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Judge sentences hospital owner, doctor to prison for fraud

It is not uncommon for physicians to take a business interest in a health care facility. Such business relationships must be entered into carefully or the physician could face allegations of illegal kickbacks and other criminal violations. A recent case provides an example.

The case begins when a former anesthesiologist purchased a hospital in 2005. Under the terms of the purchase agreement, the former owner guaranteed 75 spinal surgeries per month at the facility. After owning the facility for a couple of months, the new owner discovered the hospital was part of an illegal kickback scheme. It became clear the previous owner, who remained involved in daily operations to better ensure the hospital met the terms of the purchase agreement, was making illegal payments to doctors. In exchange for these funds, the government stated the doctors would steer patients to receive spinal surgeries at his hospital. The decision to have the surgery at that specific hospital, the government argues, was not for the patient’s wellbeing but instead for financial gain.

The former anesthesiologist allowed the scheme to continue. However, two years later the former anesthesiologist sold his share of the hospital back to the original owner. Although he removed himself from the situation, the government was able to build a successful case for his role in the scheme.

The case provides an example of the need for due diligence before purchasing a private practice or health care business. A failure to discover the use of illegal methods can lead to a difficult situation in the future and potential criminal charges. The charges can come with serious penalties. In this case, a federal judge sentenced the physician and hospital owner to 15 months imprisonment, a $60,000 fine and forfeiture of over $1 million in allegedly ill-gotten gains.

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