Psychiatric chain agrees to plead guilty to fraud

June 29, 1994|By New York Times News Service

DALLAS -- National Medical Enterprises Inc., one of the nation's largest psychiatric hospital chains, said yesterday that it would plead guilty to paying kickbacks and bribes for referrals, even as a former executive admitted to arranging $20 million to $40 million of these payments -- and then scheming to get Medicare reimbursement.

The company said it had agreed to pay $362.7 million and admit today or tomorrow to seven charges, in what would be the largest settlement ever between the government and a health care provider.

The former company executive, Peter Alexis, pleaded guilty on Monday to charges involving bribery and kickbacks. Alexis said that top company officials took part in arranging the payments and that he agreed to aid the government's prosecution of other individuals.

Alexis' admissions, covering a period from 1985 to 1990, included false statements on Medicare expense reports and a conspiracy to pay kickbacks. He testified that more than 50 doctors and others received payments. Some, according to a document he signed, received furniture and expense money for their offices.

Alexis faces a maximum of 10 years in prison and a $500,000 fine, with his sentence presumably depending in part on the extent of his cooperation.

Prosecutors said his case provided the best window yet on misconduct now endemic to medicine that may ultimately prove as costly as the corruption that ravaged so many savings institutions.

In the medical world, "practices that are illegal have been accepted and tolerated -- very much akin to the climate that pervaded the savings and loans," said Paul E. Coggins, the U.S. attorney in Dallas.

Federal officials have estimated that fraud swallows about 10 percent of the nation's health care expenses, or $80 billion to $100 billion a year. With savings and loan prosecutions winding down, the Clinton administration has made the policing of health care fraud a priority.

Investigators have accused National Medical of taking patients who did not need treatment and keeping them against their will until their insurance coverage ran out. Complaints from some of those patients over the last few years touched off federal and state prosecutions.

National Medical, based in Santa Monica, Calif., said in April that it had set aside $375 million to settle charges of fraud and patient abuse against the company, though not against individuals. It said yesterday that its payments will include $324.2 million in the government's civil case, $33 million in the criminal case and a probable $16.3 million to settle claims by other states.

The federal charges cover bribes and kickbacks at six hospitals, in California, Colorado, Indiana, Missouri, Texas and New Jersey, from 1986 to 1991.

Christi Sulzbach, the company's associate general counsel, said the company had sold, closed, or arranged to sell all but 10 of the 81 psychiatric hospitals it had, and planned to leave that business entirely. "The company has completely refocused its energies," she said, referring to its 35 other hospitals in the United States and 12 more it partly owns abroad.

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