Deeper Than the Headlines: Oncology Billing Fraud

In January of 2012, Collen Herren, former clinical nursing director for specialty clinics at Marshall Medical Center (Placerville, CA), filed a lawsuit (Case 2:12 -cv-00098-JAM-KJN) under the False Claims Act in U.S. District Court for the Eastern District of California. More than 4 years later, the Department of Justice announced a $5.5 million dollar settlement. 26%, or $1.4 million, of the settlement was awarded to Ms. Herren. In addition to Marshall Medical Center, four other defendants were named in the suit. They included the Marshall Foundation for Community Health, El Dorado Hematology and Medical Oncology, Dr. Lin H. Soe and Dr. Tsuong Tsai.

According to court documents, Ms. Herren was hired in June of 2010 to supervise Marshall’s oncology clinics. She alleges that after making repeated attempts to bring Marshall in compliance with billing requirements, she was terminated in December of 2011. She alleges that the Chief Executive Officer, Chief Operating Officer, Chief Nursing Officer and the VP of Specialty Care Services of Marshall, were made aware through written memoranda and oral conversations that Marshall was illegally billing government healthcare programs for certain hematology and oncology services but they refused to correct the non-compliant practices. Ms. Herren alleged that no corrective action was taken even after hospital officials were warned by Ms. Herren, the hospital’s highest level compliance official, and by managers of the hospital’s pharmacy.

Key to the allegations, is the requirement of direct supervision by a physician or other practitioner when chemotherapy, infusions and other injections were provided to patients. Because the Hematology/Oncology Center was an “off campus” facility of the hospital, “direct supervision” means that the physician or nonphysician practitioner must be immediately available to furnish assistance and direction throughout the performance of the procedure (see 42 CFR 410.27(a)(1)(iv)(A). “Immediately available” means that the physician could not be performing other uninterruptable procedures at the same time, and “remotely available” by phone or other telecommunication did not count. Therefore, the hospital could not be entitled to payment for services which required a physician to be “immediately available” if the physician, in fact, was not immediately available.

Ms. Herren alleged that chemotherapy, infusion procedures and some injections (such as Procrit, Neupogen, Neulasta and Xgeva) were provided on a daily basis without the presence of a physician in the area, nor anywhere near the facility.

Additionally, the types of drugs and medications administered to oncology patients often come in single-use or single-dose vials (SDV). If not all of the drug in the SDV was used on a single patient, government payment policy allowed billing for the amount of drug that was “wasted.” For example, if a SDV contained 100 mg of a drug, but a patient only needed 95 mg then 5 mg would be wasted. But billing rules allowed for specific mechanisms and code modifier usage so the facility could bill for all 100 mg of the drug.

Ms. Herren alleged that the SDVs of drugs were routinely double billed to the government by rounding up the amounts used for such drugs when billing them. For example, if a 100 mg vial was split between two patients, each receiving 50 mg, then the government would be billed for 100 mg of drug for the first patient and 100 mg of drug for the second patient. In other words, both 50 mg doses were rounded up to 100 mg. The government was billed for a total of 200 mg of drug when only a 100 mg vial was used. In other cases, they billed the wasted amount appropriately, but the hospital used the amount on another patient. For example, if 460 mg of a 500 mg vial of a drug was used on one patient, the remaining 40 mg was billed as “wasted” but it would actually be used on a second patient and then billed on that second patient’s claim too. Thus, for a 500 mg vial of drug, 540 mg was ultimately billed to the government over the course of treating two patients.

The last allegation included the billing of physician visit codes (CPT code 99214 or 99215) when the physician was not actually present. Ms. Herren alleged that Drs. Tsai and Soe, after initially having an office visit with patients, billed a second physician visit code for patients referred to Marshall’s hospital clinic for performance of blood transfusion treatments, despite the fact that no physician actually saw those patients at the hospital while the treatments were occurring there. 

The lawsuit outlines numerous allegations of communications amongst hospitals executives, the physicians and the compliance officer. The compliance officer even sent a memorandum to the physicians and copied the hospital’s executive leadership. It stated, in part: 

"Marshall's Executive Leadership has requested that I provide you some regulatory information regarding Medicare's conditions for coverage and payment of therapeutic services provided in the Hematology/Oncology clinic and the corresponding requirement for physician supervision of these services." It then goes into exhaustive detail for several pages citing and quoting regulations and Medicare guidance explaining that physicians need to be "immediately available" for the procedures occurring at the Center. The memorandum concludes by stating: As you can see from the sources I have quoted, supervision of outpatient services is an important payment requirement for hospitals. Medicare believes that this is one way to ensure it is purchasing a minimum level of safe, quality care for its beneficiaries.” 

Shortly after, it is alleged that Drs. Soe and Tsai sent a memorandum in reply stating: 

“We have had discussions about this numerous times in the past 8-10 months; with various people-Colleen Leger, Rick Vance, Shannon Truesdell, Cathy Krejci-at various forums-board meetings, post Root Cause Analysis (RCA) meeting, and now at cancer committee. Our response has always been the same. Infusion room has twelve chairs. If fully staffed and efficiently scheduled it can easily be used to treat three to four patients per chair, totaling 36 to 48 patients a day at current level of physician coverage. Our chemotherapy infusion volume is averaging only 6-10 day currently. So we are utilizing less than one-third of its capacity. Therefore, our conclusion is that it is not a coverage issue, it is an efficiency issue. We hope that this letter will once and for all put a stop on this issue. We will be open for discussing physician coverage when the infusions clinic starts treating larger numbers of patients in infusions room, i.e. more than 36 patients per day.” Ms. Herren alleged that her email demonstrated the physicians’ lack of coverage and their concern for money over patient safety.

From court documents, it appears that the compliance office was concerned. The compliance officer allegedly sent Ms. Herren and hospital leadership an email entitled, “recent development.” The email included emphasis from the compliance officer, “Hospital Settles False Claims Act Case Re: Physician's Supervision.” It then contained details about a hospital in Michigan that had settled a False Claims Act case where "chemotherapy had been administered at an oncology center without appropriate supervising practitioner present." 

False Claims Act cases are fact-specific. In this settlement, the defendants did not admit liability for the alleged false conduct. However, reading the court documents can often provide additional insight that is deeper than the headlines. Compliance programs that want to avoid similar settlements should study these type of documents and consult with experts on how to implement effective compliance programs.