Ex-Florida hospital director gets prison time for role in $1B fraud scheme


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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




An unexpected twist in the ACA case


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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.



Ex-CFO, 3 surgeons charged in $950M kickback scheme in California


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Federal prosecutors unsealed charges this week against nine new defendants for their alleged roles in a kickback scheme that resulted in the submission of more than $950 million in fraudulent claims, mostly to California’s worker compensation system, according to the Department of Justice.

The nine defendants were charged in relation to the government’s investigation into kickbacks physicians received for patient referrals for spinal surgeries performed at Pacific Hospital in Long Beach, Calif. They are among the dozens of physicians and other medical professionals allegedly involved in the scheme.

Of the nine defendants recently charged, three are orthopedic surgeons. Daniel Capen, MD, agreed to plead guilty to conspiracy and illegal kickback charges. He allegedly accounted for about $142 million of Pacific Hospital’s claims to insurers. Timothy Hunt, MD, who allegedly referred spinal surgery patients to Dr. Capen and other physicians, agreed to plead guilty to a conspiracy charge involving his receipt of illegal kickbacks. Tiffany Rogers, MD, allegedly received illegal kickbacks to refer patients for spinal surgeries to Pacific Hospital.

The other defendants recently charged in the scheme include the former CFO of Pacific Hospital’s physician management arm, George Hammer. He agreed to plead guilty to tax charges based on the fraudulent classification of illegal kickbacks in hospital-related corporate tax filings. Two chiropractors as well as two companies and an individual associated with one of the chiropractors were also charged for their alleged involvement in the scheme, according to the DOJ.

Michael Drobot, former owner and CEO of Pacific Hospital, ran the 15-year-long kickback scheme. He was sentenced to more than five years in prison in January.



Court Slaps $114M Judgment in Lab Kickback Scheme


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A U.S. District judge in South Carolina trebled the False Claims Act liability of three defendants who submitted nearly 39,000 false claims to Medicare and other government health programs.

The CEO of a medical testing lab and two affiliated sales executives have been hit with a civil judgement totaling $114 million for paying kickbacks to physicians for referrals.

The defendants are: Tonya Mallory, the former CEO of Richmond, Virginia-based Health Diagnostic Laboratory; and Floyd Calhoun Dent III, and Robert Bradford Johnson, co-owners of Alabama-based BlueWave Healthcare Consultants Inc., a third-party sales firm that contracted with HDL.

The facts:

  • The three defendants were found guilty of civil fraud in three whistleblower suits that were heard by federal jury in Charleston, South Carolina in January.
  • The defendants disguised payments to physicians as processing and handling fees of between $10 and $17 for each patient they referred to blood testing labs: HDL, and Singulex Inc., of Alameda, California.
  • Physicians referred patients to HDL and Singulex for medically unnecessary tests, which were then billed to federal healthcare programs.
  • The three defendants were found liable for submitting 35,074 false claims, worth $16.6 million submitted to Medicare and TRICARE by HDL, and 3,813 false claims, worth $467,935, submitted by Singulex.
  • Under the False Claims Act, the court trebled damages, offset settlement payments received from HDL and Singulex for the same claims, and awarded $63.8 million in penalties requested by the United States, for a total judgment of $114.1 million.


New healthcare fraud trends managed care organizations need to watch


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Even traditional fraud schemes can be difficult to detect, and new methods will only make things more difficult for security teams watching healthcare dollars, says Shimon R. Richmond, special agent in charge at the Miami Regional Office in the Office of Investigations for the Office of the Attorney General.

Richmond gave a presentation on healthcare fraud trends on November 16 at the annual National Healthcare Anti-Fraud Association conference in Orlando, and says hypervigilance is key because obvious red flags are rare.

Where fraud is most prevalent

Richmond says these methods are often based in home health care, personal services, community-based services, and hospice care.

“We see a lot of unnecessary services and billing for services not provided. In the personal care services arena there are a lot of incestuous relationships in terms of who’s providing the care, who’s receiving the care, and who’s billing,” Richmond says. “One really kind of significant theme is pervasive and that’s the overwhelming influence of kickbacks in every area of fraud that we’re seeing.”

Kickbacks can be difficult to detect because this type of fraud often occurs outside of medical systems, he says. Data analytics systems can help, particularly if a system can recognize spikes in billing patterns or from certain providers.

“That’s a red flag. There are those anomalies that we can identify in a proactive manner. But the outside financial arrangements are really something that law enforcement is really only able to get into once we delve into an investigation,” Richmond says.

New fraud trends  

Emerging fraud trends are another challenge when counteracting fraud. It’s difficult to get in front of a new problem that hasn’t been seen before, and the game is always changing, Richmond says.

Recently, Richmond says he has seen an uptick in inappropriate prescriptions for  SUBSYS (fentanyl sublingual spray), which is meant to be prescribed to treat breakthrough pain in cancer patients.

“We’ve seen a huge issue lately where it is being marketed and prescribed to noncancer patients,” Richmond says. “Huge amounts of this drug are being prescribed, but the prescriber is not an oncologist.”

