Top Ten Stories - Top Ten Printable View (http://www.modernhealthcare.com/CGI-B

[Guest guest]

June 21, 1999 Page 60 News

Is this the mob or healthcare?: K.C. fraud case has executives bemoaning prosecutors' rough-and-tumble tactics

PHOTO CAPTION: Treadway;

The prosecutor told one witness after his deposition that he was a " lying sack of s-. "

She told another that she would " shove the documents up your a- on the witness stand. "

She named unindicted co-conspirators in public documents, contrary to U.S. Justice Department policy.

She tried to get two defendants' lawyers excluded from appearing in the courtroom to defend their clients.

And she went so far as to indict two lawyers on criminal charges for the advice they gave their hospital client-an unprecedented assault on what had been regarded as safe territory for lawyers.

All in a day's work upholding the law, said the U.S. attorney for Kansas and FBI agents.

Ruthless, unwarranted intimidation tactics, said the defendants and their lawyers.

The subject is the aggressive-and very successful-prosecution of a huge Medicare fraud conspiracy involving Baptist Medical Center in Kansas City, Mo., and seven defendants.

Some say healthcare executives and physicians for too long have enjoyed special treatment from federal investigators, and criminals should be treated as criminals.

But many in the healthcare community worry that Assistant U.S. Attorney Treadway in Kansas and her FBI investigative team have set a bold new standard for scorched-earth techniques that are more suitable to use on drug dealers and mobsters than healthcare executives and physicians (See story, p. 64).

In fact, one of the defense attorneys who tangled with Treadway, Eisenbrandt, is going on the speaking circuit with a talk titled " Lawyers Under Attack: Lessons from United States v. . " He argued that in the Baptist case " federal prosecutors have blurred the once-clear distinction between legitimate advice to clients and joining criminal conduct. "

Attorneys who represent heavily regulated clients, especially healthcare operators, should heed this case and insulate themselves from any risk of federal prosecution, Eisenbrandt said.

Eisenbrandt will give the speech at the meeting of the American Association of Healthcare Lawyers in Chicago on June 30.

Indeed, the Baptist case isn't the only one to arouse the ire of potential defendants who've been subjected to the shock treatment of a federal investigation. The Tennessee hospital association and the American Hospital Association have loudly protested the techniques used in an FBI raid on a small hospital there, in which agents allegedly intimidated employees and patients (May 24, p. 3). Government officials have denied the allegations.

Treadway's case ended conclusively on April 5 with guilty verdicts for four defendants: Dan , Baptist's former chief executive officer; Dennis McClatchey, its former chief operating officer; LaHue, D.O.; and his brother LaHue, D.O. The LaHues were nursing home medical directors who were convicted of conspiring to receive bribes from and McClatchey in exchange for patient referrals to Baptist.

A third hospital executive, Keel, Baptist's former vice president, was found not guilty by the Kansas City, Kan., federal jury because the statute of limitations for the alleged offense had passed. Two lawyers indicted and tried with the other five were declared not guilty by U.S. District Court Judge Lungstrum before they had a chance to present their defense.

Defendants in the case fumed privately about the way they were treated but declined to speak on the record. That's because the case may continue for years in the form of new trials, appeals and other legal wranglings.

On May 12, lawyers for the defendants filed motions seeking to have the verdicts overturned. Treadway's 180-page response was submitted June 15. Sentencing is scheduled for Aug. 16.

Yet some outside observers who are familiar with the varieties of Medicare fraud and abuse wonder why the government carried out a criminal prosecution at all when the same results could be obtained through civil action. Treadway's tenacity in pursuing this case strikes these observers as overly zealous.

Not at all, counters Judy , supervisory special agent in charge of the FBI's healthcare squad in Kansas City: " In our view, the people who would defraud the healthcare system are no different from drug dealers or bank robbers or any other federal criminal. There (don't appear to be) bodies strewn everywhere, but trust me, there are. The victims in this case certainly are the frail elderly.

