Robert Leavitt Speaks at Chicago Bar Association Meeting

March 17, 2005. Robert Leavitt addressed the Chicago Bar Association's Commercial Finance and Transaction Committee at its monthly luncheon meeting today. Mr. Leavitt spoke about the Uniform Commercial Code requirements for perfecting security interests in deposit accounts and the key issues raised in the control agreements necessary to perfect such security interests. The well-attended meeting included both in-house attorneys from a number of local area banks, as well as outside attorneys representing financial institutions and their customers. Attendees received Mr. Leavitt's topic outline along with a copy of the latest draft ABA model control agreement.

To receive a complementary copy of the outline or the model control agreement, or to discuss any issues relating to the subject of Mr. Leavitt's talk, please feel free to contact him directly at:

(312) 628-7199
rleavitt@lowis-gellen.com

Lowis & Gellen Client Acquires Two Railroads in Single Transaction

Lowis & Gellen represented the buyer in its acquisition of two short line railways, one located in Texas and one in Arizona, from one of the largest short line and regional rail service providers in the US. The two lines, representing over 230 miles of track, sold for a total of $8.05 million in cash and notes.

Simultaneously with the purchase of the railroads, the client refinanced both its existing senior and subordinated debt. The combined value of all these transactions (the refinancing and the acquisition of the railway lines) totaled $9.65 million.

The Lowis & Gellen team consisted of Gerald Haberkorn, Robert Leavitt and Jim Lechowicz, who exclusively handled all legal aspects of the transaction including the structuring, drafting and negotiating of the purchase and finance documentation.

For more information, please contact:

Jerry Haberkorn, (312) 456-2701

geraldh@lowis-gellen.com

Lowis & Gellen Client purchases Chicago Landmark Delicatessen

Lowis & Gellen represented the buyer in its acquisition of a Chicago landmark delicatessen. The delicatessen, a fixture on Chicago's north side for over 50 years, sold in an all cash deal involving bank and SBA financing.

The transaction consisted of a combination stock and real estate purchase, with the real estate being placed separately into a limited liability company especially created for that purpose.

The Lowis & Gellen team consisted of Gerald Haberkorn, Robert Leavitt and Jim Lechowicz, and exclusively handled all legal aspects of the transaction including the creation of the special purpose real estate LLC, and the structuring, drafting and negotiating of the purchase and finance documentation.

For more information, please contact:

Jerry Haberkorn, (312) 456-2701

geraldh@lowis-gellen.com

The Criminal Prosecution of a Medical Malpractice Case

Shellie Karno, Law Firm of Lowis & Gellen

Suffering from chronic headaches, a thirty-five year old Michigan woman sought medical treatment at United Memorial Hospital, a 105-bed community hospital in Greenville, Michigan. Dr. Jeffrey Askanazi, Chief of the Anesthesiology Department at the Hospital, treated her for pain management. Utilizing the Racz procedure, Dr. Askanazi injected pain medication directly into the epidural space of the spinal column. The procedure was performed on 21 separate occasions without event. During the 22nd treatment, the patient arrested, could not be resuscitated, and died. An autopsy revealed that the needle had punctured the cervical spine. A malpractice lawsuit was filed against Askanazi and the anesthesiologist, and was settled out of court. This was only the beginning of Dr. Askanazi's legal battles.

Medical License Suspension by State

The Michigan Office of Health Services opened an investigation based on several complaints regarding Dr. Askanazi's clinical treatment. In addition to the death of the Greenville woman, two other patients suffered permanent paralysis post injection by Dr. Askanazi. A hearing was held and expert testimony was presented regarding the Racz procedure. Dr. Askanazi testified that he realized he had inadvertently punctured the cervical spine, but denied that the puncture caused her death. Dr. Askanazi testified that the anesthesiologist providing sedation during the procedure administered too much anesthesia, and failed to properly resuscitate. His testimony was supported by expert opinion. Nonetheless, the Michigan Attorney General's Office suspended Dr. Askanazi's medical license, citing ten cases of improper care.

State Criminal Investigation for Involuntary Manslaughter

Concurrent with the license proceedings, the Attorney General for the State of Michigan conducted a criminal investigation as to whether Dr. Askanazi could be charged with involuntary manslaughter. To maintain a conviction for involuntary manslaughter, Michigan law requires that the state prove gross negligence, rather than mere negligence. The State Attorney General decided not to prosecute Dr. Askanazi for involuntary manslaughter, being unable to produce an expert willing to testify that Dr. Askanazi's treatment was grossly negligent.

