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Increased "HEAT" on Physician Contracts Leads to Criminal Charges Against Hospital, Owner, Executive and Physicians

April 24, 2013

The United States Attorney's Office for the Northern District of Illinois announced that it has arrested the senior executive of Sacred Heart Hospital in Chicago and four physicians for alleged violations of the Antikickback Act. In addition, the FBI and the Office of Inspector General of the U.S. Department of Health & Human Services executed search warrants in connection with allegations of alleged Medicare and Medicaid fraud schemes involving emergency room evaluation, testing and observation services alleged to be not medically necessary.

According to the allegations, the hospital administrator paid kickbacks to physicians in return for referrals which were concealed as rent payments, payment of salaries of physicians' employees, payment for contracts for duties without any real responsibilities, creating alternative billing arrangements, and paying physicians to supervise and teach nonexistent medical students.

The FBI is still probing claims that a pulmonologist at the hospital performed a high number of unnecessary intubations and prolonged them by directing heavy sedation of the patients, thereby resulting in procedures which were not medically necessary. Apparently, tracheotomies were a substantial source of insurance reimbursement for the hospital, resulting in reimbursement of $160,000 for a tracheotomy if the patient stayed for 27 days. According to the press report, hospital employees stated that they often stretched a patient's inpatient tracheotomy stay to 28 days to maximize Medicare reimbursement.

The case emphasizes increased scrutiny of hospital contracts with physicians. Such agreements must be fair market value and not take into consideration the volume or value of referrals. The case is being investigated by the Healthcare Fraud Prevention & Enforcement Action Team (HEAT), a joint effort between the Department of Justice and HHS focusing on Medicare and Medicaid fraud.

Affiliated Attorney

Jack L. Gruenstein
Chair, White Collar Crime Practice Group
(215) 575-2768
jlgruenstein@mdwcg.com

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