Menendez contacted top officials in friend’s Medicare dispute

By Carol D. Leonnig and Jerry Markon

From The Washington Post

Sen. Robert Menendez raised concerns with top federal health-care officials twice in recent years about their finding that a Florida eye doctor – a close friend and major campaign donor – had overbilled the government by $8.9 million for care at his clinic, Menendez aides said Wednesday.

Menendez (D-N.J.) initially contacted federal officials in 2009 about the government’s audit of Salomon Melgen, complaining to the director overseeing Medicare payments that it was unfair to penalize the doctor because the billing rules were ambiguous, the aides said.

Last year, in a meeting with the acting administrator of the agency in charge of Medicare and Medicaid, Menendez again questioned whether federal auditors had been fair in their assessment of Melgen’s billing for eye injections to treat macular degeneration, the senator’s aides said.

The agency had ordered Melgen to repay the $8.9 million, and at the time of both conversations, Melgen was disputing the agency’s conclusion. His appeal continues to this day.

Menendez’s office provided this account of his contacts with the Centers for Medicare and Medicaid Services after The Washington Post asked about the role he had played in the long-standing dispute between Melgen and the agency over his billing practices.

Menendez, who became chairman of the Senate Foreign Relations Committee this month, is under scrutiny because of his close relationship with Melgen. The doctor donated more than $700,000 last year to Menendez’s reelection campaign and other Senate Democrats. And when Melgen needed help with a port security contract in the Dominican Republic last year, Menendez urged U.S. officials to press the country to carry out the multimillion-dollar agreement.

Menendez is facing a Senate ethics inquiry about two free trips he took in 2010 on Melgen’s private plane to the doctor’s seaside mansion in the Dominican Republic. Menendez acknowledged this month that he had not properly disclosed the trips. He wrote a personal check for $58,500 to reimburse Melgen.

Meanwhile, a federal investigation of what law enforcement officials say are allegations of health-care fraud by Melgen escalated last week when FBI agents and health-care investigators raided medical offices in West Palm Beach where he runs Vitreo-Retinal Consultants. The teams spent nearly 24 hours searching the premises and removing dozens of boxes containing billing and medical records and computer files.

Federal investigators and health-care auditors have had concerns about Melgen’s billing practices at various times over the past decade, two former federal officials said. In part, they have examined the volume of eye injections, surgeries and laser treatments performed at his West Palm Beach clinic.

But a Menendez aide said Wednesday that the senator did not know Melgen was under formal investigation for possible fraud until the well-publicized raid last week.

“Senator Menendez was never aware of and has not intervened in any Medicare fraud investigation on behalf of Vitreo Retinal Consultants,” his office said in a statement.

The senator’s conversation with federal officials about Melgen’s case was unrelated to the current investigation, Menendez aides said.

“On a separate issue regarding Medicare reimbursement, he has in the past raised concerns with CMS about conflicting guidelines and ambiguity in CMS rules that are difficult for providers to understand and can lead to judgments after the fact,” the statement said. “His interest was in making sure providers were not penalized if CMS clarified or changed the rules of the game retroactively.”

Alan Reider, Melgen’s attorney, said Wednesday that his client has returned the government money in dispute but is contesting the CMS audit finding so he can reclaim the money. Reider said Melgen believes he was following Medicare guidelines. Reider added that Melgen was not aware that his practice was under investigation until federal agents arrived at his clinic last week.

At issue in the reimbursement dispute is Melgen’s multiple use of individual vials for eye injections to treat macular degeneration. Federal auditors have said Melgen often billed the government three to four times for injections from a single vial, according to two federal officials and lawyers familiar with the case.

The government’s Medicare program reimburses providers $2,000 for each vial, so Melgen was billing $6,000 to $8,000 for each vial.

Melgen’s attorneys said the doctor was properly billing for treating four patients with medical injections, albeit from one vial.

After CMS ruled in 2008 that Melgen would have to repay the government, he and his legal representatives contacted Menendez’s office, arguing that the finding was unfair, the senator’s aides said. Menendez’s staff members had several conversations with agency officials to learn more about the billing rules and the details of Melgen’s case in particular, the aides said.

