01-004548PL Department Of Health, Board Of Medicine vs. Joel K. Shugar, M.D. Status: Closed Recommended Order on Tuesday, June 11, 2002.

Summary: Board alleged Respondent filed false claims based on erroneous Current Procedural Terminology codes. Found: Respondent did not knowingly file false claims.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF HEALTH, )

BOARD OF MEDICINE, )

)

Petitioner, )

)

vs. ) Case Nos. 01 - 4548PL

) 01 - 4549PL

JOEL K. SHUGAR, M.D., )

)

Respondent. )

)

RECOMMENDED ORDER

Notice was provided and a formal hearing was held on

March 12 through 14, 2002, in Tallahassee, Florida, and

conducted by Harry L. Hooper, Administrative Law Judge, with the

Division of Administrative Hearings.

APPEARANCES

F or Petitioner: Diane K. Kiesling, Esquire

Agency for Health Care Administration

2727 Mahan Drive, Building 3

Room 3226, Mail Stop 39

Tallahassee, Florida 32308

For Respondent: Gary A. Shipman, Esquire

Brian Newman, Esquire

P ennington, Moore, Wilkinson,

Bell & Dunbar, P.A.

Post Office Box 10095

Tallahassee, Florida 32302 - 2095

STATEMENT OF THE ISSUE

Whether Respondent's medical license should be disciplined

because he filed false insurance claims.

PRELIMINARY ST ATEMENT

An Administrative Complaint was filed before the Board of

Medicine in the case of Dr. Joel K. Shugar (Dr. Shugar) on

April 20, 2001, which was assigned to the Division of

Administrative Hearings (DOAH) Case Number 01 - 4549PL. A second

Administrat ive Complaint was filed on September 26, 2001, which

was assigned DOAH Case Number 01 - 4548PL. In both cases

Respondent demanded a formal hearing before DOAH, and on

November 27, 2001, the agency referral was filed with DOAH. In

response to the DOAH's Ini tial Order, the parties, among other

things, requested that the cases be consolidated. By Order

filed December 5, 2001, the cases were consolidated under DOAH

Case Number 01 - 4548PL.

The cases were set for March 11 though 14, 2002. Due to

the necessity t o address certain discovery issues, the case did

not proceed to a final hearing until March 12, 2002.

The Administrative Complaints in this case, as originally

filed, charged violations of Section 458.331(1)(h) and (n),

Florida Statutes. Petitioner withdrew all charges under

Section 458.331(1)(n), Florida Statutes, during the final

hearing. Petitioner also withdrew the request contained in the

consolidated complaint that a sanction involving suspension or

revocation of license be recommended.

Peti tioner called Ms. V.A.A.; Jean Acevedo; Diana

Calderone, M.D. (by videotaped deposition); and Thomas Breza,

M.D. (by videotaped deposition). Petitioner offered and had

admitted Exhibits 1 - 6, 8 - 10, 11 (as it relates to specific

admissions 6, 46, 65, 77, 82 , 83, and 84 only), 12 - 14, 15, 15A,

and 16.

Dr. Shugar presented the testimony of Margie Vaught;

Mitchell King, M.D.; Sheila Hilson; and Broward Taff.

Dr. Shugar also testified. Dr. Shugar offered and had admitted

Exhibits 5, 9, 10, 12, 13, 15, 16 , 19, and 20.

A Transcript was filed May 6, 2002. The parties jointly

requested that proposed recommended orders be due on May 29,

2002. This was approved by an Order entered May 13, 2002. Both

parties filed Proposed Recommended Orders on or prior to th at

date and they were considered in the preparation of this

Recommended Order.

Because of confidentiality issues, references to patients

are accomplished through the use of initials rather than names.

References to statutes are to Florida Statutes (19 95),

unless otherwise noted.

FINDINGS OF FACT

1. Petitioner is the state agency charged with regulating

the practice of medicine pursuant to Section 20.43 and Chapters

456 and 458, Florida Statutes.

