Agents raid hospital operator National Medical is subject of fraud probe

August 27, 1993|By New York Times News Service

Federal agents across the country yesterday raided offices and hospitals of National Medical Enterprises, one of the nation's largest hospital companies, as part of a national investigation of health insurance fraud.

Law enforcement officials familiar with the investigation said they seized documents as part of an effort to prove that the company had participated in a national conspiracy to defraud patients and insurance companies.

In a statement, the company's general counsel, Scott Brown, said National Medical was cooperating with investigators in making documents available and praised law enforcement agencies for not disturbing patients at nine hospitals entered by federal agents. The company, which said facilities in at least seven states were involved, said it had not violated the law.

A Justice Department spokesman said last night that the government could provide only limited details of the raids. But another official described the effort as "a major operation" that involved extensive coordination among federal agencies across the country, with Washington in charge.

National Medical Enterprises has already been sued by more than a dozen of the nation's largest insurance companies, which contended that the company defrauded them of more than $750 million.

Last week, the company sued 16 companies, accusing them of conspiring to delay or deny payments for patient care.

More than 130 former patients have also sued National Medical Enterprises for fraud, physical mistreatment and false imprisonment.

The publicly held company, based in Santa Monica, Calif., had $133 million of income on nearly $4 billion of revenues for its 1992 fiscal year. It operates 61 for-profit psychiatric hospitals among its 131 medical operations and has acknowledged that its hospitals were overzealous in their pursuit of patients.

But the company, which replaced its top executives this year, has said it was making a concerted effort to make certain no abuses take place in the future.

"We are hopeful that the records obtained today will help the government put to rest many of its concerns, and in any event lead to a prompt resolution of the Government's investigations," Mr. Brown said.

Yesterday's raids grew out of an initiative announced last year by William S. Sessions, then the FBI director, to make health care fraud a priority in enforcement operations. More than 50 former counterintelligence agents have been reassigned to the effort.

But the raids also come at a time when the Clinton administration has said it was planning to make the fight against health care fraud a significant part of the package of proposals the president would announce with his health-care reform package.

"The reform package contains a number of very specific anti-fraud proposals that will bring the hammer down on something that is costing America up to $100 billion a year," Kevin Anderson, a White House spokesman, said last night.

The troubles for National Medical Enterprises began in 1991, when the families of some young patients in Texas reported that private security guards had taken adolescents to

National Medical Enterprises facilities against their will.

In several cases, lawsuits contend that patients who did not need psychiatric hospitalization were held against their will until their insurance coverage ran out.

Eight insurance companies, led by a unit of Travelers Corp., filed suit against National Medical Enterprises on July 30, 1992, in Washington. Five other companies have since joined the plaintiffs.

Thomas Brunner, a lawyer for the group of insurance companies, which includes other industry giants such as Metropolitan Life Insurance Co. and Prudential Insurance, said that the group of 13 collectively paid $625 million in National Medical psychiatric claims in the five-year period beginning in 1988.

"We believe a substantial part of those claims were fraudulent," Mr. Brunner said. Two other groups of insurance companies have filed similar lawsuits in a federal court in Dallas.

An assistant general counsel for National Medical Enterprises, Chrisi Sulzbach, said last night that she would not comment on allegations by individuals suing the company. But she said the litigation by the insurers was part of an insurance industry effort to control the amount they paid for health care claims.

Among the agencies involved in yesterday's raids were agents of the Defense Department Criminal Investigative Service, the Postal Inspection Service, the Department of Health and Human Services, the Internal Revenue Service and the FBI.

The Defense Department became involved in the investigation because of billing questions raised by Champus, the medical program that pays for the care of dependents of military personnel.

In a brief statement issued yesterday in Washington, the FBI said the raid involved its field offices in Atlanta, Dallas, Denver,

Detroit, Houston, Indianapolis, Los Angeles, Miami, Milwaukee, Minneapolis, New Orleans, Norfolk, Phoenix, St. Louis, San Diego, Tampa and Washington.

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