Allina and Medica will limit executive perks, travel
Glenn Howatt
Star Tribune
Published Sep 25 2001
Allina Health System and Medica health plan will limit
spending on consultants, trips, executive compensation and
limousines under agreements announced Monday with
Minnesota Attorney General Mike Hatch.
Allina also said it has offered to pay $16 million to settle a
federal investigation into improper Medicare and Medicaid
billings by the company's hospitals and clinics during the past
nine years.
With Hatch's investigation complete and an end to the federal
case in sight, Medica and Allina officials, along with Hatch,
said it is time to rebuild the two nonprofit companies, which
have been under investigation for more than a year.
"We all believe it is negative energy and a distraction to the
necessary work of the two companies and this office to try to
resolve all the issues that arose from the past," said Hatch. "For
my part, I do not intend to take further action."
Hatch released six volumes of documents about his
investigation, including thousands of pages of supporting
evidence. The documents, which had been provided to Allina
and Medica board members during the past two months, show
that the companies spent excessively on consultants, travel, gifts
and administrative expenses.
Hatch's office also contended that Medica premium dollars
were used to entice clinics to refer patients to Allina hospitals.
But Hatch said he is satisfied that the problems will end because
the companies have split and because new management and
new boards have been installed.
John Morrison, a banking executive who became Allina's
chairman last month, said that the search for a new chief
executive officer has begun, and that the new board is keeping a
close watch on expenses.
Allina in 'iron grip'
"We apologize for past mistakes," Morrison said. "I'm going to
put an iron grip on the expenses, and we are going to watch this
carefully."
Chief executive Gordon Sprenger will retire by Oct. 1. David
Strand, who was to have become CEO, left earlier this month.
When asked Monday about Strand's severance package,
Morrison said that it was "excessive" and that the board might
examine it. Strand could not be reached Monday.
Morrison did not disclose the size of the severance, which was
negotiated before the Allina board was restructured in August.
Documents released by Hatch Monday said that last year
Strand received a compensation package of $635,400, including
a $100,000 signing bonus that was part of a $200,000 two-year
payment for remaining with the company.
To help cut company costs, Morrison said, $22 million in
overhead expenses are on the chopping block. The company
also will move its headquarters from Minnetonka to the Phillips
Eye Institute in south Minneapolis by December. The institute is
among the 17 hospitals and 47 clinics that Allina owns or
operates.
Billing concerns
Federal authorities have been investigating Allina's hospitals
and clinics because of questions about the system's Medicare
billing practices. The Star Tribune reported last April that a
federal grand jury was hearing testimony on whether company
employees overbilled or double-billed Medicare for $19 million.
In April Allina denied that it defrauded the government. On
Monday Mark Mishek, Allina's general counsel, characterized
the problems as billing errors. According to Allina officials, the
pending agreement with the U.S. Attorney's office, calls for the
company to repay $16 million -- $13 million in
underpayments and $3 million in interest.
U.S. Attorney Tom Heffelfinger said he could not comment on
whether an investigation is underway.
Allina is one of many health-care organizations that federal
authorities have investigated for either Medicare billing errors
or fraud. A nationwide examination began in 1993 after
President Bill Clinton promised to crack down on Medicare
fraud.
Since then, federal officials have reached settlements with
doctors, health-care agencies, hospitals and clinics. The
amounts range from a few hundred thousand dollars to $840
million paid by Columbia/HCA Corp., a national hospital and
health-care organization.
In 1999, Medicare lost $13.5 billion because of fraud, waste and
mistakes. But that figure was down considerably from 1996,
when a comprehensive audit concluded it lost $23 billion
through errors and fraud.
At Medica, new board chairman Ted Deikel said he agreed with
Hatch's conclusion that Medica's administrative expenses were
too high, but he would not elaborate on how much expenses
could be brought down.
However, he said he will be looking at employee staffing levels
by department. Although Medica's membership has not grown
since 1998, its staff has grown by 23 percent and its payroll by
63 percent, according to documents released by Hatch.
Another cut could come today when the Medica board will
decide on whether to go ahead with the construction of an
office building in Hopkins.
Financial constraints
Under agreements reached with Hatch's office, both Allina and
Medica have agreed to limit expenses to prevent abuses like
those uncovered by the investigation.
The companies agreed not to spend more than $2 million per
year on lobbyists, trade group dues, political consultants and
image consultants. The companies will not pay for membership
dues in spas, country clubs, golf clubs or any athletic club. Golf,
tennis and other sporting fees will require approval by the board
chairman. Company conferences must take place in Minnesota,
North Dakota or Wisconsin.
"It will be very difficult for employees to leave the state of
Minnesota without my prior approval," said Deikel. "We need
to get people to understand that they can be confident in this
health plan."
Limousine travel is forbidden, as is reimbursement for spousal
travel. And the companies must make their expense summary
public.
Hatch's investigative findings can be viewed on the Web at
ag.state.mn.us
-- Glenn Howatt is at howatt@startribune.com .
Staff writer Josephine Marcotty contributed to this report.
© Copyright 2001 Star Tribune. All rights reserved. |
