Everyone is calling on physician groups and hospitals to align their patient care and business incentives. But where do all the pundits go when federal investigators come a knocking? Several recent investigations demonstrate the legal risk inherent in close business ties between physician groups and hospitals, especially when those ties get too tight.
In Indiana, an investigation into the referral patterns of a physician-owned rehabilitation hospital has scuttled the parent companys plans to buy a hospital from LifePoint Hospitals.
In April, federal and state agents raided Doctors Hospital and Neuromedical Center in Bremen, Ind.; homes and offices of Cameron Gilbert, president and CEO of parent company Physicians Hospital System; and spine surgeon Jamie Gottlieb, one of Physicians Hospitals 83 physician investors. They also visited Gottliebs i-Spine Institute in Elkhart, Ind. None of the parties has been accused of any wrongdoing.
Physicians Hospital System, Mishawaka, Ind., was close to completing a deal to buy LifePoints 49-bed Starke Memorial Hospital in Knox, Ind., which required the approval of the Starke County board of commissioners because the county owns the property and equipment. The commissioners met five days after the raids brought the investigation to light and voted to table the decision for a month, agreeing too little was known about what the government was looking for. Clarian Health, Indianapolis, had been on board as a 30% partner.
I believe the county commissioners and the county council acted very appropriately, Gilbert said. We are very confident that information that was provided by other people to the investigators will be proven faulty, hopefully sooner rather than later. These commissioners were sitting there at an incredible disadvantage.
A spokeswoman for the U.S. attorney in northern Indiana said the office does not discuss active investigations and refused to confirm details the office reportedly disclosed to the local media.
It relates to healthcare billing fraud, improper referrals of patients and suspected illegal kickbacks to doctors, Assistant U.S. Attorney Donald Schmid was quoted as telling the South Bend (Ind.) Tribune the day of the raids.
It was very embarrassing, Gilbert said, and he explained his understanding of the matter this way: Others have provided information to investigators that we had inappropriate admissions into our hospital and that physicians were being incentivized to put patients into the hospital. Both are incredibly false allegations.
The agreement with LifePoint expired at the end of April, and LifePoint declined to extend it, Gilbert said. LifePoint spokeswoman Diane Huggins confirmed that LifePoint is exploring other options for selling Starke Memorial.
Gilbert, who was Starke Memorials CEO from 2000 to 2003, said he intends to put together a new offer. Were trying to do the absolute best we can for that community, he said. Physicians Hospital System also includes RiverCrest Specialty Hospital, a long-term acute-care hospital in Mishawaka, where the company plans to open a medical-surgical hospital later this year.
Gottlieb did not return a call seeking comment.
In Maryland, meanwhile, months after seeing new leadership installed at an affiliate hospital near Baltimore, Catholic Health Initiatives officials are standing behind the much-lauded 332-bed St. Joseph Medical Center as it endures a criminal investigation that has dislodged three top leaders.
Its the kind of leadership turmoil that could become more common as regulatory pressures continue to ratchet up and investigators cast a sharper eye toward healthcare providers, and particularly physician-hospital agreements such as the one at issue in the St. Josephs probe, observers said.
There are a growing number of cases being brought to the attention of the Justice Department by physicians who are frozen out of these arrangements, said lawyer Michael Mustokoff, a Philadelphia partner with Duane Morris whose practice includes criminal defense and healthcare regulatory work.
Patricia Bosse, vice president of mission and institutional advancement at St. Joseph, confirmed in an e-mailed statement that the hospital is cooperating with investigators from HHS inspector generals office who are scrutinizing the hospitals relationship with an unnamed physician group.
Beth OBrien, the CHI senior vice president of operations whose executive group includes St. Joseph, was installed indefinitely as the leader of the Towson, Md., hospital by the St. Joseph board of directors on Feb. 26. OBrien subsequently was made interim president and CEO of the hospital on May 8, hospital spokeswoman Vivienne Stearns-Elliott said. OBrien has assembled a team to help restructure and strengthen the hospitals compliance program, Bosse said.
Stearns-Elliott would not comment on a May 9 report in the Baltimore Sun that the three executives who resigned were CEO John Tolmie, Chief Operating Officer Sylvia Sly Moore and Vice President of Operations Lucy Shamash. The hospital has said previously that three unidentified executives were placed on indefinite administrative leave to avoid conflicts of interest with the ongoing investigation into the hospitals financial relationship with a physician group.
Similarly, while the representatives declined to identify the physician group at issue, they did not dispute the Sun story that identified the physician group as Midatlantic Cardiovascular Associates, or CSA, a major regional cardiology practice that operates in St. Joseph and other hospitals.
In an e-mailed statement, Midatlantic CEO Robin Levy said the practices specialists see patients at nine community hospitals, and it would be not be appropriate for the firm to comment on an ongoing investigation at any medical institution.
Cardiac care is no ordinary service line for St. Joseph. In a market in which it competes with several other providers, St. Joseph was rated one of the nations top 100 hospitals for cardiovascular care by Thomson Reuters for the eighth time this year, a Maryland record.
HHS officials were tight-lipped about the investigation, referring all questions to the U.S. attorneys office in Baltimore. We have made no statements, and there is nothing public available about the case, said Marcy Murphy, spokeswoman for the federal prosecutors office.
But much has been said about the relationship between St. Joseph and Midatlantic in civil court filings. In a case set for trial in Baltimore County Circuit Court in January 2010, a surgery group called Cardiac Surgery Associates accuses Midatlantic of using its influence in cardiac physician referrals to derail CSAs attempts to strike an exclusive deal for cardiac surgical services between CSA and St. Joseph. Midatlantic at the time was in merger talks with CSA, but the surgical group had balked at demands that its surgeons divert some of their annual salaries to cover the physician groups overhead, calling the demands attempted extortion.
Despite the fact CSA surgeons were instrumental in building the cardiac surgery practice at St. Joseph Hospital into premier national stature, Midatlantic has used its patient referral leverage against CSA to ensure they now perform only a small number of the surgeries at St. Joseph Hospital, according to CSAs 2006 complaint.
In response, Midatlantic called CSA a disgruntled former monopolist in legal filings and said the firms principals became upset when Midatlantic decided to start hiring surgeons to compete with their business. In other words, at the same time that plaintiffs accuse Midatlantic of unfair competition, they complain that Midatlantic injured them by preventing them from excluding all competition from St. Joseph, Midatlantic attorneys wrote. Midatlantic says it is not subject to the federal ban on physician self-referrals because it qualifies under the group practice exemption to the Stark law.
For their part, St. Joseph officials will confirm only that federal investigators are examining the financial relationship between the hospital and one physician group, according to Bosses statement. Hospitals are highly regulated environments, she said. Investigations of this nature are becoming more commonplace.
Finally, in Illinois, Northwestern Memorial Hospital in Chicago has reported no new developments in a federal investigation disclosed to bondholders in late 2008 regarding relationships between the 787-bed hospital and Northwestern Medical Faculty Foundation. The medical practice is made up of more than 500 physicians who are faculty members of the hospitals academic affiliate, Feinberg School of Medicine of Northwestern University.
Nothing has been determined at this point, said Northwestern Memorial spokeswoman Kris Lathan.
The hospitals unaudited financial statements filed for bondholders in April contains a one-paragraph summary of the investigation, noting only that the hospital received subpoenas from HHS inspector generals office in August 2008 and is cooperating fully.Submit a letter to the Modern Physician Reader Blog. Please include your name, title, company and hometown. Modern Physician reserves the right to edit all submissions.