2. Pursuant to Section 20.43(3)(g) Petitioner has

contracted with the Agency for Health Care Administration to

provide consumer complaint, investigative, and prosecutorial

services required by the Division of Medical Quality Assurance,

councils or boards, as appropriate, including the issuance of

eme rgency orders of suspension or restriction.

3. Dr. Shugar is a physician holding Florida license

ME 0053263, which was issued to him by Petitioner.

4. Dr. Shugar, during all times pertinent, practiced

medicine in Perry, Florida. Dr. Shugar began practicing in

Perry in 1991. Although Respondent is currently known to be

primarily an ophthalmologist during all times pertinent, he was

engaged in the general practice of medicine.

Patient B.O.

5. B.O., a 49 - year - old female, became a pati ent of

Dr. Shugar in February 1995. On June 8, 1996, Patient B.O. was

seen by Dr. Shugar. He observed a lesion on her nose. Patient

B.O. and Dr. Shugar were concerned that the lesion might be

malignant.

6. On or about July 27, 1996, Patient B.O. presented to

Dr. Shugar for the purpose of having the lesion removed. Using

local anesthesia, Dr. Shugar surgically removed the lesion and

some surrounding tissue. This material was sent to a

pathologist in Tallahassee, Florida, who upon examinatio n,

opined that the growth was a benign nevus rather than a

carcinoma.

7. On August 5, 1996, the sutures were removed and Patient

B.O.'s medical records indicated that the area was, "well

healed." Patient B.O. had no complaints with regard to the

out come of the surgery.

8. When Patient B.O. subsequently received a bill in the

amount of $2,225, she was shocked at the amount. She called

Respondent's office and her insurance company. She personally

paid only $100.

9. Sheila Hilson was the person who assigned Physicians'

Current Procedural Terminology (CPT) codes for Dr. Shugar. CPT

codes are numbers assigned to actions taken during patient

evaluation and management and to procedures performed. CPT

codes are widely used by government agen cies and insurance

companies.

10. CPT codes translate into dollar amounts used for

billing patients and provide the basis for reimbursement by

insurers and governmental agencies. A CPT code for a simple

procedure will translate into a certain number of dollars. A

CPT code for a more complex procedure will translate into a

larger number of dollars.

11. Dr. Shugar utilized a superbill, which is a list of

CPT codes provided in the written word and in a bar code. The

superbill contained only the most common ailments. In the usual

case, Dr. Shugar, subsequent to treating a patient, would circle

the appropriate CPT code on the superbill. The superbill with

the circled item would then be forwarded to his administrative

office and the appropriate ch arge would be billed to the patient

or third party payer in accordance with Dr. Shugar's direction.

12. If the superbill did not contain an item for a

particular procedure, Dr. Shugar would make a note on a patient

and evaluation management form an d his clerical staff would

divine the correct CPT code from his note.

13. Dr. Shugar did not regularly supervise the billing

process. He would only become involved when a problem was

encountered.

14. As noted above, Dr. Shugar, during times pe rtinent,

had a general or family type practice which meant that he

treated a wide variety of ailments. Because of this, it was

impossible for his superbill to reflect all of the work that he

accomplished.

15. The procedure performed on Patient B.O . was not

reflected on the superbill. This being so, Ms. Hilson reviewed

Respondent's notes on the patient management and evaluation

record and determined a CPT code. This was her usual practice

when the procedure was not listed on the superbill.

16 . Ms. Hilson, when reviewing the patient evaluation and

management form, noted that Respondent had performed work on

Patient B.O.'s nose and observed the word "plasty." She began

her code determination exercise by turning to the section under

"nose" and thereafter went to the section under "repair."

Following this trail resulted in the conclusion that the

procedure was a rhinoplasty.

17. As will be noted hereinafter, determining correct CPT

codes is fraught with difficulty and often experts on CP T codes

will disagree as to the proper code to be assigned when

presented with identical descriptions of a procedure. That

having been said, Ms. Hilson's determination, nevertheless, was

far off the mark.

