News in brief - March 28, 2005

Blues plans sue Calif. clinics for "massive fraud" - Pa. physician-owned hospital to close - Arkansas passes any-willing law - Company buys psychiatric facilities - Physician ID thief sentenced

Blues plans sue Calif. clinics for "massive fraud"

Nine outpatient surgery centers in southern California are being sued for $30 million by a dozen Blue Cross and Blue Shield plans in connection with what the Blues companies are calling a "massive fraud scheme" involving unnecessary surgeries.

The civil lawsuit, filed March 10 in U.S. District Court in Los Angeles on behalf of 12 Blues plans, alleges that clinic owners and managers, in cooperation with several medical management firms and 21 physicians, conspired to recruit patients from around the nation and transport them to southern California for procedures such as colonoscopies and endoscopies that were medically unnecessary. In some cases several procedures were done on the same patient, the suit said.

The clinics and individuals named in the suit had not filed responses in court at press time. Various news organizations had not been able to reach those accused for comment.

The alleged schemes, collectively dubbed "rent-a-patient" by the health plans, began in the late 1990s. The FBI said the clinics had billed Blues plans and other insurers more than $1.3 billion and that plans and employer sponsors had lost about $350 million in connection with the fraudulent claims, according to The New York Times.

The patients who underwent the procedures were found by paid recruiters and were compensated either with cash or discounted cosmetic surgery, the suit said. Recruiters were paid up to $4,000 per patient, while patients got between $200 and $2,000, according to the Times, which quoted FBI officials. The Dept. of Justice and the Orange County (Calif.) district attorney's office also have filed criminal charges against various targets of the lawsuit.

The suit represents "a significant milestone in the fight against healthcare fraud," Thomas Brennan Jr., chair of the National Health Care Anti-Fraud Assn. and director for special investigation at Highmark Blue Cross, said in a statement.

Pa. physician-owned hospital to close

Six months of physician leadership couldn't save a Philadelphia hospital. Women's Medical Hospital, formerly known as MCP Hospital, announced March 9 that it would close its doors as soon as patients could be safely discharged or transferred. The closure was blamed on insufficient patient volume.

"While we had hopes of rebuilding this community hospital with its rich heritage, there just wasn't enough patient revenue to support and maintain operation of an acute care facility," said Nancy J. Pickering, MD, chief executive of the hospital, in a written statement.

Dr. Pickering, a cardiologist, and a group led by physicians bought the facility in August 2004 from Tenet Healthcare Corp. The move was a last-ditch effort to save the hospital after Tenet had slated it to close citing mounting financial losses.

Lawmakers including Pennsylvania Gov. Edward G. Rendell had gotten involved in the effort to keep the hospital open. In a written statement, the governor expressed his regret that the historic facility would close.

Arkansas passes any-willing law

Arkansas' Legislature has passed an any-willing-provider bill that aimed to open up all of Arkansas' state-regulated insurance networks to any doctor who fulfilled the health plan's basic qualifications.

On Feb. 21, the state Legislature passed the measure, over strong opposition from Arkansas BlueCross BlueShield and several large employers, which warned the bill would raise insurance expenses for companies straining to afford coverage for workers. But the bill had the support of the Arkansas Medical Society and of Gov. Mike Huckabee, who was expected to sign the measure.

Company buys psychiatric facilities

Psychiatric Solutions Inc. has signed an agreement to buy 20 inpatient psychiatric facilities from Ardent Health Services for about $560 million. The deal, which is subject to regulatory approval, would give PSI approximately 2,000 additional inpatient beds, bringing its total to more than 6,000. The Franklin, Tenn.-based company, which currently operates 34 freestanding psychiatric inpatient facilities, said that would make it the largest provider of inpatient psychiatric care in the nation.

Physician ID thief sentenced

A federal court in March sentenced a Jonesborough, Tenn., woman to five years in prison and ordered her to pay $1.3 million in restitution for Medicare fraud, according to The Tennessean newspaper.

The sentencing of Mailee Renae Lodge brings to an end a case AMNews profiled on Oct. 13, 2003. Lodge and her husband, Craig Lodge, stole the unique physician/practitioner identification number of Jonathan L. Pollitte, MD, an internist in Johnson City, to submit more than $2 million in bogus claims to Medicare. Dr. Pollitte was not aware of the fraud.

Craig Lodge was sentenced last year to three years in prison after pleading guilty to several charges, including health care fraud and identity theft.