Two-week nationwide law enforcement action produces criminal charges for submission of over $2.75 billion in alleged false billings

The announcement from the U.S. Attorney's Office for Montana was pretty bland: "Whitefish doctor sentenced for defrauding Medicare and other federal health programs." But the devil, as they say, is in the details:

A Whitefish doctor who admitted defrauding Medicare and other federal government health programs through a telemedicine conspiracy that resulted in more than $31 million in false billing was sentenced today to six months in prison, to be followed by six months of home confinement, fined $100,000 and ordered to pay $780,509 restitution, the U.S. Attorney’s Office said.

The defendant, Ronald David Dean, 64, pleaded guilty in July to conspiracy to commit wire fraud. . . .

The government alleged in court documents that Dean, a licensed physician, was paid by a telemedicine company to sign orders for durable medical equipment that patients did not need. Dean then fraudulently charged Medicare, CHAMPVA and the Railroad Retirement Board programs for telemedicine office visits that did not occur.  The telemedicine company also used Dean’s information to prescribe unneeded and unnecessary covid tests to patients.  The conspiracy ran from about January 2022 until July 2023. The total amount billed to Medicare, the VA and the Railroad Retirement Board based on orders Dean signed was $31,432,001, and the total amount paid from those programs was $13,785,724.

As part of the scheme, Dean relied on information provided by people he did not know, with an unknown amount of training or experience, to prescribe braces for beneficiaries he did not see or evaluate himself. Dean frequently did not even talk to the beneficiaries, and when he did it was merely to tell them the braces were approved. Dean had no idea if those people who received braces actually needed them. With the covid tests, Dean provided blanket authorization for the telemedicine company to send out tests to anyone and bill Medicare for as many covid tests as the company desired.

The case was part of a strategically coordinated, two-week nationwide law enforcement action that resulted in criminal charges against 193 defendants for their alleged participation in health care fraud and opioid abuse schemes that resulted in the submission of over $2.75 billion in alleged false billings. The defendants allegedly defrauded programs entrusted for the care of the elderly and disabled to line their own pockets, and the Government, in connection with the enforcement action, seized over $231 million in cash, luxury vehicles, gold, and other assets.

Fear and greed are classic human motivators. This time, as I suspect in most such cases of health care fraud, greed overcame any fear of being caught. Six months in the pokey seems awfully light, but I assume the sentence falls within a range permitted by the Federal Sentencing Guidelines. A month for every million paid by the government would have had a nice ring to it.

HHS OIG and DOJ Publish 2023 Report on Fraud and Abuse Enforcement

Unlike the proposed, scammy Department of Government Efficiency, whose billionaire leaders seem focused on slashing budgets and trimming enforcement efforts in numerous federal agencies regarded as part of the "deep state," DOJ and HHS have actually been working hard to root out skullduggery and outright theft in the health care industry. This report is quite revealing. It also begs the question whether we will see another report like this from the next administration. 

Here's an overview:

In FY 2023, civil health care fraud settlements and judgments under the False Claims Act exceeded $1.8 billion, in addition to other health care administrative impositions won or negotiated by the Federal Government. Due to these efforts, as well as those of preceding years, more than $3.4 billion was returned to the Federal Government or paid to private persons in FY 2023. Of this $3.4 billion, the Medicare Trust Funds received transfers of approximately $974 million during this period, in addition to $257.2 million in Federal Medicaid money that was transferred separately to the Centers for Medicare & Medicaid Services.

One gets the feeling that $1.8 billion is the tip of the fraud-and-abuse iceberg. First, the report shows just how thoroughly fraud permeates most aspects of the health care system. The report discusses major areas of enforcement efforts (past, present, and future) and should be read by any healthcare lawyer who advises any individual or institutional providers on this list:

• Ambulances 
• Clinics (e.g., pain clinics, ophthalmology services and related ambulatory surgical centers)
• COVID-19 Related Enforcement 
• Diagnostic Testing (huge)
• Durable Medical Equipment (DME) (an oldie but a goodie, still huge)
• Electronic Health Records 
• EMTALA Violations
• Genetic Testing/RPP (Respiratory Pathogens Panel )Testing 
• Home Health Providers 
• Hospice Care
• Hospitals and Health Systems (see below for the details of one especially notable enforcement action against a renowned hospital and health system)
• Laboratory Testing 
• Managed Care 
• Medical Devices 
• Pharmacies 
• Physical Therapy 
• Physician and Other Practitioners 
• Prescription Drugs and Opioids 
• Psychiatric and Psychological Testing and Services
• Substance Use Treatment Centers 
• Telemedicine Exploitation and Fraud

More detail on the "Hospitals and Health Systems" item. 

In February 2023, the University of Pittsburgh Medical Center (UPMC), University of Pittsburgh Physicians (UPP), and a cardiothoracic surgeon agreed to pay $8.5 million, submit to a year-long audit, and implement a corrective action plan to resolve civil FCA allegations that UPMC (an integrated health care system and teaching hospital based in Pittsburgh), UPP (UPMC’s physician practice group), and the surgeon (a teaching physician and longtime chair of UPMC’s department of cardiothoracic surgery) violated the Teaching Physician Regulations, 42 C.F.R. §§ 415.190 and 415.192, by performing as many as three complex surgeries at the same time, failing to participate in all of the key and critical portions of those surgeries, unnecessarily inflating anesthesia times during those surgeries, and billing Medicare and other government Health Benefit Programs for those surgeries and services.  In its September 2021 Complaint-in-Partial-Intervention, the government alleged that, from 2015-2021, UPMC, UPP and the surgeon submitted false claims for payment related to: (1) doubly- and triply-concurrent surgeries, during which the surgeon left a first surgery before the key and critical portions of that surgery were complete, participated in as many two other simultaneous surgeries in separate operating rooms, and caused delays and complications in some of those surgeries; (2) surgeries where the surgeon did not participate in the timeout at the outset of the procedure; (3) surgeries where the surgeon was outside the hospital facility, unlocatable for significant stretches, or otherwise not immediately available throughout the procedure; (4) unduly prolonged anesthesia services associated with the surgeon’s concurrent surgeries and absences; and (5) procedures, services, and care related to otherwise avoidable complications caused by the concurrent surgeries. 

This is far from an isolated incident. Massachusetts General Hospital, one of the Harvard teaching hospitals, was cited for the same activity and paid out three settlements that totaled $32.7 million to settle three claims of multiple simultaneous surgeries between 2019 and 2022 (Boston Globe, Feb. 18, 2022 - paywall; law firm blurb based on the story). In June 2024 I wrote on the issue when it involved a major Houston hospital.

