ABC Hospital is one of two hospitals in the community. The Hospital offers all major specialty services (e.g. cardiology, neurology, pulmonology, etc.)

The Hospital is approached by a cardiologist who asks if the Hospital needs a medical director for its cardiology services. Generally speaking, a medical director is responsible for overseeing the delivery of services in a particular specialty or department. For example, a medical director might set schedules, develop standard processes and protocols, review cases to ensure that quality care was provided, and perform a host of other administrative functions.

The Hospital has medical directors in each of seven other specialties. The other medical directors have personal service contracts with the hospital pursuant to which each is paid $10,000 per year to serve as the medical director. Each medical director is required to spend 100 hours per year providing medical director services. The Hospital offers a contract to the cardiologist on these same terms.

The cardiologist rejects the offer. He says he will only serve as a medical director if he is paid $50,000 per year. He mentions that he is on the medical staffs of both hospitals in the community, and he mentions that he performs a lot of procedures at both hospitals, which generate a significant amount of revenue for the hospitals. He says he thinks $50,000 annually is more than reasonable under these circumstances, and he intends to approach the other hospital to see if they need a cardiology medical director if ABC hospital turns him down. He mentions that if the other hospital retains him, he likely would perform more procedures there, as it would be more convenient in light of the increased time he would be spending at the other hospital as its medical director.

You are the compliance officer at ABC Hospital. The Hospital's chief operating officer reaches out to you. She describes the above scenario to you. She says the Hospital has needed cardiology medical director for some time, and the lack of cardiology medical director has probably resulted in lower quality patient care and, on a few occasions, patient harm. Therefore, the hospital would like to contract with the cardiologist. She asks your advice on how to proceed.

Part III - Additional Facts

After reviewing your recommendations, the CEO of ABC Hospital has responded with theCEO's decision on the matter

Actions. He is hired.

• Six months after entering this arrangement, you receive an inquiry from the other community hospital's compliance officer.
• She says that the cardiologist has not performed any procedures at that hospital in the last six months, and there is a rumor that ABC Hospital is paying the cardiologist to do refer patients to ABC Hospital so that the cardiologist may perform procedures there.
• She says that the other hospital is considering whether to file a complaint with OIG.
• You conduct an internal investigation which reveals that in the last six months, the cardiologist has performed one hundred procedures at ABC Hospital, fifty of which were paid by Medicare.
• In the preceding 6-month period, the cardiologist performed only fifty procedures at ABC Hospital, of which twenty-five were paid by Medicare. ABC Hospital was paid a total of $100,000 for the procedures performed by the cardiologist in the last six months, of which $40,000 was paid by Medicare.

Questions

Create lengthy detailed memo (more than 2 docs)for ABC Hospital's board of directors which:

1. Summarizes the situation;
2. Explains the potential legal ramifications resulting from the arrangement;
3. Recommends what actions the Hospital should take, if any, to remedy any violations and/or mitigate its potential liability for any violations?