Posted on September 12, 2024

Medical practitioners and providers paid $26.8 billion over the past decade to settle federal allegations including fraud, bribery and patient harm, a Reuters investigation found. Paying up means staying in business and, for some, avoiding prison. U.S. prosecutors helped them do it.

When federal enforcers alleged in 2015 that New York surgeon Feng Qin had performed scores of medically unnecessary cardiac procedures on elderly patients, they decided not to pursue a time-consuming criminal case.

Instead, prosecutors chose an easier, swifter legal strategy: a civil suit. Qin agreed to pay $150,000 in a negotiated settlement and walked free to perform more cardiac surgeries at his new solo practice in lower Manhattan.

Qin faced no judge or jury. He did not admit to wrongdoing. He maintained his license to practice. What’s more, neither Qin nor government officials were required to notify patients who purportedly were subjected to vascular surgical procedures they didn’t need. Those included fistulagrams to spot issues like narrowed blood vessels or clots, and angioplasties to open clogged coronary arteries.

Within months of the settlement, a registered nurse working for Qin at his Manhattan practice alerted authorities that something seemed amiss. The nurse, who ultimately turned whistleblower, alleged to federal prosecutors that the surgeon was performing unnecessary procedures on patients, mostly elderly Asian and Black immigrants whose care was covered by the public programs Medicare or Medicaid.

Prosecutors indicted Qin in 2018 on a felony count of fraud, which carried a maximum sentence of 10 years in prison. But in 2021, in a deal brokered behind closed doors, prosecutors dropped that charge in favor of yet another civil settlement, court records detailing that agreement show.

Once again, Qin kept his New York license to practice with no restrictions; a restricted license is one of the few ways the public can learn that a doctor has been disciplined for bad behavior. Qin agreed to pay a total of $800,000 in annual installments ending in December 2025, deposited with the U.S. Department of the Treasury. As an added penalty, he was banned from billing public health programs until February 2025.

Department of Justice officials and their investigative partner, the Office of Inspector General (OIG) for the Department of Health and Human Services, told Reuters that “conflicting evidence from experts” made it legally difficult to challenge Qin’s subjective surgical decisions, which led to the dropped indictment.

Federal agencies regulate billings and payments involving public health programs like Medicare. State governments, often working in tandem with a board of medical professionals, oversee licensing and disciplining of physicians and many other types of healthcare practitioners.

The New York Department of Public Health, which has authority over the New York State Medical board and speaks on its behalf, declined to comment on whether the state launched its own investigation of Qin.

Qin, in a response to this report through his attorneys, disputed the government’s allegations. But his settlement agreement included his signed acknowledgement that he had performed and billed for surgical procedures based on symptoms that were “insufficient to justify these treatments.”

The registered nurse who reported Qin to authorities in 2015 was stunned that the criminal charge was dropped.

“A wealthy doctor bought his way out of jail,” whistleblower Mark Favors told Reuters in his first public interview about the Qin case. “How many people get a deal like that?”

The answer, it turns out, is plenty.

Over the last decade alone, at least 540 doctors and healthcare practitioners collectively paid the government hundreds of millions of dollars to negotiate their way out of trouble via civil settlements, then continued to practice medicine without restrictions on their licenses despite allegations that included fraud and patient harm, a Reuters investigation found. That figure is the result of the first-ever comprehensive analysis of federal civil settlements and state disciplinary actions.

Separately, more than 2,200 hospitals and healthcare companies likewise negotiated civil deals to sidestep prosecution for alleged offenses that included paying bribes, falsifying patients records and billing the government for unnecessary patient care, the Reuters analysis shows. In many of those cases, the physicians, staffers and top brass who purportedly committed those misdeeds were not named publicly by prosecutors or forced to pay settlements themselves. Federal enforcers said they sometimes withhold names of individuals in these situations because of ongoing or planned investigations.

The U.S. government collected more than $26.8 billion in healthcare-related civil settlements and judgments from 2013 to 2022, the Reuters analysis found.