18. A rhinoplasty, CPT Code 30400, is what is colloquially

called a "nose job." A rhinoplasty is a substantially more

involved procedure than the excision of a lesion. Moreover, it

is usually, but not always, considered a cosmetic procedure of a

type not usually reimbursed by insurance.

1 9. Ms. Hilson also filed for this procedure under CPT

Code 13152, "Repair, complex, scalp, arms, and/or legs; . . .

2.6 cm to 7.5 cm."

20. It was this error that resulted in Patient B.O.'s

being shocked when she received her bill. The bill, in the form

of a claim, was also sent to B.O.'s medical insurance carrier.

21. Patient B.O.'s insurance carrier responded to the

claim with a letter dated August 27, 1996, which was date

stamped by Respondent's office on September 5, 1996. This

letter requ ested documentation as follows: (1) Degree of

functional impairment; (2) date of injury; (3) X - ray report of

the injury; (4) pre - operative photographs; and (5) patient's

history and physical examination report. Neither the coding of

the procedure nor the word rhinoplasty was mentioned in the

letter.

22. On September 10, 1996, Ms. Hilson discussed the matter

with Dr. Shugar for the first time. Dr. Shugar answered the

carrier's letter on September 23, 1996. Neither the coding of

the procedure nor th e word rhinoplasty was mentioned in this

letter. The response was factually correct.

23. The claim, despite the additional information supplied

by Dr. Shugar, was denied by the carrier. In the ensuing months

Ms. Hilson and the carrier exchanged let ters. Eventually

Dr. Shugar discovered that Ms. Hilson had filed a claim for a

rhinoplasty.

24. Subsequently, on September 8, 1997, the claim was

re - filed under CPT Codes 11441 and 13150 - 51. This was incorrect

also and resulted in codes whi ch caused Dr. Shugar to be

inadequately reimbursed for the procedure performed.

25. Subsequent to this filing, Patient B.O.'s insurance

carrier paid $600 to Dr. Shugar. This amount, along with the

$100 paid to him by Patient B.O., resulted in Respon dent's

receiving a total of $700 for treating the lesion on Patient

B.O.'s nose.

Patient V.A.A.

26. V.A.A. became a patient of Dr. Shugar in 1995. On

February 14, 1996, Patient V.A.A. presented to Dr. Shugar with a

lesion on her cheek and a crusted place on her nose. Both areas

caused concern for malignancy which Dr. Shugar desired to rule

out. Dr. Shugar made a referral to a Dr. Grate in Tallahassee,

Florida, an ear, nose, and throat physician, because of

Respondent's concern that the area on her nose was a basal cell

carcinoma.

27. On March 23, 1996, Dr. Shugar removed the lesion on

Patient V.A.A.'s cheek. Dr. Shugar noted that the lesion was

1.1 centimeters in diameter. He documented in V.A.A.'s medical

record that he "excised under loup e mag., 3.0 cm length, complex

closure."

28. A pathology report was generated by Ketchum Wood and

Burgert Pathology Associates which diagnosed an absence of

malignancy. On April 4, 1996, it was noted that the incision

was "well healed."

29. Ms. Hilson reviewed the Patient Evaluation and

Management Record and filed a claim with Patient V.A.A.'s

insurance carrier for the cheek surgery using CPT Codes 11403

and 13131. CPT Code 11403 addresses, "Excision, benign lesion,

except skin tag (unless l isted elsewhere), trunk, arms or legs;

. . . lesion diameter 2.1 to 3.0." CPT Code 13131 addresses,

"Repair, complex, forehead, cheeks, chin, mouth, neck, axillae,

genitalia, hands and/or feet; 1.1 cm to 2.5 cm."

30. Ms. Hilson's use of CPT Code 114 03 was improper

because that code does not address procedures involving the

cheek and because the lesion, as noted in the Patient Evaluation

and Management Record, was 1.1 centimeters. It was the length

of the closure which was three centimeters.

