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00;00;01;19 - 00;00;24;10
Jonathan Porter
Welcome to another episode of Hush Blackwell's False Claims Act Insights podcast. I'm your host, Jonathan Porter. One of the reasons we at Husch Blackwell wanted to start this podcast was to talk about emerging issues within the world of government fraud enforcement. To talk about big DOJ settlements that our clients want to know about so they can avoid that fate down the road.
00;00;24;22 - 00;00;47;06
Jonathan Porter
And today we're talking about one of the biggest FCA risk areas for healthcare clients, the Stark Law. And one of the biggest FCA settlements in recent years. The $345 million settlement with an Indiana health system over alleged Stark Law violations. There's a ton that the healthcare world can learn from this settlement and other recent Stark Law developments.
00;00;47;06 - 00;01;27;01
Jonathan Porter
And so that's the focus of today's episode, the Stark Law. We have two great guests to help us pull out lessons from this big, Stark Law settlement. I'm excited for you listeners get to benefit from their insights here in this complex enforcement area. So joining us from Husch Blackwell is my colleague, Megan Phillips. Megan has been a Stark Law guru since before the healthcare industry needed Stark Law gurus, since before the Tuomey case that put Stark on everyone's radar negative and has been advising Husch Blackwell's healthcare clients on Stark and many other healthcare laws and regulation since 2007 and is without a doubt one of the health law industry's leading minds on the
00;01;27;01 - 00;01;57;16
Jonathan Porter
Stark Law. And speaking of one of the best within the healthcare industry, we're also joined by my friend Raul Ordonez. Raul is college basketball star turned healthcare compliance officer. Raul is vice president and chief compliance officer with Jackson Health Systems, one of the largest public health systems in America. And the primary teaching hospital for the University of Miami Miller School of Medicine, a leading voice on healthcare compliance and a sought after speaker, which is how, which is how I know Raul.
00;01;57;16 - 00;02;20;01
Jonathan Porter
Raul and I spoke together about telehealth compliance at a HK event in Florida last year, and we stayed friends, bouncing interesting healthcare ideas off of each other. Now, I'm very excited that he's joining us today to talk about the Stark Law rules only law, to my knowledge that he is a rabid fan of the University of Tennessee, where he went to law school.
00;02;20;01 - 00;02;37;07
Jonathan Porter
And I'm free giving that orange allegiance this day. In this day, only Raul, because we are months away from the start of college football and because I want to be a good host. And so Raul and Megan, welcome to the podcast. Thanks for telling our listeners a little bit about the Stark Law.
00;02;37;19 - 00;02;54;00
Raul Ordonez
Thank you for having me, Jonathan. And and to the Blackwell team and Megan, it's a pleasure to meet you. I will say that college basketball star is stretching it quite a bit, but I will have to pay you back for that. And I'm glad I didn't wear my orange checkerboard time for this.
00;02;54;15 - 00;02;57;25
Megan Phillips
Hi. Jonathan and Raul, nice to meet you, Raul. It's great to be here.
00;02;58;02 - 00;03;21;08
Jonathan Porter
So to get started, so our listeners know exactly what the Stark Law is, but I bet some other of our listeners are thinking to themselves right now. But wow, I had no idea that Iron Man Tony Stark from the Marvel movies had his own law. That's really cool. So, Megan, can you start us off by giving our listeners a brief background of what the Stark Law is, why this law was created in the first place?
00;03;21;08 - 00;03;25;07
Jonathan Porter
What does it prohibit and how does it tie in with the False Claims Act?
00;03;26;07 - 00;03;55;10
Megan Phillips
Sure, absolutely. I wish the Stark Law was as fun as watching in Avengers movie, but that unfortunately, is not usually the case. The Stark Law is actually named after former Congressman Pete Stark, who sponsored the initial bill in 1989. As an interesting side note, Pete Stark, who has now passed away, actually called for its repeal and replacement about ten years ago or so, saying that it had morphed into something much more confusing and burdensome than what was originally intended.
00;03;55;25 - 00;04;24;01
Megan Phillips
So take that for what you will as we get into today's discussion. Generally, the stark law is a federal civil statute that prohibits physicians and their immediate family members from referring Medicare patients for certain types of services, which we refer to as designated health services or DHS for short. If these physicians are referring Medicare patients for DHS to entities with which they have a financial relationship, the Stark Law will prohibit those referrals unless an exception applies.
