The chief executive of a Tenet Healthcare Corp. hospital in San Diego was indicted by a federal grand jury on eight counts of violating anti-kickback laws by allegedly authorizing illegal payments to doctors to win more referrals of Medicare patients.
Barry Weinbaum, 49, who has run Alvarado Hospital Medical Center for 12 years, pleaded not guilty Friday to the charges in U.S. District Court in San Diego. If convicted, the La Jolla resident faces a maximum of five years in prison and a $25,000 fine on each count.
According to the indictment filed late Thursday, Weinbaum authorized Alvarado to pay more than $10 million in relocation packages to doctors who joined medical groups in Alvarado's service area, with much of the money allegedly paid to the physician groups for referring business to the hospital.
The federal Medicare Anti-Kickback statute prohibits hospitals from making kickbacks to physicians for referring patients whose care is paid for by the Medicare or Medicaid programs.
"Paying kickbacks for patient referrals improperly interferes with physicians' independent medical judgment and inflates the cost of health care for all of us," U.S. Atty. Carol C. Lam said.
Tenet said that it would pay for Weinbaum's legal defense and that he would remain chief executive of the hospital.
"We believe in the personal and professional integrity of Barry Weinbaum and we expect him and the hospital to be fully vindicated," said Tenet's acting chief executive, Trevor Fetter.
Weinbaum's attorney, Tom McNamara, said he expects his client "to be exonerated."
Since October, when the Santa Barbara-based company was hit by a series of government investigations into its hospitals, Tenet's stock has fallen by about two-thirds.
A federal probe was launched into Tenet's practice of boosting profit with special payments Medicare makes for the sickest patients. Federal officials also are looking into whether two doctors at a Tenet hospital in Redding, Calif., performed unnecessary heart surgeries.
Last week Jeffrey C. Barbakow, Tenet's CEO for the last decade, resigned.
On Friday, Tenet shares rose 27 cents to $16.27 on the New York Stock Exchange.
"The good news is this appears to be something very specifically related to one issue at one hospital, instead of something systemic," said Sheryl Skolnick, an analyst with Fulcrum Global Partners. "That will be important to investors."
A principal witness in the Weinbaum case is La Mesa, Calif., physician Paul Ver Hoeve, according to the indictment. Court documents said Ver Hoeve, facing 64 counts of mail fraud, pleaded guilty in federal court in 2000 to one count in a scheme to defraud Medicare.
Tenet officials said Friday that Ver Hoeve avoided jail time in that case in exchange for his information about Weinbaum.
In December, federal agents armed with a search warrant raided the San Diego hospital's executive offices looking for various records, including patient admissions, consulting agreements and referral records of 10 doctors, including Ver Hoeve.
In the indictment, Ver Hoeve claimed he received nearly $700,000 in kickbacks through relocation accords that brought four doctors to his practice.
Ver Hoeve's lawyer, Michael Lipman, said Friday, "I assume the government is satisfied that my client is being truthful; otherwise they would not have gone forward."