of all physician agreements as well as tracking software that will send notifications if (i) a request for payment is made to a physician who does not have a current, fully executed agreement; (ii) if a payment is received by a physician who does not have a current, fully executed agreement; and (ii) an agreement is approaching its expiration date and has not been renewed.
• Key personnel, including employed physicians, should receive compliance training and updates on an annual basis regarding the hospital’s policies and procedures as they relate to physician contracting. Compliance training should also be provided to independent contractor physicians prior to implementing a financial agreement and annually thereafter.

Beimers told OTW that one interesting aspect of the case was the decision to make the self-disclosure submission to the U.S. Attorney’s Office in Utah, which occurred after OIG had stated that it would not entertain “Stark only” self-disclosure submissions, but before CMS’s (Centers for Medicare and Medicaid Services) creation of its self-disclosure process for Stark matters. “However, it’s not clear the outcome would have been different under the CMS Self-Referral Disclosure Protocol, as there just aren’t enough CMS resolutions yet to get a meaningful sense of how their approach might differ from that of DOJ, ” added Beimers.