Relocation incentives get California hospital CEO indicted

Experts say accusations against the leader of a Tenet subsidiary should cause all parties to ensure the legality of their physician recruitment agreements.

By Katherine Vogt, amednews staff. June 30, 2003.

The indictment of a hospital chief accused of violating anti-kickback laws in connection with physician relocation arrangements may make hospitals reluctant to offer incentive packages to potential physician recruits, some attorneys say.

The accusations against Barry Weinbaum, CEO of Alvarado Hospital Medical Center in San Diego, shed light on an area of law where physicians and hospitals can get into trouble, experts say. His case may provide a good opportunity to review how physician relocation incentives can be conducted legally -- and what provisions might raise a red flag.

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"There may be other facts here, but I think this case causes health care lawyers to wonder whether a not-unusual recruitment agreement will now be called into question," said Jeremy Miller, a Los Angeles-based health attorney. "And one concern for physicians may be that some may have trouble getting jobs in certain places where the group or hospital would like to hire them, but they are concerned about recruitment arrangements."

The U.S. Attorney's office in San Diego June 6 said a federal grand jury had indicted Weinbaum on charges of making illegal payments to doctors to induce the referral of patients. The indictment alleges that Weinbaum paid more than $10 million to physicians to relocate to the hospital's service area, with much of the money going to the established medical practices the physicians joined. The indictment also claims that those practices were either targeted for increased referrals by Alvarado or were loyal referrers of patients to the hospital.

The indictment identified internist Paul Ver Hoeve, MD, as one of the physicians who received illegal remuneration from Alvarado. Weinbaum allegedly entered into relocation agreements with four physicians who joined Dr. Ver Hoeve's practice, knowing that at least $600,000 paid to the physicians would be passed through to Dr. Ver Hoeve. But neither Dr. Ver Hoeve nor any other physician was charged along with Weinbaum in the indictment.

Weinbaum pled innocent to all of the charges, which included one count of conspiracy to violate the federal anti-kickback statute and seven counts of offering and paying illegal remuneration. Each count carries a maximum penalty of five years in prison and a $25,000 fine. His attorney, Tom McNamara, did not return phone calls seeking comment.

In a written statement, Tenet said the allegations against Weinbaum apparently came from Dr. Ver Hoeve, whom the company described as a "disgraced physician" who gave up admitting privileges at Alvarado in 1998 and was indicted for Medicare fraud two years later. According to Tenet, Dr. "Ver Hoeve agreed in 2001 to provide information in return for a sentence of probation, community service and restitution of $50,000."

Dr. Ver Hoeve's lawyer could not be reached for comment.

"We believe in the personal and professional integrity of Barry Weinbaum, and we expect him and the hospital to be fully vindicated from these unfortunate allegations," said Tenet acting CEO Trevor Fetter.

The indictment is the latest setback for Tenet Healthcare Corp., which owns Alvarado. The U.S. Justice Dept. has sued the hospital chain, accusing it of overbilling Medicare. The FBI is investigating a claim, made in at least two lawsuits, that two physicians at a Redding, Calif., Tenet hospital performed unnecessary heart operations. In addition, the Internal Revenue Service is looking into whether the company owes $269 million in back taxes and interest. And the company's CEO recently resigned.

Miller, whose firm specializes in representing physicians and medical groups, said the typical recruitment agreement is with a doctor coming out of training. The physician may start up his or her own practice or join a small group.

In those cases, Miller said a hospital may get involved by providing incentives such as help with moving expenses, liability insurance and even a marketing stipend. Under many deals, the hospital also will guarantee the physician makes at least a certain wage, depending on the specialty.

The benefit period is usually one to two years after the time of relocation. And most recruiting agreements contain a clause that says the physician will have to pay back the benefits if he or she leaves the general service area within a certain time period.

The arrangements can run afoul of federal anti-kickback law. But Miller said they can be protected if certain criteria are met, including proof from the recruiter there is a need for that type of physician in the service area.

Miller said the recruitment of physicians straight out of training programs or from distant markets is much safer under the law than the recruitment of an established doctor.

Experts say physicians should be wary of offers for above-market payments for services and below-market rents for office space.

"I just want to protect my doctors from being accused of kickbacks," said Marvin Firestone, MD, a neuropsychiatrist and attorney in San Mateo, Calif., who reviews relocation agreements for physician clients.