Physician Leases Self-disclosed in 2008

The former owner of the facility that was known as South Coast Medical Center (SCMC) in Laguna Beach, Calif., agreed to pay more than $72,000 in a civil monetary penalty (CMP) settlement concerning leases with providers. After it reported the problematic arrangements to HHS Office of Inspector General (OIG), the company overhauled its compliance program to keep better track of leases.

OIG alleges that SCMC had multiple arrangements with physicians that raised compliance issues under the Stark law and anti-kickback statute, according to the settlement. The facility entered into OIG’s self-disclosure protocol in February 2008, it says.

The arrangements SCMC reported were physician service contracts and medical office building leases. According to the settlement agreement, OIG says that one lease with a physician involved financial benefits that implicate the anti-kickback statute, and that SCMC “presented claims for designated health services furnished during the relevant time period that resulted from prohibited referrals.”

SCMC was acquired by St. Joseph Health System in 2009 and is now known as Mission Hospital. The previous owner was Adventist Health. According to a statement from Adventist, the company cooperated with the government and entered into the settlement without admitting liability. The parties settled to avoid the uncertainty and expense of litigation, the settlement says.

The improper arrangements were discovered during an internal contract review at SCMC, says Kevin Longo, the facility’s corporate compliance officer. “Health care entities are responsible for any errors or omissions by their independent contractors or agents (e.g., property management companies) who manage physician contracts on behalf of the health care entity,” he tells AIS. “It is vitally important to implement routine monitoring procedures over your independent contractors who are responsible for physician contracting activities.”

Once the arrangements were found and reported to OIG, Longo says, Adventist expanded its routine physician contract audit process to include:

1. Obtaining copies of all medical office building leases, rent roll (i.e., occupancy list) and floor plans if possible;
2. Performing a walk-through of each hospital-owned property, making a note of all occupant signage and suite numbers;
3. Tracing each of the signage names to the rent roll and/or floor plans;
4. Tracing each name on the signage to an executed contract;
5. Physically reviewing each contract file that is maintained by the property manager to verify that it includes: (a) an executed contract; (b) fair-market-value documentation support, copies of fair-market-value surveys, etc.; (c) payment history report; (d) rent-due aging report; (e) a review of all correspondence involving delinquent payments; and (f) an evaluation of the sufficiency of any actions taken;
6. Confirmation that the property manager contract is structured so the person is a truly independent contractor and includes provisions concerning conformance to the hospital’s compliance program and appropriate indemnification provisions; and
7. Confirmation/verification that the property manager or hospital personnel enters the lease arrangements into the hospital physician contract database.

Reprinted from the Nov. 22, 2010, issue of REPORT ON MEDICARE COMPLIANCE