The report has some additional intriguing details:

In FY 2023, the Department of Justice (DOJ) opened more than 802 new criminal health care fraud investigations.  Federal prosecutors filed criminal charges in over 346 cases involving at least 530 defendants.  More than 476 defendants were convicted of health care fraud related crimes during the year.  Also, in FY 2023, DOJ opened more than 770 new civil health care fraud investigations and had over 1,147 civil health care fraud matters pending at the end of the fiscal year.  Federal Bureau of Investigation (FBI) investigative efforts resulted in over 620 operational disruptions of criminal fraud organizations and the dismantlement of more than 127 health care fraud criminal enterprises. 

In FY 2023, investigations conducted by HHS’s Office of Inspector General (HHS-OIG) resulted in 651 criminal actions against individuals or entities that engaged in crimes related to Medicare and Medicaid, and 733 civil actions, which include false claims, unjust-enrichment lawsuits filed in Federal district court, and civil monetary penalty (CMP) settlements.  HHS-OIG excluded 2,112 individuals and entities from participation in Medicare, Medicaid, and other Federal health care programs.  Among these were exclusions based on criminal convictions for crimes related to Medicare and Medicaid (871) or to other health care programs (314), for beneficiary abuse or neglect (203), and as a result of state health care licensure revocations (531).  

There's no denying it's been another busy year for the enforcers, but there seems to be no stopping health care providers (real or fake) with larceny in their heart. 

Two New Enforcement Actions from Texas Attorney General

As easy as it is to dislike Ken Paxton for his extravagantly disruptive policies on abortion and gender-affirming care for minors, his office does a good job in its enforcement program against health fraud. Two recent examples:

Attorney General Ken Paxton’s Investigation Results In 10-Year Prison Sentence And Over $34 Million Restitution For North Texas Doctor (November 25, 2024; State of Texas) Attorney General Ken Paxton’s Medicaid Fraud Control Unit Plays Key Role In Largest Ever Criminal Enforcement Action Targeting Opioid Distributors (November 25, 2024; State of Texas)

Health Care Fraud: Texas Style

On Oct. 15 a federal jury in Houston convicted the owner of a firm that operated 14 pharmacies, on fifteen counts including conspiracy to commit mail fraud, conspiracy to violate the anti-kickback statute, bribery concerning programs receiving federal funds, conspiracy to commit bribery, five counts of healthcare fraud, and six counts of money laundering, resulting in $160 million in fraudulent claims that were paid by Medicare. 

As described by the Office of the U.S. Attorney for the Southern District of Texas:

From 2014 through 2021, Mohamad Mokbel led a company called 4M Pharmaceuticals which operated 14 pharmacies with straw owners. The jury heard evidence that Mokbel illegally purchased thousands of Medicare beneficiaries, including their identification number, personal health and physician information. Mokbel targeted elderly diabetic patients who are dependent on diabetic testing supplies to manage their blood sugar levels. Mokbel paid $16 to $40 per Medicare beneficiary.  

To maximize reimbursements and without regard for medical necessity, Mokbel then directed 4M employees to use the Medicare beneficiaries’ patient data to run insurance claims to determine if Medicare or other insurance plans would cover and reimburse at a high rate for the topical creams, Omega-3 pills and other medications that Mokbel intended to sell through 4M pharmacies.

At Mokbel’s direction, 4M employees would then fax pre-filled prescription requests to the patients’ doctors appearing to be for diabetic testing supplies with topical creams added at the bottom. They also included false representations that the patient was requesting a 4M Pharmacy fill their medications. In reality, Mokbel had previously purchased the patient’s personal information, the patient had not selected a 4M Pharmacy and the patient was often unaware the request was being made on their behalf. 

Many doctors apparently took the representations in the fax at face value and did sign and send back the prefilled prescription requests to 4M. Mokbel’s call center in Houston and later in Egypt then contacted the patients and made false and misleading statements about the topical cream and their doctor’s order. Mokbel’s pharmacies then shipped out numerous topical creams, often on auto-refill, and excessively billed Medicare, Medicaid and private insurance plans. 

Mokbel made over $200 million as a result of the scheme. 

The money value of the fraud is considerably less than the record for Medicare fraud, but what caught my eye was the complexity of the scheme and the lineup of law-enforcement agencies involved in the case: Homeland Security Investigations (HSI) Houston, the FBI, IRS Criminal Investigation, the U.S. Department of Health and Human Services, the U.S. Food and Drug Administration, and the Texas Attorney General’s Medicaid Fraud Control Unit. This was a big, big deal for these investigators.

Health Care Fraud & Abuse: The Week in Review

It's been a busy week-and-a-half on the health-fraud enforcement front. I like posting these DOJ/Office of Inspector General updates for a number of reasons. [1] The scope and variety of the fraud schemes is truly impressive, exceeded only by [2] the brazenness of the fraudsters and [3] the success rate of the state and federal enforcement offices.

THE WEEK IN REVIEW

• United States Files False Claims Act Complaint Against Erlanger Health System -- July 26, 2024: This qui tam action is for alleged violations of the Stark Law in the form of "compensation Erlanger paid to [employee] physicians [that] was well above fair market value." 
  
  
• Precision Lens Agrees To Pay $12 Million To The United States For Kickbacks To Doctors In Violation Of The False Claims Act -- July 25, 2024: From the announcement -- 

"Precision Lens provided kickbacks to [ophthalmic surgeons] in the form of travel and entertainment, including high-end ski trips, fishing, golfing, hunting, sporting, and entertainment vacations, often at exclusive destinations. For many of the trips, physicians were transported to luxury vacation destinations on private jets, including trips to New York City to see a Broadway musical, the College Football National Championship Game in Miami, Florida, and the Masters Tournament in Augusta, Georgia. Precision Lens sold frequent flyer miles to its physician customers at a significant discount, enabling the physicians to take personal and business trips at well below fair market value.

 

"The jury found that Precision Lens’s conduct resulted in $43,694,641.71 in fraudulent claims submitted to Medicare. By operation of the statute, the court entered a $487,048,705.13 judgment against the company and its owner, which included treble damages and civil penalties under the False Claims Act. Following post-trial motions, the court reduced the judgment to $216,675,248.55. After the United States conducted a review of the defendants’ financial position and ability to satisfy the judgment, the parties entered into a settlement agreement which requires Precision Lens and the estate [of the deceased owner of Precision Lens] to immediately pay $12 million to resolve the United States’s claims." [emphasis added]

• Substance Use Disorder Treatment Clinics To Pay More Than $850,000 To Resolve Allegations They Knowingly Overbilled Medicaid For Office Visits -- July 25, 2024: This is a standard-issue "upcoding" case. From the announcement -- The U.S. and Virginia "contended that, from 2016 through mid-2023, the clinics submitted claims to Virginia Medicaid containing code 99215, which signifies a meeting with a patient involving at least two of the following three components: a comprehensive medical history, a comprehensive medical examination, and medical decision making of high complexity. However, the clinics knew the meetings were regular check-ins during substance use disorder treatment and did not meet those criteria."
  
