Memorial Hospital's agreement two weeks ago to pay a $1.3 million settlement to conclude a three-year federal anti-kickback probe left several obvious questions unanswered.
Settlement of the federal investigation alleged that Memorial had for some years illegally induced physicians and physicians' groups to bring their patients to Memorial in violation of federal statutes that prohibit hospitals from offering illegal inducements to secure Medicare and Medicaid billings. Among the unanswered questions are:
• Why would Memorial pay such a hefty settlement while denying any intentional wrongdoing?
• Why did the U.S. investigators give Memorial credit for "self-reporting" the alleged violations in 2009, when the Department of Justice's settlement statement charged that Memorial and its Denver owner, Catholic Health Initiatives, gave area physicians below-market lease rates and other inducements to lure patients that violated Stark and Anti-Kickback Statute laws "beginning as early as January 2003."
• What allegedly went wrong with Memorial's compliance protocols between 2003 and 2009?
• Why did the U.S. Attorney's office, the Justice Department and the Inspector General of the Department of Health and Human Services wait until 2009 to commence an investigation of Memorial's alleged Stark violations, when these same agencies were engaged in a similar investigation of Memorial's chief competitor, Erlanger Hospital, at least by 2003?
These agencies concluded their investigation of Erlanger for Stark law violations in 2005 under terms that required Erlanger to pay a stunning sum of $40 million, and to mount a stringent compliance program to assure that it would meet federal standards pertaining to Stark and Anti-kickback laws going forward.
The difference in the investigative treatment of Erlanger is unavoidably glaring. It raises questions about disparate treatment in the investigative process. It illustrates how Medicare/Medicaid fraud laps over into the arena of hospital and provider competition, and it shows how that competition drives up the cost of Medicare/Medicaid and health care generally, rather than driving it down.
In this case, it also prompts particular focus on the whistleblower lawsuit of a former Memorial contract compliance officer, Carmen M. Schreane. Her suit was filed on Jan. 20, 2009, in the U.S. District Court in Nashville, but left under seal and idle since then due to the subsequent investigation against Memorial.
Schreane alleges in her lawsuit that she was hired by Memorial in December 2007 to manage contract compliance, and directed in January 2008 to review vendor agreements and contracts. She subsequently reported apparent Stark violations involving dozens of physicians at Memorial's Chattanooga Heart Institute and at its North Park facility, her suit claims. The former, she charged, covered physicians who were given below-market leases for nearly 20 years while doing some 400 surgeries a year; physicians at North Park were given similar below-market leases for many years. A few were also allegedly given $100,000 to $200,000 in renovation and construction allowances.
According to Schreane's lawsuit, she was shunned and stripped of compliance duties after she filed her report, and its contents were not pursued. Following several grievance procedures, she says she was fired for violating her "confidentiality" agreement. At that point, her suit says she contacted FBI agents, gave them copies of the documents and filed the whistleblower suit.
In an interview with this paper's health care reporter, Mariann Martin, Schreane said she told Memorial officials about the violations "long before" they "self-reported." Memorial officials declined to comment about the lawsuit, but said they would contest Schreane's claims.
The outcome may not be known for some time, but the unanswered questions and Schreane's lawsuit cast long shadows over the market competition here, and the excessive costs it drives in replicated services, marketing inefficiencies and higher provider costs. It also begs the question of fairness in the settlement costs vis-à-vis Memorial's that yet haunt Erlanger's ability to meet its public burdens.