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| Dear Friend,
He's the sixth physician to settle whistleblower lawsuit allegations.
Perhaps the target wasn’t Day-Glo orange, but the wound was life changing, if not life threatening.
More often than not, whistleblowers file False Claims Act lawsuits against the entity they allege as being at the center of fraudulent activity, for example, the entity that is paying kickbacks. Whether that entity is a hospital, an ambulatory surgery center, or an implantable device manufacturer, the entity is typically the prime target because it’s the nexus of the claims that the whistleblower alleges are fraudulent.
Because the entity is, metaphorically speaking, painted Day-Glo orange with a gun range target on its front, back, and sides, many physicians involved in questionable “arrangements” often feel that they won’t be swept up in the mess, that their risk is smaller.
Bypassing the issue of the difference between a feeling and either thinking or knowing, they are wrong.
Back on March 16, 2020, in my post, Free Stay Out of Jail Pass, I wrote about the FCA lawsuit in which the United States government intervened and alleged that SpineFrontier, a spine device manufacturer, and Kingsley Chin, M.D., its founder and Chief Executive Officer, as well as other Chin-controlled entities, paid spine surgeons over $8 million in sham “consulting” payments ostensibly for product evaluations, when in fact the payments were for the use of SpineFrontier devices.
In the weeks that passed, the government settled civil health care fraud claims against five physicians, each of whom admitted to seeking and obtaining kickbacks from SpineFrontier via a sham intermediary called “IME,” for consulting work he did not perform, and then cooperated with the government’s investigation. Each of the five also admitted that one or more of SpineFrontier, Chin, or Aditya Humad, the CFO of SpineFrontier and a defendant, specifically instructed him to bill “consulting” hours to SpineFrontier for each and every surgery in which he used a SpineFrontier device, regardless of whether he spent any time actually consulting.
The five physicians are:
1. Dr. F. Paul DeGenova, an orthopedic spine surgeon in Ohio, agreed to settle the government’s claims for $486,985.
2. Dr. Michael Murray, an orthopedic spine surgeon in New York employed by the Department of Veteran Affairs, agreed to settle the government’s claims for $330,668.
3. Dr. Joseph Shehadi, a neurosurgeon in Ohio, agreed to settle the government’s claims for $323,419.
4. Dr. Agha Khan, a neurosurgeon in Maryland, agreed to settle the government’s claims for $310,843.
5. Dr. John Atwater, an orthopedic surgeon who worked in Florida and in Illinois, agreed to settle the government’s claims for $105,149.
And then, on April 24, 2020, Dr. Jeffrey R. Carlson, an orthopedic surgeon in Virginia, became the sixth surgeon to agree to settle with the government in connection with SpineFrontier. The “price” for his deal was astronomically higher: he agreed to pay $1.75 million to resolve the civil claims.
Dr. Carlson admitted that he estimated his purported consulting hours based on the number of times he used a SpineFrontier product in a given month, as opposed to tracking actual time he spent consulting. He admitted that he cannot document the consulting hours he submitted for payment to SpineFrontier and IME.
In addition, he admitted that he sought and received consulting payments from SpineFrontier for time he spent during his surgical procedures, for which Medicare and other federal health care programs were already paying him.
Last, Dr. Carlson also admitted to accepting free meals from SpineFrontier, for himself and his surgical staff, on almost every day that he performed a surgical procedure with a SpineFrontier product. In total, SpineFrontier provided Dr. Carlson and his staff meals that cost thousands of dollars.
Note that each of the settlements, which one may safely assume was made without admission of liability, relates to a civil action, only. However, you should bear in mind that the type of activity that was alleged to have occurred underlying the FCA allegations would also support criminal charges for violation of the federal Anti-Kickback Statute should the government bring them.
In other words, these civil settlements may not be the end of the matter for Drs. DeGenova, Murray, Shehadi, Khan, Atwater, and Carlson.
Of course, the same lesson, potential civil and criminal liability applies to anyone caught up in a kickback mess.
As I always say, think like a carpenter and measure twice (or even thrice), vetting each deal carefully with healthcare counsel, before cutting once, cutting your own neck, that is. |
| Tuesday - The Tragedy of No Ownership of Group Leadership
Watch Tuesday's video here, or just keep reading below for a revised, more polished transcript: |
| | I was thinking about the "tragedy of the commons," a term used to express the fact that, when everyone owns, or is responsible for, something, no particular individual steps up to take responsibility.
The term originated from the description of the common farming area in a colonial town, which was open to anyone to use to herd their flock or grow a garden. (Today, these areas, still called "commons," are town parks.) Because everyone owned the commons, no one felt personal responsibility for it. As a result, they often fell into states of waste.
The same thing happens within a medical group. When no one is compensated to be in charge but someone or some few are charged with the task of leading the group, they have no real “buy-in” to lead. After all, they are not being compensated for their value.
Would you come to work every day if you weren’t paid?
So what you end up with in too many groups is a complete lack of leadership. The leaders aren’t paid or they aren't paid enough. And, they are still expected to work their full share of the caseload.
On top of that, their leadership is often second-guessed by the other members of the group. It’s second-guessed by way of criticism. It’s second-guessed by a way of a governance style that is consensus based. It’s second-guessed by way of requirements of unanimity either by way of the group's organizational documents, or by way of culture.
A group is a terrible thing to waste.
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| | Wednesday - Physician Practice Consolidator Gets Owned
Watch the video here, or just keep reading below for a slightly polished transcript:
It’s not quite rest in peace for physician practice consolidator Hygea Holdings Corp. It’s more like rest in pieces.
