Doctors Investigated For Fraud Kidney Group Target Of Probe Into Overbilling Medicare

They are among Spokane’s medical elite, four highly skilled doctors who won the trust of patients and the admiration of peers.

Now the federal government is trying to determine if doctors at Northwest Nephrology Associates also cheated taxpayers out of a million dollars or more.

The group is suspected of routinely billing Medicare in the early 1990s for a higher level of care than patients needed.

In the jargon of medicine, the practice is known as “upcoding,” and it’s one of the most common forms of Medicare abuse.

Investigators are focusing on about a million dollars in billings. Court records filed by one of the doctors place the disputed claims at $2 million to $5 million.

The U.S. attorney’s office is trying to sort out who should be held responsible. Some of the doctors may not have known the billing practice was wrong. Anyone found accountable could face stiff fines, jail time and the loss of a medical license.

The investigation was launched by a whistleblower lawsuit filed in federal court in November 1995. The lawsuit remains sealed; no criminal or civil charges have been filed.

Although the lawsuit’s details are secret, the case has drawn national attention.

The government issued a fraud alert in December 1995, warning insurance contractors of a “dialysis treatment fraudulent billing scheme” in the Northwest.

The alert from the U.S. Department of Health and Human Services said a group of doctors had billed Medicare for a more expensive dialysis code four times more often than the national average.

There are legitimate reasons for local billing differences. Doctors may see sicker patients or they may not know how to properly bill for a procedure.

But sources say that doesn’t explain the number of more costly billings out of Spokane. “Give me a break,” said a prominent kidney doctor in the eastern United States.

The case publicly has focused on Mark Frazier, a kidney doctor who’s also accused of threatening the life of another doctor and providing questionable care.

But he’s not the only physician involved. Investigators have also looked into the billing records of Mary Anne McDonald, Leo Obermiller and Katherine Tuttle.

Interviews and documents show the entire group followed the billing strategy. It’s unclear whose idea it was.

“The only thing I can say is, they knew what they were doing,” said one former employee of Northwest Nephrology Associates.

Another source familiar with the group described Tuttle as an “innocent lamb.” The source also said McDonald was not concerned about money.

The four doctors refused to comment, referring questions to their lawyers. Most of the lawyers also declined to talk in detail about the allegations.

Richard Tallman, a Seattle lawyer representing the group’s business manager, said he hoped the investigation would be finished soon.

“From our standpoint, it’s best if these things get resolved,” he said. “The worse thing that happens in these cases is the cloud that hangs over their heads for months and years and what it does to their professional reputations in the community.”

Federal investigators have interviewed dozens of health-care workers, but few people are willing to talk publicly about the case.

Nurses are nervous about losing their jobs. Doctors don’t want to talk about other doctors. Nobody really wants to talk about Frazier, who’s alternately feared and respected.

“I’m very angry but I’m also real ambivalent, because they’re fine physicians,” one nurse said. “I’m not sure what role they played in it. Somebody must have known.”

Patients also praise Northwest Nephrology doctors. Ethel Parker, who is 75, started seeing Tuttle in 1993 when her kidneys began to fail.

“I figure that she saved my life,” Parker said. “I keep telling her, if you move, I’m moving with you.”

A demanding job

Kidney doctors have a special place in Spokane’s medical industry.

Sacred Heart Medical Center opened the first community hospital dialysis unit in the country in 1962, about the time the procedure was gaining acceptance nationwide. It had three beds and three kidney specialists.

A new kidney machine was purchased in 1970 with 1 million Betty Crocker coupons snipped by the community.

Now, most of the 330 patients on dialysis in the region go three times a week to Sacred Heart’s outpatient clinic or its four satellites. About 100 perform dialysis at home.

Medicare pays for at least 85 percent of the bills to treat people with failing kidneys.

Dialysis removes waste and extra fluid from the blood in people whose kidneys can’t do the job.

In the most common form of dialysis, a patient is hooked to an artificial kidney machine for almost four hours. The machine cleans the blood and pumps it back into the patient.

Almost half of dialysis patients have diabetes. The rest have high blood pressure, genetic problems or other kidney ailments.

Only a tiny percentage of doctors specialize in kidney work. Many of these doctors, called nephrologists, work grueling, 60-hour weeks with beepers as their constant companions.

“The truth is, I think doctors who give up their lives to work in nephrology - I don’t know what they’re paid, but they’re worth every penny of it,” one Sacred Heart nurse said.

Frazier’s ex-wife claimed in divorce papers that he made $300,000 to $400,000 a year during their marriage, although he placed the figure at closer to $120,000 a year.

Only 81 doctors in the Washington State Medical Association specialize in kidneys, and more than half of those are in King County. Ten practice in Spokane County. The next closest kidney doctors are in Wenatchee.

Two doctors’ groups in Spokane have traditionally looked after the region’s kidney patients - Northwest Nephrology and a group based at Rockwood Clinic.

Frazier and Richard Steury, one of Spokane’s first kidney specialists, formed Spokane Nephrology in 1984. Obermiller joined the group the same year, and McDonald came on board three years later.

