DOJ Announces Criminal Charges in Alleged $1.2 Billion Health Care Fraud Scheme

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Yesterday, the U.S. Department of Justice (DOJ) announced that it has filed charges against 36 defendants in relation to an alleged health care fraud scheme that resulted in approximately $1.2 billion in fraudulent payments. According to the DOJ’s press release, the charges follow a “nationwide coordinated law enforcement action” involving the DOJ, Centers for Medicare and Medicaid Services (CMS), Federal Bureau of Investigation (FBI), and other agencies.

The defendants, who include medical professionals, a telemedicine company executive, marketing executives, and the owners and executives of multiple clinical laboratories and durable medical equipment (DME) companies, are facing charges in 13 federal districts. These districts are located in Florida, Georgia, Louisiana, Michigan, Mississippi, New Jersey, North Carolina, Tennessee, and Texas.

“We have seen the DOJ lead several coordinated large-scale health care fraud takedowns in recent years. As combating health care fraud clearly remains a top federal law enforcement priority, we expect this trend to continue into 2023 and beyond.” – Dr. Nick Oberheiden, Founding Attorney of Oberheiden P.C.

As illustrated in a graphic the DOJ released in connection with its announcement, the takedown largely centered around an alleged telemedicine scheme that funneled money to various entities in Louisiana. According to the DOJ, the scheme involved providing medically unnecessary tests and medications to Medicare beneficiaries in all 50 states, resulting in fraudulent Medicare reimbursements which were then used to pay kickbacks to those involved. However, the takedown targeted several other similar alleged schemes as well, not all of which appear to be directly related to the alleged scheme in Louisiana. As the DOJ explains in its press release:

“The coordinated federal investigations announced today primarily targeted alleged schemes involving the payment of illegal kickbacks and bribes by laboratory owners and operators in exchange for the referral of patients by medical professionals working with fraudulent telemedicine and digital medical technology companies. Telemedicine schemes account for more than $1 billion of the total alleged intended losses associated with today’s enforcement action.”

Combating telemedicine fraud has been a recent priority for the DOJ, due in large part (though not exclusively) to the sudden expansion of telemedicine practice and authorization triggered by the COVID-19 pandemic. Fraudulent cardiovascular genetic testing—which played a major role in the takedown as well—also currently has a high profile among the DOJ, CMS, and FBI, and the DOJ’s press release refers to this as a “burgeoning scheme.”

DOJ: Telemarketers and Health Care Providers “Lured” Elderly and Disabled Patients Into Medicare Fraud Scheme

According to the DOJ, the companies and individuals targeted in the takedown engaged in a nationwide scheme to “use deceptive techniques to induce Medicare beneficiaries to agree to cardiovascular genetic testing, and other genetic testing and equipment.” Many of these Medicare beneficiaries were elderly or disabled patients, who the DOJ says the defendants “lured” into undergoing medically unnecessary tests and accepting medically unnecessary services, medications, and medical devices.

In one example, the DOJ alleges that a telemedicine company would contact Medicare beneficiaries to offer supposedly “free” or “low cost” testing, medications, and medical devices. The telemedicine company would then refer these patients to a telemedicine doctor, who would subsequently order testing and products through the telemedicine company. The telemedicine company would then place orders with medical equipment companies and laboratories, which would bill Medicare before paying kickbacks to the telemedicine company. In total, the DOJ alleges that this cycle occurred thousands of times, resulting in hundreds of millions of dollars in fraudulent Medicare reimbursements.

Specific Charges Filed in the DOJ’s $1.2 Billion Health Care Fraud Takedown

Along with its press release and graphic, the DOJ has also published case summaries for the 28 cases it has filed to date in the states listed above. Here are some examples of specific charges that are currently pending:

  • Middle District of Florida – The DOJ is pursuing cases against three individuals in the Middle District of Florida who are collectively accused of defrauding Medicare of approximately $63 million. One defendant is accused of operating a call center through which he “targeted Medicare beneficiaries and encouraged them to accept expensive prescription medications they neither wanted nor needed.” The DOJ also alleges that this defendant submitted false and fraudulent Medicare Part D claims through his pharmacy network, and that he paid kickbacks and bribes to obtain fraudulent prescriptions from physicians who did not make determinations of medical necessity. The other defendants are accused of purchasing Medicare beneficiaries’ personal information in order to engage in telemedicine fraud and signing more than 7,800 doctor’s orders for DME at the request of two “purported telemedicine companies” without examining or testing the patients.
  • Southern District of Florida – The DOJ has filed seven cases in the Southern District of Florida charging the individual defendants with a broad range of offenses. The charges include (but are not limited to) misusing COVID-19 relief funds, submitting false enrollment records to Medicare, fraudulently billing Medicare more than $18 million for DME, selling referrals and paying kickbacks to telemarketing companies and clinical laboratories, purchasing patient leads in order to sell medically unnecessary topical creams and other “highly reimbursing medications” to Medicare beneficiaries, and using shell companies to attempt to obscure the recipients of kickback proceeds.
  • Northern District of Georgia – In the sole case filed in Georgia, the DOJ alleges that the owner of two DME companies paid illegal kickbacks to obtain Medicare beneficiaries’ information and to secure doctors’ orders for DME. According to the DOJ, “[a] substantial portion of the doctors’ orders purchased by Tisdale contained signatures by physicians or other health care providers whose names and professional identifying information were used without the doctors’ authorization and prior knowledge.”
  • Eastern District of Louisiana – In Louisiana, the DOJ is pursuing charges against two defendants accused of fraudulently billing Medicare in excess of $225 million for medically unnecessary cardiovascular genetic testing and definitive urine drug testing. Among other allegations, the DOJ claims that the defendants “paid kickbacks to marketers in exchange for referrals of specimens for testing by the laboratories that were not prescribed by the beneficiary’s treating physician and were not used in treatment,” and “execut[ed] sham agreements with purported marketing entities to hide the nature and source of the kickbacks.”
  • Eastern District of Michigan – In three separate cases filed in the Eastern District of Michigan, the DOJ alleges that the defendants—a licensed registered nurse and two physicians—participated in various schemes to defraud Medicare. Specific allegations include (but are not limited to) providing referrals for DME without examining patients and using “pre-filled intake forms dictating what DME should go to which beneficiaries,” signing doctor’s orders for medically unnecessary DME without examining Medicare beneficiaries, and approving thousands of DME orders on behalf of a telemedicine company without conducting assessments of medical necessity.
  • Northern District of Mississippi – In Mississippi, the DOJ has charged a podiatrist with ordering unnecessary molecular diagnostic testing and prescribing medically unnecessary foot bath medications. The DOJ is also alleging that the podiatrist accepted bribes and kickbacks “from a purported marketer acting on behalf of various pharmacies and diagnostic laboratories.”
  • District of New Jersey – In New Jersey, the DOJ has filed several cases against defendants accused of playing various roles in telemedicine fraud schemes involving medically unnecessary testing, medications, and DME. These include schemes to obtain fraudulent Medicare reimbursements and kickbacks related to pain creams, orthotic braces, genetic testing, and COVID-19 tests.
  • Western District of North Carolina – The DOJ has charged a physician and physician assistant in the Western District of North Carolina with prescribing medically unnecessary genetic testing and DME. In both cases, the DOJ alleges that the defendants had little or no interaction with the patients and submitted millions of dollars in false claims to Medicare.
  • Middle District of Tennessee – The DOJ has charged a physician in Tennessee with signing doctors’ orders and prescriptions for DME, topical creams, and cancer genetic testing for multiple telemedicine companies that submitted false and fraudulent claims to Medicare. According to the DOJ, the physician did not see or physically examine the patients in many cases, and provided orders and prescriptions “without regard for medical necessity.”
  • Eastern and Southern Districts of Texas – The DOJ has filed charges against dozens of individuals in the Eastern and Southern Districts of Texas who are alleged to have participated in fraudulent telemarketing schemes. Most of the defendants are facing money laundering charges in connection with their alleged efforts to cover up kickbacks paid through fraudulent management services organizations (MSOs). Other charges include fraudulently billing blood tests as hospital outpatient services (which reimburse at a higher rate), providing patient DNA samples to marketers in exchange for reimbursements, and performing medically unnecessary genetic testing.

Health Care Providers and Other Entities Must Carefully Review Their Telemedicine Practices and Telemarketing Relationships

As the DOJ states, its recent takedown “builds on prior telemedicine enforcement actions involving over $8 billion in fraud, including 2019’s Operation Brace Yourself, 2019’s Operation Double Helix, 2020’s Operation Rubber Stamp, and the telemedicine component of the 2021 National Health Care Fraud Enforcement Action.” The DOJ’s efforts are led by the Department’s Health Care Fraud Strike Force, which has filed charges against more than 5,000 defendants accused of fraudulently billing government health care programs and private payors in excess of $24 billion since its inception in 2007.

Given the DOJ’s current focus on telemedicine and the use of telemarketing to identify and target Medicare beneficiaries, health care providers and other entities should carefully review their current telemedicine practices and telemarketing relationships. All providers and businesses should have comprehensive and custom-tailored compliance programs, and they should be taking proactive steps to document their compliance on an ongoing basis. Those who are currently facing scrutiny from the DOJ, CMS, FBI, or any other federal authority should engage defense counsel immediately.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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