00;04;24;11 - 00;05;04;10
Megan Phillips
When the law was originally enacted, DHS only included clinical lab services. But a few years later, the law was expanded to include 11 other types of DHS, including radiology, drugs, physical therapy and inpatient and outpatient hospital services, among others. The law was enacted because Congress was concerned about overutilization. In other words, Congress was concerned that if a physician had a financial interest in an entity to which he or she referred, the physician might be incentivized to over refer patients to that entity in order to financially benefit, because the Medicare program at the time was primarily based on a fee for service reimbursement structure.
00;05;04;19 - 00;05;26;14
Megan Phillips
This could result in Medicare overpaying physicians for unnecessary procedures and Congress's concern. I also wanted to point out that the stark law is a strict liability statute, which means that no bad intent is required in order to violate the law. If the law applies to a financial relationship between a physician and an entity, the relationship must be structured to meet an applicable exception.
00;05;26;23 - 00;05;57;09
Megan Phillips
Basically, any time something of value is transferred between it referring physician and a DHS entity, there will be a financial relationship that must be an exception. There are numerous exceptions to the stark law for different kinds of compensation arrangements, including ownership, interest in group practices, employment arrangements, independent contractor arrangements, leases and others. Many of these exceptions have certain key elements in common, such as compensation must be fair market value, commercially reasonable, and not take into account the volume or value of referrals.
00;05;58;02 - 00;06;16;24
Megan Phillips
It's also important to note that a violation of the Stark law can serve as a predicate violation for application of the false claims Act, meaning that if you have a financial arrangement that doesn't meet an applicable, stark exception, you may have violated both the Stark Law and the False Claims Act with respect to any claims you submitted for those prohibited referrals.
00;06;17;15 - 00;06;23;18
Megan Phillips
This can significantly increase the potential damages or settlement amounts that the government alleges a stark law violation.
00;06;23;28 - 00;06;50;10
Jonathan Porter
That's great, Megan. Thank you. So I've not heard that anecdote about Congressman Stark before. I think in general, Congress is terrified of how complex health care is and they're very cautious about tweaking it. Yeah, I'm sure he was blown away by how complex things can be in the health care world and how you could take his relatively simple idea about the compensation and blow it completely into this huge thing within the health care industry.
00;06;50;18 - 00;07;14;03
Jonathan Porter
That's pretty funny. So transitioning a little bit, I mentioned the Toomey case in our intro. And Rahul, you were at Jackson Health System when that case was tried. I recall a lot of people talking about that case back then and you may have experienced the same role. So tell our listeners a little bit about the Toomey trial and what sort of impact it had on those in the health care world back then.
00;07;14;18 - 00;07;45;04
Raul Ordonez
Sure. So I think at that time, probably early to mid part of last decade, there were a number of cases that were either settling or in the Toomey case that actually went to trial, which I think is what made it maybe even the most interesting. But I think part of it having occurred right around that time where you had multi million dollar judgments or settlements occurring all at once, really made it interesting or something that people in the compliance world were studying very closely.
00;07;45;12 - 00;08;09;00
Raul Ordonez
And what I think really set this case apart again is the fact that it went all the way to trial. And so there are a couple of aspects of the judgment and the trial itself that I think are worth noting or mentioning. One was the concept of fair market value. So in this particular case, one of the two to maybe focus on some of the facts.
00;08;09;00 - 00;08;43;01
Raul Ordonez
First, it was a hospital system that engaged in employment arrangements with various community physicians. But the government's position was that the hospital had engaged in these strange part time employment rather than a typical full time employment, in order to prevent the physicians from performing their cases in the office setting. So in essence, there's always this notion that bad facts in essence make bad law.
00;08;43;01 - 00;09;10;29
Raul Ordonez
So a lot of these cases and the ones around that time were very sort of unique. But this one, again, given the sort of part time employment model, but it included full time benefits and a couple of other sort of unique facts in some ways probably contributed to this being such a major case. So one of the parts when we think about fair market value, the fact that just getting a fair market value opinion is not enough.
