$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. 

Hellacious (and Audacious) Health Care Fraud of the Week (V)

Another fine example of the alleged Willie Sutton explanation for robbing banks  except now the miscreants barely need to leave home to get to where the money is. Tapping into the vast funds swishing around the health care system is so easy, who needs to rob banks? By the way, earlier this year I cast doubt on the effectiveness of criminal law as a deterrent to crime. There is a nice essay that just went on-line today that develops that thought with more finesse and insight. Take a look at Christopher Slobogin, "The Rationality of Criminality," JOTWELL (July 3, 2023) (reviewing Harold Winter, The Economics of Crime: An Introduction to Rational Crime Analysis (2020)), https://crim.jotwell.com/the-rationality-of-criminality/.

Ocean County Man Admits $21.7 Million Health Care Fraud Scheme And COVID-19 Wire Fraud Scheme (June 30, 2023; U.S. Attorney's Office, District of New Jersey). From DOJ's announcement:

Alexander Schleider, 57, of Lakewood, New Jersey, pleaded guilty before U.S. District Judge Michael A. Shipp in Trenton federal court to an information charging him with one count of conspiracy to commit health care fraud and one count of wire fraud. According to documents filed in the case and statements made in court:

• Schleider owned and operated durable medical equipment (DME) companies in New Jersey that provided orthotic braces to beneficiaries of Medicare and other federal and private health care benefit programs without regard to medical necessity. Schleider and his conspirators obtained prescriptions for the DME braces through the payment of kickbacks and bribes to individuals operating marketing call centers, who in turn utilized the service of telemedicine companies to obtain prescriptions for the DME. Schleider caused losses to Medicare and other health care benefit programs of $21.7 million.
  
  
• Schleider also committed wire fraud in connection with funds made available in response to the COVID-19 pandemic. After one of his DME companies received $322,237 from the Department of Health and Human Services’ Health Resources and Services Administration Provider Relief Fund, Schleider submitted a fraudulent attestation to HRSA in which he claimed that the DME company provided diagnoses, testing, and care for individuals with possible or actual cases of COVID-19 after Jan. 31, 2020. In reality, the DME company had ceased billing for any services in April 2019. The attestation also falsely claimed that the payment would only be used to prevent, prepare for, and respond to coronavirus, and that the payment shall reimburse the recipient only for health care related expenses or lost revenues that are attributable to coronavirus. Schleider did not use the funds for those purposes, but transferred them into other accounts and subsequently used them to purchase real estate and vehicles, among other things.

The maximum penalties are pretty stiff:

The charge of conspiracy to commit health care fraud is punishable by a maximum potential penalty of 10 years in prison and a fine of $250,000, or twice the gross profit or loss caused by the offense, whichever is greatest. The charge of wire fraud is punishable by a maximum potential penalty of 20 years in prison and a fine of $250,000, or twice the gross profit or loss caused by the offense, whichever is greatest. 

And yet . . . hope springs eternal in the hearts of health care fraudsters! 

$2.5 billion in health fraud schemes charged against 78 suspects

I'm skipping my "Hellacious Health Care Fraud of the Week" feature to highlight DOJ's announcement of a massive health fraud enforcement action. Some of these schemes are old-fashioned wine (fraud) in new bottles (telemedicine, e.g.). Most, though, are audacious in concept if not execution. It seems never to have occurred to most of the accused individuals that the government also has computers!

NPR (among others) reports on a nationwide sweep by DOJ that resulted in 78 individuals being charged with various schemes to commit health care fraud at a value of $2.5 billion.

From the DOJ announcement: 

The defendants allegedly defrauded programs entrusted for the care of the elderly and disabled, and, in some cases, used the proceeds of the schemes to purchase luxury items, including exotic automobiles, jewelry, and yachts. In connection with the enforcement action, the Department seized or restrained millions of dollars in cash, automobiles, and real estate. 

“These enforcement actions, including against one of the largest health care fraud schemes ever prosecuted by the Justice Department, represent our intensified efforts to combat fraud and prosecute the individuals who profit from it,” said Attorney General Merrick B. Garland. . . .