31. Upon consideration of all the available evidence, it

appears that Ms. Hilson simply made a coding error because of a

transposition of the length of the lesion and the length of the

closure. Because of the coding error, Dr. Shugar obtained less

compensat ion than he was entitled to.

32. When Patient V.A.A. came to Dr. Shugar on April 4,

1996, for follow - up on her cheek incision, Dr. Shugar was

concerned because Patient V.A.A. had not visited Dr. Grate as

she had been advised. Patient V.A.A. had deci ded to forgo

treatment by Dr. Grate because her medical insurance would not

pay for treatment by him.

33. Dr. Shugar had previously made a differential

diagnosis on the suspicious area on V.A.A.'s nose of basal cell

and squamous cell carcinoma. Th e passage of time since

February 14, 1996, when he first observed the area, and a closer

examination of the area, enabled Dr. Shugar to make a diagnosis

of basal cell carcinoma during the April 4, 1996, visit.

34. After considering the desires of Pa tient V.A.A. and

the treatment regimens available in the local area, Respondent

decided on that date to prescribe Efudex. Efudex is a chemical,

which when applied to a growth on the skin, will destroy the

growth and, for that matter, skin not having a gro wth upon it.

Dr. Shugar referred to this procedure as, "Chemical treatment of

malignancy."

35. This was billed by Ms. Hilson under CPT Code 17283.

This code is under the general heading of, "Destruction,

Malignant Lesions, Any Method," and specific ally, "Destruction,

malignant lesion, any method, face, ears, eyelids, nose, lips,

mucous membrane,: . . . lesion diameter 2.1 to 3.0 cm."

36. Patient V.A.A. obtained the Efudex and applied it to

the lesion herself, having been instructed by Dr. Shug ar as to

its proper use.

37. On April 25, 1996, Dr. Shugar saw Patient V.A.A. and

instructed Patient V.A.A. to discontinue the use of the Efudex.

On May 29, 1996, V.A.A.'s last visit with him, Dr. Shugar noted

that the carcinoma on her nose was "wel l - treated."

38. After receiving the superbill for the April 4, 1996,

treatment provided to Patient V.A.A., Ms. Hilson selected CPT

Code 17283. She selected this code based upon Dr. Shugar's note

that he had used "chemical treatment." This selection was not

discussed with Dr. Shugar.

39. When Patient V.A.A. received her explanation of

benefits she believed it to be in error because it indicated a

surgical procedure had been performed on April 4, 1996. She

contacted Dr. Shugar's office on Septe mber 5, 1996, and pointed

out that she did not have a surgical procedure on April 4, 1996.

Dr. Shugar called her and explained that the chemical treatment,

according to the CPT manual, was the same as a surgical

procedure.

40. In the 1996 CPT Code M anual, the narrative description

for CPT Code 17283 states, "Destruction, malignant lesion, any

method, . . . nose." Destruction is further defined to include

chemical treatment.

41. The CPT Code Manual language is amended from year to

year to res olve ambiguities and confusion over code selection.

In 1999, the CPT Code Manual was amended to clarify that

initiation of treatment with Efudex should no longer be billed

under the series of codes for chemical treatment of benign

lesions. Dr. Shugar was correct in his use of the 1996 manual.

42. Patient V.A.A. was insured under a cancer policy

issued by American Family Life Assurance Company. In October of

1996, Patient V.A.A. was provided a claims form by her insurance

representative. She called Dr. Shugar to inquire again about

the nature of the procedure he provided.

43. Patient V.A.A.'s insurance representative suggested

that she complete it and send it to the insurance company. She

either faxed or personally delivered it to Dr. Shuga r's office.

44. Subsequently, she received the claims form from

Dr. Shugar's office. The claims form has what appears to be

Dr. Shugar's initials on it. Dr. Shugar denied that he

initialed the form. Broward Taff, who was accepted as a

han dwriting expert, testified that the initials on the claim

form were inconsistent with the more than one hundred known

signatures and initials provided by Dr. Shugar.

