The physician owner of Larkin Community Hospital says he hopes to put the South Miami, Fla., hospital's troubled past behind it after signing an agreement to pay $15.4 million to settle civil fraud and kickback allegations dating back a decade.Current and former owners of for-profit Larkin settled a government-initiated False Claims Act lawsuit that alleged that one of the former owners, James Desnick, M.D., a Chicago-area ophthalmologist and entrepreneur, paid kickbacks for patient referrals to physician brothers George and Jack Michel. Jack Michel, M.D., is the 122-bed hospital's president and chief executive officer. Prosecutors also alleged that Jack Michel and his partners transferred patients from assisted-living centers and nursing homes they owned or controlled to Larkin for unnecessary medical treatments and then billed Medicare. The defendants -- including Desnick, the Michels and two other former owners, Rabbi Morris Esformes and his son, Philip Esformes -- settled in late November 2006 without admitting wrongdoing.
The 2004 lawsuit, filed by U.S. Attorney R. Alexander Acosta, noted that the Michel brothers accounted for half the patient referrals to Larkin between 1997 and 1999.Acosta said in a news release it was bad enough that scarce Medicare and Medicaid funds were spent on medically unnecessary care, "but it is far worse that elderly patients were purposely subjected to painful and uncomfortable procedures and hospitalizations just to generate extra revenue for the hospital and others," Acosta said. Jack Michel in an interview denies the allegations, saying he never accepted any kickbacks. "I never took a penny," he says, adding that the settlement payments will not affect Larkin's operations. He says he recognizes that his hospital has a reputation to overcome, but feels confident that with the lawsuit settled, Larkin can move forward. Jack Michel says the hospital has a top-notch medical staff and loyal patients. "We're happy to put this behind us," he says. He says he settled to avoid the high cost and uncertain outcome of expensive litigation. Jack Michel, who with his brother also operated nursing homes and had gerontology practices, bought Larkin in 1998 from Desnick. He recently bought back a 45% stake in the hospital he'd sold to the Esformeses, who control assisted-living centers and nursing homes. Desnick had purchased Larkin in 1997 from HealthSouth Corp. Desnick, the former owner of the now-defunct Doctors Hospital of Hyde Park in Chicago, separately had paid nearly $20 million to settle fraudulent billing and kickback charges at that hospital between 1999 and 2001, when doctors filed for bankruptcy. Larkin's original owner, the late Miami developer and alleged mob associate Cal Kovens, went to prison with former Teamsters union President Jimmy Hoffa for siphoning money from a Teamsters' pension fund to build Larkin and two other South Florida hospitals, according to news reports.