Kerlan-Jobe Clinic Pays to Settle Lawsuit

The world-famous sports medicine clinic whose physicians tend to the Lakers, Dodgers and Kings has paid $2.65 million to the government to settle a whistle-blower lawsuit alleging it overbilled Medicare and other federal health-care programs over an eight-year period, the U.S. attorney’s office said Tuesday.

Without admitting any wrongdoing, the Kerlan-Jobe Orthopaedic Clinic agreed to pay the $2.65 million on behalf of itself and 17 of its physicians, including co-founder Dr. Frank W. Jobe.

“This settlement sends a message that no physician, no matter how prominent, is above the law,” said Assistant U.S. Atty. David K. Barrett.

But Dr. Ralph Gambardella, the clinic’s president and chairman, maintained that the dispute was over technical issues that did not reflect on the doctors’ professional conduct.

The lawsuit was brought by a former employee under the False Claims Act, which allows private citizens to sue for fraud on behalf of the federal government and receive up to 25% of the money recovered.

Trevor R. Baylor, who was in charge of maintaining patient records at the clinic, stands to receive $556,500, or 21% of the settlement, according to the U.S. attorney’s office.

It was the second time Baylor had successfully sued a medical facility under the federal whistle-blower law. In 2000, California Emergency Physicians, one of the state’s largest emergency physician groups, agreed to pay the government $1.2 million to settle allegations of overbilling uncovered by Baylor.

California Emergency Physicians was under contract at Pomona Valley Hospital Medical Center, where Baylor was employed in the mid-1990s as medical records director.

“His experience there led him to know it when he saw it at Kerlan-Jobe,” his attorney, Paul D. Scott, said Tuesday.

Baylor declined to be interviewed, referring all queries to Scott, who said his client was assessing his future in light of the settlement. “It’s been a long ordeal for Trevor,” said the attorney. The lawsuit was filed under seal in 1998, and persuading the government to join the case was a struggle, according to Scott.

The suit alleged that Kerlan-Jobe, which has offices in Los Angeles, Beverly Hills, Pasadena and Anaheim, knowingly overbilled Medicare, Medi-Cal, the U.S. Labor Department’s workers’ compensation program and the Defense Department’s medical program from 1993 through 2001.

In many cases, the suit contended, doctors at the clinic “upcoded” or billed for more elaborate procedures than were actually performed. Other times, the suit alleged, follow-up examinations were booked as first-time consultations, entitling the physicians to bill at a higher rate.

The suit also charged that doctors at Kerlan-Jobe engaged in a practice known as “unbundling.” For example, a physician who performed an orthopedic surgery would bill separately for the surgery and for a graft used in the surgery, the suit alleged.

In 1998, the suit alleged, an internal audit revealed widespread billing irregularities at Kerlan-Jobe. Baylor charged that the clinic and its physicians were informed of the findings but made no effort to reimburse the government for the excessive billings.

He estimated the government’s losses at $1.25 million or more. If Baylor and the government had prevailed at trial, Kerlan-Jobe would have been liable for triple the government’s losses plus civil penalties.