In all, the news agency examined 2,788 federal civil settlement cases and administrative actions over that time period; that figure includes the 540 cases of doctors and other healthcare practitioners who kept their licenses after agreeing to civil deals. Most cases were jointly investigated by the Justice Department and the OIG of Health and Human Services.

— Whistleblower and nurse Mark Favors, who was stunned that federal prosecutors in 2021 dropped a criminal fraud charge against his former boss in favor of a civil settlement“A wealthy doctor bought his way out of jail. How many people get a deal like that?”

Victims, meanwhile, received no share of these settlements, which are funneled to a Treasury Department general fund. Consequently, they must pursue their own civil cases in search of restitution for suffering and harm, Reuters found.

Neither the government nor the alleged wrongdoers were required to notify patients who may have been affected. A recovering Michigan patient learned last year that her gynecologic oncologist had been accused of performing dozens of unnecessary surgeries - procedures like the one she underwent - only after seeing media reports about his settlement. A subsequent review of her medical records by another doctor revealed that her reproductive organs, which had been removed, were not cancerous, she told Reuters.

The U.S. civil justice system has become a key tactic in the government’s battle against healthcare fraud. Compared with criminal cases, civil settlements require a lower burden of proof and are generally quicker to litigate.

But the civil system also offers perks for suspected offenders, sometimes unintended, and often at the expense of patients, the Reuters analysis found.

In nearly every civil settlement agreement analyzed by Reuters, defendants were not required to acknowledge fault or liability. What’s more, about 9 in 10 businesses and individuals accused of falsely enriching themselves were allowed to continue billing the very government programs they had been accused of defrauding, Reuters found.

Tasked with protecting public health programs from waste and fraud, more than two dozen current and former federal prosecutors and investigators who spoke to Reuters defended settlements as a cost-effective compromise to recover taxpayer monies. They contend that compliance, not punishment, is the aim so that accused wrongdoers can stay in business, thus preserving public access to vital healthcare services.

Among the physicians who kept their licenses:

The Michigan doctor who treated the woman who said her reproductive organs were removed unnecessarily. He was accused of performing unwarranted radical hysterectomies and administering excessive chemotherapy treatments. Prosecutors allege the physician had already scheduled at least one patient for surgery before examining her for the first time. He paid $775,000 last year to settle.

A California doctor – the founder and owner of a national hospital chain – accused of a profit-driven scheme to hospitalize patients who required less costly, outpatient care. The doctor and his chain paid a combined $37.5 million last year to settle that case, which followed two similar settlements totaling $66.25 million.

Michigan and California medical board and health officials, who regulate healthcare licenses and impose disciplinary actions against offenders who violate state codes of conduct, told Reuters they were aware of the federal settlements in these respective cases. They declined to comment about whether they had received any complaints about these doctors or had initiated their own investigations.

Membership on nearly all state medical boards is dominated by doctors who make rules about conduct and decide punishment for their peers, according to Matthew Smith, executive director of the Washington-based Coalition Against Insurance Fraud. As a result, the system tends to protect physicians, he said.

“They look the other way. They don’t want to know,” said Smith, whose organization advocates anti-fraud laws on behalf of insurers and a consortium of government agencies, law enforcement and consumer groups.

Some state medical boards have policies that seemingly thwart or discourage complaints of wrongdoing, Smith said. These include requiring parties making complaints to do so in notarized statements, and disclosing their identities to accused doctors, according to data from the Federation of State Medical Boards, a Washington-based nonprofit trade organization.

Secrecy is also pervasive, federation data shows. In at least 28 states, boards can issue confidential disciplinary orders to close cases without public disclosure; not even the complainant is allowed to know what happened.

Tracking federal healthcare settlements can be difficult. There is no central government archive. While most civil cases are filed in publicly accessible federal courts, the OIG in the past decade resolved hundreds of civil actions as administrative or internal matters whose public disclosure was scant, the Reuters analysis found. Enforcement notices posted on the OIG’s website about these cases typically are no longer than a few sentences. These brief summaries provide no details about the allegations or the identities of suspected offenders.

