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AHLA's Speaking of Health Law
The Community Health Network Settlement: A Valuator’s Perspective
Community Health Network, Inc. of Indiana (CHN) entered into an agreement with the Department of Justice (DOJ) in December 2023 to settle alleged violations of the False Claims Act. The settlement amount of $345 million was the largest settlement of its kind in history. Dave Hesselink, Managing Principal, SullivanCotter, A.J. Orille, Consulting Principal, SullivanCotter, and Mark Ryberg, Practice Leader, Physician Workforce, SullivanCotter, discuss the particulars of the 2023 CHN settlement with DOJ, with a focus on the valuation components. They also share some practical takeaways for health care organizations looking to maintain their physician compensation compliance programs. Sponsored by SullivanCotter.
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Speaker 2:Support for A HLA comes from Sullivan Kotter, which partners with healthcare organizations to drive performance and improve outcomes. Through the development and implementation of integrated workforce strategies, the firm's proven approach helps organizations align their business strategy and performance objectives. For more information, visit sullivan kotter.com .
Speaker 3:Hello, we're delighted that you're joining us today. I'm Dave Hess Link with Sullivan Kotter. We're a workforce advisory firm for the healthcare industry. I'm a managing principal in our physician workforce practice and have been advising clients on physician compensation regulatory compliance matters. Since I joined the firm 12 years ago. I'm joined today by AJ Elli , a consulting principal in our physician workforce practice. AJ has been advising clients on physician compensation regulatory compliance matters for the entirety of the 14 years that he has worked for Solve Connor . So welcome, aj.
Speaker 4:Thanks, Dave. It's a pleasure to be with you today.
Speaker 3:Great. The focus of our discussion today is an intriguing topic, as I'm sure a HLA listeners are aware. Community Health Network of Indiana entered into an agreement with the Department of Justice in December of 2023 to settle alleged violations of a false claims act. The settlement amount of 345 million was a staggering amount, the largest settlement of its kind in history. Now since then, CHN has entered into an agreement with the whistleblower in December of last year to resolve both non intervened False Claims Act , uh, false Claims Act claims, and the Keam Relators employment related claims. That latest settlement plus the 2023 settlement brings ch N's total settlements to $480 million. These settlements resolved whistleblower allegations that CHN Senior Management conducted an illegal scheme to recruit physicians for employment to capture their downstream downstream referrals during a period of time from 2008 through 2020. In public statements, CHN has not admitted liability, nor did the DOJ admit that the whistleblower's complaints were unsupported. Sullivan Kotter has been identified in the DOJ DOJs complaint and intervention as one of the valuation firms that CHN retained during the period of time covered by the settlement. As a consultant to CHN Sullivan, Kotter is bound by our client confidentiality agreement. So all of our comments today will be based on publicly available information and also proprietary information related to our fair market value methodology and survey data. Let me also note that neither AJ nor I have been involved in providing CHN with fair market value services or any consulting advice. So with that set up , uh, in today's podcast, AJ and I will discuss the information released by the DOJ regarding the 2023 CHN settlement, focusing in particular on the valuation circumstances. We'll do that for about 20 minutes, and then pivot to an interview with Mark Ryberg , who is a leader of Sullivan Kotter's physician workforce practice. And like a j and i, mark has not been involved in providing CHN with fair market value services or other consulting advice either. So we think this will be an interesting podcast. Our goal in today's discussion is to share our perspective as evaluators and to share some practical takeaways for healthcare organizations that are striving to stay on track with their physician compensation compliance programs. So with that introduction, let's dive right into our discussion about the particulars of this settlement with the DOJ . So AJ in the Keam Relators original complaint, CHN was alleged to have deployed a defensive strategy beginning in 2009 to employ hundreds of key referring physicians to prevent their referrals from leaking to CH N's competitors. Now, we both know that CHN is certainly not the only health system to consider and act on employing private practice physicians on their medical staff, whether that's done as a so-called defensive strategy or whether that's done for other reasons, health systems around the country have employed and continue to employ private practice physicians in their market. So that leads me to a question about whether that practice is risky from a compliance standpoint or if perhaps the way it was executed by CHN leadership put the organization at risk. So what are your thoughts on that question?
