Eye Surgeon to Pay $250,00 to Settle Suit : Medicare: The money is part of a settlement made with the government after the La Jolla surgeon was accused of fraud by a fellow doctor.

A La Jolla eye surgeon agreed Monday to pay $250,000 and perform 400 hours of community service to settle a lawsuit that accused him of Medicare fraud, federal prosecutors said.

Dr. Raymond Y. Chan agreed to the deal to bring to a close a suit--involving glaucoma operations--that originally was filed by another eye surgeon under a novel federal anti-fraud law, lawyers in the case said.

Chan denied any wrongdoing and said Monday through his lawyers that he settled only to avoid a lengthy and expensive court case.

The former colleague, Dr. Paul E. Michelson, stands to pocket $50,000 of the $250,000 for “whistle-blowing,” though both he and his Los Angeles attorney insisted his motive was not financial. Rather, lawyer John Phillips said, Michelson tipped off federal prosecutors because he was “conscience-bound by his professional obligations.”

The settlement also provides for the payment of $75,000 in attorney’s fees, Phillips said.

The case is believed to be one of the first in the nation to be brought under the 1986 anti-fraud law that centered on allegations of Medicare fraud, Assistant U.S. Atty. John J. Robinson said at a press conference.

The law is more commonly used as a tool in cases involving charges of fraud in defense contracting cases, lawyers said Monday.

Prosecutors did not bring a criminal case against Chan. There was not enough evidence of criminal intent, Robinson said.

Michelson, 47, who lives in La Jolla, said Monday that he stands by his decision to turn in a fellow doctor. “You just reach a point where you have to do something,” he said.

Michelson filed the suit against Chan in April, 1987, in federal court in Los Angeles. He was joined in the case by a Los Angeles nonprofit corporation called Taxpayers Against Fraud, a group formed by public interest lawyer Phillips to help in cases brought under the anti-fraud law.

The law, called the False Claims Act, was enacted originally in 1863. Under the 1986 amendments, a private citizen may file a civil suit in the name of the government alleging fraud by a contractor and share in any financial recovery.

Michelson filed his suit after becoming curious when both he and Chan worked in the mid-1980s at the same office, part of the Scripps Clinic and Research Foundation. It alleged that Chan administered unnecessary office laser treatments for glaucoma and billed Medicare for complex, more expensive hospital surgeries, prosecutor Robinson said.

The case involved about 200 treatments, primarily on elderly patients, from 1983 to 1986, Robinson said.

Michelson’s original claim was also filed against Scripps, alleging that it had a supervisory and administrative duty in the Medicare program. Scripps settled that suit in 1988 for $350,000, Robinson said. Michelson earned about $58,000 from that settlement, all of which he donated to charity, Phillips said.

Alerted by the filing in Los Angeles, meanwhile, federal prosecutors in San Diego opted to take over the case--exactly the sort of procedure provided for by the 1986 anti-fraud law.

Chan said Monday in a statement issued by his San Diego lawyer, Michael L. Lipman, that he denied “any wrongdoing whatsoever with regard to his billing or treatment of patients.”

Rather than endure further court action, however, Chan decided to settle, Lipman said.

“Litigation against the federal government carries two problems,” Lipman said.

“One, the cost is astronomical to defend yourself against allegations made by the federal government,” Lipman said. “And, secondly, you never have an upside, you only have a downside.

“If you win, they never apologize and they never pay you for your attorney’s fees and all the grief you’ve suffered. And, if you lose, you can get destroyed financially.”

U.S. Magistrate Barry Ted Moskowitz approved the settlement in an order signed Monday.

Michelson said he plans to turn over the $50,000 he is due to charity, including new medical ethics departments at UC San Diego and at Johns Hopkins University in Baltimore.

* MICHELSON PROFILE, in View, E1