Jake DeGroot [CC BY-SA 3.0], via Wikimedia Commons

November 13, 2019; Becker’s Hospital Review and the Des Moines Register

This week has been a tough one for Sioux Falls-based Sanford Health, at least as far as it appears from the outside. Today, it announced that its proposed $11 billion merger with UnityPoint Health had been called off, and at the same time, Sanford was required to sign an agreement with the federal government that conditions their further dealings with Medicaid and other federal funding programs on their hiring an outside auditor to monitor the system’s compliance with federal laws.

The agreement has been forged in the aftermath of a whistleblower lawsuit that resulted in more than $20 million in penalties for the hospital accused of allowing Dr. Wilson Asfora to defraud the federal government out of millions of dollars.

The merger was, apparently called off by UnityPoint Health, whose board voted 13-to-6 against the proposal.

The two health systems announced their intent to merge in June. The merged system would have encompassed 76 hospitals and outpatient and long-term care centers across 26 states. It would have employed more than 83,000 people and 2,600 physicians.

Both systems were to have voted on the deal on November 12th, but UnityPoint met a day earlier and withdrew its interest.

Officials with UnityPoint said in a statement they “seriously explored” the potential merger but ultimately “concluded we can most effectively fulfill our mission by maintaining our existing corporate structure.” An official with Sanford Health, meanwhile, expressed disappointment.

That these two situations were occurring simultaneously may certainly be nothing more than happenstance. A $20 million fine is a minimal hit on Sanford’s $6 billion in assets, but the new requirements that will be imposed for the next five years may be a different kettle of fish.

The requirements contained in the 36-page integrity agreement between Sanford and the inspector general for the US Department of Health and Human Services will require annual training on federal laws guarding against kickbacks for all Sanford employees on the medical staff. It will also require an independent compliance officer be contracted and that a compliance board be established. Sanford will also be required to hire a certified independent review organization to audit its claims to Medicare and Medicaid.

“The paid claims shall be reviewed based on the supporting documentation available at Sanford’s office or under Sanford’s control and applicable Medicare and state Medicaid program requirements to determine whether the items and services furnished were medically necessary and appropriately documented and whether the claim was correctly coded, submitted, and reimbursed,” the agreement says.

Maybe not the most propitious moment for a merger.—Ruth McCambridge