The sentencing of a former Vermont hospital chief executive to two years in federal prison last week may send a strong signal to other healthcare executives that prosecutors are increasingly willing to trace criminal activity up to the highest ranks of an organization.
William Boettcher's sentencing makes him the first former official of Fletcher Allen Health Care in Burlington, Vt., to receive prison time for his role in a scheme to lie to state regulators about the cost of the hospital's expansion project.
As part of his plea agreement, Boettcher faced a maximum prison sentence of two years. That U.S. District Court Judge William Sessions III gave him the maximum sentence was meant to send a strong message, said Russ Hayman, a former federal prosecutor who is now a partner in charge of health law in the Los Angeles offices of McDermott Will & Emery.
"It will reverberate among hospital executives," Hayman said, adding that it may not bode well for other former Fletcher Allen executives allegedly involved in the scheme.
Boettcher, 58, will begin his term in a federal prison work camp in Nellis, Nev., on June 7. In January he pleaded guilty to criminal charges of conspiring to hide the cost of the 519-bed hospital's expansion project. According to prosecutors, Boettcher and other former executives concealed the cost of the expansion, called the Renaissance Project, by creating two budgets, one with false figures for state regulators and another with the true figures.
Three other former Fletcher Allen officials have been charged criminally in the scandal: Thad Krupka, former chief operating officer; David Demers, former senior vice president; and David Cox, former chief financial officer. Krupka and Demers have pleaded guilty to state or federal charges of conspiring to lie about the project's cost. Cox is fighting similar charges. David Kirby, the U.S. attorney for Vermont, said Krupka and Demers planned to testify at Cox's trial, which probably won't start until early next year. Krupka and Demers, he said, will be sentenced after Cox's trial.
While Boettcher and others told state regulators the project would cost $173 million, the initial cost was actually roughly $253 million. Since then, it has ballooned to about $380 million. As part of his plea agreement Boettcher will repay the hospital $733,210 he received in severance pay when he resigned from Fletcher Allen in September 2002.
Hayman said the Boettcher case is somewhat unique because it involves a hospital's top official. In most recent cases, prosecutors have gone after lower-level executives, he said. Other hospital CEOs who have served time recently include Dan Anderson, former CEO of Baptist Medical Center in Kansas City, Mo., who was convicted in 1999 of paying kickbacks for patient referrals, and J. Michael Gavin, former CEO of Memorial Hospital of Salem County in Salem, N.J., who served a five-month sentence beginning in late 2001 for tax evasion (March 18, 2002, p. 6).
Given recent corporate scandals at Enron and WorldCom -- in both cases top executives are alleged to have directed underlings to commit fraud -- Hayman said top healthcare executives are likely to be a target for future prosecution of fraud cases.
"The federal government has redoubled its efforts to trace alleged fraud to the highest levels," he said.
In another case winding its way through the legal system, Barry Weinbaum, the former chief executive officer of Tenet Healthcare Corp.'s Alvarado Hospital Medical Center in San Diego, is scheduled to be retried this month in a case involving illegal payments made to doctors in exchange for patient referrals. Mina Nazaryan, a former administrator at the hospital, pleaded guilty to conspiracy in the case.