Speaker 4:Well, given that health system employment of previously independent physicians is so common around the country, I , I think the answer to that question must be that the circumstances specific to CH N's execution of that practice is what put the organization at risk. In particular, CHN pursued employment of key referring physicians as a strategy promising to increase referring physician compensation well beyond what they made in private practice. According to the complaint, CHN used historical referral and utilization patterns to determine which specific independent physicians would be receiving employment offers. And I would distinguish this approach from most of the employment circumstances we see where , uh, health systems are employing physicians to fill a patient access need in their market that's currently not being met by the private practice community. So sometimes private practice physicians will approach their local health system to discuss employment either because their practice isn't financially sustainable or because of another need, like getting help with practice call coverage. And these circumstances don't constitute a health system strategy per se, but rather a means to preserving patient access to existing physicians in their market who would otherwise be forced to leave that market, thereby reducing patient access. So while these circumstances are, are different than what the key TAM relator and the DOJ alleged in the CHN settlement , health systems still need to approach these situations cautiously. For example, consideration of the private practice physician's referrals to the health system should never be factored into an employment compensation offer. And as we know from the DOJs intervention complaint in the 2023 CHN settlement, CHN allegedly considered and directly factored in the value of physician referrals for hospital ancillary services into the employment compensation offers.
Speaker 3:Aj, I I think that brings up a couple more observations. Uh , one would be that to the extent the health system has a defined employment compensation plan and the previously private practicing physician is brought into that plan and paid consistent with the terms of that standard employment compensation plan, the health system has a logical defense even if the employment compensation is higher than what the physician earned in their private practice. Would you agree with that?
Speaker 4:I do agree with that promise , Dave. I , I think , uh, another important consideration here is equity, right? So even if the private practice physician is brought into the employment model , uh, uh, at , uh, histor lower than their historical pay level, the , the organization likely wouldn't be able to maintain that differential for very long from an equity standpoint.
Speaker 3:Yeah, that's a great point. I I think the second observation I have is this situation brings up some , uh, commercial reasonableness and how consideration of commercial reasonable should impact employment decisions. The , the government alleged that there was no apparent legitimate reason to employ the private practice physicians pursued by CHN other than preserving their market share of referred services from these physicians. So one of the key tests of commercial reasonables is whether there is a legitimate business purpose to the arrangement other than consideration of physician referrals. In the example you provided a few moments ago, employment as a means of preserving patient access to key services would be a legitimate business purpose and would meet that test of commercial reasonable
Speaker 4:Y You're exactly right, Dave. We find that many health system clients are diligent about documenting fair market value, but far less so about documenting commercial reasonableness in its 2020 regulatory update. CMS was clear about stating that the quote big three, so meaning fair market value, commercial reasonableness, and the volume or value standard, those still apply in assessing physician compensation arrangements and that each of those elements is a separate standard that needs to be met. So just because an arrangement is fair, market value doesn't necessarily make the arrangement commercially reasonable. And documenting the business purpose of a physician compensation arrangement is just as important as documenting FMV. So remember that at , at the time of these employment arrangements, the competitive environment in Indianapolis was especially hot, and in times of heightened pressure, organizations should expect heightened scrutiny. So a well-developed business purpose justification is especially important. That brings us to our, our second discussion topic , uh, commercial reasonableness of increases in physician compensation through employment. And this topic of commercial reasonableness brings up another interesting discussion point from the , the CHN settlement. The key tamra later alleged that physician compensation was not commercially reasonable because in many cases, CN proposed substantial increases over PRI private practice compensation, and there later raised that issue with regard to 18 orthopedic surgeons being recruited by CHN in 2011 . So, Dave, what is Sullivan Kotter's position on this topic?
