N.J. Neurologist Charged with Million Dollar Insurance Fraud Scam

December 28, 2005

New Jersey Attorney General Peter Harvey reported that a Mercer County neurologist, his former medical practice and four former medical diagnostic and/or medical equipment corporations, along with the former office manager, have been charged with devising a lucrative insurance fraud scheme which resulted in nearly 50 insurance companies processing more than one million dollars in fraudulent reimbursement claims for medical services that are alleged to have been improperly performed and then billed to the insurance companies.

According to Vaughn McKoy, director, Division of Criminal Justice, and Insurance Fraud Prosecutor Greta Gooden Brown, Dr. Alan E. Ottenstein, 49, of Washington Crossing, Pa., and his former office administrator, Jean Woolman, 56, of Morrisville, Pa., were charged in a seven-count State Grand Jury indictment with multiple counts of racketeering, conspiracy to commit racketeering, attempted theft by deception, and Health Care Claims Fraud.

The indictment also charged Ottenstein’s former medical practices and/or corporations with multiple criminal charges. The corporations are identified as: Lawrenceville Neurology Associates, Pa., formerly located at 2997 Princeton Pike, Lawrenceville, Mercer County; Hamilton MRI, LP (a/k/a Open MRI at Hamilton, a/k/a Hamilton Super Open MRI); Hamilton Neurodiagnostic Associates, Pa. (a/k/a Hamilton Diagnostic Associates); Neurology Pain Center, Pa., all formerly located at Whitehorse-Mercerville Road, Hamilton, Mercer County; and N.R.E.C., Ltd. (a/k/a National Regulated Equipment Company, Ltd.), formerly located at West Sahara Drive, Las Vegas, Nev.

The State Grand Jury indictment alleges that from Oct. 1, 1990 through Aug. 31, 2003, Ottenstein, Woolman, and Ottenstein’s medical practice and service corporations, conspired to submit more than one million dollars in fraudulent claims for medical treatments and services to nearly 50 insurance companies, including New Jersey Manufacturers, Aetna, Allamerica, Allstate, AmeriHealth, Guardian, HealthNet, Horizon Blue Cross/Blue Shield, Liberty Mutual, MetLife, New Jersey Cure, The Oxford Plan, Prudential, State Farm, and Zurich.

The indictment alleges that Ottenstein and Lawrenceville Neurology Associates, Ottenstein’s primary medical practice, submitted thousands of fraudulent claims seeking insurance reimbursements for varying medical procedures that were improperly performed or not performed at all and submitted unjustified bills seeking facility fees and reimbursement(s) for non-existent medical supplies.

The indictment identifies several types of alleged insurance fraud, including improper billings seeking reimbursement for epidural pain management injections; improper billing for separate anaesthetic and steroid injections as part of epidurals (procedures that should not have been billed separately); separate billing charging the use of contrast agent(s) as part of an epidural procedure when the procedure(s) should not have been separately billed; fraudulent billing for medical supplies (sterile trays) when such supplies were not used; fraudulent billing for “facility fees” when such fees were not charged; altering Magnetic Resonance Imaging (MRI) reports so that patients (primarily patients injured in automobile accidents) would appear to have auto-related injuries when, in fact, no such injury existed; and fraudulently billing mechanical disk recovery system treatment(s) as surgical procedures when such procedures were not surgical-related.

The indictment charges that Ottenstein submitted more than 2,400 claims totaling $506,000 to health insurance carriers for Disc Recovery System (DRS) procedures purportedly performed on patients for treatment of herniated and degenerative discs. The investigation determined that Ottenstein billed for surgical DRS, yet, no surgery was done. It is charged that Hamilton MRI (not a licensed MRI facility) billed for MRI procedures after MRI reports were allegedly altered by Ottenstein and Woolman to reflect abnormal diagnoses for otherwise normal scans.

Hamilton MRI and Ottenstein are also charged with generating more than $225,000 in billings for contrast injections, when such injections were not done. The indictment alleges that Ottenstein performed single epidural injections containing an anesthetic (for pain) and a steroid but billed as if injecting each patient separately with each medication, subsequently billing insurance companies more than $600,000 for the procedures.

It is further charged that Ottenstein billed insurance companies for “sterile trays” and other sterile supplies separately, rather than as items included in the billings for the epidural injections. These separate supply charges totaled in excess of $125,000. N.R.E.C., a company owned and run by Ottenstein and Woolman, was the supplier of the sterile trays. The Neurology Pain Center also lacked a Certificate of Need nor is the facility a licensed Medicare provider, yet the Neurology Pain Center fraudulent charged insurance companies $342,000 in fraudulent facility fees.

New Jersey Manufacturers Insurance Company and The Prudential Insurance Company, two of the victim insurance carriers, filed civil actions against Ottenstein and his medical companies alleging allegations of civil racketeering. Those matters are pending.

Brown noted that Ottenstein was arrested by State Investigators on July 17, 2003, after search warrants were executed at his (Ottenstein’s) various offices. As a result of the arrest, Ottenstein was released on $50,000 bail set by Mercer County Superior Court Judge Maryann Bielamowicz. Additionally, the Division of Consumer Affairs, through the State Board of Medical Examiners, suspended Ottenstein’s license to practice medicine.

The indictment was handed up to Mercer County Superior Court Judge Linda Feinberg, the assignment judge in charge of the State Grand Jury, on Dec. 16.

The case will be assigned to the Mercer County Superior Court for trial. The defendants will be ordered to appear in Court for arraignment and bail.

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