More Corruption Comes to Light

There is more news on the health system front in McAllen. It was only a matter of time before people got busted. Looks like they had it coming. Here is the link to The Monitor article. Keep in mind it's not the greatest newspaper, so not the greatest writing. If you want to read it here you can check it after the jump.


McALLEN — There were no doctors, no patients or even a floor at a medical office on the city’s south side, but to Hidalgo County’s largest hospital system it was reputedly worth lease payments of $8,000 a month.

The lease allegedly was a sham contract given to disguise an improper kickback to Eugenio Galindo, a McAllen doctor, a whistle-blower contended among his allegations in a lawsuit he filed accusing South Texas Health System of Medicare and Medicaid fraud.

Galindo is one of seven Rio Grande Valley doctors whom the U.S. Department of Justice, which joined in the suit at the point at which it was settled, said received “bogus” job titles, lease agreements and other payouts in exchange for referring patients to South Texas’ hospitals.

On Oct. 26, South Texas Health System, which includes McAllen Medical Center, ended the suit — and the nearly four-year federal investigation it spawned — with a $27.5 million settlement. The government said it wrongly paid the health system almost twice that amount — $50 million — to treat the seven doctors’ patients.

The suit — which was filed in 2005 by a former employee and later joined by the federal government, but not unsealed for public inspection until a week after the settlement — helps shed some light on why medical costs in the McAllen area have grown to be among the highest in the nation.

The doctors named in the settlement are Galindo, Subbarao Yarra, Carlos Mego, Jose Igoa, E. Linda Villarreal, Harish Koolwal and Luis Arango — a Mission doctor who settled his own fraud allegations with the government in 2003. The allegations are not in the settlement, but many are outlined in the suit originally filed by Bruce Moilan Sr., a former systems director for materials management for South Texas Health System. In agreeing to the settlement, South Texas Health System admitted no liability and denied any wrongdoing.

The suit alleged, among other things, that:

>> Galindo, 51, an oncologist who is now on the board of managers for Edinburg-based Doctor’s Hospital at Renaissance, received fees from medical directorships that he used to pay off advances and loans from the health system. One of the loans was for about $8,000 and the other for about $500,000. Additionally, the health system leased an office space he owned, among other arrangements. The allegations occurred at some point from July 1, 2000, to Dec. 31, 2006. Galindo did not return repeated calls seeking comment.

>> The McAllen cardiology practice operated by Yarra, 51, and Mego, 49, received a $150,000 loan for “office expenses” that the health system later wrote off at some point between Jan. 3, 2000, and Dec. 31, 2002. Both Yarra and Mego did not return repeated calls seeking comment.

>> Igoa, 55, a McAllen psychiatrist, received equipment, furniture and had rent at two of his offices paid by South Texas Health System since at least 1996. He has also been the medical director of South Texas Behavioral Health Center. The allegations occurred at some point between Jan. 1, 1999, and Jan. 31, 2005. From 2006 until at least when the suit was filed, Igoa received free housekeeping and supplies for an office. Igoa did not return repeated calls seeking comment.

>> Villarreal, 62, an Edinburg internal medicine doctor, received a medical directorship and landscaping, painting, air conditioning, carpeting and furniture for properties she owned at some point between Jan. 1, 2000, and Dec. 31, 2006. Villarreal has denied the allegations.

>> Koolwal, 55, a McAllen cardiovascular diseases specialist, received office space and equipment and a medical directorship at some point between Aug. 1, 1999, and Oct. 31, 2001. Koolwal declined to comment.

In early September, wind whipped through the empty entranceway and hollow window frames into Galindo’s bare-dirt-floored office at a medical office park at 1200 E. Savannah Ave. Recently, two electricians were wiring the once empty building which now has a floor and some furniture. They said that work had begun on the building’s interior about two months ago.