Tuttle joined in 1991, just before Steury retired.

In 1992, the doctors renamed the group Northwest Nephrology Associates, with Frazier as president, Obermiller as vice president and McDonald as secretary and treasurer.

Extra visits, extra money

The accusations against Northwest Nephrology involve patients who received dialysis in Sacred Heart’s inpatient kidney ward.

Investigators suspect doctors visited these patients during dialysis more than once - and billed for the extra visits - even if they weren’t medically necessary.

Most accusations center on the common type of kidney dialysis called hemodialysis.

Doctors bill Medicare by using hundreds of codes that describe the procedure or type of care provided. With dialysis, doctors are paid for supervising patient care and making sure patients have no problems.

Most hospitalized patients are visited once by the doctor during hemodialysis. For a single visit, Medicare paid a doctor about $74 in Spokane last year.

If a patient has complications during dialysis - for instance, a racing heart or extremely high blood pressure - the doctor visits the patient more than once.

For multiple visits to one patient - no matter how many visits were made during the dialysis - Medicare paid about $131 last year.

Medicare guidelines require a medical reason to bill for more than one visit. Doctors aren’t supposed to just stick their heads in the door to collect the extra money, according to guidelines from the Renal Physicians Association, a national organization for kidney doctors.

“It isn’t the number of times you stop by, it’s why you stop by,” said William Bennett, a kidney doctor and professor of medicine at the University of Oregon Health Sciences Center. “There has to be a reason.”

Dr. Elizabeth Sundberg, who works with the Rockwood Clinic kidney group, said she bills for very few multiple visits.

“You do multiple visits if somebody is sick,” said Sundberg, who learned of the Northwest Nephrology investigation about 1-1/2 years ago. “Not just miserable, but sick. And not as a matter of course.”

The gap between Medicare payments for single and multiple visits - a difference of $57 last year - has narrowed.

Three years ago, Medicare paid Spokane doctors about $75 for a single visit during inpatient hemodialysis and $199 for more than one visit.

The government won’t provide payment information for individual doctors, but releases data by region.

Nationally, about 20 percent of inpatient hemodialysis is billed for multiple visits. The rest are single visits.

The numbers are much different in Eastern Washington, where Northwest Nephrology and the Rockwood Clinic group were the only kidney specialists for years.

In 1994, the last full year before the federal investigation started, Eastern Washington doctors billed for multiple visits in 66 percent of inpatient hemodialysis cases.

Sacred Heart nurses said they were routinely told to mark down two visits for the Northwest Nephrology doctors. They said they were rarely asked to mark down two visits for the Rockwood Clinic group.

Dr. Curtis Wickre of the Rockwood Clinic group said his firm has traditionally billed for multiple visits in only 5 percent of inpatient hemodialysis cases. Both Wickre and Sundberg said they were aware that Northwest Nephrology doctors recorded multiple visits.

“When I first got here, they were doing two notes,” said Sundberg, who joined Rockwood Clinic in 1992. “I don’t know what they’re doing now.”

Nursing logs show Northwest Nephrology doctors stopped by for a second visit as soon as six minutes after the first.

Three nurses said the patients weren’t critically ill. If they had been, they’d have been in the Intensive Care Unit instead of the 33-bed kidney ward, the nurses said.

“We didn’t question it, because it was in their opinion an acute patient who needed two notes,” one nurse said. “We did what we were told, as nurses do.”

Medicare didn’t question it either. Medicare contractors are supposed to review bills to make sure they are appropriate. But the government paid more than 93 percent of the multiple visit billings in Eastern Washington from 1994, records show.

Then, the federal investigation began.

By 1996, the first full year after it started, Eastern Washington doctors had backed off from billing for multiple visits. The region’s doctors charged for multiple visits only 11 percent of the time - half the national average and way below what they’d billed just two years earlier.

The insurance contractor began questioning even those charges. Medicare refused to pay 80 percent of the more expensive billings.

Fraud hard to track

Medicare audits in 1995 also suggest different billing practices between Northwest Nephrology and the Rockwood Clinic group.

The Northwest Nephrology audit said the group owed the government about $19,000 from 19 cases reviewed, mainly because of a lack of documentation for its billings.

The Rockwood Clinic audit of five cases said the government owed those doctors about $200.

Doctors nationally say they are more likely to underbill, like the Rockwood Clinic, than overbill for fear of being targeted by fraud investigators.

“Most people try to play by the rules,” said Bennett, the doctor from Oregon. “The perception that some segment doesn’t is not a healthy thing.”

For 10 years, Larry Reynolds worked with kidney doctors in Florida as a representative for that region’s Medicare contractor.

He’s talked to doctors about correctly using the inpatient kidney dialysis codes. Reynolds said the system doesn’t necessarily catch dialysis upcoding.

“They were paying automatically,” he said of contractors who process Medicare bills. “The system would let those claims go through. You cannot design a system that will always catch every improper claim.”

Tracking fraud is usually an after-the-fact money chase, with investigators only uncovering problems that have already put down roots.

