Feds charge 36 in $1.2B healthcare fraud schemes

Thirty-six people across the U.S. were charged for their alleged roles in schemes involving $1.2 billion in fraudulent telemedicine, durable medical equipment, cardiovascular and cancer genetic testing, the Justice Department announced July 20. 

The alleged schemes involved lab owners paying medical professionals illegal kickbacks and bribes in exchange for referring patients. The medical professionals were allegedly working with fraudulent telemedicine and digital medical technology companies. 

“As alleged in court documents, medical professionals made referrals for expensive and medically unnecessary cardiovascular and cancer genetic tests, as well as durable medical equipment,” the Justice Department said. 

Prosecutors allege that in many cases the test results or durable medical equipment were not provided to the patients.

Ex-Theranos president Sunny Balwani found guilty of fraud

Sunny Balwani, the former president and chief operating officer of bankrupt blood-testing company Theranos, on Thursday was found guilty of 12 counts of conspiracy and fraud against certain investors and patients.

  • It’s a similar verdict to one handed down in January to Theranos founder and ex-CEO Elizabeth Holmes, who once dated Balwani.

Why it matters: Balwani isn’t a household name like Holmes, but he was instrumental in building a billion-dollar house of cards that duped both investors and patients.

Courtroom drama: Balwani’s attorneys tried to pin the blame for Theranos’ failures on Holmes, much as her attorneys had tried to blame Balwani.

  • As we wrote when the trial began: Holmes tried to thread an incredibly narrow rhetorical needle, denying the existence of fraud while also redirecting blame. Balwani seems to be attempting something similar; claiming he was a savvy executive with lots of past success, but also a naif who was bamboozled by Holmes.
  • But prosecutors, who originally wanted to try the pair together, often used Balwani’s own words against him. For example, they presented a text message from Balwani to Holmes that read: “I am responsible for everything at Theranos.”
  • One big difference between the trials, however, was that Balwani didn’t testify in his own defense.

Details: Balwani was convicted on all 12 counts brought against him, after nearly five days of jury deliberations. This includes a wire fraud charge related to a $100 million investment in Theranos from the family of former U.S. Education Sec. Betsy DeVos.

  • Holmes had been convicted on four of seven counts, each one related to investors and carrying a maximum sentence of 20 years in prison.

Look ahead: Expect Balwani to appeal the verdict, as has Holmes already has done.

Former hospital executive convicted in $1.4B billing scheme

The former leader of a rural hospital chain has been convicted for his role in an elaborate pass-through billing scheme, the Justice Department announced June 27. 

After a 24-day trial, Jorge Perez, 62, of Miami, was convicted of conspiracy to commit healthcare fraud and wire fraud, healthcare fraud and conspiracy to commit money laundering of proceeds greater than $10,000.

Prosecutors said Mr. Perez conspired with others to bill for $1.4 billion of medically unnecessary laboratory testing services. He used rural hospitals as billing shells to submit claims for services that were mostly performed at outside laboratories. 

The evidence presented at trial showed that Mr. Perez and other defendants targeted and obtained control of financially distressed rural hospitals through management agreements and purchases. They targeted rural hospitals because they often get higher reimbursement rates for laboratory testing from private insurers, according to the Justice Department. 

The defendants promised to save the rural hospitals from closure by turning them into laboratory testing sites, but instead billed for fraudulent laboratory testing. Through the scheme, Mr. Perez and others made it appear the laboratory testing was performed at the rural hospitals when, in most cases, it was done by outside testing laboratories owned by defendants, prosecutors said. 

“After private insurance companies began to question the defendants’ billings, they would move on to another rural hospital, leaving the rural hospitals they took over in the same or worse financial status as before,” the Justice Department said. At least three of the hospitals were forced to close. 

Ricardo Perez, 59, of Miami, was also convicted of conspiracy to commit healthcare fraud and wire fraud, healthcare fraud and conspiracy to commit money laundering of proceeds greater than $10,000 on June 27. He is Jorge Perez’s brother, according to Kaiser Health News

Ex-healthcare CFO sentenced for role in fraud scheme

The former CFO of Pacific Hospital’s physician management arm was sentenced to 15 months in prison June 24 for a tax offense related to a kickback scheme, according to the Justice Department

The sentencing came about four years after George Hammer was charged. In 2018, he pleaded guilty to one count of filing a false tax return. 

Mr. Hammer allegedly supported a kickback scheme that resulted in the submission of more than $500 million in bills for kickbacks for surgeries. He allegedly supported the kickback scheme by facilitating payments to people receiving kickbacks and bribes pursuant to sham contracts that were used to conceal illicit payments, according to the Justice Department. 

