Late Mountain Home Doctor May Have Crafted Largest Medicare Fraud in State's History: $14.7M

The late Dr. Stacey Johnson of Mountain Home (inset) once owned and practiced at this medical building, where the alleged Medicare fraud occurred.
The late Dr. Stacey Johnson of Mountain Home (inset) once owned and practiced at this medical building, where the alleged Medicare fraud occurred. (Kevin Pieper)
The U.S. Attorney’s Office charged that proceeds from the fraud went to build this mansion.
The U.S. Attorney’s Office charged that proceeds from the fraud went to build this mansion. (Kevin Pieper)
The U.S. Attorney’s Office charged that proceeds from the fraud went to build this mansion.
The U.S. Attorney’s Office charged that proceeds from the fraud went to build this mansion. (Kevin Pieper)

If Dr. Stacey M. Johnson of Mountain Home had not died earlier this year at 63, he likely would have been charged with overbilling Medicare by $14.7 million, according to a criminal investigator’s affidavit that was recently made public.

Johnson’s medical career ended in 2009 when the Arkansas State Medical Board pulled his license for recklessly running too many tests on patients. Now the U.S. Attorney’s Office for the Western District of Arkansas is in the process of recovering money from what may be the largest Medicare fraud in the state’s history.

On Sept. 20, the U.S. Attorney’s Office filed a civil forfeiture lawsuit in an attempt to seize Johnson’s ex-wife’s Mountain Home mansion, which prosecutors said was paid for with proceeds from the Medicare fraud. Johnson’s ex-wife, Cynthia Johnson, paid $600,000 to settle the lawsuit and keep the property. The case was closed Oct. 4.

Cynthia Johnson told Arkansas Business last week that she had been given immunity from criminal prosecution and was scheduled to meet with federal investigators on Oct. 10.

She said she didn’t believe her former husband committed Medicare fraud.

“I worked in the office for 28 years with him, and he did not overbill Medicare,” she said. “He didn’t even pay attention to what was being billed. He was simply the physician and he did what he felt was right for the patients.”

Others disagree.

Conner Eldridge, U.S. attorney for the Western District of Arkansas, told Arkansas Business last week that recovering more assets is “an ongoing effort.”

“We are serious about trying to do all we can to locate those funds or assets,” he said. “There are a number of assets that we’re taking a look at.”

He wouldn’t say whether anyone would be charged. “It’s an ongoing investigation,” he said.

Dr. Johnson was allowed to continue practicing despite signs and allegations of over-testing dating back for years.

“It’s a serious Medicare fraud case,” said Eldridge, who was appointed U.S. attorney at the end of 2010. “So when you look at the amounts of overbilling and the amounts of money that was sought and obtained for Medicare for tests that were not medically necessary, it’s pretty astounding.”

While fraud against government insurance programs can come at any level, the fraud that is prosecuted tends to be by providers rather than beneficiaries. For instance, of the seven cases of fraud against Medicaid, the joint federal and state insurance program for the poor, that Arkansas Attorney General Dustin McDaniel has announced since May, only one alleges fraud by a beneficiary.

‘Lifelong Dream’

Born Oct. 20, 1949, in Alma, Ga., Stacey Johnson’s “lifelong dream was to become a physician,” according to the obituary posted online by Roller Funeral Home in Mountain Home.

After receiving his medical degree from Tulane University in New Orleans in 1975, Johnson completed a residency program in internal medicine and then a fellowship in cardiology in Dallas.

Stacey and Cynthia Johnson met in Texas and were married in 1976. After he completed his training, they started looking for a place to practice.

He wanted to live in a small town and she wanted to live on a lake. They found the right combination in Mountain Home, Cynthia Johnson said.

In 1980, Dr. Johnson started his private practice in internal medicine and cardiology and opened the Physicians’ Medical Center of the Ozarks in 1982.

The first signs of trouble surfaced between 1985 and 1990, when Dr. Johnson was counseled by Medicare “for conducting excessive tests on patients,” Cynthia Johnson told investigators in 2010, according to an affidavit filed in the forfeiture case by Thomas Kowalski, a special agent with the Department of Defense’s Office of Inspector General.

She told Arkansas Business that questions about over-testing dogged Dr. Johnson for years.

“There were times when I would say to him, ‘Stacey, can you just not order quite so many follow-up tests,’” Cynthia Johnson said last week. “And he would look at me and say, ‘Are you the doctor?’”

She said he didn’t order the tests for the money. Instead, Cynthia Johnson told Kowalski in 2010, Dr. Johnson had an undiagnosed disorder that caused him to attempt to find anything that could be wrong with a patient.

The early 1990s was a rough time for Dr. Johnson. The first of what would be more than two dozen complaints involving over-testing was filed against him at the state Medical Board, though no action was taken against him for many years.

He also struggled with alcoholism. In 1991, he spent four to five months in an alcohol and drug rehabilitation program. (Johnson revealed the treatment in a statement filed with the Medical Board, but it is unclear whether he was forced into the program or went voluntarily.)

Doctors’ Concerns

Cynthia Johnson told Arkansas Business that other cardiologists who worked for the hospital in Mountain Home, Baxter Regional Medical Center, didn’t like her husband because he was competition.

She said that in the early 2000s, the doctors tried to have his privileges revoked at the hospital and conducted a scathing review of his work.

In 2003, Cynthia Johnson hired Dr. J. David Talley of Paducah, Ky., to review Dr. Johnson’s files that the other hospital doctors had inspected. Talley’s report, which Cynthia Johnson provided to Arkansas Business, found no fault with Dr. Johnson’s work.

