Medicaid Fraud Control Unit and Other Prosecutors Hard At Work Replenishing State Coffers Depleted By State’s COVID Response

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As the holiday season approaches and New Yorkers struggle with finances due to COVID-related limitations imposed on business, the government has been searching for ways to alleviate the hardships faced by many. For example, Attorney General Letitia James and Governor Andrew Cuomo recently announced that the Office of the Attorney General (OAG) renewed, for the eighth time, an order to halt the collection of medical and student debt owed to the State of New York, including those matters specifically referred to the OAG for collection. However, when one hand giveth, the other taketh away. Because the State treasury has also suffered tremendously during the pandemic, agencies are under pressure to recoup losses. Thus, like other agencies, the Medicaid Fraud Control Unit (MFCU) of the OAG is working harder than ever to prosecute health care fraud and recapture State funds and penalties.

Case in point:  Recently, on October 2, 2020, the OAG secured a four million dollar settlement against several physical therapy offices operated throughout New York City by Alex and Diana Klurfeld. According to the OAG, the companies, Williamsburg Physical Therapy, P.C. and Euro Physical Therapy, P.C. (collectively “Williamsburg PT”) falsely billed Medicaid and other federal health care programs for physical therapy services.

The case against Williamsburg PT was initiated by two former Williamsburg PT employees— the so-called “whistleblowers.”  The whistleblowers filed a lawsuit under the qui tam provisions of the federal and New York False Claims Act, which allow people to file civil actions on behalf of the government and share in any recovery. As a result of this complaint, there was a joint investigation between the Medicaid Fraud Control Unit (MFCU) in the Office of the Attorney General and the U.S. Attorney's Office for the Eastern District of New York.

The allegations were that during the period from January 1, 2008, through July 27, 2018, Williamsburg PT engaged in several fraudulent billing practices impacting Medicaid, Medicare, the Federal Employees’ Compensation Act Program (FECA), and the Federal Employees’ Health Benefits Program (FEHBP) for physical therapy services. Specifically, the complaint alleges, that Williamsburg PT:

  • Improperly billed for work performed by unlicensed physical therapy aides and/or unlicensed physical therapy assistants without direct supervision of a licensed physical therapist as if Medicare and Medicaid licensed physical therapists had performed the work;
  • Improperly billed Medicare and Medicaid for exercises the patients did not perform;
  • Improperly backdated treatment on bills submitted to Medicare and Medicaid in order to receive payment for treatment rendered after the authorization date; and
  • Improperly waived co-payments for Medicare and Medicaid patients.

In furtherance of the scheme, the Defendants instructed the employee-whistleblowers and other employees to ensure that the signatures of licensed therapists were included (and sometimes forged), and that services were back-dated so that they would be approved. When one of the whistleblowers refused to engage in these fraudulent practices, Defendants retaliated against her by humiliating her in front of her co-workers, cutting her hours, refusing to grant her paid-time off, and refusing to grant her any raises. Similarly, the owners retaliated against another whistleblower, who refused to engage in fraud, by making her work in an uncomfortable environment, refusing to send her help when she needed it, and harassing her.

Eventually, after an investigation and complaint were filed against Williamsburg PT, the Defendants agreed to pay $4 million to the United States and New York State, half of which is to resolve claims pertaining to New York’s Medicaid Program. Of the $2 million related to the New York Medicaid program, $1.2 million will go to New York and $800,000 will go to the federal government.

The timing and gravity of this settlement are important reminders that fraudulent practices will be aggressively pursued by the government in this environment. Not only can whistleblowers personally benefit from reporting fraud, but they can assist the State and federal governments in replenishing their coffers. 

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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