  
• United States Obtains $26M In False Claims Act Judgments Against Laboratory Companies And Their Owner -- July 25, 2024: This is a default judgment (i.e., for failure to defend the government's allegations), which (based upon memory alone) seem pretty rare. The allegations were that the defendants 

"sought to profit from the unfolding COVID-19 pandemic by offering COVID-19 tests to nursing homes as a way to bill Medicare for a wide array of medically unnecessary respiratory pathogen panel (RPP) tests. The complaint alleged that these RPP tests were not medically necessary because the beneficiaries had no symptoms of a respiratory illness and because the tests were for uncommon respiratory pathogens.

 

"The complaint also alleged that Britton-Harr and Provista Health submitted claims for RPP tests that were never ordered by physicians and sometimes for RPP tests that were never performed, including over 300 claims that stated that the nasal swab test sample was supposedly collected from the beneficiary on a date after the beneficiary had died."

COVID-19 fraud and elder fraud. Despicable. 

• Santa Paula Doctor Pleads Guilty To Health Care Fraud For Role In Hospice Scam That Bilked Medicare Out Of $3.2 Million -- July 24, 2024: False certification of terminal condition --> submission of fraudulent claims of hospice eligibility.
  
  
• Riverside County Chiropractor Agrees to Pay $180,000 to Resolve Allegations of Health Care Fraud -- July 24, 2024: Another upcoding case? Medicare was billed for surgically implanted neurostimulators when the defendant actually "taped a disposable 'electroacupuncture' device called 'Stivax' to their patients’ ears. Stivax devices do not require surgical implantation and are not reimbursable by Medicare."
  
  
• Mental Health Services Providers Pay Over A Million To Settle False Claims Liability -- July 24, 2024: Defendants billed various government health care programs for physician services that were actually performed by nonphysicians who were not directly supervised by a physician. 'Some services occurred on dates when the physicians were traveling outside of the United States and thus unable to provide the services. Others allegedly occurred at times when it was not logistically possible for the physicians to have rendered them or directly supervised the services themselves due to the sheer volume of patients at multiple office locations located in and around the Houston area."
  
  
• Admera Health Agrees To Pay Over $5M To Settle False Claims Act Allegations Of Kickbacks To Third Party Marketers -- July 24, 2024: Classic.
  

• Doctor Convicted For Illegally Distributing Over 1.8M Doses Of Opioids And $5M Health Care Fraud Scheme -- July 23, 2024: Physician convicted of "conspiring to illegally distribute over 1.8 million doses of Schedule II controlled substances, including oxycodone and morphine, to drug-seeking individuals and drug abusers and for defrauding health care benefit programs of more than $5.4 million."
  
  
• Two Individuals Indicted For Stealing More Than $150,000 From MassHealth Program -- July 23, 2024: A Massachusetts Medicaid member is alleged to have falsely submitted timesheets  attesting to personal-care assistant (PCA) services that were never rendered. because the PCA was incarcerated during the time periods in question. 
  
  
• Topeka Man Charged With Embezzlement -- July 22, 2024:  Program manager and director of the Prairie Band Potawatomi Nation’s Diabetes Prevention Program is accused of embezzling $5,000 or more in federal grant money. 
  
  
• Owner Of Home Health Care Company Convicted Of Multimillion Dollar Heath Care Fraud Scheme -- July 22, 2024: For years, defendant's company billed the Massachusetts Medicaid program for home health services it did not provide, were not authorized, or were not medically necessary. The company also paid kickbacks and laundered illegal proceeds. The fraudulent billings amount to "at least" $100 million. The owner of the company used the proceeds "to treat herself to million-dollar cash bonuses, a lavish house, and a Maserati." Crime pays . . . until it doesn't.
  
  
• Attorney General Bonta Secures Sentencing of Southern California Dentist for Medi-Cal Fraud -- July 22, 2024: Defendant owned dental practice where she served as a dentist and carried out the fraudulent billing scheme. Under defendant's contract with a Federally Qualified Health Center that participates in Medi-Cal, she received reimbursement for each day of service billed rather than for the individual services provided to the patient. However, her dental practice fraudulently split its services over multiple days on its claims for reimbursement in order to maximize reimbursement from Medi-Cal. 

COVID-19 Vaccine Fraud: The Worst of the Worst?

Here's the case summary from USDOJ (Office of Public Affairs, June 17, 2024):

A New York woman pleaded guilty today to fraudulently destroying over 2,600 COVID-19 vaccines and issuing a corresponding number of fraudulent COVID-19 vaccination record cards.

According to court documents, Kathleen Breault, 66, of Cambridge, a midwife at Sage-Femme Midwifery PLLC (Safe-Femme), an authorized COVID-19 vaccine administration site in Albany, New York, conspired to obstruct the government’s distribution of COVID-19 vaccines by providing COVID-19 vaccination record cards to individuals who were not vaccinated, including to minors who were at the time ineligible to be vaccinated and to Canadian citizens who were not present in the United States when they were purportedly vaccinated. In addition to destroying COVID-19 vaccines and issuing fraudulent vaccination record cards, Breault and her co-conspirators made over 2,600 false entries into a New York State database that tracked COVID-19 vaccine distribution. Breault agreed to pay more than $37,000 in restitution for the destroyed vaccines.    

Breault pleaded guilty to conspiring to defraud the United States and its departments and agencies. She is scheduled to be sentenced on Sept. 18 and faces a maximum penalty of five years in prison. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors. 

The worst of the worst? It's up there. 

Most health care fraud is about money -- ill-gotten gains obtained by billing for services that were never rendered or that were not medically necessary and appropriate. Individual patients are sometimes harmed in these schemes (denied care they actually needed or exposed to treatment risks that were unnecessary), and then there are the addiction cases that -- in addition to the risk of death or serious injury -- often harm not only individuals but also families and contribute to the harm to whole communities. Even "pure financial fraud" harms insurance programs by taking away funds that could otherwise pay for the provision of medical care to patients in need of it.

This case adds another dimension to fraud-based community harms: public health and safety. Falsely documenting vaccinations and diverting thousands of doses of vaccine to the trash is doubly harmful. It allows unvaccinated individuals to work and play within communities that depended on the widest possible rate of vaccination. And many communities at times throughout the worst of the pandemic experienced vaccine shortages. This case isn't only about money. It's about a kind of depraved indifference to communal well-being that is hard to fathom.

NEWS FLASH: Telehealth Fraud is Health Fraud. Full Stop.

Here's the headline from DOJ, along with excepts from the news release announcing the arraignment of two principals of a telehealth company in California:

Founder/CEO and Clinical President of Digital Health Company Arrested
for $100M Adderall Distribution and Health Care Fraud Scheme

The founder and CEO (He) of a California-based digital health company and its clinical president (Brody) were arrested today in connection with their alleged participation in a scheme to distribute Adderall over the internet, conspire to commit health care fraud in connection with the submission of false and fraudulent claims for reimbursement for Adderall and other stimulants, and obstruct justice. . . .

