Turf war among University of Miami/Jackson Memorial Hospital doctors exposed in proposed settlement over Medicare fraud claims. (Miami Herald)

"Jackson Health System and University of Miami have been partners since 1952. UHealth provides more than 90 percent of the physicians at Jackson, which is the training hospital for UM’s Miller School of Medicine. For a time, the relationship grew strained, partly because UM purchased the former Cedars Medical Center across the street.

"A long-simmering schism between University of Miami surgeons and pathology doctors over costly lab testing for Jackson Memorial Hospital’s renowned transplant program has surfaced in a fierce federal court dispute over fraudulent Medicare billing claims.

The turf war dates back more than a decade, but it has come to light in a proposed $22 million settlement to be paid by UM and Jackson Memorial to resolve the Medicare claims fight with the Justice Department, according to court records.

Federal prosecutors have joined a trio of former UM senior administrators who sued the university in two separate whistle-blower claims, accusing the medical school’s surgery department of overcharging the taxpayer-funded health insurance program for transplant lab tests that were previously under the control of pathology physicians at Jackson Memorial.

For years, UM’s surgeons have performed hundreds of organ transplants at Jackson’s Miami Transplant Institute, while exerting tremendous influence over its administrative operations in the partnership between the private university and public hospital.

So when the chairman of UM’s surgery department, Dr. Alan Livingstone, decided to move pathology testing for organ transplant patients from Jackson’s labs to his department on the medical school campus, no one stood in the way — even though the change raised costs for patients significantly, according to the two civil lawsuits filed by the former UM administrators. The cases were unsealed in early November by a federal judge in Miami.

Court records also reveal that an external audit of the surgery department’s transplant lab services stirred up fears among some surgeons to speak out about the divisive issue because of concerns about their careers. An independent transplant consultant noted in a memo that a few UM transplant surgeons said they were afraid because of pressure from the “highest levels” to keep the transplant lab testing under the surgery department and away from the pathology department.

There was nothing illegal about Livingstone’s moving the transplant lab testing to his department — a practice that began in 2007 and continues to this day. But his decision to shift oversight of the transplant lab services led to a fraudulent billing scheme by UM’s surgery department, as it overcharged Medicare for a high level of unnecessary tests costing millions of dollars, according to the allegations in two whistle-blower lawsuits. Most of their claims were supported by the Justice Department.

One of the False Claims Act cases was filed by a former UM medical school chief operating officer, Dr. Jonathan “Jack” Lord, a pathologist who was hired by the university’s then-president, Donna Shalala in 2012. Lord was forced out the following year.

The second case was brought by a former UM professor and chief of clinical pathology, Dr. Philip Chen, and Joshua Yelen, a former administrator for UM’s pathology department. Under federal law, the Medicare program will be reimbursed most of the money from the proposed $22 million settlement, but about $4 million will be paid to Lord for being first to file a claim against UM while Chen and Yelen will receive about $100,000 for their claim against Jackson Memorial.

(A third case accusing UM and Jackson Memorial of similar fraudulent billing for transplant lab tests was brought by a former Jackson finance director, Mitchell Wallace, but his suit does not qualify for a share of the planned settlement.)

All of the cases were filed in Miami federal court seven years ago. The Miami Herald was first to report the proposed Medicare fraud settlement after Election Day, following an order by U.S. District Judge Cecilia Altonaga to unseal the court record.

TOP EXECS CRITICIZED

The Lord and Chen-Yelen whistle-blower complaints and exhibits reveal not only conflicts between senior UM physicians over billing for pathology lab services at Jackson’s Miami Transplant Institute but also accusations against Livingstone and Shalala, who stepped down as UM president in 2015. Shalala was elected to Congress in 2018 but lost her reelection bid in November.

What kept the billing scheme going, according to Chen and Yelen’s lawsuit, was the threat of UM’s powerful surgeons to move surgeries out of Jackson Memorial and into the university’s own hospital across the street. Both suits claim that Livingstone resisted the pathology doctors’ efforts to move the transplant lab testing back under their control because Livingstone, as surgery chief, received salary bonuses for the higher revenues that UM received as a result of the bills to Medicare.

Livingstone, who was director of the Miami Transplant Institute until October 2012, defended his handling of the surgery department’s transplant lab billing, saying in a prepared statement that “none of my compensation was ever related to the lab volumes” paid by Medicare.

