Life Science Compliance Update

June 19, 2015

Big Day For Enforcement: DOJ Announces the Agency’s Largest Criminal Healthcare Fraud Takedown


Attorney General Loretta Lynch and Department of Health and Human Services (HHS) Secretary Sylvia Burwell announced yesterday an unprecedented nationwide sweep led by the Medicare Fraud Strike Force in 17 districts, resulting in charges against 243 individuals, including 46 doctors, nurses and other licensed medical professionals, for their alleged participation in Medicare fraud schemes involving approximately $712 million in false billings.  In addition, the Centers for Medicare & Medicaid Services (CMS) also suspended a number of providers using its suspension authority as provided in the Affordable Care Act.  “This coordinated takedown is the largest in Strike Force history, both in terms of the number of defendants charged and loss amount,” DOJ wrote.

The defendants are charged with various health care fraud-related crimes, including conspiracy to commit health care fraud, violations of the anti-kickback statutes, money laundering and aggravated identity theft.  Notably, more than 44 of the defendants arrested were charged with fraud related to the Medicare prescription drug benefit program known as Part D, which the DOJ states is the fastest-growing component of the Medicare program overall.”

Interestingly, the announcement comes about a month after CMS released the Medicare Part D database listing individual physicians' prescribing habits

The charges are also based on alleged fraud schemes involving various medical treatments and services, including home health care, psychotherapy, physical and occupational therapy, durable medical equipment (DME) and pharmacy fraud. 

According to court documents, the defendants participated in alleged schemes to submit claims to Medicare and Medicaid for treatments that were medically unnecessary and often never provided.  In many cases, patient recruiters, Medicare beneficiaries and other co-conspirators allegedly were paid cash kickbacks in return for supplying beneficiary information to providers, so that the providers could then submit fraudulent bills to Medicare for services that were medically unnecessary or never performed.  Collectively, the doctors, nurses, licensed medical professionals, health care company owners and others charged are accused of conspiring to submit a total of approximately $712 million in fraudulent billing.

This action represents the largest criminal health care fraud takedown in the history of the Department of Justice, and it adds to an already remarkable record of enforcement,” said Attorney General Lynch.  “The defendants...billed for equipment that wasn’t provided, for care that wasn’t needed, and for services that weren’t rendered." (emphasis added)

“This Administration is committed to fighting fraud and protecting taxpayer dollars in Medicare and Medicaid,” said Secretary Burwell.  “This takedown adds to the hundreds of millions we have saved through fraud prevention since the Affordable Care Act was passed.  With increased resources that have allowed the Strike Force to expand and new tools, like enhanced screening and enrollment requirements, tough new rules and sentences for criminals, and advanced predictive modeling technology, we have managed to better find and fight fraud as well as stop it before it starts.”

“Every day, the Criminal Division is more strategic in our approach to prosecuting Medicare Fraud,” said Assistant Attorney General Caldwell.  “We obtain and analyze billing data in real-time.  We target hot spots – areas of the country and the types of health care services where the billing data shows the potential for a high volume of fraud – and we are speeding up our investigations.  By doing this, we are increasingly able to stop schemes at the developmental stage, and to prevent them from spreading to other parts of the country.” (emphasis added)

The press release also broke down the various state hot spots:

In Miami, a total of 73 defendants were charged with offenses relating to their participation in various fraud schemes involving approximately $263 million in false billings for home health care, mental health services and pharmacy fraud.  In one case, administrators in a mental health center billed close to $64 million between 2006 and 2012 for purported intensive mental health treatment to beneficiaries and allegedly paid kickbacks to patient recruiters and assisted living facility owners throughout the Southern District of Florida.  Medicare paid approximately half of the claimed amount. 

In Houston and McAllen, Texas, 22 individuals were charged in cases involving over $38 million in alleged fraud.  One of these defendants allegedly coached beneficiaries on what to tell doctors to make them appear eligible for Medicare services and treatments and then received payment for those who qualified.  The company that paid the defendant for patients submitted close to $16 million in claims to Medicare, over $4 million of which was paid.     

In Dallas, seven people were charged in connection with home health care schemes.  In one scheme, six owners and operators of a physician house call company submitted nearly $43 million in billings under the name of a single doctor, regardless of who actually provided the service.  The company also significantly exaggerated the length of physician visits, often times billing for 90 minutes or more for an appointment that lasted only 15 or 20 minutes.   

In Los Angeles, eight defendants were charged for their roles in schemes to defraud Medicare of approximately $66 million.  In one case, a doctor is charged with causing almost $23 million in losses to Medicare through his own fraudulent billing and referrals for DME, including over 1000 expensive power wheelchairs and home health services that were not medically necessary and often not provided.  

In Detroit, 16 defendants face charges for their alleged roles in fraud, kickback and money laundering schemes involving approximately $122 million in false claims for services that were medically unnecessary or never rendered, including home health care, physician visits, and psychotherapy, as well as pharmaceuticals that were billed but not dispensed.  Among these are three owners of a hospice service who allegedly paid kickbacks for referrals made by two doctors who defrauded Medicare Part D by issuing medically unnecessary prescriptions. 

