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Fraud in Hospital Adds to Increased Cost in Healthcare Affecting Medical Malpractice Issues

February 21, 2012

As we have written about before on this blog, rising medical costs are often attributed to increases in doctors’ malpractice insurance premiums due to so-called “frivolous” litigation. This is certainly what many in the media and in politics will have you believe because it squarely places the blame on one group of people (trial lawyers) and ignores many more complicated and difficult explanations that require time, effort and investigation to understand.

The Wall Street Journal recently published an article by John Carreyrou, Tom McGinty, and Joel Millman titled “In Small California Hospitals, the Marketing of Back Surgery.” The authors claim that a California hospital specializing in workers’ compensation spinal surgeries paid Paul Richard Randall about a million dollars per year as a consultant while he employed shadowy tactics to keep surgery patients coming in and collecting huge amounts of money from selling surgeons medical hardware. Randall no longer works for the hospital, Tri-City Regional Medical Center, after they received word that he had previously served time in a federal prison on felony racketeering charges.

The small hospital that previously employed Randall billed $533 million for 5,138 spinal-fusion surgeries over a 10-year period. This is three times what any other hospital in the state billed over the same time period, even hospitals several times larger than Randall’s.

At Tri-City, Randall’s alleged system was to recruit surgeons, then sell them highly marked-up metal spinal implants to use in surgery. To give you an idea, his company charged over $42,000 for pieces it could buy for $3,600. That’s nearly a 1,200% price increase. In one eight-month period last year, his distribution company paid $326,000 for a batch of surgical items that then cost the hospital $1.1 million.

He would allegedly then distribute “kickbacks” to local chiropractors and physicians of between $15,000 and $20,000 per operation in return for them referring their patients to Tri-City. The authors claim that he paid these doctors directly out of the profit he turned from selling the spinal hardware at such a steep price increase. The authors explain, “Within three years [of Randall being hired], Tri-City’s billings for spine surgery on workers’ compensation patients soared twentyfold to $65 million.” Randall also reportedly had a $100,000 per monthdeal with another medical distributor in which he would recruit additional surgeons to hospitals that used this company’s hardware.

Making matters even more tragic, a 52-year-old tomato cannery employee named Consuelo Solorio suffered a spinal injury at work. She visited both a chiropractor and a local spine surgeon, neither of whom recommended surgery. But somehow she ended up being referred to a surgeon who worked at two of the hospitals for which Randall consulted. She was wrongly given a bone-growth product known to the FDA to cause life-threatening tissue swelling and subsequently died from breathing difficulties the day after surgery.

This is only one example of shady, fraudulent dealings in the healthcare industry, and Randall’s alleged total effect (he previously worked at other hospitals) easily totals in the hundreds of millions of dollars. These figures dwarf even the most catastrophic of medical malpractice cases in which an individual is wrongfully and negligently harmed and deserving of compensation. However, political talking points never mention criminal rackets like this that cost the healthcare system millions upon millions of dollars annually. An effective solution to many healthcare budget woes is to investigate more alleged cases of outright corruption rather than bar everyday citizens’ access to the courts and to financial restitution.

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