Speaker 3:Yeah, that's, that's indeed an interesting point , uh, brought by the relay . Um , when the key TAM complaint was filed in July of 2014, there was no definition of commercial reasonable that had been published in any of the Stark or any kickback statute regulation iterations. Up to that point, commercial list was a requirement of meeting stark and anti kickback statute safe harbors, but CMS had never provided a definition or guidance about how to meet that requirement. And there was one interesting settlement in April of 2015 that a lot of folks referenced, and that's the, the , uh, $22 million Citizens Medical Center settlement , uh, that was referenced widely in the legal evaluation community as a potential marker of commercial reasonable related to, and , and that particular case was related to compensation increases from private practice to an employment setting. So in that case, if you recall, several private practice cardiologists were employed by Citizens Medical Center , uh, in Texas Compensation for those newly employed cardiologists was established at rates below the median of then current national market survey data for cardiology. So seemingly very reasonable. And , and while that compensation level doesn't seem particularly risky, the proposed compensation was more than double what those cardiologists were earning in private practice. The presiding judge's comments about the commercial reasonableness of operating a cardiology practice at a loss ranging from, in that case, 400,000 to a million dollars per year, resulted in a viewpoint within the industry, including us at Sullivan Kotter, that commercial reasonable might include consideration of the change in compensation resulting from employment regardless of the level of compensation. That viewpoint wasn't really modified until the latest stark in NA Kickback statute regulations were released in December of 2020. And recall that those regulations included that two test definition of commercial reason list . One, is there a legitimate business purpose, and two, is a compensation arrangement a sensible way to achieve the business purpose. That new definition in the accompanying commentary by CMS clearly stated that there are many legitimate business purposes for offering a medical practice at a loss other than securing referrals. Those business purposes should be documented as well as the fair market value of the compensation arrangement. So since that , uh, regulatory update, we've re revised our commercial reasonable guidelines at Sullivan Kotter to be consistent with a new definition and CMSs two-pronged test. Now, those new guidelines are not definitive as to the potential increase in physician compensation going from private practice to employment. And as I stated earlier, if there's an established comp employment compensation plan that will pay physicians consistent with fair market value, bringing private practice physicians into an employment model in accordance with that plan, even if it results in an increase in compensation, is defensible from a commercial reasonable standpoint, as long as the two tests of commercial reasonable are net . So I think the key here is having a , a consistent plan design. Certainly if you have increases in compensation resulting from employment in a one-off compensation model and exception, those are far less defensible and should be factored into an overall commercial reasonable assessment. Aj, this topic of Sullivan Kotter's guidelines was cited by the DOJ in their intervention complaint. Specifically, they summarized our fair market value guidelines several times. Uh, could you, for the audience , uh, benefits here, could you recap those guidelines and explain how they were developed? Certainly,
Speaker 4:Dave , in a nutshell, we use the 75th percentile total cash compensation or TCC reflecting a blend of national market surveys as our initial top . If the proposed physician compensation arrangement falls at or below the 75th percentile the market, we believe that arrangement falls within the middle of the market and within fair market value. Now, we've modified that test somewhat since the time period covered by this settlement, and I'll explain that modification in just a moment. But for arrangements that exceed the 75th percentile, the national market, we look first to personally performed physician productivity as the supporting factor. And that's because when we look at physicians with reported TC levels , um, that are above the 75th percentile, the number one factor driving that comp compensation by far is their personal productivity. And so the tests that we've developed using our survey data to gauge alignment are TCC to productivity ratio tests . And the test that was referenced several times in the DOJs intervention complaint was the TCC to work RVU ratio during the time period covered by this settlement. Sullivan Kotter used a single TCC to work RVU ratio test, which was at or below the 60th percentile, regardless of the specialty. And since that time, we've refined our guidelines to distinguish that ratio by specialty category. So we're using the 60th percentile, TCC per work, RVU for medical and surgical specialties using the 65th percentile, TCC per work, RVU for primary care specialties and the 55th percentile TCC per work RVU for hospital based specialties. Again, those ratios are supported by our survey data as producing reasonable alignment between pay and productivity in the national market. And that alignment between pay and productivity is, is really the bedrock of our fair market value guidelines. And we test those ratios each year against the current survey additions to ensure they're still appropriate. And finally, there, there are some physician compensation arrangements that exceed the 75th percentile of the national market and are not supported by personally performed productivity. Um, these could be situations where a situ , uh, physician is working an extraordinary amount but doesn't generate supporting productivity as in the case of, say, a hospitalist who might be working extra shifts but doesn't generate commensurate productivity due to maybe a low census or the type of shift work . And in that situation, we can evaluate that extra work effort if it's documented. However, we, we also acknowledge that there are some physicians or particular circumstances that warrant compensation exceeding the 75th percentile of the market without supporting productivity or work effort. And the facts surrounding those individuals or situations should be documented , and they may be supportive from a fair market value perspective. Examples include a luminary physician who might be a renowned clinical leader in his or her field, or perhaps maybe a situational circumstance where recruitment is very difficult and compensation must be in the top quartile to attract any candidate. The facts surrounding those individuals or situations are what we call business judgment factors. And that term was referenced in the DOJs intervention complaint when they recited our fair market value guidelines.