The office was purchased by The Eugenio G. Galindo Family Limited Partnership in 2002. South Texas allegedly began leasing the office in June 2003, the lawsuit stated. According to the county’s appraiser, the space is owned by E.V.G. Management LLC, a company registered to Galindo.

South Texas Health System — a subsidiary of Pennsylvania-based Universal Health Services Inc. — operates McAllen Medical Center, McAllen Heart Hospital, Edinburg Regional Medical Center, South Texas Behavioral Health Center, Edinburg Children’s Hospital, Edinburg Regional Rehab Center and Cornerstone Regional Hospital.

The health system was accused of violating the False Claims Act, the Anti-Kickback Statue and Stark Law — laws that govern Medicaid and Medicare. Under federal law, providers such as South Texas are not allowed to bill the government for patients referred from doctors it has a “financial relationship” with, unless that arrangement falls into specific exemptions.

Joel Androphy, a Houston-based lawyer who has represented whistleblowers in fraud cases, compared the allegations against South Texas to arrangements he has investigated between drug makers and physicians, where pharmaceutical companies pay doctors to prescribe certain medicines. Such payouts compromise a doctor’s independence, he said.

“The government views kickbacks and bribes as tainting the entire billing process,” Androphy said. “You question the integrity of the doctor.”

Some financial arrangements are permissible. Hospitals can cover expenses for relocating doctors, give income guarantees, offer annual and signing bonuses and even educational loan forgiveness programs. Doctor’s Hospital at Renaissance can also legally pay doctors who are invested in the facility a monthly dividend check because it is doctor-owned.

South Texas allegedly erred in tying the financial incentives to referrals, such as with paid medical directorships. The positions, ostensibly for guidance and leadership of a unit within a hospital, are allowed if the doctor is paid a wage that does not exceed the “fair market value” and if there is documented work performed. South Texas is accused of providing “sham” medical directorships to at least four of the seven doctors — Galindo, Koolwal, Igoa and Villarreal.

The health system was accused of making Koolwal the medical director of the Edinburg Children’s Hospital in 2005, the year before the facility opened. He also allegedly had a medical director position at Edinburg Regional Medical Center. Koolwal said he would contact his lawyer when he was reached by phone last week. He has since not returned calls seeking comment.

Villarreal, a former president of the Hidalgo-Starr County Medical Society, was the medical director of the former South Texas Rehabilitation Pavilion. She said that South Texas grandfathered her into the position because she had a similar post with a rehab center at the former Edinburg General Hospital, which the health system purchased in 1997.

“Since we were still at the time very, very short on qualified individuals to do the rehab, I was given that position and basically grew with the program,” Villarreal said. “It was not a secret that I was medical director.”

She said that as director she documented all her work. She referred most of her patients to the Edinburg rehab center, because for some time she did not have privileges at other area hospitals, something Villarreal said was difficult to obtain because she was not board-certified in a rehab-related specialty.

In June this year, an article in The New Yorker magazine brought national attention to McAllen when it highlighted how average Medicare spending per enrollee in the U.S. is near the top in the City of Palms at $15,000 — or nearly two times the national average. Some local doctors were irate after the piece and many said that the writer Atul Gawande’s assertion that the high costs are due to an “across-the-board overuse of medicine” were false.

President Barack Obama even chimed in, reportedly making the article mandatory reading at the White House.

Then in a press release after the settlement, the government nodded to the cost debate with the U.S. Department of Health and Human Services inspector general, Daniel Levinson, saying that fraudulent financial arrangements could increase health care costs by “shifting provider attention to the quantity of treatments, rather than keeping it focused on the quality of care.”

South Texas Health System denied the charges later the same day, saying the “investigation had absolutely nothing to do with the quality of care.”

The health system has since declined to comment. Universal Health Services also declined. A message left for Frederick Robinson, South Texas’ legal counsel and a partner at the law firm Fulbright and Jaworski, was not returned.

“There was no evidence or claims made by the government that taxpayer funds were wasted or expended on payments for improper or unnecessary medical treatments,” the release said.

