CoxHealth, Justice Department settle for $60M

The health system’s board of directors opted to settle with the U.S. Department of Justice rather than drag the case through court, which would have prolonged the already three-year process and rack up more legal fees, CoxHealth officials said at a July 22 news conference.

CoxHealth will pay an initial $35 million, plus five annual $5 million payments with 4 percent annual interest. CoxHealth also agreed to enter into a Corporate Integrity Agreement with the Office of Inspector General of the U.S. Department of Health and Human Services; the health system will participate in a five-year program of legal compliance education for employees and heightened monitoring and reporting to the department.

Financial blunders

In a news release also issued July 22, U.S. Attorney for the Western District of Missouri John F. Wood said the settlement reiterates the government’s allegations that:

• beginning in January 1996, CoxHealth entered into prohibited financial agreements with physicians at Ferrell-Duncan Clinic Inc., and those agreements induced physicians to refer patients to CoxHealth, which violates federal laws;

• January 1997–March 2005, CoxHealth submitted Medicare cost reports that used an improper method of reporting its medical clinics’ overhead; and

• January 1999–December 2004, CoxHealth improperly billed Medicare for end-stage renal disease treatments.

“We had an issue interpreting highly complex Medicare billing regulations and in structuring the relationship with some of our physician partners,” CoxHealth President and CEO Robert Bezanson said at the conference, adding that the issues had nothing to do with quality of care or billing for services that never happened. “It’s certainly been an expensive lesson.”

CoxHealth and its board began reserving funds when it realized the issues could have a financial impact, and that reserve along with money from a separate long-term reserve fund will cover the initial payment, officials said. The health system expects to use long-term reserve funds to pay the remaining five installments as well.

While the settlement resolves the health system’s ordeal, it does not apply to specific employees being investigated separately on the allegations, outside counsel Stephen Hill said at the conference. Hill said the U.S. Attorney’s office would be in contact with them, and he confirmed that CoxHealth pays those employees’ legal fees, though officials declined to say how much that has amounted to.

Project setbacks

Bezanson said CoxHealth would next move forward on capital improvements projects that have been on hold until a settlement was reached and the health system could go to the bond market. Those improvements include:

• the addition of 286 spaces to the Cox South parking garage, under way now and slated for completion early next year;

• construction of a 78,000-square-foot emergency room adjacent to the outpatient center at Cox South, with five trauma rooms, 57 exam rooms, a 25-bed observation unit and an embedded radiology department. When first announced, the ER was scheduled to open in spring 2008. Its new groundbreaking date is spring 2009;

• renovations to the Walnut Lawn campus to develop it as an orthopedic hospital; and

• construction of a 60,000-square-foot, two-story ambulatory surgery center and medical office building at the Walnut Lawn campus.

CoxHealth is focusing on improvements to its south-side facilities and for now has put the planned overhaul of its Cox North campus on hold, Vice President of Corporate Communications Laurie Cunningham said.

When first announced in February 2006, the north-campus plan was to start that year and take place over about seven to 10 years.

It’s too early to say when those changes could begin, Cunningham said, but she noted that the first project on that agenda is a new Cox College of Nursing and Health Sciences facility.