A prominent Chicago hospital and six orthopedic surgeons defrauded the U.S. government's Medicare and Medicaid programs by overbilling for a heavy caseload of surgeries the doctors often didn't attend, according to allegations in a whistleblower lawsuit filed by a surgeon and a former hospital employee.

The complaint against the surgeons, their practice and the places where they operate, such as Rush University Medical Center, includes allegations that financial ties with device maker Zimmer Holdings Inc. (ZMH) spurred bad behavior. Zimmer is among a handful of orthopedics firms that reached deals with the Department of Justice in 2007 over charges of wielding surgeon payments to entice product usage. The allegations in the whistleblower suit cite incidents from before that deal.

The accused surgeons and hospital said the allegations are false.

Some issues were first raised in 2004, then unsealed in March when the hospital agreed to pay more than $1.5 million to settle false-claims charges related to real estate. An amended complaint filed in the U.S. District Court for Northern Illinois last month includes a more detailed list of allegations that surgeons booked impossibly busy schedules and often left residents to perform complex procedures, but billed Medicare as if they were there.

This doesn't comply with billing rules for Medicare, the government program covering elderly Americans, and Medicaid, a program for the poor, the recent complaint said. The allegations were brought by Robert S. Goldberg, who performs surgery at Rush, and June Beecham, a former director of real estate there. They also allege that hospital officials were alerted to these issues but swept them under the rug.

"This is a case that exposes the orthopedic practice at Rush as one focused only on quantity and monetary gain at the expense of patient health," their complaint said.

The six surgeons and Midwest Orthopaedics, where five of them still work, "categorically deny the allegations," according to a statement from them forwarded by law firm McGuireWoods LP. They also cited prior "frivolous and unsubstantiated charges" made by Goldberg.

A spokeswoman for Rush said the hospital believes the lawsuit has no merit and intends to vigorously defend the case, while Zimmer--which isn't named as a defendant--said it's not familiar with the suit.

The federal government was involved in the settlement announced in March, but has declined to intervene in the portion of the suit currently at issue. As a whistleblower case, the people bringing the charges are entitled to a portion of money the government could recover.

The ultimate outcome for doctors here could include settlement payments or, if pursued all the way through a trial, a mandatory exclusion from billing Medicare or Medicaid, said Patrick Burns, director of communications for the nonprofit group Taxpayers Against Fraud. He said overbilling isn't uncommon but noted these allegations suggest an institutionalized pattern that reflects the wrong kind of financial incentives.

The doctors named in the case include Richard A. Berger, a well-known surgeon who helped develop products for Zimmer and once ranked among its highest-paid consultants, along with Brian J. Cole, Aaron G. Rosenberg, Craig J. Della Valle, Wayne G. Paprosky and Mitchell B. Sheinkop. All except Sheinkop still practice at Rush, a spokeswoman confirmed.

An attorney representing Sheinkop couldn't immediately be reached for comment Thursday.

The recently filed complaint mainly cites examples of alleged overbilling from several years ago. There were cases of Medicare getting billed for surgeries that overlapped or were closely scheduled, making it impossible for the surgeon to attend to the extent required by Medicare rules, the complaint said. It cited an example of a surgeon using a video link so he could perform surgery in one place and monitor another.

These alleged instances occurred before Zimmer paid $169.5 million--by far the most among its orthopedics peers--in an agreement with the Department of Justice that also included corporate monitoring. The company's once-strong ties to surgeons at Rush appear frayed in the wake of that agreement.

In an April 2008 interview, Berger called out Zimmer for canceling and paying off surgeon contracts, saying it could hurt the company. Company records show he still received $5.7 million that year, a big increase from 2007 as Zimmer settled up with consultants, but he wasn't listed as a company consultant last year. As reported in March, Berger publicized a problem then that he and fellow surgeon Della Valle said they found with a Zimmer knee product; the company has denied there is an issue while citing evidence of the product's good track record.

According to the whistleblower complaint, Zimmer's former generosity played a part in Rush surgeons' billing practices. The surgeons "knew that in order to maintain their celebrity status with Zimmer, they would have to continue to be among Zimmer's biggest customers, and they accomplished this goal by scheduling and billing Medicare for hundreds, if not thousands, of joint replacements surgeries annually that did not comport with the Medicare Rules and Regulations," the complaint said.

-By Jon Kamp, Dow Jones Newswires; 617-654-6728; jon.kamp@dowjones.com

(END) Dow Jones Newswires

July 08, 2010 17:35 ET (21:35 GMT)

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