Universal Health Services, King of Prussia, Pa., said its two-hospital
South Texas Health System, based in McAllen, was served today with a
criminal subpoena by federal authorities. The criminal investigation is
related to an ongoing civil investigation of potential False Claims Act
violations at the system; that investigation was launched in November
2005. The investigations cover the systems physician relationships since
Jan. 1, 1999, UHS said.
The civil subpoena was issued by HHS inspector generals office, but the
company did not say what law enforcement authority issued the criminal
subpoena. The U.S. Attorneys office in Houston also was involved in the
civil investigation and indicated to UHS in 2005 that authorities were
interested in physician employment agreements and potential solicitations
of patient referrals from physicians, the company said.
South Texas Health System has struggled in recent years because of
competition from a physician-owned specialty hospital nearby. The system contributed 19% of the companys pre-tax earnings in 2003,
but that percentage fell to 13% in 2004 and then to 4% in 2005, Universal
said in a securities filing last year.
In the first quarter of 2005, UHS bought a local physician group and
health clinic for $5.2 million in cash upfront and an agreement to pay as
much as $9.8 million more based on certain contingencies, the filing
indicates. In 2001, Universal paid $56 million to Charlotte, N.C.-based
MedCath to buy McAllen Heart Hospital and make it part of McAllen Medical
Center. -- by Vince