In a case that points to the risks of atypical physician relationships, Catholic Medical Center (CMC) in Manchester, New Hampshire, agreed to pay $3.8 million to settle false claims allegations that it paid some of its cardiologists to provide call coverage for an independent cardiologist when she was on vacation or otherwise unavailable in return for her patient referrals, the U.S. Attorney’s Office for the District of New Hampshire said Feb. 9.[1] The hospital allegedly provided the call coverage free to the cardiologist, which is a reminder that hospitals have to be careful about picking up the tab for services physicians normally pay for, attorneys said.
According to the settlement, between 2009 and 2019, CMC allegedly paid some of its employed cardiologists to be near the office of the sole-practitioner cardiologist “to provide medical services for her patients should the need arise.”[2] The cardiologist referred millions of dollars’ worth of procedures and other services to CMC over that decade. Because the conduct allegedly violated the Anti-Kickback Statute, the claims submitted to Medicare, TRICARE and the Veterans Health Administration were false, the government said. The false claims lawsuit was set in motion by a whistleblower, former CMC cardiologist David Goldberg.
“Anytime you have unorthodox arrangements with referring physicians, they often have regulatory implications as the government determined was the case here,” said attorney Adam Robison, with King & Spalding in Houston, Texas. “Hospitals can’t pay for in-kind services for the benefit of physicians in the manner alleged here. The lesson learned is when hospitals provide unusual benefits to referring physicians at no charge, it raises potential concerns.”
Remuneration to physicians that isn’t fair market value or commercially reasonable generally puts hospitals at risk of an Anti-Kickback Statute or Stark Law violation, said attorney Bob Wade, with Barnes & Thornburg in South Bend, Indiana. “The big picture is no matter how benign the thing is you are providing, whether it’s as silly as trash disposal or it’s call coverage, you can’t provide it to a physician for free if it’s the physician’s responsibility,” he said. “Anytime from a hospital’s perspective you are providing anything of value, physicians have to pay fair market value.” He encourages compliance officers to “have their antennas way up” about providing goods or services to independent physicians they would otherwise have to pay for. But it’s often hard for a compliance officer to know about them “unless the compliance officer was involved in the drafting of the contracts or approval of the arrangements,” Wade added. Even on the surface, a call coverage transaction might pass the smell test. That’s why he said he wants to know the backstory. He tells hospitals, “‘I understand it sounds like a simple transaction but tell me everything about it. You know, why are we doing this?’”
Complaint: Cardiologists Were Paid $10K for Weekends
In the complaint, the whistleblower alleged that CMC started providing the sole-practitioner cardiologist, Mary-Claire Paicopolis, “with weekend and holiday coverage at her practice in the Lakes Region at no cost.”[3] The freebie came after years of her referrals to the Heart Institute at CMC. In turn, CMC allegedly would pay physicians who agreed to participate in the arrangement $10,000 per weekend and $3,000 per night. “In effect, CMC pays its cardiologists above market rate to provide a service of substantial value to Dr. Paicopolis, so that she will return the favor to CMC by referring patients for procedures with (in some cases) marginal indications, who ultimately bill Medicare,” the complaint alleged. “This quid pro quo relationship had the effect of CMC giving a prohibited ‘kick back’ to Dr. Paicopolis in the form of no-cost services in exchange for Medicare referrals in violation of 42 U.S.C. § 1320a-7b(b)(1).”
Then CMC sought Medicare reimbursement and would allegedly falsely certify the service was medically necessary and complied with “all applicable Medicare and/or Medicaid laws, regulations, and program instructions for payment including but not limited to the Federal anti-kickback statute,” the complaint said. The settlement did not include allegations that the other cardiologists were paid above-market value, however, or anything about “marginal indications.”
Goldberg left the hospital in 2016 “after raising his concerns,” according to the whistleblower’s attorney, Charles Douglas.
CMC did not admit liability in the settlement. Lauren Collins-Cline, a spokesperson for the hospital, said, “This call coverage arrangement originated almost 15 years ago with the input of legal counsel in order to provide high quality care for patients. It is no longer in place. While CMC vigorously disagrees with the government’s allegations that this arrangement violated federal law, we have agreed to settle in order to avoid long costly civil litigation. CMC holds itself to the highest ethical standards in patient care and business conduct. That’s embedded in our mission, and will always remain our highest priority.”
‘Look at All the Flows of Remuneration’
Wade said he can imagine that the hospital thought it made sense to cover Paicopolis’ calls when she was unavailable. “I have had this conversation with other hospitals before,” he said. When physicians go on vacation and don’t have coverage, their patients may wind up at a different hospital. That may not be in the best interests of the patient, and it doesn’t serve the business interests of the hospital, Wade said. “It makes good medical and business sense” to arrange call coverage, he said. “But under the regulations we have, that’s a benefit given to the physician, and the physician has to pay for it.” Or physicians must arrange the call coverage themselves. There is more latitude with employed physicians than an independent physician like Paicopolis, he noted.
Robison advises hospitals to “look at all the flows of remuneration” to physicians who are in a position to refer patients, whether the payments are in kind or cash. “Those arrangements need to be scrutinized,” he said. “If it’s determined after review of those arrangements that the Stark Law and/or Anti-Kickback Statute are implicated, the arrangement must be structured to comply with a Stark Law exception and ideally an Anti-Kickback Statute safe harbor.”
Wade and Robison were surprised the CMC case didn’t include allegations of Stark Law violations. “Essentially the allegation was there was a financial relationship formed between the hospital and independent cardiologist as a result of the call services which, based on the allegations, presumably could not have met a Stark law exception,” Robison noted.
Hospitals also should consider the commercial reasonableness of a service as well as its fair market value, Wade said. That means considering whether it’s commercially reasonable to provide a free service to the doctor, such as satellite TV as part of an office lease.
The Stark Law makes some allowances for hospital freebies to physicians, in kind in one case and cash in another. The nonmonetary compensation exception caps the per-physician dollar amount that hospitals and other entities providing designated health services are permitted to give referring physicians in gifts, meals, etc. The maximum allowed by CMS this year is $452. And the revised Stark regulation, which took effect in January 2021, created an exception for limited remuneration to a physician, with a maximum of $5,000.[4] The remuneration for items or services—which can be cash—must be fair market value, commercially reasonable and not take into account the volume or value of referrals, although it doesn’t have to be memorialized in writing.
Contact Wade at bob.wade@btlaw.com, Robison at arobison@kslaw.com, Collins-Cline at lauren.collins-cline@cmc-nh.org and Douglas at chuck@nhlawoffice.com.