Audit Ascribes Undue Profits to Fertility Doctors

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

The audit alleged that the physicians at the controversial Center for Reproductive Health kept more than $167,000 in cash and failed to report 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 question may actually be larger since tax returns after 1992 were not reviewed and records for fertility work performed outside Orange County were not made available.

The detailed report--which charged that two of the center’s doctors were given envelopes of cash to take home each night--was made public along with a second review examining medical practices at the center, which has become the focus of nationwide attention.

The second review, prepared by a clinical panel of three University of California physicians, portrayed the center as a poorly managed facility where eggs were taken from patients without their consent and given to infertile woman who later bore children. 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 panel, which was created to investigate the allegations raised last year by three whistle-blowers.

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

University officials declined to comment about the whistle-blowers, who began raising allegations of impropriety in February, 1994. All three whistle-blowers accepted financial settlements from the university, and neither they nor UC Irvine will comment about their cases.

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

Asch has resigned from the medical center staff but is still on the faculty. All three men are on paid leave pending the completion 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 [the] 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.”

University officials said Sunday that the reports confirmed disturbing allegations publicly directed against the fertility clinic in recent weeks.

UC Irvine 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 . . . severing our relations with the clinic and placing the faculty members on leave . . . were necessitated by those findings.”

Chancellor Laurel 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 that 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--apparently without deleterious effects--to nine patients. 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 financial auditors were forced to work around two enormous obstacles: a lack of access to all the patient files and limited access to the records from doctors, especially financial documents, officials noted.

The auditors concluded that Asch and Balmaceda submitted false insurance claims, primarily by misdiagnosing key procedures so patients could 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 as 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, university audits have cited lax accounting procedures at the center; one such audit was undertaken at the request of the doctors after $4,600 was found to be 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. Until the practice was changed, auditors said, two of the doctors received cash in envelopes at the end of each working day.

“Each month the physicians split the cash amongst themselves,” auditors concluded.

One employee told auditors that the cash taken in by the center amounted to $50,000 to $60,000 for each series of treatments, and that on one day alone “she gave Asch $12,000.”

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 another $800,000 may have been improperly excluded, according to the audit. The audit did not cover additional fertility work done in San Diego; Milan, Italy, and Guadalajara, Mexico, auditors said.

When the university pressed the auditors for more information about money that 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 remainder, Asch received $412,485, Balmaceda received $418,099 and Stone got $289,739, the audit showed.

The auditors were asked to explore numerous allegations raised by the whistle-blowers, but could not confirm all of them. Other charges, from the purported misappropriation of UC 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 UC Irvine.

The clinical panel laid out a devastating case that the center flatly ignored medical ethics and 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 that 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 reportedly never consented to her eggs being donated, yet they ended up with Patient A, who became pregnant and delivered a baby boy. One witness, a nursing assistant, told the panel that she was “one hundred percent 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 on which the egg donation box was left blank, a former nursing assistant told the 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.”

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.