United States of America et al v. Stanford Healthcare Billing Office et al

FIRST AMENDED COMPLAINT against Defendants Frederick Dirbas, Does, Stanford Health Care, Stanford Health Care Advantage, Stanford Healthcare Billing Department, The Board of Directors of the Lucile Salter Packard Childrens Hospital at Standord, The Board of Directors of the Stanford Health Care, The Board of Trustees of Stanford University, The Leland Junior University, Debra Zumwalt amending Complaint - (Discovery), {{1}}, filed by Plaintiff Emily Roe

Central District of California, cacd-2:2017-cv-08726

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24 Page ID #:294 ~~ f~Jll~22 AMil~~4 l ~. = ~ ~ ~:; 2 ~,, -- ~ -, 4 5 6 7 UNITED STATES DISTRICT COURT 8 FOR THE CENTRAL DISTRICT OF CALIFORNIA 9 WESTERN DIVISION 10 11 UNITED STATES OF AMERICA No. CV 17-08726-DSF(AFMx) ex rel.[UNDER SEAL], et al 12 Plaintiffjs], [FILED UNDER SEAL PURSUANT 13 v. TO THE FALSE CLAIMS ACT,31 14 [UNDER SEAL], U.S.C. §§ 3730(b)(2) AND (3)] IS Defendant[s]. 16 FIRST AMENDED COMPLAINT 17 JUDGE: Hon. Dale S. Fischer ~~ 18 19 20 21 22 2; 24 25 26 27 - ~- FIRSTAMENDED COMPLAINT United States et. al., vs. Stanford et. al. QUI TAM (3] USC § 3729(a)) 28 24 Page ID #:295 r" ~ ~ ~ LJ Gloria Juarez, Esq. SBN 109115 .= . ._~. ~ LAW OFFICES OF GLORIA JUAREZ 2 P.O. Box 4591 ~ Montebello, California 90640-9997 3 Telephone (213)598-4439 4 Attorneys for Relator, Emily Roe 5 IN THE UNITED STATES DISTRICT COURT 6 FOR THE CENTRAL DISTRICT OF CALIFORNIA 7 WESTERN DIVISION 8 THE UNITED STATES OF AMERICA; CASE NO.: CV17-08726-DSF 9 and THE STATE OF CALIFORNIA; JUDGE: Hon. Dale S. Fischer 10 ex. Relator Emily Roe., an individual; [FILED UNDER SEAL PURSUANT 11 Plaintiffs, TO FALSE CLAIMS ACT,31 U.S.C. §§ 3730(b)(2) AND (3)] 12 vs. 13 STANFORD HEALTHCARE BILLING JURY TRIAL DEMANDED DEPARTMENT, STANFORD 14 HEALTH CARE (FORMERLY FIRST AMENDED COMPLAINT 1 5 KNOWN AS STANFORD HOSPITALS FOR CIVIL DAMAGES AND CLINICS), DR. FREDERICK 16 DIRBAS, DEBRA ZUMWALT, THE 1. VIOLATION OF 31 U.S.C. §§ 17 BOARD OF DIRECTORS OF THE 3729-33 FALSE CLAIMS ACT STANFORD HEALTH CARE, THE "QUI TAM ACTION" 18 BOARD OF DIRECTORS OF THE 19 LUCILE SALTER PACKARD 2. VIOLATION OF CAL. CHILDREN'S HOSPITAL AT INSURANCE CODE §1871 et.seq. 20 STANFORD, THE LELAND JUNIOR 21 UNIVERSITY, THE BOARD OF 3. VIOLATION OF CAL. GOVT TRUSTEES OF STANFORD CODE §§§ 12650-12656 FOR MEDI- 22 UNIVERSITY, STANFORD HEALTH CAL FALSE CLAIMS ?; CARE. ADVANTACTE, and DBES ? -1.0, inclusive, Complaint Filed: Dec. 4, 2017 24 First Amended Complaint: Defendants. 25 June 20, 2018 26 27 - 2- FIRSTAMENDED COMPLAINT United States et. al., vs. Stanford et. al. QUI TAM (3l USC § 3729(a)) 28 24 Page ID #:296 1 STATEMENT OF COMPLAINT 2 1. This is a False Claims Action (herein "FCA"), brought on behalf of -, Plaintiffs, the United States of America and the State of California, (herein 4 "Plaintiffs") against defendants Stanford et al. for false surgical billing. This case 5 is filed under seal on behalf of Plaintiffs, ex relations Relator Emily Roe pursuant 6 to the qui tam provisions of the Civil False Claims Act including 31 U.S.C.§§ 7 3729-33, Cal. Gov't Code §§ 12650-12656, and the California Insurance Frauds 8 Prevention Act (herein "IFPA") pursuant to Insurance Code § 1871 et. seq. 9 10 2. Evidence incorporated infra was uncovered through proprietary data 1] mining of thousands of adjudicated Medicare claims. Claims analysis showed that 12 defendants Stanford et. al and its surgeons freely took advantage of a flawed 13 medical payment system by habitually upcoding and unbundling major surgical l4 codes for breast cancer surgery as well as unbundling and charging exorbitant fees 15 for otherwise "free" services, considered part of the global surgery fees. 16 Additionally, Stanford customarily released "ever-changing" medical records 17 which were not only variable depending on the requestor, but also indecipherable 18 and purposely ambiguous records. For example, a single 23hour mastectomy 19 hospitalization at Stanford resulted in 500 pages of medical records which were 20 at best, unintelligible and internally contradictory as to the services performed. 