00;09;10;29 - 00;09;43;08
Raul Ordonez
And in the actual trial, the government had their own independent experts that were calling to question the accuracy of the opinion that the health system had relied on in the Toomey case. So that, you know, an understanding really what the government's experts, how they viewed fair market value became very important because now you as a health system want it to be prepared in the event to be able to judge your own employment arrangements in the same way.
00;09;43;20 - 00;10;33;23
Raul Ordonez
The two other notable points that came out of the Toomey case. One was what it really means for compensation to take into account the volume or value of of referrals. And in the Toomey case, I believe he major issue was that the physicians were being paid a productivity bonus based on their own personally performed product tivity, which I think is a very common structure for employment compensation, but really unique factor in this case was that the actual pool of moneys from which the productivity bonus was paid included revenue that was generated from non personally performed services.
00;10;33;28 - 00;11;20;03
Raul Ordonez
So that designated health services that these positions would have been ordering that were not personally performed by them like diagnostics, radiology, pharmacy, etc. that was in the pool and so that made it a very unique arrangement as well. Now what was interesting and I think what got a lot of commentary was that the actual holdings and the language in the cases did not necessarily distinguish the fact that the pool included the technical revenue, but really made it called into question whether any w rb you bonus based on personally performed services was by definition a stark law violation.
00;11;20;04 - 00;11;58;07
Raul Ordonez
So that was something that got a lot of folks in the industry talking as well. And then I think the last piece of of the Toomey case that got a lot of commentary related to the government's contention and the experts contention upon whom they relied that one of the major pieces of evidence that the arrangements took into account the volume or value of referrals and maybe was not commercially reasonable, was the fact that the practice was not making a profit based on its own personally performed referrals?
00;11;58;16 - 00;12;25;21
Raul Ordonez
In other words, the losses that the practice was generating in comparison to the salaries that were being paid would only be justifiable if the health system took into consideration the additional revenue that it's receiving based on all of this non personally performed designated health service. So again, all of those ancillary services like diagnostics and radiology and pharmacy, etc..
00;12;26;03 - 00;12;44;29
Jonathan Porter
Thanks for all that super helpful. That's great background for understanding where we are in Stark enforcement. And I think the reason the Toomey case got such big publicity is it went to trial and that's a super rare thing. And the False Claims Act will do a whole other podcast about why False Claims Act trials are rare, but I appreciate that background.
00;12;44;29 - 00;13;03;10
Jonathan Porter
So Megan, unpack for our listeners the concept of how those in health care set physician compensation in a compliant way. You hear a lot about fair market value studies to ensure compliance. Why are those done and what drives physician compensation, if not the value of their surgeries being done at a hospital?
00;13;03;15 - 00;13;29;23
Megan Phillips
Well, they're the most important things that need to be considered when setting physician compensation are the concepts I mentioned earlier a fair market value, commercial reasonableness and that compensation not take into account the volume or value of referrals. There are a lot of different considerations that go into determining fair market value. Many hospitals consult salary surveys like MTM or Sullivan Cotter when determining their employed physicians compensation.
00;13;29;28 - 00;13;58;13
Megan Phillips
These can be really useful to get a general idea of what a certain specialty is paid, but there are limitations. For example, salary surveys are not that helpful. If there are extenuating circumstances for why, you may want to pay a physician at a rate that's higher in the compensation range due to things like a really experienced physician or trying to recruit to a rural area where a lot of physicians don't like to come on or as call coverage requirements, etc., for these types of situations.
00;13;58;13 - 00;14;21;01
Megan Phillips
And really in all cases, it's helpful to engage a third party fair market value consultant to provide an opinion on the proposed compensation. These consultants can really dig into the facts and circumstances surrounding specific positions and can provide more insight into where a physician fits on the range. One really important consideration in determining fair market value compensation is a physician's personal productivity.
00;14;21;13 - 00;14;46;01
Megan Phillips
And by personal productivity, I mean professional services that the physician himself personally performs and by personally performs, I mean services that the physician physically does himself, not by a mid-level practitioner or nurse or medical assistant that the physician receives, and more importantly, not services that he generates for the hospital that he's working for. This also gets into the volume or value issue that was such a big consideration.
