Healthcare Business News

Ohio hospital to pay $8.5 million for self-disclosed violations

By Joe Carlson
Posted: March 14, 2014 - 1:45 pm ET

Financial deals with two doctors will cost a 71-bed hospital in northern Ohio $8.5 million through a settlement with the Justice Department.

Executives at ProMedica Memorial Hospital in Fremont, Ohio, told the government that two joint ventures with physicians had likely allowed illegal profits to flow to the two doctors, potentially running afoul of Medicare and Medicaid's rules on how hospitals can pay doctors. The Justice Department said the agreements violated the False Claims Act, the anti-kickback statute and the Stark law.

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A news release about the settlement provided only broad outlines of the allegedly illegal agreements that were flagged during an internal audit in 2012. One involved a joint venture with a pain-medicine doctor, and the other was an arrangement under which an ophthalmologist purchased intraocular lenses and then resold the eye implants to Memorial at inflated prices.

Justice Department officials in Washington and Cleveland didn't immediately provide a copy of the executed settlement agreement, and hospital officials declined to send it. Although Memorial officials self-disclosed the conduct that they uncovered internally, the settlement does not require the hospital to admit wrongdoing.

“The discrepancies that were found were operational in nature, and the caliber of patient care provided was never brought into question,” a hospital statement says. “All of the services provided to patients were reasonable and necessary.”

The $8.5 million settlement is a sizeable amount of money for the 71-bed hospital, which posted a $400,000 loss on its operations for the fiscal year that ended Sept. 30, 2012, according to its most recent tax filing available. The hospital had $72 million in total revenue that year. The hospital's CEO and chief financial officer were both employees of an outside management and consulting company, Quorum Health Resources. In January, the hospital joined the ProMedica system for undisclosed terms.

The state of Ohio will receive $600,000 from the settlement, because some of the money paid under the two arrangements involved the state-funded Medicaid program.

The case did not stem from a whistle-blower lawsuit. Rather, HHS' inspector general's office and the Justice Department operate the self-disclosure program for situations when a hospital's compliance department has identified potential liabilities and seeks to resolve them.

The OIG revealed last year that hospitals and companies that self-disclose potential violations can typically expect to pay about 1 times the amount of government healthcare dollars billed for through illegal arrangements—which would be a discount from the triple-damages available under the False Claims Act and other federal laws.

“We are pleased that Memorial stepped forward to disclose these improper financial relationships and is working to avoid future occurrences,” HHS Inspector General Daniel Levinson said in a news release.

The statement from ProMedica noted that the settlement does not affect their relationship with Memorial: “We commend the leadership team at ProMedica Memorial Hospital for the integrity, transparency and diligence they displayed throughout the disclosure and settlement process. We look forward to working with the hospital team to enhance compliance efforts to prevent issues such as these from happening again.”

Follow Joe Carlson on Twitter: @MHJCarlson

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