The Medford hospital now at the center of a local police investigation recently resolved a lengthy federal probe into a whistleblower lawsuit claiming fraudulent billing
Weeks before local police launched an investigation into reports of alleged drug diversion and potentially related patient deaths at Asante Rogue Medical Center, hospital management quietly settled litigation stemming from a federal Medicare fraud probe.
The probe, which has not been previously reported, was seemingly unrelated to the new investigation. It was based on a whistleblower lawsuit filed by one of the hospital’s own doctors that accused management at the Medford hospital of ignoring billing fraud. Instead, the suit claimed, management targeted the doctor who reported it.
According to the suit, the Federal Bureau of Investigation investigated the allegations contained in the lawsuit that was secretly filed under seal in 2021. Court records showed that after investigating, the federal government joined the whistleblower’s suit to recoup funds.
U.S. District Judge Michael McShane in October approved a settlement to which Asante and the doctor accused of overbilling, Dr. Charles Carmeci, collectively agreed. The judge’s order approving the settlement partially unsealed documents in the case.
Court records did not detail any dollar amounts in the settlement, and the Oregon U.S. Attorney’s office has not yet responded to requests for the information. A formal request from The Lund Report under the Freedom of Information Act is pending.
In the suit, Dr. Nicholas Engstrom, a cardiothoracic surgeon who worked at the Asante Rogue Regional Medical Center in Medford, claimed his then coworker, Carmeci, billed government health programs for procedures he didn’t do and performed unnecessary procedures to boost his compensation.
No criminal charges have resulted from the claims and the federal investigation.
Carmeci did not respond to requests for comment. Engstrom’s attorney, Jennifer Middleton, declined to comment.
Contacted about the lawsuit, a spokesperson for Asante, Lauren Van Sickle, wrote in an email that health system leadership “will not be commenting.”
In 2022, the hospital received 57% of its revenue from government programs including Medicare and Medicaid, or $642 million in all, according to the most recent financial report submitted to state regulators.
Allegations date back to 2015
Asante Health Systems operates three hospitals and 41 clinics in southern Oregon, employing about 5,700 health care workers.
In 2015, Engstrom began working at the Medford hospital as one of three cardiothoracic surgeons, physicians who specialize in procedures involving the heart, lungs, esophagus and other chest organs. According to the lawsuit, Engstrom was employed by Asante Physician Partners and when one of the cardiothoracic surgeons retired in 2019, Engstrom and the other partner, Carmeci, received half of the total amount that they collectively billed.
Engstrom became aware of the alleged fraud later that year when operating room nurses allegedly told him Carmeci was recording surgical procedures that he had not completed, according to the lawsuit.
Other hospital staff also began telling Engstrom Carmeci engaged in improper billing, the lawsuit claims — including allegedly removing three stitches from a patient and billing it as a hernia revision.
The lawsuit claims that Carmeci encouraged Engstrom to change his billing practices to increase payments, for instance telling him to “find more holes” in a patient’s heart because closing them would significantly increase how much he could bill for a surgery.
Carmeci also advised Engstrom to pull out a small piece of pericardium, a membrane enclosing the heart, to be analyzed and bill for a partial pericardiectomy, according to the lawsuit. Engstrom also felt that Carmeci performed unnecessary aortic aneurysm surgeries, described as “a highly reimbursed” procedure, according to the lawsuit.
“When Engstrom asked Dr. Carmeci about why he was suggesting these billing schemes, Dr. Carmeci responded, ‘it's a game to me. I want to get paid $2 million a year,’” according to the lawsuit's claims.
Asante Physician Partners is a nonprofit provider group that is set up to provide services for the health system. According to the organization’s 2022 tax documents, Carmeci is its highest compensated employee, taking home $2 million that year.
Engstrom took over Carmeci’s services while he was out for the holidays in December 2019, according to the lawsuit. During that time, it claimed, Engstrom concluded that Carmeci billed for procedures “that should never be done together” on the same day for the same patient.
When Carmeci returned to work, Engstrom told him he “no longer wanted to be a part of sharing the proceeds of the practice with these billing standards,” according to the lawsuit.
“Instead of trying to explain to Dr. Engstrom what had happened in the individual cases, Dr. Carmeci demeaned the nurses, said that Dr. Engstrom should not pay attention to them and that his practices were ‘defendable in court,’” reads the lawsuit.
Engstrom reported his allegations that Carmeci engaged in improper billing to hospital management in January 2020 and was called to a meeting with Chief Medical Officer Grebosky and Vice President of Quality Scott Wilbur, according to the lawsuit. Engstrom claimed in his lawsuit that the two did not address his concerns and instead accused him of violating federal medical privacy laws because he knew so much about Carmeci’s patients.
Following the incident, Engstrom faced multiple accusations of misconduct, the lawsuit states. The first was when Engstrom was on paternity leave and Grebosky called and berated him for his treatment of an operating technician, a charge he was cleared of following a review, the lawsuit states.
Additionally, the lawsuit claims management made multiple accusations that Engstrom mistreated nurses, all of which were either left uninvestigated or were false. Asante management also investigated Engstrom for supposedly having a weapon at the hospital: which an investigation revealed was a small pocket knife with the word “blessed” engraved in it that a patient had given him as thanks for saving his life.
“Dr. Engstrom, who has access to and uses extremely sharp instruments supplied by his employer daily in the course of his work, was ordered to remove the pocketknife from campus,” reads the lawsuit.
Engstrom in 2020 contacted the Office of Inspector General of the U.S. for the Centers for Medicare and Medicaid Services, as well as the Federal Bureau of Investigation, the lawsuit states. After Asante received notice of a criminal investigation into Carmeci in July 2020, the hospital's legal team asked him to go over his allegations, according to the lawsuit.
Around the same time, Asante stepped up its efforts to recruit a new cardiothoracic surgeon, according to the lawsuit. One candidate reached out to Engstrom after the interview and said that Asante management had discredited the doctor and didn’t expect him to be there much longer, the lawsuit states. The candidate also turned down the job.
Grebosky responded angrily and falsely accused Engstrom of telling candidates that there was an FBI criminal investigation into Asante when he was only aware of the inquiry regarding Carmeci, according to the lawsuit.
“The harassment and excessive scrutiny that Dr. Engstrom experienced as soon as he reported fraudulent billing was escalating,” reads the lawsuit. “Dr. Engstrom feared that Asante’s management might create an allegation that would affect his license. He had no reasonable option but to find another position and leave Asante. Dr. Engstrom has incurred considerable personal cost to himself and his family from his reports.”
Engstrom brought his lawsuit using a provision of the False Claims Act that allows fraud whistleblowers to sue on behalf of the federal government and share part of the recovered funds.
After filing the suit, Engstrom took a position at McKenzie-Willamette Medical Center in Eugene. Carmeci is still listed online as a physician at Asante.
Filings indicate that Engstrom was satisfied that the settlement was “fair, adequate, and reasonable” under the law.
Fraud in Medicare and Medicaid, the federal government’s two public health insurance programs, costs taxpayers an estimated $100 billion annually.