00;14;46;01 - 00;15;07;02
Megan Phillips
And to me, generally speaking, a physician who is employed by or has a contract with the hospital cannot be paid in a manner that takes into account the volume or value of the physicians referrals to the hospital. So it's not appropriate to pay a physician a percentage of the technical fees or hospital fees that he or she generates or refers to a hospital because those services are not personally performed.
00;15;08;03 - 00;15;32;21
Megan Phillips
It's also important to remember that in order for a physician to be paid in the higher ranges of compensation, his or her personal productivity needs to also be in the high range. It doesn't make sense necessarily to pay a physician compensation in the 75th percentile in his or her personal production is only in the 25th percentile. As we often say in the industry, not everyone can be paid at the 90th percentile because that's not how percentiles work.
00;15;33;01 - 00;15;56;12
Jonathan Porter
First of all, I appreciate the math lesson right there, Megan, because that's just a fact. But I've got several friends who are these third party fair market value consultants, and I'm fascinated by their job. Then going back to what we talked about earlier, I wonder what Congressman Stark would think about this whole industry existing that serves to give health systems cover for providing their physicians with a fair market value compensation.
00;15;56;21 - 00;16;12;17
Jonathan Porter
To my knowledge, no other industries where you have to go through that in order to, you know, pay your people. But here we are. So I actually want to go back to something that Megan talked about before, and that's the knowledge component here. So in a lot of health care enforcement actions, the big factor is the defendant's knowledge.
00;16;13;01 - 00;16;33;24
Jonathan Porter
For example, the Anti-Kickback statute can only be violated if the defendant acted both knowingly and willfully. In essence, DOJ or whistleblowers have to prove that you knew what you were doing and that you knew that what you were doing was something that the law forbids. That's a really, really high bar. That willfulness statute, something that the law forbids.
00;16;33;25 - 00;16;58;21
Jonathan Porter
That's that's a unique mindset. And that's the way that you can you can only violate the unique by statute that way. What's fascinating to me is that for the stark law, there isn't that really high bar. Health care companies can violate Stark even if they don't know they're violating it. Well, what kind of what type of challenges does that present to those charged with ensuring health care compliance?
00;16;59;13 - 00;17;35;29
Raul Ordonez
I think it creates a lot of challenges. And the reason is, I think it's a lot more understandable to operate that if they're intending on breaking the law, intending on generating referrals and paying somebody more than they should, then they should get in trouble for that and they can understand that. But in many ways, a lot of these technical, stark violations are a result of sloppiness and sloppy contracting where to the point that you just made the operator may not have had any intent at all to violate or to drum up additional business.
00;17;36;07 - 00;18;13;27
Raul Ordonez
But by nature of the fact that they did not have or did not set up the arrangement in a way that can meet a stark exception, it is by definition, a stark violation. So that's something that we want to ensure we communicate late to our operators is letting them know that these sorts of policies that we have created to ensure that, for example, if there's any arrangement, a financial arrangement involving a physician, that there has to be a justification that's obtained and a fair market value has to be received prior to engaging in the arrangement.
00;18;14;01 - 00;18;39;17
Raul Ordonez
The agreement has to be in writing prior to execution. That's really what this is for, is not to just protect the organization from an anti kickback violation that could result from some type of nefarious actor. But to protect the organization from an accidental, stark violation. The other piece that I would mention is along the same lines, you know, the Anti-Kickback statute has safe harbors.
00;18;39;26 - 00;19;01;23
Raul Ordonez
So a lot of the stark exceptions are very similar to the safe harbors that we're protecting ourselves for. So getting fair market values and trying to insure and justify commercial reasonableness, etc., that would satisfy those safe harbors. But the difference is, if you don't satisfy a safe harbor, you technically have not violated the Anti-Kickback statute, but with the stark law.
00;19;02;01 - 00;19;16;27
Raul Ordonez
If you violate or you don't meet an exception, you violate the stark law. So that's why I think it's important to ensure that that you have all of this this detail, particularly around fair market value, because there's really no choice, at least when it comes to physician compensation.
