Physician contracting is legally perilous, Tenet executives say

During a wide-ranging interview at the Modern Healthcare offices on March 5, Trevor Fetter, president and CEO of Tenet Healthcare Corp., and Keith Pitts, Tenet's vice chairman, were asked about the issue of False Claims Act lawsuits against hospitals and health systems and how health care organizations need to protect themselves from this liability threat. What follows is an edited transcript of their remarks.

Trevor Fetter: If you stray on any of this, somebody will call you out. You will end up with a complaint or an investigation, or you'll end up self-disclosing. The penalties far exceed the scope of relationship. It's an area where you have to be incredibly careful.

Hospitals acquiring ambulatory surgery centers are not the best example because in those specific types of transactions, there are safe harbors that make them one of less-risky relationships. More risky is entering into run-of-the-mill contracts for services with entities that could be construed as referral sources, such as any physician practice or a nursing home. You just have to be very careful.

Fetter: The Stark laws are a bit at odds with other objectives of government and what we believe is in interest of the public. The trend toward greater integration between providers of different types has heightened the risk in contracts, because everyone is moving in this direction. If you didn't have this trend at all, with doctors engaging in different integration models, you wouldn't have any risk. That was the era when the Stark laws were written. But we're way beyond that era. At Tenet, we have an enormous infrastructure in compliance and law and auditing to make sure from the beginning that the intent is correct, the execution is compliant, and the ongoing management and contracts are good. You have to put those contracts in files and watch them year after year.

I don't think the government's approach to enforcement is any different. You just have much more of this activity. You also have a whistleblower community that is much better developed now. And you have self-disclosure, with 10K reports. We had a matter last year that we brought to the government over rehabilitation services that we performed in some of our hospitals. They were medically necessary and ordered by doctors. The government said that's fine, but please don't send us the bill. We found it and investigated it. You have to be so careful in all these areas. There are conflicting goals out there.

Keith Pitts: It's complicated in the M&A environment today. We have all these systems and every physician contract is automated. Tenet has the best-developed compliance infrastructure I've ever seen. But independent hospitals don't have business courtesy records, for example. They say they don't entertain much. That's just not good enough. They don't have that infrastructure. It's not that they have the intent of doing wrong. We see that sometimes. It's much more complex today than it was.

Fetter: We have to assess the value of all charity events. When a hospital buys a table and invites a physician, we have to ascribe the value of that seat. We take a very strict view of this.

Fetter: A formal input system mitigates your risk. We have a well-developed system with compliance officers in every hospital and an 800-number phone line. That's the first thing: You want to encourage your employees, if they feel there is anything inappropriate taking place, to report it to you, not only to stop it early, but also because it counts for a lot once you get to the point where you're having a dialogue with government. In one case, we self-disclosed an issue to the government that originated in an email to me from an employee deep within one of our hospitals. It was not a coherent email. It rambled for an entire page, single spaced. It said, “by the way, we may be billing for things we aren't supposed to.” It didn't say that in any sinister way. It involved a difference in that market between Medicare national coverage determination and the local coverage determination. There were different intermediaries. It's beyond mind-bogglingly complex. But when email like that comes in, it goes to our compliance group and they open a ticket. We have a tracking system. That complaint isn't closed until the issue is clearly investigated and resolved. That system applies not just to compliance complaints but also if someone sends an email saying they have a really mean, abusive boss. Most of them are like that.

We also do exit interviews. That's important when someone is leaving because they don't like what they are being asked to do. There is, unfortunately, a really big payday for people who have been involved in whatever the issue is. There is a whole plaintiff bar doing this because the dollars are so big. The potential refunds aren't whatever you earned, it's gross billing. You could have done all sorts of services that were referred by the doctor and you could have lost money as a hospital. But you have to refund all of the gross revenue.

Fetter: When I read about (Halifax), I thought, wow, that's a lot of money. My second thought was, I don't know the facts. These things are so incredibly fact-specific. I wouldn't rush to judgment. The kind of compliance issues you see in this industry generally don't originate with bad intent. They are caused by sloppy practices. Perhaps the paper trail was not right. You can end up with a handful of bad emails that are difficult to explain. One person in the hospital might have had perfectly good intent but someone else writes, “Great, we'll get all of Dr. X's referrals.” Now you've violated Stark.

Pitts: I agree that these cases are fact-specific. But all CEOs should say: “There but for the grace of God could go anybody.” These cases should be a wake-up call, particularly to those who haven't paid attention. It could be anybody. What can you learn from that? It's not that those guys are bad guys, you don't know. It could happen to any organization.

Fetter: In our example of the rehabilitation services, we convened all of our chief executives in a strategy meeting and devoted an hour to a case study. No one had any bad intent. To the contrary, the doctors, nurses, and administrators all were trying to do what was right for patients. But in end, it was a very large settlement, one we have no interest in repeating. You try to learn from these. I would hope the rest of the industry would gain an understanding of how these hospitals got in this position. Was it an evil plan to get referrals from doctors, or was it a whole process that was sloppy?

If one purpose of entering into a physician arrangement is to gain referrals, that is a de facto Stark violation. But if your reason for doing it is that you are operating an emergency room and you need cardiologists on staff, or if you are running an accountable care organization and you have gaps in service coverage, or if you are trying to establish a new clinic for the community's benefit, those are legitimate. But if there is a doctor across the street and I want his business, that is a violation of Stark. So you can imagine what traps this lays in terms of how you approach that conversation. You need to be very careful of what you're doing and about paying fair market value.