The former chief operating officer of Cleveland-based MetroHealth System was sentenced to more than 15 years in prison for his role in a conspiracy to defraud the health system through a series of bribes and kickbacks, according to the Department of Justice.
Five things to know:
1. The sentencing came after former COO Edward Hills, DDS, and three co-defendants — all dentists at MetroHealth — were found guilty of criminal charges in July 2018. The four men were indicted for the crimes in October 2016.
2. According to court documents presented by the Justice Department during the trial, Dr. Hills and two of his co-defendants engaged in a racketeering conspiracy from 2008 through 2016 that involved a series of bribes, witness tampering and other crimes.
3. Federal prosecutors alleged Dr. Hills solicited cash, checks and expensive gifts from the two co-defendants beginning in 2009, and in return took actions on their behalf allowing them to operate their individual private dental clinics during regular business hours while receiving full-time salaries from MetroHealth.
4. Dr. Hills, who also served as interim president and CEO of MetroHealth from December 2012 through July 2013, allowed the co-defendants to hire MetroHealth dental residents to work at their private clinics during regular business hours and did not require them to pay wages or salaries to residents. He allowed the three individuals and others to solicit bribes from prospective dental school residents, which amounted to at least $75,000 between 2008 and 2014.
5. Dr. Hills’ co-defendants are scheduled to be sentenced later this month.
Collectively, the executives, business owners and medical professionals involved in the conspiracy are accused of causing more than $1 billion in losses for Medicare.
Two dozen people were indicted in the multistate, international telemarketing and DME scheme, which allegedly occurred in 17 federal judicial districts.
The 130 DME companies submitted more than $1.7 billion in claims to Medicare, were paid more than $900 million, and accounted in total for more than $1 billion in losses for the federal government.
The swindled money was allegedly laundered through international shell corporations and used to purchase exotic automobiles, yachts and luxury real estate in the United States and abroad,
Federal prosecutors are calling it one of the largest healthcare fraud schemes they’ve ever investigated.
Criminal indictments were made public this week against 24 people, including CEOs, COOs, physicians, and other executives at five telemedicine companies, and the owners of 130 durable medical equipment companies across 17 federal judicial districts for their roles in various schemes to bilk Medicare out of $1.2 billion.
Prosecutors said the DME companies allegedly paid kickbacks and bribes in exchange for the referral of Medicare beneficiaries by physicians in cahoots with fraudulent telemedicine companies for unnecessary back, shoulder, wrist and knee braces.
Some of the defendants allegedly controlled an international telemarketing network that lured over hundreds of thousands of elderly and/or disabled patients into a criminal scheme that crossed borders, involving call centers in the Philippines and throughout Latin America, prosecutors said.
The defendants allegedly paid doctors to prescribe DME either without any patient interaction or with only a brief telephonic conversation with patients they had never met or seen.
“The breadth of this nationwide conspiracy should be frightening to all who rely on some form of healthcare,” said Don Fort, Chief of Criminal Investigations at the Internal Revenue Service, one of six federal agencies involved in the probe.
“The conspiracy described in this indictment was not perpetrated by one individual. Rather, it details broad corruption, massive amounts of greed, and systemic flaws in our healthcare system that were exploited by the defendants,” Fort said.
The 130 DME companies submitted more than $1.7 billion in claims to Medicare and were paid more than $900 million, and accounted in total for more than $1 billion in losses for the federal government.
The swindled money was allegedly laundered through international shell corporations and used to purchase exotic automobiles, yachts and luxury real estate in the United States and abroad, prosecutors said.
Court documents allege that some of the defendants lured patients for the scheme by using an international call center that advertised to Medicare beneficiaries and “up-sold” the beneficiaries to get them to accept numerous “free or low-cost” DME braces, regardless of medical necessity.
The international call center allegedly paid illegal kickbacks and bribes to telemedicine companies to obtain DME orders for these Medicare beneficiaries. The telemedicine companies then allegedly paid physicians to write medically unnecessary DME orders. Finally, the international call center sold the DME orders that it obtained from the telemedicine companies to DME companies, which fraudulently billed Medicare.
In New Jersey, Neal Williamsky 59, of Marlboro, and Nadia Levit, 39, of Englishtown, New Jersey, owners of 25 DME companies, were indicted for their alleged participation in a $150 million scheme.