Speaker 3:Thanks for that recap, aj. Uh , could I infer that by citing Sullivan Connor's fair market value guidelines, the DOJ indirectly endorsed Sullivan Cotter's approach to determining fair market value?
Speaker 4:We believe so by, by documenting where CHN Management allegedly proceeded with executing a physician compensation arrangement, even when it exceeded our fair market value guidelines, the DOJ was essentially relying on our FMV guidelines to pursue alleged false Claims Act violations against CHN and ultimately to settle that case. And whether those identified arrangements were within fair market value was never disputed by cnm .
Speaker 3:Well , and I think that brings up a point related to market survey data. 'cause we certainly rely on market survey data for much of our fair market value testing. A as our listeners are probably aware, CMS included some commentary in the 2020 Stark and in a kickback statute regulations regarding survey data that some observers in the industry have used to dismiss survey data as irrelevant in determining fair market value. And in particular, CMS stated in their commentary that the industry should be cautious about making fair market value determination on market survey data alone, and that federal agencies do not consider that 75th percentile is a bright line test in determining fair market value. On the other hand, there are commentary also stated that market survey data continues to be relevant and in many cases, maybe all that is required. So in this settlement, since the DOJs case rested, at least in part on Sullivan Kotter's fair market value determinations, which relied heavily on comparisons to market data and the fact that the settlement was announced three years after the publication of these revised star and anti kickback statute regulations, I , I think couldn't we surmise that the DOJ relied heavily on market survey data to pursue these alleged violations and reach a settlement with CHM ?
Speaker 4:I think you can. Yes, that , that's, that's exactly the conclusion that our listeners can arrive at when considering the details that have been released publicly by the DOJ in their intervention complaint , it seems like a stretch to interpret the CMS commentary to mean that survey data is irrelevant. It's , uh, it's hard to dismiss the relevance of market survey data when in essence the DOJ relied on it in negotiating the settlement . I think the 2020 regulatory updates serves notice to the industry that blind reliance on market survey data as a bright line test does not necessarily satisfy the FMB requirement. And that individual facts and circumstances of a particular arrangement must also be considered. Now , um, listeners may be puzzled by our reliance on the 75th percentile , uh, TCC as our first test of fair market value. So let me, let me circle back to a statement that I made earlier in our conversation on this topic. Recall that during the time period covered by this settlement, Sullivan Kotter's FMV guidelines had a 75th percentile TCC test or what some might call a bright line test. Well, prior to the December, 2020 star and anti-kickback statute regulatory update, we had concluded through our annual review of the survey data that we needed to modify that test to require some degree of productivity alignment, even for arrangements that fell below the 75th percentile. So our revised FMV guideline requires a , a fairly loose 25 percentile point alignment between pay and productivity when pay falls between the 50th and 75th percentile of the market. So to use an example for a compensation arrangement where TCC approximates the 70th percentile, we'd require productivity to be at or greater than the 45th percentile. Now, there could be supporting factors other than personally performed productivity, perhaps something similar to the business judgment factor concept we discussed earlier. But if a compensation arrangement falls between the median and 75th percentile and the TCC market positioning exceeds that of work RVs by more than 25 percentile point , we'd require documentation of those supporting factors.
Speaker 3:Oh , great. Thanks for that clarification, AJ and , and that thorough discussion. Uh, the final topic I want to cover before we pivot to our interview with Mark is the alleged multiple bad factors that were described in the DOJs intervention complaint. And those included , um, the, the following. CHN allegedly considered the incremental impact of hospital based reimbursement differentials from referrals to hospital ancillary departments in their compensation formula, CHN allegedly openly considered the downstream impact of physician referrals In management meetings where compensation was discussed, CHN allegedly provided evaluators including Sullivan Cotter with incorrect data, with the intent of obtaining , uh, favorable fair market value opinion. CHN allegedly used multiple valuation firms attempting to at obtain a favorable fair market value opinion. And at their request, CHN management allegedly pledged to CHN board members. That's the veracity of employment. Pro forma assumptions would be tested and brought back to the board for review at periodic intervals, but they didn't follow through on those promises. So AJ, as a , as a evaluator, what's your reaction to those alleged bad facts?
