Lawsuit alleges massive fraud

Government seeks $50 million damages

July 07, 1999|By Eric Siegel | Eric Siegel,SUN STAFF

Within months of becoming medical director of a private radiation cancer treatment center in Baltimore, Dr. Syed Rahman began to question procedures performed by technicians, believing they were unnecessary.

His concern led to his firing -- and to a $340,000 wrongful termination judgment against the two Pennsylvania companies that operated the clinic.

It also led to a multimillion-dollar medical fraud case by the federal government against Dr. Douglas Colkitt, a State College, Pa., physician and entrepreneur who sits atop a complex health care enterprise that runs about three dozen cancer centers in nine states, including Maryland.

The government's suit, scheduled for a May trial in U.S. District Court in Baltimore, accuses Colkitt-controlled companies of billing Medicare and a medical program for families of military personnel out of more than $12 million between 1992 and 1997 through a variety of fraudulent billing schemes.

Add to that the triple damages allowed under the federal False Claims Act and other penalties, and the total the government is seeking in the civil action tops $50 million. That makes it among the more substantial cases being pursued by federal authorities as part of an intensified, coordinated fight against health care fraud required by Congress three years ago.

The government's suit charges that Colkitt's companies' submitted "thousands" of false claims to Medicare over a five-year period. It alleges that the companies billed for services not ordered or provided by physicians, billed for duplicate services and misrepresented services to get higher reimbursements. It says the companies "routinely" billed for multiple treatment plans for "numerous" patients when physicians had prepared one plan.

Colkitt, through his Baltimore lawyer, Paul Mark Sandler, vigorously denies any wrongdoing and claims the future of his companies is being imperiled by the government prosecution.

Medicare approved billing

In court papers, Sandler calls the government's complaint a "quintessential `shotgun' pleading" made up of a "jumbled mass of vague claims."

Sandler says in court papers that Colkitt's companies' bills were reviewed regularly by insurance companies that administered the federal medical programs and found nothing wrong. "The government cannot seriously contend that the defendants were fraudulently billing for services when the Medicare carriers employed by the government were auditing and approving the very same billing practices," he said.

Four years after Rahman filed suit and 10 months after the government intervened, the bitterly contested case is on its third judge and its eighth volume of court filings.

And it is getting more contentious.

In late May, prosecutors from the U.S. attorney's office in Baltimore and the U.S. Department of Justice in Washington claimed that several of Colkitt's companies -- including EquiMed Inc., the holding company that controls all the others -- merged, reorganized or transferred assets to avoid having to pay the government if they lose in court.

Between December and February, the assets of 17 cancer centers were transferred to 11 newly created corporations owned by former EquiMed employees and relatives of Colkitt, prosecutors said.

Last month, Colkitt's attorneys asked the court to dissolve a temporary restraining order forbidding his companies from selling assets without government approval. They based their argument on a recent U.S. Supreme Court ruling that federal judges can't freeze assets of a company that is in debt to assure it can pay a judgment in a pending court case.

Also last month, U.S. District Judge Alexander Harvey II granted a request by Colkitt to allow Colkitt's companies' administrative appeals of findings of overpayments to go forward while the court case proceeds. But he declined to lift suspensions dating to October of $2.2 million in Medicare payments to Colkitt companies.

For Colkitt's companies, more than money is at stake in the case. Forty percent of the companies' revenues come from Medicare payments, according to court records; three of its seven Maryland centers have been closed because of financial problems caused by the suspension of Medicare payments.

"The very existence of the defendants is being jeopardized by the actions taken against them by the United States of America," Sandler said in court papers. He declined to discuss the case beyond the court filings, saying he would reserve comments for the courtroom.

Government cracking down

The Rahman case is one of 107 civil health care fraud actions filed by the government last year, or 20 percent more than were filed in 1997, according to the annual report on the Health Care Fraud and Abuse Control Program of the Department of Justice and Department of Health and Human Services. The government also filed 322 health care fraud criminal cases last year. In all, the government won or negotiated more than $480 million in judgments, settlements and fines last year, the report said.

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