To identify settlements, Reuters created a database of federal civil cases filed by the DOJ, then identified internal actions by the OIG, which is tasked with policing public healthcare programs for waste and fraud. Additional cases were tallied from healthcare company disclosures to the U.S. Securities and Exchange Commission and through Westlaw, a legal research service owned by Thomson Reuters. Doctors’ identities from civil cases were crossmatched with state medical board disciplinary files to determine each doctor’s license status and enforcement history. (More details on Reuters’ methodology can be found here.)

Civil settlements may not be a perfect solution in every case, but they are often a necessity for understaffed and underfunded prosecutors, said Jim May, a former assistant U.S. attorney who served in South Carolina from 2012 to 2021. Criminal convictions in such cases are rarely a slam dunk. May said negotiated settlements are a way to hold defendants accountable, particularly those who have the financial means to hire lawyers skilled at forestalling criminal prosecutions with delay tactics.

‘To Do Great Harm’

Confidential healthcare investigations can span years before a criminal indictment or civil settlement is announced. During this critical time gap, suspected bad doctors routinely stay on the job, potentially placing more unwitting patients at risk of harm.

Federal enforcers lack the legal authority to suspend or revoke a doctor’s license. That power is reserved for state medical boards.

Not one of the 540 doctors named in individual pay-to-stay cases examined by Reuters had their license suspended or revoked, either while a federal investigation was underway or after a settlement was reached, the analysis found. This was true even for cases in which medical board records show the boards had received warnings from whistleblowers or federal agencies that a doctor was suspected of hurting patients.

Among such cases was that of the Michigan gynecologic oncologist, a Detroit-area physician named Vinay K. Malviya. He kept working – and remains licensed today – despite allegations leveled by prosecutors in federal court records that he administered excessive chemotherapy treatments and performed medically unnecessary radical hysterectomies from February 2011 to June 2017. The state medical board was aware of those allegations and opted not to suspend Malviya’s license while the probe proceeded, board records show.

According to allegations made by prosecutors in federal court records, concerns about Malviya had swirled for years at the nonprofit hospital system where he worked, prompting executives of that organization, Ascension Medical, to launch an internal review of his cases. Their confidential report, completed in March 2017 according to a federal affidavit, “confirmed that several patients had been harmed by the gross negligence of Malviya in conducting unnecessary procedures and chemotherapy harmful to the patient,” previously sealed federal court records seen by Reuters show.

Later that same year, in July 2017, three Ascension Medical employees filed a sealed whistleblower suit with a Michigan federal court. The Justice Department agreed to join the suit and quickly opened its own investigation with the OIG, federal court records show.

The three whistleblowers – all office staffers who handled patient records and billings – claimed that as far back as 2011, Malviya had performed medically unnecessary radical hysterectomies: removal of the uterus, ovaries and fallopian tubes. In one instance, Malviya had already scheduled a patient for the procedure before examining her for the first time, according to their federal complaint.The whistleblower suit also pointed to a financial motive: Both Ascension and Malviya collected more revenue from complex surgeries and treatments, which qualified for higher reimbursements from government-run programs like Medicare.

In August 2021, the DOJ publicly announced a settlement with Ascension, and it unsealed portions of the whistleblower suit. Hospital officials agreed to pay $2.8 million based on allegations that they had “knowingly” submitted false billing claims from 2011 through 2017, according to a DOJ settlement statement.

The DOJ noted that Ascension had ended its contractual relationship with the doctor involved. It did not disclose Malviya’s identity because he remained under federal investigation.

Ascension officials did not respond to Reuters’ requests for comment about the settlement or disclose when they ended their employment contract with Malviya. Prosecutors publicly credited Ascension officials for cooperating with their investigation and for voluntarily disclosing evidence of potential fraud. The settlement was neither an admission of liability by Ascension nor a concession by the government that its claims were unfounded, according to the signed agreement.

