How One Hospital Benefited on Questionable Operations

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A very large percentage of operationsin the USA are not necessary. F.

 

http://www.nytimes.com/2003/08/12/business/12TENE.html?th

 

August 12, 2003OPERATING PROFITS How One Hospital Benefited on Questionable

OperationsBy KURT EICHENWALD

 

 

Could it possibly be, Dr. Patrick Campbell wondered, that doctors at his

hospital in Redding, Calif., were cracking open the chests of perfectly healthy

people?

 

Dr. Campbell, an internist, first suspected trouble in Redding Medical Center's

cardiology program soon after joining the hospital in 1993, according to papers

obtained by federal investigators. That year, one of his patients underwent

open-heart surgery even after the surgeon told Dr. Campbell the procedure was

unnecessary. Two years later, another patient received a coronary bypass, though

the cardiologist's report said it was not necessary.

 

Then there were the numbers — tens of thousands of diagnostic tests, thousands

of surgical coronary procedures. The totals seemed more likely for a major

university medical center than for a hospital in a rural community of about

90,000 people.

 

Dismayed, Dr. Campbell brought his concerns to Stephen E. Corbeil, the

hospital's chief executive at the time. Though Dr. Campbell declined to comment

on the meeting and Mr. Corbeil did not return telephone calls, the papers

obtained by federal investigators indicate that the administrator's response was

succinct: The young internist, he said, should mind his own business.

 

Ultimately, Dr. Campbell's concern proved to be everyone's business. Last week,

the hospital's owner, Tenet Healthcare, agreed to pay $54 million to the

government to resolve accusations that Redding Medical doctors conducted

unnecessary heart procedures and operations on hundreds of healthy patients.

Tenet did not admit any wrongdoing and agreed to cooperate with further

investigations.

 

As disturbing as the accusations may be, there would have been a logic to what a

patient called Redding's " little house of horrors " — a logic born of the twisted

finances of American health care, which may have made the hospital less willing

to hear concerns about two of its highest-billing doctors.

 

Until federal agents raided Redding last fall, Tenet's business model was based

on maximizing the dollars it could collect from Medicare, the nation's biggest

buyer of health care. And Medicare's complex formulas — the template for private

insurers, as well — reward some kinds of health care more richly than others,

and few more richly than cardiac care.

 

So it was that two heart doctors at Redding — Dr. Chae Hyun Moon, the chief

cardiologist, and Dr. Fidel Realyvasquez, its top cardiac surgeon — became

immensely powerful, people who worked there said. Tenet promised investors

growing profits, and at Redding, these people said, that required steady growth

in cardiac care.

 

Together, Dr. Moon, who also sat on the hospital's board, and Dr. Realyvasquez

directed the California Heart Institute, the cardiac program that Redding had

started in the 1970's, and it proved to be a bonanza.

 

`We were constantly being pushed to bigger budgets, and there was no way to do

it without the heart institute, " one former Redding administrator said. " People

were terrified that Moon would go on vacation, because of the effect a few days

would have on the hospital's financial performance. "

 

While few doubt the hospital would have responded to explicit evidence of

problems in the heart program, like high death rates, the financial pressures

created a disincentive to pursue less specific suspicions, people who worked at

Redding said.

 

And there were many suspicions. Besides Dr. Campbell, more than half a dozen

doctors, along with medical technicians and patients, expressed concerns to

multiple administrators, according to people interviewed and records obtained by

investigators. There were also questions of competence: one former executive

said that two years ago, a representative of the company whose ultrasound

machine Dr. Moon relied on for many of his diagnoses warned that he was misusing

it.

 

But the hospital never conducted the peer reviews that might have confirmed the

critics' doubts.

 

" I sometimes just shake my head at the American system, where the financial

intent is almost cleverly designed to create mischief, " said Uwe Reinhardt, a

Princeton University health care economist. " For administrators, it creates a

conflict of interest when they're trying to deliver the numbers at the same time

that doctors are saying the hospital is doing too much cardiac surgery. "

 

Tenet's $54 million settlement with the government — the largest ever for

accusations of billing federal health programs for unnecessary care — means that

the company will not face criminal or civil charges. But the company has been

upended by the scandal, the first in a series of events to raise questions about

the company's finances. Numerous executives, including Jeffrey C. Barbakow, its

longtime chief executive, have resigned, and its stock has lost almost

three-quarters of its value.

