U.S. settles case against Broward Health for millions less than it lost in alleged fraud

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By Dan Christensen, FloridaBulldog.org 

The U.S. Justice Department settled a massive healthcare fraud case against Broward Health last month for millions of dollars less than the government lost as a result of the alleged fraud, records show.

Broward Health paid the government $69.5 million to end a vexing investigation begun in 2010 after Fort Lauderdale orthopedic surgeon Michael Reilly blew the whistle on improper financial relationships between the hospital system and its physicians dating back more than a decade. The scheme allegedly cheated American taxpayers, Medicare and Medicaid.

Documents released to FloridaBulldog.org by the North Broward Hospital District under Florida’s public records law add new perspective to the deal that Justice Department attorneys touted as an unqualified achievement.

The records show that even after significantly narrowing the scope of the alleged fraud to facilitate settlement, the government accepted $2.1 million less than its claimed losses, and $5.5 million less than the $75 million in losses that Broward Health itself had calculated.

Likewise, Broward Health was not required to reimburse the government for the costs of the five-year probe by attorneys and agents at both the Justice Department and the Department of Health and Human Services.

“The government’s goal is to change behavior,” said Patrick Burns, co-director of the Washington-based Taxpayers Against Fraud Education Fund. “If in fact you only recover what was stolen, then you have not sent a deterrent message, and when you have a recovery less than what was stolen, you have sent the opposite message.”

Mark Lavine, the South Florida assistant U.S. attorney who helped lead the case against Broward Health, said he was not authorized to respond to media inquiries. He forwarded a request for comment to the public information office, but no response was received before deadline.

Broward Health Chairman David Di Pietro said the $1.27 billion hospital system paid the settlement with funds drawn from its $800 million in reserves.

INCENTIVES TO SETTLE

The documents, including a 115-page transcript of a confidential Aug. 20 meeting between Broward Health’s seven-member board of commissioners and its lawyers, show that a favorable payout number wasn’t the only incentive for Broward Health to settle.

Without an agreement, Broward Health faced the chilling prospect of prolonged and embarrassing litigation with the government seeking excess of $500 million in actual and punitive damages under the False Claims Act. Other risks included a possible expansion of the investigation to include more doctors and exclusion from federal health care programs – the so-called corporate “death penalty.”

“The vast majority of cases settle. They don’t want to run the risk of being kicked out of Medicare and Medicaid. Exclusion is just too big a threat,” Linda Baumann, a healthcare attorney with Washington’s Arent Fox law firm, told commissioners at the two-hour Aug. 20 meeting.

Commissioners, each appointed by Gov. Rick Scott, voted unanimously to settle that day after viewing a PowerPoint presentation outlining settlement talks and listening to Baumann’s colleague, attorney D. Jacques Smith, call the proposed $69.5 million penalty and a requirement that Broward Health establish a corporate integrity program, “very reasonable.”

The whistleblower investigation kicked off by Dr. Reilly’s False Claims Act lawsuit looked at alleged Medicare and Medicaid fraud that arose from overly generous contracts Broward Health gave to doctors who referred patients for tests and procedures. The federal Stark Law limits financial relationships hospitals may have with referring physicians.

In May 2011, federal agents subpoenaed 10 years of Broward Health’s records from 27 staff physicians. Over the next few years, the inquiry focused on nine doctors the Justice Department was “most interested in,” according to Smith.

Broward Health produced a total of 1.7 million documents. Included were internal emails that attorney Smith told commissioners “weren’t what Linda and I would call ‘best practices,’ okay?”

“Some of the documents we turned over, and some of the things we saw, frankly were troubling,” Smith said.

‘SMOKING GUNS’

But those weren’t Broward Health’s only problematic records. There were thousands of additional documents the government never saw because Broward Health’s lawyers claimed they were privileged due to attorney-client relationships or for other legal reasons.

If the case had continued, government investigators may have been able to get a look at those records. Here’s how attorney Baumann characterized them before the board: “You have documents that are on the privilege log that are not the greatest, but I really didn’t see a huge number of smoking guns.”

The law firm’s PowerPoint presentation provides a breakout by physician of the losses they caused to the government and the liability that resulted for Broward Health. The top five: cardiologist Violeta McCormack, $30.1 million; pediatrician Hector Rodriquez-Cortes, $11.2 million; pediatrician Rudolph Roskos, $9.2 million; cardiologist Michael Chizner, $8.5 million; and hematologist Shazia Zafar, $5 million. Dr. Zafar now works for Memorial Healthcare.

The nine doctors faced no regulatory action or penalties as a result of their involvement in the allege fraud scheme. “The irony of the Stark Law is that all the penalties are directed at the organization and not the doctors,” Baumann explained to Broward Health’s board.

Broward Health doctors with contracts that paid them annual salaries in excess of a million dollars took pay cuts last year when their contracts were renegotiated to make them “commercially reasonable.” Still, a bad taste remained for some commissioners.

“So what do we say, though, when somebody says that Dr. Chizner cost us $8.5 million and is still making $860,000 a year?” asked board chairman Di Pietro.

“Well, you have to be very confident that your current contract is totally squeaky clean,” replied Baumann.

Will Broward Health seek to recover those lost millions by filing clawback lawsuits against its physicians?

“We have not formally considered that option, but likely no,” said Di Pietro, citing legal reasons.

NO ADMISSION OF WRONGDOING

Broward Health, which received $146.1 million in property taxes last year, admitted no wrongdoing in the board-approved settlement. Still, Di Pietro and several other commissioners expressed concern about public accountability – with Di Pietro noting for the record that physician contracts used to be handed out in secret by the board chair, the chief financial officer and the chief executive officer.

“Is there any responsible party still at the district on an executive level?” Di Pietro asked.

“Not that I’m aware of, said Baumann. “To me, the fault lay in an inadequate legal staff to be honest…You just didn’t have hardly any lawyers. And this is a huge organization.”

Meanwhile, Broward Health, a medical safety net for Broward County, faces the prospect of having to pay extra millions for additional misconduct outside the scope of the settlement.

For example, attorney Baumann told the board that a coding audit of Broward Health’s medical records, apparently done by the Department of Health and Human Services, found “a 53 percent error rate” and “no indication of follow up.”

Overpayments to Broward Health from federal healthcare programs now must be returned.

“You know, that’s a million or two. It’s relatively small,” Baumann told commissioners.

Baumann added that Broward Health also is liable for various failures to make required disclosures to the government under the federal Stark Law. “There is going to be money that has to be paid under the Stark self-disclosure,” she said, without elaborating.

Broward Health Chief Executive Officer Dr. Nabil El Sanadi and Di Pietro declined to comment on the coding audit or the district’s other outstanding liabilities saying they were unfamiliar with those matters.

Further, the lawyers warned, Broward Health could face having to pay Florida millions of dollars if state Attorney General Pam Bondi decides to sue under the Florida False Claims Act to recover the state’s Medicaid losses from the scheme.

The Justice Department discussed the case with Bondi’s office in June, but Broward Health has not heard back from the state.

“I don’t think it’s likely,” said Baumann. Still, she said, it’s possible if Florida needs “some extra money, because it’s a relatively easy way.”

Asked Tuesday about Attorney General Bondi’s intentions, spokesman Whitney Ray said, “We plan to review the settlement for any needed action.”