Florida Dermatologist Settles False Claims Act Lawsuit for $26.1 Million

The Department of Justice (DOJ) recently announced one of the largest False Claims Act settlements with an individual, resolving allegations that a Florida dermatologist was performing medically unnecessary surgeries on Medicare patients and participating in an illegal kickback scheme.  Dr. Steven J. Wasserman, whose practice is in Venice, Florida, agreed to pay the government an astounding $26.1 million to settle the case.

According to the DOJ, the fraudulent activity began in or around 1997, when Dr. Wasserman first arranged an illegal kickback scheme with Tampa Pathology Laboratory (TPL) and its owner, Dr. Jose Suarez Hoyos. Since that time, the number of patients affected and the amount of fraudulently collected Medicare reimbursements has grown exponentially.

The Case Whistleblower

Details of the False Claims Act violations originally came to light when a former TPL employee came forward with critical information about the fraudulent activity. Dr. Alan Freeman worked as a staff pathologist for TPL from 2000 to 2003. After consulting with a False Claims Act attorney in 2004, Dr. Freeman chose to file a whistleblower complaint under the qui tam provisions of the False Claims Act. With the necessary details provided by Dr. Freeman, the government was successfully able to expose a multi-million dollar Medicare fraud scheme involving Dr. Wasserman, TPL and Dr. Hoyos.

Medically Unnecessary Surgeries

According to the DOJ, Dr. Wasserman allegedly performed thousands of medically unnecessary skin surgeries on his patients in order to increase his overall revenue. The bulk of these surgeries, known as adjacent tissue transfers or “local flaps”, were performed on Medicare patients. Dermatologists utilize adjacent skin transfers after removing certain skin defects, such as cancerous lesions or benign growths. It is a common procedure among patients age 60 and over, making it easily justifiable for Dr. Wasserman to submit reimbursement claims to Medicare.

When performing an adjacent skin transfer, a physician surgically transplants a section of healthy skin onto a skin defect. This is done by simply cutting a flap from the healthy skin lying directly adjacent to the defect. The healthy tissue is then folded or “flapped” over the skin defect and sutured into place, forming a protective covering.

According to the complaint, Dr. Wasserman allegedly performed thousands of these unnecessary adjacent skin transfers and received around $6 million in Medicare reimbursements.

Kickback Scheme

In addition to performing unnecessary procedures for financial gain, Dr. Wasserman was also accused of concocting an elaborate illegal kickback scheme with TPL and Dr. Hoyos. Dr. Wasserman agreed to send all of his skin biopsies to TPL for testing and diagnostic purposes, while TPL provided Dr. Wasserman with pathology reports that included a diagnosis and a blank signature line at the bottom. TPL performed all of the pathology reports and let Dr. Wasserman sign them after they were completed, passing off the diagnoses as his own and collecting Medicare reimbursements for procedures he never performed.

According to the DOJ, Dr. Wasserman also performed a massive number of medically unnecessary skin biopsies on his patients in an effort to increase his referrals to TPL. In fact, TPL and Dr. Hoyos previously reached their own settlement with the government in relation to the allegations contained within the same False Claims Act lawsuit. According to the settlement, TPL and Dr. Hoyos will pay $950,000.

For his willingness to come forward and file his own False Claims Act lawsuit on behalf of the United States, Dr. Freedman’s share of the settlement will be just over $4 million.

“Doctors who take illegal kickbacks and perform unnecessary procedures not only put their own financial self-interest over their duty to their patients, they raise the cost of health care for all of us as patients and as taxpayers,” said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Civil Division of the Department of Justice. “The Department of Justice will not tolerate those who abuse the public health care programs to which we all contribute and on which we all depend.”