Three hospital executives, two doctors and two lawyers went on trial last week in federal court in Kansas City, Kan., charged with conspiring to solicit and pay kickbacks for Medicare patient referrals. In a decade-long scheme, the doctors earned millions of dollars and the hospital netted thousands of nursing home patients it wouldn't otherwise have had, prosecutors alleged.
"It's a typical white-collar crime," Assistant U.S. Attorney Tanya Treadway told the 14 Kansans on the jury. "It's about money-who wants it and who gets it. Ronald and Robert LaHue always wanted more money. You will repeatedly hear this pattern: `Pay us or we will take our patients elsewhere.' "
Baptist Medical Center in Kansas City, Mo., allegedly did pay the LaHues-both osteopaths-$2.1 million over 10 years to keep those patients coming, Treadway said.
The trial's opening Jan. 25 ended a seven-year investigation, countless pretrial motions and a trip to the 10th U.S. Circuit Court of Appeals in Denver for procedural reasons.
Healthcare lawyers regard United States of America v. Dan Anderson et al. as the biggest, most troubling Medicare fraud case to hit a courtroom. The case could significantly affect the way hospitals do business with physicians and lawyers.
The trial, which opened 18 months after the initial indictments were unsealed, is expected to last until mid-March.
The defendants are charged with violating federal anti-kickback statutes that bar any form of remuneration to induce Medicare or Medicaid patient referrals.
If found guilty, the defendants could face fines and imprisonment.
Dan Anderson was the chief executive officer at Baptist Medical Center in Kansas City, Mo., from 1980 to 1997. Prosecutors allege that starting in 1984, Baptist paid kickbacks to the LaHues to secure a steady stream of nursing home patients who needed hospital-based services.
Robert LaHue owned Blue Valley Medical Group, which specialized in nursing home patients. His brother, Ronald, worked for the group.
In 1984 Baptist entered contracts with the LaHues, which the government called disguised kickback schemes. The government says it has documents that show two other hospital executives besides Anderson-Dennis McClatchey, the chief operating officer, and Ronald Keel, a vice president-actively participated in the scheme.
In 1997, Baptist Medical Center paid a fine of $17.5 million to settle related allegations by the Justice Department.
Two lawyers for the hospital, Ruth Lehr and Mark Thompson, are accused of participating in the conspiracy by drafting contracts to conceal what they knew were illegal arrangements. Without the lawyers' complicity, Treadway said, "the bribery conspiracy would not have had its long and lucrative life."
But in opening statements by the defense, the "Blue Valley system" was portrayed as an innovative attempt to provide appropriate and efficient medical and hospital care to underserved nursing home patients. Long before the phrase "continuum of care" came into vogue, the LaHues had placed doctors in nursing homes, offered transportation to an outpatient clinic at Baptist and ordered admission to the hospital only when necessary, the defense said. This system even saved Medicare money, the defendants' lawyers argued. The $75,000 a year that the hospital paid each brother from 1984 until 1995 was money well earned for services rendered.
Some of the defendants agreed to talk to the press as long as their names weren't used. One said that what the hospital was trying to do "was 15 years ahead of its time."
"It's a tremendous program," another defendant said. "It takes us out of the Stone Age in treating nursing home patients. I sure wish I could talk about it more, but I'm under restrictions."
Some witnesses are being compelled to testify by grants of immunity from prosecution.
Many of the witnesses are executives whose hospitals were approached by Blue Valley Medical Group to set up a geriatric program like Baptist's.
Four facilities did set up such programs. They are Alexian Brothers Hospital and Deaconess Medical Center, now called Deaconess West Hospital, in St. Louis; Bethany Medical Center in Kansas City, Kan.; and St. Joseph Medical Center in Wichita, Kan. Bethany later paid a fine of $1.2 million.
Other hospitals declined to participate. For example, Joseph Crossett, CEO of Liberty (Mo.) Hospital, and Frank Devocelle, CEO of Olathe (Kan.) Medical Center, rejected the LaHues. They are expected to testify for the prosecution.
The first witness was the former medical school instructor of both LaHue brothers at the University of Health Sciences, an osteopathic school in Kansas City, Mo. Leonard Mennen, D.O., who now practices in Tampa, Fla., portrayed them as greedy schemers who asked for kickbacks to continue sending their patients to University Hospital, also in Kansas City, Mo. University Hospital refused to pay, Mennen said, because it would have been illegal.
So the LaHues took their patients to Baptist Medical Center, which today is part of the Health Midwest hospital consortium. University Hospital closed its doors in 1987.