Highlights Of HHS’ December Enforcement Actions

Richard P. Kusserow | January 2014

The Department of Health and Human Services (HHS) wrapped up 2013 with successful enforcement actions in its never-ending effort to combat fraud, waste and abuse in federal health care programs. The below synopsis of the enforcement efforts highlight HHS’ successful approach, and provides insight on the governments focus for the beginning of 2014.

Home Health Fraud. Two patient recruiters who worked for Good Quality Home Health Care Inc. and Caring Nurse and Good Quality, two Miami home health care agencies, were sentenced to prison and ordered to pay millions in restitution for their participation in a $48 million home health Medicare fraud scheme. The patient recruiters solicited and received kickbacks and bribes from the owners and operators of home health agencies in return for allowing the agency to bill the Medicare program on behalf of the recruited patients for home health care and therapy services that were medically unnecessary and/or not provided. In a related case, in February, the owners and operators of home health agencies were sentenced to prison.

Another patient recruiter, working for Caring Nurse Home Health Corp., also in Miami, was sentenced to 108 months in prison and ordered to pay $24 million in restitution for his participation in a $48 million home health Medicare fraud scheme. The recruiter solicited and received kickbacks and bribes from the owners who billed the Medicare program on behalf of the patients for home health care and therapy services that were medically unnecessary and/or not provided. The same patient recruiter also pleaded guilty to his involvement with fraudulent billings for Nation’s Best Care Home Health Corp. that also submitted fraudulent billings for approximately $30 million. The two owners and operators of Caring Nurse and Good Quality were sentenced to serve 108 and 51 months in prison, respectively.

A married Miami couple and owners of a health care clinic were sentenced in connection with an $8 million health care fraud scheme involving the now-defunct home health agency company that purported provided home health and physical therapy services to Medicare beneficiaries. They were sentenced to serve 87 months in prison and 57 months, respectively, for conspiracy to commit health care fraud. They billed, among other things, expensive physical therapy and home health care services that were not medically necessary and/or not provided. Furthermore, they paid kickbacks and bribes to patient recruiters who provided patients for the company, and to co-conspirators in doctors’ offices and clinics in exchange for home health and therapy prescriptions, medical certifications, and other documentation.

Using Phony Social Security Numbers to Obtain Benefits. In West Palm Beach, two individuals pled guilty to obtaining multiple social security numbers (SSN) in order to obtain federal housing, social security, food, cash, and medical benefits from U.S. Department of Housing and Urban Development, Social Security Administration, U.S. Department of Agriculture and Department of Health and Human Services, as well as in buying a number of real estate properties. Guilty pleas were for making false statements to the federal government.

Mental Health Services Fraud. In Fort Lauderdale, Florida, a licensed mental health counselor at the defunct health provider Health Care Solutions Network Inc. (HCSN), pleaded guilty for his role in a $63 million health care fraud scheme. The mental health facility purportedly provided Partial Hospitalization Program (PHP) services that were routinely fabricating patient medical records to support false and fraudulent billing to government sponsored health care benefit programs, including Medicare and the Florida Medicaid program.

False Statements to Obtain Controlled Substances. A federal grand jury return an indictment for a South Dakota individual for false statements relating to health care matters and attempt to obtain controlled substances by fraud.  The charges relate to presenting a falsified prescription for Hydrocodone, a Schedule III controlled substance, to the Indian Health Services Pharmacy.

Hospitalist Fraud. The government has intervened in a qui tam lawsuit against the Hospitalist Co. Inc., and its North Hollywood, California subsidiary IPC, for allegedly submitting false claims to federal health care programs. IPC is one of the largest providers of hospitalist services in the United States, employing physicians and other health care providers who work in more than 1,300 facilities in 28 states. The lawsuit alleges that IPC physicians sought payment for higher and more expensive levels of medical service than were actually performed, a practice commonly referred to as “upcoding.” Specifically, the lawsuit alleges that IPC encouraged its physicians to bill at the highest level regardless of the level of service provided and encouraged physicians with lower billing levels to “catch up” to their peers.

Doctor Sentenced For Health Care Fraud.  A Youngstown, New York doctor, who previously pleaded guilty to obtaining controlled substances fraudulently and to health care fraud, was sentenced to 6 months of home detention and 2 years’ probation, and loss of his medical license.  He had been employed as an emergency room physician where he devised a scheme with his girlfriend to pretend to suffer from a medical condition known as Trygeminal Neuralgia. He then performed an apparent examination of her, fraudulently diagnosed her and issued a prescription to her for Dilauded, a controlled substance.

Medical Supply Company. In San Antonio, Texas, a federal grand jury returned a 21 count indictment of DTS Medical Supply Company owner and two employees, in connection with an estimated $3.5 million health care fraud scheme involving identity theft and eight counts of aiding and abetting false statements related to a health care matter. Medicare and Medicaid set a rate of compensation for each of these devices and the rate of compensation differed between devices and was to be based on the type of device that was prescribed for the beneficiary and delivered to the beneficiary. The defendants were charged with conspiring to submit numerous false and fraudulent benefit claims to Medicaid and Medicare in seeking compensation for powered wheelchairs, when less costly power scooters were delivered. The fraud involved paying a recruiter to recruit customers.

Home Health Fraud. Twenty Detroit-area residents were charged in a $34 million Medicare fraud scheme related to physician home visits, home health care, chiropractic and psychotherapy. Defendants, that included physicians, owners and operators of companies, office employees and patient recruiters, allegedly submitted fraudulent claims for services that were never rendered and with paying kickbacks to obtain patients to be billed. Nineteen of the defendants were arrested or surrendered to authorities with one remaining at large. In addition, search warrants were executed at nine locations and seizure warrants of 14 bank accounts related to the alleged fraud schemes.

