Thirteen people involved in a $27 million healthcare fraud scheme have been sentenced to a combined 84 years in federal prison, the Justice Department announced Aug. 31.
The defendants allegedly participated in a fraud scheme that involved Novus Health Services, a Dallas-based hospice agency. The defendants allegedly defrauded Medicare by submitting false claims for hospice services, providing kickbacks for referrals and violating HIPAA to recruit beneficiaries. Novus employees also dispensed controlled substances to patients without the guidance of medical professionals, according to the Justice Department.
Novus CEO Bradley Harris admitted to the fraud and testified against two physicians who elected to go to trial. Mr. Harris pleaded guilty to one count of conspiracy to commit healthcare fraud and one count of healthcare fraud and aiding and abetting. He was sentenced to 159 months in federal prison in January.
The 12 others convicted in the scheme include three physicians, four nurses and several executives.
Editor’s Note: This story has been updated with the DOJ’s statement regarding its civil fraud complaint. This story was originally filed June 3.
Updated: July 13, 3:30 p.m.
The federal government filed a civil complaint Tuesday in federal court in Brooklyn against the country’s largest dialysis provider alleging that the company performed unnecessary procedures on dialysis patients.
The Department of Justice has formally intervened and joined the False Claims Act whistleblower lawsuit filed against dialysis giant Fresenius Medical Care, according to court documents filed in U.S. District Court in Brooklyn.
The DOJ’s False Claims Act complaint alleges Fresenius Vascular Care, a business unit of Fresenius Medical Care performed these unnecessary procedures at nine centers across New York City, Long Island and Westchester, and billed the procedures to Medicare, Medicaid, the Federal Health Benefits Program and TRICARE. The complaint seeks damages and penalties under the False Claims Act.
The whistleblower complaint alleges that from about January 1, 2012 through June 30, 2018, Fresenius routinely performed certain procedures on patients with end stage renal disease (ESRD) who were receiving dialysis, without sufficient clinical indication that the patients needed the procedures. Fresenius knowingly subjected ESRD patients—who included elderly, disadvantaged minority, and low-income individuals—to these procedures to increase its revenues, the DOJ complaint states.
A Fresenius spokesperson said the company disputes the allegations contained in both the relators’ complaint and the U.S. government’s complaint and “intends to vigorously defend the litigation.”
“Our network of vascular centers is leading efforts to reduce total healthcare costs and improve patient outcomes by expanding access to innovative and less-invasive procedures. Our policies are intended to result in a high standard of care and compliance with government regulations,” the Fresenius spokesperson said in a statement.
Breon Peace, United States Attorney for the Eastern District of New York, called the company’s alleged conduct “egregious,” claiming that Fresenius “not only defrauded federal healthcare programs but also subjected particularly vulnerable people to medically unnecessary procedures.”
“This Office will hold medical providers accountable for practices that needlessly expose patients to harm for financial gain at taxpayer expense,” Peace said in a statement.
Two doctors allege in a lawsuit that the country’s largest dialysis provider performed potentially thousands of unnecessary, invasive vascular procedures on late-stage kidney disease patients and fraudulently charged Medicare and Medicaid for these procedures.
The lawsuit, originally filed in 2014 in New York, claims Fresenius Medical Care and its business unit, Azura Vascular Care, violated the federal False Claims Act. The case remained under seal until the court lifted the seal May 9. The federal government has 60 days to file its complaint.
Nineteen states also are included in the lawsuit and potentially could join the case.
The U.S. attorney in the Eastern District of New York will be taking over with respect to federal False Claims Act fraud claims against Fresenius, according to law firm Cohen Milstein Sellers & Toll, which is representing the plaintiffs in the case.
The U.S. attorney’s office declined to comment at the time.
The plaintiffs, two practicing nephrologists, charge in the complaint that Fresenius performed thousands of end-stage renal disease-related treatments that were “not medically reasonable and necessary” and that “exposed patients to undue and unnecessary risks.”
In a statement provided by a spokesperson, Fresenius declined to comment on the lawsuit.
