ST. PAUL (AP) -- Allina Health System has reached a $16 million settlement with the U.S. Attorney's office, ending an investigation into whether the company for nine years improperly billed Medicare and Medicaid.
Company officials made the announcement at a news conference Monday to release the final report in Attorney General Mike Hatch's investigation into whether the company's lavish perks and spending violated its status as a nonprofit.
Hatch, together with executives and doctors for the company, portrayed the dual announcements as the mark of a fresh start for the embattled health organization.
"We're thinking of our company now as Re-Allina, so to speak," said Scott Tongen, an Allina district medical director.
Among Allina actions questioned in the Hatch report:
--Lavish trips for executives included a $590 private limousine tour of Napa Valley vineyards and a $1,295 hot air balloon ride complete with a champagne brunch.
--Despite Allina's own policies forbidding the practice, the company paid for golf clubs, and exclusive golf course memberships for officials.
--Executives were required to attend "sleepover conferences" and play ring toss in an effort to find their "inner self."
--Consultants arranged mandatory cocktail parties at a Marriot hotel. Managers reported they were reprimanded if they failed to attend.
--A California consultant who described herself as an adviser and confidant to movie stars billed Allina more than $2 million for "executive coaching." Hatch said he was unable to determine what she actually did, and she never had a written contract. Payments to her and other consultants totaled more than $56 million over three years.
--Asked about his work with Allina in a casual conversation, one consultant who earned more than $150,000 answered that he "essentially baby sits the executives and tries to make them feel important."
--One senior vice president worked at the company only five months, but received severance payments for nine months.
--In at least 10 cases, Allina paid severance payments to executives who resigned their position and were therefore the payments were not required.
The report, contained in seven large volumes running thousands of pages, found that the company spent more than 18.7 percent of its money on administrative costs, an amount Hatch called exorbitant.
The spending included millions on consultants and corporate perks as well as efforts to influence the media and legislators. Documents described a "war room" at Allina headquarters in Minnetonka to deal with the investigation. Officials also proposed doing "negative research" on Allina's critics, including Hatch.
The documents also show the company paid $1,470 for a July 1999 dinner party in honor of Health Commissioner Jan Malcolm, who was a vice president for public affairs with the company until her appointment in January 1999.
State ethics laws forbid state officials from receiving gifts from lobbyists or the companies who employ lobbyists, such as Allina.
Health Department spokesman Buddy Ferguson said Malcolm requested an opinion on the matter from the Campaign Finance and Public Disclosure Board this summer after learning that her name had surfaced in Hatch's investigation.
In late August, the board determined that Malcolm's attendance at the party violated the state's gift ban. Ferguson said Malcolm was not available for comment but has since reimbursed Allina $215 to cover herself and a guest.
Hatch, meanwhile, lavished praise on two new leaders of Allina, which is in the process of being divided. Under the split -- supported by Hatch -- Medica will oversee health plans while Allina will run the company's 47 clinics and 17 hospitals, including Abbott Northwestern Hospital in Minneapolis.
At Hatch's request, the company named John Morrison as Allina's chairman of the board and Ted Deikel in the same position for Medica.
In response to the changes, Hatch announced this summer that he will not pursue his investigation further. He said while there are numerous areas he could pursue, it would not serve any purpose.
"Nobody got away with anything," Hatch said Monday. "Public outrage and condemnation is about the strongest penalty you can have."
Meanwhile, the company also released its own internal report detailing the way former officials and lobbyists hoped to influence a key state senator.
The document shows company officials plotted to offer to have United Health Group, a company that does $135 million in business with Medica, build a facility in the district of Sen. Doug Johnson, DFL-Tower, who is chairman of the Senate Finance Committee. In return, the officials wanted him to cancel planned legislative hearings looking into Allina.
Johnson said that while he did discuss attracting the facility to his Iron Range district, no deal regarding the hearings was offered, and he wouldn't have taken it if it was.
At the news conference, company officials detailed the changes in management and in the culture of the company they say have been implemented in response to Hatch's findings.
"I'm going to put an iron grip on the expenses," said Morrison. He said he has already found $22 million in overhead costs to cut and said the company will move its headquarters to a less expensive building. He also said the company may try to recover some of the multimillion dollar retirement packages offered to executives who left in the wake of the investigation.
Deikel said the company already has ended excessive travel costs and consultant fees. "We've gone after the easy stuff."
Allina officials said the settlement reached with the U.S. Attorney included $13 million in fines plus $3 million in interest.
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