A South Florida doctor under criminal investigation for alleged excessive billing of Medicare emerged as the federal health program’s top-paid physician in the nation Wednesday, according to the most detailed data on physician payments ever released in Medicare’s nearly 50-year history.
Salomon Melgen, a West Palm Beach ophthalmologist, was paid $21 million by Medicare in 2012 — more than any other physician who billed the taxpayer-funded program that year, according to new government data.
More than half of those payments went toward reimbursing Melgen for his injections of a costly drug, Lucentis, to treat patients suffering from a retinal disease, macular degeneration. His prolific use of that drug is at the center of the U.S. attorney’s investigation into Melgen’s practice, which thrives largely on payments from the Medicare program.
Kirk Ogrosky, an attorney for Melgen, issued a statement Wednesday denying that his client has defrauded the federal health program for seniors and the disabled.
“At all times, Dr. Melgen billed in conformity with Medicare rules,’’ said Ogrosky, a former federal prosecutor who for years fought Medicare fraud in South Florida and other hot spots.
“While the amounts in the CMS data release appear large, the vast majority reflects the cost of drugs,” Ogrosky said, adding that “the amount billed by physicians is set by law, and drug companies set the price of drugs, not doctors.’’
Melgen, 59, who has attracted media attention because of his longtime friendship with Sen. Bob Menendez, D-N.J., has been under a federal grand jury investigation for alleged Medicare fraud for more than a year. His payment information was included in the data, which details how the federal program paid out roughly $77 billion to about 880,000 doctors and other health care providers in 2012.
According to sources familiar with the criminal investigation into Melgen's alleged excessive billing, FBI and Health and Human Services agents are trying to determine whether he bilked Medicare for treating patients who did not need or could not benefit from his Lucentis injections.
A tiny fraction of all providers, mainly oncologists and ophthalmologists, received about a quarter of Medicare payments in 2012, with Melgen leading the pack.
Melgen’s lawyer, Ogrosky, said that the $21 million paid to the physician cannot be attributed as his earnings; rather, the payments represent reimbursements to his practice, Vitreo-Retinal Consultants, that cover mostly expenses.
All of his practice’s Medicare claims are billed through his name, though several of his 30-employee staff have provider numbers to bill the program as well. Medicare prefers that physicians and providers submit bills in their names.
The vast amount of his payments go toward buying expensive drugs such as Lucentis, the costly injection used to treat macular degeneration, the retinal disease that causes blindness. On average, he treats about 15 patients a day, Ogrosky said.
Under Medicare’s policies, Melgen is allowed a six percent profit for his services above what he pays for the drugs.
“He bills exactly as Congress and Medicare requires him to bill,” Ogrosky told the Miami Herald.
Jonathan Blum, principal deputy administrator for the Centers of Medicare and Medicaid Services, said Wednesday that ophthalmologists and oncologists tend to be higher paid in Florida and elsewhere.
“Both of those professions are ones that use high-cost drugs as part of their practice, part of their treatments,” he said. “Very expensive drug therapies tend to be the treatment of choice.’’
Though Avastin is a less-costly alternative to Lucentis, Medicare has no authority to overrule a physician's discretion about the best therapies for their patients. “By statutes, the Medicare program pays physicians for drugs that they believe are best suited for their patients,” Blum said.
Melgen has been on Medicare's radar for years. In 2009, Medicare auditors investigated his billing practice for treating patients with Lucentis, which is manufactured by San Francisco-based Genentech, and concluded that his company, Vitreo-Retinal, was overpaid about $9 million over the previous two years.
According to the audit, the FDA-approved labeling for Lucentis stated that physicians should use one vial of the drug for each patient, at a cost of about $2,000. Each vial contained four doses, but the labeling stated that physicians should use only one dose for each patient and discard the excess amount, the audit said.
In 2007 and 2008, Melgen typically used each vial to treat four patients and billed Medicare for $8,000, according to the audit. He continued that practice through June of last year.
The Medicare auditiors accused him of improper billing based on his “multidosing” of Lucentis. During his appeal, Melgen returned the millions in payments that he had received from Medicare. After losing, he sued the federal government to recover that money.
The parallel criminal investigation has dragged on because agents and their experts must evaluate thousands of patients' records and the eye doctor's multi-dosing billing practices to determine if Melgen has committed any fraud against the government program.
Since January 2013, Melgen has seen his four clinics in Palm Beach and St. Lucie counties raided twice, as federal agents pursued their criminal case against him. The federal grand jury has also issued subpoenas for his medical and business records.
Investigators believe Melgen provided treatments for patients with “wet” macular degeneration — leaky blood vessels that damage the area of the eye responsible for central vision — that were often medically unnecessary, according to sources familiar with the criminal probe. Lucentis effectively blocks new blood vessel growth and leakiness.
The pain-staking criminal investigation directed by the U.S. attorney’s office should be concluded this year, according to sources.
Meanwhile, Melgen's legal dispute with Medicare has also prompted a separate Justice Department investigation in Washington. Prosecutors are examining the physician's relationship with Menendez, the New Jersey lawmaker.
Prosecutors, along with the FBI, have investigated whether Menendez abused his official position to help Melgen while the physician made sizable campaign donations to the senator and provided him with free trips to the Dominican Republic, among other allegedly unreported gifts.
In 2009 and again in 2012, Menendez asked top Medicare officials to clarify the billing rules for administering Lucentis because his aides said the senator thought they were ambiguous.