Govt’s Legal Complaint Against Lahey Clinic

February 15, 2017

A lawsuit filed in the federal court of Massachusetts against Lahey Health by the Bermuda Government details alleged arrangements between Lahey and former Premier Dr Ewart Brown, with the legal complaint alleging that it “resulted in Bermuda’s payment of millions of dollars for medically unnecessary services.”

“Under principles of equity and good conscience, Defendants should not be permitted to retain the benefits they acquired,” the legal complaint [PDF] says.”All funds, revenues, and benefits received by them rightfully belong to Bermuda and should be returned to Bermuda.”

Parties Involved

The Plaintiff is listed as “the Government of Bermuda, acting by its Attorney General,” while the Defendants are listed as Lahey Clinic Hospital and Lahey Clinic, which are incorporated in Massachusetts and are collectively referred to as Lahey.

“The Defendants played integral roles in the Enterprise and its operations. Without their participation in the Enterprise’s operations, the Enterprise would not have been able to conduct its activity,” the suit states.

Dr Brown is not a defendant in this lawsuit, however is cited as a “non-party co-conspirator”, and is described as a “British Overseas Territories citizen” who is the “owner of Bermuda Healthcare Services [BHCS], a medical clinic which he has owned and operated since at least 1993, and the Brown-Darrell Clinic a medical clinic which he has owned and operated since 2007.”

“Brown served as a Member of Bermuda’s Parliament from 1993 through 2010,” the document states. “He is and has been one of the most politically powerful individuals in Bermuda for more than two decades.”

Boston law firm of Cooley LLP is representing the Government of Bermuda.

Jurisdiction: Lawsuit Filed In Massachusetts

The suit was filed in Massachusetts, with the document saying,”This Court has jurisdiction under 28 U.S.C. § 1331, because this action arises under the laws of the United States, and 18 U.S.C. § 1964(c), because this action alleges violations of the RICO Act, 18 U.S.C. § 1962.”

“Defendants reside in this District, and a substantial part of the events or omissions giving rise to the claims occurred in this District.”

Legal Action Brought Under Racketeer Influenced and Corrupt Organizations Act [RICO]

“Bermuda brings this action under the Racketeer Influenced and Corrupt Organizations Act [RICO”], 18 U.S.C. §1961 et seq., to recover for injuries it has suffered to its business, property, and right to honest services,” the legal complaint says.

The suit alleges violations of wire and mail fraud statutes, the Foreign Corrupt Practices Act, the Travel Act, and the Money Laundering Control Act..

The wire and mail fraud statutes are cited as the suit alleges the defendants used thousands of mail and interstate wire communications to create and manage the schemes alleged in the suit

Suit Alleges Two Decades Of Actions

The suit alleges that, “For nearly two decades, Lahey and Brown conspired to promote and ensure Lahey’s increased prominence as both a local and an overseas healthcare provider for Bermudians.”

It notes, “Lahey’s formal relationship with Brown began in 1997, while Brown served as Bermuda’s Shadow Minister for Human Affairs and also Director of BHCS. Pursuant to an agreement between Lahey and Brown which Lahey began sending Massachusetts-based specialist physicians to Bermuda to service patients at BHCS.”

As has already been reported, the suit states that Lahey allegedly conspired with Dr Brown to design and perpetuate an enterprise fueled by Lahey’s payments to Dr Brown which were allegedly “disguised as consulting fees,” in return for which Dr Brown allegedly “facilitated and ensured that Lahey: received preferential treatment when bidding on healthcare contracts issued by the Bermudian Government.”

Who Is Alleged To Have Benefited?

The suit is against Lahey, filed in the jurisdiction they operate in, and alleges that “the enterprise was wildly successful and resulted in the enrichment of both Lahey and Brown at the expense of the Bermudian Government and people.”

The suit alleges Dr Brown “benefited handsomely”, while “Lahey’s revenues also grew substantially throughout its relationship with Brown.”

The document states that the agreement “called for Lahey’s payment of consulting fees to Brown and BHCS and, in exchange, Brown and BHCS would promote healthcare opportunities [for Lahey] in Bermuda and elsewhere in the West Indies.”

Lahey is alleged to have paid Dr Brown fees, with the complaint stating that in 2001 they totaled “at least $125,000,” grew over time, and the complaint states that emails indicate that in 2008 “the agreement was for $504,000 [$42,000 per month].”

Bermudian Insurers Said To Have Paid Lahey Over $40 Million

The legal complaint alleges that, “Between 2006 and 2016, Bermudian public healthcare insurers paid Lahey over $40 million for services that Lahey provided in Massachusetts, and Brown paid Lahey hundreds of thousands, if not millions, of dollars in fees to interpret MRI and CT scans performed at his clinics.”

Suit Says Scans More Than Doubled, Alleges ‘Medically Unnecessary’ Scans Done

“Between 2004 and 2012, CT scanning in Bermuda more than doubled, from 75.0 CT scans per 1000 to 171.4 scans per 1000 in 2012. By contrast, the Cayman Islands, which has a population only slightly smaller than Bermuda, registered 57.5 scans per 1000 in 2012,” the suit states.

“Similarly, between 2004 and 2012, MRI use in Bermuda more than doubled, from 41.1 scans per 1000 in 2004 to 84.4 scans per 1000 in 2012. The Cayman Islands registered 27.1 scans per 1000 in 2012.”

“Bermudians soon ranked among the most scanned patients in the world, receiving nearly twice as many scans as nations with comparable populations,” the complaint states, alleging that “excessive, medically unnecessary” MRI and CT scans were performed.