Fresenius Medical Care North America is the largest dialysis provider in the U.S., operating over 2,600 dialysis units nationwide and treating over 205,000 patients annually. Its business unit, Azura Vascular Care, operates more than 90 vascular care facilities across the country.
The American Hospital Association, on behalf of its nearly 5,000 healthcare organizations, is urging the Justice Department to probe routine denials from commercial health insurance companies.
Specifically, the AHA is asking the Justice Department to establish a task force to conduct False Claims Act investigations into the insurers that routinely deny payments to providers, according to a May 19 letter to the department.
The request from the AHA comes after HHS’ Office of Inspector General released a report April 27 that found Medicare Advantage Organizations sometimes delayed or denied enrollees’ access to services although the provider’s prior authorization request met Medicare coverage rules.
“It is time for the Department of Justice to exercise its False Claims Act authority to both punish those MAOs that have denied Medicare beneficiaries and their providers their rightful coverage and to deter future misdeeds,” the AHA said in a letter to the Justice Department. “This problem has grown so large — and has lasted for so long — that only the prospect of civil and criminal penalties can adequately prevent the widespread fraud certain MAOs are perpetrating against sick and elderly patients across the country.”
The Justice Department has intervened in a whistleblower lawsuit accusing former executives of San Antonio-based Merida Health Care Group of violating the False Claims Act, according to Law360.
The Justice Department is intervening in the action, which dates back to 2015, alleging the former executives submitted more than $120 million in false claims to Medicare for medically unnecessary home health services and hospice care. The Justice Department is also adding Merida Health Group’s former CEO Henry McInnis to the complaint, according to the report.
The Justice Department alleges Mr. McInnis and Rodney Mesquias, the former owner of Merida Health Care Group, violated the False Claims Act, and the government is also seeking damages under the common law and equitable theories of fraud and payment by mistake, according to court documents filed April 7 in the U.S. District Court for the Southern District of Texas.
Mr. McInnis was sentenced to 15 years in prison in February 2021 for his role in a healthcare fraud and money laundering scheme. Mr. Mesquias was sentenced to 20 years in prison in late 2020.
Oak Street Health, a value-based primary care network for adults on Medicare, is facing a Department of Justice inquiry into its relationships with third-party marketing agents and its provision of free transportation for members.
The DOJ is investigating whether Oak Street violated the False Claims Act, per a regulatory filing published Monday. On a call with investors Tuesday, management declined to provide additional information into the government’s request, saying it was too early to know for sure what exactly the agency is investigating but that they’re working to comply.
Otherwise, the provider had a generally solid third quarter with better-than-expected revenue and well-controlled medical costs, analysts said. Oak Street increased its full-year 2021 guidance following the results, which beat Wall Street expectations with topline revenue of $389 million, up 78% year over year and a quarterly record for the company.
The federal government is increasingly cracking down on alleged fraud, especially in the Medicare Advantage program. In privately run MA plans, CMS pays companies on a per-member basis, then adjusts payments based on the acuity or severity of their member’s health status, as supported by provider data like diagnostic codes. Generally, the sicker the member, the higher the plan’s reimbursement.
That’s led to allegations of plans hiking risk scores to overinflate members’ health needs, resulting in higher payments from CMS. Watchdogs have been finding higher incidence of fraud and abuse as the MA program becomes more popular, growing to cover more than 40% of all Medicare beneficiaries.
Oak Street isn’t a traditional plan itself, but enters into full-risk contracts with Medicare Advantage plans, and via CMS’ direct contracting program, in which it assumes full responsibility for patients’ medical expenses in exchange for a fixed per-member, per-month payment. The Chicago-based company is the latest target of a federal inquiry into whether it violated the False Claims Act.
According to the primary care company, the DOJ sent a civil investigative demand on Nov. 1 asking for information about Oak Street’s relationships with third-party marketers and transportation partners.
Oak Street does provide patients transportation to appointments when they need it and has various ways for finding new patients, including community partnerships, but it’s unclear what the DOJ is specifically investigating, CEO Mike Pykosz told investors.
