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    "It's a physician's duty to expose fraud if he suspects it"

    "It's a physician's duty to expose fraud if he suspects it"

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    By Berkeley Rice, Senior Editor

    That's the belief of dermatologist Andrew Hendricks (below), who blew the whistle on a giant lab. After several tense years, his lawsuit reaped $182 million for the Feds.

    Click here to view full-size graphic

    To encourage private citizens to unearth health fraud, the federal government now offers a bounty of up to $1,000 to patients who report deceitful Medicare billing. But anyone--including a physician--can file a whistleblower or qui tam suit on behalf of the government against those suspected of health fraud.

    The government, which is stepping up its antifraud efforts with new vigor and increased funding ("The search for Medicare fraud," Medical Economics, June 21, 1999), also offers whistleblowers a healthy share of whatever it recovers in these cases.

    The stories behind many whistleblower suits never get told. This one is being told now, three years after the suit's conclusion, because a key figure has finally agreed to talk in detail about his role. --The Editors

    In 1996, the federal government settled a false claims case against the nation's largest chain of clinical laboratories for a whopping $182 million. The whistleblower who filed a vital qui tam suit in that case was Andrew Hendricks, a dermatologist in a small town in southeastern North Carolina. His outrage at the laboratories' billing practices and his tenacity in pursuing the case were essential to the final result.

    Until recently, for reasons of privacy, Hendricks, now 51, has been reluctant to talk publicly about his role in the case. But he agreed to tell his story to Medical Economics because he wants to encourage other physicians who suspect health fraud to follow his example. In fact, he's set up his own organization to help would-be whistleblowers.

    The following account is based on interviews with Hendricks and his lawyer, details gleaned from his suit and the settlement, and comments from government officials involved in the case. The defendants declined a request for interviews, but did review and comment on an early draft of this article.

    A new Medicare policy opens the door for labs

    For many years, Hendricks routinely sent blood samples to Roche Biomedical Laboratories and National Health Laboratories, two of the largest chains in the country. In the late 1980s, to encourage doctors to send it more business, Roche began offering panels of tests at prices much lower than if the tests were ordered separately. For example, Roche charged Hendricks $10.30 for its standard diagnostic multi-chem profile, which included about 20 different blood tests. The company offered a more comprehensive package of tests called "executive profile" for $14.70, which included CBC and urinalysis.

    Hendricks took advantage of this offer and switched much of his lab business to Roche. In August 1991, however, while going over some lab reports, he noticed that Roche's executive profile included a TSH test that he hadn't ordered. He had his nurse tell the company not to do the TSH test unless he specifically ordered it. Several months later, he saw that Roche was still doing the TSH test without his request.

    About the same time, Hendricks discovered that Roche was routinely adding a test for HDL cholesterol whenever he ordered the standard multi-chem profile. Since that panel already included a test for total cholesterol, he felt the additional HDL test wasn't necessary. "If the patient had a history of heart disease or high cholesterol, I might have ordered that extra test," says Hendricks. "But only then."

    The next time Roche's sales rep showed up, Hendricks complained about the unnecessary tests. As he recalls, the rep told him, "What are you worrying about? They're not costing you anything."

    Technically, that was true. Hendricks would typically pass those bills on to the patient's health insurer, adding a fee to cover his interpretation and evaluation of the test reports. However, he never saw the lab bills for his Medicare and Medicaid patients, who constituted the majority of his practice. Roche would send him their test reports, but bill the government directly.

    Under this new arrangement, neither the doctors nor their Mediplan patients saw the lab bills unless a problem developed. In December 1992, one of Hendricks' patients came to him with a bill from Roche that had been rejected by Medicare. Hendricks saw that Roche was charging Medicare far more than the lab was billing him for the same panel of blood tests. "What they had done," he explains, "was to unbundle the individual tests and charge for them separately, including the ones I hadn't ordered."

    A call to the fraud hotline, but does anyone care?

    Unsure whether that was a solitary clerical error, Hendricks called Medicare to request copies of Roche's blood test bills for some of his patients. He was told that Medicare "cannot share that information with physicians."

    Hendricks consulted several colleagues, but none had noticed any overbilling by the labs. He also called experts at Johns Hopkins Medical Center, where he'd done his residency, to ask if there were medical grounds for doing HDL and thyroid tests on every patient. They told him No.

    In December 1992, Hendricks called North Carolina's Medicare fraud hotline to report his discovery. "They told me they were too busy to deal with my complaint," he recalls. He next called the national Medicare hotline, but the phone just rang and rang.

