AP NEWS

Alaska city agrees to pay $4.1M over physician compensation

March 13, 2020 GMT

SITKA, Alaska (AP) — An Alaska city plans to pay $4.1 million to the federal government to resolve outstanding liabilities related to physician compensation violations.

The Sitka Assembly voted to make the payment from an escrow account established to cover obligations from the sale of Sitka Community Hospital, The Daily Sitka Sentinel reported Wednesday.

The city’s debt to the government resulted from physician Medicare and Medicaid reimbursements that were discovered during a merger between the community hospital and Southeast Alaska Regional Health Consortium.

“We prepared for this settlement and this settlement is the best we could’ve hoped for,” City Administrator John Leach said.

The transfer from the city’s general fund will be replenished by contributions from the consortium and a municipal tobacco tax, which was previously dedicated to the city hospital, city officials said

The $4.1 million settlement will come from $4.5 million the city set aside in escrow to the federal Office of the Inspector General, which was required under an inspector general’s agreement and an asset purchase agreement between the city and SEARHC, Leach said.

The purchase agreement outlines the terms of the affiliation between SEARHC and Sitka Community Hospital.

“SEARHC has cooperated, collaborated and consented to the release of the $4.125 million from the city-funded escrow account to the OIG as required by the settlement agreement and in accordance with the APA,” Leach said in a statement.

The hospital overcompensated physicians in violation of two federal laws, Leach said.

“We self-reported this to the OIG when we realized it happened,” Leach said in an interview. “It’s a common thing that can happen in hospital mergers.”