Reprinted from REPORT ON MEDICARE COMPLIANCE, the nation's leading source of news and strategic information on Medicare compliance, Stark and other big-dollar issues of concern to health care compliance officers.
By Nina Youngstrom, Managing Editor
April 22, 2013 Volume 22 Issue 14
The CEO and CFO of a Chicago hospital were arrested on April 16 in connection with an alleged scheme to pay physicians for patient referrals, according to the U.S. Attorney’s Office for the Northern District of Illinois.
CEO Edward Novak, owner and CEO of 119-bed Sacred Heart Hospital, CFO Roy Payawal and four affiliated physicians were charged with violating the federal anti-kickback law. Their alleged malfeasance was recorded by “cooperating witnesses” at the request of government agents, according to a 90-page FBI affidavit filed in support of the criminal complaint. The cooperating witnesses were a physician, who was then-chairman of emergency room operations, and Administrator A and Administrator B, both members of the senior executive staff. Administrators A and B recorded in-person and telephone conversations with Sacred Heart executives, physicians and employees, the affidavit says.
The thrust of the complaint is that the hospital carried out a plan to pay physicians kickbacks for their referrals of Medicare and Medicaid patients, allegedly at the direction of the CEO and CFO. Alleged kickbacks were concealed in “fictitious rental payments” that the hospital made to physicians for office space it never used; salaries for the physicians’ employees (e.g., physician assistants); “ghost contracts” to physicians (e.g., medical directorships without duties); and payments to physicians to train and supervise nonexistent medical students.
“Sacred Heart’s efforts to recruit physicians willing to sell their patient referrals to the hospital were openly discussed among the hospital’s executive staff,” Administrator A and B said, according to the affidavit. “For example, on April 10, 2012, Administrator B consensually recorded a meeting with Payawal and Administrator A in which Administrator B inquired about the types of ‘incentives’ Sacred Heart could offer prospective referring physicians.”
The feds executed search and seizure warrants in connection with the investigation, which is ongoing. The FBI affidavit states that “the investigation extends to allegations of unnecessary emergency room admissions.” Meanwhile, the government seized about $2 million from bank accounts that had been collected in Medicare reimbursement.
“The arrests should send a chilling message both to health care executives and physicians: If you pay or accept kickbacks, big trouble follows,” says former federal prosecutor Michael A. Hirst, with Hirst Law Group in Davis, Calif.
Hospital Recently Settled EMTALA Case
Interestingly, in mid-February, Sacred Heart settled a civil monetary penalty case with the HHS Office of Inspector General for $50,000 over an alleged violation of the Emergency Medical Treatment and Labor Act. The settlement, which was signed by the now-arrested Novak, alleged that the hospital failed to screen a 63-year-old woman when she presented at the emergency room last year. Her companion said she was not breathing, but the hospital allegedly called the fire department to transport her to another hospital, “where she was pronounced dead,” according to the settlement. Sacred Heart did not admit liability.
If compliance officers work at hospitals where there is a whiff that senior management may be engaging in illegal arrangements, they may feel hopeless, says Albany attorney Robert Hussar, with Manatt, Phelps & Phillips. “If senior management is involved in a scheme, it makes a compliance officer’s job much more challenging. But there are still things you can do,” he says, including:
· Educate staff about potential instances of noncompliance. “Make sure they know their obligation to come forward,” Hussar says.
· Ensure you have an active auditing and monitoring program. “It needs to do more than look at the four corners of a document,” he says. For example, when paychecks are given to physicians for space the hospital leases, go check the space. Is it truly the number of square feet paid for in the lease? Is it used for the purpose stated in the contract? And look behind medical directorships and other personal service arrangements. Did the physicians really perform the job duties as set forth in the contract, and did they work the required number of hours? Is that particular medical directorship even necessary or is it used to reward a physician for loyalty to the hospital? “You need to kick the tires on arrangements,” he says.
If something isn’t right, compliance officers should go directly to their board of directors if senior management is involved, Hussar says.
Sacred Heart Hospital spokeswoman Jessica Thunberg said the hospital is cooperating with law enforcement and has no other information on the FBI investigation. But, she said, the Illinois Department of Public Health visited the hospital on April 17 and reviewed its ability to care for patients. “Following that visit, Sacred Heart Hospital continues to accept patients and provide care,” she said, and the chief nursing officer is now acting administrator. Lawyers for the CEO and CFO did not return RMC’s calls for comment.
To read the press release, visit http://tinyurl.com/cpfes4d.
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