Kickbacks for Patient Referrals for MRI. A physician practicing gastroenterology and internal medicine in West Orange, New Jersey pleaded guilty to receiving cash kickbacks for diagnostic testing referrals, becoming the 13th doctor and 14th defendant to be convicted in connection with the government’s investigation of illegal payments made by a West Orange, New Jersey diagnostic testing facility. The physician took payments from Orange Community MRI, LLC in exchange for referrals for MRIs and CAT scans to the diagnostic testing facility over a period of three years on a per-patient basis.

Health Care Fraud Charges Against Russian Diplomats. Charges were made against 49 Russian diplomats for participating in a widespread fraud scheme to illegally obtain Medicaid benefits. The defendants charged are current or former Russian diplomat or the spouse of a diplomat employed at either the Russian Mission to the United Nations, the Russian Federation Consulate General in New York, or the Trade Representation of the Russian Federation in the USA, New York Office.  The defendants and their unnamed co-conspirators participated in a widespread scheme to illegally obtain Medicaid benefits for prenatal care and related costs by, among other things, falsely underreporting their income or falsely claiming that their child was a citizen of the United States. Moreover, before, during, and after the time that the defendants applied for and received hundreds of thousands of dollars in Medicaid benefits, they spent tens of thousands of dollars on luxury items, including cruise vacations and purchases such as watches, shoes, and jewelry, at stores such as Tiffany & Co., Jimmy Choo, Prada, Bloomingdale’s and Burberry.

Unlawful Distribution of Controlled Substances, Health Fraud and Money Laundering. A Louisville, Kentucky obstetrician/gynecologist was charged by a federal grand jury with 14 counts of unlawful distribution of controlled substances, healthcare fraud and money laundering. The charges state he knowingly and intentionally distributing and dispensing controlled substances, including Oxycodone, Alprazolam, Clonazepam, Hydrocodone, Phentermine and Carisoprodol, not for a legitimate medical purpose and beyond the bounds of a professional medical practice.  On average, he would see more than 35 patients per day, providing medically unnecessary services. A typical first-time patient would pay $75 for a gynecological exam, and each visit thereafter, the patient would typically pay $35 in cash and receive a Schedule II-V controlled substance prescription without a physical examination.  He was also charged with one count money laundering for purchasing a 2012 Honda Accord with $15,000 in cash and a $5,971.63 check from money derived from the unlawful dispensing and distribution of controlled substances and health care fraud.

Durable Medical Equipment Fraud. A man and his wife, both owners of a DME business, along with another individual, were convicted by a federal jury in San Francisco, California for conspiracy to commit health care fraud, health care fraud, and paying and receiving kickbacks involving referral of Medicare beneficiaries. They submitted over $3.2 million in fraudulent claims to Medicare for power wheelchairs and accessories based on bogus prescriptions for Medicare beneficiaries who had been identified by the defendants and other street-level recruiters. They also paid and received cash kickbacks in exchange for referral of the Medicare beneficiaries. They used a co-conspirator physician to obtain bogus prescriptions for power wheelchairs. Two other co-defendants previously pled guilty to charges.

Wound Care False Claims. In a qui tam case, owners of the Lymphedema & Wound Care Institute Inc., have paid the United States $4.3 million to settle claims they violated the Federal False Claims Act by submitting claims to the Medicare program for physical therapy treatments provided by unqualified therapists. They conducted business in four locations throughout the Houston, Texas area. They billed the Medicare program for providing manual lymphatic drainage therapy to Medicare beneficiaries using massage therapists as opposed to physical therapists as required under the rules and regulations governing the Medicare program.

Causing Widespread Hepatitis C Outbreak. A former employee of Exeter Hospital in New Hampshire was sentenced to 39 years in prison for his conduct in causing a widespread Hepatitis C outbreak in numerous states.  He was a “traveling” radiologic technician, using various placement agencies to find employment at medical facilities in New York, Pennsylvania, Maryland, Arizona, Kansas, Georgia and New Hampshire.  He stole syringes of Fentanyl, a powerful anesthetic intended for patients undergoing certain medical procedures, to which he did not have authorized access. He injected himself with the Fentanyl intended for his patients, knowing he was infected with Hepatitis C. And then, replaced the stolen syringes with syringes he stole from previous procedures and refilled with saline. Consequently, instead of receiving their prescribed doses of Fentanyl with the intended anesthetic effect, those patients actually received saline tainted with the defendant’s strain of the Hepatitis C virus.

CVS’ Caremark Fraud. In a qui tam case, Caremark LLC, a pharmacy benefit management company (PBM), will pay the government and five states a total of $4.25 million to settle allegations that it knowingly failed to reimburse Medicaid for prescription drug costs paid on behalf of Medicaid beneficiaries, who also were eligible for drug benefits under Caremark-administered private health plans. Caremark is operated by CVS Caremark Corp., one of the largest PBMs and retail pharmacies in the country that administers and manages the drug benefits for clients who offer drug benefits under a health insurance plan. Under the terms of the agreement, the government will receive approximately $2.31 million. In addition, Arkansas, California, Delaware, Louisiana and Massachusetts will share $1.94 million. Caremark used a computer claims processing platform called “Quantum Leap” to cancel claims for reimbursement submitted by Medicaid for dual eligible beneficiaries. Caremark’s actions caused Medicaid to incur prescription drug costs that should have been paid for by the Caremark administered private health plans rather than Medicaid.

About the Author

Richard P. Kusserow established Strategic Management Services, LLC, after retiring from being the DHHS Inspector General, and has assisted over 3,000 health care organizations and entities in developing, implementing and assessing compliance programs.