Huge fine levied in kickback case

February 15, 1995

In a case considered a harbinger of things to come for the imaging center industry, Thomas E. Haire,founder of Radiation Care, an Atlanta-based radiation therapyprovider, agreed in December to a fine of $2 million, ending atwo-year federal investigation

In a case considered a harbinger of things to come for the imaging center industry, Thomas E. Haire,founder of Radiation Care, an Atlanta-based radiation therapyprovider, agreed in December to a fine of $2 million, ending atwo-year federal investigation of alleged Medicare anti-kickbackviolations.

Haire was also barred from participating in Medicare and Medicaidprograms for four years, according to terms announced by the U.S.Attorney's office in Atlanta. Radiation Care, which runs radiationtherapy and diagnostic imaging centers, admitted no wrongdoingin the settlement.

Suit was brought against Radiation Care for an investment schemethat, according to the government, provided quick profits forphysicians in a position to refer Medicare patients to the radiationtherapy service. Selected physicians were offered an opportunityto purchase Radiation Care stock for $1 or $2 per share alongwith assurances that the stock's value would escalate when thecompany went public.

About 60% of Radiation Care stock was held by referring physicianswhen the initial public offering was held, according to courtdocuments. The initial price was $8 per share.

Radiation Care was prosecuted under the same stringent anti-kickbacklaw that laid the basis for federal anti-self-referral legislationeffective Jan. 1. The law, generally known as Stark II, prohibitsphysicians from referring Medicare or Medicaid patients to diagnosticimaging services in which they hold an ownership interest. Violatorscan be fined up to $10,000 per referral and barred from Medicareparticipation.

The settlement paves the way for Radiation Care to be acquiredby a subsidiary of Maryland-based Oncology Therapy, accordingto a report published in the Atlanta Journal and Constitution.

In September 1994, another company Haire helped found settleda similar case also involving physician self-referral. T2 Medical,a home infusion company, agreed to pay $500,000 and admitted nowrongdoing. Haire reportedly earned millions from the venture,which was singled out by Business Week magazine in 1990 and 1991as one of the fastest growing small companies in the nation.