Malviya’s name was ultimately revealed in April 2022 when prosecutors disclosed their settlement deal. The doctor agreed to pay $775,000 and not bill government programs for patient care for three years, according to court records.

In a written statement provided to Reuters, Malviya denied wrongdoing and noted that there was no determination of liability in his agreement with the government. He said he settled to avoid the “stress and great expense of litigation.” He said independent specialists had reviewed the cases in question and concluded that he had followed well-established standards of care. Malviya characterized himself as a “doctor of last resort” who treated difficult, complex cases that required unique treatments, akin to navigating “uncharted waters,” he wrote.

Malviya may face a private malpractice suit as well.

At least 150 former patients have been interviewed by Michigan attorneys who formally notified Malviya in December about their intent to file a lawsuit; a mandatory 182-day waiting period is required in Michigan malpractice cases to give potential defendants a chance to prepare for court. The case can be filed any time after late June.

Referring to the potential suit, Malviya in his statement to Reuters labeled claims of patient harm made by personal injury attorneys as “false and defamatory” and said he had demanded that they retract those assertions made online and in letters to patients.Donna MacKenzie of Olsman MacKenzie Peacock & Wallace was one of the attorneys who conducted patient interviews.

“Women told us that they believe he performed unnecessary surgeries or ordered excessive chemotherapy,” she said. “Many said that they suffered life-changing harm.”

She and other attorneys on the case said they declined Malviya’s retraction demands.

One of Malviya’s former patients, who asked not to be identified before the suit is filed, said she sought treatment in 2017 due to severe stomach pain. She said Malviya diagnosed her with an ovarian cyst, which was alarming because her family had a genetic history of cancer. She agreed to surgery to remove the cyst. “I thought I could die from cancer,” she said.

Only after surgery did she learn that all her reproductive organs had been removed, she said. After learning of Malviya’s 2022 settlement with federal prosecutors from local media reports, the woman said she shared her medical records with another doctor who determined that her cyst had not been cancerous. She now believes the cyst could have been removed without the loss of her reproductive organs. Reuters could not independently confirm her claims.

Michigan’s Department of Licensing and Regulatory Affairs opened an investigation into Malviya in 2017 after receiving a confidential complaint, which included medical summaries of 10 patients, according to records from the state’s Board of Medicine. The board opened its own investigation in 2018 to determine if disciplinary action was warranted.

— Michigan personal injury attorney Donna MacKenzie, who represents former patients of Dr. Vinay K. Malviya“Women told us that they believe he performed unnecessary surgeries or ordered excessive chemotherapy. Many said that they suffered life-changing harm.”

Board documents in Malviya’s case cited a 2017 report by a state-hired expert. The report concluded that Malviya, in some cases, “had performed radical hysterectomies where there was no indication for the procedure,” according to the board’s investigative summary, reviewed by Reuters. The unidentified expert also wrote that Malviya had ordered excessive chemotherapy which, if unchecked, “has the ability to do great harm.”

The 19-member medical board had the legal power to temporarily suspend Malviya’s license pending its investigation, which occurred about four years before the federal settlement. It chose another option: In 2019, the board ordered Malviya to attend a continuing education course and pay $15,000 to the board, its records show.

State medical board and licensing officials did not respond to Reuters’ requests for comment.

Malviya, 69, remains actively licensed without restriction in Michigan, though his private practice office has closed. He did not comment on his employment status.

Multiple settlements, no liability

California-based Prime Healthcare Services Inc, a corporate umbrella for dozens of U.S. hospitals, is the only medical facility system in the country to have settled three federal civil cases in the last six years, based on the Reuters analysis.

For the government, the cases represent success. Not only did prosecutors negotiate multimillion-dollar settlements from Prime corporate entities, they also extracted settlements from several doctors, including the chief executive officer.