Federal Criminal Investigation for Fraud

At the same time, the United States Attorney's Office initiated a criminal investigation leading to the filing of felony charges against Dr. Askanazi for fraudulently billing Medicare, Medicaid, and private insurers. Askanazi was charged with thirty-four counts of fraud for upcoding patient office visits and billing for medically unnecessary procedures with intent to defraud. The issues at trial were strictly related to billing practices, and not to medical negligence or the quality of care. However, the local newspaper repeatedly vilified Dr. Askanazi, and blamed him for multiple patient injuries and deaths. His attorney urged the judge to order a change of venue. Despite concern regarding the salacious nature of the newspaper articles, the judge denied the request.

At trial, the prosecutor portrayed Dr. Askanazi as a greedy and reckless physician who was only concerned about making money. The defense argued that Dr. Askanazi was a pioneer in an emerging specialty and disagreements about the proper course of treatment are a fact of medicine. With regard to billing irregularities, defense counsel argued that the defendant was a research scientist who tried to bill properly in a new field while faced with conflicting advice. The jury deliberated for seven hours and convicted Dr. Askanazi on thirty-three of the thirty-four counts. Dr. Askanazi was ordered to pay restitution of $411, 060, in addition to a $25,000 fine, and 600 hours of community service. Dr. Askanazi was also sentenced to three years in prison. On appeal, the conviction was confirmed, and Dr. Askanazi served his complete sentence.

Federal Prosecution of the Hospital and CEO

Several months after Dr. Askanazi's trial, a federal grand jury indicted United Memorial Hospital for conspiracy to commit fraud by submitting claims for unnecessary facility fees. The government's theory was that the Hospital was on notice that Dr. Askanazi was performing unnecessary procedures, but ignored the problem and instead focused on the favorable financial impact of the lucrative facility fees he generated. A conviction on a single count involving a Medicare or Medicaid claim could have resulted in exclusion of the Hospital from participation in federal health care programs for five years. A trial would involve catastrophic risk for United Memorial Hospital.

In its case, the government intended to offer testimony about the Greenville woman's death as evidence of the Hospital’s criminal intent and knowing submission of the claims. Evidence that United Memorial Hospital continued to submit bills for facility fees even after the patient's death would indicate that the Hospital knowingly and voluntarily agreed to cooperate with Dr. Askanazi to defraud the government. When the Greenville woman died, the United Memorial Hospital took no immediate action with regard to Dr. Ashkenazi's privileges. The Hospital continued to submit bills for payment of facility fees, including eighteen bills for procedures performed after her death. At the height of Dr. Askanazi's pain practice, the Hospital's net income grew from less than a half million dollars to over two million dollars. Dr. Askanazi's pain practice had become responsible for approximately one third of the Hospital's bottom line. Prior to trial, United Memorial Hospital pled guilty, and agreed to pay full restitution, fines, and the costs of the prosecution. An order was subsequently entered permitting the hospital to allocate approximately half of its $1.05 million criminal fine to indigent care.

Meanwhile, the Hospital's CEO's income had spiraled, as his annual bonuses were tied to hospital revenues. The CEO was concurrently exploring an employment opportunity with Dr. Askanazi's new biotech firm. In addition to the charges brought by the government against United Memorial Hospital, the prosecutor charged the Hospital CEO with perjury. This charge stemmed from his grand jury testimony regarding his relationship with Dr. Askanazi, and the Hospital's anesthesia contract with Dr. Askanazi. On the second day of his trial, federal prosecutors dropped the charges against him.


Federal Prosecution of the Medical Staff President and Department Chair

Pursuant to the provisions of its bylaws, the Hospital Board had relied upon the Medical Executive Committee and its peer review subcommittee for oversight of quality of care issues and physician credentialing. The Medical Staff President and Emergency Medicine Chief were both members of the Medical Executive Committee and its peer review subcommittee. Several physicians, nurses, and operating room staff complained repeatedly to medical staff leadership and Hospital administration about Dr. Askanazi's practice patterns, long before the Greenville woman's death. These complaints eventually reached the Board of Directors, and that Board requested that the Medical Executive Committee initiate a peer review of Dr. Askanazi's practice. The peer review subcommittee retained an outside physician to review Dr. Askanazi's cases for indications of medical necessity. The consultant concluded that Dr. Askanazi's patient assessments were inadequate, and Dr. Askanazi's findings in support of diagnoses were consistently absent, with "an apparent routine overuse of invasive techniques without clear indications". The resultant peer review recommendation of counseling and monitoring for improved documentation was never carried out. Dr. Askanazi continued to perform pain management procedures for another 11 months, until he voluntarily resigned from the medical staff one month after the death of the Greenville woman.

