The five defendants in the Kansas City, Kan., Medicare fraud case may be conspirators who exchanged big bucks for patient referrals. Or they may be victims of prosecutors trying to nail them for creating an innovative, cost-saving system to care for Medicare patients in nursing homes.
Whatever the outcome, the protagonists have had their say. It's now up to the 12 Kansans on the jury to decide whether the defendants were conspirators or victims or something in between.
The jury and judge heard closing arguments last week in the biggest, most consequential criminal prosecution for Medicare fraud and abuse in recent years. After three days of deliberation in the Robert J. Dole United States Courthouse, the jurors went home April 2 without having reached a decision. They were scheduled to resume deliberation on April 5.
In addition to the five remaining defendants, also on trial is the way healthcare organizations and their executives respond to financial incentives created by changes in federal health insurance programs (Feb. 15, p. 2).
The charges against the five have been trimmed during the court proceedings, but they are still serious. Three executives at Baptist Medical Center in Kansas City, Mo., are charged with conspiring with Robert LaHue, D.O., and his brother Ronald LaHue, D.O., to pay the LaHues for referring hundreds of nursing home patients to Baptist. If found guilty, the defendants could face fines and imprisonment.
The executives are Dan Anderson, former president and chief executive officer; Ronald Keel, a former vice president; and Dennis McClatchey, former chief operating officer.
Four other hospitals set up similar arrangements with the LaHues and their practice, Blue Valley Medical Group. In the indictment, the Baptist defendants were charged with conspiring with the other hospitals, but U.S. District Judge John Lungstrum dropped those charges.
Two lawyers for Baptist, Ruth Lehr and Mark Thompson, also were charged as part of the conspiracy. But Lungstrum acquitted them from the bench when the government concluded its case on March 9.
Robert LaHue is charged with wit-ness tampering, and both LaHues are charged with submitting false bills to Medicare, but the judge removed those allegations from this case. The LaHues will be tried later on those charges.
On March 29 and March 30, attorneys for the prosecution and defense pulled out the stops in their closing arguments.
Assistant U.S. Attorney Tanya Treadway hammered her central point relentlessly: "What was of primary importance to the hospitals? Receiving the patients."
Contending the LaHues demanded payments for patient referrals, a violation of the anti-kickback statute, she flashed numerous documents onto electronic screens to remind the jury of incriminating content, which had been highlighted in yellow.
The defense argued that the contracts between Baptist and the LaHues might not have specified what the LaHues would do or how many hours they would work but still represented a real program the LaHues ran for nursing home patients.
"The services were done; they were done well; they were worth the money," said R.J. Campbell, Keel's attorney.
In closing, Bruce Houdek, Robert LaHue's attorney, explained how Medicare's prospective payment system, introduced when Baptist and the LaHues set up their clinic, changed the way hospitals had to do business.
"The hospital gets the same amount of money for pneumonia if the patient stays one day or 10 days," he said. "The hospital is justified in paying Blue Valley Medical Group to set up the system to make this work. . . There is no direct evidence of improper utilization, of giving more care than was needed."
The defense dwelled on the issue of intent. If the hospital executives acted in good faith and did not intend to break any law, they must be acquitted, attorneys said.
The defense called five witnesses -- two doctors and three nurses -- who worked in the geriatric clinic at Baptist. They said the Blue Valley program was a genuine coordinated-care system that benefited patients and added expertise to the hospital.
But in her rebuttal, Treadway insisted it didn't matter whether Blue Valley benefited nursing home patients or saved money for Medicare. If the hospitals paid the doctors a bribe for patients, all parties committed fraud and engaged in a conspiracy.
The trial began Jan. 25. The prosecution took six weeks to present its case; the defense rested after one week.
Anderson and McClatchey took the stand in their defense. Anderson testified for about 11 hours, and McClatchey for about six. Keel and the two LaHue brothers did not take the stand.
By taking the stand, McClatchey allowed his attorney, Charles German, to introduce evidence to the jury that the Federal Bureau of Investigation tried to ensnare him. Thomas Eckard, the government's main witness, called McClatchey in August 1994 while wearing an FBI wiretap. He tried to induce McClatchey to admit that the hospital was paying for patient referrals. But McClatchey insisted everything was aboveboard, admitting only that the LaHues' services were poorly documented. The prosecution had moved to keep the tape from being admitted into evidence, and the judge had ruled that it would not be admitted.
That was the first of two setbacks the government suffered in the final days of the trial. A misstep in Treadway's closing argument allowed the defense to tell the jury that the judge had declared the lawyer defendants not guilty. Up to that point, the jury knew only that the lawyer defendants disappeared from the courtroom after March 9.