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A Better Partnership


Apr 2006
April 01, 2006

Alvarado Hospital: Another Mistrial in Physician Recruiting Prosecution

Many of you have been following the Alvarado Hospital case. That's the case in which a San Diego hospital and its chief executive officer, some physicians and others were charged criminally in connection with the hospital's physician recruitment program.

The issue in the case isn't the financial size of the physician recruitment packages, which were quite modest ($100,000 on average, over ten years). Instead, the theory behind the prosecution is that one undocumented purpose of the hospital recruiting arrangements was to reward the established physician groups that the new doctors would be joining, encouraging those groups to continue making Medicare referrals to the hospital.

As you may recall, the case was tried for the first time in late 2004 and early 2005, but the first jury hung. The government chose to retry the case last fall. This time, the United States District Attorney Carol Lam herself tried the case. It's rare that a United States District Attorney personally tries a case, but this particular United States Attorney has published a well-known treatise on "Prosecuting and Defending Health Care Fraud Cases." So maybe she had a particular interest in personally prosecuting this matter.

But the government ran into trouble again in the second trial. After listening to weeks of trial testimony, the jury deliberated for more than 60 days (an incredible length of time for deliberation). Over time, tempers in the jury room grew more and more frayed.

The judge has now officially declared a mistrial in this second round. Here's a link to the press account:

There is no word yet on whether the government will try the case for a third time.

Lessons for physician recruitment include the following: Have a recruitment plan, approved by the board. Follow that plan. Make sure there's documentation in your files supporting both the need for a new physician and the reasonableness of the recruitment package being offered. Make sure that the benefits of the recruitment package flow to the new doctor, rather than the group the doctor is joining. (The new Stark II rules governing physician recruiting reinforce this last reason.)

If you have any questions or concerns, feel free to contact Richard Bouma at 616.752.2159.

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