Telemedicine Fraud

The enforcement action included charges against 11 defendants in connection with the submission of over $2 billion in fraudulent claims resulting from telemedicine schemes. In a case involving the alleged organizers of one of the largest health care fraud schemes ever prosecuted, an indictment in the Southern District of Florida alleges that the chief executive officer (CEO), former CEO, and Vice President of Business Development of purported software and services companies conspired to generate and sell templated doctors’ orders for orthotic braces and pain creams in exchange for kickbacks and bribes. The conspiracy allegedly resulted in the submission of $1.9 billion in false and fraudulent claims to Medicare and other government insurers for orthotic braces, prescription skin creams, and other items that were medically unnecessary and ineligible for Medicare reimbursement. 

As part of the alleged conspiracy, individuals in a massive telemarketing operation, located in the United States and abroad, targeted the elderly and disabled with direct mail, television advertisements, and other forms of advertising to induce them to contact offshore boiler-rooms staffed by individuals who “up-sold” the elderly and disabled on unnecessary medical equipment and prescriptions. According to the indictment, the software platform that the defendants allegedly operated was actually a conduit for these telemarketers to coordinate the payment of illegal kickbacks and bribes to telemedicine companies to obtain doctors’ orders for Medicare beneficiaries. The defendants allegedly programmed the software platform to generate false and fraudulent orders for telemedicine practitioners to sign and obstruct Medicare investigations by concealing that the interactions with beneficiaries had occurred remotely using telemedicine. The program-generated orders falsified certifications that the telemedicine doctors had examined the beneficiaries in person, and falsified diagnostic testing that Medicare required for brace orders. After the original CEO sold the company in a corporate acquisition, the new corporate leadership allegedly chose to continue the pre-existing fraud scheme.

In another telemedicine fraud case, in the Eastern District of Washington, a licensed physician was charged for signing more than 2800 fraudulent orders for orthotic braces, including for patients whose limbs had already been amputated. As alleged, the physician took less than 40 seconds to review and sign each order.

The cases announced today build on earlier telemedicine enforcement actions involving over $10.1 billion in fraud. The April 2019 Operation Brace Yourself Telemedicine and Durable Medical Equipment Takedown alone resulted in an estimated cost avoidance of more than $1.9 billion in the amount Medicare paid for orthotic braces in the 20 months following that enforcement action, preserving the Medicare trust fund for necessary medical care.

Pharmaceutical Fraud

The enforcement action also included charges against 10 defendants in connection with the submission of over $370 million in fraudulent claims submitted in connection with prescription drugs. In one case announced today, the owner and corporate officer of a pharmaceutical wholesale distribution company was charged for an alleged $150 million fraud scheme in which the company purchased illegally diverted prescription HIV medication, and then marketed and resold the medication by falsely representing that the company acquired it through legitimate channels. The defendant allegedly purchased the diverted medication at a substantial discount from individuals who obtained the drugs primarily through illegal “buyback” schemes in which they paid HIV patients cash for their expensive HIV medication and repackaged those pills for resale. To cover up their scheme, the defendant and others falsified labeling and product tracing documentation to make it appear legitimate. Pharmacies purchased the misbranded medications, dispensed them to patients, and billed them to health care benefit programs, all while the defendants reaped substantial illegal profits. 

In a related case, on June 15, an individual in the Southern District of Florida was sentenced to 15 years in prison for his role in this nationwide scheme. According to court documents, the defendant illegally acquired large quantities of prescription drugs from patients for whom the drugs had been prescribed but not yet consumed. The defendant and others then repackaged the drugs and sold them to wholesale companies. In some instances, the medication that the defendant sold contained the wrong medication, broken pills, and even pebbles, leading to complaints by pharmacies. The defendant used his share of the proceeds to purchase luxury goods, including a $280,000 Lamborghini, a $220,000 Mercedes, and three boats. 

Opioid Distribution and Other Types of Health Care Fraud

The charges also targeted over $150 million in false billings submitted in connection with other types of health care fraud, including the illegal distribution of opioids and clinical laboratory testing fraud. Today’s enforcement action includes charges against 24 physicians and other licensed medical professionals who lined their own pockets, including doctors who allegedly put their patients at risk by illegally providing them with opioids they did not need. The charges also include cases where healthcare companies, physicians, and other providers paid cash kickbacks to patient recruiters and beneficiaries in return for patient information, so that the providers could submit fraudulent bills for Medicare reimbursement. 