    Hendricks was plagued by self-doubt: "I wasn't sure this was really a case of fraud," he recalls, "and I didn't want to make false accusations. Even if it was fraud, I wasn't sure I could stop it. But I also believe in the Hippocratic oath, and in doing the right thing. If the company was doing this to patients all over the country, then I believed they were stealing the taxpayers' money, and someone had to stop it."

    A little-used law gives the doctor an opening

    In January 1993, Hendricks read an article about health fraud that mentioned qui tam suits filed by individuals on behalf of the government. The article mentioned a New York City law firm of Getnick & Getnick, which specializes in such cases. "I had never heard of qui tam before," Hendricks recalls, "and I had no idea how complicated and how long a process it could be. But it sounded appropriate for my case because it compels the government to pay attention when a private citizen files a suit."

    Hendricks met with attorney Neil Getnick, who asked him to send whatever documentation he had to back up his fraud claim. "Dr. Hendricks gave us enough evidence to convince us the case was worth pursuing," says Getnick, "but we asked him to gather more, as part of our investigation. For a successful qui tam suit, we needed enough to persuade the government to join the case."

    At Getnick's request, Hendricks went through his charts and checked Roche's lab test reports for about 100 Medicare and Medicaid patients over the preceding year. He found that Roche had done the extra HDL or TSH tests on most of them. He then asked several patients to write to Medicare and ask for copies of those bills. "I had to help some of them do it," he says, "because it was a complicated process."

    When those patients brought in the copies of their test reports, Hendricks saw that Roche was routinely charging the government $20.90 for each TSH test and $12.50 for each HDL test, even though he hadn't ordered them. There was more involved than unnecessary tests, however.

    As Hendricks discovered, Roche was billing Medicare $138 for each executive profile, more than nine times the $14.70 it was charging him for the same test panel. For the multi-chem profile, Roche was charging Medicare $46.50, vs $10.30 when billing Hendricks directly. One reason for the higher prices was that when billing Medicare, Roche was unbundling the charges for the different tests, instead of including them all under one fee, as the lab did when billing doctors directly.

    In August 1993, Hendricks attended an educational seminar in Orlando--sponsored in part by Roche Biomedical Labs--on diagnosing and treating thyroid conditions. At that conference, Roche's medical director introduced the main speaker, an endocrinologist who described himself as a Roche consultant. While admitting that the American Thyroid Association does not recommend thyroid screening for every patient, the speaker insisted that Roche's executive profile panel, including the TSH test, was so inexpensive that it made sense to screen everyone.

    The suit goes forward with frustrating silence

    That same month of '93, Getnick filed Hendricks' false claims suit against Roche Biomedical Labs. The suit accused the company of manipulating the packaging and pricing of lab tests, billing Medicare and Medicaid for tests that were medically unnecessary, and defrauding the government by charging more than eight times the prices the lab charged doctors for the same tests.

    Although Getnick's firm handled the case, Hendricks remained deeply involved. He took several days off work to meet with Getnick and, later, with Department of Justice lawyers in Washington, DC. "Dr. Hendricks was an essential member of our team," says Getnick. "He did much of our research on the appropriateness of various blood tests."

    Hendricks and his wife worried about his role in taking on a major national corporation. They were aware that whistleblowers in other qui tam suits had been fired or demoted by their employers. Although as a solo practitioner he had no employer, he was understandably nervous. "In a case like this," he explains, "you worry that with so much money at stake, someone might try to stop you."

    To give the government time to investigate Hendricks' claim and to pursue the case on a nationwide basis, the suit was kept under court-ordered seal for three years, and Hendricks was sworn to secrecy. Both actions are customary in such cases. Federal agents listened to his accounts and accepted the documentation he provided. But they wouldn't reveal--at least to him--whether they believed his charges. "It was like going to a bad cocktail party," Hendricks recalls. "No one would acknowledge what I was saying."

    The government's investigation of the labs, which had begun before Hendricks filed his suit, was conducted by the Department of Justice, US attorneys in New York, North Carolina, and California, Health and Human Services' Office of Inspector General, and the FBI. Based on its investigation, the government broadened the case to include similar false claim charges against National Health Labs and Allied Clinical Labs, two of Roche's main competitors.

    The case became even more complex in 1995, when Roche merged with National Health Labs (which had acquired Allied Clinical Labs) to form Laboratory Corporation of America, thereby becoming the largest clinical lab in the world.

