On April 9, 2019, the Department of Justice (DOJ), working with multiple departments and agencies, including the U.S. Department of Health and Human Services—Office of the Inspector General (HHS-OIG), brought enforcement actions against 24 defendants that included executives and business owners of telemedicine and durable medical equipment (DME) companies, and three licensed medical professionals, for their alleged participation in one of the largest healthcare fraud schemes ever targeted.1 Enforcement officials stated that more than $1.2 billion in losses to federal healthcare programs and patients resulted from an international web of fraud involving illegal kickbacks, bribes, and money-laundering. The DOJ named five companies connected to the scheme: Video Doctor USA, AffordADoc, Web Doctors Plus, Integrated Support Plus, and First Care MD. The Centers for Medicare and Medicaid Services (CMS) – Center for Program Integrity (CMS-CPI) also brought adverse administrative actions against 130 DME companies that billed more than $1.7 billion in claims, of which more than $900 million was paid out.
According to the DOJ, the complex, multi-layered scheme involved a network of telemarketing call centers located in the Philippines and Latin America that advertised to and “upsold” elderly and/or disabled Medicare beneficiaries in the United States, pushing “free or low-cost” medical braces regardless of medical necessity. The call centers paid kickbacks and bribes to telemedicine companies, which in turn paid doctors to write orders for DME products with little or no interaction with the patients. Some doctors reportedly spoke briefly by telephone with patients they never met or saw. The call centers then sold the orders to DME companies, which fraudulently billed Medicare. The defendants and their associates later laundered proceeds through international shell companies to buy exotic cars, yachts, and luxury property around the world, officials alleged.
This is not the first telemedicine fraud scheme taken down by the DOJ in recent years. In October 2018, four Florida men and seven pharmacies were indicted for a $1 billion fraud scheme that involved telemedicine.2 Defendants set up a telemedicine company, HealthRight LLC, which allegedly deceived consumers and doctors at the center of a broad web of fraud. HealthRight LLC reached out to consumers across the country, fraudulently obtaining their insurance coverage information and pushing prescriptions for pain creams and other products. The company then contacted doctors, misrepresenting this consumer outreach as legitimate telemedicine consults. Doctors approved the prescriptions, which were then billed to insurance companies at prices steeply marked up by the defendants.
Given the rapid growth of telemedicine and digital health technologies in recent years, prosecutors and regulators are ramping up scrutiny. Companies that interact with or contract with healthcare professionals and/or manufacture or distribute products or services that are payable by Medicare, Medicaid, or other federal healthcare programs, should assess their compliance risks under five key federal fraud and abuse laws: the False Claims Act, the Anti-Kickback Statute, the Physician Self-Referral Law, the Exclusion Authorities, and the Civil Monetary Penalties Law.
Jeff Weinstein and Eva Yin contributed to the preparation of this WSGR alert.