Albert Davydov, 26, of Rego Park, New York, was charged for his alleged participation in a $35 million DME scheme.
Creaghan Harry, 51, of Highland Beach, Florida; Lester Stockett, 51, of Deefield Beach, Florida; and Elliot Loewenstern, 56, of Boca Raton, Florida; the owner, CEO and VP of marketing, respectively, of call centers and telemedicine companies were charged for their alleged participation in a $454 million kickback and money laundering scheme.
Joseph DeCoroso, MD, 62, of Toms River, New Jersey, was charged in a $13 million conspiracy to commit healthcare fraud and separate charges of healthcare fraud for writing medically unnecessary orders for DME, often without speaking to patients, while working for two telemedicine companies.
In Florida, Willie McNeal, 42, of Spring Hill, the owner and CEO of two telemedicine companies, was charged for his alleged participation in a $250 million scheme to swap kickbacks and bribes for DME referrals.
In Dallas, Texas, Leah Hagen, 48, and Michael Hagen, 51, of Dalworthington Gardens, owners and operators of two DME companies, were charged for their alleged participation in a $17 million kickback scheme that generated unnecessary DME orders.
In El Paso, Texas, Christopher O’Hara, 54, of Kingsbury, the owner of a telemedicine company, was charged in an $40 million scheme to swap kickbacks and bribes for referrals to DME providers.
In Philadelphia, Randy Swackhammer, MD, 60, of Goldsboro, North Carolina, was charged for an alleged $5 million conspiracy to commit healthcare fraud. Swackhammer allegedly wrote medically unnecessary orders for DME while working for a telemedicine company, often with only brief conversations with patients.
In California, Darin Flashberg, 41, and Najib Jabbour, 47, both of Glendora, and owners of seven DME companies, were charged with alleged participation in a $34 million scheme that paid kickbacks and bribes in exchange for unnecessary DME orders.
In South Carolina, Andrew Chmiel, 43, of Mt. Pleasant, owner of over a dozen companies involved in the scheme, was charged in a $200 million scheme to pay kickbacks and bribes in exchange for unnecessary DME orders.
“THE BREADTH OF THIS NATIONWIDE CONSPIRACY SHOULD BE FRIGHTENING TO ALL WHO RELY ON SOME FORM OF HEALTHCARE. ”
DON FORT, CHIEF OF CRIMINAL INVESTIGATIONS AT THE INTERNAL REVENUE SERVICE
The former director of outreach programs at Larkin Community Hospital in South Miami, Fla., was sentenced to 15 months in prison April 3 for her role in a $1 billion healthcare fraud scheme.
Four things to know:
1. The judge handed down the sentence just over two months after Odette Barcha pleaded guilty to conspiring to defraud the federal government and paying and receiving healthcare kickbacks.
2. Ms. Barcha was one of three defendants charged in an indictment unsealed in July 2016. She allegedly had physicians at Larkin Community Hospital discharge patients to skilled nursing homes and other facilities owned by Philip Esformes, who allegedly paid kickbacks for those admissions.
3. Prosecutors allege Mr. Esformes, who operated a network of more than 30 skilled nursing homes and assisted living facilities in Florida, admitted Medicare and Medicaid beneficiaries to the facilities even if they did not qualify for skilled nursing home care or for placement in an assisted living facility. Once admitted, the patients received medically unnecessary care that was billed to Medicare and Medicaid.
4. The seven-week trial of Mr. Esformes wrapped up March 29, according to the Miami Herald. On April 5, a federal jury found Mr. Esformes guilty of various counts, including paying and receiving kickbacks, bribery, money laundering and obstruction of justice, according to Law360.
The former top Detroit Medical Center cardiologist is suing the health system, arguing he was forced out of his job for complaining about alleged fraud at the health system, including unnecessary surgeries billed to Medicare and Medicaid.
The wrongful discharge and retaliation lawsuit was filed in Detroit U.S. District Court by Dr. Ted Schreiber, who was recruited by the DMC in 2004 and developed a trademarked process to speed life-saving treatment for heart attack patients. He also was the founding president of the new DMC Heart Hospital that opened with fanfare in 2014.
Schreiber’s accusations are “unsubstantiated,” a DMC spokeswoman said Monday night, and the health system continues to have a “culture of integrity.”
