It's Business and It's Personal

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OIG to execs and board members: Your bank accounts aren't safe.

If you're serving in a hospital or health system's C-suite or board of directors, the folks at the Office of Inspector General have a message for you: They're getting serious about compliance with antikickback laws, and if they find you're out of line, they might just go after your personal bank account.

They sent this message late last fall after Michael Bakst, former CEO of Community Memorial Hospital in Ventura, CA, entered into a settlement with OIG to resolve allegations that he violated the Civil Monetary Penalties Law and provisions of the federal physician self-referral (or "Stark") law. Bakst, while he admitted no wrongdoing, will have to pay a $64,000 fine from his personal account to settle the matter. It might seem like a small price to pay, since OIG was seeking $5 million from Bakst, but it represents the first time in recent memory that an officer at a hospital has been held personally responsible for false claims for activities he performed on the job, says Cindy Reisz, an attorney and member of Bass, Berry & Sims' Healthcare Industry and Corporate and Securities practice in Nashville.

"The OIG, CMS, and state and federal prosecutors are really making a point of expanding their enforcement activities," she says. "They're expanding beyond the provider to go after individuals who are involved in making these decisions."

Community Memorial settled its part of the case for $1.5 million, stemming from activity that allegedly occurred between May 2002 and September 2003. In it, the OIG charged Bakst with personally negotiating financial arrangements with physicians and directing improper payments to them in violation of the Stark law. The OIG further alleged that Bakst caused the submission of false claims to the Medicare program that should not have been paid because of the underlying Stark law violations.

In a release, Lew Morris, chief counsel to the OIG, said the office strongly believes that "individuals who caused the fraud should also be held accountable."

Reisz says boards and C-suite members, such as CEOs, chief operating officers, medical directors, and chief medical officers, should be aware that changes are coming, both from recently enacted legislation and pending healthcare reform legislation that will expand powers of OIG and CMS while at the same time lowering criminal intent levels and burden of proof to go after individuals.

"From one perspective, you could see it as an encouragement that board members exercise their fiduciary responsibilities," she says. "From another, it could have a chilling effect on board participation."

She says boards and top executives should be conducting regular reviews of financial relationships and discussing with counsel whether some of them rise to the level of a violation.

"If you find out, there's an ability to self-disclose under the antikickback statute, which can significantly mitigate your exposure," she says.

Philip Betbeze

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