00;19;17;13 - 00;19;34;25
Jonathan Porter
I think that's a critical point that you're making a rule. I at least once a week I tell a client, look, you may not be in this case safe harbor. That doesn't mean that you have violated the end kickback statute. It's a willfulness statute. But that's that's very different advice when it comes to a story. It's a totally different world.
00;19;35;06 - 00;20;00;10
Jonathan Porter
And I don't think enough people understand the difference between those. So. Thanks for pointing that out. So let's discuss one more case before we talk about this big $345 million settlement. There was a case in the Third Circuit a few years back that drew a lot of attention within the health care industry. The University of Pittsburgh Medical Center was sued by a whistleblower and accused of violating Stark in the way that they compensated physicians.
00;20;00;29 - 00;20;38;00
Jonathan Porter
DOJ decided not to intervene in this case. In the stark theory, there was seen by many to be somewhat aggressive. The allegation was that UPMC, which was paying its physicians a set rate based entirely on overuse, was violating START because WVU based pay could include referrals to the hospital. I'm far from a start guru and when the Third Circuit decision came out saying that WVU based pay could include referrals, I didn't understand it, and I didn't understand how hospitals were supposed to compensate physicians.
00;20;38;00 - 00;20;45;15
Jonathan Porter
So Megan helped me understand why basing compensation on WRVA News and violates Stark.
00;20;45;28 - 00;21;10;02
Megan Phillips
Well the UPMC case an interesting one and involved physicians like you said Jonathan, who are being paid based on their personal barbecue production, which is very common compensation methodology in the industry. It's the allegations are actually very similar to to me where the relator alleged in this case that the compensation methodology varied with or took into account the volume or value of referrals or other business generated by the referring physicians.
00;21;10;26 - 00;21;37;06
Megan Phillips
At first, the Third Circuit appeared to be perpetuating the same theory that the Fourth Circuit that in Toomey, which is called the correlation theory. The theory is that generally when a physician contracts provide professional services for a hospital, he or she will provide RB use for services that he or she personally performed. And as I mentioned earlier, compensating a physician for personally perform professional services is not considered to be compensation for referrals.
00;21;37;26 - 00;22;07;15
Megan Phillips
So no harm, no foul. Not so fast, said the Fourth Circuit. There is often a corresponding technical component or facility fee that can be billed by the hospital in connection with the physicians personally perform professional service. The correlation theory holds that by generating the RV you through the professional service, the physician refers the corresponding hospital fee. The more RV use the physician generates, the more hospital fees are generated and the more money both the physician and the hospital make.
00;22;07;21 - 00;22;31;27
Megan Phillips
That's the thinking at that. The physician's compensation takes into account the volume and value of the physicians referrals to the hospital in the UPMC case. The Third Circuit cited to me and its reversal of a motion to dismiss, and it appeared to adopt the correlation theory. However, it backtracked a few months later when it issued a rehearing decision that revised its decision and removed its reliance on Toomey.
00;22;32;15 - 00;22;59;21
Megan Phillips
Essentially, the court held that the high compensation paid to the physician sufficiently suggests that the compensation took into account the volume or value of referrals, but it no longer concluded that the compensation varied with the volume or value of referrals. So they really focused on the level of high compensation of more of a fair market value issue. Although not entirely clear, it's possible that the Third Circuit was persuaded by the CMS commentary that was issued in 2019.
00;23;00;14 - 00;23;23;08
Megan Phillips
The CMS had issued this commentary and in the months between the two decisions and they related to a proposed regulatory update, the stark law in that commentary seems expressly disavowed the correlation theory. However, it's not clear whether this impacted the court because CMS had already disavowed the correlation theory essentially back all the way back in 2004 and commentary as well.
00;23;23;24 - 00;23;49;14
Megan Phillips
Perhaps CMS reiteration of the position in 2019 swayed the court, but they didn't cite to it. So it's difficult to tell. In 2021, when those proposed regulations were finalized by CMS, CMS again reiterated its position against Toomey and against the correlation theory. Some folks requested that CMS actually codify it into the regulations itself, that CMS expressly declined to do so.
00;23;49;25 - 00;23;54;13
Megan Phillips
So it's kind of an unknown out there whether courts will continue to perpetuate this correlation theory.
