Intermountain Healthcare Settlement of $25.5 Million Stems from Stark Law Violations

On April 3, 2013, the Department of Justice (DOJ) announced a settlement with Intermountain Healthcare (Intermountain) 44 months after Intermountain submitted a voluntary disclosure of potential violations under the Stark Law. Intermountain uncovered these potential issues after conducting a year-long internal review of its employment agreements, lease agreements, and personal services arrangements with physicians. The $25.5 million settlement (Settlement) is the latest settlement entered into jointly by the DOJ and the Office of Inspector General of the Department of Health and Human Services (OIG) and a hospital stemming from violations of the Stark Law that were largely “technical” in nature (e.g., expired agreements, missing signatures, lack of written agreements). Even though the settlement amount includes some monies related to nontechnical Stark Law violations, this Settlement illustrates the genuine risks of operating financial relationships with physicians under agreements that are not fully memorialized and executed. According to news reports, a portion of the settlement relates to Intermountain’s failure to renew leases for office space rented to physicians over a 10-year period.

Key Aspects of the Settlement

Intermountain is a nonprofit corporation that operates the largest health system in the State of Utah. The health care system is comprised of 22 hospitals, Intermountain Medical Group, a subsidiary with more than 185 physician clinics, and an affiliated health insurance company called SelectHealth. Intermountain employs over 33,000 health care personnel to serve the health care needs of patients in both Utah and Idaho.

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:
 

  1. 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;
     
  1. 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
     
  1. 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.
     

Some of the key terms of the Settlement are similar to other settlements of this nature. Specifically, the Settlement does not represent an admission of wrongdoing or liability on the part of Intermountain. Notably, in consideration of Intermountain’s voluntary disclosure, the DOJ did not seek exclusion from Medicare, Medicaid, and the other federal health care programs nor did it impose a Corporate Integrity Agreement (CIA).

Key Takeaways

The Settlement reiterates that the DOJ will not concede minor or “technical” violations of the Stark Law and will continue to collect money for such deviation from the Stark Law’s requirements. Providers should beware that voluntary disclosures may shield them from exclusion or the imposition of a CIA, but the repayment responsibility may still be quite burdensome. To avoid the possibility of a large repayment, providers should consider adopting the following best practices:
 

  1. Providers should 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.
     
  1. Like Intermountain, providers should consider implementing 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.
     
  1. 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.

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