The audience in Chicago attending the Physician Agreements and Ventures Conference on November 11 and 12 eagerly anticipated the keynote address of Carol C. Lam, U.S. Attorney for the Southern District of California. Ms. Lam, who graduated from Yale University with a degree in philosophy and Stanford University with a degree in law, has developed a flair for indicting health care executives and hospital systems for fraud.
There is an element of masochism among health care executives, consultants and lawyers, judging from the number of health care conferences at which Ms. Lam has spoke and is scheduled to speak. (You can catch up with her again in Snowmass, Colorado in early January.)
On October 27, Ms. Lam's office commenced what is anticipated to be a three month trial of Almarado Hospital Medical Center and its CEO, Barry Weinbaum on charges of fraud related to the recruitment of physicians. The government asserts that Almarado's physician recruitment program was a sham program disguising a pattern of illegal kickbacks to existing physicians. They rely on the use of "host arrangements" to existing physician groups rather than payments to the recruited physicians. (The host group would then pay salary of the new physicians). The government points to $15 million in "recruitment" payments to 99 physicians and the circumstance of $435,000.00 in income guarantees provided to an ophthalmologist whose brother joined his practice, in a recruitment where there was no evidence of a shortage of ophthalmologists. Tenet Healthcare Corp., which owns Almarado, refuses to settle, insisting that the recruitment program for whatever faults, was legal and without intent to bribe physicians. Tenet, arguably has already been significantly punished by the drop of its stock value from about $50 per share to $11.09 per share because of these and other troubles.
In Chicago the assembled crowd was anxious to absorb the wisdom of Ms. Lam as to the demarcation between fraud and legitimate business practices. The long awaited Stack II, Phase II regulations issued by Centers for Medicare and Medicaid Services issued in March, after all, promised specific physician recruitment guidelines that now explicitly permit recruitment payments to physician groups, as long as only incremental overhead costs are compensated and the group imposes no noncompete on the recruited physician. Ms. Lam disappointed. She presented a history lesson on fraud and abuse prosecution including her own successful role in the prosecution of National Health Laboratories, a large Medicare overutilization case. She said that "corruption of doctors' medical judgment" is the overriding concern. She objected to the use of federal regulatory roles in a way that promises "plausible deniability." Possibly, she meant deniable intent to defraud.
Presumably if one has "plausible deniability" one is innocent in a criminal action where the standard of guilt is beyond a reasonable doubt. What exactly is the "corruption" of a doctor's "medical judgment"? If a doctor elects to send his patients to one facility over another because one is more convenient, or promises better parking or helps her recruit new physicians to her practice is that really a corruption of medical judgment? Where exactly is the line? Under developing case law it is illegal for a hospital to "induce" referrals, but not to "encourage" referrals. The OIG frequently recites that the overbroad state kickback statute means what it says it means, that the giving or receiving of "anything of value" in exchange for referrals, implicating even a suspicious cup of coffee if the intent is to "induce" referrals. This view suggests that doctors sell themselves to the highest bidder.
The politicians who provide those kinds of statutes may perhaps provide some ethical guidance as encouragement vs. inducement. Jesse Unruh, the late powerful California assemblyman, responded to a reporter's inquiry about accepting gifts from lobbyists. "If you can't eat their food, drink their booze and sleep with their women and vote against them the next day - you don't belong in this business." (That was a paraphrase). More recently we have Tom Scully, the former administrator of CRIS, obtaining an "ethical waiver" to negotiate a job as a lobbyist for the healthcare industry while shepherding the Medicare Prescription Drug Modernization and Improvement Act of 2003 ("MMA") through the Congress. It was Mr. Scully who threatened to fire a CMS auditor if he revealed that the anticipated cost of the Act was $139 billion under reported . Then there is the specter of the Hon. Billy Tauzin (R. La.), accepting a job as president of the pharmaceuticals industry's trade association at an unprecedented annual compensation of $2.5 million in January, 2004 after completing his service as Chairman of the Energy and Commerce Committee of the House of Representatives where he was the principal architect of the MMA.
The pharmaceutical industry paid over $141 million in campaign contributions and lobbyist fees for 952 lobbyists retained to help grease the MMA through Congress. One wonders if that is "corrupted political judgment," that should be the subject of prosecutorial attention. Where is the ethical line? When is the government defrauded and when is it not? Cup of coffee Ms. Lam? Perhaps the issue is one of audacity - the Tenet prosecutions are relatively minor distractions and perhaps easier to comprehend in the criminal context.
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