Mo­tive ques­tioned

N.J. hospi­tal pays $12.6 mil­lion set­tle­ment

Modern Healthcare - - THE WEEK IN HEALTHCARE - Joe Carl­son

Car­diac care is a fast-grow­ing and lu­cra­tive ser­vice for hos­pi­tals, but a re­cent $12.6 mil­lion set­tle­ment for al­leged kick­backs at a New Jersey hospi­tal is re­mind­ing health sys­tems to en­sure they’re not il­le­gally buy­ing re­fer­rals for heart care. A whis­tle-blower, car­di­ol­o­gist Dr. Ni­cholas DePace, said two-cam­pus Cooper Health Sys­tem in Cam­den paid doc­tors $18,000 a year to at­tend four an­nual meet­ings of the Cooper Heart In­sti­tute Ad­vi­sory Board be­tween 2004 and 2010 that were ac­tu­ally shams de­signed to com­pen­sate doc­tors for re­fer­ring pa­tients to Cooper.

The state and fed­eral gov­ern­ments joined DePace’s law­suit as plain­tiffs. Although kick­back al­le­ga­tions against hos­pi­tals aren’t un­heard of, the al­leged ad­vi­sory board scheme is more com­mon to cases against phar­ma­ceu­ti­cal com­pa­nies and de­vice­mak­ers, lawyers say.

The hospi­tal set­tled the civil case with­out ad­mit­ting wrong­do­ing by agree­ing to re­form its train­ing and com­pli­ance pro­grams and paying $10.2 mil­lion to the U.S. Jus­tice De­part­ment and $2.3 mil­lion to the state.

The set­tle­ment was more than dou­ble Cooper’s en­tire op­er­at­ing profit for 2011.

“One of the things I found most in­ter­est­ing about it is it re­sulted in a rel­a­tively large kick­back set­tle­ment even though the amounts paid to the physi­cian were rel­a­tively mod­est,” said S. Craig Holden, pres­i­dent of law firm Ober Kaler in Baltimore and a former trial at­tor­ney with HHS’ in­spec­tor gen­eral’s of­fice.

Holden said that in cases like Cooper’s, which in­volved al­leged vi­o­la­tions of the anti-kick­back statute and the False Claims Act, any re­fer­ral from a physi­cian re­ceiv­ing an in­ap­pro­pri­ate pay­ment is con­sid­ered tainted, and there­fore Medi­care pay­ments must be re­turned on top of po­ten­tial triple-dam­ages and other penal­ties.

“You’re look­ing at all of your Medi­care pay­ments for ser­vices or­dered by th­ese physi­cians be­ing at risk. And when you are talk­ing about car­diac physi­cians, that can add up to a lot of money,” he said.

In a writ­ten state­ment, Cooper Univer­sity Hospi­tal Pres­i­dent and CEO John Sheri­dan Jr. de­fended the or­ga­ni­za­tion’s mo­tives in paying to set­tle the case.

“Af­ter more than three years of ex­tended dis­cus­sions with government lawyers, we de­cided in the best in­ter­ests of Cooper, to set­tle our dis­pute with­out the ad­mis­sion of wrong­do­ing to avoid the bur­dens and un­cer­tain­ties of a pro­tracted lit­i­ga­tion,” ac­cord­ing to his state­ment. “This al­lows us to fo­cus our full en­er­gies on serv­ing our com­mu­ni­ties.”

Ex­actly how many other hos­pi­tals have physi­cian ad­vi­sory boards like Cooper’s and how many pay their ad­vis­ers isn’t clear. Holden said that it used to be a more com­mon prac­tice, and that it’s more com­monly seen in other sec­tors of health­care, such as the phar­ma­ceu­ti­cal and de­vice in­dus­tries.

But re­gard­less of the con­text, such ar­range­ments are not in­her­ently il­le­gal.

Vir­ginia Gib­son, a part­ner with Ho­gan Lovells in Philadel­phia and former pros­e­cu­tor in the U.S. at­tor­ney’s of­fice there, said hos­pi­tals can glean im­por­tant in­for­ma­tion from such ar­range­ments, like whether they’re pro­vid­ing state-of-the-art fa­cil­i­ties and how med­i­cal spe­cial­ties are evolv­ing.

“There’s noth­ing il­le­gal about an ad­vi­sory board and noth­ing il­le­gal about paying con­sul­tants. It’s in how you struc­ture the pro­gram and how you value the ser­vices be­ing pro­vided,” she said.

If board mem­bers are just lis­ten­ing to lec­tures and not pro­vid­ing ac­tual ser­vices to the hospi­tal, they can’t be com­pen­sated as ad­vis­ers. And even when they’re pro­vid­ing real feed­back, pay­ments have to be at fair mar­ket value and not in­flated so much that a pros­e­cu­tor could con­clude that they’re in­tended to dis­guise com­pen­sa­tion for other rea­sons.

Gib­son and Holden said the fact that the Cooper whis­tle-blower was one of the doc­tors in­vited to be an ad­viser was un­usual—and es­pe­cially dam­ag­ing for Cooper.

DePace, a car­di­ol­o­gist with Franklin Car­dio­vas­cu­lar in south­east­ern Penn­syl­va­nia and South Jersey, said he was in­vited to join Cooper’s ad­vi­sory board in 2007 along with other high-vol­ume physi­cians. A news re­lease from his at­tor­ney said DePace “quickly re­al­ized that the (board) was a thinly veiled kick­back scheme” that paid doc­tors “for do­ing noth­ing more than sit­ting and lis­ten­ing to mar­ket­ing pre­sen­ta­tions and lec­tures on ir­rel­e­vant topics.”

“At least one (board) mem­ber ad­mit­ted to Dr. DePace that, when mak­ing re­fer­rals, he knew that Cooper, through the (board), ‘but­ters his bread,’ ” the news re­lease said.

DePace will re­ceive about $2.4 mil­lion as the whis­tle-blower who filed the orig­i­nal case.

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