All the Governor's Men

After 18 months, the partners will be paid according to the number of patients they see and surgeries they perform. In the medical industry, every procedure is worth a commensurate number of "relative value units," or RVUs. The average sports medicine orthopedist pockets $28.10 per RVU, according to the Medical Group Management Association, a leading trade group. The district will pay Kanell $55.20 per RVU for his clinical work -- nearly twice the national average. But if you total his entire salary, it comes out to a whopping $79.10 per RVU, verging on three times the average.

Kanell, who lives in Fort Lauderdale, does have a big name. After 35 years in in sports medicine, he's well known, having worked not only with South Florida teams but also with the Yankees and Orioles during spring training. The fact that his son, Danny Kanell, is a backup quarterback for the Denver Broncos only adds to the doctor's semifame.

But the 63-year-old Kanell knows his limitations; he almost exclusively performs arthroscopic surgeries. When a serious knee injury befalls a Dolphins star or a world-class pitcher like World Series MVP Josh Beckett, the athlete usually sees an out-of-town specialist.

Like Lwin, the practice hired the right men to secure the district deal: Blosser and Sayfie. And Caldwell, whose father is a former Republican state legislator and right-hand man to Rep. Shaw, is well-connected in his own right, counting Scherer among his patients (as well as NBHD Commissioner Steven Berrard). Caldwell also happens to live just a few blocks from Scherer and Lwin on Ponce de Leon Drive in Rio Vista.

The Kanell deal was first aired publicly on April 15, 2003, at a meeting of the district's Legal Review Committee. To justify the doctors' exorbitant salaries, officials submitted a one-page sheet, called a pro forma, that lists all projected revenues and expenses. Today, that document is shrouded in mystery. No district officials, including Scherer or Kanell, have taken credit for it.

That might be due to the fact that the pro forma heavily inflates the Kanell practice's projected revenues and suggests that the district violated federal law that forbids doctors from receiving remuneration for referrals of patients and medical services to health care providers like NBHD.

The first number on the pro forma is the revenue projection for the three doctors: $2,491,451. This correlates with industry averages -- but it represents a vast exaggeration of what Kanell and his partners made in past years.

Before signing with the district, Kanell, Caldwell, and Yoldas worked for the private Holy Cross Hospital in Fort Lauderdale. Holy Cross officials wouldn't discuss Kanell's work there, but one former hospital board member, who demanded anonymity, claims the doctors were unproductive and cost the hospital hundreds of thousands of dollars between 1998 and 2003. Those shortfalls prompted Holy Cross leadership to force them out of their jobs last year, the source alleges. Kanell, however, insists he and his partners left of their own volition.

The doctors' Holy Cross revenues aren't a matter of public record, but the hospital apparently has a leak. Someone sent the 2001 Holy Cross orthopedic report to Dr. Reilly. It indicates that Kanell and his partners collected only $1,288,406 -- or about half the district's projection.

Kanell insists those numbers are low but doesn't dispute that they came from Holy Cross. He admits he doesn't know how much his practice actually earned. "Holy Cross came back with three different sets of numbers at three different times," Kanell complains. "They have a totally inaccurate accounting system over there. They can't come up with the right numbers."

But it seems apparent that the district figures were inflated to justify the lucrative salaries negotiated by Sayfie, who also says he can't pinpoint the district's revenues. "What isn't being taken into the equation is the MRIs we bring [to the district] and other things, like x-rays and physical therapy," Kanell elaborates. "Our numbers are more than just our services."

Kanell is basically confessing that the district is paying his practice for referrals. The problem with that explanation is that such compensation may violate federal anti-kickback legislation. Those laws are in place because such payments may be viewed as an inducement to defraud Medicaid by referring patients for unnecessary medical procedures.

The NBHD pro forma even seems to formalize illegal kickbacks -- it includes $788,837 for "ancillary revenue" -- or money generated from MRIs, x-rays, and other procedures picked up by the district, and $500,000 that would go to the district for "rehab revenue."

Fort Lauderdale health lawyer Gabe Imperato says the federal anti-kickback law, which is a felony punishable by up to five years in prison and parallel civil legislation, known as Stark laws, have numerous exceptions. One of the "safe harbors" for doctors is in cases of a "bona fide employer-employee relationship," so long as the compensation falls under fair market value.