“We have had no meaningful conversations with the government,” Pykosz said. “I’m not really sure what the link is.”
The CEO noted it’s not unusual for such inquiries to take months to resolve, particularly in the hyper-regulated healthcare industry, but said he wouldn’t speculate further.
A civil investigative demand is a form of administrative subpoena, and doesn’t denote any regulatory or legal action itself. However, it is used by the government to kick off investigating potential False Claims violations, and determine whether there’s sufficient evidence to warrant filing an action, according to the National Law Review.
Penalties for violating the act could range from $11,655 to $23,331 per violation, plus triple damages. Total penalties have resulted recently in some significant payouts from MA participants. Notably, in late August, integrated health system Sutter Health agreed to pay $90 million to settle whistleblower allegations of risk adjustment fraud, in the largest False Claims Act settlement against a hospital system in the MA program.
Analysts noted the inquiry, while in early stages, is a point of concern for Oak Street’s future stock performance.
“This creates a new potential risk factor that we are unlikely to get clarity on for some time,” SVB Leerink analyst Whit Mayo wrote in a note.
Oak Street, which also provides services to patients with a range of insurance options, had an otherwise solid quarter, eclipsing $1 billion of year-to-date revenue for the first time in the company’s history.
The highly infectious delta variant did contribute to higher expenses, as it has with other providers.
Oak Street reported $15 million in costs from COVID-19 admissions in the first half of the year, and another $10 million in the third quarter. COVID-19-related expenses surged in the latter half of August and continued into September, but tailed off early into the fourth quarter, CFO Tim Cook said.
The majority of Oak Street’s patients are in northern U.S. markets, however, which experienced coronavirus surges last year during the winter as more people stayed indoors.
“We will see what happens in November and December,” Cook said. “While COVID costs are going to be lower in Q4, unfortunately we’re not in a world where they’re going to be zero.”
In the quarter, the primary care provider’s medical claims expense doubled year over year to almost $310 million. Oak Street’s medical loss ratio of 82.2% was lower than analysts expected, though management said they expected it to be higher in the fourth quarter.
Pykosz and Cook called out medical costs from new patients brought in during 2021 as a system-wide stressor.
Because diagnoses from 2020 claims are used to determine 2021 risk scores, fewer claims last year could mean lower risk scores and lower payments for plans this year. Oak Street’s patients, especially older adults in low-income communities, used fewer services last year during COVID-19, which resulted in lower revenues this year even as costs expanded.
Management said they expected to get back on track in 2022 as patients new to Oak Street this year will contribute to higher reimbursement next year, closing the current medical-cost gap between tenured and new patients.
“This is certainly an outlier year from every other year we’ve had results,” Pykosz said.
Oak Street, which was founded in 2012 and went public in August 2020 at a $9 billion valuation, reported a net loss of almost $110 million in the quarter, compared to a loss of $59 million at the same time last year.
Oak Street continued expanding its membership and network in the quarter, reporting 69% at-risk patient growth and opening 15 new centers in seven new markets.
“At this point we don’t feel there’s a lot of pressure or competitive dynamics pressuring our performance,” Pykosz said.
In the third quarter, Oak Street served 100,500 risk-based patients, representing 76% of its total patient base. The company expects at-risk patient volume to grow to between 111,500 and 113,500 patients this year.
A Cleveland Clinic-owned hospital system in Akron, Ohio, is paying the federal government $21.3 million to settle claims it illegally billed the Medicare program.
Akron General Health System allegedly overpaid physicians well above market value for referring physicians to the system, violating the Anti-Kickback Statute and Physician Self-Referral Law, and then billed Medicare for the improperly referred business, violating the False Claims Act, between August 2010 and March 2016.
Along with an AGHS whistleblower,the Cleveland Clinic Foundation, which acquired the system at the end of 2015, voluntarily disclosed to the federal government its concerns with the compensation arrangements, which were enacted by AGHS’ prior leadership, the Department of Justice said Friday.
