Audit Ascribes Undue Profits to Fertility Doctors

Three UC Irvine fertility specialists profited at the expense of the university, their patients and insurance companies, receiving cash payments and failing to report nearly $1 million in income, according to an audit released Sunday.

The audit alleges that physicians at the controversial Center for Reproductive Health kept more than $167,000 in cash and didn’t disclose more than $800,000 under a contract in which a portion of the doctors’ fees were supposed to be shared with the university.

Auditors said the amounts in dispute may even be larger since tax returns after 1992 were not reviewed and records for fertility work in San Diego; Milan, Italy; and Guadalajara, Mexico, were not made available.

Until the practice was changed, auditors said that at the end of each day, envelopes of cash were given to two of the doctors to take home. “Each month the physicians split the cash amongst themselves,” auditors concluded.

The university also released a second scathing report Sunday by a clinical panel of three University of California physicians called in to investigate allegations raised last year by three whistle-blowers.

The panel found that the doctors bestowed eggs from patients without their consent to infertile woman who later gave birth. That practice happened at least twice, and perhaps as many as five times, according to officials.

“We find this allegation to be the most serious and troubling of all of the allegations because of the profound ethical and moral questions,” said the report by the panel, composed of three physicians.

The panel also faulted the university for failing to investigate the fertility operation well before the whistle-blowers surfaced because the university’s own internal audits disclosed problems at the clinic as far back as 1991.

University officials won’t comment about the whistle-blowers, who first began raising allegations of impropriety in February, 1994. All three whistle-blowers accepted financial settlements from the university, and neither they nor UCI will comment about their cases.

The three accused doctors--Ricardo H. Asch, Jose P. Balmaceda and Sergio Stone, all world-renowned fertility experts--have said repeatedly that they did nothing wrong. They contend that they are being victimized by university officials and staff members, and even a blackmailer trying to extort $100,000 each from them.

Asch has resigned from the medical center staff but is still on the faculty. All three men are on paid leave pending outcome of the university’s investigation.

Attorney Ronald G. Brower, who represents Asch, said Sunday that there is no evidence of financial wrongdoing or that eggs were improperly handled.

“The doctor’s position is still the same,” Brower said. “There is no allegation contained in the clinical panel report that says that anyone they talked to has evidence that the doctor intentionally misused or knowingly misused any embryos.”

“Every single person on the clinic staff received their paycheck from UCI,” Brower said. “The record-keeping systems in place were a product of the doctors and the staff. And the staff was charged with responsibility of maintaining embryos and seeing that the embryos were not misused.”

Patrick Moore, who represents Balmaceda, also dismissed the reports, saying they “were based on some very flimsy evidence.” Moore complained that “we were given such a limited opportunity to provide information to the panel, particularly when their conclusions were so overstated.”

But university officials said Sunday that the reports confirmed disturbing allegations publicly levied against the fertility clinic in recent weeks.

UCI Executive Vice Chancellor Sidney Golub said, “We believe that both . . . reports indicate that our high level of concern was well justified and the actions that we’ve taken thus far of severing our relations with the clinic and placing the faculty members on leave and of reporting to appropriate agencies were necessitated by those findings.”

Chancellor Laurel L. Wilkening said in a prepared statement: “Our objective all along has been to arrive at the truth in this complex and disturbing matter. These reports lend added validity to some of the allegations.”

Among other things, the clinical panel concluded that Asch imported and dispensed the fertility drug HMG Massone, which is not approved for use in this country by the Federal Drug Administration. Records the panel reviewed showed that Asch sent the drug by Federal Express to a patient in Florida.

The panel confirmed that the drug was given to nine patients, whose care was not “compromised.” When the drug was given, patient charts were marked with an “A” to indicate the medication came from Asch, and “the patients receiving this drug would usually pay cash,” a university employee told the panel.

Both the panel and the auditors were forced to work around the lack of full access to patient files and other records from doctors, especially financial documents.

“Our investigation was hampered by the lack of availability of records related to the Center for Reproductive Health,” the auditors wrote.

Auditors concluded that Asch and Balmaceda submitted false insurance claims, primarily by misdiagnosing key procedures in order for patients to obtain reimbursement. This practice was first verified by the university’s internal auditors in January, 1993, and Asch apparently admitted having done it as far back 1991, according to the audit.

“Dr. Asch admitted to having falsified the diagnosis in two instances in 1991 (which we reviewed) to obtain insurance benefits for the patient,” auditors wrote.