For the public, however, the string of settlements underscores the enforcement limits of this approach when alleged offenders can repeatedly pay to close cases.

In the first settlement in 2018, Prime and its nonprofit foundation, along with Dr. Prem Reddy, founder and CEO, collectively paid $65 million in settlements to the government. Federal enforcers alleged that the defendants from 2006 to 2013 “knowingly submitted false claims” to Medicare by hospitalizing an undisclosed number of patients who could have been treated with less costly outpatient care, and by “falsifying information concerning diagnoses” to increase Medicare reimbursements.

A hospital whistleblower, who received about $17 million from that settlement, alleged in an affidavit that “many patients were told that they were far sicker than they were, creating an atmosphere of uncertainty and fear.” The government did not require Prime or Reddy to acknowledge fault or liability, according to court records, nor were they made to notify patients who were allegedly hospitalized unnecessarily.

Similar allegations surfaced in 2019. Reddy and two Prime-managed hospitals in Pennsylvania agreed to pay $1.25 million to the government to settle allegations of billing for unnecessary hospitalizations and false diagnoses, according to federal court records. Once again, patients were not notified because, as with the first settlement, the government did not require Prime or Reddy to acknowledge fault or liability.

Speaking on behalf of Prime and Reddy, Prime’s communications vice president Elizabeth Nikels said in a written statement that the 2018 and 2019 agreements were the result of billing confusion among hospital staff. That confusion, she said, was exacerbated by vague Medicare rules at the time. The settlements “did not relate to patient care and were entered to ensure that Prime Healthcare could focus on its mission of saving and transforming hospitals for communities across the country,” the statement said.

Prime and Reddy settled for a third time in 2021.

Prosecutors accused Prime of paying three times market value to acquire the Victorville, California-based practice of cardiologist Siva Arunasalam, which is considered a kickback under federal law. Prosecutors maintained that the deal, designed to boost patient admissions to a Prime hospital, was “substantially negotiated” by Reddy. The sales price was not disclosed in court records. Additionally, Prime “overcompensated” Arunasalam based on volume of patient referrals, according to DOJ allegations.

Prime settled for about $33.7 million, Reddy paid $1.7 million and Arunasalam settled for $2 million, deposited into a Treasury department general fund, according to court records. Nikels, the Prime spokesperson, said in her statement that the company disputes the allegation that it overpaid for Arunasalem’s practice. Nonetheless, Prime submitted to enhanced federal monitoring for five years as part of a so-called integrity agreement in which government regulators monitor billings, patient admissions and physician compensation, she said.

Neither Arunasalam nor his attorney responded to requests for comment.

The Medical Board of California is responsible for enforcing a code of behavior for physicians that prohibits dishonesty and unethical actions involving patient care. Like boards in most states, the California body can mete out discipline privately or via actions that would allow the public to learn of a doctor’s disciplinary history.

The California board’s publicly available records show no investigation or discipline of Reddy based on allegations linked to the three settlements. Other state records show that Reddy did not renew his medical license registration in 2018, making him ineligible to practice medicine in California. He remains the CEO of Prime, a role that does not require a medical license.

Public records likewise indicate that Arunasalam faced no action by the board. He remains licensed with no restrictions.

The California medical board did not respond to requests for comment.

A ‘remarkable result’

The difficult part of being a secret whistleblower is showing up to work each day and pretending that nothing is wrong, said Mark Favors, the registered nurse who alleged that his New York employer Dr. Feng Qin had performed unnecessary cardiac procedures on elderly immigrants. Favors’ accusations led to Qin’s $800,000 civil settlement in 2021.

“I wanted to warn patients about what I knew,” he said. “I watched patients suffer complications, some had to be rushed to the emergency room, but I was sworn to secrecy by federal investigators.”

A former U.S. Army nurse, Favors said he didn’t know that Qin was under federal investigation when he got hired in 2012 to help manage the doctor’s private practice on the edge of Chinatown. Nor was he aware of Qin’s 2015 civil settlement until a drug sales representative told him about a brief mention of it in a healthcare trade publication.