“It appears that Dr. Johnson is a caring cardiologist who pays attention to patients’ symptoms and wants to make a diagnosis and an appropriate treatment plan,” Talley wrote. “I personally find this refreshing.”

A Baxter Regional Medical Center spokeswoman said last week that Johnson was a member of the hospital’s medical staff in good standing until he lost his license in 2009.

In 2003, Dr. Johnson decided to expand his medical office to include a blood lab, nuclear cardiology, imaging and outpatient surgery.

“I was aiming for better care for my patients in an environment that I could have more control,” he wrote in a 2011 application to recover his medical license. “I wanted to break even and make a living, but we gave out a lot of free care.”

The 19,000-SF, three-story building opened in 2004 and cost about $11 million. The building was attached by a covered walkway to his medical clinic. He also used the third floor of the building as an apartment.

The expansion helped Johnson’s billings balloon from $2.6 million in 2003 to $8.6 million in 2006.

But the increased billing raised red flags.

An ‘Aberrant’ Biller

In 2006, in an attempt to root out fraud, the Centers for Medicare & Medicaid Services hired AdvanceMed Corp. to analyze Medicare billings by providers in Arkansas, Louisiana and Oklahoma for 2003-05.

The analysis ranked Johnson as the most “aberrant” biller among cardiologists in Arkansas. That sparked a full investigation, which was launched on July 25, 2006.

AdvanceMed’s year-long review found problems with more than 90 percent of his billing.

It said Johnson performed 115 unnecessary heart catheterizations between 2004 and June 30, 2006. Nearly 80 percent of the 822 claims he submitted during that period were denied because the documentation didn’t support the medical need for the procedure billed.

AdvanceMed wasn’t alone in its analysis. In 2007, Pinnacle Business Solutions Inc., which is contracted by CMS to pay Medicare claims, became alarmed by Dr. Johnson’s claims, finding that between April and September 2006, he was the No. 1 biller in the country for two procedures involving catheter placements.

Those findings were forwarded to the Office of the Inspector General for the U.S. Department of Health & Human Services, which started an investigation in August 2008 and found even more questionable billings, Kowalski’s affidavit said. After looking at the periods between Jan. 1, 2004, and June 30, 2006, and Jan. 1, 2007, through June 26, 2009, “an established Medicare overpayment to Johnson was calculated as” $14.7 million, Kowalski’s affidavit said.

A U.S. attorney — Kowalski’s affidavit didn’t say which one — hired Dr. Maan Jokhadar of Atlanta to look over the medical records of six of Johnson’s patients.

Jokhadar found “Dr. Johnson’s documentation was voluminous, repetitious and overall poor in quality,” Kowalski wrote. “Documentation focused on patients’ social and family situations, and rarely elaborated on symptoms or complaints presented by the patients.”

Jokhadar also found that Johnson ordered a number of tests that weren’t medically necessary, while other tests were just duplicates of previous tests.

Meanwhile, patient complaints were stacking up against Johnson at the state Medical Board. And his marriage to Cynthia was falling apart. She told Arkansas Business that he left her for a younger woman. He fired Cynthia from her job at his practice and filed for divorce on the same day, Jan. 13, 2009.

‘Potentially Dangerous’

On March 31, 2009, Principal Life Insurance Co. of Des Moines, Iowa, which had policyholders who were treated by Johnson, filed a complaint with the Arkansas State Medical Board. It said Dr. Johnson’s “excessive testing both invasive and noninvasive is not within the standard of care and potentially dangerous to the patient.”

It also said that after reviewing 10 medical records of Johnson’s patients, it “identified, what we feel, are serious concerns regarding the outcome of those reviews.”

The concerns were that the tests performed “are far in excess of what is justified by the patient’s problems,” the letter said. And many of the tests posed “significant unnecessary risks to the patients,” the letter said.

In 2009, the Medical Board had other doctors review Johnson’s patient files. What they found troubled them. Dr. Donald Meacham of Little Rock told the board that a 39-year-old patient had 92 tests, of which only six were appropriate.

“I believe this does rise to the level of gross negligence or ignorant malpractice,” Meacham wrote.

The board found that Johnson’s behavior “is a danger to the public health, safety, and welfare” and issued an emergency order of suspension on Aug. 17, 2009.

He would try but would never get his license back.

‘I Greatly Miss Medicine’

While investigators continued to look into Johnson’s overbilling, he was devastated by the loss of his practice.

“I greatly miss Medicine,” Johnson wrote in an April 2012 letter to Dr. Bob Cogburn of Mountain Home, a member of the Medical Board. “Medicine is the only thing I know how to do. … I hate to see 13 years [of] training and 29 years [of] experience go down the drain.”

Apparently, the more than $8 million Johnson received in the form of salary, dividends and other income between April 1999 and January 2009 was gone.

In his letter to Cogburn, Johnson blamed his financial troubles on his ex-wife, who he said used his money “to build her ostentatious lake house, and left me and my Practice in heavy debt. I will soon need to go on public relief or get a job at McDonalds; is this something you want to see happen to a fellow physician?”

Cynthia Johnson said that after he lost his license, her ex-husband didn’t take care of himself, smoking and eating too much.

And investigators were closing in.

Federal agents were pursuing criminal charges for wire and health care fraud and a civil forfeiture of assets, Special Agent Kowalski said in his affidavit.

One person close to the case who asked not to be named said a federal grand jury had been called and Dr. Johnson was likely to be indicted.

But that didn’t happen. On March 5, he died of natural causes.