Speaker 4:Yeah, I think this settlement reinforces the peril that organizations can put themselves in when engaging in misconduct similar to what was alleged in this case. Although CHN was a Sullivan Kotter client, when on the witness stand or in a deposition, our consultants are obligated to testify truthfully about our approach, our opinions, and our interactions client. So engaging a valuation firm like Sullivan Kotter does not insulate an organization from potential prosecution when there's evidence of potential wrongdoing. Secondly, our opinions are conditioned upon receipt of accurate data. Um, evaluators typically don't audit that data and they clearly state so in their opinion, falsifying data to obtain a favorable opinion from a evaluator is easily discovered in an investigation like this one. And finally, using multiple valuation firms to obtain the opinion you want , uh, what we would call opinion shopping is , is problematic. We know that some organizations have established a list of approved valuation firms and individual physician arrangement negotiators are able to choose a preferred firm from that list to perform a particular valuation. And while we understand that that might seem like an approach to maintain competition among valuation firms, it does introduce a potential valuation bias where over time a particular valuation firm is identified as providing more favorable opinions and therefore preferred for that reason , unless managed carefully that practice could prove to be risky in the event of a regulatory investigation.
Speaker 3:Yeah. Good, good comments, good observations, aj. And let me just also comment that , um, incorporating hospital-based reimbursement differentials or discussion of downstream referrals in compensation deli , uh, deliberations are obviously problematic practices. Uh, we believe that organizations that have created a firewall between the knowledge or understanding of the impact of downstream referrals and compensation decisions have effectively controlled for that risk. So we'd recommend that as a best practice . Thanks, AJ for a great discussion. It's time now for us to pivot to our interview with Mark Ryberg, who is the practice leader for Sullivan Kotter's physician workforce practice. So let's, let's get to Mark included in this conversation now. Uh , listeners, it's my pleasure to introduce, introduce Mark Ryberg . Mark is a managing director, currently serves as Sullivan Kotter's physician workforce practice leader. Mark also serves on Sullivan Kotter's Board of Directors. Mark , uh, thanks so much for joining us on this podcast.
Speaker 5:Thanks, Dave. Happy to be here.
Speaker 3:Mark, I think the first question our listeners might have is what, if anything was known about this D-O-G-D-O-J investigation at Sullivan Cotter before it was announced, and what actions were contemplated by firm leadership at the time?
Speaker 5:Given the nature of our work, we tended to get involved with key TMS on a relatively regular basis as the competitiveness of physician compensation is often a central issue in these challenges. There are typically two ways we are involved in the first scenario, our prior work product may be part of the government's investigation. In these scenarios, we typically receive a document hold from the client, or in some instances, as was the case in the community example, we receive a subpoena from the federal government. In the community case, we followed our standard process, which was to secure outside counsel and set about to ensure compliance with the subpoena. That includes active engagement of the client team and in established protocol around document retention, email, and communication etiquette as well, as well as walling off all relevant information from the remainder of the firm. You asked what we knew at the time of the subpoena relative to the case, and the answer is, as is the case in most of these situations, very little. We were not privy to the specifics of the complaint at that time, which is a fairly common fact pattern. In the second scenario, we may be called upon as an expert to support a client in the defense of a ketan where we have not historically reviewed or opined on the particular physician compensation at the center of the challenge. These engagements tend to be directed by counsel and subject to the attorney client privilege . It's important to note that we apply the same analytical model and process that is our standard quantitative testing criteria AJ previously elaborated on in our approach to these assessments.
Speaker 3:Thanks, mark. A , a , a second question there is, how can board members ensure that their concerns regarding particular physician compensation arrangements or physician compensation in general, let's say, are adequately addressed by management?