The suit also alleges Dr Brown “induced physicians to refer patients to his clinics for diagnostic testing by paying them kickbacks even where such testing was not medically necessary.”

“Lahey could also draw upon its experience with its scanning operations in the United States to determine that the sheer volume and nature of the scans performed at the Brown Clinics, as outlined below, was problematic,” the suit alleged.

“Blinded by its obvious desire to keep its ‘consulting’ relationship with Brown intact and also by lucrative scanning fees and an ever-increasing presence on the island, Lahey stayed silent,” the suit says.

Emails From Lahey To Dr Brown

The suit details emails allegedly sent by Lynn Malloy-Stofer, Lahey’s then-Chief Operating Officer and Senior Vice President of Business Development.

One email allegedly sent by Ms. Malloy-Stofer’s noted that she was happy “to see how [Brown’s] leadership in Government has influenced the many changes.”

The suit also says, “Ahead of a general election in December 2007, Ms. Malloy-Stofer emailed Dr Brown on November 5th to state, “I only wish that we could vote. Just learned of your announcement for a December 18th election,” adding that “we wish you upcoming success” and “whatever the outcome, you will always be ‘premier’ in our minds.”

The suit also alleges that in July 2008, Ms Malloy-Stofer emailed Dr Brown “at his official Government email address” to inform him that she had “obtained approval to raise his consulting fees by 9%,” with the document alleging that “the agreement was for $504,000 [$42,000 per month].”

Trial By Jury

“Plaintiff demands a trial by jury as to all claims that may be tried to a jury,” the document states.

What Is The Lawsuit Seeking?

The suit alleges that the “practices have resulted in Bermuda’s payment of millions of dollars for medically unnecessary services” and the “Plaintiff has suffered monetary damages.”

Bermuda “brings this action to recover for injuries suffered,” it states, “to recover for injuries it has suffered to its business, property, and right to honest services.”

“Under principles of equity and good conscience, Defendants should not be permitted to retain the benefits they acquired,” the document says.”All funds, revenues, and benefits received by them rightfully belong to Bermuda and should be returned to Bermuda in an amount to be determined at trial.”

The legal complaint puts forward that, “Defendants are jointly and severally liable to Plaintiff for three times the damages Plaintiff sustained, plus the cost of this suit, including reasonable attorneys’ fees.”

Lawsuit Filed Shortly After Search Warrants Executed

The lawsuit was filed late Tuesday afternoon, which follows after police descended on both medical clinics owned by Dr Brown this weekend, keeping both facilities cordoned off for much of the weekend, with police entering and leaving both locations carrying boxes  in and out.

A warrant said the search was looking for Cost Forms for X-Rays, Ultrasounds, Eschocardiograms, MRIs, and CT scans, and the police confirmed they executed search warrants at two medical offices, and said a number of records were seized.

Bermuda Government Believes It Has ‘Substantial Claims’ Against Lahey

Attorney General Trevor Moniz said, “On 14 February 2017, and on behalf of the Government of Bermuda, I issued proceedings against Lahey Clinic, Inc. [a.k.a. Lahey Hospital & Medical Center, Burlington] and Lahey Clinic Hospital, Inc. [together, “Lahey”] in federal court in Massachusetts in the United States of America.

“The proceedings follow many months of investigations by the Attorney General’s Chambers into certain arrangements between Lahey and former Premier Dr. Ewart Brown involving undisclosed payments made by Lahey to Dr. Brown over a period of many years.

“In return for such payments, we assert that Lahey received preferential treatment from the Government in relation to its work in Bermuda and for Bermudians.

“Over a lengthy period of time, MRI and CT scans have been carried out by Dr. Brown’s clinics and interpreted by Lahey staff, which appears to have been medically unnecessary.

“As a result of these investigations, the Government believes it has substantial claims against Lahey, and has issued the proceedings accordingly.”

Dr Brown’s Previous Comments

Dr Brown has not yet responded to this lawsuit, however he previously defended himself on other occasions, most recently following the police operations at his facilities this weekend.

Noting the Bermuda police investigation began years ago and has cost over $2 million, Dr Brown said, “The investigation, which was ostensibly launched as one looking at political corruption, clearly morphed into an investigation of my personal businesses.

“It is clear that what originated as a suspicious prosecution has now become a dogged persecution, as Police look high and low to find a crime with which to charge me.”

Following the arrest of BHCS Chief Medical Officer Dr Mahesh Reddy last year, Dr Brown said that Dr Reddy “had his home raided at dawn in a heavy handed manner” based on “a suspicion that he had been overusing MRI and CT scanners,” with Dr Brown saying he wants to “make it absolutely clear that these suspicions are completely unfounded.”

Lahey Says Allegations Are Baseless, Will Vigorously Defend

In response, Lahey Hospital & Medical Center spokesperson said, “We have not had the opportunity to review the lawsuit. We are confident that any allegation of impropriety by Lahey Hospital & Medical Center is baseless and without merit.

“We have a 25-year track record of providing the highest-quality care to our patients in Bermuda, and our business practices are beyond reproach.

“In fact, Lahey Hospital & Medical Center provides high quality care to the people of Bermuda at a lower cost than other international health care providers on the island.

“We will review these allegations and vigorously defend ourselves through every step of the legal process.

“Despite this lawsuit, we remain committed to the people of Bermuda, as we believe our presence on the island has greatly benefitted our patients and their communities.”

Update: The 54-page legal complaint is below [PDF here]

click here Bermuda Govt's lawsuit against Lahey

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