According the U.S. Department of Justice, Family Dermatology, P.C. (“Family Dermatology”), based in Lilburn, Georgia, has agreed to settle allegations that it violated the Stark Law and False Claims Act. The government said the allegations concerned financial relationships Family Dermatology and its affiliated companies had with dermatologists they employed as independent contractors.
According to the government, three whistleblowers brought separate qui tam actions under the False Claims Act against Family Dermatology; its sole shareholder and CEO, Paula Nelson, M.D., individually and doing business as Nelson Dermatopathology and Pathology Laboratory; Family Dermatology’s CFO and secretary, Adeyinka “Yinka” Adesokan, who is also the husband of Paula Nelson, M.D.; Databased, Inc.; and approximately 59 current or former Family Dermatology practices in 9 states. The whistleblowers, Dr. Scott M. Ross, Dr. Mark F. Baucom, and Dr. Harold Milstein, and the federal government alleged that Family Dermatology had improper financial relationships with dermatologists at its various offices across the Eastern United States.
According to the whistleblowers, Family Dermatology expanded its business by purchasing other dermatology practices and then contracting with the dermatologists who sold the practices to stay on and continue to work for Family Dermatology as independent contractors. Allegedly, the independent contractors were paid based on a percentage of the professional services rendered by the physicians. The whistleblowers claimed that this compensation arrangement encouraged the over-utilization of dermatology and/or dermatopathology services and was a violation of the Stark Law and False Claims Act.
In addition, the government alleged that the independent contractor dermatologists were required by Family Dermatology to send all of their skin samples to Nelson Dermatopathology and Pathology Laboratory, the laboratory in Atlanta, Georgia owned by Paula Nelson, for processing. The government alleged that these referrals of pathology services were improper and violated the False Claims Act and resulted in the submission of false claims to government healthcare programs such as Medicare and Medicaid.
According to one of the whistleblower’s complaints, Databased, Inc., owned by Adesokan, sells a comprehensive practice management and electronic medical records system tailored to dermatology practices. The whistleblower alleged that Databased would sell its software to dermatologists at a steep discount and after a few months when the practices were dependent on the system, Adesokan would allegedly threaten to increase the price dramatically unless the practices referred all of the their dermatopathology work to Nelson Dermatopathology and Pathology Laboratory. The whistleblower alleged that this conduct also violated the False Claims Act.
According to the Justice Department, Family Dermatology will pay $3.2 million to settle the allegations that it violated the False Claims Act. The whistleblowers will share in $584,000 of the settlement proceeds as their reward under the qui tam provisions of the False Claims Act.