Top 5 Lessons to Learn from Sutter’s Historic $46 Million Settlement

healthcare compliance programsIn December, the Department of Justice announced that Sutter Health agreed to pay $46.1 Million to resolve allegations arising claims around improper compensation agreements. The DOJ alleges that from 2012 to 2014, Sutter Health violated the Stark Law by billing Medicare for services referred by Sacramento Cardiovascular Surgeons Medical Group Inc. (Sac Cardio) physicians that exceeded the FMV range. 

“Improper financial arrangements between hospitals and physicians can influence the type and amount of health care that is provided,” said Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division.  “The Department is committed to taking action to eliminate improper inducements that can impact physician decision-making.”

While there are many takeaways from the historical settlement, here are 5 key lessons to for healthcare professionals to take to heart going forward:

1. The government can and will investigate whistleblower allegations.
The initial allegations were brought forth by Laurie Hanvey, an experienced Compliance Officer with over 25 years of experience that noticed payments and time sheets from Sac Cardio that didn’t add up. Hanvey noticed that they billed Sutter for more than 40 hours a week for five weeks a month and that they had falsely recorded non-work items such as vacations as time spent at work. She then halted payments to Sac Cardio before Sutter Health gave in after demands from the Sac Cardio team who had threatened to shut down the operating rooms.

Safe to say, when presented with this information from Hanvey, the DOJ immediately took notice and began looking into the serious allegations. Simply put, if you allow bad behavior, it’s only a matter of time until you are caught.

2. If you aren’t being proactive in creating a culture of compliance, the costs of being reactive are significant. 
Once under investigation from the initial allegations, Sutter had to dedicate more resources to seeing if there were any other compliance issues that the DOJ would inevitably discover. As a result, Sutter had to self-report anti-kickback and overbilling for Medicare patients at some of their surgery centers. The result? An additional $15 million settlement. Unless you are OK with potentially spending millions of dollars after the fact, creating a culture of compliance saves a significant amount of money, time, and peace of mind.

3. It’s critical to document commercial reasonableness for medical directorships.
If you cannot justify a medical directorship and prove commercial reasonableness, you run a major compliance risk that could cost your organization millions of dollars. In the case of Sac Cardio, the DOJ found them to have duplicative medical directorships from Sutter Health on top of $900,000 for call coverage agreements and free physician assistants in exchange for the Sac Cardio surgeons referring patients to Sutter hospitals. 

4. Just because Sutter got caught doesn’t mean it isn’t happening at other health systems.
Let’s face a hard truth: the only thing separating Sutter Health from other health systems with poor compliance practices is the fact they got reported on by a whistleblower which opened the floodgates. It would be naive at best and irresponsible at worst to assume Sutter is the only health system that has potential bad actors running afoul of Stark, AKS, and False Claims. While Sutter is paying the price right now, they are far from the only organization facing compliance issues and this should be a wakeup call to others to ensure they have their ducks in a row.

5. More health systems will be investigated by the DOJ in 2020 - will you be on the list?
Let’s face another hard truth: whistleblowers can be potentially awarded millions of dollars for reporting bad behavior to the government. If it can happen to Sutter, it can happen to you. And if the same situation happens at your health system, if you are directly responsible for creating a culture of compliance, you could very well lose your job if you aren’t ensuring everyone within your organization is aware of the rules, regulations, and penalties associated with Stark, AKS and False Claims.

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