Speaker 5:First and foremost, board members should be very familiar with the overall physician compensation governance process within the organization, particularly the review and approval process for physician compensation. That affords them the ability to inquire about certain aspects of the program at a level of detail fitting of their responsibility. Second, board members should ensure there is sufficient time and committee meetings for active discussion and deliberation, particularly to the extent that high risk arrangements are on the agenda. If there is an unresolved issue in a meeting and or there is a need for follow-up from management, that should be a priority at the next meeting or addressed in a special session if time is sensitive. Third board members must be afforded access to other stakeholders in the organization other than just the CEO or a member of the C-suite. Fourth board members should also be entitled to ask for access to the external valuation experts providing support to management in an effort to understand the full scope of their work as well as their findings and supporting rationales. In some instances, boards may also request request access to external legal counsel to provide guidance relative to potential risk, whether in the process or a specific physician compensation arrangement.
Speaker 4:Mark the key TAM environment is challenging for healthcare organizations. Whistleblowers are incented to bring complaints forward by the prospect of sharing up to 30% of a potential settlement, and as a result, the DOJs Annual Healthcare Fraud and Abuse Control program reports that they receive an average of more than 13 key TAM suits filed each week. How do you think healthcare organizations can protect themselves against KET TAM activity?
Speaker 5:Well, I believe it starts with sound governance practices. Aj, the organization should have an established compliance program with the focus on transparency and consistency. By that I mean that healthcare organizations should be transparent about their physician compensation governance processes with physicians, with management, and even more broadly with employees. Moreover, a highly consistent process for the oversight of physician compensation tends to develop sound habits and ensure consistent and regular reviews. Organizations should also ensure that they have the appropriate talent in place to effectively manage physician compensation, and that the organizational stakeholders involved with the compliance program have the requisite training and experience to ensure that management is effectively utilizing the authority. It has been delegated by the board. Although this list is not exclusive, it is a solid foundation to a program decide to avoid potential whistleblowers. By the same token, physician compensation plan, consistency is another strong defense. If employed physicians understand that the organization has a compensation plan in place, and that that plan is adhered to consistently sus suspicion about favoritism or potential reward for referrals is largely mitigated. Neither of these actions is a guarantee, of course, and bad behavior can negate good intentions quickly. One last point with respect to good governance, and that is that mistakes happen. Most are likely unintentional, some may be intentional, but either way, it is critically important when an organization's compliance program has an established process to handle potential complaints related to stark or anti-kickback violations. A dangerous fact pattern on the government's radar is awareness of a problem coupled with failure to correct. Once a problem is known, it is imperative that an organization develops a plan of action to course correct and demonstrates the fortitude to execute on that plan.
Speaker 3:Thanks, mark. You know, somewhere in an organization like CHN , the impact of the physician affiliation strategy must be understood in order to make good business decisions. So how should healthcare organizations navigate those inevitable comparisons between say, further investment in their physician affiliation strategy, which might include employment and the potential growth and market share that might accrue from that strategy?
Speaker 5:Dave, healthcare organizations can and should understand that relationship that is the relationship between physician affiliations, whether through employment or independent contractor relationships and operating margin. That said that understanding should be limited to a finite pool of stakeholders responsible for making informed business decisions. For example, the C-suite. The CFO, the finance department organizations should have a wall separating those, evaluating the broader economics from those tasks with developing and administering physician compensation plans. Stated more simply, the relationship between an employed physician and the volume of referrals he or she generates for the health system can in no way factor into compensation decision making for that physician. Many organizations create a firewall between those responsible for negotiating individual physician compensation arrangements, and those who understand the financial impact of those potential physician relationships. That firewall serves as a barrier to any in intentional or inadvertent disclosure of the financial impact of potential physician referrals.
Speaker 3:Mark, I've, I've heard that term firewall used before. Practically speaking, how does that work in real life?
Speaker 5:Typically what we see is restricted access to any information regarding the financial impact of physician referrals and centralization of physician compensation negotiations. Among a few select individuals who are familiar with the regulatory guardrails and who are not privy to the financial information that may be reported at the physician or service line level. These folks very intentionally live in a sheltered environment where they cannot be influenced by hospital financial performance data. When it comes to determining physician compensation, compensation decisions are made entirely based on market factors and equity with other similarly performing physicians within the organization. Performance in this context is based solely on the physician's professional practice and the outcomes achieved on behalf of that physician's patients.
