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Statements Open Trial in Tenet Kickback Case

By Elizabeth Douglass Times Staff Writer

SAN DIEGO -- Over 13 years, Tenet Healthcare Corp. and two hospital executives paid illegal kickbacks to doctor groups to boost patient referrals and revenue at the company’s struggling Alvarado Hospital Medical Center in San Diego, a federal prosecutor said in court Tuesday during opening statements.

“This case is about a for-profit hospital ... for whom making money was more important than obeying the law,” Assistant U.S. Atty. Daniel E. Butcher told a federal jury.

Tenet and the executives misused laws governing doctor recruitment agreements 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,” Butcher said. “It was a covert kickback scheme.”

His remarks came at the beginning of what is expected to be a three-month trial in U.S. District Court. Tenet, Alvarado, former hospital Chief Executive Barry Weinbaum and former physician recruiter Mina Nazaryan face charges of conspiracy and violation of the federal anti-kickback law.

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David J. Schindler, an attorney representing Tenet, downplayed the government’s case against the company as “a fantasy,” saying prosecutors ignored information that didn’t fit their conspiracy theory. The doctor relocation agreements at issue were “all perfectly legal and done out in the open.... No one ever bribed a doctor.”

If convicted, Tenet’s 311-bed Alvarado hospital could be dropped from the government-funded Medicare program -- a blow viewed as a financial death sentence for a hospital. Weinbaum and Nazaryan also face possible prison terms.

In outlining the government’s case, Butcher said the kickback scheme began when Alvarado faced a revenue shortfall as it was losing Medicare patients to rivals. Weinbaum joined the hospital in 1991 and hired Nazaryan in 1995 to expand the facility’s doctor recruitment program.

Prosecutors claim that Weinbaum spent $15 million on 99 doctor relocation packages that included excessive salaries and overhead compensation that was funneled to physician groups that took in the new doctors.

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Tenet and the hospital justified the stepped-up recruitment by citing a shortage of doctors in the region -- a pretext that didn’t support giving agreements to a whole family of doctors as well as to a plastic surgeon, Butcher said.

The goal “was to induce the physicians in that group to send more patients to Alvarado Hospital,” Butcher said.

Over the life of the alleged conspiracy, Butcher said, Alvarado nearly doubled its revenue and significantly boosted patient admissions.

Tenet attorney Schindler said the physician relocation laws were confusing and changing all the time, and the company was trying to adjust its policies.

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“They were revising it over and over again to try to keep pace with the regulations.... Tenet was trying to do the right thing,” he said.

Thomas W. McNamara, an attorney representing Weinbaum, said, “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.”

McNamara also said that doctors often take five years to establish a practice. He showed the jury physician relocation agreements at nearby San Diego hospitals that had similar or higher compensation levels, including one that guaranteed income of $1 million.

For Tenet, the nation’s second-largest hospital chain, the kickback trial is only one in a mountain of legal woes. In the last two years, Tenet has faced an investigation over a questionable scheme to boost Medicare billings for its sickest patients, as well as allegations of unnecessary heart surgeries at a hospital in Northern California.

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Tenet is in talks that could result in it paying more than $1 billion to settle hundreds of claims of unnecessary heart surgeries and to end most of the federal investigations into the chain’s practices.


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