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A Miami psychiatrist claims a financially ailing national hospital chain fired him as medical director of its Ocala, Fla., facility last April because he blew the whistle on fraudulent billing practices. Dr. Stefan Rose alleges that Charter Behavioral Health Systems deliberately admitted healthy patients in a “heads-for-beds” scheme and sponsored phony involuntary civil mental commitments, according to a suit filed in Palm Beach Circuit Court. However, Rose’s claim may end as a footnote to a two-year-old federal probe of the nearly bankrupt Charter Behavioral Health Systems and its parent company, Magellan Health Services Inc. Whether Magellan failed to provide medically approved care is the focus of a nationwide investigation by the Justice Department, according to Securities and Exchange Commission records. And the Health Care Financing Administration in Washington has been investigating Charter for two years on “Medicare-related matters,” said Judy Holtz, a spokeswoman for HCFA’s inspector general. So even if Rose wins a court judgment, collecting it may force him to chase Magellan and even its major investor, Richard Rainwater, a good friend and fund-raiser for President-elect George W. Bush. Rose’s suit, filed in November, demands unspecified damages for breach of contract and defamation of character under Florida’s Whistleblowers Act against the defunct Atlanta-based network of 88 psychiatric hospitals. Nine were in Florida. Rose’s cameo role with Charter started on March 27, 2000, when he took over as medical director at Charter’s Ocala franchise. After threatening management he would go public over Charter’s billing practices, Rose was fired on April 27, the suit claims. He was ordered to empty his desk and was escorted out the door, according to his suit. Rose claims Charter issued bogus orders extending patients’ hospital stays and bilked a young male out of a large trust fund, admitting him many times with phony diagnoses over six years. “We know there’s likely more than 100 patients admitted who shouldn’t have been,” says Scott W. Rothstein of Phillips Eisinger Koss Rothstein & Rosenfeldt of Hollywood, one of Rose’s lawyers. Rose could not be reached for comment. His phone numbers are not listed and Rothstein would not say how to reach his client. Charter filed for bankruptcy in Delaware last February and will be completely dissolved by the end of March, according to Charter’s general counsel Sally Austin. Aware of Rose’s suit, she refused comment. “My company is in a precarious position and is just going away.” Charter’s parent, Magellan Health Services Inc. of Columbia, Md., the country’s largest behavioral health care manager, denies any responsibility to Rose, according to spokeswoman Erin S. Somers. Magellan manages mental health care through a network of 58,000 professionals, 6,000 facilities and reaches 65 million people, Somers said. Rose’s road to relief could lead to Rainwater in Texas. In 1995, Rainwater invested $70 million in Magellan and remains its largest single investor. His role as a health care mogul isn’t new. He founded HCA/Columbia, the country’s largest hospital chain. Through his real estate investment trust, Crescent Real Estate Equities Co. in Fort Worth, Rainwater paid $400 million to Magellan in 1997 for Charter’s 88 hospital buildings. The deal also transferred half of Charter’s common stock to a Crescent affiliate. Then, in August 1999, Magellan transferred 40 percent of its common stock in Charter to Crescent, retaining 10 percent. Charter buckled under the financial weight of $80 million in annual franchise fees to Magellan along with hugely diminished private and public reimbursements for mental health care, according to SEC records. After Rainwater refused to guarantee a $50 million loan in November 1999 to infuse new cash into Charter, the hospital chain filed for bankruptcy protection last February with $50 million in assets and $100 million in debts, according to published reports. Magellan, however, is financially fit and unaffected by Charter’s demise, adds Somers. Despite Charter’s demise, Rothstein says he’s confident he’ll find a way to collect on any potential court judgment for Rose. He declined, however, to discuss the case further.

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