Revolving Doors at John George 

Alameda County pays psych contractor big bucks to purge patients from its mental hospital. Critics call the practice dangerous and unethical.

By now we've all heard the horror stories about managed care: women kicked out of maternity wards soon after giving birth and patients denied life-saving operations as health-care companies struggle to contain skyrocketing costs. But in what appears to be a first for a public entity, Alameda County has been offering substantial financial incentives to ensure that its severely mentally ill patients are rapidly released from the county psychiatric hospital.

The incentives are paid to a private company run by Fremont psychiatrist Bhupinder Waraich, whose firm provides contract doctors to the county's John George Psychiatric Pavilion. In exchange for cycling patients in and out quickly, Waraich (pronounced "ver-dash") receives an annual bonus of up to $240,000.

The practice is designed to reduce the number of hospital days for which the county receives little or no reimbursement from the state or federal governments, but it has led to what sources inside the facility call a "cycle of suicide." The sources contend that within the last year, two patients discharged by Waraich doctors -- prematurely, they allege -- killed themselves not long afterward, while a third hurled himself off the Bay Bridge soon after he was sent packing. According to one hospital source, the jumper survived and was promptly returned to John George. The three patients cannot be named because federal law prohibits medical providers from releasing confidential information.

While Waraich himself did not return phone calls, one of his top doctors, psychiatrist Kurt Biehl, acknowledged that a patient jumped off the Bay Bridge a week after being released. Yet Biehl, who is chief of inpatient services for John George but gets his paycheck from Waraich, sees little connection between the discharge and the suicide attempt. Asked about the other incidents, the doctor says he heard rumors about one suicide, but doesn't believe it followed closely upon the patient's release. "I can tell you we have not had one suicide within 24 hours [of discharge]," he says.

Regardless of whether early discharge contributed to these troubling events, sources inside and outside the hospital are disturbed by the financial incentives in the county contract, which they consider unethical. "This is a travesty and tragedy," says Dr. Daniel Borenstein, a professor of clinical psychiatry at UCLA and past president of the American Psychiatric Association. "The doctors doing this are putting themselves in jeopardy for unethical medical practice. They're jeopardizing their licenses."

Although Borenstein knows of some private hospitals and insurance companies that offer financial bonuses to shorten the stays of the severely mentally ill, he says this is the first time he has ever heard of it in a public setting. "It's awful," he says bluntly. "Financial incentives like this are widely discredited in the private sector."

John George, an eighty-bed hospital in the hills of San Leandro, is a place where poor or homeless mentally ill people from throughout the East Bay are taken, primarily by the cops, when they've been deemed a danger to themselves or someone else. Patients are admitted under a state law that allows them to be held for 72 hours against their will if hospital psychiatrists agree that such a danger truly exists.

The cost of those three days is covered in full, but after that it becomes harder for the county to get reimbursed. To get paid, the hospital must document that the patient is still "acute" -- either in danger or dangerous.

There are two facilities in the county for patients who don't quite meet the acute standard but aren't yet ready to face the world. Unfortunately, they often have weeks-long waiting lists, and because John George is intended primarily for the most severely mentally ill patients during times of crisis, many subacute patients end up on the streets 72 hours after being admitted.

If the Waraich doctors manage to limit John George's unreimbursed or partially reimbursed hospital days to less than ten per month, the contractor gets a $20,000 bonus. For 11 to 25 days, the bonus is $15,000, and so on under a graduated scale that decreases the payment as the number of "denied" hospital days grows.

Individual Waraich shrinks don't benefit directly from the arrangement, but county docs who work alongside them are upset about the incentives the firm receives. John George staff psychiatrists say they have complained repeatedly, and a rift has developed between the two groups. "There is a horrible conflict of interest," says Dr. Adrienne Fratini, a county psychiatrist who works at John George. "Doctors are supposed to put patients first."

And sometimes they don't, says Dr. Harold Cottman, another staff psychiatrist, who claims some of the contract doctors have what he describes as "discharge fever."

"I am not saying all of the [Waraich] doctors do this, but we see a troubling number of acute and subacute patients being discharged before they are ready," he says. "There is no question there is a danger to the public from this practice. These people can escalate at any time, and clearly there is the potential for members of the public to be harmed and for these people to commit suicide."

According to Cottman, a nine-year John George veteran, a patient can be stabilized within 72 hours but still may not be ready for discharge. Many of the patients kicked free by Waraich physicians are released prematurely so the company can earn its hefty bonus, Cottman and other county doctors allege. As a result, staff doctors say, these patients end up back at the hospital within 24 hours and must be readmitted and reevaluated at a per-patient cost of $1,500 to $2,000, which the county recoups from the state and federal governments.

Dr. Biehl acknowledges that many of the patients come back, but says it's because the community has few resources to help them once they leave the hospital, and because a lot of them abuse drugs, exacerbating their illnesses. Critics of the incentives, however, deride the situation as a kind of swindle in which the county bilks the larger government entities by getting its 72-hour reimbursements over and over.

For their part, county officials deny any problems with the incentives. The health system, they say, is laboring under a multimillion-dollar deficit and can afford to keep only those patients who are truly acute. "Alameda County pays $750 a day to John George only if the patient is acute," explains Jeff Raleigh, a spokesman for the Alameda County Medical Center, which oversees the hospital.

Raleigh says the patient load at John George is enormous -- some ten thousand emergency room visits a year -- but there are only eighty beds. Scarce resources, he says, must be used carefully. "The contract has those incentives to reduce denied days, but that is, I think, good management practice," he says. "It makes sure the treatment team makes certain that the patients are acutely ill. None of the doctors receive extra pay for doing this."

Even so, one former contract psychiatrist who did not want his name used says Waraich management continuously tells its doctors that they must keep denied-hospitalization days to the bare minimum. The former Waraich employee claims that one company administrator, also a doctor, would order patients discharged over the objections of even some of his fellow Waraich psychiatrists. Asked about that administrator, Biehl would say only, "He no longer works for Waraich."

Biehl also points out that it was county officials who wrote the incentives into the contract to ensure their dwindling mental health resources would be used efficiently. "A denied day means there's no medical necessity for the patient to be there," he says.

But UC Berkeley social work professor Steven Segal, who has studied how mental health funding is best spent, came to a very different conclusion. "From the results of our study as well as other investigations," he wrote in a 2002 article published in the journal Social Work in Health Care, "it would appear that brief hospitalizations, currently the mainstay of treatment efforts, may be too short and insufficient for meeting the needs of severely mentally ill individuals."

Segal also found that patients released early because of managed-care pressure received subsequent inpatient care at nearly twice the rate of those who were allowed a longer stay in the first place.

John George psychiatrist Cottman believes that if there are bonuses for early discharge, there also should be penalties if the patient comes right back to the hospital. "If the patient ends up back in the emergency room within 24 hours, then the [Waraich] doctors should be debited and the discharging psychiatrist should be debited personally," he says. "These patients stay in a revolving door and many of them don't get well, but the company keeps getting its bonus and the hospital keeps getting paid."

UCLA's Borenstein believes the bonus scheme needs to be dumped altogether because it runs counter to the practice of good medicine. "This is terrible," he says. "The worst part of it -- the travesty and tragedy -- is the patients are suffering."

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