Saint Joseph Health Care Settles Fraud Allegations: Analysis of Court Documents

Worse than I thought.

I prepared an earlier article about this settlement based on press releases from the U.S. Attorney’s Office and that of the FBI. I had slim hopes that more information would be available any time soon, but once again I was wrong. I subsequently obtained the full text of the Settlement, but also the recently-unsealed qui tam Relator’s Complaint to the court that started it all. The Complaint revealed a staggering degree of malfeasance with a parade of examples of medically unnecessary procedures extending beyond angioplasty alone to major cardiac surgery, and involving more than one St. Joseph Hospital. It also suggests the direction future prosecutions are going. The Settlement does not protect Saint Joseph Health System from future financial or programatic penalty as much as I expected. Both documents can be downloaded using the links provided above or at the end of this article.

The Settlement.

The payment of $16.5 million immunizes St. Joseph only from charges of violations of the False Claims Act, and of Federal Anti-Kickback and Stark Laws. The first violation includes billing Medicare and Medicaid for things that were not done. The latter two cover things like payments by hospitals to physicians to induce referrals, and self-referrals by physicians to companies that they or their family members own. The Settlement covers activities only from Jan 1, 2008 to Aug 31 2011. It also settles claims for violations of Kentucky fraud and abuse and self-referral laws. It specifically excludes a number of named physicians and their businesses from any protection by the Settlement as well as individuals who have already received notice that they are under investigation.

The 18-page Settlement covers more than just angioplasty abuse, and includes medically unnecessary medical testing, diagnostic cardiac catheterizations, internal pacemaker placement, and even open-chest coronary artery bypass graft surgery (CABGS).

No admission of guilt.
Saint Joseph London tells us that the Settlement is not “an admission of liability by Saint Joseph London…,” but its statement omits the rest of the sentence, “… nor a concession by the United States that its claims are not well founded.” [The claims of the United States are rather forcefully stated and believable. At least one of the parties is already in jail.]

Not all potential transgressions excused.
The covered parties are not released from violations of the IRS tax code. Nor are they released from any criminal liability or “administrative liability,” or any conduct other than the Covered Conduct. The Settlement does not include things such as liability for warranty claims, or deficient quality of goods and services. It specifically excludes any liability for “personal injury or property damage or for other consequential damages from the covered conduct.” These last few items leave Saint Joseph hanging out naked in the many malpractice and civil suits lining up against it.

One hospital or others?
It is not clear to me that the Settlement covers improper activities or requires remedies at St Joseph London Hospital alone, or at other hospitals in the St. Joseph/ KentuckyOne Health hospital chain. (See comments related to the Claim Document that follows.)

Financial impact not limited to the $16.5 million fine.
Saint Joseph must pay an additional $295,000 in legal fees to the Relators who initiated the complaint. St. Joseph also agrees to repay the Federal programs Medicare, Medicaid, and Tricare any unallowable costs already billed to these programs plus interest and penalties. Adding injury to injury, “Saint Joseph London agrees that it waives and shall not seek payment for any of the health care billings covered by this Agreement from any health care beneficiaries or their parents, sponsors, legally responsible individuals, or third party payers based upon the claims defined as Covered Conduct.” To me this sounds like Saint Joseph also has to give a lot of money back to the private sector.

Saint Joseph agrees to open its books wide, and to cooperate fully with all other ongoing and related investigations.

Saint Joseph London will not be excluded from future participation in Medicare or Medicaid but only for violations of fraud, kickbacks, or “prohibited activities.” All the excluded potential liabilities remain grounds for this hospital “death sentence.” The Inspector General of HHS also reserves the right to exclude the hospital or physicians from federal programs under statutory mandatory exclusions under 42 U.S.C. § 1320a-7(a). This has to do with individuals or entities convicted of crimes, patient abuse, felony fraud, or controlled substance abuse.

Of considerable relevance with respect to one of the themes of this Policy Blog, “All parties consent to the United States’ disclosure of this Agreement, and information about this Agreement, to the public.” Such a clause may be routine, but I really did not expect it.

