Hospitals raise legal concerns by lavishing pay and perks on staff doctors

wheelinghospital-300x111As hospitals boost their size and power to push their profits even higher, they’re also raising alarms with federal regulators over their too cozy relationships with doctors who are pulling down big pay from them now as part of their staffs.

Uncle Sam long has sought to ensure that the billions of tax dollars that get spent in the health care system don’t become medical spoils, riches that get passed around a select few through kick-back and self-referral schemes. These are barred by regulation, notably in Medicare- and Medicaid-funded care, and by the “Stark law.”

Jordan Rau of the Kaiser Health News service reported that a hospital in Wheeling, W. Va., has gotten regulators attention by lavishing pay and perks on specialists in its employ, including $1.2 million a year for a pain specialist and $770,000 annually and 12 weeks’ vacation for a cardiothoracic surgeon. The money is far higher than what such experts command in the area and it’s more surprising because the treatment areas these high-paid doctors work in are big financial losers for Wheeling Hospital.

But here’s the twist, as Rau reported it, based on federal lawsuits against the hospital: “Specialists in fields like labor and delivery, pain management and cardiology reliably referred patients for tests, procedures and other services Wheeling offered, earning the hospital millions of dollars.”

Indeed, specialists are a kind of medical cash cow with their collateral activities:

Hospitals live and die by physician referrals. Doctors generate business each time they order a hospital procedure or test, decide that a patient needs to be admitted overnight or send patients to see a specialist at the hospital. An internal medicine doctor generates $2.7 million in average revenues—10 times his salary—for the hospital with which he is affiliated, while an average cardiovascular surgeon generates $3.7 million in hospital revenues, nearly nine times her salary, according to a survey released this year by Merritt Hawkins, a physician recruiting firm.

Institutions like Wheeling Hospital insist that they shower specialists with big pay and perks to ensure they can offer comprehensive, quality care to their patients. They say there are no illicit kickbacks or self-referrals.

Federal lawsuits across the country have asserted, though, that hospitals are pushing boundaries as they consolidate, seek to capture market share, and hike their profits — by overpaying doctors, offering them free office and other space, and even setting their salaries based on business they generate. Hospitals in Detroit and Montana have settled lawsuits over such practices for a combined $100 million, without conceding any wrongdoing.

The rising number of such cases is yet another way that patients and communities will struggle with hospitals profit-seeking consolidations. As Rau reported of the relations between doctors and hospitals:

Hospitals have gone on buying sprees of physician practices and added doctors directly to their payrolls. As of January 2018, hospitals employed 44% of physicians and owned 31% of practices, according to a report the consulting group Avalere prepared for the Physician Advocacy Institute, a group led by state medical association executives. Many of those acquisitions occurred this decade: In July 2012, hospitals employed 26% of doctors and owned 14% of physician practices. ‘If you acquire some key physician practices, it really shifts their referrals to the mother ship,’ said Martin Gaynor, a health policy professor at Carnegie Mellon University in Pittsburgh. Nonprofit hospitals are just as assertive as profit-oriented companies in seeking to expand their reach. ‘Any firm—it doesn’t matter what the firm is—once they get dominant market power, they don’t want to give it up,’ he said.

Indeed, the nonprofit, independent RAND Corporation recently found that hospitals with the leverage to do so charge private health insurers, those covering Americans who get insured through their work, higher rates — sometimes three times as much — as what Uncle Sam pays (in Medicaid and Medicare) for comparable medical services. The New York Times, separately, has reported that hospital mergers and consolidations lead to higher patient costs and lower quality of care.

In Wheeling, Rau found that the hospital bosses in suits focused not on doctors’ therapeutic talents but their profit-boosting capacities, emailing each other, for example, about a cardiovascular surgeon who generated $11 million in revenues, or the $4.6 million in “downstream” money that a $1 million-a-year ob-gyn produced.

In my practice, I see not only the harm that patients suffer while seeking medical services, but also their struggles to access and afford safe, efficient, and excellent medical care. This has become an even greater ordeal due to the skyrocketing cost, complexity, and uncertainty of treatments and prescription medications, too many of which prove to be dangerous drugs. Doctors and hospitals should be reasonably compensated for their life changing and life-saving work.

But medical venality, regarding doctors and patients and profit centers to be exploited to the max, is unacceptable. Let’s see how the Wheeling case wends through the civil justice system. Two things about it are worth noting, and maybe they are applicable elsewhere, too: A hospital executive blew the whistle on what he deemed to be the excessive financial machinations involving medical personnel. Yes, under federal statutes, he could be a monetary beneficiary, if the courts find fault in the hospital’s practices. That’s an acceptable deal, especially considering another key point that Rau raises about the now much more profitable hospital: By independent, external measures, it offers poor care, earning just one star in the annual federal rating system.

Patrick Malone & Associates, P.C. listed in Best Lawyers Rated by Super Lawyers Patrick A. Malone
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