The Houston Chronicle

March 24, 1997, Monday, 3 STAR Edition

Few doctors lost licenses over scandal;
Psychiatric hospitals accused of filling beds ‘at any cost’


SECTION: a; Pg. 1

LENGTH: 2699 words

Flashbacks of the taunting and torture in the now-defunct
Psychiatric Institute of Fort Worth continue to haunt Jeannie
It’s been nearly eight years since Warren’s adoptive mother
committed her to the for-profit psychiatric hospital. But
Warren vividly recalls the terror of some two dozen “”rage
reduction” therapy sessions in which health workers pinned her
down on a gym mat, then muffled her nose and mouth as her
psychiatrist ground his fists into her ribs and stomach.
The psychiatrist, Dr. Robert Hadley Gross, told Warren his
actions were part of therapy designed to allow her to release
underlying anger against her biological mother.
“”I cried and hyperventilated,” Warren recalled. “”I stopped
breathing twice. When I started breathing again they would
slam me back down on the mat. ”
Warren has since won an $ 8.4 million judgment against Gross
for assaulting and intentionally inflicting emotional distress
on her. Gross, 38, indicted on federal mail fraud charges
alleging he took kickbacks for referring patients, is believed
to have fled to England. U.S.prosecutors are seeking
extradition of the fugitive psychiatrist.
“”I just hope doctors now don’t feel invincible,” Warren, 24,
said. “”They are not God and can be touched. They can’t do
whatever they please to anyone. ”
The action against Warren’s therapist, however, is unusual. He
was one of only five doctors and six others in Texas who faced
criminal charges following a scandal that swept for-profit
psychiatric hospitals in the late 1980s and early 1990s. Six
hospital officials and two psychologists were charged in other
Many patients allege they were misdiagnosed or held against
their will for lengthy, unnecessary psychiatric hospital
treatment as doctors and hospitals milked insurance benefits.
Although more than 100 former patients have settled claims
stemming from the scandal, more than 1,000 others still have
lawsuits pending against doctors and corporate hospital
Federal records show indictments and convictions in several
states, but most occurred in Texas – especially against
therapists at the now-closed Psychiatric Institute of Fort
Worth. Two of the hospital’s doctors have been convicted.
Only a few Texas psychiatrists lost their medical licenses
because of the scandal, records show. None worked in the
Houston area. With a five-year statute of limitations for mail
and billing fraud, further indictments are unlikely,
investigators and prosecutors said.
The FBI in Houston recently closed its investigation, Special
Agent-in-Charge Don Clark said.
“”We did not capitalize, for whatever reasons, on that
investigation,” Clark said
Clark, transferred from San Antonio’s FBI office last August,
said he plans to make health care fraud a top priority.
Paul Coggins, the U.S. attorney in Dallas, called health care
fraud “”epidemic,” with an estimated cost of $ 100 billion
“”Health care fraud is probably the most underinvestigated and
underprosecuted of white collar crime,” he said. “”We are just
now scratching the surface. ”
He noted that medical fraud cases are more difficult to
investigate and prosecute than other crimes. “”Often those
involved in the fraud are smarter that most criminals and will
hire the best lawyers,” Coggins said.
Texas became a focus of the for-profit psychiatric hospital
scandal in 1991, when state Attorney General Dan Morales said
an investigation of the industry had found an array of
The probe ended in 1992 with $ 15 million in agreed judgments
and settlements against four of the nation’s largest
psychiatric hospital chains, including California-based
Psychiatric Institutes of America, at the time a subsidiary of
National Medical Enterprises.
Federal officials, including U.S. Attorney General Janet Reno,
later ballyhooed their success in a federal probe of PIA.
In 1994, NME pleaded guilty on behalf of its psychiatric
hospital chain subsidiary to paying doctors and others to
refer patients to its hospitals. The corporation paid the
federal government a record $ 379 million in fines, penalties
and civil damages and agreed to close or sell off its more
than 70 psychiatric hospitals, including 11 in Texas.
NME, which changed its name to Tenet Healthcare in 1995 after
a merger with Dallas-based American Medical Holdings Inc.,
also has paid more than $ 300 million in civil damages to
insurance companies, former patients and shareholders. The
company may face further civil demands in Canada because of
allegations that U.S. private psychiatric chains bilked $ 160
million in Ontario Health Insurance Plan benefits.
Pete Alexis, a regional officer who oversaw the corporation’s
Texas psychiatric hospitals, admitted conspiring to pay from
$ 20 million to $ 40 million in bribes to psychiatrists,
psychologists, and others in exchange for patient referrals.
Alexis, 47, was sentenced to five years probation and 200
hours of community service. He also agreed to give up $ 220,000
in assets that included his collection of Cartier jewelry,
furs, antiques and art as part of a simultaneous civil
Federal prosecutors were upset that Alexis didn’t serve prison
