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Feds say UM hid inflated charges from patients in $22 million settlement over Medicare fraud

The University of Miami fraudulently billed millions to the Medicare program for unnecessary transplant lab tests and inflated doctors’ fees even after federal regulators had caught UM hiding the higher charges from patients, the Justice Department said as it released a settlement agreement with the school.

The agreement, signed this spring to resolve false claims allegations in whistle-blower lawsuits, requires UM to pay about $22 million to the federal government, with half of that total going to the taxpayer-funded Medicare program for the elderly and disabled. The university must also pay the state of Florida about $325,000 under the terms, with half of that amount going to the Medicaid program for the indigent.

Jackson Memorial Hospital, which has a joint operating agreement with UM’s medical school to provide doctors and other services including organ transplant lab tests, must also pay $1.1 million to the federal government, according to the agreement.

The Justice Department’s Monday announcement solidified a settlement proposal that had been reached with the Coral Gables university in January of last year and brought to the attention of a Miami federal judge on Election Day last November. It took months to resolve all the terms, including a corporate integrity agreement designed to prevent the UHealth system and UM’s own hospital from filing false claims with Medicare again.

In a statement, the university downplayed the settlement, saying the agreement resolved nearly decade-old claims “stemming from certain past administrative practices, including billing notices at UHealth’s outpatient clinics and lab testing protocols at its transplant center.” School officials also asserted that “UHealth’s best-in-class quality of care was never in question.“ The Justice Department did not comment on that issue in the 15-page settlement or a separate press release.

The Justice Department began investigating the allegations after they were first raised by the former chief operating officer of the UM Miller School of Medicine, Jonathan “Jack” Lord, who filed a whistle-blower lawsuit in 2013. Lord, who was forced out by former UM President Donna Shalala, is expected to receive about $4 million of the settlement as a reward for initiating the suit against his former employer.

Lord accused the university of filing false claims with Medicare for unnecessary lab tests on kidney transplants and overcharging patients for clinic visits during a period when UM was struggling with massive debt after undertaking an ambitious transformation of the medical school into a sprawling academic healthcare system under Shalala.

After leaving UM, Shalala was elected as a Miami congresswoman in 2018 but the Democrat was defeated in a surprising upset in her race for reelection last November. In March, UM announced that Shalala, who had served two terms as the U.S. Health and Human Services secretary in the Clinton administration, rejoined the school as a professor teaching a class on the politics of health policy.

The whistleblower’s lawyer, Jeffrey Sloman, a former U.S. attorney in Miami, issued a statement condemning UM’s fraudulent billing practices and unnecessary lab tests, singling out Shalala as having created the Medicare regulations on hospital facility fees that the university was found to have flouted by the Justice Department.

“Tens of billions of dollars are lost annually to fraud, waste and abuse and Miami is the Medicare fraud capital of the United States,” Sloman said. “Today’s announced settlement and the schemes described in the DOJ press release are ironic considering they were committed by an iconic South Florida institution under the leadership of the former Secretary of Health and Human Services, the very agency that promulgated the Medicare rules that were violated.”

Shalala could not be immediately reached for comment. She was not named as a defendant in Lord’s false claims act case and two other whistle-blower suits later filed by ex-UM professor and chief of clinical pathology, Dr. Philip Chen, and Joshua Yelen, a former administrator for UM’s pathology department. (They are expected to receive a portion of UM’s and Jackson’s settlement payments to the Justice Department.)

Shalala’s role as UM’s former president during the expansion of the university’s medical school and healthcare system — including the purchase of the former Cedars of Lebanon hospital in 2007 — was a factor into the former employees’ claims.

One of the central claims in Lord’s lawsuit focused on a “facility fee” that UHealth charged at outpatient clinics and doctors’ offices within its network in South Florida — billing for use of the facility in addition to the physician’s services without properly notifying patients and federal regulators of the surcharge.

Medicare rules require UHealth to notify patients and federal regulators in writing of any facility-fee surcharge added to a regular medical bill. UM claimed it posted notices and informed patients of the additional charge. But Lord’s suit alleged that UHealth failed to disclose to patients the range of extra costs totaling hundreds of dollars for each clinic or office visit, as required by Medicare.

The facility fee rules allowing hospitals to charge patients extra for care at off-site clinics and doctors’ offices were written more than two decades ago during the Clinton administration towards the end of Shalala’s term as HHS secretary. With proper licensing and notification, Medicare allows such extra fees at outpatient facilities located within 35 miles of a healthcare network’s main hospital. UHealth, for example, has a Sylvester Cancer Center in Deerfield Beach, where it charges the facility fee.

During the course of their investigation, Justice Department lawyers and HHS investigators found that the university’s healthcare network was overcharging patients from 2009 to 2015 for facility fees even after Medicare regulators had warned UM officials about the unlawful practice.

“Here, the government alleged that UM converted multiple physician offices to hospital facilities, and then sought payment at higher rates without providing beneficiaries the required notice, even after being advised by a Medicare administrative contractor that its notice practices were deficient,” the Justice Department said in a news release.

In addition, Lord’s complaint alleged that another questionable billing practice began in 2008, when UM’s pathology services for organ transplants at the Miami Transplant Institute were placed under the control of the medical school’s surgery department, at the time headed by Alan Livingstone, a cancer surgeon. A turf battle erupted between the hospital’s surgery and pathology departments, who argued over the number of transplant lab tests for patients and who should oversee them, according to internal emails and documents reviewed by the Miami Herald.

Livingstone, backed by Shalala, prevailed and the lucrative service stayed under his oversight.

Lord’s suit claimed that the university’s pathology services at Jackson submitted bills to Medicare for thousands of “unsigned and unrequested” lab tests involving kidney and other transplant services. The practice, which ran through 2017, generated millions of dollars in revenue for the surgery department as well as salary bonuses for Livingstone, the suit claims.

Livingstone’s attorneys, David O. Markus and Margot Moss, rebuffed Lord’s accusations of wrongdoing when the settlement proposal was disclosed last November, calling UM’s agreement with the Justice Department a “shakedown.”

In the news release announcing the final settlement, Justice Department lawyers said the university’s doctors controlled Jackson Memorial Hospital’s “decision to purchase pre-transplant laboratory tests from UM at inflated rates in exchange for UM’s surgeons and Department of Surgery continuing to perform surgeries at JMH.”

The UM case, which took eight years to finalize, was led by civil divisions at the Justice Department and U.S. Attorney’s Office in Miami, along with Health and Human Services’ Office of Inspector General and other government agencies.

Miami Herald staff writer Daniel Chang contributed to this report.