Bradford Regional Medical Center is being sued in federal court
for alleged fraud, and allegedly paying kickbacks to doctors Peter
Vaccaro and Kamran Saleh for referring all their patients to
BRMC.

The lawsuit, filed in July of 2004 by doctors Dilbagh Singh, V.
Rao Nadella, Paul Kirsch and Martin Jacobs against BRMC, V&S
Medical Associates, Vaccaro and Saleh, is still pending in federal
court in Erie before Judge Maurice Cohill. The doctors are suing
under the Federal False Claims Act, as well as the Stark Law and
Medicare anti-kickback statute.

The Stark Law prohibits a physician from referring patients to a
medical facility where he holds a financial relationship. The
anti-kickback statute prevents a physician from being compensated
for referrals. The false claims portion alleges that the defendants
perpetuated a scheme where they presented claims for reimbursement
to government agencies for services rendered to patients who were
illegally referred to BRMC.

The plaintiffs, Singh, Nadella, Kirsch and Jacobs, filed the
suit as a “qui tam” action, meaning they are suing on behalf of the
U.S. government against someone who has allegedly submitted a false
claim to the government.

The plaintiffs allege the scheme arose out of an equipment
sublease that BRMC entered into with Vaccaro and Saleh.

According to court records, in 2001, Vaccaro and Saleh decided
to expand their practice by leasing a nuclear cardiology imaging
camera and performing related diagnostic services for patients in
their office. The doctors signed a lease on June 6, 2001, for the
camera.

“After learning of V&S’s plans to obtain a nuclear camera,
BRMC adopted a policy preventing physicians from having competing
interests with the hospital,” the plaintiffs’ attorneys state. “It
then used that policy as leverage to get V&S to enter into a
sublease arrangement.”

The doctors were informed by BRMC that by operating the camera
in their office, they were violating a recently approved BRMC
policy — put into effect on May 23, 2001 — on doctors with
competing financial interests. Violating the policy would result in
a physician being ineligible for medical staff appointment and the
loss of clinical privileges at BRMC.

A dispute ensued between the hospital and V&S Medical.

The plaintiffs’ attorneys state, “the ‘dispute’ in question
revolved around the fact that Vaccaro and Saleh had reduced their
nuclear cardiology referrals to BRMC. It would be a novel
interpretation of the Anti-Kickback Statute to hold that a hospital
may manufacture a dispute over physicians’ referral practices, and
then ‘resolve’ the dispute by paying the physicians to induce
referrals.”

On Oct. 1, 2003, BRMC and V&S Medical entered into a 5-year
sublease for the nuclear camera in which BRMC would pay the lease
payments of $6,545 to V&S, along with $23,655 a month in
non-compete payments and a 10 percent billing fee.

“…the true purpose of the payments was to obtain V&S’s
referrals,” alleges the suit. “Indeed, (former BRMC chief executive
officer) George Leonhardt admitted (during deposition) that he
wouldn’t have entered into the sublease arrangement except for the
expectation of referrals.”

BRMC hired an independent contractor to review the lease and
place a value on the services. The contractor’s valuation notes
that the value was “expressly based on the anticipated referrals
from V&S,” the suit states.

Meanwhile, throughout the life of the sublease, the camera in
dispute stayed at V&S Medical, although BRMC had effectively
purchased it. As the sublease was being finalized, BRMC decided to
obtain a camera with newer technology.

So in 2004, V&S — not BRMC — entered into a lease agreement
for a new camera to be used and installed at BRMC. In December of
2004, BRMC agreed to buy out the $200,000 remaining in the lease
for the old camera — a lease which was Vaccaro’s and Saleh’s
responsibility, not the hospital’s.

And V&S Medical was permitted to keep the camera, which was
paid — entirely — for by the hospital.

After the buyout of the first lease, BRMC began paying monthly
payments to V&S Medical for the new camera in the amount of
$4,494.77, along with $2,299.14 for a service agreement, and were
still paying $23,655 a month to the medical office for the
non-competition agreement, according to the court records.

At the same time, BRMC submitted “numerous” claims for
reimbursement of services where Vaccaro and Saleh were identified
as the attending physician, showing that the two doctors were
indeed referring patients to the hospital, the records read. The
attorneys for BRMC do not deny this, but said “it is conceivable
that BRMC may have mistakenly identified Dr. Vaccaro or Saleh on
some of the claim forms,” the court records read.

“This assertion is staggering,” states the plaintiff’s
attorneys. “In essence, BRMC is saying ‘Instead of committing
Medicare fraud by submitting claims based on referrals from Drs.
Vaccaro and Saleh, it is possible we committed Medicare fraud by
falsely identifying the attending physician on the claim forms
submitted to Medicare.’”

The attorneys for the defense counter each argument, saying the
plaintiffs mischaracterized the sublease for the nuclear camera;
the amounts paid to Vaccaro and Saleh were fixed and didn’t
fluctuate up or down based on the number of referrals coming from
the doctors; and the plaintiffs are out to “ruin the defendants”
BRMC, it’s now-former board of directors and both Vaccaro and
Saleh, their competitors.

Both sides have asked the judge to decide in their favor with a
summary judgment, which is a judgment before a verdict based on
statements and evidence presented to the judge.

There is no financial demand on the part of the plaintiffs in
the case should they be victorious in their suit.