It may not have the broad public appeal that HealthSouth Corp. founder Richard Scrushy's criminal trial has, but the healthcare industry is paying attention to the retrial of a Tenet Healthcare Corp. hospital in San Diego accused of violating the federal antikickback statute.
Tenet's Alvarado Hospital Medical Center, former Alvarado Chief Executive Officer Barry Weinbaum and a Tenet subsidiary are accused of using physician-relocation agreements to funnel money to existing physician practices near Alvarado and ensure referrals from the practices. In the first criminal trial in U.S. District Court in San Diego, the jury deadlocked, leading U.S. District Judge M. James Lorenz to declare a mistrial in February (Feb. 21, p. 4).
"It's a very closely watched case because very few criminal kickback cases go to trial and verdict," said Laurence Freedman, a healthcare lawyer with Patton Boggs and a former U.S. Justice Department lawyer.
The case is considered vital to Tenet as it negotiates with the federal government for a global settlement of various investigations into the company's practices on physician recruitment, Medicare outlier reimbursements and communications with investors.
The government recently revealed a lot about its thinking on the outlier investigation in a friend-of-the-court filing it made in two racketeering lawsuits filed against Tenet in U.S. District Court in Miami (May 30, p. 18). The Securities and Exchange Commission notified Tenet in April that its investigators expect to recommend bringing a civil enforcement action against the company and six former executives, including former CEO Jeffrey Barbakow, regarding the adequacy of their financial disclosures about outlier payments (May 2, p. 17).
Carol Lam, the U.S. attorney in San Diego, has taken an active courtroom role in the Alvarado retrial, which began May 4. The retrial is the first case Lam has personally tried in the nearly three years that she has been in her position, said a spokeswoman for the U.S. attorney's office. Lam chose to be part of the four-lawyer courtroom team because of her background in healthcare fraud cases, the spokeswoman said.
U.S. attorneys don't often try cases, Freedman said. "It's completely consistent with Carol's dedication as a career prosecutor. She's tried a lot of high-profile healthcare cases," he said.
Lam was an assistant U.S. attorney in San Diego from 1986 to 2000 and chief of the office's major-fraud section for the last four years of that tenure. Freedman said Lam secured a criminal conviction in 1995 against a former executive of a hospital operated by National Medical Enterprises, Tenet's predecessor. A jury convicted the executive on a count of mailing threatening communications to a witness but found him not guilty on two other counts. Lam also obtained a guilty plea and a $110 million settlement of civil Medicare fraud charges against National Health Laboratories during her earlier stint in the U.S. attorney's office.
The Alvarado retrial could last through most of the summer, as the first trial took more than four months.