00;23;54;18 - 00;24;15;29
Jonathan Porter
Yeah, that case. Megan, so you're not so fast. That case had like nine different not so fast. It was jarring to to follow which a lot of people in the health care industry were because it was this interesting thing that to me the general concept of physician takes case to hospital doing surgery in hospital. That could be a referral because the hospital's also getting paid for that.
00;24;16;10 - 00;24;38;26
Jonathan Porter
To me, that's a very interesting concept. I'm glad we have people like you to help advise on those things, because I certainly cannot do that. So and by the way, about UPMC, the Pittsburgh Post-Gazette reported last month that that key term was settled on the eve of trial for $38 million, which sounds like a win for the defense there, given the dollars involved.
00;24;39;22 - 00;25;02;19
Jonathan Porter
But the whistleblowers were reported to receive 29% of that, which is near the maximum allowed by law, which 30%. And so that reported $11 billion payday for the whistleblowers plus attorney's fees is surely a win for their side as well. So that was a hotly followed case. And again, selling on the even trial that almost went to trial.
00;25;02;19 - 00;25;22;23
Jonathan Porter
And it's a fascinating case and was interesting follow Megan. Thanks for your wisdom on that. Hopefully our listeners got something out of that. So Rachel, with all of that backdrop, let's get into our record breaking $345 million settlement. I know you've presented on this settlement before, so tell our listeners about the conduct that led to this really, really big settlement.
00;25;23;08 - 00;25;54;03
Raul Ordonez
Thank you, Jonathan. So it's a really interesting case because the facts that occurred go back all the way to 2009. And I believe the case was probably filed around 2013 or 2014. So a bit of a delay between then and now when the settlement finally took place. But there's just a lot of facts here, and I would encourage anybody in the audience to read the actual complaint, because then you get a little bit more color regarding everything that's alleged.
00;25;54;03 - 00;26;38;28
Raul Ordonez
It's a bit comprehensive, but generally just to try and sort of summarize, the hospital began a very aggressive campaign to start employing physicians in the area to try and maintain market share, which sounds familiar, and allegedly to try and gain additional leverage with the different commercial payers in the area. And so the government focused specifically on the employment arrangements with these community cardiologists and turned employed community neurosurgeons and breast surgeons and really they all kind of fed a very similar fact pattern or structure.
00;26;39;10 - 00;27;17;23
Raul Ordonez
First, the government alleged or focused on the fact that the hospital system under this new employment arrangement was paying each of the physicians, in many cases, almost double or beyond double of what the physicians were collecting as part of their individual practices or in private practice, which seems to suggest that the only way that would be justifiable, according to the government, is if the additional referrals that these physicians would be bringing to the hospital system would be taken into account.
00;27;17;23 - 00;27;44;05
Raul Ordonez
So that was one of the major points of the cases and I think something that every organization needs to take into consideration is how much are we paying this physician and how does it compare to what the physician was collecting in private practice? The second piece that I think is sort of universal among the different physician groups is the fact that a third party fair market value analysis was obtained for each of these employment arrangements.
00;27;44;18 - 00;28;20;07
Raul Ordonez
And in each of the cases or most of the cases, the fair market value opinion stated that the agreement, as proposed either did not meet fair market value or in instances where they did allow for it. The hospital system had provided faulty information. So for example, it provided an estimation of collections that took into account the non-poor personally performed DHS referrals as opposed to just the personally performed referrals.
00;28;21;01 - 00;28;46;14
Raul Ordonez
The government was of the opinion that they, in essence knew better, but nonetheless the third party fair market value agreements could not be taken as evidence of fair market value because they were either not accurate or not adhered to. And I think a big take away for any health care organization is it's almost better not to get a fair market value opinion at all than to obtain one and then not follow it.
00;28;46;17 - 00;29;13;20
Raul Ordonez
Because the government's position, if you just read the complaint, it's basically just taking the opinion line by line and and using it against the organization. I think there was also some forum shopping as well. So what to what some organizations have gotten in trouble for and this was no exception is they obtained a fair market value opinion. They did not like the result because the opinion did not bless the the arrangement in question.
00;29;13;23 - 00;29;36;15
Raul Ordonez
And so they went out and shot another opinion to try and hopefully get a favorable opinion for the arrangement. So that again was another important fact and unique fact here. And then I think the last key fact relates to the internal meetings that were taking place within the organization, which again are described in vivid detail in the complaints.