    Based on a computerized analysis of bills from the three labs for the entire country over several years, the Justice department estimated the total amount paid by the government for unnecessary tests at more than $200 million. Under the False Claims Act, if the case had gone to trial, and the government had proven the alleged damages, LabCorp could have faced treble damages of more than $600 million, plus a substantial penalty for each false claim, and attorneys' fees.

    Finally, a settlement resolves the case

    In November 1996, LabCorp agreed to pay $182 million to resolve the false claims case against Roche, NHL, and Allied Labs. At the time, it was the largest recovery from any qui tam false claims suit, the largest settlement of any kind involving a clinical laboratory, and the third largest involving claims of health care fraud. (In 1997, SmithKline Beecham Clinical Laboratories settled a false claims suit for $325 million.)

    In the settlement, the government alleged that Roche had violated the False Claims Act through the "marketing, sale, pricing, and billing" of its test panels. The government also alleged that Roche had "routinely added" HDL tests to its multi-chem profiles, and TSH tests to its executive profiles, "knowing those tests were not specifically ordered by physician-clients, and were not reasonable and necessary for the diagnosis or treatment of illness."

    In the settlement, LabCorp denied the government's allegations. The company did agree, however, to institute a government-imposed "corporate integrity" program to prevent such billing problems from happening.

    In a letter to Medical Economics, responding to an early draft of this article, LabCorp's attorney, David King, insists that the company was "anxious to prove in litigation that it did not submit any false claims." In addition to the time and cost of a protracted legal battle, however, LabCorp had another powerful motive to settle: According to King, the government threatened to suspend the company from the Medicare and Medicaid programs during litigation, which would have cut its revenues by about 25 percent.

    Getnick sees LabCorp's denial as a face-saving gesture: "When a company pays $182 million to settle a case and agrees to a corporate compliance program, I think that speaks for itself."

    Hendricks will not reveal his share of the settlement. But qui tam filers typically receive 15 to 25 percent of the government's total recovery, depending on the extent of their role in initiating and developing the case. And since Roche was responsible for the biggest part of the settlement, the whistleblower's share probably came close to $10 million.

    At Hendricks' insistence, his name wasn't mentioned in the government press releases announcing the huge settlement. His role in the case eventually became known, however, when reporters found his name in the court papers. The Wall Street Journal, The New York Times, and the Associated Press ran stories with relatively little detail on the settlement, followed by local papers in North Carolina.

    When reporters called Hendricks for interviews, he refused. Now, three years after the settlement, he's more willing to speak out.

    "I didn't want any credit for the case," says Hendricks, "and I didn't want my name in the papers. I was worried about negative effects of any publicity over the amount of my reward. I was afraid of getting crank calls from people looking for money, and my wife was worried about the safety of our family."

    Hendricks had also been concerned about the reactions from his medical colleagues. But most were proud that a local doctor had stepped forward. "Some of them told me afterward that they had also noticed something funny about their lab test," says Hendricks, "but they didn't think there was much they could do about it. My patients were also pleased at the news, particularly those who had had billing problems with Roche. One brought me a gold whistle as a symbol for being a whistleblower."

    Today, there's not much about Hendricks' lifestyle to suggest that he's the recipient of a multimillion-dollar bounty. He still practices full time in the same modest office in the middle of town. He and his family still live in the same home they've owned for 15 years, and he still drives a 1983 Toyota wagon with 85,000 miles on it. The only significant change: He takes Friday afternoons off.

    Having worked closely with Hendricks for several years on the case, attorney Neil Getnick isn't surprised by his nondisplay of wealth. "This guy is the genuine article," says Getnick. "It's unusual to find someone as committed as he is to doing the right thing, and who's really not motivated by personal gain."

    Looking back on the case, Hendricks views it not as a battle against Roche, but as a fight for patients. "I believe it's a physician's duty to expose fraud if he suspects it," he says. "If something doesn't look right, it may be wrong."


    Qui tam lawsuits: They're tough on whistleblowers, too

    Qui tam lawsuits, also known as whistleblower suits, are filed by individuals on behalf of the federal government under the False Claims Act.

    Congress enacted that law during the Civil War to stop sales of defective military supplies to the Union Army. The act was amended in 1986 to encourage private citizens to expose fraud by federal contractors. It now rewards whistleblowers with up to 30 percent of any funds recovered, depending on the extent of their help--and the government's involvement--in the case. The amount of recovery can be substantial, since the law calls for penalties of up to $10,000 for each false claim, plus treble damages based on the total overpayment.

