Medical staff members help end problems at California hospital

Some California physicians say a recent settlement between a Ventura hospital and the Dept. of Justice underscores the importance of a self-governing medical staff.

Community Memorial Hospital in December 2007 agreed to pay $1.5 million to settle allegations that the facility gave improper gifts, loans and payments to some doctors in exchange for Medicare patient referrals. No doctors were named in the agreement, and the hospital did not admit any wrongdoing. Community Memorial administrators voluntarily disclosed the financial relationships, which took place under the hospital's former leadership.

Doctors say the settlement sheds light on previously strained relations between the medical staff and hospital board that prompted a legal dispute in 2003. It also signals a new era of cooperation between the two sides, said John V. Hill, MD, a former medical staff chief who spearheaded the doctors' battle.

He said the agreement addresses a number of concerns the medical staff had, but was unable to voice.

"This reflects the new mind-set the board had after [the dispute], and to the hospital's credit [medical staff members] were included in ferreting this out," Dr. Hill said.

Tom Curtis, the medical staff's former attorney, said, "The discovery of the underlying abuses ... or even the self-disclosure would not have ever come about had not this medical staff taken the action they did" to restore self-governance.

The medical staff sued the hospital after it instituted a "code of conduct" that gave the hospital board authority to discipline doctors who did not measure up to standards. The hospital also adopted a policy that took away medical staff members' voting rights and ability to hold leadership positions if the doctors had a financial stake in a competing facility.

The parties ultimately settled in 2004. As a result of the agreement, the medical staff revamped its bylaws to protect its rights and responsibilities in patient care, and did so with the support of a new hospital administration, Dr. Hill said. The American Medical Association/State Medical Societies Litigation Center and the California Medical Assn. supported the medical staff with financial and legal resources.

Community Memorial Hospital President and CEO Gary Wilde said the medical staff initially brought the questionable transactions to the hospital's attention and prompted an internal investigation. The hospital and medical staff "truly are united and together went forward to report this," said Wilde, who came on board after the medical staff's efforts led to the ouster of the former head executive in 2004.

Settlement reveals improprieties

The deal reached in December 2007 with the U.S. Attorney's Office for the Central District of California resolved allegations that Community Memorial violated federal anti-referral statutes, known as Stark laws. The hospital allegedly compensated doctors for referring Medicare patients to the facility, and then billed for services arising from the prohibited referrals.

The agreement details a variety of improper payments, including:

• Interest-free loans ranging up to $450,000.
• Rental arrangements at below-market rates.
• Gifts, such as digital cameras, computers and airline tickets.
• Employment contracts with physicians' family members.

Community Memorial Hospital, formerly Community Memorial Hospital of San Buenaventura, Calif., did not face any criminal liability.

With the change in leadership, Wilde said the hospital put a new compliance program in place to audit the board's financial activities, which had sparked the investigation.

Dr. Hill said he and other medical staff chiefs after him participated in audits and "gave [the compliance officers] leads on what to look for."

Dr. Hill is now a full voting member on the hospital board. "That would not have occurred before," he said, adding that the environment is "much more physician-friendly."

Still, he said the $1.5 million fine was unfortunate because it ultimately penalizes patient care.

Wilde said the hospital is working to recover loans and other funds owed to the facility, but not the gifts, which were mostly insignificant in value. Many doctors believed the gifts were personal in nature, Wilde said, although some physicians returned them.