45. The claim to the insurance company would have resulted

in a payment directly t o Patient V.A.A. The record contains no

evidence that Dr. Shugar was aware that the claim form was

submitted to his office or that he participated in its

completion.

Petitioner's experts

46. Jean Acevedo conducts coding and billing compliance

audit s for health care practices. She is a licensed health care

risk manager and a certified professional coder. She was

accepted as an expert in the area of CPT coding.

47. In conducting an audit she reviews between ten and 15

patients per provider. Physicians make mistakes when

determining CPT codes upon which billing amounts are determined.

She is of the opinion that a physician who is in a general

practice treating a wide variety of maladies is apt to make more

billing errors than a physician who is a specialist.

48. When performing a compliance audit on providers who

have been previously determined to have submitted false bills,

Ms. Acevedo will audit between 20 to 50 patient charts. She

considers a provider to be in compliance so long as the errors

do not exceed five percent of the total dollar amount of the

charges billed.

49. The testimony of Ms. Acevedo was credible.

50. Thomas Breza, M.D., is a dermatologist. He was

accepted as an expert witness in the area of CPT coding.

51. He never performs services which are not on his

superbill. It is his opinion that physicians are responsible

for every billing error which results in an incorrect claim

being filed. He believes he would be committing fraud if he

allowed an in correct bill to leave his office. However,

Dr. Breza admitted that he has mailed incorrect bills from his

office.

52. Dr. Breza's testimony indicated that his personal

definition of fraud is different from the legal definition of

fraud. His op inion, with regard to the requirements of

accuracy, are based on his experience as a specialist and failed

to take into account the variety of diagnoses and procedures

experienced in a general practice.

53. Diana Calderone, M.D., was accepted as an e xpert

witness in the area of CPT coding.

54. Like Dr. Breza, Dr. Calderone takes a Draconian

approach when addressing coding errors. While opining that

coding and resultant billing errors were unacceptable, she

conceded that total accuracy is unre alistic and acknowledged

that she had made mistakes in this area.

55. Dr. Calderone, is also a dermatologists with little or

no experience with the coding problems inherent in a general

practice.

56. Margie Vaught is an independent health care

consultant. She is a certified professional coder, and sits as

a board member of the National Advisory Board of the American

Academy of Professional Coders. She performs compliance audits

for health care practices. She was accepted as an expert

witness in the area of CPT coding.

57. She reviews between ten to 30 patient charts per

practitioner when doing a compliance audit. She has never made

an audit that did not reveal coding errors.

58. Ms. Vaught reviewed all of the information provide d in

this case regarding the bills prepared by Dr. Shugar. It is her

opinion that there is insufficient information for one to

determine whether there is any pattern to Dr. Shugar's billing

procedures.

59. Ms. Vaught noted that the HCFA Form 1500 was a form

developed for billing in the case of federal medical programs.

A HCFA Form 1500 will be accepted by federally funded programs

with the signature of a physician's agent rather that the actual

signature of the physician. She explained that many private

carriers use the HCFA Form 1500 for billing purposes and some of

them require no signature.

60. Ms. Vaught's testimony was credible.

61. Mitchell King, M.D., is a board - certified family

practice physician. He is an assistant professor and director

of the Department of Family Medicine at Northwestern University

Medical School in Chicago. Dr. King was accepted as an expert

in the area of CPT coding.

62. Dr. King has published three studies related to CPT

coding by family practice p hysicians. One of the studies

demonstrated that 38 percent of family practice physicians

delegate all or a portion of CPT coding to a staff member.

Another found that physicians selected the wrong code 48 percent

of the time. Another found that certifie d coders disagreed as

to the appropriate code 43 percent of the time.

63. Dr. King agreed with Ms. Acevedo to the effect that a

family practice physician would have more coding errors because

of the broad nature of the services rendered. He believes that

the CPT code manual is difficult to use.

