More details emerge on Providence St. Mary Medical Center’s $22.7 million insurance fraud settlement

Identifying them as “Dr. A” and “Dr. B,” the U.S. Attorney’s Office of the Eastern District of Washington said at a press conference on Tuesday, April 12, that two former Walla Walla neurosurgeons hurt patients and committed insurance fraud while practicing at Providence St. Mary Medical Center.

Standing outside her Spokane office, U.S. Attorney Vanessa Waldref told listeners that not only did the hospital knew of the problems of extensive, unnneccessary and improperly charted operations, it paid the surgeons bonuses for such behavior.

The case that her office has been investigating has not only turned into the largest health care settlement in the history of this side of the state, but will also have a critical impact on patient safety, Waldref said.

“This is not just about the money” but about protecting patients from danger and harm in the future, she pointed out.

Thanks to whistle-blowing by the former medical director of the St. Mary neurology department — Dr. David Yam was employed by St. Mary in that role then — state partners and the Walla Walla Police Department, those actions were brought to light and stopped. Now Providence must pay $22.7 million, the largest ever health care fraud settlement in Eastern Washington, according to the U.S. Attorney’s Office of the Eastern District of Washington.

At a news conference on Tuesday, April 12, U.S. Attorney Vanessa Waldref said that after fully cooperating with an investigation into the two spine surgeons who practiced in Walla Walla between 2013 and 2018, Providence has agreed to pay to resolve allegations it fraudulently billed Medicare, Medicaid, and other federal health care programs for medically unnecessary neurosurgery procedures.

The hospital was not only aware of allegations around the surgeons, it allowed the two to resign rather than report them to proper authorities, Waldref said.

“Today’s joint settlement between Providence, the United States, and the State of Washington, which administers Washington’s Medicaid program using a combination of state and federal funding, is the largest-ever health care fraud settlement in the Eastern District of Washington,” Waldref said.

Providence is a large health care and hospital system that operates 51 hospitals in seven western states, including St. Mary where, between 2013 and 2018, the hospital employed neurosurgeons identified in the settlement agreement as Dr. A and Dr. B. Providence placed the two surgeons on leave after questions about their practices arose, and they left Providence in 2017 and 2018, respectively.

Waldref said St. Mary’s paid neurosurgeons based on a productivity metric that provided them a financial incentive to perform more surgical procedures of greater complexity. Between 2014 and 2018, “Dr. A” was one of the highest producing neurosurgeons in the entire Providence system. Between 2014 and 2017, based on the productivity metric, Providence paid Dr. A between $2.5 million and $2.9 million per year.

According to 2018 tax documents filed with the Internal Revenue Service, Walla Walla-based Dr. Jason Dreyer was the second-highest paid employee in the Providence system then, making $3,058,885 in a combination of base pay, incentive bonuses and other compensation. His pay was second only to the health system’s CEO, Rod Hockman, who made more than $10 million for that period.

After an investigation that began in 2019, the state Department of Health in 2021 put Dreyer’s medical license on restricted status after finding he posed a threat to patients.

Officials said then the surgeon exaggerated what procedures were needed for multiple patients to justify extensive spine surgeries. In several cases, imaging showed those operations occurred without clear medical indications.

Medical records showed Dreyer overstated his treatments and inadequately charted his work, using a “cut and paste template language” in patients’ charts, according to DOH investigators. Multiple patients underwent unnecessary spine surgeries, sometimes multiple spinal surgeries, placing them at risk of harm, charging documents showed.

Waldref said Tuesday’s settlement resolves allegations that Providence falsely billed Medicare, Washington State Medicaid, and other federal health care programs for deficient and medically unnecessary neurosurgery procedures performed by Dr. A and Dr. B.

“Ensuring that surgical procedures are medically appropriate and properly performed is critical to building safe and strong communities here in the Eastern District of Washington. Patients with back pain and spinal injury deserve top-notch care from a provider who puts the patient first and is not improperly influenced by how much he can bill for the procedure,” she said.

St. Mary’s failure to ensure the surgeons were performing safe and medically-appropriate surgery procedures, despite repeated warnings, put patients’ lives and safety at serious risk, Waldref said.

“I am also gravely concerned that Providence’s decision not to report Dr. A or Dr. B to federal or state medical oversight bodies allowed both surgeons to simply resign from Providence and then continue to endanger patients at other hospitals.”

As part of the agreement, Providence admitted that during that time period medical staff reported concerns that the neurosurgeons were endangering the safety of patients, that they created through surgeries excessive complications and negative outcomes, performed surgery on people who were not good candidates and failed to properly document procedures and outcomes.

Staff also reported to hospital authorities that Dr. A completed medical documentation with false and exaggerated diagnoses in order to get paid by insurance providers, including Medicare.

Providence allowed the surgeons to resign, thus skirting around reporting obligations to the National Practitioner Data Bank or the state Department of Health, Waldref said, and allowing those doctors to go elsewhere and continue practicing.

One of those surgeons has moved to another state; her office has sent the pertinent information to that state’s health authorities, she said.

According to the DOH website, Dreyer’s license remains restricted and he cannot perform spinal surgeries unless that procedure is approved by two other, Washington-licensed, board-certified neurosurgeons; one of those cannot work in the same place as Dreyer.

Dreyer was employed at a Multicare Rockwood Clinic in Spokane when state officials first sanctioned him in 2021. He is no longer employed there, staff confirmed.

Waldref said her office is committed to making sure nothing like this happens again.

As part of the settlement, the hospital entered into a five-year corporate integrity agreement to implement and maintain a number of quality-of-care and patient safety obligations. It must also retain outside experts to perform annual systems reviews and claims.

Her office was not going to let St. Mary simply “cut a check and walk away” from her office’s findings, Waldref said.

“While Providence’s conduct was extremely troubling, I do want to commend Providence for stepping up, accepting responsibility, taking appropriate and meaningful corrective action, and for fully cooperating with our investigation as well as agreeing to fully cooperate in our ongoing investigations,” the U.S. Attorney said, adding that everyone benefits from patient protections.

Employees who are willing to come forward with concerns and evidence are the best gatekeepers of patient safety, Waldref said.

WWPD Chief Scott Bieber said his department is very proud to have played a small part in helping get some justice for the victims in this case.

“I appreciate the kind words from U.S. Attorney Vanessa Waldref about the role the Walla Walla Police Department played in helping investigate this case. It is always our goal to work collaboratively with our federal and state law enforcement partners,” Bieber said.

“Patients trust their doctors that the care they receive is necessary, particularly when they are undergoing neurosurgery,” said Washington state Attorney General, Bob Ferguson. “Performing unnecessary surgeries for profit is a betrayal of that trust. I’m proud of the work we did with U.S. Attorney Waldref and our federal partners, and we look forward to continuing our work together to protect Medicaid dollars for those who need them.”

In a statement released Tuesday, Providence St. mary Medical Center said it is committed to taking specific, concrete actions to ensure “this isolated incident” in Walla Walla does not happen again.

“Providence has strong existing protocols and safeguards to ensure we deliver quality care and make continuous improvements that further enhance those protocols and safeguards. We have already taken swift action to implement the terms of the corporate integrity agreement that we have reached with the U.S. Department of Health and Human Services Office of the Inspector General.”

Tuesday’s announcement does not change anything regarding Washington’s statute of limitation for reporting medical negligence, which is three years from the date of injury, a spokesperson in Waldref’s office said.