Ron Wall
Posted: 05/25/2010 08:14:08 PM PDT

I attended the San Bernardino County Board of Supervisors meeting May 11. Two physicians reported concerns about the quality of care at Arrowhead Regional Medical Center (ARMC), the political environment and the lack of action to correct problems.

After Dr. John Steinmann and his colleague Dr. Keyvan Safdari presented their concerns, the hospital CEO Patrick Petre defended the practices of the hospital. Members of the board asked questions to clarify what Petre described. A lack of expertise by the members is evident. They do not know the regulations surrounding hospital licensure, Medicare certification or regulatory limits to physician contracting. This allowed Petre to gloss over issues by providing vague responses.

The problems at ARMC revolve around these areas:

1. Conflict of interest; 2. Quality of service; 3. Regulatory compliance.

Stark Laws are regulations that define acceptable business practice for physicians in programs receiving Medicare. One test of compliance is “Inducement to Refer.” This concept speaks to whether a physician can refer business to himself. It would seem Dr. Dev GnanaDev may be engaging in this. The language of the contracts he holds with ARMC would determine if he is in violation. If so, he places the county and himself in jeopardy. Greater concern is with his billing company that is used by other groups. He does have the ability to refer and profits from referrals. It would serve the county well to have a health care attorney examine all physician contracts to assure compliance. If found to be in violation, it’s important that ARMC self-report to CMS any violation. Failure to do so will magnify the potential consequences CMS may visit upon ARMC, including payback and fines.

Also of concern is the structure of the contracts. When a department is contracted, the amount is agreed to be paid to the contracting agency. Problems arise when the amount does not cover expenditures or when the contracting agency cuts expenses to maximize profit. The latter seems to be the case in the surgery contract. The complaint raised is that Dr. GnanaDev has not chosen to pass savings on.

Secondly, the concern is he has reduced the quality of services, resulting in harm to patients.

There are other ways of contracting services. Contracting on a cost basis would allow ARMC to benefit from any cost savings that may be produced and dis-incentivize hiring of lowest-cost practitioners.

ARMC can also include an “indemnity clause” where the contractor would agree to pay back money if its behavior caused any payback. The county could include a 30-day “out clause” to terminate an agreement, although under present leadership this would be likely used to control dissent.

Outsourced service has built into it administrative costs. ARMC could eliminate that cost by hiring physicians directly and save money.

Petre mentioned that CMS had conducted a “Validation Survey” of ARMC. Most hospitals maintain their certification and licensure through periodic surveys by a private organization like the Joint Commission. If the certification is in question, CMS will perform a Validation Survey. The question never posed was, “Why did CMS determine a Validation Survey necessary?”

Petre mentioned that survey started in November. Surveys usually last a week. Then, a Statement of Deficiencies is provided within 30 days. The hospital has 30 days to respond with a “Plan of Corrections.” It is now May and Mr. Petre indicated that he would submit the hospital’s response May 14. The Board of Supervisors should ask, “Why is the plan of correction being submitted well past the deadline?” A May 7 article in The Sun mentions an extension was sought.

Two conclusions can be drawn. First, the November survey was not taken seriously and not responded to, or more likely, the initial survey was followed by a second to verify the plan of corrections submitted. CMS can choose to accept the plan as demonstrated by their findings during the follow-up survey, and bestow certification.

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