Special Report: Local dermatology practice accused of overcharging

A local dermatology practice has been named in a multi-million dollar federal suit.

This comes as Action News was looking into claims Family Dermatology was over-billing patients.

Now, new details reveal they may also have been overcharging you, the taxpayer.

It was no secret to the dozens of patients who contacted us that Family Dermatology had allegedly questionable billing practices.

They say they were double-billed, over-charged, and even harassed for tests they say were paid for or never done.

But now Family Dermatology are in the spotlight, facing allegations they improperly billed Medicare $10 million.

Dr. Paula Nelson is the owner and primary dermatologist who runs multiple franchised Family Dermatology offices across the eastern United States.

Some patients and lawsuits claim there was a practice that may have gone to extremes to feed Dr. Nelson's lavish lifestyle.

When Maureen Conlon of Reading, Pa. got a bill, three years after her 2010 visit to Family Dermatology in Exeter, she at first thought it was funny. That was because insurance had already paid to have her skin cancer removed and because there was no way the bill was hers.

"I get billed for a penis biopsy. I thought it was hysterical," Conlon said.

Jeremy Ervin says he got harassing calls saying he owed $530 even though he had proof insurance already paid a bill from 19 months before.

After hundreds of calls, Ervin says he finally got a letter saying his account has been cleared.

"Especially when you don't owe the money, that's very frustrating," Ervin said.

And Action News also spoke with some doctors off camera who say they weren't paid in some cases hundreds of thousands of dollars.

In a lawsuit, one Georgia dermatologist alleges Nelson and her husband "diverted funds" from the practice to benefit their own "extravagant lifestyle" including their $8.5 million mansion in Georgia, formerly owned by Kenny Rogers, "vacations to Dubai," and "extravagant parties in foreign countries," where they would "wipe sweat from [their guests'] foreheads" with "$100 bills."

"I received a bill in the mail for somewhere in the ball park of about $1,200," Abigail Fallen of Northeast Philadelphia said.

While Nelson was allegedly living that life of luxury, Fallen was fending off what she said were calls bullying her to pay a bill from 2010, she says she didn't owe.

"I essentially sit in limbo hoping that I have enough of a paper trail to protect myself," Fallen said.

Then, just last week, Dr. Nelson and Family Dermatology were named in a federal settlement.

The Justice Department staked a $10.5 million claim against Nelson for improperly billing Medicare, but then settled with no admission of wrongdoing for $3.2 million and half the proceeds if Nelson sells her 15,000 square foot Georgia estate, a mansion, possibly bought on the back of clients, like Gary Blockus of Laury Station, Pa.

Blockus says a collections agency harassed his young daughter on her personal cell phone for a bill he said insurance had already paid.

"When they start harassing my daughter and I can't stop it, the only way I can stop it is to pay the money, I do it," Blockus said.

Our multiple attempts to reach Dr. Neslon were unsuccessful.

Patients say they would call Family Dermatology and their collections agency, dozens, even hundreds of times and never get a response.

Most said they were only left alone when they filed a formal complaint with the Better Business Bureau or the Attorney General's Office against Family Dermatology.