Major Settlement Between King’s Daughters Hospital and U.S. Department of Justice.

A $40.9 million settlement over issues of unnecessary cardiac catheterizations and coronary stents was apparently reached last February. Is it final yet?

Modern Healthcare reported yesterday on additional bad news for King’s Daughters Medical Center, including a $40.9 Million-plus settlement with the U.S. Department of Justice related to unnecessary cardiac procedures. The following language comes from the Medical Center’s annual independent audit for the fiscal year ending September 2013, as released this March 14.

“In February 2014, the Medical Center and the United States of America, acting through the DOJ and on behalf of the Office of Inspector General (OIG-HHS) of the Department of Health and Human Services (HHS) (collectively the “United States”) and the Commonwealth of Kentucky, reached an agreement to settle the DOJ’s review related to unnecessary diagnostic cardiac catheterizations and coronary stents. Under the terms of the agreement, the Medical Center will pay $40.9 million (“Settlement Amount”) to the United States. Interest will accrue on the Settlement Amount at the simple rate of 2.5%. Accordingly, $40.9 million is included in the current accrued governmental settlement at September 30, 2013 for the Settlement Amount. An additional $8 million has been included in the current accrued government settlement at September 30, 2013 for legal fees associated with the investigation and settlement. In addition to the settlement, the Medical Center will enter into a Corporate Integrity Agreement with the OIGHHS.”

Little or no news about the settlement.
I find no announcement of any settlement as of this morning on the websites of the Eastern District US Attorney, King’s Daughters Medical Center, or Kentucky’s Inspector General. I will try to ask for such. Apparently there was an additional settlement in September, 2013 of which I have no other details. Can anyone help?

Bad news upon bad news.
The 45-page auditor’s report for the years ending September 30, 2013 and 2012 is not good news for the hospital and its community. Total assets fell by $36.5 million. Total liabilities rose by $12.2 million. Net patient service revenues fell by $67.0 million (12.5%). Investment income fell. Salaries and wages were reduced to match decreasing patient volume. Participation in the hospital’s defined benefit pension plan was frozen and a matching defined contribution plan substituted. The excess of expenses over revenues after the $48.9 million settlements led to a $61.3 million loss for the year. The self-insured Medical Center is holding a reserve for medical malpractice claims of $23.7 million for 2012 and 2013, “However, it is reasonably possible that recorded reserves may not be adequate to cover the future settlement of claims.” Other unsettled federal investigations such as for implantable cardio-defibrillators may be occurring.

From other documents available on the Modern Medicine website, the bond ratings of the hospital have been downgraded, and the hospital was late in making a required report to the bondholders. The Huron consulting group has been retained to help bail the hospital ot of its difficult position. This is the same group that was retained by Jewish Hospital here in Lousiville.

Getting better yet?
In a summary of operations covering last three months of 2013, operating income continued to fall, as did admissions, patient days, and total surgical procedures. It is not clear to me that they have turned a corner yet.

The hospital and its community deserve better.
In its report to its bondholders yesterday, KDMC makes a good effort to put the best light on matters. It stresses the 5-star and various Top-Heart-Hospital ratings it has received, but then again, St. Joseph London Hospital had similar ratings and its invasive cardiac program is rapidly collapsing. I have written much about such ratings and expressed my concerns that they are not measuring things that are the most important, or doing so reliably. Many things are measured, but whether cardiac or any other procedures are medically necessary is not one of them– and that is what is at issue at KDMC. In my opinion, King’s Daughters would do well not to brag about past cardiac glory. I believe it needs to swallow its pride and demonstrate that it can earn its stripes all over again.

There are many other clinical things at the hospital that seem to be going well. The hospital deserves to have the air around it cleared of any undeserved allegations, but given what has been made available after other settlements and investigations that I have been following, that is not likely to happen for some time.

King’s Daughters Hospital serves a part of our state that faces a myriad of socio-economic disadvantage. Many people and employees depend on its success. It will have a difficult row to hoe for a while.

As always, if I have made an error of fact or interpretation, please let me know.

Peter Hasselbacher, MD
President, KHPI
Emeritus Professor of Medicine, UofL
March 26, 2014

One thought on “Major Settlement Between King’s Daughters Hospital and U.S. Department of Justice.”

  1. I attempted to get a copy of the settlement. I was informed by the Office of the Inspector General in Kentucky’s Medicaid division that details could not be released because the settlement hasn’t been finalized yet. Similarly, the hospital had nothing to release at this time. If I were smarter, I would have noticed that the language in the financial audit said that the parties had only “reached an agreement to settle.”

    Perhaps the only good thing to come out of the scandals is that hospitals in Kentucky and elsewhere will use them as “learning opportunities” to change their business models of providing health services. Maximizing revenue is not a medically indicated or desirable end in-and-of itself. We are not making widgets here!

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