“The individuals charged today allegedly disregarded the first rule of medical care—do no harm—in order to maximize profits, and there is no place for such fraud in our healthcare system,” said Secretary of Homeland Security Alejandro N. Mayorkas. . . . 

“As alleged in the indictment, the defendants provided easy access to Adderall and other stimulants by exploiting telemedicine and spending millions on deceptive advertisements on social media. They generated over $100 million in revenue by arranging for the prescription of over 40 million pills,” said Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division. “These charges are the Justice Department’s first criminal drug distribution prosecutions related to telemedicine prescribing through a digital health company. As these charges make clear, corporate executives who put profit over the health and safety of patients—including by using technological innovation—will be held to account.”

According to court documents, He and Brody allegedly conspired with others to provide easy access to  Adderall and other stimulants in exchange for payment of a monthly subscription fee. The indictment alleges that the conspiracy’s purpose was for the defendants to unlawfully enrich themselves by, among other things, by increasing monthly subscription revenue and thus increasing the value of the company. Done allegedly arranged for the prescription of over 40 million pills of Adderall and other stimulants, and obtained over $100 million in revenue. 

He and Brody allegedly obtained subscribers by targeting drug seekers and spending tens of millions of dollars on deceptive advertisements on social media networks. They also allegedly intentionally structured the Done platform to facilitate access to Adderall and other stimulants, including by limiting the information available to Done prescribers, instructing Done prescribers to prescribe Adderall and other stimulants even if the Done member did not qualify, and mandating that initial encounters would be under 30 minutes. To maximize profits, He allegedly put in a place an “auto-refill” function that allowed Done subscribers to elect to have a message requesting a refill be auto-generated every month. He wrote that Done sought to “use the comp structure to dis-encourage follow-up” medical care by refusing to pay Done prescribers for any medical visits, telemedicine consultation, or time spent caring for patients after an initial consultation, and instead paying solely based on the number of patients who received prescriptions.

“The defendants in this case operated Done Global Inc., an online telehealth website that prescribed Adderall and other highly addictive medications to patients who bought a monthly subscription. The defendants allegedly preyed on Americans and put profits over patients by exploiting telemedicine rules that facilitated access to medications during the unprecedented COVID-19 public health emergency,” said DEA Administrator Anne Milgram. “Instead of properly addressing medical needs, the defendants allegedly made millions of dollars by pushing addictive medications. In many cases, Done Global prescribed ADHD medications when they were not medically necessary. In 2022 the FDA issued a notice of shortages in prescription stimulants, including Adderall. Any diversion of Adderall and other prescription stimulant pills to persons who have no medical need only exacerbates this shortage and hurts any American with a legitimate medical need for these drugs. The DEA will continue to hold accountable anyone, including company executives, that uses telehealth platforms to put profit above patient safety”. . . .

He and Brody allegedly persisted in the conspiracy even after being made aware that material was posted on online social networks about how to use Done to obtain easy access to Adderall and other stimulants, and that Done members had overdosed and died. They also allegedly concealed and disguised the conspiracy by making fraudulent representations to media outlets to forestall government investigations and action and induce third parties to continue doing business with Done. . . .

This isn't just about money. It's about enabling addiction and about killing patients. I am amazed at the sociopathic conduct alleged here, and even more amazed that a digital company thought it could (allegedly) engage in massive on-line health fraud without leaving a digital trail  that would lead directly back to the company and its leaders. Hubris? Stupidity? Both?

Health Care Fraud: The Beat Goes On (and On and On)

 

More enforcement news from the HHS Office of Inspector General:

• Queens And Brooklyn-Based Eye Doctor Settles Health Care Fraud Claims For More Than $2.4 Million (June 6, 2024; U.S. Attorney's Office, Eastern District of New York)
• Five Individuals Arrested For Defrauding Medicare Of Over $15M Through Sham Hospices And Money Laundering (June 7, 2024; US DOJ)
• Former Fresno Sleep Clinic Owner Sentenced To 46 Months In Prison For Submitting Over $1.5 Million In Fraudulent Claims For Sleep Studies To Medicare And Medi-Cal (June 6, 2024; U.S. Attorney's Office, Eastern District of California)
• Chronic Disease Health Care Provider To Pay Florida Medicaid Nearly $600,000 For False Claims Act Violations (June 5, 2024; State of Florida)

These aren't huge amounts of money, as far as health care fraud goes in this country. What impresses (and depresses) me is the steady drumbeat of criminal activity in this sector. With all the money sloshing around in the industry that counts for the largest percentage of our GDP, the lure of easy money is apparently irresistible. 

More Healthcare Fraud Enforcement Actions: The Beat Goes On

  It's hard to know who is winning the battle against healthcare fraud -- the fraudsters or the enforcers. The list of enforcement outcomes (charges, verdicts, sentencing) is pretty darned impressive, both for the brazenness of the crimes and the success of the prosecutors. 

The HHS Office of Inspector General has a useful website that list 9,232 enforcement actions over the past decade. For my purposes, it's over-inclusive, because it lists "[c]riminal, civil or administrative legal actions relating to fraud and other alleged violations of law, initiated or investigated by OIG and its law enforcement partners" -- in other words, way more than only criminal prosecutions for health care fraud. The site does have some filters, but none are specific to health care. The listings for the past week alone, however, show the heavy concentration of health care fraud and the use of the criminal-justice system to punish wrongdoers:

• Florida Felon Sentenced to Prison for Role in Multi-Million Dollar Health Care Kickback Scheme After Pleading Guilty to COVID-19 Fraud and Unlawfully Possessing Firearm (May 30, 2024)
• Attorney General Ken Paxton Secures 84-Month Prison Sentence for Clinic Owner in $15 Million Medicare Fraud Scheme (May 30, 2024) (Note: Paxton's a terrible model of a public servant, but his fraud task force has done admirable work over the years going after healthcare fraudsters)
• Medical Device Manufacturer Innovasis Inc. and Two Top Executives Agree to Pay $12M to Settle Allegations of Improper Payments to Physicians (May 29, 2024) 
• Wisconsin Attorney Sentenced To Five And A Half Years In Federal Prison For $2.3 Million Fraud And Tax Evasion Schemes (May 28, 2024) 
• Penn Highlands Healthcare To Pay $735,000 To Settle False Claims Act Allegations (May 28, 2024) 
• Doctor Convicted Of $70M Medicare Fraud Scheme (May 24, 2024)
• Florida Businessman Daniel Hurt To Pay Over $27 Million For Medicare Fraud In Connection With Cancer Genomic Tests (May 24, 2024) 

Is it characteristic of fraudsters that, in their heart of hearts, they really believe they won't be found out by the authorities? Of do they take a (misguided) risk/reward calculation? 