Pharmacies can also be involved in fraudulent activities by searching patient insurance plans to find high-cost prescriptions that can be filled and paid for. The pharmacies then target those consumers to push medications they don’t need, or bill for prescriptions that are never filled.

“A lot of times it’s a bait-and-switch type situation where they’ll do some kind of advertising for a knee brace or some other kind of thing just to get patients to call a number,” Richmond says. Once patients call, they are told the product they were interested in is not available but are offered a more expensive substitute. “There are a lot of marketing companies out there that are acting as lead generators where they are essentially selling to patients the idea of trying out these pains creams or scar creams.”

Hospitals and provider groups in financial distress are also becoming involved in fraud schemes, setting up in-house labs or working with outside labs to generate claims, often for fraudulent genetic testing or urine/drug screens. They may bill for unneeded tests with a kickback, or collect samples that never get tested but are still billed, he says.

Cyber threats and identity theft also continue to be a problem, Richmond says, with a huge spike in the area of telemedicine.

New fraudsters enter the arena

“We are seeing bulk cash transfers, weapons caches, and drug organizations migrating in as they develop their technological abilities and acumen in how to exploit electronic health records,” Richmond says. “This is kind of an evolving threat, and unfortunately, so much of the information is obtainable either online or through an employee that compromises the organization and practice.”

Security teams have to focus on trending information from data on encounters and billing practices, and analyze patterns just to try and keep up.

“I can’t emphasize enough the value of the investments in the analytics and proactive monitoring. That is crucial. Being in the law enforcement arena, a lot of our proactive efforts involve a combination of those analytics and looking for those outliers, or those parts that don’t make sense,” Richmond says. “At the end of the day, it’s all about hypervigilance.

Part owner of proposed Chesapeake eye-surgery center faces allegations in kickback scheme, feds say


Proposed site for the Center for Visual Surgical Excellence in Chesapeake

A North Carolina-based physician and part owner of a proposed medical center in southern Chesapeake is facing allegations of involvement in a kickback scheme.

The U.S. Attorney’s Office in Minnesota is pursuing a civil action against Jitendra Swarup, an ophthalmologist at Albemarle Eye Center in Elizabeth City, N.C., a spokeswoman said Friday. She said the government’s complaint would be filed by a court-mandated mid-November deadline.

Swarup was among more than a dozen physicians and four companies listed as defendants in a 2015 complaint lodged by a “whistleblower” and former executive of Sightpath Medical. The lawsuit alleges physicians were bribed through travel, entertainment and “sham consultancy agreements” to use Sightpath products and services.

The company and its former CEO, James Tiffany, settled with the government and the whistleblower recently for $12 million, according to the U.S. Attorney’s Office in Minnesota and court documents. The 2015 complaint, which was originally filed in 2013, claimed, among other things, that Sightpath paid Swarup consulting fees to induce referrals.

“We intend to vigorously defend Dr. Swarup, and we believe he will be completely exonerated,” Swarup’s lawyer, Marc Raspanti, said Friday. Raspanti said no criminal charges have been filed, and there is no criminal investigation. The spokeswoman in Minnesota wouldn’t comment on the existence of a criminal investigation, but to date, there has not been a criminal charge issued, she said.

Raspanti, a Philadelphia-based attorney, said he is “cautiously optimistic” the government can be persuaded to “spend their time elsewhere.”

Swarup and Chesapeake ophthalmologist Paul Griffey want to build an outpatient surgery center on about 1.5 vacant acres off Carmichael Way in Edinburgh. Twelve surgeons are committed to what’s being called the Center for Visual Surgical Excellence, Griffey told council members last week. Services would include cataract, retinal and other surgeries, city planning documents say.

According to a certificate of public need issued for the center last month by the Virginia Department of Health, the capital costs of the project are $3.7 million, with financing costs of $1.4 million. It’s scheduled for completion by October 2018. A condition of the state’s certificate is that the center must provide “an appropriate level” of charity services, according to department documents.

City staff and the Planning Commission have recommended approval of a conditional-use permit. City Attorney Jan Proctor said Friday the City Council is aware of the civil lawsuit, but it is not a factor in the land-use issue.

“Dr. Swarup vigorously denies the allegations, and they provide no basis to deny the (permit) whether or not true,” Grady Palmer, the attorney for the project, wrote in an email to council members Sept. 1. The council will consider the proposal tonight.

Swarup, a Suffolk resident, told council members last week that he’s been practicing for 20 years in northeastern North Carolina, where Albemarle Eye Center has five offices, including two on the Outer Banks. He is licensed in Virginia and North Carolina, according to state medical board websites, and is affiliated with hospitals in both states.

Settlement documents say Sightpath Medical supplies medical facilities with products that ophthalmologists use for surgeries in ambulatory surgical centers and hospitals.

Federal payers, including Medicare, reimburse the facilities and the physicians, documents said. Sightpath offered and paid illegal remuneration to physicians to promote the use of its products and services, which resulted in the submission of false claims, the settlement documents said.

The 2015 complaint contends that Swarup began receiving $8,000 a month around 2002 as a consultant for Sightpath, but that he “does not perform commercially reasonable services for these payments.”

