Trial Against Tenet Healthcare Subsidiary Over Physician-Relocation Agreements at Alvarado Hospital Begins
Assistant U.S. Attorney Daniel Butcher on Tuesday in his opening statement in a criminal trial of Tenet HealthSystem Hospitals, a Tenet Healthcare subsidiary, said that the company and two administrators at Alvarado Hospital Medical Center "paid illegal kickbacks to doctor groups to boost patient referrals and revenue," the Los Angeles Times reports (Douglass, Los Angeles Times, 10/27).
In the case, federal prosecutors allege that Alvarado and other Tenet hospitals have offered physician-relocation agreements in exchange for patient referrals. Under anti-kickback laws for federal health care programs, hospitals cannot directly pay physicians for such referrals. In July 2003, a federal grand jury issued a 17-count criminal indictment of Alvarado; CEO Barry Weinbaum; and owner Tenet HealthSystem Hospitals, over allegations that the hospital paid more than $10 million for more than 100 physician-relocation agreements between 1992 and 2000. Federal prosecutors also have charged former Alvarado administrator Mina Nazaryan in the case (California Healthline, 10/18).
Butcher said, "This case is about a for-profit hospital ... for whom making money was more important than obeying the law," adding that Tenet sought to hide a conspiracy that "was intended to put money in the pockets of established physicians so that Alvarado Hospital would be repaid with more referrals and more money. It was a covert kickback scheme." Butcher said that Weinbaum, who joined Alvarado in 1991, spent $15 million on 99 physician-relocation agreements that included excessive salaries and overhead compensation. Weinbaum hired Nazaryan in 1995 to expand physician recruitment efforts, Butcher added.
As a result, Alvarado nearly doubled revenue and significantly increased patient admissions, Butcher said. Tenet "justified the stepped-up recruitment by citing a shortage of doctors in the region," but according to federal prosecutors, the "pretext didn't support giving agreements to a whole family of doctors as well as to a plastic surgeon," the Times reports.
David Schindler, an attorney for Tenet, called the allegations "a fantasy" and said that federal prosecutors ignored evidence that contradicted their case. Schindler said that the physician-relocation agreements in question were "all perfectly legal and done out in the open. ... No one ever bribed a doctor."
Thomas McNamara, an attorney for Weinbaum, added, "These agreements made sense for the million people in Alvarado's service area, and there was a hope that they would make sense for the hospital as well" (Los Angeles Times, 10/27).
U.S. District Judge M. James Lorenz on Monday denied a Tenet request to dismiss the indictment against Tenet HealthSystem Hospitals. Tenet argued that several of the witnesses for the prosecution lied in grand jury testimony. However, Lorenz ruled that Tenet presented "no undisputed evidence of perjury" and was "impermissibly attacking the sufficiency of evidence before the grand jury" (Bloomberg News/Los Angeles Times, 10/26).
Last week, Lorenz denied a motion filed by Tenet that sought a perjury hearing over the allegedly false testimony. Tenet attorneys filed the motion after the U.S. attorney's office informed them that several prosecution witnesses might have lied in grand jury testimony (California Healthline, 10/18).