On October 5, 2009, the Office of Inspector General (OIG) announced that the former Chief Executive Officer and Compliance Officer (CEO/CO) of Community Memorial Hospital (CMH) in Ventura, California, agreed to pay $64,000 in a settlement agreement with the OIG. The settlement resolves OIG allegations that the former CEO/CO of CMH personally negotiated inappropriate financial arrangements with physicians and directed improper payments to them in violation of the Civil Monetary Penalties Law and federal Stark Law (Stark) over a 16-month period from 2002 to 2003.
Typically provider organizations, and not their individual officers, are the subjects of a civil fraud and abuse settlement with the federal government. As this case indicates though, the OIG will pursue enforcement actions against individual provider officers, particularly where the facts suggest individual culpability on the part of those individuals. As the OIG Chief Counsel proclaimed in the press release accompanying the settlement: "[t]he Office of the Inspector General strongly believes that, in addition to holding corporations accountable for health care fraud, individuals who caused the fraud should also be held accountable."
The CEO/CO had served in these positions for 25 years but resigned in 2003 following a legal dispute with the hospital medical staff. Following his departure, CMH conducted an internal review into loans the hospital had made to several medical staff physicians. The internal review resulted in the hospital making a self-disclosure to the OIG regarding several financial transactions with physicians that possibly violated Stark. All of the improper transactions allegedly occurred during the CEO/CO's tenure. Ultimately, in late 2007, CMH agreed to pay $1.5 million to the federal government to resolve CMH's liability regarding the disclosed conduct. That settlement agreement released the hospital from further fraud and abuse exposure related to that conduct, but did not similarly release former hospital officers, directors, and employees. Therefore, the government was still permitted to pursue an individual enforcement action against the former CEO/CO for his role in the alleged violations.
Although publicly available information does not confirm those specific facts that compelled the OIG to pursue a fraud and abuse action against the former CEO/CO in this particular case, the 2007 Settlement Agreement between CMH and the Department of Justice did list several problematic financial relationships with physicians in which the former CEO/CO was allegedly involved. These arrangements apparently included several instances in which the former CEO/CO received reimbursement from the hospital for gifts he allegedly provided to physicians, such as expensive watches, computer equipment, and airline tickets.
The number of investigations by the OIG, and other federal enforcement agencies, continues to increase in an effort by these agencies to reap lucrative settlements and reduce perceived fraud and abuse in the healthcare industry. This latest settlement only reinforces the need for healthcare organizations and their individual officers to be vigilant regarding the pertinent regulatory requirements when entering into financial relationships with physicians and to maintain compliance procedures to review existing relationships on an ongoing basis.
If you have any questions, please do not hesitate to contact Scott Taebel at (414) 721-0445 or via email at Staebel@hallrender.com.
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