Providers who thought their legal troubles were over once they signed a settlement or corporate integrity agreement are in for a costly surprise.
In a sign that the HHS inspector general's office is monitoring corporate integrity agreements more aggressively, the agency has cited Honolulu-based Straub Clinic and Hospital for violating its agreement and assessed the 139-bed hospital $71,000 in stipulated penalties.
Straub President and Chief Executive Officer James Smith said in a written statement that the most recent problem stemmed from a delay in filing several reports.
"Operating under a corporate integrity agreement was a new experience for Straub, and in many respects the first year was a learning experience," Smith said. "Straub acted in good faith to implement all aspects of the (agreement). However, in a few limited situations, Straub failed to report to the inspector general in the time frames specified."
In November, Straub paid $30 million for the ownership stake held by beleaguered physician-practice manager PhyCor, which purchased it in 1997.
Although the inspector general monitors more than 470 corporate integrity agreements in healthcare, it has assessed penalties for violating integrity arrangements and settlement agreements only three times, said Michael Shaw, senior counsel to the inspector general. Shaw said Straub was cited in December for three integrity agreement breaches, including failure to submit a complete annual audit and twice failing to report overpayments. It also must pay the cost of the audit review.
At that time, PhyCor still owned Straub.
The original Straub settlement signed in August 1998 resolved allegations of outpatient laboratory unbundling and failure to report and pay back credit balances between 1992 and 1995. The for-profit hospital paid $2.4 million to settle without admitting legal guilt. And that settlement contained the original integrity agreement.
It wasn't the first time Straub was cited for violating a government fraud agreement. Earlier in 2000, the inspector general fined the hospital $10,000 for violating its settlement agreement. In 1999, the agency imposed the same civil monetary penalty against 381-bed St. Joseph Medical Center, Towson, Md., for the same violation.
In both cases, explained Lawrence Goldberg, chief of civil recoveries for the agency, the penalties were assessed because the hospitals submitted unallowable costs to Medicare, such as the costs of the investigation, legal fees and settlement amounts.
"The size of the fine is not an indication of the amount of money involved," Goldberg said, declining to disclose the specific amounts.
Shaw said the agency monitors all integrity agreements and underlying settlements. It can assess stipulated penalties for violations of agreements and civil monetary penalties for violations of original settlement terms.
Shaw declined to say how many other violations the agency is negotiating.
Michael Ruggio, a former U.S. Justice Department attorney, said the inspector general did not seem to enforce integrity agreements and settlements in the past. Now, "they assign somebody to follow up on every (agreement)," he said.