A former Spokane kidney doctor could face prison time and millions of dollars in fines if convicted of overbilling the federal government and private insurance companies.
After hearing secret testimony, a federal grand jury returned a 14-count indictment against Dr. Mark Frazier and his former corporation, Northwest Nephrology Associates.
Frazier and the corporation were charged Thursday with mail fraud, false statements and false claims. No other doctors in the group were indicted.
Frazier, 51, helped start Northwest Nephrology in 1984. He is accused of masterminding a scheme to defraud Medicare, Medicaid and private insurance companies of at least $1.5 million over five years.
“It’s the result of a long and arduous investigation by a superb task force … to help stem the tide of losses due to fraud in the health-care industry,” Assistant U.S. Attorney Frank Wilson said.
If found guilty, Frazier would have to repay the money he’s accused of bilking from insurers. He also faces up to $3.5 million in fines and 70 years in prison, although that length of sentence is unlikely.
Frazier’s lawyer, Irwin Schwartz, said he hadn’t seen the indictment.
“I would be a fool to respond to something I haven’t had my hands on,” Schwartz said.
A criminal summons will be issued for Frazier, who is not considered a flight risk, Wilson said. He will be ordered to appear in U.S. District Court in Spokane.
The indictment caps a fraud investigation that lasted more than 2 years and involved almost half the kidney doctors in town.
Frazier is accused of asking other doctors in the group to bill insurers for a higher level of inpatient care than patients needed for two major types of dialysis. This type of fraud is called “upcoding.”
The other doctors in the firm - Mary Anne McDonald, Leo Obermiller and Katherine Tuttle - were not criminally charged, but they are still named in a civil whistle-blower lawsuit unsealed by the federal government last month.
Northwest Nephrology fractured in late 1995, after the lawsuit accusing the doctors of fraud was filed.
An amended lawsuit will probably be filed soon, removing Tuttle and possibly others as defendants.
Dr. Stephen Fox, who filed the whistle-blower lawsuit and reported the fraud allegations to the federal government, said McDonald and Obermiller were also responsible for the overbilling.
Fox, now a doctor in Colorado, said he was disappointed that Frazier was the only doctor indicted.
“He is definitely the scapegoat,” said Fox, who worked with Northwest Nephrology for about 15 months. “They all shared in this. It was a group effort. Dr. Frazier did not seem to be in charge nor in control of himself, let alone the group decisions.
“They were all aware of his poor patient care and were willing to overlook it, or to ignore it, to preserve their incomes.”
Lawyers for McDonald, Obermiller and Tuttle said they were happy their clients aren’t being prosecuted. They said the doctors had cooperated with federal investigators.
“I’m pleased the government has completed its investigation and that Dr. Tuttle has been cleared of any wrongdoing,” said Carl Hueber, her lawyer.
“The government studied the evidence in this case for a long time and reached the conclusion, with which I agree, that Dr. McDonald should not be charged with a crime,” said Ron Sim, McDonald’s lawyer.
“We are delighted,” said Larry Finegold, Obermiller’s lawyer.
Obermiller and McDonald now run Nephrology Consultants in Spokane. Tuttle is the director of research at The Heart Institute.
Frazier’s life has spiraled downward since the fraud investigation started.
He was arrested last June, and his privileges yanked at area hospitals, after allegedly threatening another doctor and interfering with Sacred Heart Medical Center.
He also was accused of providing poor patient care and training a laser-sighted weapon on joggers as they ran by his home.
Frazier pleaded guilty to interfering with Sacred Heart in late December in exchange for prosecutors dropping a more serious harassment charge.
The state medical board also may pull Frazier’s medical license over allegations of poor care and erratic behavior.
He moved near his family in Omaha, Neb., last year after being treated at the C.F. Menninger Memorial Hospital in Kansas, a psychiatric hospital.
Fox said he first talked to federal investigators 3-1/2 years ago about the billing because he was worried about Frazier’s medical care.
A task force of investigators from the Inspector General’s Office in the Department of Health and Human Services, the U.S. Secret Service and the Internal Revenue Service looked into the case.
Frazier is accused of systematically filing false insurance claims for services not necessary or not documented. He allegedly asked other doctors in the group to make two progress notes on the records of hospitalized patients receiving two types of kidney dialysis - hemodialysis and peritoneal dialysis.
An inpatient visit billed with two notes pays a doctor significantly more than an inpatient visit billed with one note.
For instance, Medicare paid $109 for an inpatient hemodialysis billed with one note in 1990. Two notes paid $287.
Northwest Nephrology doctors billed with two notes 80 percent of the time. Kidney doctors nationally bill with one note 80 percent of the time.