Whidbey General Hospital fine settles Stark Law violations

Now that it’s the New Year, administrators at Whidbey General Hospital are hoping to move past well-publicized violations of a complicated federal law which cost the hospital a CEO and more than $850,000.

Hospital CEO Tom Tomasino, who took over after the problem emerged, said the administration now has a streamlined, triple-check system to ensure all contracts with physicians are complete and legal, while the hospital has the administrative staffing to deal with the swelling number of contracts and other legal documents.

The trouble started in 2008 when former hospital CEO Scott Rhine discovered possible violations of the Stark Law, which is a federal law designed to prevent physician self-referrals and kickbacks in Medicaid and Medicare billing.

“The ultimate goal of the Stark Law is really to prevent unnecessary tests,” Tomasino said, adding that neither hospital nor federal officials discovered any evidence of such unneeded testing at Whidbey General.

Still, there were problems. Administrators found a long list of physicians who have expired contracts, contracts that had not been signed or no written agreements with the hospital, all of which violates the Stark Law.

Hospital leaders reported the violations to the Office of Inspector General for the U.S. Office of Health and Human Services and hired an outside attorney to go through all the contracts and identify any problems. Amidst the turmoil, the board of commissioners asked Rhine to resign, sparking controversy in the hospital. The hospital’s Medical Executive Committee hit the board of commissioners with a vote of no confidence for the way they handled Rhine’s departure and the lack of communication.

The Office of Inspector General reported in a statement that Whidbey General had over 100 violations surrounding various contracts and agreements. In addition to the lack of contracts and unsigned contracts, investigators identified “a variety of improper lease arrangements, personal service arrangements, malpractice subsidies, and a housing allowance and an equipment loan with one physician.”

Tomasino said the problems were administrative oversights and the doctors were not at fault. According to Tomasino, the former CEO said he wasn’t able to keep up with the increasing number of contracts and the complexity of the contracts and things just got away from him.

“It’s so complex and changes so frequently that it’s really hard for hospitals to remain on top of it,” Tomasino said, referring to the Stark Law.

The violations were unintentional, self-reported and didn’t cost Medicaid and Medicare any unnecessary expenses, but that doesn’t matter to the federal government. Tomasino explained that the Stark Law is a strict-liability law, which means intent doesn’t matter.

Hospital officials and federal officials finally negotiated a penalty last September. The hospital agreed to pay $858,571 for the violations, which is a somewhat modest fine compared to penalties that often run in the millions, hospital public affairs officer Trish Rose pointed out.

Tomasino said the administration had set money aside for the expected fine, so it wasn’t a big blow to the hospital’s budget.

With this behind him, Tomasino said hospital officials can concentrate on the difficult job of keeping the small, rural hospital financially afloat.


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