Speaker 4:Mark, do do you think healthcare organization boards understand that challenge and how they must hold management accountable for maintaining that firewall to protect the organization ?
Speaker 5:A great question, aj. I think experienced and well-functioning boards and board committees who have competent legal and valuation counsel understand the inherent risks of physician compensation arrangements in these organizations. Boards, board committees and management work together to ensure that management has taken the steps necessary to minimize whistleblower concerns and to ensure that those concerns are thoroughly addressed through the organization's compliance programs. These board members also tend to receive regular, at least annual education and or updates on market trends and best practices in the governance of physician compensation. These are essential to their understanding of how to both identify and mitigate risks. I sincerely hope that this CHN settlement serves as a wake up call to those organizations and their boards who have been lulled into thinking that this couldn't happen to them . A headline grabbing settlement like this can happen if boards and management are not attentive to the risk.
Speaker 4:Mark, another important question that I'm sure our listeners have is what are the the key lessons learned from the DOJs investigation of CHN and the eventual settlement?
Speaker 5:Aj, we often advise our clients to pay close attention to these settlements as they can be directionally informative as to the focus of current and future enforcement efforts. Additionally, they provide a wonderful opportunity for every organization to conduct a critical self-assessment of their own governance procedures to ensure they remain both contemporary and well-managed. In terms of the most poignant lessons learned, there are a few, as we previously noted, an organization can't take into account the impact of downstream referrals or provider-based billing reimbursement differentials when determining physician compensation Following the acquisition of a group, that explains why it is so important for organizations to ensure a sufficient firewall between those stakeholders, assessing the business rationale for physician arrangements from those charged with developing, implementing, and managing physician compensation agreements and programs. With respect to external evaluators, there are a few lessons to note. First, FMV opinion shopping creates a documentation trail that may be problematic at best and at worst, evidence of bad intent. Second, as an accounting garbage in equals garbage out. Providing a third party evaluator with incorrect or incomplete information exposes the organization to risk as it can no longer reasonably rely upon the work product of that evaluator. That is particularly challenging if that work product was used to obtain board support for a given arrangement. As we often tell our clients, it is imperative that organizations don't sacrifice discipline for speed. Third, ignoring the guidance of third party evaluators can lead to poor decision making . If an organization receives counsel or advice for an out from an outside expert that is contradictory to its course of action, it should ensure sufficient deliberation and thoroughly document the rationale for maintaining course to the extent that matter is within the purview of the board. We would also advise a robust discussion at the board level to ensure awareness and consensus relative to the proposed course of action. With respect to the board and or the compensation Committee, organizations should ensure they're actively engaged with the govern overall governance process. That should include regular, at least annual education on market trends and best practices, and governance. Organizations should conduct regular audits of their compensation programs to ensure that compensation plans are operating as intended, that individual physician compensation arrangements are defensible, and that any outliers have been evaluated, and the supporting rationale for the compensation has been thoroughly documented. These processes should be summarized and or reviewed at the board level to support the board's determination that management is effectively managing the fiduciary responsibility de delegated to it by the board. Finally, and most importantly, off the heels of the CHN settlement, when organizations are engaging board members and those board members raise concerns and or provide direction, organizational management should act accordingly. Finally, we can't emphasize enough how impactful poor electronic communication etiquette is in the majority of the settlements, both large and small. In our experience, when the government begins an investigation, one of their first asks is for any and all related email traffic. Given the relatively lax attention, most organizational stakeholders pay to the way they communicate over email, it follows that email is often a treasure trove of unhelpful information that can sync even the most robust governance process. Organizations would be wise to focus education on the dos and don'ts of electronic communication.
Speaker 3:Mark, thank you, I , I think that's a good note to end on. I want to thank you for your time and insights today into the CHN settlement and good position compensation governance practices. I'm confident this has been valuable to our A HLA listeners, and thank you as well, AJ, for your insights and commentary. On behalf of Sullivan Cotter and a HLA, thank you for listening. Have a great day.
Speaker 2:Thank you for listening. If you enjoyed this episode, be sure to subscribe to ALA's speaking of health law wherever you get your podcasts. To learn more about a HLA and the educational resources available to the health law community, visit American health law.org.