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 15, 2015

HHS-OIG Fraud Alert: Physician Compensation Arrangements May Result in Significant Liability


Last week, the Department of Health and Human Services Office of Inspector General (OIG) released a fraud alert entitled “Physician Compensation Arrangements May Result in Significant Liability.” The OIG states that physicians who enter into “compensation arrangements such as medical directorships must ensure that those arrangements reflect fair market value for bona fide services the physicians actually provide.” While the agency does not necessarily mention anything groundbreaking in the kickback arena, the OIG specifically noted its recent settlements with 12 individual physicians who entered into “potentially illegal medical directorships and office staff arrangements” as the impetus for the alert. 

The OIG did not name the 12 physicians in the Fraud Alert, but the individuals and a small summary about the alleged scheme are included on OIG’s website. It turns out that all 12 involved physicians had compensation arrangements with Fairmont Diagnostic Center and Open MRI Inc. (Fairmont) and settled with the OIG between 2013 and 2014. Fairmont and its founder Dr. Jack Baker settled allegations that the company entered these prohibited financial relationships including "sham personal services contracts," for medical directorships back in 2012.  View the Fairmont False Claims Act settlement here.  

In the individual physician settlements, OIG alleged that the compensation paid under the medical directorship arrangements constituted improper remuneration under the anti-kickback statute for a number of reasons, including:

(1)  The financial arrangement took into account the physicians’ volume or value of referrals

(2)  The payments did not reflect fair market value for the services to be performed, and

(3)  The physicians did not actually provide the medical directorship services called for under the agreements. 

OIG also alleged that some of the 12 physicians had entered into arrangements under which an affiliated health care entity paid the salaries of the physicians’ front office staff. "Because these arrangements relieved the physicians of a financial burden they otherwise would have incurred, OIG alleged that the salaries paid under these arrangements constituted improper remuneration to the physicians," the agency states. "OIG determined that the physicians were an integral part of the scheme and subject to liability under the Civil Monetary Penalties Law."

Tips for Medical Directors

In an informative document released a few years ago entitled “A Roadmap for New Physicians: Avoiding Medicare and Medicaid Fraud and Abuse,” OIG outlined a long list of useful information for doctors to stay out of kickback trouble. The roadmap includes a list of “tips” for medical directors. OIG linked to this document in its latest fraud alert, so it is worth looking back on. 

"If you choose to accept a medical directorship at a nursing home or other facility, you must be prepared to assume substantial professional responsibility for the care delivered at the facility," OIG states. "As medical director, patients (both your own patients and the patients of other attending physicians) and their families count on you, and State and Federal authorities may hold you accountable as well."

To do this job well, physicians should, according to the agency:

  • Actively oversee clinical care in the facility;
  • Lead the medical staff to meet the standard of care; 
  • Ensure proper training, education, and oversight for physicians, nurses, and other staff members; and
  • Identify and address quality problems

The roadmap also offered a number of case examples for medical directors to take note of.

  • A physician group practice paid the Government $1 million and entered into a 5-year Corporate Integrity Agreement to settle alleged violations of the AKS, FCA, and Stark law related to medical directorships with a medical center. Allegedly, the agreements were not in writing, the physicians were paid more than fair market value for the services they rendered, and the payment amounts were based on the value of referrals the physicians sent to the medical center.

  • Two orthopedic surgeons paid $450,000 and $250,000 to settle allegations related to improper medical directorships with a company that operated a diagnostic imaging center, a rehabilitation facility, and an ambulatory surgery center. The company allegedly provided the physicians with valuable compensation, including free use of the corporate jet, under the medical directorship agreements, which required the physicians to render limited services in return. The agreements with the physicians allegedly called for redundant services and served to encourage the physicians to refer their patients to the facilities operated by the company.


The latest OIG alert publicizes some recent enforcement actions against individual physicians. The government has long said it will increasingly target individuals, and the agency has made clear through this notice that they are particularly interested in medical directorship agreements. 



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