National Medical Enterprises
US District Court Judge Joe Kendall leveled his gaze at Peter Alexis. 'So it was just a massive kickback operation?' Alexis, a former VP of Psychiatric Institutes of America, a subsidiary of National Medical Enterprises (NME), answered in the affirmative. 'Yes, Your Honor.'
'Were you buying patients?' Judge Kendall continued.
Again, the same response. 'Yes, Your Honor.'
Patients like Sherry, who as a young teenager in 1987, was referred to NME's Brookhaven Psychiatric Pavilion in Dallas for evaluation of a possible chemical imbalance, were among the untold number of children who were put in psychiatric hospitals not because of any medical need, but because NME was bribing doctors to hospitalize kids that had good insurance. Sherry's insurance was so good that she spent 422 days locked inside what some insiders described as a "clinical rat hole."
How did this happen in America?
Richard Eamer, former CEO of NME, found a niche in the healthcare market at a time when the government was otherwise tightening-up oversight of Medicare payments to hospitals. While payments to general hospitals were being scrutinized, it appeared there were virtually no cost-control measures in place for psychiatric facilities.
NME quickly bought-up facilities around the country and set its plan in motion. Patients at NME facilities became a commodity, and company executives employed any means necessary to get patients into their facilities. Lucrative "consulting" contracts were given to doctors who would be more than happy to refer patients to NME, without regard for whether they needed to be hospitalized. These cooperative doctors were essential to NME's scheme, and they were monitored closely and highly motivated.
To disguise payments for their referrals, NME signed personal service contracts with the doctors and kept track of patient admissions, length of stay, and revenue generated by referred patients. NME also plied the doctors with lengthy six figure practice guaranties, payments for office expenses and annual stipends for accepting figurehead roles in their hospitals.
The financial motives of the company led to a dangerous shift in the way patients were cared for. Treatment and healing were no longer the main goals at NME. These had been replaced by one simple, perverse objective: fill beds at any cost.
The real victims find a champion of their rights.
It was not until 1993, when 600 federal agents raided 20 NME facilities, that the public became aware of what was really going on at the company. NME -- at its peak a multi billion-dollar empire with more than 100 hospitals across four continents -- was involved in one of the largest healthcare-related frauds in history. Following the raid on its facilities, NME paid the government $379 million in criminal fines, civil damages and penalties, making it one of the largest False Claims Act settlements in history.
Although the government secured its fines and the insurance companies that paid for the unlawful hospitalizations recovered some of their money, civil lawyers had largely ignored the former patients' rights.
That is, until Tommy Fibich approached Jim Moriarty about three children who had undergone a harrowing experience at one of NME's psychiatric hospitals outside of Houston, Texas. Thereafter, Fibich and Moriarty joined forces with Steve Hackerman of the Bristow Hackerman Wilson & Peterson firm in an effort to seek justice for the real victims of NME's scam - the former patients.
The legal team screened thousands of cases before filing suit on behalf of approximately 600 former NME patients, most of whom were children when they were hospitalized following a "free screening" for ADD or similar marketing ploy. The "free screenings" were little more than a cleverly designed way to x-ray a prospective patient's wallet for insurance coverage.
After settling in on their client group, the lawyers brought Pat Green, a prominent lawyer from Montgomery County Texas into the group, and proceeded to file suit against NME and its affiliated companies, including 11 hospitals and more than 80 doctors and psychologists. The legal team recruited experts from around the country to testify on behalf of the children. Doctors like Bruce Perry, a world-renowned expert on children in crisis, who at the time was Chief of Psychiatry for Texas Children's Hospital in Houston.
Central to the legal team's strategy was a willingness to stand up, fight, and take the defendants head on, for any and all challenges thrown at them.
Events early on set the tone for what turned out to be a lengthy and acrimonious legal fight. Soon after the case was filed, NME's lawyers, believing the Plaintiffs would back down, sent deposition subpoenas to take four different plaintiff's depositions per day every day for weeks on end beginning approximately one month later. Coordinating an event like that would take a monumental effort and considerable teamwork and expense given the number of parties involved.
The Plaintiffs' legal team waited to respond to these subpoenas until the Friday before the depositions were scheduled to begin. The response was both simple and powerful:
Every one of the plaintiffs would appear for the depositions as subpoenaed on the dates and times indicated.
The following Monday morning, NME's lawyers appeared from all over the country unprepared to carry out the challenge they believed would never be answered. The depositions went on for six weeks before NME decided it had seen enough.
Ultimately, after years of battling at the courthouse, painstaking review of hundreds of thousands of internal documents and dozens of depositions doctors, psychiatrists and company executives, NME caved on the eve of the first case set for trial and agreed to settle all of the claims for a confidential amount.