News & Features

KRH Agreement Requires Compliance Officer, Stipulates Penalties

Public document lays out details of mandatory compliance program following $24 million settlement

In addition to a $24 million settlement between the Department of Justice and Kalispell Regional Healthcare, where physicians allegedly received illegal remuneration in exchange for patient referrals to in-house services, the hospital must also enter into a mandatory compliance program with federal authorities.

The details of that program are laid out in a 41-page document released publicly by the Office of Inspector General U.S. Department of Health and Human Services. Called a Corporate Integrity Agreement, the terms of the document come on the heels of an unprecedented settlement that Kalispell Regional Healthcare (KRH) reached with the Department of Justice to resolve allegations that its physicians were involved in an illegal kickback scheme, in violation of the federal Anti-Kickback Statute, the False Claims Act and the Stark Law.

The settlement was the result of a so-called “whistleblower” lawsuit brought by Jon Mohatt, the former chief financial officer for the hospital’s physician network, who in September 2016 brought forth sweeping complaints of fraud to federal investigators, launching a two-year investigation.

Court documents state that Mohatt managed financial operations at KRH “for over 46 medical practices consisting of over 220 medical providers and $100 million in net revenues.”

In that capacity, he had firsthand knowledge of and access to the financial details and personnel inner-workings revealed in his lengthy, highly detailed complaint.

“Through his work and experience, Mohatt has direct, detailed, and personal knowledge that Kalispell Regional has violated Federal Stark and Anti-Kickback Laws as described in detail below,” the court documents state.

The settlement resolved allegations originally brought in two lawsuits filed by Mohatt under the qui tam provisions of the False Claims Act, which allow private parties to bring suit on behalf of the government and to share in any recovery.

Mohatt will receive $5,411,521 as his share of the recovery in the two consolidated cases.

The settlement will be paid over a six-year period, and is the largest False Claims Act recovery in Montana history.

Bryan Vroon, lead counsel for Mohatt, has represented whistleblowers in 85 settlements involving false claims against federal health care programs, resulting in more than $384 million in recoveries to the Federal Treasury since 2010. He said the agreement between KRH and the government will go a long way to ensuring compliance.

“I think the requirements of this Corporate Integrity Agreement are extensive, and while for a case like this these requirements are fairly standard, not all settlements under the False Claims Act require a CIA,” he said. “The government generally only requires a CIA when they find widespread violations of the federal law. With respect to what they have found, they have imposed a significant compliance program to require KRH to abide by the law. And if they breach the agreement, they are subject to serious penalties, including exclusion of Medicare and Medicaid.”

Vroon said the monetary settlement is only a small part of the intent behind the False Claims Act, while the Corporate Integrity Agreement (CIA) bears enough teeth to firmly hold health care programs accountable by requiring a stringent compliance program.

The CIA with KRH also requires the hiring of a compliance officer and imposes new duties to monitor, report and certify that its financial arrangements with physicians meet federal requirements surrounding federal health care programs like Medicare and Medicaid. A violation could mean exclusion from those programs.

The CIA lasts five years and also includes requirements to appoint a compliance committee; develop written standards and policies; implement an employee training program; retain an independent review organization; establish a confidential disclosure program; report overpayments, reportable events and ongoing investigations or legal proceedings; and provide an implementation report to the OIG on the status of the entity’s compliance activities.

The compliance officer will “report directly to the chief executive officer, and shall not be subordinate to the general counsel or chief financial officer or have any responsibilities that involve acting in any capacity as legal counsel or supervising legal counsel functions,” according to the CIA.

The CIA includes numerous financial penalties for failure to comply with the CIA, including a fine of $2,500 for each day KRH fails to establish, implement or comply with any of the following obligations: employing a compliance officer; establishing a compliance committee; and developing a written training plan and training and education programs for employees, contractors and board members.

According to Vroon, the False Claims Act and the Stark Statute are designed to compel health care organizations alleged to be in violation of federal law to comply.

The civil Stark statute prohibits hospitals from billing Medicare for services rendered to patients by doctors with whom the hospital has a financial relationship, unless the financial relationship falls within specified exceptions.

According to the lawsuit, the overcompensation of specialist physicians and senior hospital executives led to more than $100 million in losses over a five-year period, which the complaint alleges was the hospital’s “primary strategy to achieve offsetting hospital profits from physicians’ referrals.”

The allegations all stem from former KRH President and CEO Velinda Stevens’ tenure, before Pamela Robertson took over in October. Stevens died in January 2017.

Robertson announced she was resigning from her position for personal reasons, effective Nov. 30.

KRH officials deny any violations of the law, say the investigation did not result in any findings of wrongdoing and maintain that the settlement with the federal government was the most efficient step forward.

Vroon said the federal government’s decision to intervene in the case suggests it found Mohatt’s allegations compelling.

“The federal government doesn’t impose these requirements based on mere allegations,” Vroon said. “They impose these requirements when they find violations of federal law.”

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