Allegedly failing to comply with the terms of a corporate integrity agreement it signed in a civil fraud settlement could doom a South Florida for-profit hospital to closure or a forced sale.
Last week's announcement by HHS Inspector General Daniel Levinson that he intends to exclude 155-bed South Beach Community Hospital in Miami Beach from billing federal health programs should allay the skepticism of healthcare lawyers and hospital compliance officers that the inspector general would never again try to exclude a hospital from billing federal insurance programs. But Levinson's announcement to exclude South Beach for violating its compliance agreement surprised health law experts, who said his action would heighten compliance vigilance.
American Hospital Association spokesman Richard Wade called the inspector general's action "a worst-case example" for the hospital industry and said the agency is making South Beach a poster child for noncompliance. Wade noted that South Beach is not an AHA member, nor is it accredited by the Joint Commission on Accreditation of Healthcare Organizations.
The inspector general's office said this is the first time in the agency's 30-year history that a hospital would be excluded for compliance-agreement violations.
Levinson announced his intent Dec. 7 to bar South Beach, known for nearly 40 years as South Shore Hospital and Medical Center, for extensive violations of its corporate integrity agreement. "South Shore's repeated and egregious failure in this case to abide by the terms of its (agreement) requires the (inspector general's office) for the first time to seek exclusion for such a violation," Levinson said in a news release.
Exclusion is considered the financial kiss of death to hospitals, which depend on Medicare, Medicaid and the military's TriCare program for 40% to 70% of their revenue. Of South Beach's total patient revenue of $94.6 million in fiscal 2004, Medicare and Medicaid generated nearly two-thirds, or $56.7 million. According to the American Hospital Directory, an online hospital database, South Beach lost $2.9 million on operations and suffered a net loss of $4.6 million on net patient revenue of $39.7 million for the fiscal year ended May 31, 2004. The hospital also lost money in 2003.
In his Dec. 2 notification letter to South Beach, the inspector general said the hospital flagrantly failed to comply with provisions of its integrity agreement by not completing, failing to submit or turning in late its required financial and compliance-monitoring reports. In that 11-page letter, Levinson cited numerous alleged violations and omissions from annual reports that constituted "a material breach" of the pact.
Levinson also cited the hospital's sale earlier this year to retired New York chiropractor and assisted-living centers operator Ira Barton. The inspector general alleged the hospital failed to reveal the sale as required under its agreement. Retired U.S. Army Col. Harry Zubkoff founded South Shore in 1968 as a not-for-profit community hospital. His son, William Zubkoff, served as president and chief executive officer, and under his leadership, the hospital was sold in 2004 to a group of physicians and real estate investors. Barton and Zubkoff bought the hospital this year. Neither Barton, its president, nor Zubkoff, its CEO, returned phone calls seeking comment.
South Beach's proposed exclusion culminates a rocky recent relationship with federal regulators. In 2002, it paid nearly $1 million to settle a whistle-blower lawsuit for overcharging Medicare for unallowable items on its cost report. It signed the integrity agreement at issue in this case, but allegedly failed to comply with the terms of that agreement and in 2003, paid a $50,000 fine for violating its agreement. In 2004, South Beach paid $12,500 to settle alleged patient-dumping violations. In both settlements, South Beach admitted no wrongdoing.
The hospital has 30 days to demonstrate compliance with its obligations and can appeal any exclusion.