The Qui Tam Action (Complaint).

The 71-page Complaint was brought to court by three interventional cardiologists from Lexington who were in a position to see what was happening and the expertise to make a judgement of medical necessity. I do not know the original date of the filing, but the amended Complaint I have was filed in August 2012. There is too much covered for me to summarize it all here. However, for those not well versed in the jargon of federal healthcare law [like me], a reading of the surprisingly clear language will take you step-by-step through what all the various laws cover and what the alleged violations actually were.

The depth and breadth of the allegations are staggering. The alleged participation of the hospital itself would have been at least  permissive of the abuses described. The hospital apparently allowed the doctors to bill for procedures done in their private offices as if they were the hospital itself, in order to capture the higher reimbursements that hospitals get for doing the same things. (This difference in payments is one of many reasons hospitals are hiring doctors nowadays, but the bonus may disappear as it is being abused.) It is asserted in the Complaint that the malfeasance was so great that the hospital knew or should have known what was going on.

As a physician myself, I was rendered furious at the parade of patient accounts illustrating the kinds of things this group of doctors and their hospital partner(s) were doing to their patients. You don’t have to be an interventional cardiologist (and I am not) to know that something unconscionable was going on. This was more than just excessive billing. Risky things were being done to normal or near-normal people with little likelihood of benefit. Could this possibly have been the standard of care at the time?  Summaries of the cases of 19 different patients who had angioplasty with stent placement, and 8 more with chest-cracking CABGS were listed. They were labeled A through CC leading me to believe that there were more examples that might have been chosen.

How many hospitals?
At least two of the of the listed patients (Patients K & CC) had several episodes of allegedly unnecessary coronary artery stenting or CABGS at Saint Joseph Lexington, another hospital in the Saint Joseph Hospital chain.

This was as bad as it gets. The web of interrelated businesses and contracts in which the malfeasance occurred (and by which it was hidden) is in itself not atypical in the healthcare industry. At one time it may even have been legal. However, cases like this should be a signal that more transparency, oversight, and accountability is badly needed. How could it possibly have taken so long for anyone in the professional, government, or private business sectors to blow the whistle on this activity? The public trust was betrayed.

To summarize:
I was asked to comment on the settlement by one of the national news agencies. Here is what I offered.

  • The announcement of the settlement today was dramatic enough on its own, but the actual settlement document itself suggests that St Joseph’s problems with the federal government are far from over.
  • The settlement is careful to limit itself only to certain specific civil false-claims violations against the hospital. Other individuals and organizations remain liable for additional unspecified alleged civil and criminal violations.
  • The qui tam Relators that initiated the lawsuit were cardiologists with the expertise to know that something wrong was going on.
  • The $16.5 million settlement will be amplified by ongoing refunds to Medicare for illegal billings by the hospital.
  • The charges leveled in the initial complaint that led to this settlement are both stunning and troublesome. The charges were not limited to angioplasty abuse alone, but actual unnecessary chest-cracking coronary artery bypass surgery. Tragically, to my reading, the allegations are believable.
  • St Joseph London was not the only St Joseph Healthcare hospital in which it was alleged that unnecessary invasive cardiac procedures were being performed.
  • The charges allege that the hospital was more than just an innocent bystander in this massive abuse of public trust. This would be kick-back medicine at its worst.
  • The public deserves full disclosure of what has happened in these hospitals and clinics. Nothing should be hidden under the rug of a settlement.
  • The worst part of all of this is the ugly suspicion that in Eastern Kentucky and elsewhere, these kinds of multi-party schemes to victimize patients and taxpayers are not limited to cardiac procedures or a single institution . We will never get a handle on controlling medical costs until we as a public are willing to hold healthcare professionals and hospitals fully responsible for these violations of trust.

I read these documents as an old scientist and not a lawyer.  If I have made errors of fact or interpretation, please let me know.

Peter Hasselbacher, MD
President, KHPI
Emeritus Professor of Medicine, UofL
January 30, 2014

Download the PDF documents.
The Amended Qui Tam Complaint, 8/8/2012
The Settlement, January 2014