 

A criminal investigation of Drs. Moon and Realyvasquez is continuing, though no

charges have been filed. Their work at the heart institute has been suspended,

and Dr. Moon has surrendered his medical license pending resolution of the

matter. Lawyers for each of them say that, while other doctors' opinions about

their decisions may differ, neither did anything illegal.

 

" Certainly physicians can and do have differences of opinion, " said Matthew

Jacobs, a lawyer in Sacramento representing Dr. Moon. " But to base a fraud

prosecution on such differences with no other evidence of fraud just doesn't

work. "

 

Malcolm Segal, a lawyer for Dr. Realyvasquez, said that his client's decisions

to operate were justified. " Dr. Realyvasquez is an outstanding, well qualified

surgeon, " Mr. Segal said. " He did everything he was supposed to do and believes

that when he provided the surgery to the patients, it was needed. "

 

For its part, Tenet says that as part of its settlement with the government, it

has imposed new checks and balances to ensure that no future problems could

occur at Redding. Harry Anderson, a Tenet spokesman, said the company's new

management had agreed to heighten monitoring and education programs " to rebuild

the reputation and services of Redding Medical Center so it may continue to

serve that community for years to come. "

 

Meanwhile, there are hundreds of former patients of the two doctors who now must

wonder whether there was any reason for their operations. They are like Shirley

B. Wooten, 78, who sought care last year for back and arm pain. After several

tests, she was told she needed emergency bypass surgery, which was conducted by

Dr. Realyvasquez. Complications followed, and Mrs. Wooten, who loved to attend

dances with her husband, Bob, and take long driving trips around the California

countryside, can no longer write or walk steadily. An independent expert has

deemed the surgery unnecessary, and she is suing.

 

" I had to quit my job to take care of her, " Mr. Wooten said. `Our lives came to

a screeching halt after that surgery, I'll tell you. "

 

Push for Higher Profits

 

 

By the winter of 1998, Redding Medical Center was virtually bursting at the

seams. A conference room was converted into a patient care area. The emergency

room was running over capacity.

 

" We were beyond full, " one former administrator said. " We were flying. "

 

That fiscal year, officials said, the hospital exceeded its budget for pretax

profit by almost 50 percent, bringing in more than $50 million. And then at a

budget meeting with senior Tenet officials, the order came down: Do better next

year.

 

" We said `We don't know how to do it unless we have extra capacity,' " the

former administrator said. " They were pushing for what I thought was ridiculous

financial results. "

 

Tenet agreed to invest millions of dollars to complete rapidly the construction

of a five-story addition to the hospital. People in town came to call it " the

tower, " a symbol of how a once sleepy hospital, founded by a single local

physician in 1945, had truly entered the big time.

 

The project only heightened Redding's dependence on Dr. Moon and the California

Heart Institute. The son of a family practitioner, Dr. Moon told associates that

his decision to become a doctor had been dictated to him by God when he was a

boy. He graduated in 1972 from the Medical College at Yonsei University in

Seoul, and completed his internship and residency at Metropolitan Hospital in

New York.

 

After setting up practice in Redding in the early 1980's, Dr. Moon rapidly

developed a reputation for aggressively pursuing evidence of coronary disease.

He also was known for being quick to recommend a cardiac catheterization, in

which a small tube is passed through a blood vessel to examine how a patient's

heart is working.

 

" His philosophy has always been if you know the anatomy of the diseased heart,

you are going to be able to make informed decisions, " said Dr. Bruce Kittrick,

an internist at Redding who does not believe the accusations against Dr. Moon.

" That is what made him really investigate anatomically most of the people he

took care of. "

 

That willingness to conduct catheterizations and other invasive procedures also

helped fuel Dr. Moon's success within Redding Medical Center. Over time, he

became one of the hospital's biggest money-makers, conducting more than 35,000

catheterizations during his years there, which other cardiologists say is easily

many times the number that they would expect in such a time frame.

 

In the last fiscal year he collected more from Medicare than all but one other

cardiologist in Northern California, figures compiled by the program show,

billing for almost $4 million in the 12 months ended June 30, 2002. In that

year, Medicare records show, he billed for 876 catheterizations for the left

side of the heart, at least four times the number performed by any of his

colleagues in Northern California.

 

By the early 1990's, Dr. Moon's success gave him enormous power in the

organization. At one point, according to several Redding doctors, a former

administrator and investigative records, Dr. Moon earned the reputation for

having been instrumental in persuading Tenet to dismiss one of Redding's chief

executives. The event, which became the stuff of hospital legend, only increased

Dr. Moon's influence, said one former administrator.