time. “”We thought he deserved a substantial period of
incarceration,” Coggins said.
He could have received up to 10 years in prison and a $ 500,000
fine. But U.S. District Judge Joe Kendall was allowed to
deviate from federal sentencing guidelines because Alexis
assisted the FBI and prosecutors.
Testimony and other statements by Alexis have convinced former
patients and their attorneys that the criminal investigation
came up short. Alexis testified and wrote in his plea that top
NME and Psychiatric Institute officials disguised profits and
shared information about soliciting and paying for referrals.
“”For a deal that started at the highest levels of the company,
to get a few middlemen is ridiculous,” said Jim Moriarty, a
Houston attorney representing 625 former NME patients.
Moriarty and Houston attorney Steve Hackerman said more than a
million pages of documents obtained in a lawsuit will
substantiate a corporate conspiracy to commit fraud. The
documents include:
Handwritten notes from the NME psychiatric hospital division
head saying the hospitals were looking for doctors who “”will
admit. ”
A handwritten memo on an audit report of the NME-owned
Laurelwood Hospital in Conroe referring to consultants as
“”headhunters who bring in patients. ”
A memo from an executive medical director at a PIA hospital in
California warning NME’s then-chief executive officer Richard
Eamer that the attitude at the psychiatric hospital chain had
been to “”put heads on beds at any cost. ”
A former senior vice president’s deposition saying he was told
by the head of the psychiatric hospital chain to “”Fill the
beds at any cost. Hire sleazeballs anything it takes. ”
A letter from a Laurelwood Hospital psychiatrist to the NME’s
psychiatric hospital division head telling him that
Laurelwood’s administrator does “”not expect anyone to discharge a patient in a few weeks when he/she has a
million-dollar coverage. ”
Trial of the lawsuit is scheduled to begin April 21 in a
Montgomery County state district court.
Attorneys representing the corporate hospital chain maintain
the patients received appropriate medical care.
“”I believe the order of proof in these cases will be: ‘Did
this patient need to be admitted in a psychiatric hospital? ‘
If the answer is ‘yes’ we should not go any further,” said
Christi Sulzbach, Tenet’s associate general counsel.
She dismissed Moriarty’s allegations about a conspiracy to
bilk insurance. “”It’s mind-boggling that hundreds of people at
individual hospitals were involved in a conspiracy,” she said.
“”It is very easy to throw allegations against a wall and see
if they will stick. ”
Sulzbach said Alexis’ activities “”certainly weren’t condoned
or authorized by his higher-ups. ”
“”His statements to government officials and others were made
in order to get himself a lighter sentence,” she said.
Tenet attorneys also have said many allegations against the
company are from disgruntled employees. And they argue that
after they settled about 100 lawsuits from former patients,
many of the hundreds of remaining suits were drummed up
through newspaper advertising by plaintiff attorneys.
Civil court records show that Alexis and his civil attorney,
Peter Thompson, received more than $ 300,000 for serving as a
consultant to plaintiff attorneys suing Tenet.
“”I think it brings into question the integrity of his
statements,” Sulzbach said. “”Moriarity has held Alexis up as a
truly evil person. Yet at the same time, we – the true
defendants – find out that Mr. Moriarity has paid Mr.
Alexis. ”
Moriarty said he paid Peter Thompson $ 72,000, but not Alexis.
“”Peter Alexis knows the inside story to the biggest
health-care fraud scam in history,” said Moriarty. “”His
knowledge is priceless. But I wouldn’t do it again because it
looks bad. ”
Alexis’ attorney, David Bell, said Alexis will not comment on
the pending litigation, but that payments by plaintiff lawyers
to Alexis for his knowledge as an expert witness were
Many former patients are bitter about the lack of criminal
“”When I spoke before a congressional subcommittee, they said
they were appalled. They said this would not happen again,”
said John Deaton, 26, a former patient at Brookhaven
Psychiatric Pavilion in Dallas. “”But I haven’t seen anything
done about it. ”
In his 1994 testimony, Deaton testified that for nearly 11
months he was confined in leather restraints and a nylon-mesh
body net. He said he was wheeled in a bed to group therapy
“”I never could understand why I was so out of control that I
had to be tied to my bed for my own protection, but I was
still able to go to group therapy five days a week and benefit
from it enough that my insurance company could be asked to pay
for it,” said Deaton, admitted to Brookhaven for depression.
When he was discharged, Deaton’s leg muscles had atrophied and
he could not stand up. “”I can’t even describe the pain in my
hips and legs. It just made me cry, the pain was so
excruciating,” Deaton said.
He said 22 different physicians ordered him tied to his bed or
wheelchair. “”Not one of them objected to my restraints,” he
After Deaton’s congressional testimony, the treating
physicians demanded that he pay them $ 25,000 for violating the
terms of a gag clause in the settlement of his lawsuit.