Heart Hospital shares facilities with Harper University Hospital that is poised to be terminated from the federal Medicare program in less than two weeks after failing inspections in October and December. Since Harper and Heart Hospital are considered a single facility by the Centers for Medicare Medicaid Services, both would be barred from the federal health insurance program for the elderly and disabled if Harper fails to pass an unannounced inspection by the April 15 deadline.
Michigan prohibits hospitals barred from receiving Medicare funding from participating in Medicaid, the health insurance program for mostly low-income people that is jointly funded by the state and federal governments. The two programs combined pay for 85 percent of Harper’s inpatient hospital stays, according to Allan Baumgarten, a Minneapolis-based hospital analyst.
The inspections in October and December were prompted by complaints from Schreiber and three other health system cardiologists who said they were forced from their leadership roles in retaliation for complaining about quality of care issues at the DMC.
Cardiologists Dr. Mahir Elder and Dr. Amir Kaki filed a similar lawsuit last week in Detroit federal court, saying they were forced from leadership posts for complaining to leaders of the DMC about unnecessary surgeries, dirty surgical instruments and other problems.
In his lawsuit, Schreiber said he brought concerns about physician competency and unnecessary and/or dangerous procedures to DMC peer review meetings in a bid to ensure that they were investigated. But his concerns were ignored by DMC and its for-profit owner, Tenet Healthcare of Dallas, according to Schreiber’s lawsuit.
“(T)he profitability of physicians was being weighed more heavily by DMC and Tenet executives than the physicians’ ability to provide services to patients within the standard of care,” Schreiber alledged in his lawsuit. “This policy resulted in an increase in unnecessary and/or risky procedures conducted by some physicians leading to bad patient outcomes and even patient deaths.”
The DMC continues to argue that Schreiber and the other cardiologists violated the company’s conduct code. The health system’s top priority is delivering “safe, high quality care to the people of Detroit,” said spokeswoman Tonita Cheatham.
“We have a culture of integrity, which means we don’t look the other way, we don’t condone inappropriate behavior of any kind, and we don’t compromise on our priorities,” Cheatham said in a statement.
“That also means we expect physicians to uphold our Standards of Conduct, including treating fellow physicians, nurses and staff members with respect and dignity. We welcome the opportunity to present the facts underlying the claims made in the complaint.”
In the lawsuit, Schreiber indicated he also complained to Tenet and DMC leaders that some cardiologists were away from the hospital during times they were required to be on-site as members of Cardio Team One’s 24-hour on-call team. He also said he raised concerns about staffing cuts that resulted in poor nursing care for cardiac patients.
Tenet Healthcare signed a three-year “corporate integrity agreement” as part of a $513 million settlement with the U.S. Department of Justice over allegations of a kick-back scheme involving involving four Tenet hospital subsidiaries in the South, according to Schreiber’s suit. The agreement required Tenet and all of its hospitals to self-report all complaints to the federal Justice Department.
“Senior management, including these Defendants, failed to do so and blatantly allowed legal violations to occur in order to generate more income by cutting medically necessary support and allowing unnecessary medical procedures, among other things,” the former cardiologist executive said in his lawsuit.
Schreiber referred a request for comment on the lawsuit to his attorney, David Ottenwess of Detroit.
“Tenet Healthcare, the current for-profit owner of the DMC, has been continually cited by the federal government for placing profits over people,” Ottenwess said. “Tenet has continued that course with its retaliation against Dr. Schreiber and others at the Heart Hospital who had the courage to question Tenet’s practices of profits over safety.”
A Florida man is capitalizing on the Trump administration’s sudden legal reversal in an attempt to get off the hook for accusations of Medicare fraud.
Philip Esformes, who operated about 20 nursing homes in the Miami area, was arrested in 2016 and charged with committing $1 billion in Medicare fraud through a complex kickback scheme.
But Esformes’s lawyers now argue the charges should be dismissed because of the Justice Department’s new position on the Affordable Care Act. ThinkProgress’ Ian Millhiser was the first to flag this creative argument.
How it works: Some of the specific charges against Esformes stem from parts of the Affordable Care Act. They are, his lawyers say, among the specific sections of law that Judge Reed O’Connor invalidated when he threw out the entire ACA.
Esformes’s lawyers acknowledge that those statutes are still on the books.