The Department of Justice notes that Mr. Hammer was a salaried employee and did not profit directly from the kickbacks and bribes. 

Twenty-two defendants, including the owner of Pacific Hospital in Long Beach, Calif., have been convicted for participating in the scheme.

Fired Mercyhealth exec sentenced for wire fraud, tax evasion

A former vice president of Janesville, Wis.-based Mercyhealth was sentenced to 3 ½ years in prison May 4 for wire fraud and tax evasion in relation to a $3.1 million kickback scheme, according to the U.S Justice Department.

Barbara Bortner, 57, Mercyhealth’s former vice president of marketing and public relations, pleaded guilty to the scheme in October 2021. 

Ms. Bortner was charged in September 2021. She admitted getting kickbacks from Ryan Weckerly, owner of a marketing agency hired by the health system, from 2015 to 2020.

Prosecutors said Ms. Bortner and Mr. Weckerly created a scheme in which Mr. Weckerly’s marketing agency, Morningstar Media Group, inflated invoices sent to Ms. Bortner for marketing work he did for Mercyhealth. In exchange, Ms. Bortner receive kickbacks from the funds received.

Prosecutors also said Ms. Bortner agreed to maintain Morningstar Media as its primary marketing group in exchange for the kickbacks.

Mr. Weckerly pleaded guilty in November 2021 and will be sentenced May 17.

Mercyhealth fired Ms. Bortner in August 2021, weeks before the charges were filed against her. Mercyhealth said the fraud didn’t affect patient care.

Justice Department adds CEO to $120M Medicare fraud case

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. 

Elizabeth Holmes found guilty of defrauding investors

https://mailchi.mp/0b6c9295412a/the-weekly-gist-january-7-2022?e=d1e747d2d8

  1. A San Jose jury convicted Theranos founder Elizabeth Holmes on four counts of fraud, deciding that she lied to investors while raising more than $700M in funds for the company. Holmes was found not guilty on four other counts relating to defrauding patients, though Theranos ended up voiding tens of thousands of erroneous test results. Each conviction carries a maximum twenty-year sentence, although Holmes is widely expected to appeal.

The Gist: It’s rare that tech executives are convicted of fraud. Investors, including many health systems, have been flooding healthcare startups with large sums of cash in hopes of big returns. But the Theranos debacle is a reminder that Silicon Valley’s “fake it till you make it culture” is not always the best fit for healthcare. Providers must continue to hold new medical technologies to high standards, regardless of how much promise they hold to “revolutionize” aspects of patient care. 

Oak Street faces DOJ inquiry into third-party marketing, transportation relationships

Dive Brief:

  • 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.

Dive Insight:

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.

Oak Street’s competition in the value-based primary care space has ramped up this year, as peers One Medical acquired a rival value-based medical chain and VillageMD got a hefty new investment from drugstore partner Walgreens.

But Pykosz pointed to Oak Street’s exclusive relationship with senior group AARP and its acquisition of specialty telehealth provider RubiconMD as differentiators, while noting there’s room for a number of players in the space.

“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.

Wisconsin health system fires VP accused in kickback scheme

Mercyhealth fires Vice President suspected in $3 million fraud with vendor  | Business News | beloitdailynews.com

Janesville, Wis.-based Mercyhealth has fired a vice president in charge of marketing and public relations over an alleged kickback scheme with a vendor, the Janesville Gazette reported Aug.16, citing a letter from the health system’s CEO. 

The vice president, Barb Bortner, was fired after health system leaders learned of a $3 million fraudulent invoice and kickback scheme that she was allegedly involved in, Mercyhealth President and CEO Javon Bea said in the letter obtained by the Gazette

“Our patients and communities we serve expect us to conduct our business affairs with the highest degree of integrity. We are all deeply saddened and disappointed that a member of our team has betrayed that trust,” Mr. Bea wrote in the letter, according to the Rockford Register Star.

Mr. Bea said Mercyhealth officials suspect Ms. Bortner is responsible for fraudulent and “improper” arrangements with an unnamed vendor, and the alleged fraud was linked to the system’s marketing division. Mercyhealth is severing ties with the vendor believed to be involved, the Gazette reported. 

The fraud does not appear to have impacted patient care, and the system is taking “all necessary steps to improve Mercyhealth procedures,” Mr. Bea wrote, according to the report. 

Read the full Gazette article here

Cleveland Clinic-owned hospital system pays $21M to settle False Claims allegations

Dive Brief:

  • 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.

Dive Insight:

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.

Of the more than $3 billion recovered by the government in 2019 from fraud and false claims, almost 90% involved the healthcare industry, according to DOJ data.

“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.