Paper charges MR scam in CON states

April 20, 1994

MRI manufacturers often pointto the capital acquisition thresholds present in various statecertificate-of-need systems when they price their low-end scannersunder $1 million. Do vendors, however, deliberately manipulatesystem prices in order to help

MRI manufacturers often pointto the capital acquisition thresholds present in various statecertificate-of-need systems when they price their low-end scannersunder $1 million. Do vendors, however, deliberately manipulatesystem prices in order to help particular customers avoid a CONreview? This was one of the charges leveled last month in an investigativeseries by The Plain Dealer of Cleveland, entitled "Imagesof Deceit."

The newspaper's MRI expose centered around "millionaireradiologist" Dr. James V. Zelch, an entrepreneurial physicianwith interest in a network of MR centers, primarily in the Clevelandarea. Zelch is a regular contributor to SCAN's sister publication,MR.

The Plain Dealer charged that Zelch repeatedly supplied Ohioand other state authorities with misleading information on newMRI projects, either low-balling the value or indicating disingenuouslythat the installation was for his private office, in order toavoid CON review.

In two examples cited by the paper, MRI supplier Hitachi wastied to the low-balling allegations made against Zelch. In oneinstance, Ohio's health director, Dr. Peter Somani, said he wasinitially inclined not to provide Zelch with a CON exemption fora Hitachi installation but changed his mind.

The state official could not understand at first how Zelchmight claim a sub-million-dollar price for the site "becauseZelch planned to install a powerful MRI machine that normallywould cost $2 million," the paper said.

After Hitachi supplied a list of five other instances whenthe same type of MR system was "purchased or offered"for under $1 million, Somani went ahead and granted the CON exemption,the paper said. But The Plain Dealer checked into the five examplesand found only one center that actually bought the Hitachi systemfor under $1 million.

The Plain Dealer then cited an out-of-state physician who boughta Hitachi system and was surprised to find that the vendor "wasselling their $1.3 million machine for $500,000 less to Zelchin Ohio."

This physician speculated to the paper that MRI suppliers mightprovide a "not fully functional" system without allits components in order to help a customer avoid a CON problem.

While much of the expose in the The Plain Dealer centers aroundCON review avoidance, the paper also lumps in self-referral abuseproblems. At times, it appears to confuse the two regulatory issues.The paper also does not clearly distinguish between referring-physicianand radiologist ownership of imaging centers.

"Ohio's system to control health-care costs by eliminatingpurchases of unnecessary high-tech medical equipment doesn't work,"said The Plain Dealer. "Instead, the system's shortcomingshave allowed huge medical profits because doctors who build centersto which they refer patients order more scans and make more money."

After surveying 24 states with laws against referring-physicianownership of medical centers, The Plain Dealer claimed that "Nodoctor has been prosecuted for violating any of the dozens ofso-called `self-referral' laws."