U.S. Drops Inquiry of Simi Hospital, Doctors : Medicine: The three physicians were accused of taking non-repayable loans for referring patients to the health facility.

Federal authorities have dropped a two-year investigation against Simi Valley Hospital and three physicians accused of referring patients to the medical facility in the mid-1980s in exchange for non-repayable loans, hospital officials said Friday.

Hospital President Alan Rice called the decision an exoneration of the hospital and of the physicians, who still practice there.

“Our board of directors is pleased to see this come to an acceptable conclusion,” Rice said. “We can now focus all of our energies and resources on meeting the community’s health needs.”

Rice said the U.S. Department of Health and Human Services had informed the hospital recently that it had dropped its inquiry of the hospital and Drs. George Dichter, Geoffrey Graham and Vahe Azizian.

Elliot Kramer, the federal inspector in charge of the investigation, did not return calls to his San Francisco office Friday.

Rice said the hospital, as “a good-will gesture,” agreed to pay $50,000 to the federal government to help cover the costs of the investigation, which involved a previous set of administrators at the hospital.

“They had quite an investigation and this was a way to help defray some of the expenses,” Rice said. “It was part of a good-faith effort.”

The three physicians who were targeted in the federal inquiry were suspected of taking hundreds of thousands of dollars in non-repayable loans from the hospital in the mid-1980s in return for referring patients to the facility.

Darwin Remboldt, the hospital’s chief administrator at the time, later testified before the Ventura County Grand Jury that the practice of giving doctors financial benefits for referring patients had been hospital policy.

Remboldt, who answered questions only after being granted immunity from prosecution, said such practices were necessary for the hospital to attract physicians to fast-growing Simi Valley.

The 1990 grand jury report concluded that the hospital and the doctors had violated state law, but county prosecutors concluded that no charges could be filed under state law because too much time had passed since the alleged crimes.

Because federal law allowed more time to file charges, Kramer’s office announced it would conduct its own investigation to determine whether there was sufficient evidence to pursue the case through the U.S. attorney’s office.

The three physicians could not be reached for comment Friday. But Christopher Caldwell, an attorney representing Dichter and Graham, confirmed that the investigation had been suspended and his clients cleared of any wrongdoing.

“All three doctors have been relieved” of any claims against them, Caldwell said. “What they are doing now is practicing medicine and taking care of their patients.”

Caldwell has maintained all along that his clients received substantial loans from the hospital but never as part of an agreement to bring patients to the hospital. He said Graham and Dichter are still paying back the $300,000 loan they received from the medical facility in 1986 to set up practice in Simi Valley.

“They are quality physicians,” Rice said in defense of the hospital’s decision to offer the loans to attract the doctors. “This has never been an issue of the quality of care at the hospital.”

Azizian, in an earlier interview, acknowledged that he had received a $25,000 loan from the hospital in 1985 with the agreement that the hospital would forgive at least part of the loan in return for patient referrals.

But Azizian said he continued to refer patients to other hospitals. Like Dichter and Graham, Azizian said he, too, was in the process of paying the hospital back.

Rice said the hospital still makes loans to doctors as an incentive to bring needed specialists to the area, but the loans must be paid back.

Since Rice took over as president of the hospital in 1989, the medical facility has changed its name from Simi Valley Adventist Hospital to Simi Valley Hospital and has spent more than $5 million on new medical equipment and renovation work.

Rice said the name change had nothing to do with the investigation. He would not discuss the hospital’s financial status, except to say that it was headed in a “favorable direction.”