At least one doctor named in the settlement had already been accused of Medicare and Medicaid fraud for performing procedures he hadn’t actually performed and others that were unnecessary. According to the suit settlement, accusations involving South Texas’ relationship with Arango occurred between Jan. 1, 1999, and Nov. 6, 2001, which overlaps the time period from 1997 until 2001, during which Arango was accused of the fraud and for billing the government health care programs for services performed by his physician assistants, according to the Texas Medical Board.

In April 2003, Arango settled with the government, paying close to $900,000, according to the state's medical board.

Arango said he was surprised he was named in the settlement when reached by phone last week. Arango, who no longer has privileges to practice at any South Texas Health System facility, said his relationship with the health system was legal and is long over.

“The hospital is doing wrong things which they do all the time,” Arango said. “I don’t know why they need to try me.”

The suit against South Texas was filed in early August 2005 by Moilan, who at the time had been employed by the system for more than six years. Under the False Claims Act, private citizens can sue on behalf of the government and share in any settlement. Moilan will receive $5.5 million, the Justice Department said. The state of Texas will receive $2.2 million to reimburse its Medicaid program.

Moilan declined to comment for this story. Marcella Auerbach, a former federal prosecutor and Moilan’s Ft. Lauderdale, Fla.-based attorney, also declined to comment on the specifics of the case, but did say that Moilan had reached a confidential settlement with the health system.

“This is an example of the type of impact a whistleblower can have if he is willing to bring critical information forward and demonstrate the courage of his convictions,” said Auerbach, a partner with Nolan and Auerbach, a prominent law firm that specializes in whistleblower cases.

The investigation, led by Assistant U.S. Attorney Andrew Bobb, focused on a seven-year period. The Texas Attorney General’s Office and the Texas Health and Human Services Commission assisted the investigation.

In February 2007, the government raided South Texas’ corporate offices in Edinburg for several hours, filling a rental truck with boxes of documents. South Texas’ parent company would later disclose in filings with the U.S. Securities and Exchange Commission that the raid was part of a separate inquiry into whether employees obstructed justice in responding to the initial subpoena. It’s unclear if the investigation is still ongoing.

During the next two years, the government and hospital system officials met several times in a protracted negotiation process. On Aug. 8, 2008, the company disclosed to investors that federal prosecutors would not pursue criminal prosecution “at this time.”

On Feb. 6, 2009, South Texas fired Moilan, according to the suit. A month later, Moilan would amend his complaint in the suit to include two claims for wrongful termination.

On Friday, Oct. 30, the government announced it had reached a settlement with South Texas Health System. Patrick O’Connell, a former chief of the Texas Attorney General’s Civil Medicaid Fraud Section, said weeks before the settlement that both the government and the accused in similar cases often look to settle to avoid going to trial.

If a medical provider goes to trial and is found guilty of fraud, in addition to civil fines, it will be shut out of the Medicare and Medicaid programs — a potentially devastating blow. The government usually settles to avoid risky litigation and because if a hospital or other provider can’t see patients under federal health care programs, it could be disastrous for the community they serve, O’Connell said.

The government said it had a “valid claim” against the health system for up to $180 million, a figure that is three times the billing charges and includes damages.

As part of the settlement, the government said it will not pursue exclusion from federal health care programs against South Texas Health System for the relationships with the seven doctors. Prosecutors could still pursue criminal charges and any of the dozens of other since-dismissed claims Moilan outlined in his suit, according to the settlement. South Texas agreed to cooperate if the government investigated doctors or other “entities” not covered by the settlement.

As part of the settlement, South Texas entered into a five-year corporate integrity agreement, which requires that the system establish procedures to track and evaluate financial arrangements between its health care facilities and their referral sources. South Texas employees will also be required to undergo training regarding financial arrangements. They will also be subject to an annual review of their compliance with the agreement by an outside party which must file a report to the inspector general for the U.S. Department of Health and Human Services.