Alvarado Hospital CEO Indicted for Alleged Illegal Payments to Physicians
A federal grand jury on Thursday indicted Barry Weinbaum, CEO of Alvarado Hospital Medical Center, a San Diego hospital owned by Tenet Healthcare, on charges that he made illegal payments to encourage physicians to refer patients to the facility, the Wall Street Journal reports. The indictment marks "another setback" for Tenet, the second-largest for-profit hospital chain in the nation (Rundle, Wall Street Journal, 6/9). Last week, Jeffrey Barbakow resigned as CEO of Tenet over the financial performance of the company, whose stock value decreased after the federal government began an investigation of company billing practices. The HHS Office of Inspector General last November announced plans to audit Tenet hospitals to determine whether the company improperly billed Medicare for outlier payments; the government also launched an investigation into allegations that two surgeons at Tenet-owned Redding Medical Center performed unnecessary procedures to fraudulently increase Medicare. In addition, Tenet officials said last November that the Federal Trade Commission had requested information about the 1999 merger of two of company hospitals in Missouri as part of a larger investigation of hospital mergers nationwide (California Healthline, 5/28).
The indictment charges Weinbaum with one count of conspiracy to violate the federal antikickback statute and seven counts related the offer and payment of illegal compensation, the AP/Sacramento Bee reports (Gentile, AP/Sacramento Bee, 6/6). The case focuses on physician-relocation agreements, which hospitals use to recruit physicians in their areas. Physician-relocation agreements can include salary guarantees and payments to cover the cost of equipment, rent and other expenses related to the establishment a new practice. However, hospitals could use such payments to "disguise bribes and kickbacks that interfere with physicians' medical judgment about where to send patients for hospital care," the Journal reports (Wall Street Journal, 6/9). According to the indictment, Weinbaum paid physicians more than $10 million to move their practices near the hospital with the knowledge that "much of that money would be passed through to established practices that Alvarado Hospital had targeted for increased referrals, and to established practices that were loyal referrers of patients to Alvarado Hospital" (Abelson, New York Times, 6/7). The indictment does not include information on the amount of the alleged improper payments or on the time period in which Weinbaum allegedly made the payments. The federal grand jury also will likely indict Alvarado Hospital in the case at a later date, Tenet officials said.
Weinbaum on Friday pleaded not guilty to the charges in the indictment, and according to his attorney Tom McNamara, he has "an impeccable history in the health care field spanning more than 20 years" (Wall Street Journal, 6/9). Trevor Fetter, Tenet president and acting CEO, said, "We believe in the personal and professional integrity of Barry Weinbaum and we expect him and the hospital to be fully vindicated from these unfortunate allegations" (AP/Detroit News, 6/7). According to Christi Sulzbach, general counsel for Tenet, the government investigation of physician-relocation agreements will "create an uproar in the hospital industry." Tenet officials added that the government has based the allegations against Weinbaum on "claims by one disgraced physician" who provided information to avoid prison time (Wall Street Journal, 6/9). According to the indictment, Weinbaum in the mid-1990s offered Dr. Paul Ver Hoeve a personal-service contract with the hospital that paid him $3,000 a month, the Times reports. Ver Hoeve rescinded his admitting privileges at Alvarado Hospital in 1998 and later pleaded guilty to unrelated Medicare fraud charges. Michael Lipman, an attorney for Ver Hoeve, said, "Dr. Ver Hoeve admitted his involvement in misbilling Medicare and has been candid and truthful with the government in telling it what he knows" (New York Times, 6/7).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.