This settlement should strike fear in the hearts of hospital executives who negotiate and/or have responsibility for physician relations and physician contracting. On October 5, 2009, the Department of Health and Human Services, Office of Inspector General (OIG) announced a settlement with Michael Bakst, the former Executive Director of Community Memorial Hospital (CMH) in Ventura, California. The former hospital administrator agreed to pay $64,000 to resolve allegations that he personally negotiated financial arrangements with physicians and directed improper payments to them, and that he caused the submission of false claims to the Medicare program that should not have been paid based upon the Stark Law violations. The OIG's initial settlement demand from Mr. Bakst was $5 million. This settlement with the former hospital administrator stems from the same conduct that resulted in CMH paying a $1.5 million settlement to the federal government in December 2007. In that case, the federal government alleged that CMH provided interest-free loans, rental arrangements at below-market rents, employment arrangements with physicians’ family members, and gifts to referring physicians. (It is not clear from the publicly available documents why the settlement did not include allegations that CMH violated the Anti-Kickback Statute as well.)
It is unusual for the Department of Justice or the OIG to pursue a separate enforcement action against a hospital administrator with respect to alleged violations of the Stark Law. Publicly available documents do not shed any light on the OIG's rationale for pursuing this action against the hospital's former administrator after the Department of Justice had already settled with CMH in 2007. The following are links to the OIG's press release about the settlement with Mr. Bakst and the Department of Justice's press release about the December 2007 settlement with CMH.