Although the demand was later dropped, Deaton’s attorney,
Robert Andrews, has been sued along with four former patients
for violating the terms of the settlement agreement.
“”My client’s testimony is not for sale,” said Andrews, who has
reached more than $ 15 million in settlements for 71 former NME
patients. “”I won’t allow my client to be bought off from
testifying before Congress. ”
The doctors’ attorney, Bill Smith, has denied that the suit
over the gag order was intended to intimidate patients, and
said the doctors did not mistreat Deaton or other Brookhaven
patients. NME officials also said its physicians only ordered
restraints when they were necessary and never used them as
Patients and their lawyers criticize federal prosecutors for
focusing on insurance fraud rather than civil rights
violations that patients say they suffered in the facilities,
including false imprisonment.
“”The government has never sought redress for the human cost of
this fraud,” Andrews said.
But Coggins said false imprisonment is difficult to prove in a
criminal case. “”You get into a screaming match between
doctors,” he said. “”It’s tough to prove the patient didn’t
need to be there. ”
As to complaints that few doctors and therapists lost their
licenses or received administrative sanctions, Tony Cobos,
general counsel for the Texas State Board of Medical
Examiners, said that its 21 investigators are swamped by about
1,800 complaints each year.
Another source said the board took the psychiatric hospital
cases seriously, but deferred to federal prosecutors.
“”You wanted to avoid jeopardizing the investigative and
prosecutorial efforts of federal and state law enforcement
authorities,” the source said. When the federal psychiatric
hospital probes continued for a long time, board action was
hindered because “”evidence could get stale. ”
Some patients, confused by the lack of criminal prosecution or
board action in the face of serious civil court allegations,
are leery of seeking further treatment.
“”On one hand my doctor has been sued in tons of lawsuits as
part of the psychiatric hospital problems, yet on the other
hand he seems to be respected by members of his profession,”
said one female patient in Dallas. “”On one hand he may be a
victim, and on the other he may have been unethical. I don’t
know what to think. ”
. . .
Defendants in scandal
Here are the defendants in criminal cases that arose in Texas
from the national psychiatric hospital scandal:
Pete Alexis, 47, who oversaw operations of 11 Texas hospitals
operated by Psychiatric Institutes of America, pleaded guilty
to conspiring to pay as much as $ 40 million in bribes for
patient referrals. He was sentenced to five years probation
and 200 hours of community service. He also agreed to
relinquish $ 220,000 in assets as part of a simultaneous civil
Dr. Hernan Enrique Burgos, 70, medical director of Psychiatric
Institute of Fort Worth from 1985 to 1992, was convicted on 14
counts of billing fraud and kickbacks. He received a four-year
prison sentence.
Bert Wayne Bolan, 55, a Burleson counselor, pleaded guilty to
mail fraud and receiving kickbacks for referring patients to
PI of Fort Worth. He was sentenced to eight years in prison,
and assessed a $ 375,000 criminal fine and $ 1.5 million civil
William Robert Wilson Jr., a PI of Fort Worth administrator,
pleaded guilty to submitting false insurance claims. He
received a one-year prison sentence and three years of
supervised release.
Dr. Richard David Yentis, 58, a PI of Fort Worth psychiatrist,
was found guilty of mail fraud and false claims for filing
more than $ 137,000 in fraudulent insurance claims for medical
services not provided. He faces up to 65 years in prison, with
his sentencing set for April 18.
Dr. Robert Hadley Gross, 38, a Colleyville psychiatrist, was
indicted on mail fraud charges alleging he accepted more than
$ 861,000 in kickbacks for referring patients to PI Fort Worth
and Bedford Meadows Hospital from 1988 to 1991. He fled the
country in July, and was charged with making false statements
to obtain a passport. Prosecutors are seeking his extradition
from England. He faces a possible maximum 30-year prison
Dr. Timothy Mark Bowlan, 39, a psychiatrist at Colonial Hills
Hospital in San Antonio, pleaded guilty to making false
claims, theft of public money and forgery. Bowlan admitted
forging documents to obtain a Texas medical license. He was
sentenced to five months in prison and three years of
supervised release.
John Stokes, 59, an associate administrator at Twin Lakes
Hospital in Denton, pleaded guilty to a charge that he
submitted more than $ 109,000 in false claims to the Civilian
Health and Medical Program of the Uniformed Services, or
CHAMPUS. He received five years probation, including six
months home detention.
Dr. Henry Edward Eugene Bonham, 55, is on trial in a Fort
Worth federal court on a 45-count indictment charging mail
fraud and filing false claims. Also on trial are his office
manager, Beverly Larae Bulger, 38, who faces a 25-count mail
fraud indictment, and Gina Gay Weems, 37, an assistant office
manager charged with one count of conspiracy to commit mail
fraud. Prosecutors charge that Bonham was out of state on some
days he billed for treating patients.