A former medical resident at Jackson Memorial who had seen the public hospital grow in partnership with the university’s medical school, Livingstone was not named as a defendant in the lawsuits though he is identified as a key player.

“I’ve dedicated over four decades of my life to my patients, my students, the University of Miami, and Jackson Memorial Hospital,” Livingstone said. “Unfortunately, between the egos and infighting, some disgruntled individuals felt the need to attack me and the university.”

“They knew better than to falsely accuse me as a defendant as I would never have settled for one penny,” he added.

The Medicare fraud dispute over the pathology lab testing services traces back more than a decade. It covers a period of time when the relationship between UM and Jackson transformed from a longtime partnership to a fierce competition after the university bought the former Cedars of Lebanon hospital in 2007. The hospital is across the street from Jackson Memorial, and it has been at the root of many disagreements between the institutions.

Jackson Memorial employees had performed lab tests for organ transplants, under the supervision of UM pathologists, prior to 2007. But that year, Livingstone moved the lab services to UM’s surgery department, a change that rankled the university’s pathology department leaders for years.

Those doctors argued that transplant lab testing services rightfully belonged in the pathology department. The lab tests are designed to monitor the compatibility of patients and transplanted organs, and the results are used to evaluate, select and monitor donors and recipients of kidneys, pancreases, livers, lungs, hearts and gastrointestinal tracts.

After the lab services were moved out of Jackson Memorial, the lawsuits contend that UM’s surgery department filed claims for thousands of unnecessary tests and other costly services that amounted to fraud against Medicare.

Both whistle-blower cases claim that when informed of the surgery department’s questionable billing activity, UM and Jackson Health System executives did nothing to stop it.

Lord’s suit says the practices were “not only well known to UM at the highest corporate level, but were encouraged.” His suit further claims that from 2007 to 2013 the UM surgery department’s annual transplant lab revenue consistently increased while organ transplants declined from 547 to 308 per year.

The reason: UM billed Medicare for “procedures that do not qualify for reimbursement” while “continuing to bill [Jackson Memorial] for the same services,” according to Lord’s suit. (Justice Department lawyers, however, have not adopted the latter claim of double-billing in the planned settlement with UM.) The university’s partnership with Jackson has long been governed by an annual operating agreement through which the public hospital pays UM for its medical services.

‘UNSIGNED, UNREQUESTED’ TESTS

Both Lord’s suit and the Chen-Yelen case claim UM’s surgery department at Jackson submitted bills to Medicare for thousands of “unsigned and unrequested” lab tests involving post-kidney and other transplant surgeries, generating tens of millions of dollars in annual revenue for the surgery department as well as salary bonuses for Livingstone and others.

“Since 2007, Dr. Livingstone orchestrated several schemes to increase the revenue of the Department of Surgery by defrauding the government’s healthcare programs,” Lord’s suit says.

Chen and Yelen not only pointed the finger at Livingstone; they also said Jackson’s senior administrators, including CEO Carlos Migoya, were “fully aware of the allegations.”

Migoya and Jackson declined to comment about that claim because the proposed settlement was still being finalized.

An attorney for Livingstone said the allegations against the former UM surgical chief are baseless. Livingstone was succeeded as surgery department chairman in 2015 by Dr. Omaida Velazquez.

David O. Markus, Livingstone’s attorney acknowledged that he, Livingstone and UM’s lawyers met with Justice Department lawyers in Miami and Washington to discuss the allegations, but he said it was to argue that the whistle-blowers’ suits lacked merit and the feds should not intervene.

Markus also challenged the suits’ central claim that Livingstone orchestrated the surgery department’s overbilling for transplant lab services to Medicare, saying that the surgical chief became a lightning rod for disgruntled doctors because of his leadership position.

“Dr. Livingstone was not involved in ordering tests,” said Markus, who represented the physician with his law partner, Margot Moss. “He was simply trying to referee a dispute between doctors over appropriate testing protocols. At all times he told the physicians to exercise their best medical judgment. No more, no less.”

TURF BATTLE

The court record, however, suggests that Livingstone as well as Shalala were directly involved in the turf battle over the frequency of the surgery department’s transplant lab services and its questionable Medicare claims.

The controversy over control of UM’s transplant lab services reached a climax in late 2012 after the top two administrative doctors at UM’s medical school had ordered an external audit of the surgery department’s lab testing.