The Anti-Kickback Statute forbids providers from paying for or otherwise soliciting other parties to get them to refer patients covered by federal programs like Medicare, while the Physician Self-Referral Law, otherwise known as the Stark Law, prohibits a hospital from billing for those services.Despite the laws and a bevy of other regulations resulting in a barrage of DOJ lawsuits and been a thorn in the side of providers for decades, fraud is still rampant in healthcare.
“Physicians must make referrals and other medical decisions based on what is best for patients, not to serve profit-boosting business arrangements,” HHS Office of Inspector General Special Agent in Charge Lamont Pugh said in a statement on the AGHS settlement.
Cleveland Clinic struck a deal with AGHS in 2014, agreeing to pay $100 million for minority ownership in the system. The agreement gave the clinic the option to fully acquire AGHS after a year, which it exercised as soon as that period expired in August 2015.
The settlement stems from a whistleblower suit brought by AGHS’s former Director of Internal Audit Beverly Brouse, who will receive a portion of the settlement, the DOJ said. The False Claims Act allows whistleblowers to share in the proceeds of a suit.
As fraud has increased in healthcare over the past decade — the DOJ reported 247 new matters for potential investigation in 2000, 427 in 2010 and 505 in 2019 — the federal government has renewed its efforts to crack down on illegal schemes. That’s resulted in the formation of groups like the Medicare Fraud Strike Force in 2007 and the Opioid Fraud and Abuse Detection Unit in 2017, which has in turn resulted in the DOJ recovering huge sums in stings, settlements and guilty verdicts.
Some of the biggest settlements reach into the hundreds of millions, and involve billions in false claims.
In 2018, DOJ charged more than 600 people for falsely billing federal programs more than $2 billion; last year federal agencies charged almost 350 people for submitting more than $6 billion in false claims. That last case led to creation of a rapid response strike force to investigate fraud involving major providers in multiple geographies.
Other large settlements include Walgreens’ $270 million fine in 2019 to settle lawsuits accusing the pharmacy giant of improperly billing Medicare and Medicaid for drug reimbursements; hospital operator UHS’ $122 million settlement last summer finalizing a fraudulent billing case with the DOJ after being accused of fraudulently billing Medicare and Medicaid for services at its behavioral healthcare facilities; and West Virginia’s oldest hospital, nonprofit Wheeling Hospital, agreeing in September to pay $50 million to settle allegations it systematically violated the laws against physician kickbacks, improper referrals and false billing.
EHR vendor eClinicalWorks paid $155 million to settle False Claims Act allegations around misrepresentation of software capabilities in 2017, while Florida-based EHR vendor Greenway Health was hit with a $57.3 million fine in 2019 to to settle allegations the vendor caused users to submit false claims to the EHR Incentives Program.
The CEO of a chain of medical clinics in Michigan and Ohio was sentenced March 3 to 15 years in prison and ordered to pay $51 million in restitution for his role in a $150 million healthcare fraud scheme, according to the U.S. Justice Department.
Mashiyat Rashid was sentenced after pleading guilty in 2018 to money laundering and conspiracy to commit healthcare fraud and wire fraud. Twenty other defendants, including 12 physicians, have been convicted for their involvement in the scheme.
Mr. Rashid, who served as CEO of Tri-County Wellness Group from 2008 to 2016, developed and approved a corporate policy to administer unnecessary back injections to patients in exchange for prescriptions of over 6.6 million doses of medically unnecessary opioids, according to the Justice Department.
Many patients experienced pain from the unnecessary injections, and some developed adverse conditions, including open holes in their backs, according to testimony at Mr. Rashid’s trial. Physicians at the clinics denied patients, including those addicted to opioids, medication until they agreed to get the injections, according to court documents.
According to evidence presented at trial, Mr. Rashid only hired physicians who were willing to administer the unnecessary injections in exchange for a split of the Medicare reimbursements for the procedures. Tri-County Wellness Group was paid more for facet joint injections than any other medical clinic in the U.S., according to the Justice Department.
Proceeds of the fraud were used to fund private jets and to buy luxury cars, real estate and tickets to NBA games, prosecutors said. Mr. Rashid was ordered to forfeit to the U.S. government $11.5 million in proceeds traceable to the healthcare fraud scheme, including commercial and residential real estate and Detroit Pistons season tickets.
