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In re Suspension or Revocation of the License Issued to Zahl

July 30, 2010


On appeal from the New Jersey State Board of Medical Examiners.

Per curiam.


Submitted: June 3, 2010

Before Judges Cuff and Waugh.

In this appeal, we review an order revoking Kenneth's Zahl's license to practice medicine in this State. The Board of Medical Examiners (BME) issued this order while Zahl's appeal from an earlier order revoking his medical license progressed through the Supreme Court. Prior to submission of this appeal for decision, Zahl filed a motion for a stay of appellate proceedings and a temporary remand to the agency to allow consideration of his motion to disqualify a certain BME member for his relationships with a law firm that formerly represented Zahl, as well as the previous chief prosecuting Deputy Attorney General. We affirm the order revoking the license and deny the motion for stay and temporary remand.

Zahl was an anesthesiologist who maintained a medical practice that concentrated in pain management. In re Suspension or Revocation of the License Issued to Kenneth Zahl, M.D., 186 N.J. 341, 344 (2006) (Zahl I). In 1999, the Attorney General filed an eight count complaint with the BME seeking revocation of Zahl's license to practice medicine in this State. The Attorney General alleged various acts of misconduct, including dishonesty, fraud, misrepresentation, false promise or false pretense, gross and repeated acts of negligence and malpractice, professional or occupational misconduct, creation of false patient records, and failure to maintain good moral character. The BME found that Zahl had committed an act of dishonesty, deception, misrepresentation, and professional misconduct with respect to his dealings with his personal disability insurance carrier. The BME also accepted the findings issued by the Administrative Law Judge (ALJ) that Zahl had committed numerous instances of deceit in his quest for greater remuneration for his services, and that the sheer quantity of these acts warranted revocation of his license to practice medicine and a substantial fine. This court affirmed the findings of fact and the fine but reversed the revocation penalty. In re Suspension or Revocation of the License Issued to Kenneth Zahl, M.D., No. A-4177-02 (App. Div. June 9, 2005). The Supreme Court not only affirmed the findings of fact of the BME but also reversed this court's penalty decision and reinstated the license revocation. Zahl I, supra, 186 N.J. at 354-57.

During the course of the initial round of appellate proceedings, Zahl sought and obtained a stay of the license revocation pending appeal. The stay was subject to several conditions including installation of a monitoring team to oversee the financial and billing activities of Zahl's practice. According to the consent order governing the stay, Zahl could not bill for services rendered outside the presence of a monitor, except for independent medical examinations and nonprocedural office visits, such as consultations. The consent order also provided that the billing monitor was responsible for determining billing practices when a fluoroscopy was used in conjunction with spinal injections. It is the violation of some of these conditions that provides the basis for the second complaint filed by the Attorney General with the BME to revoke Zahl's license.

On November 21, 2005, the Attorney General requested that Zahl submit to a Statement Under Oath (SUO) proceeding. Zahl responded to the inquiry by stating that a physician employed part-time by him performed several unmonitored procedures between October 23, 2004 and September 8, 2005. This physician submitted an SUO and denied performing the procedures identified by Zahl.

The Attorney General filed a verified complaint on January 26, 2006, with the BME alleging that Zahl failed to comply with the consent order by billing for procedures outside the presence and supervision of the practice and billing monitors, created false patient records for these services, failed to pay the attorneys' fees awarded in Zahl I, failed to provide timely records to the monitors, and used improper billing codes. We refer to this proceeding as Zahl II. After an evidentiary hearing, the hearing committee of the BME issued a fifty-nine page report and order temporarily suspending Zahl's license to practice medicine on March 3, 2006. Following the Supreme Court's denial of his motion for emergent relief, his license was suspended effective March 9, 2006. On April 26, 2006, the Supreme Court issued its decision in Zahl I reinstating the BME order to revoke Zahl's license. Zahl I, supra, 186 N.J. at 343.

The Zahl II matter was transferred to the Office of Administrative Law (OAL), where a hearing commenced on March 8, 2007. At this time, only fifty-five procedures remained contested. At this hearing, the part-time physician employed by Zahl testified, as well as a nurse anesthetist and an X-ray technologist employed by him. Several patients testified on behalf of Zahl. In addition, Zahl testified on two occasions. On December 17, 2008, the ALJ issued his Initial Decision. This decision addressed only the false certification of records and improper billing codes counts because the other charges had been either withdrawn or dismissed.

As to the fifty-five contested procedures, the ALJ found that the part-time physician employed by Zahl did not perform the contested procedures, that Zahl billed for the fifty-five procedures, and the monitor was not present during these procedures. The ALJ also found that the part-time physician was hired to do electromyography (EMG) testing and was expected to learn to do other procedures. This physician did not perform the cervical injections except in one instance when Zahl directed the needle during a procedure on a patient referred to as M.B. Furthermore, spinal injections were beyond the part- time physician's expertise, he never performed thoracic injections, the stellate ganglion block procedure, or the radiofrequency lesioning procedure. The part-time physician assisted Zahl in doing cervical injections and may have significantly participated in one diskogram procedure. Finally, the ALJ found that Zahl scanned the part-time physician's signature from his medical license for the purpose of inserting it in computerized patient charts.

The ALJ then concluded that these actions occurred while the consent order governing the stay of sanction pending appeal was in effect. He concluded Zahl violated the terms of the consent order and that the BME retained jurisdiction to enforce this order. In his discussion, the ALJ asserted that Zahl used the part-time physician to circumvent the monitoring provisions of the consent order. He also noted that the testimony of the patients "was of little value," and the testimony of employees was tainted by self-interest. As to a penalty, the ALJ noted that the issue informing the penalty was Zahl's character and honesty not his performance as a physician. Although Zahl's license had been revoked at the time the ALJ issued his decision, the ALJ recommended a six-month suspension followed by a one-year period of billing monitoring, plus a $10,000 fine and reimbursement of the actual costs of prosecution as determined by the Office of the Attorney General.

The BME accepted the ALJ's findings but modified the penalty. In its April 24, 2009 written decision, the BME accepted the credibility determinations of the ALJ, granted the motion for summary decision on Count Four (alleging repeated violations of the consent order for Zahl's improper billing of the fluoroscopy procedure), left unaddressed by the ALJ, and affirmed his findings on Counts One, Two and Three (alleging failure to comply with the consent order and creation of false patient records, failure to pay the Zahl I attorneys' fees, and failure to provide records and information to the billing monitor). Addressing the penalty, the BME concluded the appropriate remedy was revocation not suspension. In doing so, the BME stated that a penalty serves "not only to punish for the numerous additional acts of dishonesty, but to supply guidance to the regulated community and to the public as to the standards of conduct to be expected of a medical professional." The BME also increased the monetary penalty from $10,000 to $50,000, but reduced the attorneys' fee award from $147,000 to $100,000.

On appeal, Zahl argues the BME deprived him of due process which requires reversal of its April 24, 2009 order. He complains the disciplinary process was unduly delayed, the BME "deprived [him] on a full processing of [his] motion for summary decision," and the Office of Attorney General, the BME and the OAL failed to investigate alterations of the Initial Decision. Zahl also argues the BME acted arbitrarily, capriciously and unreasonably because its final decision is not supported by the record. Zahl also contends "the totality of [the] circumstances in Zahl I and Zahl II warrant[s] that this [court] exercise original jurisdiction." The BME responds that its finding that Zahl's conduct constitutes professional misconduct and warrants revocation of his ...

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