The senior physicians — Lord, the medical school’s COO, and Pascal Goldschmidt, the school’s then-dean and a former Duke University cardiologist — hired a consulting firm, Transplant Management Group (TMG), to conduct the outside audit, with UM president Shalala’s approval.

At the time, both UM administrators were under intense pressure after they had laid off some 900 full- and part-time medical school employees due to financial difficulties in spring 2012. The layoffs stemmed from the university’s rapid expansion into a healthcare system under Shalala, including its purchase of the old Cedars of Lebanon hospital and the opening of outpatient clinics across South Florida.

Livingstone’s lawyer said UM administrators “threatened” the surgical chief with the external audit because he was among the medical school staff who decried the layoffs ordered by Lord and Goldschmidt. Hundreds of faculty members signed a no-confidence petition in the two top administrators; Lord stepped down as COO under pressure from Shalala, but she refused to remove Goldschmidt as dean.

Court records show that the external audit stirred old rivalries and fears among the medical school staff.

One unidentified UM transplant surgeon told the outside consultant at TMG that “they had been instructed from the ‘highest levels’ to be vague and standoffish with us, [and] not share too much information about the leadership and financial issues within the transplant program,” a Nov. 19, 2012, memo stated.

“He went on to tell me that it is very known internally that the [transplant] lab has been performing tests without signed physician orders, performing known medically unnecessary testing and questionable billing practices,” according to the consultant, who was not identified in the memo.

That December, as dissent mounted among UM’s doctors, Shalala shut down the external audit of the university’s Immunological Monitoring Laboratory or IML used to process transplant patient tests. “The President has directed that, effective immediately, the investigation of the IML be led and managed by Internal Audit [at the university],” according to an email written by UM’s general counsel.

UM then hired a law firm, Hogan Lovells, and another outside auditor to do the probe. The following year, the university agreed to reimburse $356,000 to Medicare regarding disputed bills for transplant lab tests by UM’s surgery department, records show.

Shalala declined to comment for this story, referring the Miami Herald’s questions to UM’s lawyer, Dan Gelber. He characterized the initial external audit ordered by Lord and Goldschmidt as “retaliation” against Livingstone.

“President Shalala learned from Dr. Livingstone of an audit that was ostensibly being used to retaliate against Livingstone for publicly challenging Dr. Lord,” Gelber said in a statement.

“In order to avoid even the appearance of taint she did precisely what proper governance would demand,“ he said. “She took the audit away from Dr. Lord and directed the general counsel to assign it to another external auditor who would report directly to the University Board of Directors, rather than to her or Dr. Lord.”

Rather than fight the two whistle-blower suits, though, UM has agreed to pay $21.5 million and Jackson Memorial an additional $500,000 to resolve the civil Medicare fraud charges under the proposed settlement with the Justice Department, the Herald has learned.

The final settlement also will require UM to sign a so-called corporate integrity agreement outlining the university’s obligations to prevent further fraud. The settlement is expected to be filed soon with a federal judge in Miami. No deadline has been set.

UM’s share of the settlement is significantly larger than Jackson Memorial’s because the private university has been held largely responsible by Justice Department lawyers for the transplant billing claims as well as for a separate practice of charging excessive fees to patients using UM Health System’s outpatient clinics without notifying them of the actual cost.

For the unnecessary lab tests for organ transplant patients, UM has agreed to pay $9 million and Jackson an additional $500,000 to the Medicare program. For failing to tell patients of the extra fees for using outpatient clinics, UM will pay an additional $12.5 million to Medicare.

UM’s lawyer, Gelber, told the Miami Herald that the university chose to settle the case for “business reasons” because the stakes were potentially in the hundreds of millions of dollars. “UM truly agonized about whether to settle this case,” he said.

In a statement, Jackson Memorial said that it “has readily complied with this [Justice Department] investigation and looks forward to resolving it to protect the health system’s Medicare program.”

A lawyer for Lord, the former UM medical school chief operating officer, said that the proposed settlement not only validates his client’s claims but also those of the other whistle-blowers who sued the university.

Miami attorney Jeffrey Sloman said both the financial settlement and corporate integrity agreement are significant punishment meant to deter UM’s medical school from committing Medicare fraud again.

Sloman said that his client is “gratified” that the Department of Health and Human Services’ Office of Inspector General has imposed the corporate integrity agreement, “especially because UM continues to deny its wrongdoing and continues to ‘agonize’ about doing the right thing.”

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