$100 Million Medicare Fraud => 9-Year Sentence

Defendant Andrew Chmiel got a one-way ticket to federal prison for 9 years following his conviction for Medicare fraud, courtesy of the U.S. Attorney's office in the District of South Carolina. He was also ordered to pay $98,935,533.00 in restitution.

Touting this as one of the biggest Medicare fraud cases ever, the press release on this case described the essentials of the scheme (emphasis added): 

Chmiel’s charges were brought in 2019 as part of Operation Brace Yourself, an investigation that originated in South Carolina. Operation Brace Yourself, which was prosecuted in conjunction with the Department of Justice’s Criminal Division Fraud Section, was a multi-jurisdictional investigation that involved the execution of more than 80 search warrants in 17 federal districts.

As for Chmiel’s criminal conduct, evidence presented to the court showed that Chmiel controlled and operated at least 10 DME companies, which were located throughout the United States. These DME companies were used by Chmiel and his co-conspirators to submit false and fraudulent claims to Medicare for braces that were not medically necessary and/or were obtained through the payment of kickbacks and bribes. 

To effectuate the scheme, these DME companies entered into agreements with an offshore call center to purchase completed doctors’ orders so the DME companies could bill Medicare. This offshore call center was advertising through television and internet advertisements.  Once a Medicare beneficiary called a 1-800 number that was on the advertisements, that Medicare beneficiary would be screened for eligibility and then convinced that he or she needed a brace, and oftentimes upsold on other braces.  The call center would then contact a telemedicine company whose physician and/or or nurse practitioner would issue a prescription without regard to the medical necessity.  Throughout the investigation the evidence revealed that beneficiaries were prescribed braces without ever being examined by, seeing, or, in some instances, even speaking to a medical professional. Evidence presented showed that Chmiel was attempting to hide that he was purchasing completed doctors’ orders by creating fraudulent and false invoices for alleged marketing and business processing services.

Throughout the health care fraud scheme, Chmiel’s companies, which included 10 DME companies, two dropship companies, and two additional companies that were used to facilitate the fraud – D.O. Delivery and Pain Center – billed Medicare in excess of $200 million and Medicare paid Chmiel’s companies in excess of $95 million.

For the past two decades, durable medical equipment has been a fertile field for fraud and, correspondingly, for federal fraud prosecutions. The perpetrators of these schemes apparently fail to take into account the investigatory tools available to the Department of Justice and the fact that the government has computers that can crunch a lot of Medicare claims. $200 million worth of DME orders from 10 DME companies was bound to be picked up by some computer's filter or algorithm. 

Criminal Liability of Health Care Providers

Some types of criminal prosecutions of health care providers are rare, while others are not.

1. Not-so-rare. This category includes fraud (against private insurers and public health programs like Medicare, Medicare, and Tricare); criminal prosecutions involving violations of the Anti-Kickback Law are announced by DOJ and state AGs every week (if not every day). Last Friday, for example, the Massachusetts Attorney General announced indictments against a dentist and his dental practice for billing the Medicaid program for services that were never rendered or were not rendered by the dentist. The charges included multiple counts of Medicaid False Claims and Larceny Over $1,200. 

Violations of state and federal Controlled Substances Acts often have a provider -- a physician, nurse, or pharmacy worker -- with access to drugs in the middle of the scheme. A recent example comes from the U.S. Attorney for the Northern District of New York. whose office announced on March 1 that a nurse practitioner received a 70-month sentence "for distributing controlled substances outside the course of professional practice and for no legitimate medical purpose." In her plea agreement, the defendant admitted that she 

unlawfully prescribed controlled substances to a total of 54 patients.  Simonson issued hundreds of unlawful prescriptions, including for the opioids hydrocodone and oxycodone, benzodiazepines (clonazepam, diazepam, and lorazepam), and the stimulants amphetamine (e.g. Adderall) and methylphenidate.  For instance, Simonson admitted that she issued a total of 63 oxycodone prescriptions to two residents of Suffolk County, New York, without treating either of them for a medical condition. The Suffolk County residents usually paid Simonson by mailing her packages of cash concealed within DVD cases.

To settle the government's civil case against her, the defendant "admitted that she improperly prescribed controlled substances to 105 patients (including the 54 listed in her criminal plea agreement), often without ever examining patients and maintaining medical records justifying her decision to prescribe controlled substances."

2. Very rare. This category involves provider errors that result in iatrogenic injury. Most such cases, of course, are handled on the civil side by medical-malpractice and medical-negligence claims. In a small percentage of cases, though, a provider will be indicted. Most such cases involve extreme departures from the standard of care resulting in a patient's death. An example was reported by the NY Times earlier this month:

A Colorado paramedic convicted in the 2019 death of Elijah McClain, a young Black man whose case helped drive the national police reform movement, was sentenced on Friday to five years in prison.

The case was a rare criminal prosecution of emergency medical personnel, and stirred outrage among paramedics and firefighters across the nation who worry that urgent decisions made as part of their jobs can be criminalized.

The paramedic, Peter Cichuniec, 51, a former lieutenant with Aurora Fire Rescue, was convicted in December of criminally negligent homicide and second-degree assault for the unlawful administration of drugs. He was one of five police officers and paramedics prosecuted in state district court over three consecutive trials. . . .

In August 2019, Mr. McClain, a 23-year-old massage therapist, was returning home from a store when he was confronted by police who were responding to a 911 call about a suspicious person. During a quickly escalating encounter, Mr. McClain was forcefully restrained by police and placed in a carotid chokehold, a neck restraint that has since been banned in Aurora and other police departments. Paramedics then injected him with an overdose of the powerful sedative ketamine. He died in a hospital several days later.

$2 Billion (with a "B") Healthcare Fraud Scheme Alleged by CMS & FBI

From Becker's Hospital Review (Feb. 13, 2024): The FBI and CMS are investigating an alleged fraud scheme. The scheme ran for two years and involves 406,000 patients and seven firms in Connecticut, Florida, Kentucky, New York and Texas. The government is looking into the possibility that the scheme cost the Medicare program $2 billion. 

The scheme is described in a report by the National Association of ACOs (NAACOS), whose president, Clif Gaus, is quoted in the report. More from Becker's:

In all cases, the companies were sold to new owners before the steep increase in catheter purchases. Some of the companies obtained Medicare accreditation under the name of a person who said they no longer worked there, the report said. 

None of the companies have been major players in the intermittent urinary catheter field, but collectively they are responsible for a national spike in urinary catheter claims, the report said. The NAACOS did not find any evidence that the patients wanted or received catheters. 

Mr. Gaus said he was concerned the companies behind the alleged fraud were using real patients' data to order medical products, suggesting several possible sources, including healthcare records and consumer data.