But the Justice Department has said it agrees with all of the O’Connor’s decision — which means it has said that “the very statutes it is seeking to enforce in this trial are unenforceable,” his brief argues.
The government shouldn’t be able to prosecute Esformes using legal authorities that it’s simultaneously saying are invalid, the lawyers argue.
My thought bubble: This seems like the kind of thing a good prosecutor will probably find a way to wriggle out of. It also seems like the kind of thing career lawyers at DOJ would have caught, if they had been allowed to shape DOJ’s position in the ACA case.
“The health care system has become horribly perverted,” says Alex Gibney, director of The Inventor: Out for Blood in Silicon Valley.
Nobody likes having a needle stuck in their arm. And nobody likes having money sucked out of their wallet, either. So when smart young entrepreneur Elizabeth Holmes emerged from Silicon Valley claiming to have a cure for a broken health care system, politicians and journalists and investors couldn’t wait to shower her with praise and money.
But the story of Holmes’ company comes with a sting. Her black outfits helped create an image of a new Steve Jobs-esque voice in Silicon Valley, but after faking demos and lying about patient treatment Holmes and her partners are now awaiting trial on charges of fraud.
I asked the film’s Oscar-winning director, Alex Gibney, if we fetishize the idea of a genius inventor. “We do,” he told me by phone from San Francisco, “and it’s bullshit.” Having tackled corruption and deceit in films about Enron, the Church of Scientology and the White House, Gibney describes Holmes as “a variation on a theme” of the type of people he’s seen before. “Elizabeth was afflicted with the notion that the end justifies the means,” Gibney says. “She thought she was entitled to make mistakes because her intention was pure and worthy and socially vital. But the mind plays tricks with you when you start down that path, as you rationalize your behavior in ways that can become quite dangerous and delusional.”
Big-name investors from both inside and outside Silicon Valley fell for Holmes’ delusion, including Rupert Murdoch, who invested $125 million into Theranos. But the question remains whether the profit-driven private sector is even suited to solving health care problems. “Reports show the health care system in the US has become horribly perverted,” says Gibney, “through this patchwork system of insurance and private enterprise and then also government legislative initiatives. Medicare is not allowed to negotiate directly with drug companies, how crazy is that?”
Everyone can agree that fixing problems in health care is a noble cause, but relying on Silicon Valley and the private sector also lined up with other political agendas for the politicians who backed her. “This notion of the entrepreneur lets government off the hook,” Gibney says.
The director does credit Holmes with highlighting problems in the laboratory testing industry. “They’re incredibly opaque with their pricing,” he points out. Patients don’t pay directly for blood tests, so depending on the circumstances, the illness or even the state, lab companies can charge outrageous prices to insurance companies to complete the test.
The health care system “is designed to enrich companies rather than to serve the health of patients,” says Gibney. “It’s full of all sorts of bad incentives.”
While things clearly need to be improved, the Silicon Valley style of disruptive innovations may not be what we as patients need. Taking control of your own health is a “a very cool-sounding libertarian notion,” but Gibney cautions that “we’re not doctors.” He’s concerned about the idea of treating patients as customers, seducing us with promises of competitive prices and greater choice. “That’s good for sneakers,” he says, “but I’m not sure a consumer/producer relationship is necessarily good for health care. You want a patient/doctor relationship, and blood testing is part of it.”
Silicon Valley has adapted the credo of “move fast and break things,” which means iterating and making mistakes until you find the right path. But you can’t make mistakes when people’s lives are at stake. And real people were put at risk when Theranos pushed ahead with a contract with Walgreens to carry out blood tests for ordinary people.
“That was a line Elizabeth crossed,” says Gibney. “If she had just wasted a lot of investors’ money on a machine that didn’t work, there wouldn’t really be a story here. It was when she put people at risk, that was the problem.”
Gibney is concerned that Holmes will be portrayed as a one-off, “one rotten apple in an otherwise pristine barrel.” But he thinks the Theranos fraud shows cracks across Silicon Valley, the health care industry and capitalism as a whole. “I tried to indicate there are bigger problems in Silicon Valley in terms of lying, in terms of becoming disruptors in ways that may make people a lot of money but may not always be a good thing.”
Within Theranos, a culture of silence and paranoia couldn’t suppress the lies forever. And so Theranos employees blew the whistle on the deceit.
