Two Tenet Healthcare subsidiaries on Thursday received a 17-count indictment from a federal grand jury in San Diego charging them with criminal violations related to kickback payments to physicians.
From 1992 to 2002, Tenet HealthSystem Hospitals and the 311-bed Alvarado Hospital Medical Center in San Diego allegedly paid more than $10 million for some 100 physician-relocation agreements, according to the indictment.
While the funds were purportedly to recruit medical services to the Alvarado service area, the indictment alleges the payments were used to induce physicians to refer patients to the hospital.
Each of the 17 counts carries a maximum of five years imprisonment and a $25,000 fine.
Tenet Healthcare had disclosed Tuesday that it expected the indictment to be handed up this week. The Santa Barbara, Calif.-based company also said it had received subpoenas for information about physician relocation agreements for all of its subsidiary hospitals.
"Kickbacks to doctors can wear many disguises, including sham relocation agreements," said U.S. Attorney Carol Lam in a written statement. "They are still kickbacks, they are still illegal, and they threaten the integrity of our medical system."
The indictment alleges that established physicians as well as recruited doctors received some of the $10 million in exchange for patient referrals. One arrangement detailed was a payment of $600,000 from Alvarado CEO Barry Weinbaum, named as one of the defendants, to internist Paul Ver Hoeve, M.D., from the funds intended for relocation agreements for four physicians who joined Ver Hoeve?s practice.
Ver Hoeve surrendered admitting privileges at Alvarado Hospital in 1998 and was indicted for Medicare fraud in 2000. Weinbaum has pleaded not guilty to charges filed against him June 5, including eight counts of breaking anti-kickback laws.
The indictment also alleges Mid-City Medical Group solicited $230,000 from Alvarado Hospital while promising that "the patient load that we are capable to expand will definitely help to increase the flow of admissions to the Alvarado Hospital Medical Center."
Mark Rust, chair of the healthcare law group at Barnes and Thornburg in Chicago, says the physicians involved in anti-kickback charges are at risk for receiving indictments of their own.
"Certainly the anti-kickback statute is a two-way street. It takes two to do it," says Rust, who represents physician groups around the country. "Whatever was offered, to the degree it was accepted, the government would have a basis for prosecuting the doctors as well."
The company defended its corporate policy on physician relocation agreements is appropriate under the law.
"We believe this very broad indictment mistakenly attacks a well-established, lawful and common means by which U.S. hospitals attract needed physicians to their communities," said Tenet President and acting CEO Trevor Fetter in a prepared statement.
Alvarado Hospital is one of two hospitals serving a market of about 470,000 people with a diverse, medically underserved immigrant population, according to Tenet. The statement cited a 2002 survey from the San Diego Medical Society that found 71% of the county's established physicians were having trouble recruiting new doctors into their practices.
In 1994, Tenet, then called National Medical Enterprises, entered criminal guilty pleas and paid the United States $325 million to settle an investigation into illegal payment to physicians to refer to certain psychiatric hospitals, among other things.
U.S. Attorney Daniel Butcher is prosecuting the current case. The defendants are expected to be arraigned today by U.S. District Judge M. James Lorenz.