" People look at it as a victimless crime, but it's not, " she said. " The taxpayer pays for this. Doctors themselves are victimized twice as much by healthcare fraud. They're getting a bad rep by people who commit this.

" We're not going to turn away from that and be intimidated or put out of business because people are going to criticize us for pursuing those kinds of investigations, " said. " I think the jury spoke loud and clear that they want us to do it. "

FBI agent Timmerberg said he took to heart the reports that the LaHues had received payments to refer patients. " How would I like it if my parents were taken to the hospital based on the fact that the doctor was getting a fee? " he said in an interview. " It shook me to think that doctors would have such little regard for their patients that they would broker them as a commodity. If you look at the testimony, that's what the jury heard. "

Defendants and their lawyers portrayed the prosecution as unremittingly hostile throughout the case. They said witnesses favorable to the defense were intimidated by the FBI into not talking, and sometimes the FBI agents didn't write down material favorable to the defense during witness interviews.

The prosecutors didn't want the defendants to be released on their own recognizance. The defendants had to surrender their passports and report to a probation officer twice a month before the trial started. They were forbidden from traveling outside Kansas City without permission, which made it hard for some of them to continue their professional activities before the trial.

" The management of the whole case-insisting that everybody be tried together-reflects the management of a drug case, " said one defendant in the case, who asked not to be identified. The war on drugs, the defendant said, has " perverted our justice system in ways that some of us were not aware of until they started being used on us. "

In the view of Bradshaw, a lawyer in private practice who was formerly the U.S. attorney for western Missouri, the FBI didn't do anything out of the ordinary in investigating this case. Bradshaw said he did not view prosecutor Treadway's use of profanity toward witnesses as an abuse of power. Those statements were revealed during trial testimony and proceedings.

" You probably hear more squawking from hospital executives because they're not used to being treated that way, " he said. " You hear this from clients sometimes. They're surprised by the aggressive attitude an agent may take. In my experience, that's just the way they operate. The agents are faced with interviewing people who they think aren't telling the truth. "

Yet Bradshaw took a different stand on the larger question of whether the defendants should have been indicted in the first place. He said he would like to see a higher standard invoked for bringing criminal charges against healthcare providers when civil charges might suffice.

Evidence at the trial never showed demonstrable harm to any patient, Bradshaw said. " I think that should have to be proved in a criminal case, that somebody was harmed or the government was harmed. From what I've heard, the government (prosecutors) didn't prove that. They felt they didn't have to prove it.

" I feel that should be one of the things that separates a civil case from a criminal case. If every patient received good care, then what's the beef? "

Jackie , the U.S. attorney for Kansas, said the case was fought by both prosecutors and defendants " at the highest standard. We were out to find the truth. The verdict speaks for itself on that. It was a textbook example of how to run a complex investigation and prosecution. Very professional. "

That hasn't stopped lawyers for the defense from expressing a different view. " What was the motive? " sputtered Bruce Houdek, the attorney for defendant LaHue. " To get publicity, to scare the bejesus out of all the hospital administrators in the country. To threaten them, make an example. "

R.J. , attorney for Keel, the one defendant the jury acquitted, said he is perplexed by the whole case, including the verdict. " I just do not think this thing constituted the crime of the century, the crime of the decade, the crime of the week. I felt the jury would get the picture. I don't know why the jury did what they did. "

said he could never fathom the aggressive prosecution of this case. " The depth of the government's feelings on this always amazed me. Every time I met with (Treadway) or (FBI Agent ) Timmerberg, I was astounded by the venom they had for these defendants. "

To , who served in the Justice Department's strike force against organized crime for eight years, turning techniques developed to fight the mob on healthcare people is taking matters too far.

The organized crime defendants " were really bad people-we're talking murder, extortion, high-stakes gambling, drug-running, serious federal crimes, " recalled.

" This is not to say that fraud in the Medicare system isn't serious. People bill for time they didn't spend, overuse services to create extra money, people are lining their pockets at the expense of the system. That didn't happen here, " concluded. -- J. Duncan Jr.

eGroups.com home: /group/ptmanager

www. - Simplifying group communications