21 '~ 3. The herewith FCA is based on Stanford's identified billing schemes 22 ~; and habitual submission of false, fraudulent and/or misleading healthcare bills to the government and private insurers, whereas Stanford: 24 (1) Unbundled and billed pre- and post-operative visits and facility 25 fees in violation of global surgery fee rules; 26 f►•yI - ~- FIRST AMENDED COMPLAINT United States et. al., vs. Stanford et. al. QUI TAM (31 USC § 3729(a)) 28 24 Page ID #:297 1 (2) Upcoded units of exorbitant surgical supplies and medical goods 2 like breast implants or artificial skin substitute- i.e. whereby Stanford billed double or more number of units than the actual units used, and 4 units recorded in the surgeon's reports; 5 (3)Unbundled and upcoded tissue pathology exam codes in violation 6 of the "one tissue, one code" rule- i.e. a single surgical pathology 7 specimen was charged as two or three pathology codes and multiple 8 facility or technical charges; 9 (4) Habitually upcoded physician office visits and time codes to the l0 highest paying level codes (CPT 99205 and 99215) without 11 documentary support; 12 (5) Freely upcoded mid-level providers (physician assistants and 13 nurse practitioners) visits to the highest paying physician codes in 14 violation of "incident to" guidelines- thereby also fraudulently 15 misreporting the actual provider of services; 16 (6) Unlawfully billed for unsupervised and unlicensed pYactice of 17 medicine, and diagnostic testing and procedures by unlicensed 18 personnel; and 19 (7) Egregiously instructed and required that its medical billers and 20 coders always bill at the maximum level andfees, re m _ar of the 21 lack of medical necessity, lack of substantiating medical records, and 22 failure to adhere to national Correct Coding Initiatives. 2; 24 SUMMARY 25 4. Stanford Healthcare is very expensive, particularly for women's health 26 and mastectomy surgery. For example, when national benchmarks fora "one-and- 27 -4- FiRST AMENDED COMPLAINT United States et. al., vs. Stanford et. al. QUI TAM (31 USC § 3729(a)) 28 24 Page ID #:298 done" single stage mastectomy cost an average of $34,839-$78,000, Stanford bills 2 a staggering $153,488.68 for the same surgery.(Exh. E, p. 95) ~,t jam. J ___,: ~ _.` K.~ ' a`~ ~ '"~ `. ~ 4 - _.e ..~ _.~_,t. _ ~.. ~ yr ~ << v =~ i ~, m, i 3 ~ or,d r:..;, a ~~:~~,3 e .Nr~!rr i v d nK:r et (SPi' 9~;. tf {~:, yfC~ &N. ~ k~ ~~rr. .~,t u. ~ '.i~o t.. ? a'va cr. v 5 a~~cs,.91 n ct, --~;r ra VGu f~..m~xs~s i~w~ ire tJ.,rts...~, .~~,r r t~lD~'1t-~ ..~U;~ir, F~c i'm~.. ~a~araw Atc_'~,..r 6 7 5. Stanford's fraudulent billing regularly targeted women's health. 8 Defendants' upcoding and unbundling affected particularly women who underwent 9 cancer treatment at the Stanford Cancer Center located on Blake Wilbur Drive in 10 Palo Alto. This facility is also known as the Wilbur Drive Cancer Center or "Blake ]l Wilbur". l2 6. Of interest in this action, are Stanford's upcoding schemes in breast LU surgery, mastectomy, surgical departments, hospital surgical supplies, and 14 countless procedures including pelvic floor testing at the "Stanford Cancer Center". 15 Breast surgery 16 Mastectomy Reconstruction 17 Surgical Departments 18 Pelvic Floor Testing 19 Stanford Women's Cancer Center 20 Stanford Cancer Center on Blake Wilbur Drive 21 Stanford Hospital 22 Stanford Pathology Department and Laboratory 23 24 25 26 Explanation of Benefits attached fora 23-hour hospitalization for a single stage "one-and-done" mastectomy at Stanford totaling approximately $150,000 billed. 27 -5- FIRST AMENDED COMPLAINT United States et. al., vs. Stanford et. al. QUI TAM (31 USC § 3729(a)) 28 24 Page ID #:299 l 7. Stanford institutionally bills much higher and quantities of codes for 2 the same or similar procedures. Industry standards show that Stanford deliberately ~ lacks transparency in its healthcare billings, and its billing ledgers are 4 indecipherable. 