"Where do you get half a million [Medicare] beneficiary names and ID numbers?" Mr. Gaus said in the report. "There has to be a breach somewhere in the healthcare system."

Urinary catheters are an appealing target for scammers; they are low-cost products with high Medicare payout margins. The orders can escape scrutiny when they accompany billing for more expensive equipment or procedures.  

 

One Guy, $234 Million Medicare Fraud Scheme

 

With a name that could be right out of Dickens novel, Imran Shams puts most other health care fraudster to shame. What he lacks in imagination -- his fraudulent conduct was pretty middle-of-the-road stuff -- he more than makes up with old-fashioned doggedness. The DOJ-OIG summary is illuminating:

A California man was sentenced today to 10 years in prison for conspiring to conceal his involvement in operating a laboratory and billing Medicare approximately $234 million for various lab tests, including COVID-19 and respiratory pathogen panel tests, despite his decades-long exclusion from the Medicare program.

“Criminals who cheat federal health programs and profit at the expense of American taxpayers will be met with the full force of the Justice Department,” said Attorney General Merrick B. Garland. “As our country was battling the COVID-19 pandemic, this individual was fraudulently billing Medicare for hundreds of millions of dollars. Today, thanks to the work of the Justice Department’s Criminal Division, he will now spend 10 years in federal prison for his crimes. We will continue to disrupt schemes that defraud the federal health programs the American people rely on, and we will hold accountable those who perpetrate those schemes.”

According to court documents, Imran Shams, 65, of Glendale, was convicted of Medicare and Medicaid fraud in separate 1990 and 2001 cases in New York and California, respectively. After each conviction, he was excluded from participation in Medicare and all federal health care programs, and advised by the Department of Health and Human Services Office of Inspector General (HHS-OIG) that he had to submit a written application to be considered for reinstatement in federal health care programs. Shams never sought reinstatement, yet he continued to operate health care clinics in New York that billed federal health care programs. In November 2017, Shams pleaded guilty to conspiracy to pay and receive health care kickbacks and other charges in the Eastern District of New York related to his operation of these clinics.

By 2018, Shams was an owner, operator, and manager of Matias Clinical Laboratory, doing business as Health Care Providers Laboratory (HCPL), a Baldwin Park, California-based clinical testing laboratory that billed Medicare and other federal health care programs. In order to maintain HCPL’s status as a Medicare provider and enable it to receive payments from Medicare for its testing services, Shams and a co-conspirator fraudulently concealed Shams’ role in HCPL from Medicare, including failing to submit required enrollment documentation identifying Shams’ ownership, management position, and prior convictions; causing the submission of false documentation to Medicare identifying another person as HCPL’s sole owner and managing officer; submitting false documentation concerning HCPL’s ownership and management to the California Department of Public Health; and making false statements to the U.S. Probation Office and Pretrial Services Agency while Shams was on federal court supervision following his 2017 conviction. Between August 2018 and April 2022, when the grand jury returned the indictment in this case and Shams was arrested and ordered detained without bond, HCPL fraudulently billed Medicare approximately $234 million. Medicare paid HCPL approximately $31.7 million based on these fraudulent claims.

Shams pleaded guilty in the Central District of California on Jan. 24, 2023, to conspiracy to commit health care fraud and concealment of his exclusion from Medicare.

In addition to the term of imprisonment, Shams was ordered to forfeit $31,761,286.21, including $4,513,106.30 in funds that the government previously seized from two bank accounts, as well as his interest in two residential properties and one business property in the Los Angeles area. Shams was also ordered to pay $31,761,286.21 in restitution.

“Shams engaged in a years-long scheme in which he billed American taxpayers nearly $234 million and lined his pockets with millions of dollars of funds intended for the health and welfare of patients,” said FBI Director Christopher Wray. “This case demonstrates the FBI’s commitment to rooting out fraud to help ensure critical healthcare funds go where they are needed most.”

Physician Acquitted in $15M Healthcare Fraud Prosecution

A federal jury in Maryland convicted the physician on five counts of healthcare fraud in connection with his billing practices for level 4 CPT codes for evaluation and management services (E/M) for Covid patients. According to Becker's Hospital Review:

Ron Elfenbein, MD, 49, owned First Call Medical Center and Chesapeake ERgent Care, which operated multiple drive-thru COVID-19 testing sites. He instructed employees, in addition to billing for COVID-19 tests, to bill for high-level evaluation and management visits, according to an Aug. 4 Justice Department news release. Dr. Elfenbein ordered the high-level visits to be billed for all patients, including those who were asymptomatic, getting tested for their employment requirements or being tested so that they could travel, according to the release. Dr. Elfenbein was accused of submitting false claims for tens of thousands of high-level visits that were ineligible for reimbursement. 

As analyzed by Husch Blackwell:

[U]nlike some CPT codes, E/M CPT codes are imprecise. There is purpose in E/M CPT codes’ imprecision in that it allows physicians flexibility to exercise their best judgment given the multitude of factors that go into medical decision-making.

But that imprecision in E/M CPT codes makes for difficult federal prosecutions. As the court held in overturning Dr. Elfenbein’s convictions, CPT codes’ “imprecision does not necessarily integrate well with the clear notice and due process guarantees of our criminal law” and “where the relevant CPT codes and related definitions are ambiguous and subject to multiple interpretations, problems clearly arise.” 

Does this mean DOJ can't win ambiguous-CPT code cases? Not at all (from Husch):

The court was careful to make clear that it is possible for the Justice Department to successfully prosecute defendants who take advantage of ambiguous CPT codes, but that such prosecutions must show objective falsity in a way the prosecutors failed to do in Dr. Elfenbein’s trial. The “Government sails in shallow waters when it prosecutes a case of this type; these cases require careful navigation,” wrote the court.

To make its point, the court pointed to several cases in which the Justice Department was able to navigate ambiguous waters, including one E/M CPT case in which the prosecution’s expert testified the medical judgment was “not even close to being properly classified” at the code’s level. And so, while prosecutions based on ambiguous CPT codes are clearly an uphill battle for the Justice Department, they are not insurmountably uphill. 

The district court's 90-page opinion is here. 

Latest Fraud Enfocement Actions include $148 Million Scheme

Here's the latest rundown from USDOJ, with some details on a couple of the most notable actions:

Lab Owner Pleads Guilty To $1.7 Million COVID-19 Test Fraud Scheme (December 1, 2023; U.S. Attorney's Office, Northern District of Texas)

Physician Sentenced For $1.2M Pill Mill Scheme (November 30 2023; U.S. Department of Justice)

Philadelphia Pharmacy Pleads Guilty To More Than $500,000 In Fraudulent Insurance Claims As Part Of Prescription Medication Scam (November 28, 2023; Pennsylvania Attorney General)

▶︎Man Charged In $148M Medicare And Medicaid Fraud Scheme (November 30 2023; U.S. Department of Justice)

A federal grand jury in Baton Rouge, Louisiana, returned an indictment today charging a Louisiana man for his role in a scheme to defraud Medicare and Medicaid of over $148 million in medically unnecessary definitive urine drug testing services.   

