Two healthcare cases announced during the first week of April, 2013, vividly illustrate the uncertainty of how much a violation of applicable healthcare statutes or regulations might cost a provider.
On April 3, 2013, the Department of Justice announced that Intermountain Health Care, Inc., which operates the largest health system in Utah, had agreed to pay the United States $25.5 million to settle allegations it violated the Stark Law and the False Claims Act by engaging in improper relationships with referring physicians. These relationships included employment arrangements under which bonuses paid to thirty-seven employed physicians allegedly took into account the value of patient referrals, undocumented office rental arrangements involving fair market value issues with eighteen physicians, and other undocumented compensation arrangements between Intermountain and 154 referring physicians.
The violations came to light as a result of a self-disclosure by Intermountain in 2009. In a statement announcing the settlement, despite the large number of physicians involved in arrangements which violated the Stark Law, Intermountain stated that the violations “were primarily technical in nature and involved things such as lack of proper paperwork…. None of these issues adversely effected in any way the quality, appropriateness, or cost of patient care.”
In a case involving the opposite end of the payment spectrum, the U.S. Court of Appeals for the 6th Circuit ruled on April 1, 2013, that MedQuest Associates, a diagnostic testing company, could not be held liable under the False Claims Act for failing to comply with Medicare physician supervision requirements at several of the company’s independent diagnostic testing facilities (IDTFs).
The U.S. District Court had previously granted summary judgment in favor of the government against MedQuest and ruled that MedQuest was liable for $11.1 million in civil penalties under the False Claims Act for failure to provide proper physician supervision for diagnostic tests involving contrast injections.
The Court of Appeals reversed the District Court’s decision, holding that the regulations which MedQuest violated were conditions of participation in the Medicare Program, not conditions of payment, and thus did not “mandate the extraordinary remedies of the False Claims Act and are instead addressable by the administrative sanctions available, including supervision and expulsion from the Medicare Program.” U.S. ex rel Hobbs v.Medquest Associates, Inc,, No. 11-6520 (6th Dis. Apr. 1, 2013).
What should one make of the fact that violations which are “primarily technical in nature and involved things such as lack of proper paperwork…” can result in a penalty of more than $25 million, while a violation involving lack of proper physician supervision of patient procedures does not support any monetary penalty (although it might provide a basis for exclusion from federal health care programs)? It appears the consequences of violating applicable legal requirements are extremely difficult to predict, and the best way to avoid any adverse consequences is to be scrupulous about compliance.