 

" No one would ever want to take him on, " he said. " Moon was Redding Medical

Center, and he knew it. "

 

Indeed, Dr. Moon became fond of making that point himself. " Who is Redding

Medical Center? " he said in a recorded presentation in the mid-1990's. And then,

participants said, Dr. Moon pointed to himself.

 

Administrators' pay grew if Redding's profits exceeded Tenet's expectations, so

the financial performance of Dr. Moon, Dr. Realyvasquez and their cardiac

program was reviewed intently.

 

As part of a companywide procedure, Redding's chief financial officer prepared a

report each month describing important events affecting the hospital's returns.

 

" They noticed everything, " one former administrator recalled. " If Moon's numbers

were off a little bit, they asked about it. "

 

In turn, Redding did all it could to keep its heart specialists happy. The

hospital began an advertising campaign, with mailings and billboards that used

tombstones and other images invoking death to persuade Redding residents to be

checked for heart disease. It paid nurses to dictate charts for Dr. Moon, who

colleagues and former administrators said made little time for record keeping.

It sponsored golf tournaments to promote the heart institute, and sometimes

offered Dr. Moon use of its helicopter to fly to the golf course, administrators

and doctors said.

 

The doctors also received particular attention from senior Tenet executives,

particularly Thomas Mackey and Neil Sorrentino, according to former Redding

executives, doctors and documents obtained by investigators. Mr. Mackey was

ultimately the chief operating officer of Tenet, while Mr. Sorrentino was the

head of its California hospitals.

 

Topping it off were the financial rewards. Former Redding administrators said

that, around 1997, Dr. Realyvasquez demanded and was given a lucrative contract,

paying him huge sums of money.

 

" He told us the number he wanted, and we had to work backwards to figure out a

way to get it to him, " one administrator said.

 

Normal checks and balances did not seem to apply to Dr. Moon, Redding physicians

said. He was not only head of the cardiology program but also a hospital

director. And though he was not board certified in cardiology or internal

medicine — a credential he dismissed as insignificant — he was also head of the

hospital's Cardiology Care Committee, in charge of conducting peer review of his

own program's quality of care.

 

Court records say that committee rarely, if ever, met.

 

Others Saw Trouble Signs

 

 

Across town, Redding's chief rival, Mercy Medical Center, also took admissions

from Dr. Moon. But the staff there was far less impressed with him.

 

In 1996, one of his patients at Mercy, Charles K. Brown, a 67-year-old man from

Anderson, Calif., suffered a stroke while Dr. Moon was performing a

catheterization and soon died. Staff members in Mercy's catheterization lab

complained to the hospital's medical division, saying that Dr. Moon's care had

fallen below appropriate standards.

 

According to court records, the staff members said that Dr. Moon left the

hospital while the patient was unstable, leaving nurses without clear

instructions. A review of the medical chart found no indication that Dr. Moon

had taken basic preparatory steps to ensure that Mr. Brown was well enough for

the procedure, according to written findings of the medical division.

 

As a result, the medical division ruled that Dr. Moon would have to be monitored

by another doctor.

 

" Leaving the nurses to deal with the complication was inappropriate and a

serious quality of care issue, " read a letter to Dr. Moon from the medical

division. `You will not jeopardize patient safety. "

 

Dr. Moon objected, saying in a letter that he had alerted Mr. Brown's other

doctors to his problems and had been assured they were handling his care. The

division revised its decision, saying that the monitoring would be limited to

two cases and that a letter would be placed in his file. Dr. Moon struck back,

announcing in an advertisement in the local newspaper that he would no longer

admit patients to Mercy. He then sued the hospital, claiming defamation and

financial harm. The suit was later dismissed.

 

About the same time, Dr. Campbell, the internist, brought his concerns about

Redding Medical Center's heart program to Mr. Corbeil, then the hospital's chief

executive.

 

Dr. Campbell arrived at Redding in 1993 and quickly benefited from Dr. Moon's

influence; the cardiologist helped him and three other doctors form a group

practice, and pledged that Tenet would provide more than $100,000 toward the

group's start-up costs.

 

The same year, Dr. Campbell's worries about the heart center began.. Dr. Moon

recommended that a patient, Mary Rosburg, receive immediate coronary surgery,

according to papers obtained by federal investigators. A surgeon working with

Dr. Realyvasquez telephoned Dr. Campbell, vehemently arguing that no surgery was

needed. Dr. Moon's view prevailed, and the once-reluctant surgeon performed the

operation. Ms. Rosburg died from complications several months later.