According to court documents, Brad Paul Schaeffer, 48, of Zachary, was a co-owner and chief executive officer of MedComp Sciences LLC (MedComp), a diagnostic laboratory located in Zachary. From approximately January 2013 through approximately August 2022, MedComp, at the direction of Schaeffer, allegedly billed Medicare and Medicaid for definitive testing of at least 15 substances in urine specimens it received, regardless of the patient’s treatment plan and history, or the request of the referring provider. 

To perpetuate the fraud, Schaeffer, through MedComp, allegedly took several actions, among them, writing off patient co-pays, directing MedComp staff to fill out and submit order forms on providers’ “behalf,” concealing the true nature, permissibility, and extent of testing from providers, orchestrating a pass-through billing scheme using hospitals, and paying kickbacks to physicians disguised as laboratory ownership interests. Schaeffer then allegedly used the fraudulent proceeds for his own benefit, including spending thousands of dollars to renovate a pool and on a pool house in his backyard, and to restore a truck. 

▶︎Caretaker Charged With Involuntary Manslaughter, Neglect For Failure To Renew Patient’s Medications Which Led To Fatal Seizure Episode (November 29, 2023; Pennsylvania Attorney General)

Kelly Gonzales, 48, was the administrator at ARC of Lawrence County, a personal care home in New Castle, when she failed to renew a prescription for the patient’s anti-seizure medication. Gonzalez then altered medical records to indicate that a health care provider discontinued the medication — which was not true.

As the administrator of the personal care home, Gonzales was responsible for the administration and management of the home, including the health, safety, and well-being of the residents. This included ensuring the residents’ paperwork was complete, that they attended all medical appointments, and received their prescribed medication in a timely manner.

According to the complaint, the resident was diagnosed with a seizure disorder and was prescribed anti-seizure medication to control his seizures. He died at the care home on Dec. 2, 2021 after not receiving his medication for over 10 days. Upon autopsy, it was discovered that the seizure disorder caused his death and that the levels of anti-seizure medication in his system were well below therapeutic levels.

Gonzales was charged Tuesday with felony counts of neglect of a care dependent person and tampering with records, and misdemeanor involuntary manslaughter. Gonzales surrendered Tuesday, was arraigned and released on her own recognizance.

Tennessee Physician Sentenced in $1.88 Million Health Fraud Case

A Tennessee doctor will have 7 years in federal prison to contemplate his crimes against the Medicare program and his patients. 

He was convicted on a 36-count indictment in the following scheme, as described by the U.S. Attorney for the Middle District of Tennessee:

The defendant, through his medical clinic in Clarksville, billed federal health insurance programs for hundreds of medically unnecessary services, including unnecessary office visits and steroid injections. The evidence at trial showed that he required Medicare beneficiaries and other patients to visit his clinic as many as six times each month and to undergo unnecessary steroid injections in order to obtain their prescriptions. The evidence also showed that the defendant altered progress visit notes in his patients’ medical records to justify higher billing rates.

The physician was ordered to pay over $1 million in restitution and serve three years of supervised release.  He was also fined $195,000 and must forfeit previously seized assets worth approximately $900,000.

This isn't the physician's first encounter with the legal system. In 2022 the Administrator of DEA revoked his authorization to prescribe controlled substances, based upon findings that he indiscriminately and dangerously prescribed large amounts of oxycodone and other controlled substances. See Fed. Reg., Jan. 19, 2022, at 2986. 

Health care fraud is as health care fraud does.

Texas Attorney Convicted for Role In Kickback Scheme

It's relatively rare for an attorney to be such an integral part of a kickback-for-referrals scheme that he gets convicted of money-laundering (as well as a charge of perjury for lying about the scheme under oath), but that's what happened this summer to Houston lawyer Peter Bennett. See Law360, 7/17/2023. Bennett was convicted on charges that he created sham corporations and sham trusts to launder money paid for referrals to a local hospital. His motion for acquittal or a new trial is pending before District Judge Jeremy Kernodle in the Eastern District of Texas. See Law360, 9/11/2023.

If there's ever an opinion in this case, it would provide a cautionary tale for my health law students . . . 

How Many Separate Fraud Schemes Can You Spot in This Picture?

This doesn't quite match the $200 million health care fraud scheme I reported on yesterday, but it could still be a great final exam "issue spotter" in my Health Care Law class. It reminds me of those children's puzzles that have 10 or 15 errors partially hidden in a picture. Here's the picture (from the DOJ press release; emphasis added):

[T]he United States has filed and settled a civil fraud lawsuit against KLAUS PETER RENTROP and his medical practice GRAMERCY CARDIAC DIAGNOSTIC SERVICES P.C. (“GRAMERCY CARDIAC”) for paying millions of dollars in kickbacks to physicians and their practices for patient referrals.

RENTROP and GRAMERCY CARDIAC offered and paid physicians and their practices millions of dollars in kickbacks in the form of inflated “rental payments” and referral fees to induce them to refer patients to Gramercy-contracted cardiologists and to Gramercy Cardiac for diagnostic tests and procedures, in violation of the Anti-Kickback Statute and the Stark Law. 

RENTROP and GRAMERCY CARDIAC’s scheme worked as follows.  RENTROP and GRAMERCY CARDIAC entered into office space rental agreements, often in excess of fair market value, with primary care and other physicians or their medical practices (the “Rental Practices”).  These agreements typically provided for the use of an exam room once or twice a month, as well as for the use of basic equipment (e.g., a telephone and a computer) and front desk staff to assist with scheduling.  The defendants often agreed to pay thousands of dollars each month in rent.  RENTROP and GRAMERCY CARDIAC also entered into independent contractor agreements with dozens of cardiologists (the “Gramercy-Contracted Cardiologists”) who were sent to see patients at the Rental Practices.  In exchange for the purported “rental payments,” the Rental Practices referred patients to the Gramercy-Contracted Cardiologists, who in turn referred many of these patients to a GRAMERCY CARDIAC office to undergo cardiac diagnostic tests and procedures.  RENTROP and GRAMERCY CARDIAC paid the Gramercy-Contracted Cardiologists a flat fee for each test or procedure performed on referred patients at a Gramercy Cardiac location, with larger fees paid for tests and procedures for which GRAMERCY CARDIAC received a greater reimbursement.  These per-procedure fees were the only compensation paid to some Gramercy-Contracted Cardiologists.

To ensure the kickbacks paid to the Rental Practices were working, RENTROP directed his staff to calculate GRAMERCY CARDIAC’s return on investment from the “rental payments” paid to each Rental Practice.  RENTROP insisted on a minimum return on investment of at least 300% from the kickbacks. 

