The recent cases in New Jersey are not isolated efforts. In August, Covenant Medical Center in Waterloo, Iowa, agreed to pay $4.5 million to resolve allegations by the DOJ that it overcompensated five employed physicians in return for referrals. Although the physicians were not named as part of the settlement, they were said to be some of the most highly paid physicians in the country. In July, Tulare Regional Medical Center in Visalia, Calif., agreed to pay $2.4 million to settle a federal whistle-blower case alleging that the health system offered commercial real estate at prices below fair-market value to physicians in return for referring patients to the system.
Nine of those physicians in the New Jersey cases have settled the suits for sums ranging from $30,000-$360,000. In all cases, the physicians agreed to repay at least the full amount of the salaries they received from UMDNJ, with several physicians paying twice the amount of the salaries received. Two other physicians involved also plead guilty to criminal charges.
The suits are a result of a federal investigation brought forth after a federal monitor at UMDNJ who alleged in 2006 that the hospital had been illegally paying kickbacks to cardiologists in return for referrals to the hospital for several years. The hospital had agreed to federal monitoring in 2005 in order to avoid prosecution for Medicare fraud charges.
UMDNJ paid part-time salaries to several cardiologists allegedly in return for referrals to the hospital while they remained in private practice. Authorities from the federal government claim that the salaries were only used as kickbacks for referrals and not for the performance of genuine services to the UMDNJ or University Hospital.
According to the allegations, the hospital hired the cardiologists as clinical associate professors but did not require them to perform any duties other than to refer patients to University Hospital. University Hospital is a state-licensed Level 1 Trauma Center, and its state funding and accreditation are dependent on the annual performance of a certain number of cardiac procedures.
The government alleges that beginning in 1995, University Hospital was failing to meet the required number of procedures and embarked on a program to bring in more cardiologists with part-time employment contracts, which served as vehicles to pay cardiologists for their referrals.
According to Scott Becker, JD, CPA, partner at McGuire Woods, cases and investigations against physicians and hospitals for their involvement in improper compensation relationships, such as the cases recently making headlines in New Jersey, are becoming more common. “These cases are indicative of the government looking much more closely at physician financial relationships. Many healthcare facilities have compensation relationships with physicians or are looking into such relationships as a way to bring in additional providers to the facility. As a result, hospitals with these relationships must take certain steps to ensure they are not at risk, legally,” he says.
Healthcare facilities should ensure that all employment and compensation agreements with physicians are put in writing. Written agreements should outline the expectations of the physician in return for the salary. Healthcare facilities also must ensure that the salaries paid to physicians are fair-market value, says Mr. Becker.
Additionally, Mr. Becker recommends that healthcare facilities regularly monitor physicians’ performance of the duties outlined in the employment agreements. “Hospitals need to take a look at their compensation arrangements and make sure that physicians are performing the required duties, not just making referrals, in return for their compensation,” says Mr. Becker. “Systems with compensation agreements that are not monitored may be paying physicians even though their expectations have not been met, which puts the health system at risk.”
