Six physicians paid $390,000 late last month in what HHS' inspector general's office called the most significant use yet of the agency's authority to impose civil monetary penalties for violations of the Medicare antikickback law.
Five of the six settled civil charges stemming from an ongoing criminal investigation involving Clearwater Clinical Laboratory and several other diagnostic services companies. The probe has led to more than 20 criminal convictions of Florida doctors and owners of the companies since it began in 1996.
The investigation is evolving into a series of civil cases that could exceed 100 settlements.
Though the inspector general's office would not disclose the number of pending cases, the former assistant U.S. attorney who first prosecuted the cases criminally said his investigation turned up the names of more than 500 doctors receiving or paying kickbacks. No hospitals have been implicated in the investigation.
Edgar Bueno, associate counsel with the inspector general's Office of Counsel, said there was no criminal release for the doctors signing the settlements, meaning they still could face criminal prosecution. Under the civil settlements, the six physicians admitted no wrongdoing.
"That's up to the U.S. attorney to determine," Bueno said.
He said the settlements mark only the second time since the inspector general received the authority to impose civil monetary penalties in 1997 that the agency has used it.
"This is the first real wave of significant settlements and what's unique is that it comes on the heels of a criminal prosecution," Bueno said. "We hope the message gets out there: That even if a criminal investigation is winding down, the administrative penalties could still be looming."
The doctors settling with the inspector general included Jai Rhee, M.D.; Mohammed Kadiwala, M.D.; Nickolas John Collucci, D.O.; Hugo Scavino, M.D.; Elbert Barnes, M.D.; and Joseph Fortunato, M.D., all of whom denied legal wrongdoing through the settlement agreements. Collucci paid the smallest fine, $16,500, and Barnes paid the largest, $150,000. Kadiwala also agreed to be excluded from Medicaid and Medicare for four years. The Balanced Budget Act of 1997 authorized the inspector general to impose civil monetary penalties of up to $50,000 per kickback offered, paid or received, plus triple damages.
The defendants allegedly accepted kickbacks from Clearwater Clinical Laboratory, another lab, Somed Co., and a series of diagnostic centers from 1992 to 1998 in exchange for patient referrals. Those alleged kickbacks included companies paying physicians higher than market-value monthly rent for office space in physician offices, paying for physician office staff or phony consulting work. Former assistant U.S. attorney in Tampa, Fla., Gary Montilla, now retired and in private practice there, led the criminal investigation.
Montilla said the investigation began several years ago with a confession by a franchise owner from a company called Florida Impotence Clinics, a now-defunct chain of 10 clinics offering impotence treatment. Owners paid $50,000 for the franchise, Montilla said, but built into the revenue stream and franchise agreement were kickback agreements with at least two diagnostic or clinical lab companies, which paid as much as $400 per patient for referrals. Those clinics, in turn, billed Medicare thousands of dollars per patient for often unnecessary tests, he said.
Montilla said the U.S. attorney investigated the clinics and found they were paying kickbacks to multiple physicians, many of whom also collected kickbacks from other clinics paying additional doctors.
"It's the train on the circular track, with the engine as the caboose," he said.
Gabriel Imperato, a healthcare defense lawyer with the Fort Lauderdale, Fla., office of Broad & Cassell, said the Clearwater investigation has dramatically affected the medical community in the Tampa Bay area.
Imperato, who has represented at least one of the defendant physicians in this investigation and the Florida Impotence Clinics case, said the government's move from criminal to civil was appropriate.
"The criminal remedies are a little heavy-handed for the behavior in some cases," he said. "If the goal is to precipitate a deterrent effect, they can do that without criminal indictments by using civil monetary penalties and the exclusion authority. Those are still very serious sanctions, especially for physicians. And they are having a deterrent effect."