Favors described that revelation as a light bulb moment. He had long found it odd that Qin paid transportation costs for his patients. It was an unusual perk considering that some lived more than 20 miles away and arrived by limo or Uber to the spartan office, with its bare-bones waiting room and blank white walls.

He said he began paying close attention to the doctor’s approach to treatment to see if Qin was honoring his pact with the government.

Favors said he found inconsistencies between what Qin wrote in patient files and the corresponding radiological images, which appeared not to support Qin’s diagnoses. He provided some of the data and images to federal investigators who, in turn, relied on medical experts to identify cases involving unnecessary procedures.

— Whistleblower Mark Favors, a nurse who reported his former boss to federal authorities for allegedly performing unneeded cardiac procedures on elderly patients

“Dr. Qin told patients that they might die if they didn’t get the procedures.”

In his sealed 2016 whistleblower suit, commonly called a qui tam action, Favors alleged that surgeries for some patients had been scheduled before their first examination with Qin. In other cases, Favors said, patients were subjected to the same surgical procedures every three months regardless of medical need. These included angioplasties in which wires and balloons are inserted into narrowed blood vessels to increase blood flow.

“Dr. Qin told patients that they might die if they didn’t get the procedures,” Favors said.

DOJ prosecutors indicted Qin in 2018 for a single count of felony fraud, but later dropped the charge as part of the $800,000 civil settlement in 2021, court records show. Federal officials awarded Favors nearly $200,000 from that agreement for his role as a whistleblower.

Qin’s attorneys, former federal prosecutors Ken Abell and David Eskew, told Reuters that their medical experts successfully disputed an undisclosed number of cases deemed by the government as medically unnecessary. Abell previously had been chief of healthcare fraud for New York’s Eastern District until 2018, while Eskew had handled healthcare cases in New York and New Jersey until 2020.

Eskew called the felony charge dismissal a rare outcome and a “remarkable result.” Prosecutors in these cases typically won’t agree to drop charges entirely; rather, they push for a deal in which the defendant agrees to plead guilty to a lesser offense, he added. OIG officials told Reuters they opted for a civil settlement rather than face the uncertainty of persuading a jury in a criminal trial that Qin knowingly performed unnecessary surgeries.

Qin’s attorneys, in a statement to Reuters, disputed Favors’ accounts of Qin’s behavior and office events. “In all events, the central premise of Favors’ qui tam complaint – that Dr. Qin performed medically unnecessary procedures – was ultimately disproven and discredited,” Abell said.

Favors noted that his suit was validated by a lengthy joint investigation by the DOJ and OIG, a probe that culminated in Qin agreeing to a hefty settlement. Favors also observed that Qin, in his signed stipulation with prosecutors, acknowledged that symptoms documented in numerous patient medical records were “insufficient to justify treatments.”

Qin’s patients, meanwhile, were left in the dark. Mirroring all other civil agreements reviewed by Reuters, Qin was not required to notify his patients of the investigation or its outcome. Nor were prosecutors or OIG officials required to warn patients that they may have been victims of unnecessary surgeries.

OIG officials did block Qin from billing Medicare and other federal programs until February 2025.

For now, Qin, 59, works as a cardiac surgeon in China, where he was born and educated, his attorneys said. But he may return to New York when he is allowed to bill government programs again, they added.

Editor’s note: A previous version of this story misidentified Dr. Feng Qin in a photo showing a surgical procedure being performed in his former private practice in New York. The photo is from promotional material produced by his office, but he is not one of the individuals shown.

“Prosecutors want to do the right thing,” May said. “But the resources aren’t always there.”

Some critics of this approach have another name for it: “Pay to stay.”

Price of Justice

By Michael Berens

Original Source

Photo editing: Corinne Perkins

Art direction: John Emerson

Edited by Marla Dickerson