As Hospitals Battle for Patients, A Prosecutor Alleges Bribery | WSJ | 6.11.04
Prosecutors have filed charges against Alvarado and its former chief executive, Barry Weinbaum, accusing them of bribing doctors with “relocation agreements” in exchange for the doctors’ referral of patients to the hospital. Such agreements are a well-established practice in the U.S. But now, they’re under threat amid the debate over skyrocketing health-care costs. …
Hospitals say their relocation payments benefit society by inducing doctors to set up shop in rural regions, impoverished inner cities or other underserved areas. But prosecutors argue that the money sometimes amounts to a bribe by hospitals hoping to get business in lucrative fields such as heart surgery.
The line between a legal payment and a bribe is murky. If a clinic takes a hospital’s money and buys equipment that is used both by the new doctor and the other doctors, is that illegal? Is the mere exchange of money potentially criminal, or must there be an explicit agreement about referrals? Legal precedents are few — which is why the government’s charges against Alvarado are making waves. The government says that over a decade Alvarado funded more than 100 relocation packages, together worth more than $10 million. …
“The case has already had a tremendous impact,” says Robert Salcido, a health-care lawyer in the Washington office of Akin Gump Strauss Hauer & Feld. “Hospitals have definitely reevaluated their practices regarding physician recruitment and some have become more conservative in terms of the number of deals they are willing to enter into and the dollar amounts attached.” …
Leading the government charge in the Alvarado case is Carol C. Lam, the U.S. attorney in San Diego. She is one of the government’s top experts in health-care fraud, having co-authored a 954-page textbook on the subject, and plans to argue the case herself. Many hospital executives believe Ms. Lam wants to set a precedent that will change practices nationwide. One hardball tactic: She filed criminal charges against Mr. Weinbaum personally, putting executives on notice that they could go to prison if their hospitals make illegal contracts. …
According to a sworn statement by a federal agent that summarizes Dr. Ver Hoeve’s testimony, he began practicing in San Diego in the late 1980s and referred most of his patients to Grossmont Hospital, an Alvarado competitor. But in 1994, the statement says, Mr. Weinbaum began calling Dr. Ver Hoeve and urging him to change his referral habits. According to the government, Dr. Ver Hoeve ultimately received at least $600,000 from four doctors who joined his practice and got relocation packages from Alvarado. Mr. Weinbaum allegedly arranged for the hospital to pay the doctors, who passed on part of the cash to Dr. Ver Hoeve. …
Tenet back in the news—how quaint.
Anyone that has been to this area of San Diego realizes very quickly that the “rural region” recruitment argument is not a dog that will hunt. “Impoverished inner cities” or “underserved areas” are similar hounds.
The geography of the I-8 corridor in San Diego is germane—Sharp’s Grossmont Medical Center is north of I-8 and within visual range of Tenet’s Alvarado Medical Center south of I-8’s location.