The government also prosecuted the Medical Staff President and Emergency Medicine Chief. The prosecution's theory against these physicians was that they conspired to conceal staff complaints and obstruct peer review proceedings in order to allow Dr. Ashkenazi to continue his practice and generate fees. These physicians and the CEO partnered with Askanazi to purchase commercial property and build a surgery center. The physicians also served on the Board of Dr. Askanazi's professional medical corporation. Notwithstanding these mutual financial interests and recommendations from other medical staff members that that they recuse themselves, the Medical Staff President and Emergency Medicine Chief continued to serve on committees responsible for reviewing Dr. Askanazi's practice. Both physicians pled guilty and entered into separate agreements with the government involving restitution, fines, and community service.


Credentials: Sword and Shield

As part of its case against United Memorial Hospital, the government subpoenaed the Credentials and Peer Review files of Dr. Askanazi and two physicians who underwent peer review during the same time period. The Hospital objected to the disclosure of these files, but the Judge overruled the objection, and ordered the Hospital to produce the files. These two physicians were taken to peer review after they voiced concerns regarding Dr. Askanzi's pain practice. The hearings resulted in suspension of each physician. The peer review proceedings of the suspended physicians were compared to the proceedings against Dr. Askanazi, and the processes stood in stark contrast. The United States Attorney concluded that the Hospital used the peer review process as a shield to protect Dr. Askanazi, and a sword to remove the physicians who questioned him. The Hospital admitted that Dr. Askanazi’s application for privileges indicated he had no training or experience in pain management, and as Chairman of the Anesthesia Department at the Hospital, had approved his own clinical privileges. The government concluded that the files demonstrated the Hospital lacked oversight of the peer review and credentialing processes and failed to properly supervise Dr. Askanazi's hospital practice.


Conflicts and Compliance

It is clear that these financial conflicts should have been disclosed, and that the medical staff president and department chair should have recused themselves from any deliberations involving Dr. Askanazi. The potential conflicts you may confront as a member of the board, a medical staff officer, committee member, or department chairman, will probably not be this obvious. The post-Enron scrutiny of corporate boards by the government, media, and the public, extends to non-profit boards, including hospitals. Physicians need to be cognizant of the health care fraud and abuse guidelines that define compliant billing practices and business relationships. On January 31, 2005, the Department of Health and Human Services, Office of Inspector General released its Supplemental Compliance Program Guidance for Hospitals. This document supplements the OIG’s 1998 Compliance Program Guidance that addressed the fundamentals of establishing an effective compliance program. The two documents collectively consider the federal anti-kickback statute, the safe harbor regulations, and other OIG advisory guidance, and offer a set of guidelines for developing, implementing, and evaluating a compliance program. To familiarize yourself with these guidelines, visit the OIG’s website at www.oig.hhs.gov/fraud/docs/complianceguidance.


Lessons Learned

Is this case an aberration, or is it the first of many criminal
prosecutions of hospitals that fail to prevent a physician from delivering substandard care? Either way, government enforcement of fraud and abuse regulations yields a huge payback, and does not appear to be slowing down. The Department of Health and Human Services released its annual report to Congress on the progress of the OIG's initiatives to decrease fraud and abuse and limit the government's health care spending. The highlight of the report included a reported savings of over $23 billion for fiscal year 2003. This is good news for the majority of hospitals and physicians who are both dedicated to providing quality patient care and committed to understanding complying with the government regulations. Here are some lessons to be learned from the experiences of Dr. Askanazi and United Memorial Hospital.

• Facilitate open discussions of issues relating to Board members' and medical staff leadership's professional and corporate responsibilities;
  
• Review conflicts policy and situations that require recusal from participation in a committee or vote;
  
• Implement policies that prohibit physicians with mutual financial interests from reviewing each other;
  
• Develop a process for addressing approval of privileges for members of the Credentials Committee or Department Chairmen;
  
• Develop objective criteria for granting privileges for new or novel clinical procedures and ongoing monitoring;
  
• Know the institution's policy for review and investigation of clinical staff complaints;
  
• Utilize quality indicators for reviewing medical necessity;
  
• Apply medical staff policies consistently to all medical staff members;
  
• Review billing and coding practices and investigate for possible patterns of unnecessary services;
  
• Revisit the institution’s Compliance Program.