Back in the salad days of June 2016, Hygea, described itself as:
“ . . . a diversified healthcare holding company led by a team of nationally recognized industry leaders with backgrounds in insurance, finance, medicine, law and technology. The company owns physician practices, ancillary medical services, such as pharmacy, physical therapy, and diagnostics, as well as a 2,500-doctor independent physician association (IPA). Hygea prides itself as ‘the physician’s choice’ in group healthcare, as evidenced by the number of acquired physicians who then choose to invest in the firm.”
But today, well, on February 19, 2020, to be exact, it’s pretty clear that the meal’s now over.
That’s the date that Hygea put itself and more than 30 affiliates into bankruptcy.
Bleeding out at the rate of around $327,000 a week, with assets of less than $10,000,000 and liabilities of, according to press reports, approximately $200,000,000, its Chapter 11 filing indicates that the company’s plan is to turn over all of the equity to its major secured lender.
Yes, in bankruptcy, other investors, such as the “number of acquired physicians who then [chose] to invest in the firm” can get wiped out. If all goes according to plan, the secured lender will simply take the “keys” to Hygea, much like some “We Finance Anyone!” auto lender repossesses a 2016 Hyundai.
Sure, hindsight is always 20/20 but sometimes the “smartest people in the room” can’t manage their way out of a paper bag. For example, here are some of the stupid business mistakes revealed in the declaration of Hygea’s President and CEO:
- They purchased physician practices that had minimal net profit.
- They failed to integrate underperforming practices into their operation so as to make them profitable.
- As a result, they became burdened with supporting a number of losing operations, that even with performance improvements will never be profitable.
The Lessons For You
The takeaways in the Hygea debacle lie on two sides of the same coin.
If you’re a buyer of medical practices, or of any other business, don’t overpay. “Everyone else” may be paying 20 billion times EBITDA, but you don’t need to be that stupid. Buying lots of businesses with no profit just creates a big business with no profit that can't pay it's debts and that goes into bankruptcy.
If you’re the seller, understand that your practice or business probably isn’t worth anywhere close to what you think it is. Pull out cash along the life of your operation and seek ways to profit from multiple transactions so that you’re not dependent on one sale to make a killing.
Sure, someone may come along (the so-called “greater fool”) and actually pay you 20 billion times EBITDA. If that’s the case, take cash or at least as much of it as you can get, even if it’s over time. It might be exciting to fancy yourself a “player” holding a big chunk of stock in a company with plans to go national . . . no, go global . . . no, go galactic, that is, until your shares are wiped out in a debt for equity swap restructure.
Perhaps, in Hygea’s case, the “smartest guys in the room” weren’t so smart.
Or perhaps there was just no room, for error, that is. |
| | Thursday - Business in the Time of Coronavirus - Part 5 |
| Listen to the podcast here, or just keep reading for the transcript.
Here is our short actionable business advice series, Business in the Time of Coronavirus, Part 5. The coronavirus crisis, in fact, any crisis, is like a magnifying glass. It tends to show the best and the worst of your business practices and of your business’s systems, or even the lack thereof. Of course, it does no good simply to complain about the defects, problems, and deficiencies that have come to light. Simply complaining is just whining. Taking action to correct the defects, problems, and deficiencies underlying the situation is what's needed. We can trace many of the first order problems, such as cash flow, being vulnerable to other’s advantage, the inability to take decisive action, and so on, back to the point that they can be seen as symptoms of underlying group structural and governance problems. Of course, other first order problems are a result of events outside of your and your group’s, your business’s, control. But even so, you’re not powerless. As I’ve been urging for many years, you can use my process, the Scenario Survey Process, to develop multiple scenarios of potential futures and then devise strategies to not only survive, but thrive, in as many of those futures as possible. For introductory level information on the Scenario Survey Process, search using that term on the firm’s blog, accessible from the home page at weisspc.com. For those interested in learning more about using that strategy tool, stay tuned to our website, weisspc.com, for the announcement of the release of an on-demand program on the Scenario Survey Process. In the meantime, stay well, stay strong, stay strategic. |
| | | | We all hear, and most of us say, that the pace of change in healthcare is quickening. That means that the pace of required decision-making is increasing, too. Unless, that is, you want to take the “default” route. That’s the one is which you let someone else make the decisions that impact you; you’re just along for the ride. Of course, playing a bit part in scripting your own future isn’t the smart route to stardom. But despite your own best intentions, perhaps it’s your medical group’s governance structure that’s holding you back
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| In fact, it’s very likely that the problem is systemic. The Medical Group Governance Matrix introduces a simple four-quadrant diagnostic tool to help you find out. It then shows you how to use that tool to build your better, more profitable future. Get your free copy here.
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| | | | | | Whenever you're ready, here are 4 ways I can help you and your business:
1. Download a copy of The Success Prescription. My book, The Success Prescription provides you with a framework for thinking about your success. Download a copy of The Success Prescription here.
2. Be a guest on “Wisdom. Applied. Podcast.” Although most of my podcasts involve me addressing an important point for your success, I’m always looking for guests who’d like to be interviewed about their personal and professional achievements and the lessons learned. Email me if you’re interested in participating.
3. Book me to speak to your group or organization. I’ve spoken at dozens of medical group, healthcare organization, university-sponsored, and private events on many topics such as The Impending Death of Hospitals, the strategic use of OIG Advisory Opinions, medical group governance, and succeeding at negotiations. For more information about a custom presentation for you, drop us a line.
4. If You’re Not Yet a Client, Engage Me to Represent You. If you’re interested in increasing your profit and managing your risk of loss, email me to connect directly. |
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