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Medicare Fraud Suit Can Head to Trial, Judge Says

TAMPA, Fla. (CN) - A federal judge refused to dismiss a false claims lawsuit that accuses a dermatologist and pathologist of using kickbacks to overcharge Medicare by more than $13 million.

In a 2004 sealed complaint, Dr. Alan Freedman claimed that his former boss, pathologist Jose Suarez Hoyos, had been paying kickbacks to a local dermatologist, Steven Jay Wasserman, since 1997 to increase Wasserman's referrals of Medicare patients to the Tampa Pathology Laboratory. In exchange for referrals, Suarez let Wasserman bill Medicare for the lab's biopsy-reading services.

According to the amended complaint, filed by the United States in October 2010 after it intervened in the suit, Wasserman would collect biopsy specimens from patients and send them to Suarez's lab for interpretation, a pathology report and diagnosis. Wasserman would then bill Medicare for the interpretation of the slides, omitting the fact that he had not done the work. The lab hid the fraud by preparing pathology reports with a signature block for Wasserman, suggesting he had interpreted the slide and drafted the report, according to the complaint.

Wasserman submitted more than 35,000 claims to Medicare and received more than $3.5 million in reimbursements for the slides he outsourced to the lab, the government says. Meanwhile, Suarez and the lab submitted the same number of claims to Medicare using a code that indicated they had only performed the slide preparation, and not the reading, according to the complaint.

Although the lab was not billing Medicare for its full work, the government says it was benefitting from Wasserman's referrals and received $3.9 million in Medicare reimbursements.

Wasserman also sent specimens of non-Medicare patients to the lab and subsequently billed the patients' private insurance for readings he never performed, the complaint states. While Medicare reimbursed Wasserman around $50 on average per slide, private insurers paid him nearly twice as much for each slide he claimed to have read.

The government claims Wasserman also performed medically unnecessary biopsies on his patients. In 1997, the year Wasserman allegedly reached a kickback agreement with Suarez, Wasserman performed nearly twice as many biopsies as he had in each of the previous six years, the complaint states.

Wasserman also allegedly "up-coded" Medicare by billing for time-consuming procedures and evaluation-and-management services he had not provided. Since 2000, Medicare reimbursed Wasserman more than $1.9 million for more than 37,000 claims he submitted using a code that applies to such services, according to the complaint. It also paid the dermatologist more than $4.1 million for at least 6,000 time-consuming tissue transfers he claimed to have performed.

Wasserman had billed Medicare for such procedures at least 36 times more often than his peers and claimed to perform more than 24 hours a day of surgical time, the government claims.

After Wasserman and Suarez moved to dismiss the government's complaint, U.S. District Judge Susan Bucklew refused on March 18. She rejected Suarez's argument that the government's complaint lacked specificity regarding Wasserman's and Suarez's agreement, noting that the government provided dates, identified parties and described the substance of the agreement.

Bucklew ruled that the government did not need to establish the actual number of referrals to the lab before and after 1997 to establish that the kickback agreement increased the lab's business. She added that the government had established that Suarez and the lab intentionally violated the Medicare anti-kickback statute.

The court also disagreed that Wasserman could have legally billed Medicare for reading biopsy slides as long as he actually reviewed the specimens and made his own diagnosis, pointing out the government said Wasserman never reviewed the slides.

Bucklew also found that the government adequately pleaded it suffered injury by paying Wasserman's false claims. Even if the lab did not pay Wasserman, the "free" pathology reports would count as remuneration under the anti-kickback statute, the judge ruled.

Though the government's amended complaint has come after the statute of limitations expired, the suit is not barred because the whistleblower's original 2004 complaint was timely, Bucklew added.

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