Feds accuse Mayo Clinic of false billing

The U.S. Justice Department has accused the Mayo Clinic of submitting false claims to Medicare and other federal programs for lab tests it never performed.

It says the improper payments went on for years until a Twin Cities doctor discovered the irregularities and blew the whistle.

The allegations, made public in a complaint filed Monday in federal court in Minneapolis, did not say how much money was at stake.

But the whistle-blower, Dr. David Ketroser, who is both a lawyer and a physician, said Mayo billed for thousands of nonexistent pathology tests over the years, costing the government millions of dollars. "They were billing for things they weren't doing," Ketroser said Monday. "If it happens once, it can be sloppiness. If it happens every single time, it's a serious pattern."

A Mayo spokesman said the billings were made in error, and that the allegations have been blown out of proportion. "We feel the DOJ complaint overstates the problem," said Bryan Anderson, Mayo's spokesman. He noted that the clinic voluntarily refunded $242,711 to the federal government in 2007, when the problem first came to light.

The federal government, however, says the payment fell short of "the full measure of damages," and that Mayo acted only after the Justice Department began investigating its lab and billing practices.

The lawsuit against Mayo was originally filed in secret in 2007, by Ketroser and three former Mayo patients, under the federal whistle-blower law. The case didn't become public until this September, when the federal government announced it would join the suit.

If the lawsuit is successful, the whistle-blowers would be entitled to up to a fourth of the money recovered by the government.

Origins of the suit

Ketroser, 59, said he discovered the suspicious billing while representing clients in malpractice cases against the Mayo Clinic. At the time, he said, he was trying to find out if Mayo doctors had missed a cancer diagnosis in one patient, who'd had surgery at the Mayo Clinic. When he asked for the frozen tissue slide -- which is used to test tissue samples -- he was told they had thrown it out, he said. Meanwhile, he discovered that Mayo had billed for a second pathology test, called an "unfrozen permanent section," the same day, but couldn't produce it. "In fact, they didn't do them," he said. "I encountered it at least 10 or 12 times."

Ketroser said he reported his concerns to the agency that runs Medicare and Medicaid, and eventually decided to file suit, along with three patients who had been falsely billed. One of them, he said, was his late uncle, Leon Latz, who had been a Mayo patient.

"I'm the one that figured it out," he said. "But the reason I know what I know is because I represented these people. And it just seemed elegantly right that they should benefit." His share of any money from the lawsuit would be divided with the three patients or their heirs, who are listed as co-whistle-blowers.

He also took issue with Mayo's defense that the billings were made in error, citing an internal memo from a Mayo official acknowledging that the improper billing had been "going on for years."

But Anderson, the Mayo spokesman, said "Mayo has fully complied with the law." He noted the original whistle-blower suit included two other allegations of misconduct involving the pathology tests, but that the Justice Department decided to pursue only the "billing error issue."

"We are confident in our position and plan to defend it vigorously," Anderson said.