[Other] 

The Center for Program Integrity of the Centers for Medicare & Medicaid Services (CPI/CMS) separately announced today that it took adverse administrative actions in the last six months against 90 medical providers for their alleged involvement in health care fraud.

Hot Topics in Health Law from AHLA's Annual Meeting

The American Health Law Association (AHLA) wrapped up its annual meeting on June 28 with a presentation on hot topics. Speakers were from DHHS/OIG (Susan Edwards), DOJ (Kelley Hauser), and private practice (Scott Hasselman, Reed Smith).

Take-aways:

• According to Edwards, OIG plans to release a general Compliance Program Guidance (CPG) by the end of this year that will help providers develop and maintain an effective compliance program. OIG will then issue by the end of next year managed care and nursing facility CPGs, Edwards said.
• The informative session also covered fraud issues related to the end of the COVID-19 public health emergency. Hauser, noting that fraud enforcement always lags behind implementation of new reimbursement, assured the audience that more enforcement actions would be coming. Hauser also said that given the sensitivity of the emergency funds, DOJ would likely look harder at use of the funds and will pursue enforcement actions even if the recovery is not a big dollar amount.
• Edwards also mentioned the OIG final rule on information blocking that was released early on June 27 and noted that a separate rule that will apply to providers will list “disincentives” for information blocking.
• Hauser reviewed recent fraud case law, such as the SuperValu case on scienter—if there’s evidence that a defendant is questioning the accuracy of certain statements or billing, you’re probably going to hear from DOJ.
• The speakers also discussed the use of AI and questioned whether it could be used to create clinical notes. Hauser noted that the government is generally in favor of any technology that could improve accuracy and predicted that more widespread use of AI will likely lead to a certification process of some sort to ensure that such programs work as intended.
• Each speaker then chose an emerging topic to discuss. Hauser picked parallel criminal and civil investigations, highlighting that such investigations are advantageous to the government and he has seen a steady increase in them during his tenure at DOJ.
• Edwards talked about managed care oversight and its increasing importance amid explosive growth in managed care. And Hasselman highlighted the corporate practice of medicine doctrine (and here) and urged lawyers to be aware of it while structuring transactions.

Covid-related Health Care Fraud

Like the medical consequences of "long-Covid," the legal repercussions for conduct during the emergency phase of the pandemic seem destined to remain with us for a long time. Case in point: It was announced today that an urgent-care chain settled a False Claims Act suit with DOJ for $1.6 million. The case arose out of whistle-blowers' allegations that the chain was illegally "upcoding" Evaluation and Management claims to Medicare for the testing and treatment of patients with suspected exposure to COVID-19 during the Coronavirus pandemic. 

There are admittedly some close judgment calls when it comes to coding claims for reimbursement, whether payment is sought from Medicare or from a private health insurer. And, as the announcement of the settlement recites, "The claims resolved by the settlement are allegations only, and there has been no determination of liability." The case for liability had to be pretty strong, though. DOJ gets to choose whether to get involved in qui tam suits brought by whistle-blowers, and the Department most often declines to take what it regards as weak cases, leaving the allegations to private litigation. 

Hellacious Health Care Fraud Cases of the Week (III)

A fresh crop of miscreants -- some charged, some convicted, some sentenced. It's hard to quantify, but the continuing tidal wave of fraud enforcement actions leads me to question the deterrent effect claimed by criminal law theorists. Or it may be that criminal liability deters penny ante stuff but when the payoff is in the millions, the possibility of some time in jail may pale in comparison the the potential gain.

