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A health care industry entrepreneur and a registered nurse are using a Civil War era law to accuse Palm Beach County, Fla.’s JFK Medical Center of fraudulent Medicare and Medicaid billing practices involving “thousands of patients and millions of dollars” since 1993. Gary D. Carroll, owner of Palm Beach Pain Medicine Inc., and Carol Nicholas, a former manager of JFK Medical Center’s outpatient surgery department, who today works for Carroll, are hoping to collect a hefty whistleblower’s bounty. Carroll and Nicholas would get a portion of any wrongly paid Medicare and Medicaid money that they help the U.S. government or the state of Florida recover. The central allegation by Carroll and Nicholas: The 387-bed hospital located in the city of Atlantis, Fla., falsified bills to Medicare to make it appear that pain treatments for patients — covered only minimally by Medicare — were actually for more lucrative services with higher reimbursements, such as surgery. “The amount of reimbursement from Medicare for pain management procedures performed on patients is so low that no hospital can afford to provide them,” says Carroll and Nicholas’ False Claims Act lawsuit filed in U.S. District Court in West Palm Beach, Fla. “However, billing pain management through Surgical Services as OR (operating room) procedures utilizing anesthesia [billing] codes, as defendants do here, produces huge revenues.” According to the complaint, Medicare and Medicaid patients account for approximately 60 percent of the 250 to 300 pain patients treated monthly at JFK Medical Center. Hospital computer records cited in the complaint also allegedly show “tremendous” monthly pain treatment revenues of $400,000 to $600,000 per month. It costs the hospital $300,000 a year to run its pain management department, the complaint says. “The improper use of the OR anesthesia codings adds approximately $3,000 additional to each procedure,” the complaint says. JFK Medical Center is the focus of the 18-page complaint filed under seal 14 months ago and only recently made public. “It’s our policy not to comment on things of a legal nature,” says JFK Medical Center spokeswoman Madelyn Passarella. The hospital has not yet retained counsel, because it has not yet been served legal notice of the case, Passarella says. HCA, the nation’s largest hospital chain and owner of JFK Medical Center, has previously been accused of fraudulent billing practices. In January 2001, HCA entered into the largest government fraud settlement in history. HCA paid $840 million in criminal fines and civil damages for defrauding government health care programs in Florida and elsewhere in the early to mid-1990s. HCA owns 41 hospitals in Florida, including 13 on the southeast coast from Fort Pierce to Miami. Other large civil claims alleging different frauds dating back to when the company was known as Columbia/HCA are pending against HCA in federal court in Washington, D.C. Lawsuits under the federal False Claims Act are also known as qui tam actions. “Qui tam” is an abbreviation of a Latin phrase that Black’s Law Dictionary translates to “who sues on behalf of the King as well as for himself.” The False Claims Act was enacted in 1863 to fight profiteering in the sale of supplies to the Union Army. It assessed heavy damages against wrongdoers, and awarded a percentage of those damages to informants who sued and recovered misspent money on behalf of the government. In the late 1980s, the act was modernized by Congress, which installed protections for people bringing claims against companies that do business with the government. Today, the act protects “relators,” as those who file such suits are known, from retaliation from employers, and guarantees the payment of regular hourly fees to their attorneys if successful. Florida, which is involved in this case because it pays hospital bills for poor Medicaid patients, has its own False Claims Act. The complaint against JFK Medical Center by Carroll and Nicholas, brought in the name of the U.S. government, was unsealed in January by Senior U.S. District Judge Kenneth L. Ryskamp of the Southern District of Florida, after the Justice Department chose not to intervene in the prosecution of the case. A decision to intervene would have meant that the government would have taken over the prosecution. The government cited no reason for declining to intervene, but possible explanations include concerns about the evidence, the cost-effectiveness of prosecution, or a lack of available investigative resources in the wake of Sept. 11. Court filings, however, suggest the Justice Department has at least some confidence in the accuracy of the allegations. Prosecutors could have asked Ryskamp to dismiss the lawsuit, but did not. And in court papers, Fort Lauderdale Assistant U.S. Attorney Marcella Cohen Auerbach, Justice Department civil attorney Diana J. Younts and Fort Lauderdale Deputy Florida Attorney General Rochelle Brahm reserved the right to change course and intervene “at a later date.” Also, they agreed to allow Carroll and Nicholas to “maintain the action in the name of the United States” and asked Ryskamp not to dismiss the litigation without telling them. First Assistant U.S. Attorney Barry Sabin declined comment. Brahm did not return three phone calls seeking comment. Meanwhile, the lawsuit proceeds without the government’s involvement. The Palm Beach lawyer for Carroll and Nicholas says his clients have a decision to make. “They may decide that if the government isn’t willing to carry the ball they don’t want to go forward,” says attorney Gary W. Roberts. “On the other hand, if they do carry the ball and prevail, they’ll get a higher percentage of the recovery than if the government carried the ball.” Roberts said Tuesday he has yet to speak with government prosecutors about the case. Any bounty paid by the government on money recovered from claims in which it intervenes is 15 percent to 25 percent. That bounty rises to 25 percent to 30 percent of any recovery if individuals prosecute cases without the government. Florida’s False Claims Act uses the same percentages. Whatever their decision, says Roberts, his clients stand by the accusations they have made to government prosecutors. Roberts declined to discuss the substance of those allegations. Carroll and Nicholas, who assert “direct and independent knowledge upon which this suit is based,” each have more than 20 years of experience in the health care business. That includes Carroll’s work operating various pain medicine businesses, and similar work by Nicholas as a manager of a pain center and the outpatient surgery department at JFK Medical Center, the complaint says. While the complaint alleges JFK Medical Center has engaged in fraudulent billing practices since its pain center was established in 1993 — two years before it was acquired by HCA — it mostly involves alleged wrongdoing that followed certain policy changes by Medicare. No specific allegations of earlier wrongdoing are addressed in the complaint. Those changes, which took effect in January 2000, sought to eliminate pain management procedures at hospitals by altering the way doctors and hospitals are reimbursed for that work. Before those changes, most pain management procedures were done at hospital outpatient surgery centers, and Medicare often had to pay an extra “facility fee.” The reimbursement overhaul changed that by slashing Medicare payments for such fees, and paying a premium to doctors who performed pain management services in their private offices, the complaint says. To get around that, the complaint says, JFK Medical Center billed pain management procedures through its Department of Surgical Services. Carroll and Nicholas say in the complaint that they first learned of the billing practice from a physician who told them the hospital was making a lot of money from pain treatment “through its relationship with PBAA.” PBAA is identified as Palm Beach Anesthesia Associates, a pain management practice that has contracted its services to JFK Medical Center for more than 20 years. PBAA, also known as Dellerson Anesthesia Group, is a defendant in the case along with JFK Medical Center and HCA. The lawsuit, however, does not cite any specific incident to illustrate the allegation PBAA was involved in alleged Medicare fraud. It was from PBAA that Carroll purchased Palm Beach Pain Medicine in June 1999. According to the suit, PBAA conspired with the hospital it worked for to submit false claims to the government. The lawsuit did not elaborate further. No representative of PBAA returned three telephone calls seeking comment.

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