TOUGH MEDICINE. Two physicians and a former hospital chief executive officer in Kansas City, Mo., were among seven people indicted last month on charges of conspiring to set up a scheme in which hospitals paid kickbacks for Medicare patient referrals from a physician group.
Dan Anderson, 58, former CEO of Baptist Medical Center, was charged by a federal grand jury in Kansas City, Kan., with conspiring with Robert LaHue, D.O., and Ronald LaHue, D.O., to pay bribes in exchange for a steady stream of nursing home patients being admitted to Baptist. Also charged were two hospital lawyers and two of Anderson's lieutenants, Ronald Keel, a vice president, and Dennis McClatchey, a senior vice president.
All seven have denied the charges.
Baptist settled civil charges with the government on Sept. 11, 1997, agreeing to pay a $17.5 million fine. It agreed to cooperate in the government's continuing investigation and set up a rigorous five-year compliance program involving all employees and staff physicians.
Baptist's parent, Health Midwest, fired Anderson last year.
The LaHues were indicted in the scheme on June 19, 1997, on May 7 and again on July 15 in a superseding indictment on five counts of soliciting and receiving bribes and one count of submitting false claims. The principals in the now-defunct Blue Valley Medical Group served as medical directors of more than 200 nursing homes.
STUMBLING BLOCK. Things don't look good for California Gov. Pete Wilson's proposed Department of Managed Care.
On July 2, the proposal was killed in the state Senate with 22 opposition votes -- all coming from Democrats. While Democrats say they are not opposed to the creation of a new department, they are opposed to a governance plan that allows the governor to appoint the agency's director.
Wilson introduced the legislation following a recommendation made last December by a special task force focusing on improving the performance of HMOs in California through stronger oversight (see June, page 44). He had intended for the department to serve as a centralized watchdog over the activities of HMOs in the state, which now is one of many duties the Department of Corporations performs.
The Legislature is considering creating a board to perform the watchdog duties, but Wilson is unlikely to sign it because he favors a stand-alone department. The legislative session ends Aug. 31.
TURNAROUND PLAN. Physicians Resource Group, trying to get out of its financial doldrums, is hoping to sell off $44.1 million in physician practice assets, or 75% of its total assets, according to documents filed with the Securities and Exchange Commission.
The ophthalmology practice management company outlined its turnaround plan in proxy statements filed in advance of a scheduled July 31 stockholders' meeting in its hometown of Dallas.
Practices would buy back their assets based on a formula that takes into account either their valuation or their management fees. They could pay with a combination of cash and liabilities assumed.
If the turnaround plan had been in place for the first quarter of 1998, PRG would have shaved its revenues to $44.8 million from $101.3 million and increased its earnings to $586,000, or 2 cents per share, from $379,000, or 1 cent per share.
PRG's stockholders do not have to give their blessing to the turnaround plan. But the company says in its SEC filing that it won't happen unless physician groups representing 51% of annual revenues -- $411.6 million in 1997 -- accept it.
PHP LAMBASTES LAWSUIT. A shareholders' class-action lawsuit against PHP Healthcare Corp. has "no merit," the Reston, Va.-based physician practice management company says.
PHP President and Chief Executive Officer Jack Mazur on June 24 released a statement calling the lawsuit an "unwarranted action."
Shareholders, in a lawsuit filed June 23 in U.S. District Court of Central California, are alleging PHP, which develops and manages provider-based networks, inflated the company's results by "engaging in numerous accounting improprieties" in a 1995 acquisition of 10 primary-care facilities from Blue Cross and Blue Shield of New Jersey. On June 2, PHP restated 1995 results after a Securities and Exchange Commission review of its accounting practices that was conducted as part of converting 70,000 shares of preferred stock into common stock.
The lawsuit charges the company with not paying preferred-stock shareholders a $2.1 million per-month penalty after it failed to complete the conversion by April 1998. PHP says it didn't convert the shares because, at a conversion price of $25 per share before June 1, no one was interested in doing so. PHP's stock has never sold for more than $19. The company denies it owes the penalty.
In July, stock in PHP, which is affiliated with 10,000 doctors, traded for around $8. One active buyer was billionaire investor John Kluge, chairman of radio and television giant Metromedia. Analysts say Kluge is close with PHP Chairman Charles Robbins.