Administrator’s Sentence For Medicare Fraud Not Reduced

FEBRUARY 10, 2003 VOLUME 10, NUMBER 32

Medicare, the federal health care program for seniors and the disabled, has very clear rules prohibiting providers from paying referral fees. The rules are in place to help prevent fraud and abuse of the giant Medicare program and its funding. Over the four decades the program has existed, however, many providers have tried to skirt—or have blatantly violated—the Medicare Antikickback Act.

Baptist Medical Center, in Kansas City, wanted to ensure that it had a steady stream of senior patients coming into the facility. One way to accomplish that would be to work out a regular relationship with Drs. (and brothers) Robert and Ronald LaHue, who operated a busy geriatric practice under the name Blue Valley Medical Group.

To encourage referrals to Baptist Medical Center, administrators hired the brothers as “Co-Directors of Gerontology Services,” for $150,000 per year. As expected, a steady stream of referrals for Medicare-reimbursed services flowed immediately to the hospital. The doctors, meanwhile, did little work to earn their fees.

One of the administrators involved in negotiating (and later renegotiating) the agreement with the Drs. LaHue was Senior Vice President Dennis McClatchey. He oversaw negotiations with the doctors in 1991 and 1992, when Baptist Medical was being bought out by Health Midwest. During those negotiations, if not earlier, he learned that the brothers were not providing $150,000 worth of service to Baptist, and that some staff members in fact wanted nothing to do with them. Still, he saw to it that their contract was renewed.

The LaHues and Mr. McClatchey were tried and convicted for violation of the Medicare Antikickback Act, and the convictions were upheld by a federal appellate court. At sentencing, the District Court decided to reduce Mr. McClatchey’s sentence. The trial judge determined that Mr. McClatchey’s 22-year-old son, who suffered from attention deficit hyperactivity disorder and a host of other psychiatric illnesses, required full-time care. The judge also found that Mr. McClatchey’s criminal behavior was totally out of character, based on his past history. His sentence was reduced to three years’ probation, home detention for six months, and a $30,000 fine.

The government appealed the sentence reduction, and the Tenth Circuit Court of Appeals agreed that a stronger sentence should be imposed. Although care of his son was a concern, his wife remained at home and could take that responsibility, said the court. As for his past good behavior, the court noted that his criminal behavior stretched over a period of several years. The case was remanded with instructions to eliminate the sentencing reduction. United States v. McClatchey, January 16, 2003.

The Medicare fraud case ended even more tragically for Dr. Robert LaHue. In February, 2002, just two days before he was to report to federal prison to begin serving his own 70-month sentence, Dr. LaHue was killed when the Chevrolet Metro he was driving drifted left of the center-line and struck an oncoming tractor-trailer. Dr. Ronald LaHue, meanwhile, was sentenced to 51 months in prison, as was Dan Anderson, the Chief Executive Officer of Baptist Medical Center.