State Sen. Ralph Alvarado, a physician running for lieutenant governor of Kentucky, was one of two dozen doctors who referred patients to a home-health agency that had given them gifts, a relationship that federal authorities later alleged was improper.
The home-health agency, Nurses Registry and Home Health, violated federal law by giving things of value to Alvarado and other doctors in order to induce them to refer patients to the business, federal prosecutors argued in a lawsuit that was settled in 2015 for $16 million.
There were no criminal charges associated with the case. Instead, the federal government intervened in 2011 in a whistleblower case that two former Nurses Registry employees filed against the company in 2008.
The government’s case was directed at Nurses Registry and owner Lennie House and his wife, not Alvarado and other doctors or doctors’ offices named in the complaint.
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But prosecutors alleged in the 2011 complaint that Nurses Registry and the Houses provided “illegal remuneration and kickbacks” to Alvarado and others, and that the doctors referred patients to the agency “in violation of federal law,” according to a court document.
“The federal settlement with Nurses Registry had nothing to do with me,” Alvarado said in a written statement Wednesday. “This is just another attempt to smear my good reputation as a medical doctor with a bogus story. This type of nonsense is why many good people dislike politics.”
Gov. Matt Bevin chose Alvarado last month to run as his lieutenant governor in this year’s Republican primary, dropping current Lt. Gov. Jenean Hampton, the first black person elected to statewide office in Kentucky. Bevin called Hampton a dear friend, but said Alvarado, the first Hispanic elected to the Kentucky legislature, represents the American dream.
The gifts to Alvarado cited in the government’s case were two tickets to a University of Kentucky men’s basketball game, an “edible arrangement” worth $56.18, and an invitation to a Coach’s Night event — get-togethers that Nurses Registry hosted where invitees could meet UK coaches. There was free food at the events, according to a court record.
All those gifts were in 2010.
Alvarado, a Republican who was elected in 2014 and represents Clark, Montgomery and part of Fayette counties, also received a total of $12,000 in campaign contributions in 2004, 2006 and 2010 campaigns from House, and his wife, Vicki S. House, an officer in the business, according to a court record.
In 2006, Alvarado made 457 patient referrals to Nurses Registry, resulting in payments to the business totaling $1,187,517 from Medicare, the taxpayer-funded health program for people 65 and older. In 2010, when Nurses Registry provided Alvarado with gifts, Alvarado sent 161 patients to the agency.
Nurses Registry, which was based in Lexington, received $444,013 from Medicare for services it said it provided to those patients, prosecutors said in a June 2014 motion.
The government sought to get back those payments and others from Nurses Registry, saying they were “tainted” by violations of two federal laws meant to guard against the potential that giving gifts to doctors could improperly influence medical decisions.
The whistleblowers and the government alleged Nurses Registry took part in widespread fraud, such as lying about how sick people were in order to justify higher Medicare payments, and providing unnecessary services.
Nurses Registry denied wrongdoing.
In particular, the company said in an October 2012 response that it denied the allegation that it provided gifts to doctors or their offices for any illegal purpose, including trying to get them to refer patients to the agency.
Some doctors received more gifts, and more valuable gifts, including cash in some cases.
Prosecutors listed a range of gifts that Nurses Registry gave doctors, or employees in their office who could supposedly influence referrals, including UK basketball and football tickets, alcohol, gift cards and baskets, and tickets to concerts by the Lexington Philharmonic, Journey, the Jonas Brothers, Taylor Swift and Alan Jackson.
In a response in court in September 2014, Nurses Registry and House referred to the gifts as “inconsequential” and argued no reasonable juror would think providing an occasional gift of small value could possibly influence a doctor to send patients to the agency.
“The government has garnered no evidence that any physician, due to receipt of a business gratuity, used influence on any patient to cause the patient to choose (Nurses Registry) over another home health provider,” attorneys for the company, House and his wife argued.
Records showed that the two dozen doctors identified in the federal complaint referred patients to Nurses Registry at the same rate in years when they didn’t get gifts as when they did, the company’s attorneys said.
However, the government said employees of Nurses Registry testified the company wanted to get business by giving gifts to doctors.
The company had employees called “community educators” whose job was to contact doctors and try to get business, according to court records.
There was testimony in the case that the intent of providing tickets to doctors “was to induce referrals, and to corruptly influence the referral process at the direction of Mr. House,” the government said.
The evidence showed that before approving a request for a gift, “Mr. House would check on the number of referrals recently received from that office to ‘start taking care of the ones that take care of us,’“ according to a September 2015 motion by prosecutors.
One educator said when referrals dried up, she would prepare “gift baskets full of goodies” to deliver.
House told an educator to ask what alcohol doctors in one office liked, according to prosecutors.
The evidence was that doctors’ offices often treated Nurses Registry “like a concierge service” and would call marketers at the business, or House, “for tickets to whatever popular event happened to strike their interest,” the government argued.
The company knew the “tickets-for-referrals scheme” was illegal; officers told the community educators to list the gifts as “supplies” on their expense reports, according to one federal motion.
Referrals from the two dozen doctors identified in the federal complaint resulted in nearly $4.8 million in Medicare payments to Nurses Registry, according to the government.
Mark Wohlander, a Lexington attorney and former assistant federal prosecutor who helped represent the whistleblowers in the Nurses Registry lawsuit, said any suggestion that the case was bogus is nonsense.
“In this day and age when there are less and less Medicare and Medicaid dollars for those in need, it is offensive when someone criticizes those willing to step forward and report fraud,” Wohlander said.
Wohlander said he was surprised Bevin picked Alvarado as a running mate given his name being mentioned in a Medicare-fraud complaint, and wondered if the governor’s office had vetted Alvarado’s involvement.
Lennie House died in February 2015. The company and estate later settled the case with the government, agreeing to pay $16 million to resolve the allegations of Medicare fraud.
The September 2015 settlement specifically covered giving gifts to Alvarado and 23 other doctors or their offices, calling them “illicit remuneration.”
Alvarado is vice chairman of the Senate Health and Welfare committee and is the co-chairman of the committee that oversees the state’s Medicaid program.