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IRS files $1 million federal tax lien against CCS Oncology

The Internal Revenue Service has filed a $1 million tax lien against CCS Oncology, one of the largest community-based providers of cancer care in the region.

The IRS placed the lien against CCS' property after the practice didn't pay to the federal government the income, Social Security or Medicare taxes withheld from employee paychecks, or the business' own Social Security and Medicare taxes, according to a notice of federal tax lien dated Oct. 12 and filed with the Erie County Clerk's Office.

The federal tax lien is only the latest sign of the intense financial pressures facing CCS Oncology, which once held 30 percent of the cancer market in the region. The difficulties include civil suits filed by former vendors and one of the practice's own physicians saying CCS has failed to make required payments.

The practice's difficulties began in July 2016, when Independent Health announced it was dropping CCS from its provider network. The move, which took effect at the end of last year, led to an exodus of patients and oncologists from CCS.

The Buffalo News previously reported that two former vendors in Tennessee sued CCS in federal court. The News also reported in the spring that the federal government was investigating CCS for billing irregularities and that a whistleblower had filed a civil suit against CCS. Dr. W. Sam Yi, CCS Oncology's medical director, denied wrongdoing.

But court filings that haven't previously been reported show the practice faces further concerns:

  • A CCS physician filed suit this year seeking $200,000 owed in a fourth and final "goodwill payment" that followed CCS' acquisition of her practice.
  • CCS sued in June to try to stop Catholic Health System from kicking the practice out of its leased office space in Kenmore Mercy Hospital. CCS said it would have to invest $1 million in a new location if its forced to move.
  • And a company in Ohio sued CCS last month for at least $282,380 for failing to pay for specialty pharmaceutical products it says it provided on credit to the practice.

CCS offered only a brief comment when contacted by The Buffalo News.

"We are advised not to comment on cases in litigation, or cases that have settled," said Brendan Chiarilli, director of marketing for CCS.

Insurance woes

CCS expanded over the past decade through a series of acquisitions and steady advertising to emerge as a strong competitor to Roswell Park Cancer Institute, Kaleida Health, Erie County Medical Center and Buffalo Medical Group in the local oncology market.

In June, CCS Oncology and CCS Healthcare, its non-oncology practice, combined had 36 physicians who serve 23 offices and clinics, including five treatment centers for cancer patients.

But Independent Health upended the practice's operations when it dropped CCS Oncology from its network.

The region's second-largest health insurer said it was declining to renew its contract with the CCS Oncology physicians after 16 months of negotiations. The decision affected 600 Independent Health members in active treatment as well as about 1,400 inactive patients.

CCS filed a lawsuit against Independent Health seeking to force the insurer to overturn its decision. CCS argued the move would have a devastating effect on the practice and its patients. The company abruptly dismissed its lawsuit in August without explanation.

CCS Oncology drops lawsuit against Independent Health

Under investigation by feds

Yi in the spring acknowledged to The News that federal authorities are investigating CCS Oncology for possible billing irregularities.

The News talked to a former CCS employee who confirmed being interviewed by investigators from several federal agencies.

Furthermore, a whistleblower has filed a civil suit against CCS that includes allegations that staff billed for unnecessary treatments and knowingly submitted false records to Medicare and Medicaid, among other allegations, according to a source familiar with the complaint who spoke on the condition of anonymity.

Yi has denied wrongdoing and has said the government's investigation eventually would clear him and other CCS employees.

No charges have been filed.

Feds probe CCS Oncology; whistleblower claims billing fraud

What an IRS lien means

The $1,041,094 federal tax lien, which includes penalties and interest, covers the tax period ending June 30, according to the notice.

Gary Bluestein, a partner with Andreozzi Bluestein who focuses his practice on tax law, said that typically means the taxpayer owes the money for the three-month period ending with the date entered on the notice. Bluestein, who previously worked as a senior attorney with the IRS and as a special assistant U.S. Attorney, spoke generally and not about the CCS case.

The type of tax that CCS owes the federal government, according to the notice, includes taxes withheld from employees' wages, employees' Social Security taxes withheld from their paychecks and the business' own contributions, Bluestein said.

The IRS regularly goes after companies that withhold taxes from their employees' paychecks but then fail to deposit that money with the federal government, he said.

Companies are required to file a form quarterly with the IRS notifying the agency that they've made the required deposits of this withheld money. But in cases where companies have vendors coming after them for payment, the company often will pay the vendors first because the payroll tax payments can be put off, Bluestein said.

Prosecutors can hold any officer of a corporation personally liable if they are found to be responsible for non-payment of the payroll taxes.

"It's a very serious problem, because it's a very serious liability to have," Bluestein said.

When the IRS places a lien against a company's property, it doesn't mean the agency is moving right away to seize assets. Generally, companies have three options once a lien is placed, Bluestein said.

They can start working out a payment agreement for the full amount of the lien; they can try to make an offer and compromise to settle with the IRS; or, eventually, they can declare bankruptcy.

CCS facing lawsuits

The tax lien isn't the only financial burden weighing on the company.

Two companies based in Knoxville, Tenn. – Radphys Oncology Services and Linac Repair Service – have sued CCS Oncology in federal district court in Buffalo, The News previously reported. They accuse CCS of failing to pay for services provided, for breach of contract and for violating nonsolicitation provisions in the contracts by hiring away Radphys and LRS employees.

The lawsuit, which had gone to mediation, was refiled this month, seeking at least $800,000 from CCS.

Cardinal Health, a specialty pharmaceutical products company based in Dublin, Ohio, on Sept. 28 filed a lawsuit alleging that CCS owed the company $277,380 in unpaid invoices and past-due fees from 2016 and 2017, plus at least $5,000 in collection costs and attorneys' fees. The lawsuit didn't spell out which products Cardinal Health sold to CCS.

Lawsuits seeking payment from CCS haven't come only from former vendors.

A CCS physician, Dr. Liveleen Gill, sued in January in State Supreme Court, accusing CCS of failing to make the last of four $200,000 "goodwill payments" it promised after acquiring her West Seneca-based practice in 2012 for $1.1 million.

CCS argued in its response that it could not make the final payment because the debt to Gill was subordinated to its debts to its banks – initially to First Niagara Financial Group and later to Bank of America after a refinancing.

However, in May, the parties resolved the dispute, according to a notation in the court record, but no paperwork was filed to document how and why.

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