In Washington state, tracking fraud has been especially tough. Four insurance contractors have handled Medicare bills in the state since 1989.

Once one contractor got up to speed, the government switched the contract, lawyers and doctors say.

The reasons for changing contractors are varied: One company, which handled Medicare money in Washington state from 1965 to 1990, let a bureau take over the program. The bureau had performance problems so the contract was switched to another company. After less than two years, that firm got out of the Medicare business.

The state’s Medicare records were just shipped in June to the newest contractor, Blue Cross/Blue Shield of North Dakota.

Medicare fraud officials say each contractor is well-trained before taking over. The shift in contractors does not mean fraud was missed, said Dave Haffie, who leads the fraud unit in the Seattle office of the Health Care Financing Administration, which handles Medicare.

“We obviously don’t catch everything,” Haffie said. “And it may take a while for a pattern to show.”

Settlement expected this year

Northwest Nephrology dissolved in February 1996, just months after federal investigators started nosing around.

Obermiller, McDonald and Tuttle formed Nephrology Consultants and moved to a smaller office at the Sacred Heart Doctors Building.

Tuttle spends most of her time at The Heart Institute, where she’s in charge of the research lab.

Frazier went solo as Northwest Renal Services. He moved his practice - and, he said in court records, as much as $7 million in hospital revenue - from Sacred Heart to Deaconess Medical Center.

Frazier is no longer involved in his practice. He’s been stripped of medical privileges and hit with criminal charges. In July he checked into a Kansas hospital that treats mental and substance abuse problems.

He’s awaiting trial on charges that he threatened the life of Wickre, who’s also director of the Sacred Heart Kidney Center.

The unidentified whistleblower who first reported the fraud allegations stands to reap up to a quarter of any money recovered by the government.

The case is expected to be settled by the end of this year.

Under the muscle-bound False Claims Act, each doctor found responsible could be fined up to three times the amount overbilled, plus other penalties. Criminal charges are possible.

“It is entirely possible in cases in multiple-person practices that the evidence will show that one person was more culpable than another,” said Tallman, the lawyer for the group’s business manager.

“For that reason, one lawyer cannot represent more than one individual. It may be in a client’s interest to point out that what he did was proper, but that what another person did was not proper.”

In the Northwest Nephrology case, most fingers are pointing at Frazier. One of his lawyers, Charles Rohr, worries that Frazier may become the fall guy.

“Sure looks that way to me,” said Rohr, who’s defending Frazier against the charges that he threatened Wickre’s life. “Only time will tell. I hope it doesn’t happen. I’m going to do everything in my power to ensure it doesn’t happen.”

, DataTimes ILLUSTRATION: 4 Photos; 2 Graphics: Medicare fraud investigaton; Medicare fraud: Blowing the whistle

MEMO: These 2 sidebars appeared with the story:

1. SOLUTIONS Here are some ways to reduce the waste, abuse and fraud that eats up an estimated $23 billion in Medicare money each year: Better enforcement. The Health Insurance Portability and Accountability Act passed last year provides more enforcement money to the U.S. Department of Health and Human Services. Technology. Insurance contractors and Medicare reviewers now can compare doctors and their billing practices with the touch of a button. That should help spot questionable claims. Watchdogs. The number of whistleblowers filing suits in the health industry has jumped from 14 in 1992 to 200 in 1996. It’s no wonder, with each whistleblower standing to gain up to 35 percent of whatever the government recovers. Patients are also encouraged to examine their medical bills. Suspected fraud can be reported to a hotline for the Office of the Inspector General at 1-800-447-8477. Fear. Doctors afraid of being investigated by the federal government or scared of whistleblowers are policing themselves. Sometimes they’re even underbilling. Revamped system. Medicare, the largest insurance provider in the world, is unwieldy and prone to fraud and waste. New programs are testing whether Medicare would operate leaner in a managed-care model. A test program in Florida, for instance, is paying physicians a flat monthly fee for each kidney patient under their care, regardless of what care is required. That would prevent charging for services that aren’t needed.

2. NORTHWEST NEPHROLOGY ASSOCIATES DOCTORS Katherine Tuttle, 41 Graduated from Northwestern University Medical School in 1982. Licensed to practice in Washington in February 1991. In 1991, joined the group later called Northwest Nephrology Associates. Now splits time between Nephrology Consultants and as the director of research at The Heart Institute.

Mark Frazier, 50 Graduated from the University of Nebraska Medical School in 1972. Licensed to practice in Washington in July 1980. In 1984, helped found the group later called Northwest Nephrology Associates. Now undergoing treatment at a Kansas hospital that specializes in mental and substance abuse problems.

Leo Obermiller, 45 Graduated from the University of Washington Medical School in 1979. Licensed to practice in Washington in August 1981. In 1984, joined the group later called Northwest Nephrology Associates. Now helps run Nephrology Consultants.

Mary Anne McDonald, 42 Graduated from Loyola University’s Medical School in 1982. Licensed to practice in Washington in July 1983. In 1987, joined the group later called Northwest Nephrology Associates. Now helps run Nephrology Consultants.