00;29;36;27 - 00;30;18;25
Raul Ordonez
But the organization was very clear among the executive leadership that the reason that these inflated salary payments made sense was because of the downstream revenue that would be collected by the organization. In other words, they were actually estimating what that downstream revenue would be and then using it to sort of lump in and or justify what the employment arrangement payment would be, you know, their sort of clear progeny that that would not be okay because that certainly taking into account the value of volume of referrals into consideration when paying or designing the employment arrangement.
00;30;19;10 - 00;30;40;02
Raul Ordonez
So I think those are the three sort of buckets that really make this case particularly interesting. And it's interesting to see how you haven't seen a lot of these major Stark or Anti-Kickback cases come. I mean, I may be forgetting a few, but it felt like maybe ten years ago you saw a lot with the tsunami and Halifax and Broward Health case.
00;30;40;11 - 00;30;57;20
Raul Ordonez
And then this one comes along. And again, these are old facts, but I wonder whether folks have maybe learned their lesson since the time of the facts in question here occurred. But still, I think, you know, a lot of good lessons for for any health care organizations, compliance program.
00;30;58;06 - 00;31;21;23
Jonathan Porter
Yarrow A lot of good lessons in there. And I agree, getting an opinion and not following it generally not a good idea. DOJ is going to seize upon that. So Megan, what are your thoughts on this big community health network settlement? Your thoughts on the way compensation was arranged there and what takeaways that our clients should know and what this settlement means for their physician compensation arrangements.
00;31;22;13 - 00;31;47;29
Megan Phillips
Well, this is a huge settlement, but I think it's important to note that there were some bad actions here that contributed to the high dollars. And I'm going to reiterate some things that Raul and you have already said. But basically here the DOJ allege that community recruited physicians by offering extremely high salaries that exceeded fair market value and that it paid bonuses based on the number of patients referred to the hospital.
00;31;48;13 - 00;32;12;00
Megan Phillips
Many of these physicians compensation exceeded the 90th percentile. In addition, community, as we just talked about, engaged multiple valuation consultants to obtain favorable opinions. And on top of that, it provided false information to at least one of those consultants that materially impacted the opinion. Without the false information, the opinion would not have found the physicians compensation to be consistent with fair market value.
00;32;12;17 - 00;32;34;07
Megan Phillips
The biggest takeaway for me from this settlement, as well as the two me and UPMC cases, is that it is advisable to obtain a fair market value opinion for your highly compensated physicians. But that being said, it's even more important to respect that opinion. Do not opinion shop. If you get an opinion that says compensation is not fair, market value, don't go try and find one that is favorable.
00;32;34;16 - 00;32;56;17
Megan Phillips
Make sure you have clear and concise discussions with your consultant to ensure they fully understand the arrangement and all the nuances it has. And it's critically important that the information you provide to your consultant is accurate and complete. Don't withhold or misstate any information in order to obtain a more favorable opinion. Basically, an opinion is worthless if it's based on incorrect information.
00;32;57;08 - 00;33;21;03
Megan Phillips
Also, not to sound self-serving, but it's important to obtain legal counsel when structuring compensation arrangements with highly compensated physicians. The stark law is an incredibly complicated statute, and we've given you just a brief taste of all the issues that need to be considered when putting a transaction together. Engaging an experienced, stark law attorney at the onset of an arrangement can save you much pain and money in the long run, and stark issues are eventually identified.
00;33;21;18 - 00;33;48;28
Jonathan Porter
Thanks for that. Megan. Yeah, and I'll make one point on it since we're talking about math a little bit. You mentioned, you know, 90th percentile. Someone's got to be in the 90th percentile. So just the way math works, there's got to be 10% of the people who are in the 90th or above percentile. You know, one of the things that I've told people when I was at DOJ and we were basing some sort of investigation on, you know, being an outlier in the Medicare data was, you know, just because you're an outlier doesn't mean that you've done something wrong.
