Doctors group, St. Joe's probed

Legal clash involves revenue, questions over heart care

March 24, 2009|By Stephanie Desmon and Robert Little | Stephanie Desmon and Robert Little,stephanie.desmon@baltsun.com and robert.little@baltsun.com

The federal agency responsible for investigating Medicare fraud and other health law violations, and whose probe of St. Joseph Medical Center led to a leadership shake-up last month, has ordered a group of cardiology specialists affiliated with the hospital to hand over business records.

Midatlantic Cardiovascular Associates, a dominant cardiology practice at hospitals in the Baltimore area, received a subpoena from the Department of Health and Human Services in June - the month the agency made a similar demand of St. Joseph, according to documents shared with The Baltimore Sun and sources connected to the hospital.

Officials at St. Joseph, which markets itself as one of the region's top heart hospitals, declined to say whether Midatlantic is the unnamed "physician group" whose relationship with the hospital is, according to hospital officials, at the center of the federal investigation. Midatlantic Chief Executive Robin T. Levy issued a statement saying, "It is not appropriate for Midatlantic Cardiovascular to comment on an ongoing investigation at any medical institution."

But state and federal court records show that the relationship between Midatlantic and the Towson hospital has been contentious for the past decade. The clash has spawned lawsuits and harsh words. In one lawsuit, some patients and employees at St. Joseph alleged that for business reasons, Midatlantic strong-armed patients into using only its cardiac surgeons, sometimes compromising their care. In another, a group of surgeons that had long done nearly all heart surgeries performed at St. Joseph alleged that Midatlantic's tactics forced it to fold.

As the dispute has escalated, St. Joseph's revenue from cardiac surgery has declined while that at rival Union Memorial has accelerated. Early last year, St. Joseph hired away two of Midatlantic's top doctors, derailing the physician group's $25 million deal to be acquired by Union Memorial's parent company, MedStar Health, and prompting a threat from Midatlantic's then-CEO to "destroy" the doctors, court records show.

Midatlantic, formed in the early 1990s, is the dominant cardiology group in the Baltimore region, with 57 cardiovascular specialists who see patients at most hospitals in the area. Through its collective size and the role that cardiologists play in the early part of a heart patient's treatment, Midatlantic makes most of the patient referrals to cardiac surgeons in the area and as such holds considerable sway over when and where patients have cardiac surgery.

Fees from cardiac surgery are critical to the bottom lines at St. Joseph and Union Memorial and can account for about one-third of each institution's annual billings. Last year at St. Joseph, cardiac surgery billings amounted to nearly $78 million.

Midatlantic officials once called St. Joseph their "flagship" hospital, but the Towson medical center has seen its total billings for cardiac surgery decline by 20 percent since 2006, according to records from state regulators. Those records also show a significant increase in billings at Union Memorial. In fiscal 2006, Union Memorial had just over half the level of billings as St. Joseph for heart surgery. Two years later, it surpassed its rival.

Federal investigators also have sought records from Union Memorial, according to sources. Hospital spokeswoman Debra Schindler said, "No one has made any allegation of any wrongdoing by Union Memorial Hospital." She declined to comment further.

Three top executives at St. Joseph - including the chief executive officer and the chief operating officer - took administrative leave last month to "avoid a conflict of interest during the investigation," and an outside restructuring team was brought in to help ensure that the hospital is complying with federal law. A St. Joseph spokeswoman said Midatlantic's doctors continue to see patients and have privileges at the hospital.

While primarily a cardiology practice, Midatlantic began employing surgeons in 2000, after its efforts to merge with a group of cardiac surgeons at St. Joseph failed and spawned a lawsuit that continues today. According to that lawsuit, before Midatlantic hired its own surgeons it referred some $10 million in annual surgery business to other medical practices.

At issue in the failed merger was Midatlantic's once-novel business model, under which all of its physicians share equally in the practice's earnings. Cardiac surgeons typically earn much more than cardiologists, and the surgeons at St. Joseph at the time were unwilling to share the costs of Midatlantic's nonsurgical practice and thus take a significant pay cut. In the three years that followed, the annual salaries of two surgeons who declined to join Midatlantic dropped from $1.12 million to just over $550,000, according to court records, ostensibly because they were not getting as many referrals from Midatlantic.

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