In July 2009, Menendez called Jonathan Blum, the Medicare director at CMS, to express concern, the aides said. Menendez brought up Melgen’s case, they said, in the context of broader concerns about the guidelines.

Then, in June 2012, Menendez raised Melgen’s case again at a meeting with CMS Acting Administrator Marilyn Tavenner, aides recounted. They said the primary subject of the meeting was the implementation of President Obama’s health-care overhaul.

The aides said Menendez never urged the CMS to take specific action on Melgen’s case.

Blum and Tavenner declined to comment through a spokeswoman for the Department of Health and Human Services.

Melgen frequently cited his connection to Menendez, according to two former federal officials and doctors in South Florida.

When federal health-care fraud investigators were questioning him several years ago about his billing practices, he invoked the senator’s name, the former officials said.

“He used Menendez’s name all the time. He would say, “Menendez is a good friend of mine, and he knows I never did anything wrong,’ ” said a former senior federal official familiar with the investigation.

In Florida, it was more threatening, several doctors in the South Florida region recounted. After one local eye surgeon criticized Melgen’s treatment methods in discussions with other Florida doctors, Melgen warned that he had important friends in the Senate, including Menendez, said two doctors familiar with the exchange. They said Melgen cautioned that his Washington friends could arrange an intensive federal audit of the surgeon’s practice.

Reider, the attorney, said he had no knowledge of any comments Melgen may have made mentioning his friendship to Menendez.

Melgen came to the attention of fraud investigators amid complaints from other local eye doctors alleging that his treatments were often unnecessary, a waste of money and sometimes harmful to patients’ eyesight, the two former federal officials and several doctors said.

At the same time, investigators considered him an “outlier” compared with his peers because of the volume of his billing and the rate at which he administered eye injections and performed procedures on government-insured patients, the former officials said. They spoke on the condition of anonymity because the investigation is still ongoing.

Melgen “was somebody who consistently showed up on the radar and was being looked at quite a bit,” said a former senior health-care fraud investigator. “The sheer volume itself is going to keep him on the radar.’’

When federal investigators interviewed Melgen, he tried to exert pressure on them by mentioning the names of Menendez and other influential politicians, the former fraud investigator said. “We thought it was odd because Menendez was in New Jersey and this guy was in Florida,’’ the official said.

A second former federal official recounted that Menendez’s name came up repeatedly when Melgen was interviewed by investigators from the Justice Department and the inspector general’s office at the Department of Health and Human Services.

“He was using Menendez more as a character reference,” the official said. “He thought he was untouchable.”

The federal interest in Melgen stretches back 10 years, when investigators interviewed Philip Rosenfeld, a nationally known retina specialist, about the volume of treatments Melgen was performing, said several eye doctors in South Florida.

These doctors said Rosenfeld, who pioneered the use of Avastin injections for macular degeneration to stem eyesight loss, had long been troubled by Melgen’s methods.

FBI agents recently interviewed Rosenfeld again, this time two days before they raided Melgen’s clinic, the doctors said.

Reached at his home in Key Biscayne, Rosenfeld declined to comment.

Doctors in south Florida said that they have been fearful of criticizing Melgen publicly, and that his Washington connections may be protecting him.

In 2010, Melgen scolded eye surgeon Randy Katz for publicly criticizing the quality of his care. According to two fellow doctors, Melgen cited his Senate connections and told Katz that he could face a Medicare investigation.

Katz did not respond to requests for comment. Melgen’s attorney declined to discuss his client’s conversations with Katz or allegations that his client had threatened other doctors.

Soon after the encounter, according to a copy of a letter obtained by The Post, Katz wrote to Palm Beach doctors in praise of Melgen.

“It has come to my attention that certain statements I made have been misunderstood as criticisms of Dr. Melgen,” Katz wrote in the open letter. “To be clear, I know Dr. Salomon Melgen to be a capable and
highly-skilled vitreo-retinal surgeon. . . . If you hear any suggestion that I have said otherwise, you should disregard that suggestion as being false.”