Healthcare News & Insights

Hospital system lands in hot water for referral practices

Your hospital must be careful with the payment agreements it makes with associated doctors and practices, especially regarding referrals. Reason: If these arrangements don’t comply with the law, hefty penalties could result. One hospital system just found that out the hard way. Scales of justice

Adventist Health System, which operates several hospitals in Florida, must pay $118.7 million as part of a settlement with the U.S. Department of Justice. The whistleblower lawsuit accused Adventist of offering doctors excessive compensation for referrals, according to an article in the Daytona Beach News Journal.

The suit, which was filed by three ex-employees, alleged that Adventist created a scheme where doctors were offered large salaries and other perks to refer their patients to Adventist hospitals.

Some of the perks included paying the leases for a surgeon’s two high-end cars, giving a family practitioner a base salary that was twice what other primary care providers in the area received, and paying a part-time dermatologist over $710,000 in a year.

Doctors who signed on to work for Adventist and received these benefits were allegedly required to refer patients to the health system’s hospitals, in violation of the Stark Law and the False Claims Act.

Along with these problems, the healthcare system was also accused of incorrectly billing services to Medicare.

Hospital’s response

As part of the settlement, Adventist Health System will pay almost $4 million to various states where it operated hospitals, including Florida, Texas and Tennessee. The rest will go directly to the feds.

Adventist admitted no wrongdoing, saying it did its own review and “voluntarily disclosed” information about its compensation strategy for doctors. It also released details about what it calls “highly technical billing and coding issues” that may have affected its claim submission process.

According to the health system, the issues it disclosed had no effect on the “quality, safety or individual cost of patient care at [Adventist Health System] hospitals or clinics,” per a statement it released about the lawsuit.

Review business arrangements

Your hospital may not have the same issues Adventist did with its salary practices or signing bonuses, but it’s still crucial to give any arrangements with primary care physicians a thorough inspection. More and more hospitals will be looking to partner with family practitioners as a larger focus is placed on maintaining the continuum of care.

Legally, a hospital can’t offer doctors any incentives for referrals – even if they’re small. Patients can be given objective information about the services your hospital offers, but rewarding a doctor for marketing your facility to patients isn’t compliant with federal law.

With that in mind, any agreements your hospital makes with physicians must be free of any clauses that could raise eyebrows or lead to legal trouble.

When in doubt about a potential business arrangement, especially when consolidating or merging, err on the side of caution and consult with your hospital’s legal team before proceeding.

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