    These suits can be very difficult to pursue, however, and they're sometimes emotionally draining for the whistleblower. They typically drag on for several years, and are kept under court-ordered seal during that time to prevent the target company from being alerted. For the same reason, the government can't offer the whistleblower any official support or encouragement during this period. If the government declines to join the case, it's often impossible for the whistleblower alone to gather enough evidence for the suit to stand up in court.

    Also, the whistleblower's job may be endangered if the defendant seeks retribution. Under the False Claims Act, however, such retaliation can be grounds for a separate suit by the victim.

    Instead of filing a qui tam suit, a physician who wants to report suspected health fraud involving Medicare, Medicaid, or other federal agencies can:

    • Call the HHS Inspector General's hotline at 800-447-8477.
    • Send an e-mail to [email protected].
    • Write to Office of Inspector General, Department of Health and Human Services, 330 Independence Ave. SW, Washington, DC 20201.

    A whistleblower offers advice to those following his lead

    Dermatologist Andrew Hendricks, who successfully pursued a qui tam lawsuit over laboratory billings, has created Professionals Against Fraud, an organization that offers free advice and assistance to would-be whistleblowers. Its hotline (800-245-7154) is answered by his office secretary.

    Hendricks promotes the service at medical meetings, and the hotline receives several calls a week from doctors, nurses, office staffers, and patients. The calls have produced several potential cases, he says.

    But many callers' claims are not legitimate or not worth pursuing, Hendricks notes. "Most people who suspect health fraud have no idea what's really illegal," he says. "For example, we get calls from people who think their doctor has overcharged them. Even if those claims are true, they're usually not fraud. Often there are good reasons why the doctor did what he did. Or his action may have been unethical, but it wasn't illegal."

    Even with calls that suggest legitimate claims of fraud, Hendricks has learned to be cautious. "You can't trust every allegation by an angry patient or a disgruntled office clerk," he explains. "You need evidence and documentation to back up those claims. And you need more than an occasional example of fraud; you must establish a clear pattern over a period of time. And the fraud must be substantial enough to justify the time and effort it takes to bring a suit.

    "Say we get a call from an office staffer about a doctor who's occasionally upcoding. It may be true, but it's not economically feasible to bring a qui tam case against one doctor for occasional offenses. Those problems can be reported to the local Medicare carrier. Qui tam suits make more economic sense when they involve an HMO, a big lab, a large hospital, or a big medical group that's systematically overbilling the government or charging for services they're not actually performing."

    One recent hotline caller reported a cardiologist who's allegedly billing Medicare for stress tests administered by his office nurse while he's at the hospital. "Now that's a clear case of fraud," says Hendricks, "because he can't bill for that procedure unless he's doing it himself. If he's charging $600 or more for each stress test, and he's billing the government for 200 or so each year, that adds up to a substantial fraud."

    Hendricks cites other examples of possible fraud that have spurred calls to his hotline:

    • A cardiologist gives every patient a treadmill test and finds hypertension or some other abnormality.
    • An internist bills the government $150 for each complete physical after spending only five minutes with the patient. "The nurses in his office know what's going on," says Hendricks, "and one of them called us."
    • General surgeons, plastic surgeons, and dermatologists do skin biopsies, then bill for an excision after just shaving the skin. "If you do a few hundred of those a year and bill them as excisions, you can get paid an extra $10,000," says Hendricks. "But anyone who analyzes that doctor's bills should notice the high rate of excisions."

    For callers with promising leads, Hendricks offers advice about gathering evidence and refers them to law firms around the country that specialize in health fraud cases. But he also urges caution and warns that such cases can take a great deal of time and energy. There's no guarantee of success, he emphasizes--while the whistleblower risks retaliation.

    Hendricks tells of one caller, an ob/gyn with the Indian Health Service, who claimed that his hospital was overcharging the government. He even went to Washington, DC, to present his case to agency officials. When he returned to work, he was fired. He has appealed, but still doesn't have his job back.

    Despite such risks, Hendricks encourages those with legitimate suspicions of fraud to pursue them. "I believe that's part of the Hippocratic oath," he says.

    By Berkeley Rice, Senior Editor

    Berkeley Rice. "It's a physician's duty to expose fraud if he suspects it". Medical Economics 1999;18:154.

    Berkeley Rice
    The author is a former senior editor of Medical Economics.

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