 

In 1995, another of Dr. Campbell's patients, Emma Jean Montgomery, came under

the care of Dr. Moon's team. An associate of Dr. Moon informed Dr. Campbell that

the patient had severe coronary disease and needed immediate surgery, which Dr.

Realyvasquez performed. Afterward, when Dr. Campbell reviewed the medical chart,

he found none of the evidence of serious heart problems that Dr. Realyvasquez

had described, according to records obtained by federal investigators.

 

Dismayed, Dr. Campbell took Ms. Montgomery's records to another local

cardiologist, Dr. Roy Ditchey, who was astounded to hear that the patient had

undergone surgery, according to information obtained by federal investigators.

 

It was then that Dr. Campbell approached Mr. Corbeil, but the administrator

dismissed his concerns, papers obtained by the investigators say. Dr. Campbell,

who still practices in Redding, has since filed a suit on behalf of the

government, under the federal whistle-blower statute, which remains under seal.

 

When faced with credible concerns about a program, health care experts said, it

is commonplace in the hospital industry to bring in an outside group to conduct

a review.

 

" Most hospital administrators are very responsible, " said Evelyn Baram-Clothier,

executive director of the American Medical Foundation for Peer Review and

Education. " I have administrators who call us to review departments just to be

sure they're O.K. "

 

In the fall of 1996, Mr. Corbeil was succeeded by Kenneth Rivers. The following

spring, according to court documents and records obtained by federal

investigators, a group of doctors including Dr. Campbell, Dr. Kittrick and two

others approached him to discuss the cardiac program.

 

According to the papers, Dr. Kittrick spoke for the group and asked for an

independent peer review of the cardiology program, to determine if the

catheterizations were reliable. Mr. Rivers replied that he would have to ask

Tenet's lawyers whether such a study would violate patient confidentiality, the

records say.

 

No such study was ever done, according to doctors at the hospital.

 

As new administrators arrived, the same pattern was repeated. According to court

papers and other records, Dr. Roy Pick, a local cardiologist, approached Mr.

Rivers's successor, Stephen Schmidt, and Mr. Schmidt's replacement, Hal Chilton,

the current chief executive. Each time, Dr. Pick, who had reviewed the records

of some of Dr. Moon's patients, raised concerns about the heart program and

asked for an independent peer review. None was undertaken.

 

Dr. Pick and Mr. Chilton did not return calls seeking comment. A phone number

for Mr. Schmidt, who has since retired, could not be located. Phone numbers

found through a computer search for Mr. Phillips, Mr. MacKay and Mr. Sorrentino

were all disconnected.

 

Dr. Thomas Drakes, a board-certified oncologist who worked at Redding for two

decades and taught at the University of California at Davis, said he, too,

raised his concerns with Mr. Schmidt, with little result.

 

" Here I am, a guy on his staff who has some credibility, and I go to Schmidt and

tell him he's going to have a `60 Minutes' episode on your hands here if you

don't do something, " Dr. Drakes said. " He just said, `Don't worry about it.' "

 

But, by 2002 the secrets at Redding Medical Center were about to burst into

public view.

 

Differing Diagnoses

 

 

Last year, the Rev. John Corapi decided, at 55, to have a cardiac stress test at

Redding. He passed the test, but Dr. Moon still suggested a trip to the

catheterization lab.

 

While Father Corapi, a Roman Catholic priest, was still on the table, Dr. Moon

broke the news: He needed an emergency triple bypass. According to Father

Corapi, the doctor said he had three dissecting arteries, a critical condition.

Still, Dr. Moon suggested waiting for surgery until the next week, when Dr.

Realyvasquez returned.

 

Anxious, Father Corapi said that he telephoned a friend in Las Vegas, Joseph F.

Zerga, an accountant who had close contacts with a cardiac unit at a local

hospital. He persuaded Father Corapi to come to Nevada for the emergency

surgery.

 

But when he got to Las Vegas, the heart specialists were confused. " While I was

being processed in, the cardiologist there said, `Excuse me, what are we

bypassing?' " said Father Corapi, who, like Dr. Campbell, has filed a

whistle-blower suit.

