Alj Reverses Medicare's Decision To Hold Laboratory Liable For Nearly $4.5 Million In Overpayments Incurred During A Federal Sting Operation

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ANTHONY C. VITALE, P.A.

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2333 Brickell Avenue, Suite A-1
Miami, FL 33129
Tel: 305-358-4500
Fax: 305-358-5113

Press Release

ALJ REVERSES MEDICARE'S DECISION TO HOLD LABORATORY LIABLE FOR NEARLY $4.5 MILLION IN OVERPAYMENTS INCURRED DURING A FEDERAL STING OPERATION

Chief Federal Administrative Law Judge Catherine Ravinski decided that Medicare could not recoup $4.5 million in overpayments and must return $1.055 million withheld from Miami's Unimed Lab since all claims submitted to Medicare were submitted under instruction and authority of the FBI. Anthony C. Vitale, Christopher A. Parrella and Robert S. Bluni of the Law Offices of Anthony C. Vitale, P.A, argued the case.

Facts

The matter arose from an alleged "overpayment" by Medicare for Part B services billed to the Florida Medicare Carrier, First Coast Service Options, Inc. under Unimed Laboratory's Medicare provider number while the laboratory was cooperating in an F.B.I. undercover sting operation to snare providers illegally soliciting kickbacks from the lab for referral of Medicare and Medicaid business.

The laboratory owner entered into a cooperating witness agreement with the FBI in 1995. Correspondence from the FBI stated:

"In direct furtherance of a duly authorized health care fraud investigation, conducted by the Miami Field Division of the Federal Bureau of Investigation (FBI) [Unimed Lab] was authorized to make payments ("kickbacks") for the referral of certain blood tests for Medicare and Medicaid recipients. [Unimed Lab] was also authorized to submit claims to Medicaid and Medicare for such blood tests actually performed and to make payments for referrals using proceeds of the claims."

The FBI agents reassured the owner that these claims would be paid. At the FBI's direction, the owner accepted assignment of Medicare benefits, performed all the lab services and submitted charges to the Medicare carrier, Blue Cross Blue Shield of Florida (BCBSF).

The FBI made a deal with the lab owner and turned the lab into an FBI operation to catch individuals soliciting kickbacks. The deal was that the lab owner could pay the kickbacks out of the lab checkbook, do the tests and be reimbursed by Medicare. The problem arose because the FBI never told Medicare that Medicare was funding the FBI's kickback operation.

The FBI set up a hidden video camera at Unimed and each week the owner videotaped between 8-10 people receiving kickbacks. The owner testified that he had no idea how many referral sources were ultimately stung, however, public records revealed that 15 or 16 were eventually indicted.

Although the FBI swore the owner to secrecy, his accountant became increasingly suspicious as he wrote kickback checks totaling $2,134,113 ($727,644 in 1995, $657,925 in 1996, and $748,544 in 1997), always under the direction of the FBI.

In 1997, Medicare issued two overpayment letters to Unimed Lab. One overpayment letter was for $3,931,853.09 and the second included two separate time periods for $623,427.09 and $227,352.69 respectively.

In January 2001, a Medicare Anti-Fraud Branch representative claimed that Medicare could not reduce the overpayment because the FBI had failed to document their investigation and provide the evidence to Medicare. The same representative advised Anthony C. Vitale, Unimed's counsel that it was the labs responsibility to resolve the situation with the FBI. The conflict was between the FBI and Medicare.

Meanwhile, Unimed's business dwindled, Medicare withheld the owner's claims totaling $1.05 million and he spent about $50,000 in legal and accounting fees. His real estate, stocks, savings and other assets vanished and vendors sued him for over $338,000 in unpaid bills. He sold his home, filed for bankruptcy, and moved in with a former employee to save rent.

Although the lab never officially closed and the Medicare provider number was not cancelled, the owner couldn't afford to keep his business going. As of June 2002, the lab owed $480,477 to creditors and had $183 in its checking account, and the IRS claimed he owed $674,000 in unpaid taxes for 1995 through 1997.

On December 11, 2001 and February 15, 2002, the overpayment was upheld in a fair hearing before a Medicare Hearing Officer and Unimed appealed the decision to a Federal Administrative Law Judge at the Social Security Administration's Office of Hearings and Appeals.

Decision

After a 2 day hearing, Chief Administrative Law Judge Ravinski found that Unimed was without fault in causing the overpayment:

"Clearly there has been a breakdown of communication between the FBI and the Carrier - however, I find that the appellant is not at fault. Applying Section 1870 of the Act, I find the appellant is not liable for repayment of the alleged overpayment."

Social Security Administration, Office of Hearings and Appeals Chief Administrative Law Judge Catherine Ravinski decided:

• That holding the appellant, Unimed Lab liable for charges billed to Medicare at the direction of the F.B.I., with the understanding that the claims would be paid by Medicare, is against equity and good conscience. That it would amount to requiring the appellant (lab owner) to fund a law enforcement investigation that would ultimately bankrupt the business.
• That the appellant reasonably believed that Medicare would pay the claims at issue to fund the kickbacks he was directed by the F.B.I. to pay out of this sting operation.
• That the appellant is entitled to a refund of funds that were withheld by the Medicare carrier to collect the alleged overpayment.

The Health Law Offices of Anthony C. Vitale, P.A., concentrates in criminal, civil, administrative and licensure representation of health care professionals and institutions. We provide Health Care Providers with ongoing consultation, information and the means to comply with Federal and State Regulations governing delivery of services paid for through Medicare, Medicaid and other payers; assist Health Care Providers in avoiding civil, criminal, administrative and licensure liability resulting from claims in violation of Federal or State statutes or regulations and represent Health Care Providers in all health care matters in Federal and State courts and in Administrative forums.

For Additional Information or a redacted copy of the ALJ decision contact:

Anthony C. Vitale or Robert S. Bluni
799 Brickell Plaza
Suite 700
Miami, Florida 33131
(305) 358-4500 Office
(305) 358-5113 Fax
avitale@vitalehealthlaw.com
rbluni@vitalehealthlaw.com