A New York physician has been charged with manslaughter in the second degree and is facing other felonies related to the overdose death of a patient, New York Attorney General Letitia James announced Feb. 19.
Sudipt Deshmukh, MD, allegedly prescribed a lethal mix of opioids and other controlled substances that resulted in the overdose death of a patient. The physician allegedly knew the patient struggled with addiction.
An indictment, unsealed Feb. 18, alleges that between 2006 and 2016, Dr. Deshmukh ignored his professional responsibilities by prescribing combinations of opioid painkillers and other controlled substances, including hydrocodone, methadone and morphine, without regard to the risk of death associated with the combinations of those drugs.
Dr. Deshmukh is facing several felony charges, including healthcare fraud, for allegedly causing Medicare to pay for medically unnecessary prescriptions.
The indictment comes after the attorney general’s office filed a felony complaint against Dr. Deshmukh in August. In 2019, the New York State Office of Professional Medical Conduct found that he committed several counts of misconduct.
The CEO of a group of Texas-based hospice and home health companies was sentenced Feb. 3 to 15 years in prison for his role in a $150 million healthcare fraud and money laundering scheme, according to the Department of Justice.
Henry McInnis was sentenced more than a year after he was convicted of conspiracy to commit healthcare fraud, conspiracy to commit money laundering, obstruction of justice and healthcare fraud.
From 2009 to 2018, Mr. McInnis and others submitted more than $150 million in false and fraudulent claims for healthcare services. The claims were submitted through Merida Group, a hospice company with dozens of locations in Texas.
Mr. McInnis was CEO of Merida. He had no medical training but acted as the director of nursing for the company. He also enforced a companywide practice of falsifying medical records to conceal the scheme and ordered employees to change medical records to make it appear patients were terminally ill.
Mr. McInnis also paid bribes to physicians to certify unqualified patients for home health and hospice.
Mr. McInnis was sentenced less than two months after the owner of Merida Group, Rodney Mesquias, was sentenced to 20 years in prison and ordered to pay $120 million in restitution.
Federal agencies have charged 345 people across the country, including more than 100 providers and four telehealth executives, with submitting more than $6 billion in fraudulent claims to payers. Of that, $4.5 billion was connected to telemedicine schemes and about $800 million each to substance abuse treatment and illegal opioid distribution.
More than 250 medical professionals had their federal healthcare billing privileges revoked for being involved in the scams, according to a statement released Wednesday.
The U.S. Department of Justice also said it is creating a new rapid response strike force to investigate fraud cases involving major providers that operate in multiple jurisdictions.
Telehealth fraud has increased significantly since 2016, the HHS Office of Inspector General said. As providers have quickly pivoted many services to virtual care during the COVID-19 pandemic, attempts at fraud will likely follow.
One of the cases outlined Wednesday included false claims for COVID-19 testing while another involved a COVID-19 related scheme to defraud insurers out of more than $4 million.
The telehealth fraud allegedly involved a marketing network that lured hundreds of thousands of people into a criminal scheme with phone calls, direct mail, TV ads and online pop-up ads. Telemedicine executives then paid doctors to order unneeded medical equipment, testing or drugs with either no patient interaction or only a brief call.
Those were either not given to the patients or were worthless to them. The proceeds were then laundered through international shell corporations and banks.
The scheme is similar to one DOJ prosecuted in April 2019involving fraudulent telehealth companies that pushed unneeded braces on Medicare beneficiaries in exchange for kickbacks from durable medical equipment companies.
The massive bust included the work of 175 HHS OIG agents and analysts and targeted myriad fraud operations across the U.S. and its territories.
One of the larger scams involved 29 defendants in the Middle District of Florida. A telemedicine company and medical professionals working for it billed Medicare for medical equipment for patients they never spoke to.
In New Jersey, laboratory owners paid marketers to get DNA samples at places like senior health fairs. Doctors on telemedicine platforms then ordered medically unnecessary and not reimbursable genetic testing.