del Mazo v. Sanchez, 75154

• Decision Date: 04 February 1988
• Docket Number: No. 75154,75154
• Parties: del MAZO et al. v. SANCHEZ.
• Court: Georgia Court of Appeals

Page 333

366 S.E.2d 333

186 Ga.App. 120

del MAZO et al. v. SANCHEZ.

No. 75154.

Court of Appeals of Georgia.

Feb. 4, 1988.

Rehearing Denied March 1, 1988.

Certiorari Denied June 1, 1988.

Randall A. Constantine, Atlanta, for appellants.

John P. MacNaughton, Jane C. Barwick, Atlanta, for appellee.

BIRDSONG, Chief Judge.

Jacinto del Mazo, appellant/defendant, brings this appeal from the grant of summary judgment to appellee/plaintiff Fred H. Sanchez. Dr. del Mazo heard that Dr. Sanchez was interested in selling his medical practice. At that time Dr. del Mazo was associated with another physician who was involved in a billing problem with Medicare and was desirous of disengaging himself from that type of conflict. Dr. del Mazo spoke with Sanchez concerning the type of practice he had, number of patients, income, and whether he had any problems with insurance, Medicare, Medicaid or malpractice claims. Sanchez informed him there were no problems and that his practice generally brought in $200,000 per year.

Dr. del Mazo said they negotiated a price for the sale of the medical practice. It was a percentage of the last year's income, and del Mazo's accountant, John Duggan, examined the books and confirmed the annual income was approximately $200,000. Duggan said Sanchez led him to believe his records were accurate and told him "he was going to Brazil or somewhere in South America and he was selling his practice...." It was his understanding "the purchase price for Dr. Sanchez' medical practice was a percentage of the practice's annual collections." Dr. del Mazo said that Dr. Sanchez assured him "his collections were for legitimate services rendered." Dr. del Mazo questioned Dr. Sanchez again after he heard rumors that there might be a problem and Sanchez was asked "if he had engaged in any improper practices or had submitted any improper claims to Medicaid or Medicare.... He assured me on each of those occasions that all of his Medicaid and Medicare claims and practices were entirely legitimate and proper."

On July 16, 1982, del Mazo and Sanchez executed an agreement whereby Sanchez agreed to sell del Mazo his "patient files" for $10,000 and included a covenant not to compete for $40,000 to be paid in monthly increments. A first payment of $5,000 was made to Sanchez, and he departed for Bolivia. The agreement provided that the seller retained the rights to his accounts receivable and that del Mazo upon receipt of those checks would deposit them in the seller's checking account in the National Bank of Georgia.

When del Mazo received checks from Medicare and Medicaid for services billed by Dr. Sanchez, he "saw documents from those entities showing that [Sanchez] had repeatedly submitted claims for and was now being paid for procedures he could not have performed, both because ... Sanchez did not have the skill, training or equipment required to perform colonoscopies, colposcopies, sigmoidoscopies with flexible fiberoptic, cardiac catheterizations, or endoscopies." Alma McAuley, Dr. Sanchez' medical assistant from September 1981 until his departure for South America, is familiar with these procedures and in her affidavit stated: "At no time after I came to work for Sanchez [in 1981] did Sanchez ever perform any of the procedures [listed above]. Furthermore, at no time after I came to work for Sanchez did Sanchez have the equipment required to perform any of the procedures identified [above]." McCauley said she was instructed by Dr. Sanchez to post a list of diagnostic codes, and that some diagnostic codes included several types of procedures. After Dr. Sanchez saw a patient, he would give her a diagnostic code and she was directed to bill Medicare and Medicaid for all of the procedures whether they had been performed or not. Between September 1981 and January 1982, Sanchez billed Medicaid and Medicare for procedures he did not perform, including "CBC's and urinalyses that were never performed ... for other laboratory work and office visits that were never performed, and ... twice for tests only performed once." The doctor's staff "were giving approximately 12 out of every 14 of his patients injections of B12, iron, or B & B (a combination of B12 and iron)."

McCauley's duties included posting the patient's files. Copies of Medicaid and Medicare claim forms were kept in and were a part of the patient files from the time she started working there in 1981 until May or June of 1982. At that time Dr. Sanchez "personally instructed [her] to destroy those claim forms from that day forward and not to put those forms in the patient files." "In May or June of 1982, the copies of those claim forms formerly kept and included in and comprising part of the patient files disappeared."

