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Press Release

Family Dermatology Pc Agrees To Pay United States More Than $3.2 Million To Settle Alleged False Claims Act Violations

For Immediate Release
U.S. Attorney's Office, Middle District of Florida

Tampa, FL – Family Dermatology P.C. which owns and operates a dermatopathology laboratory in Georgia and a number of dermatology practices throughout the Eastern United States, has agreed to pay the United States $3,247,835 plus interest to settle allegations that it violated the False Claims Act by engaging in improper financial relationships with a number of its employed physicians, the Justice Department announced today.

“The Department of Justice has had longstanding concerns about improper financial relationships between health care providers and their referral sources, because such relationships can alter a physician's judgment about the patient's true health care needs and drive up health care costs for everybody,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Department’s Civil Division.  “In addition to yielding a recovery for taxpayers, this settlement should deter similar conduct in the future and help make health care more affordable.”

The settlement announced today resolved allegations that financial relationships that Family Dermatology and its affiliates had with a number of their employed physicians violated the Stark Statute and the False Claims Act.  The Stark Statute restricts the financial relationships that health care providers may have with doctors who refer patients to them.  Family Dermatology employs a number of dermatologists as independent contractors and it has routinely required them to use Family Dermatology’s in-house pathology lab, which operated under the name Nelson Dermatopathology, for their pathology services.  The government alleged that Family Dermatology’s financial relationships with a number of these physicians did not comply with the requirements of the Stark Statute, and that Family Dermatology improperly billed Medicare for dermatopathology analyses performed by Nelson Dermatopathology on specimens that were sent to the laboratory by these employed physicians.

“The defendants financed the expansion of their business across the Eastern United States with improper financial arrangements that resulted in illegal referrals and, ultimately, inflated payments from Medicare,” said Acting U.S. Attorney John Horn of the Northern District of Georgia.  “We expect providers to follow the law and will pursue those who do not.”

“Physician self-referrals that violate the Stark Statute undermine medical decision making, jeopardize patient care and cost the taxpayers money,” said U.S. Attorney A. Lee Bentley III of the Middle District of Florida.  “Patients need to have confidence that the advice they receive from their physicians is based on sound medical practice, not illegal financial relationships between providers.  We will continue to investigate and pursue these types of violations in our district.”

“This settlement not only demonstrates the need for oversight involving such matters under the False Claims Act, but also the FBI’s commitment toward enforcing this as well as other health care fraud based violations,” said Special Agent in Charge J. Britt Johnson of the FBI’s Atlanta Field Office.

“Health care companies that make sweetheart deals with physicians to boost profits undercut both the financial integrity of Medicare and the public’s trust in the medical profession,” said Special Agent in Charge Derrick L. Jackson of the Department of Health and Human Services’ Office of Inspector General (HHS-OIG).  “Our agency will continue to hold those who engage in such improper financial schemes accountable.”

The allegations settled today arose from three separate lawsuits filed by three whistleblowers, Scott M. Ross MD, Mark F. Baucom and Harold Milstein MD under the qui tam provisions of the False Claims Act.  Under the act, private citizens can bring suit on behalf of the government for false claims and share in any recovery.  The whistleblowers will collectively receive more than $584,000 from the recovery announced today.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $24 billion through False Claims Act cases, with more than $15.3 billion of that amount recovered in cases involving fraud against federal health care programs.

The cases, United States ex rel. Ross v. Family Dermatology of Pennsylvania, P.C., et al., Case No. 1:11-cv-2413 (N.D. Ga.); United States ex rel. Baucom v. Family Dermatology of Pennsylvania, P.C., et al., Case No. 1:11-cv-4260 (N.D. Ga.); and United States ex rel. Milstein v. Family Dermatology, P.C., et al., Case No. 1:13-cv-1027 (N.D. Ga.), were handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Offices of the Northern District of Georgia and the Middle District of Florida, and HHS-OIG.

U.S. ex rel. Milstein was originally filed in the Middle District of Florida and subsequently transferred to the Northern District of Georgia.  The claims settled by this agreement are allegations only, and there has been no determination of liability.

Updated February 4, 2016