Two Jacksonville Compounding Pharmacies And Their Owner Agree To Pay At Least $7.4 Million To Resolve False Claims Act Allegations (June 15, 2023; U.S. Department of Justice) Three Defendants Plead Guilty In Personal Care Attendant Fraud Cases (June 15, 2023; Massachusetts Attorney General) Attorney General Josh Stein Announces $4.7 Million Health Care Conviction (June 14, 2023; North Carolina Attorney General) Carr: Hart County Man Indicted For Elder Exploitation (June 14, 2023; Georgia Attorney General) Office Of The Attorney General’s Medicaid Fraud Control Unit Sends Owner Of Home Health Company To Prison For 57 Months For $1.4 Million Fraud Scheme (June 13, 2023; Texas Attorney General) Attorney General Alan Wilson Announces Arrest Of Kershaw Co. Man For Exploitation Of A Vulnerable Adult (June 13, 2023; South Carolina Attorney General) TennCare Fraud Investigation Leads To Arrest In Memphis(June 9, 2023; Tennessee Attorney General)

AHLA's most recent 50-state survey looks great: Health Care Fraud Law: A 50 State Survey. The research required for such a project is back-breaking. 

My first publication for AHLA (actually, it was for NHLA, one of the merger partners that produced the AHLA) was “State Illegal Remuneration and Self-Referral Laws” (1996). Searching out every relevant state statute led to free-standing prohibitions, prohibitions inside professional licensing laws, and -- in one memorable instance -- a prohibition against paying for referrals that was buried in the Massachusetts motor vehicle insurance statute. 

It looks like AHLA rounded up health lawyers from each jurisdiction to research their own state's laws. Smart. Very smart.

Members and non-members alike can order a copy here.

Hellacious Health Care Fraud of the Week (II)

Continuing a feature that I introduced on May 21,  here are four more cases released today by the OIG at HHS. Ordinarily I would pick a favorite based upon the audaciousness of the scheme or the staggering financial implications, but these four are all interesting in their own way:

• Chief Compliance Officer Convicted of $50M Medicare Fraud Scheme (June 8, 2023; U.S. Department of Justice)
• Lavaca Man Sentenced In $134 Million COVID-19 Health Care Fraud And Money Laundering Scheme (June 8, 2023; U.S. Attorney's Office, Western District of Arkansas)
• Battle Creek Couple Sentenced On Fraud Charges (June 6, 2023; U.S. Attorney's Office, Western District of Michigan)
• Stacey Hayes Convicted Of Felony Theft Of Medicaid Funds (June 2, 2023; New Hampshire Attorney General)

Hellacious Health Care Fraud of the Week (I)

As with banks and bank robbers, health care is where the money is. And for some so-called health care providers, the temptation to rob, steal, and cheat is apparently irresistable. Starting today I will highlight some of the more audacious schemes drawn from the week's health fraud indictments, settlements, and verdicts.

We begin this series with the settlement of a civil fraud case in the Southern District of New York. A Bronx nursing home allegedly made cash payments to a hospital supervisor in return for patient referrals. Okay: big yawn. But the second fraud scheme is the frosting with sprinkles on top of the boring cake. The nursing home allegedly switched residents out of the lower-paying Medicare Advantage plan and into the relatively higher-paying Original Medicare plan without the consent of their residents. The parties paid $3.46 million to the United States to settle the claims.

Massive HHS settlements & judgments in 2020 for false and fraudulent claims

The gory details are contained in a report of the Inspector General released this month. Becker's Hospital CFO Report has a summary (emphasis added): 

HHS' watchdog agency, the Office of Inspector General, recovered $3.1 billion in false and fraudulent claims in 2020, according to a July report. 

OIG won or negotiated more than $1.8 billion in judgments and settlements in 2020, which, combined with efforts from previous years, led to 2020's $3.1 billion recovery. Of the $3.1 billion, $2.1 billion was transferred to the Medicare Trust Fund, and $128.2 million in Medicaid funds was transferred to the Treasury. 

A total of 440 people were convicted of healthcare fraud and related crimes in 2020, the OIG said. The Department of Justice opened 1,148 healthcare fraud investigations in 2020, according to the report.

Even after teaching health law (including fraud and abuse) for 33 years, I am still gobsmacked by the amount of thievery and other forms of law-breaking that goes on in the healthcare industry. I am reminded of Willie Sutton's reported response to a reporter's question why he robbed banks: "Because that's where the money is."  The health care sector represents 18% of GDP, more than defense and all levels of education combined. Yep, that's where the money is all right.