“I think all of us should be aware that there are certain cultural, and also legal, impediments to hearing the bad news,” says Gibney, who highlights the use of nondisclosure agreements to gag employees. These legal contracts are supposed to protect trade secrets, but they can also be used to prevent insiders from calling out corruption. “Look at Harvey Weinstein,” Gibney says. “NDAs are rapaciously used by people to cover up misdeeds.”
Yet for some reason, we have a strange relationship with those insiders who do come forward. “It’s sort of like they’re showing us up,” says Gibney. He recalls being asked the same two questions over and over after making The Smartest Guys in the Room, his film about the corruption within Enron: “One was about this guy who got away with it, sailed off with $200 million and married a stripper. But the other question was about Sharon Watkins, the whistleblower, and it was always, ‘Who does she think she is? How come she’s so holier-than-thou?’ Of all the lessons to take away from Enron, she’s not really the malefactor, but it seemed to really get under people’s skin.”
Gibney has made a career out of exposing corruption from the business sector to the CIA to the White House. “Part of us is secretly thrilled by people who are conning the game,” he says. “But we always at the end want to see them punished, so it’s kinda like a double pleasure. You wanna see ’em sneak around — and then you wanna see the hammer come down.”
“I’ve been spending a lot of time on problems,” Gibney says as we wrap up the interview. “I’m starting to think about doing films about people who are coming up with solutions.”
The former president and CEO of Our Lady of The Lake Foundation, the fundraising arm that supports Baton Rouge, La.-based Our Lady of the Lake Regional Medical Center, stole more than $810,000 of donations, according to an independent auditor’s report cited by The Advocate.
John Paul Funes headed the foundation for more than 10 years and led several multimillion-dollar fundraising campaigns for the hospital. He was fired in November after a third-party investigation revealed “a pattern of forgery and embezzlement of funds.”
The hospital hired Deloitte Touche Tohmatsu to review documentation that led to Mr. Funes’ firing.
“We’ve identified approximately $810,000 lost due to fraudulent activity committed by Mr. Funes,” Baton Rouge-based Franciscan Missionaries of Our Lady Health System, which owns Our Lady of the Lake Regional Medical Center, told The Advocate. “Over several years, he orchestrated a series of fraudulent transactions that involved the purchase and distribution of gift cards, charter flights and payments to individuals, including forged documents, invoices and signatures. He misled hundreds of people in and outside of our organization.”
Over the next 30 days, the Franciscan Missionaries will replace the $810,00 in lost funds. The organization plans to seek restitution from Mr. Funes.
The Department of Health and Human Services under the Trump administration has taken a deregulatory approach toward healthcare delivery. Its efforts on the payer side includes expanding the availability of individual health insurance policies that don’t conform to the rules of the Affordable Care Act, and more recently liberalizing the use of tax credits to purchase them.
However, the HHS has made one of its boldest proposals on the provider side. Over the summer, the Centers for Medicare & Medicaid Services issued a request for information (RFI) regarding potentially loosening up the Stark and anti-kickback laws.
Originally signed into law in 1972, the Anti-Kickback Statute barred any sort of renumeration to a provider to induce the referral of a patient. The Stark Law, enacted in 1990, bars doctors from referring Medicare or Medicaid patients to any ‘designated facility’ in which they have any form of a financial relationship. Both laws have been updated – and strengthened – numerous times in the intervening years. The HHS’ proposed changes would signal a shift away from how those laws are interpreted.
According to Mark Hardiman, partner with the Nelson Hardiman healthcare law firm in Los Angeles, the move represents a desire by HHS “to move all payments away from fee-for-service and make the providers at risk on both the upside and downside.”
Although the proportion of fee-for-service payments made to Medicare providers has shrunk in recent years, it still comprises the majority. A total of $392 billion in Medicare fee-for-service payments were made in 2017, according to the Kaiser Family Foundation, 56 percent of all payments made from the program. Although that’s down from 70 percent of all Medicare payments made a decade prior, the continuing aging of the Baby Boomer population and healthcare cost inflation is putting pressure on CMS and HHS to find ways to continue to pare back costs. Coordinated care initiatives such as accountable care organizations comprise just a small fraction of all Medicare payments, and many providers are balking about taking on too much downside financial risk when forming accountable care organizations.