But the most damaging findings by auditors involved money.

No less than three times since 1991, Golub said, has the university audited lax accounting at the center--once at the request of the doctors, after $4,600 was stolen.

While several accounting practices were corrected, from January, 1992, through December, 1993, the clinic’s cash was simply handed over to the doctors who took it home, auditors said. One employee told auditors that “the cash received amounted to $50,000-$60,000” per fertility treatment series, and that on one day alone “she gave Asch $12,000,” the report said.

In January, 1994, the clinic began depositing the cash in a bank instead of giving it directly to the doctors.

The doctors did not deny receiving the cash when auditors asked about it, but they “claimed to have no knowledge of how the cash payments were reported in the financial records of the practice.”

In all, auditors calculated that $167,000 in cash was never included in the income figures reported to the university, and that another $800,000 may have been improperly excluded, according to the audit.

When the university pressed the auditors for more information about money the doctors might owe under their contract, the auditors could not obtain it. “Our ability to provide information to you has been severely hampered,” the auditors wrote.

The university had a keen interest in that record-keeping because a portion of the university’s costs of providing services to the center were to be reimbursed and the doctors were to share about 11% of their professional fees.

Although the auditors were only able to obtain the 1992 income tax return for the doctors’ partnership, it provided a glimpse of how lucrative baby making can be. That year, the doctors took in $2,104,606. The center’s expenses were $1,004,281, primarily for lab fees, drugs, medical supplies and $138,450 to the university.

Of the remaining $1,100,325, Asch received $412,485, Balmaceda $418,099 and Stone $289,739.

The auditors were asked to explore numerous allegations raised by the whistle-blowers but could not confirm all of them. Others, ranging from the purported misappropriation of UCI Medical Center property to the university’s supposed misuse of consultants, were not sustained.

No less blistering in its findings was the 16-page report of the clinical panel, by Dr. Stanley Korenman, a medical professor and associate dean at UCLA; Dr. Mary C. Martin, associate professor and director of the in vitro fertilization program at UC San Francisco, and Maureen Bocian, associate professor and director of the division of human genetics and birth defects at UCI.

The clinical panel asserted that the center, flatly ignoring medical ethics, took eggs from women without consent and transferred them to others.

Asch, Stone and Balmaceda denied to the panel that they implanted eggs without consent, but they couldn’t or wouldn’t provide access to patient charts, according to the report, a refusal the panel found shocking since it could so easily clear up any confusion or misunderstanding.

“If no eggs were ever donated without the explicit consent of the [donors], then it should be straightforward to verify this [with the patients],” the panel wrote. “We offered to the physicians that the allegations could be dismissed if they would permit us to interview the patients in their presence and confirm their consents. However, the physicians chose not to pursue that course of action.”

The panel found it improbable that a patient would be unable to recall exactly whether she had given permission to donate her eggs to anyone else, in part because donors were charged less for services and in part because of the gravity of the situation.

“It is highly likely that each woman would have a very reliable and precise recall about any discussion regarding donating eggs, even in the past, because each woman was infertile and participating in extraordinary interventions in order to achieve her own desired pregnancy,” the panel concluded.

Using information from eyewitnesses, billing records, logs and portions of patient files, the panel pieced together enough information to convince them that eggs had been misappropriated.

In one case, a woman described only as Patient M never consented to her eggs being donated, yet they ended up Patient A, who became pregnant and delivered a baby boy. One witness, a nursing assistant, told the panel she was “100% certain” that Patient M had not consented.

In another case, 10 of Patient C’s eggs were given to Patient J, who signed a consent form that left the egg donation box blank, a former nursing assistant told the investigating panel.

That lack of access to patient records, the panel wrote, and the fact that the doctors “were unable to locate the original charts for any of the patients alleged as unconsenting donors cannot be dismissed as coincidental.”

It demonstrated “a pattern of practice that indicated the physicians made authoritarian decisions regarding patient treatment,” the panel wrote, adding that the observation was made even more disturbing because of the “complex nature of and the emotional investment of these patients.’

Chancellor Wilkening, in her statement Sunday, said: “These fact-finding investigations have been exhausting and difficult for the university, but we are most concerned for the emotional stress on the patients and their families.

“We still hope the physicians will cooperate so that the matter can be resolved and the concerns of patients answered to their satisfaction.”

Times staff writer David Reyes contributed to this report.