Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: FRIDAY, August 27, 1993                   TAG: 9308270144
SECTION: NATIONAL/INTERNATIONAL                    PAGE: A6   EDITION: METRO 
SOURCE: Los Angeles Times
DATELINE: LOS ANGELES                                LENGTH: Medium

U.S. HEALTH-FRAUD PROBE TARGETS BIG HOSPITAL CHAIN

The criminal investigation of the giant hospital operator focuses on charges of false billing and diagnoses, as well as suspicions that illegal payments were made to doctors for referring Medicare patients to National Medical facilities, sources close to the investigation said.

The investigation primarily involves the company's psychiatric hospitals, which also are the subject of a bevy of civil lawsuits by patients alleging malpractice and by 19 major insurers accusing National Medical of hundreds of millions of dollars in overbilling.

John Hoos, a spokesman for the FBI's office in Los Angeles, said the search was part of an "ongoing investigation into possible criminal conduct" at National Medical. He declined to elaborate.

Authorities said National Medical, a $4 billion-a-year company and one of the nation's largest health-services firms, is cooperating with the government investigation.

"We are hopeful that the records obtained today will help the government put to rest many of its concerns, and . . . lead to a prompt resolution of the government's investigation," Scott Brown, National Medical's acting general counsel, said in a statement.

The government has estimated that health care fraud costs billions of dollars and is a big factor in soaring medical costs. Earlier this year, the Justice Department doubled the number of FBI agents investigating crimes in the $738 billion health care industry and set up special prosecution units in 12 cities.

National Medical has been a top priority of the crackdown, according to government sources. The government has been investigating activities at National Medical's psychiatric hospitals for about two years.

The National Medical case could prove to be the largest investigation ever of suspected health fraud in the United States, said a government source.

Sixteen insurers have sued National Medical in federal court in Washington, D.C., accusing it of submitting more than $750 million in bogus bills. Three other insurers have filed suit in Texas, also alleging billing fraud. On Aug. 19, National Medical filed two suits against all 19 insurers in Washington, D.C., alleging conspiracy, consumer fraud, defamation and restraint of trade.

National Medical also faces more than 100 civil lawsuits alleging abuse and mistreatment of patients at company-owned facilities.

The firm said authorities also searched its regional offices in Dallas and Fairfax, Va., and nine of its 61 psychiatric hospitals. It said the government subpoenaed records at offices in Tampa and Indianapolis.

Also involved in the investigation are the Department of Health and Human Services, Internal Revenue Service, Defense Criminal Investigative Service and U.S. Postal Inspection Service.