00;33;48;28 - 00;34;04;18
Jonathan Porter
We're going to look at you because this doesn't make sense to us. But it could be that your particular practice makes perfectly perfect, perfect sense. And so I don't like it when DOJ says something like, you know, you're in the 90th percentile and therefore you must have done something wrong. I don't think that's the I don't think that's entirely fair.
00;34;04;18 - 00;34;27;22
Jonathan Porter
But this is an incredibly complex area. And, you know, Megan, thanks for sharing your thoughts with our listeners. So, Rachel, we'll give you that. You're our guest, your host, Blackwell's guest on his podcast. So you get the final word here. The landscape out there seems tough with this recent settlement. So how do large health systems with tons of physician relationships, how do they manage to maintain compliance?
00;34;27;22 - 00;34;34;22
Jonathan Porter
What are your tips on how compliance can function to avoid becoming the next $100 million stark settlement?
00;34;35;23 - 00;35;18;18
Raul Ordonez
So I think you have to have very strong policies around physician compensation such that there's a very strict process regarding who can pay a physician and how. And you have to be very deliberate regarding who are the individuals that are involved in making those decisions and what the process is for doing that. Obtaining a third party opinion is obviously, I think, very important, but then having somebody that will be involved, the process and we'll review the opinion, compare it to the actual agreement in question, and then make sure that they agree, whether that's compliance, whether that's legal.
00;35;18;24 - 00;35;52;16
Raul Ordonez
But I think you need to have multiple stakeholders involved and that's to ensure that the agreements on their face are compliant. I think you also need to have a good education and training program to ensure that you have at least all of these physician arrangements going through this process that your organization has created. But if folks don't know that this process exists and there's other ways that people can try and execute contracts on behalf of the organization, that's a very large risk.
00;35;52;25 - 00;36;23;25
Raul Ordonez
And then I think it's very important to have compliance on the date at the table, especially at the highest levels of the organization. In these particular cases, especially this last one, it's really the content and emails and the the board presentations where the organization was explicitly stating that the way they plan to fund these exorbitant salaries was taking into account the downstream referrals that the organization would be receiving.
00;36;24;03 - 00;36;52;12
Raul Ordonez
That was being said in a, you know, sort of a semi or organizationally a public setting, probably private within the organization. But this is not something that was set in secret that people were sort of conspiring this was an official company meetings and you would think had somebody with some knowledge and expertize with regards to health law and compliance been in the room, they would have been able to identify what was being proposed was extremely problematic.
00;36;52;12 - 00;37;24;07
Raul Ordonez
So it's interesting to see how this organization, in addition to paying a $345 million settlement, they also have an arrow that will be reviewing their claims. But they were also having a compliance experts to the board being mandated, which it's my understanding is very unusual that you have both of those. So I think the government's position was that this all may have occurred because of a lack of oversight, a lack of having the correct people in the room, so to speak.
00;37;24;17 - 00;37;49;14
Jonathan Porter
That's great Rachel. I appreciate it. This has been a super fun conversation for me. I really wanted to cover this settlement, but I'm not near smart enough to intelligently tell our listeners about it. And so it's been a pleasure, Megan and Raul, for both of you joining us. I hope our listeners got something out of that and I'll take the privilege of closing us out by looping back to this concept that we discussed in our very first episode, which was about whistleblowers.
00;37;49;14 - 00;38;12;21
Jonathan Porter
So whistleblowers follow big settlements. There were employees of health systems that read about the Toomey trial, and they decided to blow the whistle on their employers compliance concerns. And I guarantee you that employees of health systems today are about this $345 million settlements and exploring whether they can get in on that recovery with their own knowledge of their own employers conduct.
00;38;12;21 - 00;38;38;01
Jonathan Porter
So this settlement agreement didn't resolve the relator share issue, but even the minimum share, which is 15%. That's an insane recovery. That's $51 million that's going to draw whistleblowers in. So Raul and Megan, we're talking about how we've been in a slow part of Stark enforcement. I think this may spark action on the Stark enforcement front for years to come.
00;38;38;01 - 00;39;02;18
Jonathan Porter
And we're going to continue to follow that at Husch Blackwell with our, with our writings, more podcast episodes and so continue to follow us and we'll continue to keep you apprized of breaking enforcements areas. But we appreciate everyone listening and we appreciate our guests and we'll see you next time.