 

Back in Redding, Father Corapi and Mr. Zerga met with hospital officials, who

said that two cardiologists had reviewed the records and agreed with Dr. Moon's

findings, though they declined to name the doctors. " I expected the hospital to

be extremely concerned over this situation, " Mr. Zerga said. " But they weren't. "

 

When further discussions with the hospital proved unsatisfactory, Mr. Zerga

contacted the Federal Bureau of Investigation. Within days, agents found their

way to Robert G. Simpson, a lawyer in Redding for whom Dr. Moon had recommended

a four-way bypass last summer. Mr. Simpson had challenged Dr. Moon's diagnosis

after getting a second and a third opinion. Mr. Simpson has since been

interviewed by federal investigators and is now representing numerous patients

suing Redding.

 

Four months after being contacted about Father Corapi, federal agents raided the

hospital.

 

For Tenet, it was as if the roof were suddenly falling in.

 

Near the time of the Redding raids, the company was hit with other financial

body blows that raised the same question: Was Tenet really as successful as it

had long appeared? Or had it just profited from multiple methods — including

unnecessary surgery at Redding — of gaming the Medicare system?

 

On Oct. 28, Kenneth Weakley, an analyst with UBS Warburg, reported that Tenet

was heavily dependent on special Medicare payments for particularly sick

patients. These " outlier " payments accounted for about 24 percent of Tenet's

base Medicare payments for overnight stays, Mr. Weakley wrote, triple the amount

three years earlier.

 

That same day, the federal Department of Health and Human Services notified

Tenet that it would be auditing its hospitals to see if the company had been

improperly manipulating its outlier payments. The company failed to disclose the

information publicly for more than a week, later saying it had waited until it

had more specifics. (The overpayment allegations were not covered by the $54

million settlement.)

 

As the events unfolded, the nature of the outlier problem became clear. Tenet

hospitals had been rapidly increasing their retail charges — amounts actually

paid by very few people who have procedures without insurance. But those numbers

are used in determining outlier amounts. In essence, Medicare was paying Tenet

more for treating sicker people, when in fact all Tenet was doing was charging

higher prices.

 

Under pressure from investors, Tenet in early November disclosed that it

received $763 million in outlier payments in the 2002 fiscal year, much of it

from 11 hospitals that had ramped up retail charges. Seven of those 11 hospitals

are in California.

 

Among that group is Redding Medical Center. According to federal data, outlier

payments to Redding were off the charts. Medicare projected that it would pay

5.1 percent of its total standard payments for inpatient care at all hospitals

to outliers. At Redding, in fiscal 2002, the payments instead reached 118.6

percent, or $55.7 million.

 

Indeed, the problems at Redding seem to infuse the repeated scandals at Tenet.

Two of the company's biggest allies of Dr. Moon and Dr. Realyvasquez were soon

gone. Mr. Mackey, the company's chief operating officer, left in November amid

reports that he was an architect of the company's pricing strategy. Then, in

March, Mr. Sorrentino, head of the company's California hospital operation, also

departed.

 

As the scandals unwound, with pricing strategies changing and the cardiac

program suspended, Redding's finances fell apart.

 

According to data filed with the State of California, total net patient revenue

at Redding for the first quarter of this year (the latest data available)

dropped almost in half from the period last year, falling from $61.1 million to

$31.2 million. All told, more than 75 percent of that decline came from the drop

in Medicare payments, which fell by $23 million.

 

Indeed, the numbers at Redding raise questions about how problems at the

hospital could have been missed. The state filings show, in the 12 months ended

June 30, 2002, Redding Medical Center generated pretax net income of $94

million, more than any other of Tenet's 40 hospitals in California. Just down

the street, the larger Mercy Medical Center reported pretax net income of about

$5 million in the same period.

 

" When those types of numbers get reported back to the home office, does everyone

stay willfully blind and declare a holiday, or does someone say, `Let's postpone

the celebration and take a hard look at these,' " said Neil Getnick of Getnick &

Getnick, which specializes in business integrity counseling. " Part of business

integrity is creating reasonable expectations amongst shareholders of what kind

of profits you can achieve, and what we have seen with Tenet indicates that the

company departed from that basic model. "

 

In that, analysts say, is the essence of the problem. Different hospitals can be

run more efficiently, but ultimately, health care is a commodity; the science

available at one hospital is the same across the street. The industry itself is

more than a century old. Yet Wall Street expects and rewards double-digit

earnings growth from hospital companies, something analysts say is

unsustainable.

 

" The hospital industry is by its very nature a mature industry, " said Mr.

Reinhardt, the Princeton economist. " It is not a high-margin business. It can't

be a growth industry like some Internet company. That is just unreasonable. "

 

Copyright 2003 The New York Times Company