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Delay in Fraud Case Put Patients at Risk

Mar 7, 2013

Dr. Steven Wasserman has entered the history books of health fraud. The Venice dermatologist recently agreed to pay $26 million to settle charges of Medicare fraud without admitting wrongdoing.

U.S. Attorney Robert O'Neill

It is one of the largest one-man settlements in the nation's history, a "watershed event," says Robert O'Neill, U.S. Attorney for the Middle District of Florida.

But it's also an example of just how long it can take to prosecute health fraud.  It took nine years from the time the government received the complaint from a whistleblower to bring the case to conclusion. The events in question go back 16 years.

The case, filed in 2004 under seal, remained secret until 2010. Wasserman's patients knew nothing about it. According to the charges, he performed thousands of unnecessary procedures -- biopsies and "adjacent tissue transfers," in which a flap of skin is stretched to cover a wound. The Medicare payment for such a procedure is higher than for a simple stitch closure.

"The number of flaps in Dr. Wasserman's practice was astonishing," said Jay Wolfson, attorney for the whistleblower in the case. "He was allegedly cutting on 70, 80 and 90-year-old  people and they didn't need to be cut on."

State health officials apparently had no idea there was an investigation going on; they listed Wasserman with a clear license and no complaints.

It can take years to build a health-fraud case, pawing through paper records and comparing billing codes to medical records,  prosecutors say. In the Middle District of Florida, which stretches from Naples to Jacksonville and encompasses half the population of Florida, it has been difficult to keep up with the caseload, O'Neill said in an interview conducted before the Wasserman case settled.

A nationwide hiring freeze for the Justice Department left the Tampa office down 20 percent on prosecutors until it was lifted temporarily so that O'Neill could hire five more last month. But now the automatic budget cuts from "sequestration" in Washington will inflict a 9 percent cut to the Department of Justice.

Employees, including FBI agents and prosecutors, will be required to take up to 14 days without pay between April 21 and the end of September. The furlough letters have already arrived, a spokesman for O'Neill's office confirmed Wednesday.

Even for a health-fraud case, nine years is a stretch; it's a mystery why the Wasserman case took so long. O'Neill's staff declined to discuss it, and neither Wasserman nor his attorney returned calls.  O'Neill was chief of the criminal division in the Tampa office at the time the whistleblower case was filed, but it is not clear whether the decisions on priorities were being made in Washington or in Tampa.

The  whistleblower, Tampa physician Alan Freedman, is keeping a low profile these days. But his attorney, Wolfson, agreed to talk about the case.

Jay Wolfson

Freedman, a pathologist, worked for Tampa Pathology Lab, and thus came to learn of an unusual billing procedure that enabled both the lab and Wasserman to boost their profits through a complicated arrangement. But it smelled funny to Freedman, and when he explained it to Wolfson, the attorney said it was a kickback agreement, and was illegal.

They drew up a complaint in 2003 and filed it in early 2004, under seal pending a decision by the Justice Department on whether to intervene.

"We expected it would take a couple or three years" to be resolved, Wolfson said. "The evidence was very strong."  Federal officials reviewed it and talked to Freedman. They appeared interested.

The following year, the FBI raided both the lab and Wasserman's office and hauled away documents, Wolfson said. But then nothing happened.

Meanwhile, Freedman was in limbo. He had left his job at the lab when he suspected it was involved in kickbacks. He couldn't talk about the case, which remained under seal.

Whistleblower, or qui tam, suits are brought on behalf of the taxpayers. If the whistleblower wins, he gets a portion of the proceeds.

The criminal division of the Justice Department gets first dibs on information the whistleblower provides. If it decides not to bring criminal charges, the civil division can intervene in the case on the side of the whistleblower. Or it can decline to get involved, at which point the lawsuit is unsealed.

Wolfson got tired of waiting for the criminal division of the Justice Department to make a decision. In 2008, he filed a petition in federal court -- behind closed doors, since the case was still sealed -- asking that the Department of Justice be forced to make a decision.

"We argued that (Freedman) had a right to a speedy trial," Wolfson said. "I asked the court to investigate the activities of the Department of Justice as it related to making progress on the case."

Senior U.S. District Judge Susan Bucklew agreed that Justice owed the whistleblower a decision, Wolfson said. "She admonished the department to stop dragging its legs."

But still nothing happened, so the next year Wolfson went back to the judge. Bucklew demanded an explanation for the delays. Attorneys from the Justice Department criminal division said they had tons of data to go through, and limited resources.

"We're doing the best we can," Wolfson recalled the attorneys saying. "The judge said, 'Do better.'"

Finally the civil division was given authority over the case, and it filed an amended complaint to intervene in the lawsuit. At that point, the case was unsealed.

The defendants sought dismissal of the case, but Judge Bucklew denied their motions in March 2011. Courthouse News offers a good summary of her decision. Tampa Pathology Laboratory and its owner, Jose Suarez Hoyos, settled shortly afterward for $950,000, according to records.

Of the $26 million that Wasserman has agreed to pay, about $4 million is expected to go to Freedman, the whistleblower.

--Health News Florida is a service of WUSF Public Media. Contact Carol Gentry at 727-410-3266 or cgentry@wusf.org.