Five major healthcare organizations are urging a federal appeals court to hold hospital executives and physicians to a narrower and harder-to-prove definition of what constitutes an illegal kickback for patient referrals.
Using a broad definition of a kickback that the organizations say is unfair, a jury in federal district court in April 1999 convicted a hospital executive and two physicians of participating in a criminal patients-for-cash scheme.
It marked the first time that a hospital executive had been convicted of a criminal kickback violation in the 23-year history of the kickback statute, which bars any form of remuneration to induce the referral of Medicare or Medicaid
The healthcare organizations fear that a broad definition of what constitutes a kickback would leave hospital executives and doctors vulnerable to prosecution every time they tried to establish some sort of business relationship.
The case sets precedents "for some very broad interpretations of the statute that we think would have a chilling effect on some very legitimate arrangements," said Thomas Nickels, the American Hospital Association's senior vice president
of federal relations.
The five groups filed their amicus brief in the 10th U.S. Circuit Court of Appeals in Denver.
The trial in Kansas City, Kan., ended in the convictions of Dan Anderson, former chief executive officer of Baptist Medical Center in Kansas City, Mo.; Robert LaHue, D.O.; and his brother, Ronald LaHue, D.O. The jury of 12 Kansans found them guilty of conspiring to solicit and pay bribes for referrals of nursing home patients to Baptist hospital.
Parties to the amicus brief are the American Hospital Association, the Federation of American Health Systems, the Association of American Medical Colleges, the American Osteopathic Association and the Missouri Hospital Association.
Anderson and the LaHues have each filed their own appeals briefs as well. Oral arguments have not been scheduled, and a ruling from the three-judge panel could take as long as a year. Meanwhile, the defendants are free on bond.
The Kansas City case has been widely followed in the hospital and medical communities because it goes to the heart of the legal nuances that govern referrals of Medicare patients by doctors to hospitals. Under federal law, hospitals are not allowed to make payments to doctors or give other inducements in exchange for patient referrals.
In the Kansas City case, the hospital had made payments of $75,000 a year each to the LaHue brothers, which they said was to cover a coordinated system of care the doctors had set up for their nursing home patients. The U.S. attorney for Kansas and the FBI, however, said these payments were merely kickbacks, and the jury agreed.
The jury reached this decision after U.S. District Judge John Lungstrum told them that they could find the defendants guilty if influencing the patient referrals was "at least in part . . . the reason the remuneration was solicited or received." This is known as the "one-purpose" rule. Prosecutors like it; defendants hate it.
"From our point of view that was a very devastating instruction," said James Wyrsch, attorney for Anderson. "That instruction is not found in the statute." Also called the Greber rule, after a 1985 case, it means that if any part of the reason for the payment was to induce referrals, the jury can convict. That's too broad, according to defense lawyers. It should be "the primary purpose" of the payment instead.
"If you had 20 motivations, and if any one of the motivations was to bring a referral, that is a violation of the kickback law," said Thomas Scully, president and CEO of the Federation of American Health Systems, which represents for-profit hospitals.
Scully's group believes referrals are such an intricate part of hospital and physician relationships that Congress did not intend the anti-kickback statute to be interpreted so harshly. A more reasonable standard is needed.
The AHA's Nickels said Judge Lungstrum's reading would tangle physicians and hospitals in all sorts of unintentional illegalities.
"Let's say that to attract a specialist, the hospital agrees to pay moving expenses. Or if the medical director in a hospital receives compensation to bring patients into the hospital," Nickels said. "Congress didn't intend that to be a violation of the law."
The amicus brief from the AHA and the other four organizations was drafted by Thomas Crane, a Boston attorney who used to work in HHS' inspector general's office and who drafted the 1991 safe-harbor rules, which guide healthcare executives in making business deals without violating the kickback laws.
"A high-profile anti-kickback case is always going to be watched,"
he said. Lungstrum's jury instruction offered the first chance since 1989 to examine the one-purpose rule in a circuit court. "That made it very important."
The government's brief, by assistant U.S. Attorney Tanya Treadway, is due at the end of June.