Doctors Allege Kickback in Hospital Suit : Health: Two radiologists who refused to pay $180,000 ‘marketing fee’ are fired by Anaheim General. The dispute follows a warning by federal authorities of possible abuses in hospital-physician contracts.

In a bitter legal dispute likely to fuel national concerns over the financial entanglements between hospitals and doctors, two radiologists have accused Anaheim General Hospital of terminating their contract because they refused to pay the hospital a $180,000 marketing fee that the doctors charge was a kickback.

The dispute, culminating in a lawsuit expected to be filed today in Orange County Superior Court, follows a warning earlier this year by federal health authorities of a “recent proliferation of contracts between hospitals and hospital-based physicians which cause kickback concerns.”

No criminal indictments have been issued, but doctors have sued hospitals over alleged kickback demands in Pennsylvania and Virginia.

The Anaheim case reached a flash point in May when the radiologists, Dr. Robert Benson and Dr. James Van Der Stuyf, refused to continue paying the hospital a monthly marketing fee of $8,000 and to pay $181,000 in “past due” fees.

In turn, the hospital refused to renew an exclusive contract with the physicians to read all X-rays and perform radiological imaging procedures on patients under treatment at the 99-bed hospital.

Tensions ran so high that on May 13, hospital Administrator Richard A. Gold ordered the radiologists off the premises and called police. Officers responded but took no action, according to an Anaheim police spokesman.

The hospital has sued to recover the $181,000.

But Joel Baruch, attorney for the radiologists, contends the hospital never performed any marketing services for the radiologists and that the fee was actually an illegal demand for a kickback.

In an interview, Gold denied the payment was a kickback, saying only that the dispute involves money that is owed the hospital.

The lawsuits provide a rare look at the inner workings of the hospital industry and the type of financial arrangements involving certain types of doctors that federal health authorities have most recently targeted for scrutiny.

Federal health authorities say kickbacks jeopardize patient care and drive up costs. The concern is that if doctors are paying kickbacks, they will be tempted to recoup their losses by performing unnecessary procedures or padding their bills.

An advisory issued earlier this year by Inspector General Richard Kusserow at the Department of Health and Human Services warned that hospitals have begun to view certain medical specialists as “potential new revenue sources . . . and some are requiring payments from those physicians.”

Typically, these doctors are “hospital-based physicians”--such as radiologists, anesthesiologists, pathologists and emergency physicians--who do not generate business on their own but depend upon others for referrals. Hospital contracts, which are supposed to be awarded on the basis of merit, are usually considered to be vital for these doctors because they guarantee a steady stream of hospital patients.

In his advisory, Kusserow cited eight cases from across the country that appear to violate anti-kickback laws. In one, a hospital contracted with a group of physicians to staff the emergency room, but required them to rebate half their cash receipts exceeding $600,000.

In another case, he stated that radiologists under contract with a hospital had to pay 50% of their gross receipts to the hospital’s endowment fund.

Kusserow charged in the report that anesthesiologists and pathologists across the country similarly have been trapped in “these illegal financial arrangements.”

“If a hospital were to extract $5 from a radiologist for every X-ray performed at the hospital,” Kusserow wrote, “there can be no doubt whatever that a kickback offense has been committed. Yet, in many of the arrangements we have recently observed, practices similar in effect to this obvious kickback are occurring.”

California law forbids any health care provider from offering or accepting any “rebate, refund (or) commission” in return for patient referrals; the federal Medicare Anti-Fraud and Abuse Act bans any remuneration for referral of Medicare patients.

The anti-kickback law has cast a long shadow over the increasingly complex financial arrangements that underlie the health care field. About 500 kickback cases involving health care professionals nationwide have been resolved by the office of the inspector general in the last several years, according to Deputy Inspector Michael Mangano.

Kusserow in January broadened the interpretation of the federal anti-kickback statute to cover payments to hospitals by hospital-based physicians, which triggered an outcry from the American Hospital Assn.

Officials of the hospital association contended in a letter of protest that Kusserow’s overzealous interpretation of the federal anti-kickback statute represents “a drastic change in government policy” that is unjustified because there is no evidence that the arrangements increase costs or lead to over utilization of services.

They argued that Kusserow has cast a sinister light on legitimate, long standing financial relationships in which doctors have sometimes paid hospitals for billing services and office space, for example.

The association’s senior counsel, John Steiner, said he surveyed hospitals nationwide and discovered “they are all baffled” by the inspector general’s suggestion that illegal kickbacks are prevalent.

Mangano said his office has received about 25 complaints about financial arrangements involving hospital-based physicians that appear to criminally violate the federal statutes. Several disputes have erupted in civil lawsuits. In Virginia, a group of radiologists has sued a hospital over a contract they were offered that allegedly required them to pay kickbacks by purchasing billing and management services from the hospital at a higher than market rate. And the Justice Department has filed a civil lawsuit against a Pennsylvania hospital that required physicians to kick back a percentage of their salaries as a donation to the hospital’s building fund.

Tom Greeson, counsel for the American College of Radiology, said he has heard of payments that hospitals have demanded from radiologists which have been characterized as rent, franchise fees, charitable donations, or fees for billing and management services.

“We’ve seen these arrangements proliferate in the last few years and we have viewed them with some alarm,” he said. “Our concern is that if this is allowed to go unabated then radiologists will be coerced into making kickbacks just to practice.”

In deciding whether a payment is legitimate, Kusserow said in a letter to hospital officials that “the touchstone for analysis” is whether it reflects the “fair market value” of services rendered.

In the Anaheim hospital case, the radiologists were working under a contract that required them to pay $8,000 a month for unspecified “marketing” services that were to be mutually agreed upon and commensurate with the work performed.

But attorney Baruch charged that no marketing services were provided and that the fees reflect “an amount far in excess of the amount that could legitimately, in an arm’s length transaction, be spent by plaintiffs for actual marketing services for their practice at the hospital.”

Baruch charged the hospital demanded a kickback from the radiologists to “enhance profits” at the hospital, which is a doctor-owned facility held in the name of Asklepios Hospital Corp.

Baruch said that when a hospital selects a physician based on the doctor’s willingness to pay kickbacks, patient care is jeopardized. He pointed out that after Benson and Van Der Stuyf were ordered to leave the hospital, its radiology department became backlogged with X-rays and other vital tests because there was no radiologist to read and interpret them.

In one case, Baruch said, a patient in the intensive care unit suffering from internal head bleeding was kept waiting about 12 hours for lack of a radiologist to read his CAT scan.