These Rental Practices referred tens of thousands of patients to the Gramercy-Contracted Cardiologists, who in turn referred more than 23,000 patients for PET and SPECT scans at GRAMERCY CARDIAC.  A significant proportion of these patients were Medicare or Medicaid beneficiaries: GRAMERCY CARDIAC billed Medicare or Medicaid for tests or procedures provided to tens of thousands of Medicare or Medicaid beneficiaries who were referred by the Rental Practices, including for PET and SPECT scans for many thousands of these beneficiaries.  As a result, the claims submitted for payment for these tests and procedures were false and violated the federal False Claims Act. 

As part of the settlement, RENTROP and GRAMERCY CARDIAC each admits, acknowledges, and accepts responsibility for the following conduct:

From 2010 through 2021, GRAMERCY CARDIAC, at RENTROP’s direction, entered into rental agreements (the “Rental Agreements”) with more than 130 physicians and medical practices (the “Rental Practices”) under which GRAMERCY CARDIAC leased a portion of the practice’s office space, usually one or two exam rooms for certain days or hours each month.  RENTROP took part in the negotiation of the Rental Agreements and signed them on behalf of GRAMERCY CARDIAC.  GRAMERCY CARDIAC paid a total of more than $11 million to the Rental Practices pursuant to the Rental Agreements. 

From 2010 through 2021, GRAMERCY CARDIAC, at RENTROP’s direction, entered into independent contractor agreements (the “Independent Contractor Agreements”) with more than 50 cardiologists (the “Gramercy-Contracted Cardiologists”) or their medical practices.  RENTROP took part in the negotiation of the Independent Contractor Agreements and signed them on behalf of GRAMERCY CARDIAC. 

GRAMERCY CARDIAC sent the Gramercy-Contracted Cardiologists to the rented office space one or more times each month to see patients who were referred for an assessment by the healthcare providers at the Rental Practice.  The Gramercy-Contracted Cardiologists in turn referred these patients to GRAMERCY CARDIAC to undergo diagnostic tests and procedures, such as PET and SPECT scans.

GRAMERCY CARDIAC paid many of the Gramercy-Contracted Cardiologists a flat fee for each diagnostic test or procedure which the cardiologist referred to GRAMERCY CARDIAC provided that the patient received the test or procedure at a GRAMERCY CARDIAC location.  These “per procedure” fees were the only compensation GRAMERCY CARDIAC provided to the Gramercy-Contracted Cardiologists.

Certain versions of Independent Contractor Agreements stated that the Gramercy-Contracted Cardiologist was to be paid not for the referrals to GRAMERCY CARDIAC, but rather for the “[a]dministration and supervision” of the PET and SPECT scans to be performed at GRAMERCY CARDIAC.  However, in many cases, the Gramercy-Contracted Cardiologists did not, in fact, administer and supervise the PET and SPECT scans and were nonetheless paid by GRAMERCY CARDIAC based solely on the number of tests and procedures referred.

At the time the Rental Agreements were executed, it was understood that the Rental Practices would refer their patients to the Gramercy-Contracted Cardiologists.  Indeed, GRAMERCY CARDIAC calculated the number of hours per month that GRAMERCY CARDIAC leased the office space based on the volume of expected patient referrals.

GRAMERCY CARDIAC calculated its return on investment from its Rental Agreements — which it internally referred to as the “efficiency” of the Rental Agreements — by comparing the revenue GRAMERCY CARDIAC generated from the patient referrals to the payments it made to the Rental Practice.  

When a Rental Agreement’s return on investment fell below the minimum threshold, GRAMERCY CARDIAC, at RENTROP’s direction, would often refuse to pay the Rental Practice the amounts due under the Rental Agreement.  In addition, at RENTROP’s direction, GRAMERCY CARDIAC Physician Liaisons advised Rental Practice physicians that if the volume of referrals to Gramercy-Contracted Cardiologists did not increase, rent would be decreased, or the Rental Agreement would be terminated.  GRAMERCY CARDIAC terminated a number of Rental Agreements because the return on investment through patient referrals was too low.

When negotiating or re-negotiating the monthly rental payment to be made under a Rental Agreement, GRAMERCY CARDIAC took into account the expected or historic return on investment based on the volume of patient referrals generated from the Rental Practice.

The rental fees paid by GRAMERCY CARDIAC under the Rental Agreements were in excess of fair market value for at least some Rental Agreements.

That's a whole lotta kickback-payin' goin' on! How much fraud are we talking about? The defendant physician and his practice are paying $6.5 million to settle the charges, but if they fail to pay, there is "a Consent Judgment in the amount of $64,416,515, which may be enforced if Defendants do not make the payments required under the settlement agreement." 

False Claims Act Settlement with EHR Provider for $31 Million

First, $31 million is a significant piece of change. Second, this was a qui tam relator ("whistleblower") case initiated by two health care professionals at a facility that used the defendant's software; the relators  collected $5.58 million for their trouble. Third, it represents a rare foray by the government into the world of healthcare tech; defendant was NextGen Healthcare Inc. (NextGen), an electronic health record (EHR) technology vendor.

In brief, NextGen was accused of selling EHR software that wasn't properly tested or certified. Medicare money was paid for the development of the software, and NextGen's assertion that its software was properly tested and certified was false. The company was also accused of violating the Anti-Kickback Law, which makes it illegal to pay anyone anything (directly or indirectly, overtly or covertly, in cash or in kind) for a referral (or to induce a referral) of an item or service for which a federal health program (like Medicare) will pay. According to the announcement from DOJ's Office of Public Affairs, "NextGen [allegedly] knowingly gave credits, often worth as much as $10,000, to current customers whose recommendation of NextGen’s EHR software led to a new sale. The government alleges that other remuneration, including tickets to sporting events and entertainment, was also provided to induce purchases and referrals."

Telemedicine Fraud

Here's an excellent review of a recent law review article on "Telemedicine Scams." The target article is by Katrice Bridges Copeland in 108 Iowa L. Rev. 69 (2022). The review is by Zack Buck in a recent Jotwell entry (July 7, 2023). His conclusion: 

Professor Copeland’s article—the first to address fraud in telemedicine—is a holistic and complete treatment of a pernicious problem in America’s health care system. . . . By adroitly focusing on the potential threats of a major new delivery mechanism such as telemedicine, she has made us aware of the next major frontier in health care fraud and abuse enforcement. In an area with such hope and promise in addressing America’s health care access challenges, and with the Public Health Emergency coming to an end, her warnings must be heeded to enable telemedicine to flourish while preventing the worst frauds from taking root.

The DOJ and HHS/OIG have brought numerous prosecutions for telemedicine fraud in recent years. The article by Prof. Copeland suggests we've only seen the beginning.