I am an orthopedic surgeon who practiced medicine in Broward County for 25 years. About 15 years ago, Broward Health, one of the nation’s largest public healthcare systems, offered me a lucrative physician employment contract.
I declined the offer after receiving legal advice that the compensation offered by Broward Health violated a federal statute known as the Stark law. The Stark law requires that physician compensation be “commercially reasonable.” A physician’s salary must be consistent with the fair market value of the services the doctor personally performs and cannot take into account the volume or value of the physician’s referrals for designated services such as diagnostic tests, surgeries, hospital admissions and the like.
Congress enacted the Stark law after it found that tying physicians’ compensation to the volume of their referrals tends to result in unnecessary medical procedures that compromise patient care and increase healthcare costs.
From 2003 on, I repeatedly warned Broward Health that its physician-compensation packages violated the law, but nothing changed. In 2010, I initiated a civil whistleblower action on behalf of the Medicare Program against Broward Health, alleging widespread, ongoing violations of the Stark law.
After a lengthy investigation, the U,S, Justice Department negotiated a settlement with Broward Health of almost $70 million — one of the largest in Stark law history. The settlement funds will compensate Medicare for what the Justice Department found to be years of Stark law violations and tainted referrals. Broward Health will also be subject to a Corporate Integrity Agreement for five years that requires an oversight committee to monitor Broward Health’s compliance with the Stark law and other federal laws.
The settlement is a major victory for the public in the fight to reform a broken healthcare system that too often puts profits before patients. But the settlement alone cannot accomplish the reform that is needed.
Broward Health comprises five hospitals, 30 clinics and more than 8,000 employees. As a publicly funded hospital district, it relies on property taxes to cover about $175 million of its annual expenses, which include the bloated physician-compensation contracts, as my lawsuit alleged.
Many of the problems at Broward Health stem from its Tammany Hall-style politics and profit goals. Broward Health is governed by a seven-member commission appointed by the governor. Unfortunately, neither a background in healthcare management nor hospital administration is required to serve on the commission. Contracts with physicians are negotiated behind closed doors among the physicians, lawyers, lobbyists, administrators and the commissioners.
This environment cultivated the highly lucrative, commercially unreasonable contracts that generated more than an estimated $200 million in losses for Broward Health over the past 14 years, excluding referral profits.
The troubles at Broward Health highlight a national problem. With more than 5,600 hospitals in this country employing physicians, only a handful of Stark cases, remarkably, have been brought against these facilities. In large part, this is because hospitals tend to hide compensation schemes that serve their narrow financial interest, while ignoring the risk of unnecessary medical care that their greed poses to patients, as well as the financial burden foisted onto Medicare.
Greed, however, should not be allowed to infect the public healthcare system. A physician’s ability to make independent decisions about a patient’s treatment is paramount to the delivery of quality medical care. When physicians are incentivized by the volume and value of their referrals, their independent judgment about patient care may become clouded, to the detriment of their patients and the healthcare system.
My hope is that Broward Health will redirect its focus away from its physicians’ finances and back toward utilizing our tax dollars to create the best medical safety net possible for all Broward County residents. It is time for our hospital system to return to its mission statement and care for the patients, not the profits.
Dr. Michael Reilly is an orthopedic surgeon who has practiced in Fort Lauderdale since 1989.