64. Dr. King's testimony was accepted as credible.

CONCLUSIONS OF LAW

65. The DOAH has jurisdiction over the parties and the

subject matter in accordance with Sections 120.57(1) and

456.073(5), Florida S tatutes (2000).

66. The party seeking to prove the affirmative of an issue

has the burden of proof. Florida Department of Transportation

v. J.W.C. Company, Inc. , 396 So. 2d 778 (Fla. 1st DCA 1981); and

Balino v. Department of Health and Rehabilitati ve Services , 348

So. 2d 349 (Fla. 1st DCA 1977). Therefore, the burden of proof

is on Petitioner.

67. Because this case is penal in nature, the material

allegations set forth in the Administrative Complaint must be

proven by clear and convincing evi dence. Department of Banking

and Finance v. Osborne Stern and Company , 670 So. 2d 932 (Fla.

1966).

68. Even though Section 458.331(3), Florida Statutes,

seems to provide a standard of proof of "by the greater weight

of the evidence," in a case not involving a suspension or

revocation of a license, the standard provided by the statute is

trumped by the holding in Osborne Stern . Although the language

of Osborne Stern does not expressly state that it is grounded in

constitutional considerations, the court's discussion of the

taking of a property interest leads to that conclusion.

69. Section 458.331(1)(h), Florida Statutes, provides as

follows:

458.331 Grounds for disciplinary action;

action by the board and department. --

(1) The following a cts constitute grounds

for denial of a license or disciplinary

action, as specified in s. 456.072(2):

* * *

(h) Making or filing a report which the

licensee knows to be false, intentionally or

negligently failing to file a report or

record required by state or federal law,

willfully impeding or obstructing such

filing or inducing another person to do so.

Such reports or records shall include only

those which are signed in the capacity as a

licensed physician.

70. Petitioner alleged that Dr. S hugar violated Section

458.331(1)(h), Florida Statutes, by "making or filing a report

which the licensee knows to be false." This parrots the

language found in the first sentence of the statute.

71. The word false has pejorative connotations which d o

not fit the facts found in this case. Clearly, there is

evidence of record that incorrect reports emanated from Dr.

Shugar's office. It is equally clear that Dr. Shugar has a duty

to ensure that CPT codes and resulting bills are correct. The

failure t o ensure that they are correct has civil, as opposed to

penal, consequences. In other words, if he files incorrect

bills, he may be liable to repay any overpayments made to him as

a result.

72. The record in this case is devoid of any evidence that

Dr. Shugar signed the claims in question or that he knew that

the submissions were false. Accordingly, he did not violate the

provisions of Section 458.331(1)(h), Florida Statutes.

RECOMMENDATION

Based upon the Findings of Fact and Conclusions of Law,

R ECOMMENDED:

That a final order be entered which dismisses the

allegations of the complaints.

DONE AND ENTERED this 11th day of June, 2002, in

Tallahassee, Leon County, Florida.

___________________________________

HARRY L. HOOPER

Administrative La w Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675 SUNCOM 278 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 11th day of June, 2002.

COPIES FURNISHED :

Diane K. Kiesling, Esquire

Agency for Health Care Administration

2727 Mahan Drive, Building 3

Room 3226, Mail Stop 39

Tallahassee, Florida 32308

Gary A. Shipman, Esquire

Brian Newman, Esquire

Pen nington, Moore, Wilkinson,

Bell & Dunbar, P.A.

Post Office Box 10095

Tallahassee, Florida 32302 - 2095

Tanya Williams, Executive Director

Board of Medicine

Department of Health

4052 Bald Cypress Way, Bin A02

Tallahassee, Florida 32399 - 1701

R. S. Powe r, Agency Clerk

Department of Health

4052 Bald Cypress Way, Bin A02

Tallahassee, Florida 32399 - 1701

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this Recommended Order. An y exceptions

to this Recommended Order should be filed with the agency that

will issue the Final Order in this case.