5 8. Stanford habitually takes advantage of a flawed medical payment 6 system and capitalizes by upcoding and unbundling surgeries, medical services, ~ and upcoding units of surgical supply codes. g 9. For example, Stanford typically bills 2 or 3 units when in fact one unit 9 is used. Stanford exercises its billing schemes regularly in the expanding field of 10 breast cancer surgery and mastectomy, where one implant costs several thousand >> dollars, and one artificial surgical tissue used is billed at $17,300 per unit. Several ~2 hundred million dollars of Stanford's annual revenues are a result of upcoding and ' ~ unbundling, and estimated to be recoverable pursuant to FCA. ~4 10. Herein Stanford's key six (6) categoric billing schemes have IS been elucidated and are demonstrated prima facie within the attached Complaint ~6 and exhibits. (¶3) However, the extent of Stanford's capacious upcoding remains ~~ to be fully fleshed out. ~g 11. Stanford's ongoing schemes to defraud the government and ~9 private payers is motivated by Stanford's ability to "game the system" by 20 unbundling global surgical fees, churning the abundantly high volume of breast 21 cancer and surgical patients into a larger number of procedures, and using 22 multiplicitous misappropriation of CPT codes for unearned enrichment and big 23 ~r~fts. 24 12. In 2016 alone, Stanford collected $3.9 billion dollars in total ~5 healthcare revenues. Stanford's billed amount was in excess of Stanford's 26 27 -6- FiRSTAMENDED COMPLAINT United States et. al., vs. Stanford et. al. QUI TAM (31 USC § 3729(a)) 28 24 Page ID #:300 1 collections. Of the nearly $4 billion dollars collected, $755.7 million was from 2 Medicare. 13. In the first quarter of2018, Stanford reported collections of$1.16 4 billion dollars, up from $1.09 billion dollars in 2017. In 2016 and 2017, while other 5 California providers experienced decreased revenues because of the 6 implementation of the Affordable Care Act, Stanford reported a sizeable income 7 increase and only single digit increase in expenses. 8 14. Of Stanford's total annual healthcare billings, it is demonstrated 9 herein that 11-15% of all its billed CPT codes are habitually and fraudulently [~ ~; manufactured through institution wide schemes including pattern upcoding and unbundling. 12 15. Stanford Health Care —which includes Stanford Hospital, Lucile L3 Packard Children's Hospital, and three affiliated medical groups — is among the 14 most expensive providers in California, making affordable care access 15 increasingly difficult to provide to commercial carriers. 16 16. On point, Blue Shield recently unilaterally terminated its contract 17 with Stanford citing: "Stanford Health Care's rates are among the most expensive 18 in California and its high costs are not consistent with our mission."(Accessed 19 at https://calhealthnews.com/blue-shield-to-drop-stanford-health-care-from-ifp- 20 network/)."As part of our continuing efforts to help make access to health care 21 more affordable for our members,Blue Shield of California is removing Stanford 22 Health Care from our Individual and Family Plan(IFP)Exclusive PPO Network, 23 effective January i, 2Cib." ~ htt~s:iiw-~vw.blueshi~idca.uo~Y1j 24 17. In relevant background, Medicare sets and publicly publishes 25 national fee schedules for all medical, surgical, and laboratory services based on 26 standard CPT codes. Hence, Medicare's fees and allowed CPT reimbursements 27 - 7- FiRSTAMENDED COMPLAINT United States et. al., vs. Stanford et. al. QUI TAM (31 USC § 3729(a)) 28 24 Page ID #:301 1 vary only slightly based on geographic factors. Thus, other than to employ creative 2 billing schemes, it is not possible to justify how Stanford routinely churns a one(1) -, day mastectomy hospitalization into a $150,000 bill when the benchmark for 4 similar services is far, far under $100,000. (https://www.cros.gov/apps/physician- 5 fee-schedule/license-agreement) 6 18. Stanford receives the lion's share of its profits and operating 7 revenues from healthcare Federal funds. Stanford's willful implementation of 8 these unlawful billing schemes is intended to override lower health care 9 reimbursements, and to circumvent reduced Medicare fee schedules. l0 19. Commercial carriers, Medi-Cal, and healthcare providers 11 typically all use the Medicare fee schedule as a benchmark for their reimbursement 12 schedules. It is industry standard that carrie