Arlene del Mazo, a Registered Nurse, and formerly head nurse at Crawford W. Long Hospital, is familiar with patients' files. After she took over Dr. Sanchez' files, she reviewed the files and compared them with insurance claims (private, Medicaid and Medicare), with information provided del Mazo by his patients and the insurers, and found "[i]n at least a majority of the files I reviewed, the patient files were grossly incomplete." Services paid for by insurers had no corresponding entry in the appropriate patient file. "Because of the lack of information in the patient files del Mazo was severely hampered in [his] efforts to treat patients, not knowing what tests or lab work or procedures had been performed previously and not knowing the results of those tests, lab work or procedures that had in fact been performed." Under regulations of Medicare and Medicaid, when Dr. Sanchez qualified as a provider of medical services, he agreed to make and maintain those records for at least three years. Dr. del Mazo, without "that historical information, or comparable information ... would have no way of knowing what tests or lab work ... had previously been performed for a patient, thereby increasing the risk that they would be duplicated and ... unnecessary tests, lab work or procedures would be performed, thereby needlessly increasing the cost, and sometimes the discomfort and risk to life and well being, to a patient."

Immediately upon learning of the missing contents of the files and the apparent fraudulent billing practices of Dr. Sanchez, Dr. del Mazo, through his attorney on July 29, 1982, notified Dr. Sanchez he rescinded the contract for "the medical practice ... I was buying from you" alleging Sanchez "seriously misrepresented certain material facts...." He tendered to Sanchez "everything I thought I was purchasing from you." Dr. del Mazo's attorney notified Medicare and Medicaid of the possible fraud, and they investigated Dr. Sanchez' billing practices. An affidavit of Richard Rapa, Manager of Medical Administration for Prudential Life Insurance, notified Dr. Sanchez that he had been suspended from the Medicare program on August 12, 1982 pending investigation and the result of that investigation was that he had billed Medicare for procedures not performed, and for which he did not have the equipment, and his billings for 1981 and 1982 "result[ed] in an overpayment of $8,372.89" which was deducted from his escrow account.

Investigation by the Georgia Department of Medical Assistance, which administers the Medicaid program in Georgia resulted in a finding that Dr. Sanchez had been overpaid $19,687.58. The investigators concluded that Dr. Sanchez "engaged in a pattern or an abusive scheme of fraud ..." and that his patients' files "lacked proper documentation to support" his claims. As a Medicaid provider he was bound by regulations to maintain those records. The regional supervisor concluded that Dr. Sanchez "did not have the skill, training or equipment ... to perform colonoscopies, sigmoidoscopies with flexible fiberoptic and endoscopies outside of a hospital.... Sanchez had none of that equipment in his office and did not have access to that equipment in a hospital." The Department also concluded that the B12 and iron injections of Sanchez' patients were "entirely unwarranted in the majority of those cases" because they were given to patients whose "laboratory tests were normal...."

The person who investigated Dr. Sanchez for the Medicaid program found that his overpayment resulted from "a pattern of fraud." In one instance, Dr. Sanchez treated a mother and billed the Department for $171, then submitted five additional billings for the same day for a total of $1,941 for treating the mother's five children and the mother. The investigator concluded that Dr. Sanchez did not treat any of the five children. Dr. Sanchez' medical assistant confirmed that he did not treat any of the children on the day he billed Medicaid for such services.

Dr. Sanchez filed this action, admitting he was "planning to leave the country" and "was negotiating with various parties for the sale of certain assets associated with [his] medical practice" and that Dr. del Mazo "agreed to purchase certain assets associated with Plaintiff's medical practice for the sum of $50,000.00...." The agreement contained a clause which Sanchez alleged "purportedly [superceded] all prior contracts...." Sanchez prayed for actual and punitive damages, costs and attorney fees. A second count asked for specific performance and Count 3 alleged a violation of privacy when Dr. del Mazo opened his mail to retrieve his checks before depositing them. Sanchez refused to return to Georgia to be deposed on the basis of the expense and the court agreed that defendant could submit written interrogatories to him. Sanchez submitted an affidavit in which he denied any intent to sell his medical practice but only sold his patient's files and agreed not to compete. He said he had fully performed the agreement and the files were delivered to del Mazo "containing all necessary and relevant information in them which was in my possession."

Dr. del Mazo answered and filed a counterclaim alleging...