According to HHS, the intent is to make it easier for providers to implement value-based care initiatives. “Removing unnecessary government obstacles to care coordination is a key priority for this administration,” said HHS Deputy Secretary Eric Hargan of the rationale behind the regulatory review. “We need to change the healthcare system so that it puts value and results at the forefront of care, and coordinated care plays a vital role in this transformation.”
Nonetheless, the hospital sector has been generally supportive of regulatory changes. In testimony to a U.S. House Ways and Means subcommittee over the summer, Michael Lappin, chief integration officer at Advocate Aurora Health, observed that strict liability rules discourage value-based arrangements.
So, what would the healthcare delivery environment resemble with looser regulations governing both laws?
According to Hardiman, the changes HHS is seeking to the regulations are far from sweeping. “They are really on the margins, and they are not signaling a fundamental shift in the enforcement of the Stark and Anti-Kickback Law,” he said.
Why would there not be a major regulatory unraveling? Hardiman notes that doing so would create chaos in healthcare delivery. Moreover,qui tam(whistleblower) lawsuits in healthcare have become a major source of income for attorneys, and they would object to too much of an unwinding. Data from the non-profit watchdog organization Taxpayers Against Fraud bears that out: Of the more than $3.7 billion in False Claims Act settlements reached in 2017, $2.4 billion involved litigation involving healthcare enterprises. It was the eighth consecutive year that healthcare case settlements topped $2 billion. Hardiman also noted that more and more litigation is being settled for large sums even when the U.S. Justice Department declines to intervene in a case.
Hardiman believes that if the regs are loosened, they would likeliest be in the form of a “series of fraud and abuse waivers.” They would cover initiatives such as managed care ventures or ACOs, making it easier for hospitals and physicians to collaborate on care coordination, as well create models to more equitably share expenses and profits and encourage cross-referrals.
“You are going to see a much more comprehensive definition as to what types of risk-sharing arrangements will not be reviewed as renumeration under the kickback statute,” Hardiman said. “I wouldn’t be surprised to see safe harbors around Medicare Advantages, ACOs, and participants in other innovative risk-sharing arrangements.”
Individual physicians and medical groups may also have the opportunity to pay inducements to patients to lose weight or engage in another health-enhancing activity – something they are currently barred from doing under most circumstances.
“Everybody knows we’re heading toward a value-based coordinated care model,” Hardiman said. “And promoting and incentivizing it is still a risky business. You want at least some practical guideposts.”
According to the DOJ, this is the ninth consecutive year that the organizations’ civil healthcare fraud settlements and judgments have exceeded $2 billion.
As part of the federal government’s increasing focus on issues of healthcare fraud, particularly in the Medicare space, the U.S. Department of Justice recovered $2.5 billion in settlements and judgments from False Claims Act Cases over the past year.
According to the DOJ, this is the ninth consecutive year that the organizations’ civil health care fraud settlements and judgments have exceeded $2 billion.
While the $2.5 billion number represents federal losses, the DOJ also said it also helped recover significant funds for state Medicaid programs
“Every year, the submission of false claims to the government cheats the American taxpayer out of billions of dollars,” Principal Deputy Associate Attorney General Jesse Panuccio said in a statement.
“In some cases, unscrupulous actors undermine federal healthcare programs or circumvent safeguards meant to protect the public health … The nearly three billion dollars recovered by the Civil Division represents the Department’s continued commitment to fighting fraudsters and cheats on behalf of the American taxpayer.”
The False Claims Act has its roots in groups trying to defraud the military during and after the Civil War and was significantly strengthened since 1986 when Congress increased incentives for whistleblowers to file lawsuits alleging false claims.
In healthcare, organizations across the industry were hit with False Claims cases including drug companies, medical device manufacturers, payer organizations and healthcare providers.
The single largest recovery over the past year was a $625 million settlement paid by drug wholesaler AmerisourceBergen to resolve a number of claims including that the company illegally repackaged injectable cancer drugs into pre-filled syringes and billing multiple doctors for individual drug vials.
The DOJ also brought cases against drug companies who increased drug prices by funding Medicare co-payments meant to serve as a check on healthcare costs.
When it comes to health plans, the government’s case against UnitedHealth Group over allegations that it knowingly obtained inflated risk adjustment payments for its Medicare Advantage beneficiaries is still ongoing.