In Tampa, five individuals were charged with participating in a variety of schemes, ranging from fraudulent physical therapy billings to a scheme involving millions in physician services and tests that never occurred.  In one case, a licensed pain management physician sought reimbursement for nerve conduction studies and other services that he allegedly never performed.  Medicare paid the defendant over $1 million for these purported services.  

In Brooklyn, N.Y., nine individuals were charged in two separate criminal schemes involving physical and occupational therapy.  In one case, three individuals face charges for their roles in a previously charged $50 million physical therapy scheme.  In the second case, six defendants were charged for their roles in a $8 million physical and occupational therapy scheme.

In New Orleans, 11 people were charged in connection with $110 million in home health care and psychotherapy schemes.  In one case, four individuals who operated two companies – one in Louisiana and one in California – that mass-marketed talking glucose monitors (TGMs) across the country allegedly sent TGMs to Medicare beneficiaries regardless of whether they were needed or requested.  The companies billed Medicare approximately $38 million for the devices and Medicare paid the companies over $22 million.

Here is a link to the court documents from each defendant. 


June 01, 2015

Senator Grassley Sets Sights On Medicare Advantage; Sends Letters To CMS and DOJ Asking For Their Strategies To Mitigate "Risk Score" Fraud


Senator Charles Grassley (R-IA), the co-author of the Physician Payments Sunshine Act, sent letters last week to the Centers for Medicare and Medicaid Services (CMS) and the Department of Justice (DOJ) concerning alleged Medicare Advantage fraud.

Update: Senator Claire McCaskill, the top ranking Democrat on the Senate Special Commission on Aging, also sent a letter to CMS asking what steps the government is taking to combat alleged Medicare Advantage fraud and abuse. 


Medicare Advantage plans are run through approved private insurance companies, and offer an alternative to traditional Medicare for seniors. CMS pays Aetna, Cigna, United HealthCare, etc., a fee per month, per patient, based on a formula known as a “risk score,” which attempts to reflect patient health. The government provides more funds to Medicare Advantage plans for patients with higher risk scores.

Recently, however, there has been a lot of scrutiny into how plans land on a given risk score. There have been reports that a number of whistleblower lawsuits have been cropping up against plans, alleging that they have been fraudulently inflating their risk scores. See Modern Healthcare’s breakdown of two recent whistleblower cases filed under the False Claims Act.

"With fraudulently inflated risk scores potentially costing taxpayers billions of dollars every year and resulting in less money in the Medicare Trust Funds for our seniors, this is an issue that must be investigated further," McCaskill wrote regarding these suits.

The Center for Public Integrity has been spotlighting Medicare Advantage for a while now, and has even developed a tool to show how much more money plans get based on different diagnoses. For example, if a doctor documents that a patient is drug or alcohol dependent, the government pays the plan $2,400 extra for the added risk and associated anticipated expense.

A Public Integrity article entitled "Home is where the money is for Medicare Advantage plans," states: "Health plans can profit because Medicare pays them higher rates for sicker patients using a billing formula known as a 'risk score.' So when a home visit unearths a medical condition, as it often does, health plans may be able to raise a person’s risk score and collect thousands of dollars in added Medicare revenue over a year — even if they don’t incur any added expenses caring for that person." The article notes that "Medicare made nearly $70 billion in “improper” payments to Medicare Advantage plans from 2008 through 2013, mostly overbillings based on inflated risk scores, according to government estimates."

In light of a number of these reports, Sen. Grassley penned a letter to DOJ and CMS asking about their approach to fighting Medicare Advantage fraud. 

According to news reports, there is an increasing number of lawsuits against insurance companies for potential Medicare Advantage fraud. Some insurance companies that offer Medicare Advantage are allegedly engaging in billing abuse by altering patient records in order to claim patients are sicker than they actually are. Medicare Advantage uses risk scores to determine how much insurance companies are reimbursed with higher rates for sicker patients. News reports indicate that some insurance companies are wrongfully claiming sicker patients, leading to inflated risk scores and reimbursements. Reportedly, the Department of Justice (DOJ) is investigating this issue.

Senator Grassley requested that CMS provide answers to the following four questions:

  1. What steps has CMS taken, and is currently taking, to ensure that insurance companies are not fraudulently altering risk scores? Please provide a detailed explanation.

  2. Is CMS working in conjunction with DOJ to investigate risk score fraud? Please explain the relationship. If not, why not?

  3. Since the inception of Medicare Advantage, how many risk score audits has CMS conducted each year? For each year and each audit, what was the value of the overcharge? How much was recovered via settlement or other measures?

  4. How much money per year is allocated by CMS for auditing Medicare Advantage fraud, waste and abuse?

Senator Grassley also requested that the DOJ provide answers to the following three questions:

  1. What steps has DOJ taken, and is currently taking, to ensure that insurance companies are not fraudulently altering risk scores? Please provide a detailed explanation.

  2. Is DOJ working in conjunction with CMS to investigate risk score fraud? Please explain the relationship. If not, why not?

  3. In the past 5 years, how many Medicare Advantage risk score fraud investigations has DOJ conducted? Of the investigations, how many resulted in criminal and/or civil sanction?

Grassley's office requested responses from CMS and DOJ by June 3, 2015.



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