Instead, the payments were made to gain Swarup’s business in North Carolina and induce referrals, the documents say. Swarup sought these payments, which continued until at least 2008, as a “quid pro quo for arranging for hospital administrations to utilize Sightpath’s services and equipment,” court documents say.

Swarup was also a guest of a company executive on at least one “luxury” fishing trip to Budd’s Gunisao Lake Lodge in Manitoba, Canada, in 2006, according to the 2015 complaint.

Raspanti said Swarup was a consultant for Sightpath from 2002 or 2003 to late 2014, but Sightpath is still contracted with hospitals in which Swarup operates. He said most of those facilities had contracts with the medical service provider before Swarup came to North Carolina to practice.

Swarup made roughly $80,000 a year in consulting fees with Sightpath, Raspanti said, which included discussions on ways to improve products and services and the training of technicians who assisted Swarup with his procedures.

“The contract, as far as we’re concerned, was legal and honored for many years by both sides,” Raspanti said. It was neither unusual nor inappropriate, he said, and contracts like it exist in other medical disciplines.

There were “half a dozen trips” over the course of Swarup’s contract with Sightpath, Raspanti said. Swarup paid for some and contributed to others, and most were requested by Sightpath executives and were part of Swarup’s contractual obligation. Executives also visited Swarup at his North Carolina home, Raspanti said.

“Just because you see an allegation doesn’t mean it’s true,” Raspanti said, noting there have been “no allegations of inappropriate surgeries, no allegations of lack of medical necessity, no allegations of bad medical outcomes.” He said Swarup has not been excluded from Medicaid or Medicare or any private insurance company.

Raspanti, a health care lawyer for many years, said his client – the only local doctor named in the 2015 complaint – has been targeted because he is an active and prolific surgeon. Raspanti said he has told Swarup to do whatever he needs to do to run his practice, including his pursuit of a new venture.

“I have told him to move full speed ahead on it,” Raspanti said.


Dallas lab company accused of paying kickbacks fights to keep its federal licenses


Erik Bugen, defendant in medical kickback scam case.(Linkedin/Linkedin)

Erik Bugen, defendant in medical kickback scam case.

An embattled Dallas laboratory company accused of masterminding a $100 million fraud through bribes and kickbacks is fighting to keep its licenses to stay in business, according to a federal civil lawsuit.

Lawyers for Next Health and Medicus Laboratories filed a lawsuit on Aug. 18 against state and federal officials and agencies, seeking a temporary restraining order and injunction to stop them from suspending or revoking the company’s federal laboratory licenses.

Such a move would effectively put them out of business, the lawsuit says. Federal inspectors said they found regulatory violations without offering specifics, according to Next Health’s lawsuit.

That’s not the company’s only concern.

Two of Next Health’s principals, Andrew Hillman and Semyon Narosov, are currently facing federal bribery and kickback charges along with 19 others in connection with the former doctor-owned hospital chain Forest Park Medical Center. Prosecutors say the hospital paid about $40 million in bribes and kickbacks in exchange for patient referrals that generated $200 million in paid claims.

The $100 million fraud allegation against Next Health comes from a lawsuit UnitedHealthcare filed in February against the company, with allegations similar to those in the criminal case. The insurer alleges that Next Health paid bribes and kickbacks to doctors and other providers between 2011 and 2016 for overpriced and unnecessary drug and genetic tests.

Legal observers say laboratories are under intense federal scrutiny due to concerns that some are paying doctors to order genetic and drug tests that aren’t medically necessary.

Four Austin men, for example, were indicted in Dallas in July, accused of paying kickbacks to physicians for ordering bogus urine tests at North Texas labs. Another Texas lab company, Sky Toxicology, is fighting similar allegations from UnitedHealthcare in a lawsuit in San Antonio. Sky lawyer David Navarro said, “We intend to pursue our claims and vigorously defend against United’s counterclaims.”

Jeffrey Baird, a health care attorney in Amarillo, said many new testing labs have opened across the nation over the past two years. He said he advises his clients not to pay marketers any commissions to find specimens for testing due to the federal anti-kickback law.

“Anytime somebody figures out that a government program is paying money for something, you’re going to have folks try to figure out how to access that money,” he said.

Once federal authorities shut down one abusive practice, fraudsters figure out another way to bill for unnecessary medical services, he added. “It’s whack-a-mole. It’s almost this cat-and-mouse game,” Baird said.

Next Health is the majority owner of Medicus, a clinical testing laboratory that became a Medicare provider in 2010, court records say. UnitedHealthcare says in its lawsuit that Hillman and Narosov control Next Health.

Medicus in 2014 paid $5 million to settle a federal civil complaint that it defrauded Medicare over urine testing services. Next Health says Medicus has stopped certain testing “out of an abundance of caution” and also ceased operations at four other labs it owns because of the latest controversy.

Government overreach?

Next Health and Medicus allege that state and federal officials have a “premeditated intent to shut down the plaintiff’s business operations” and are not following their own rules and procedures.

Company representatives could not be reached for comment. But in court documents, they say they were not given time to correct “alleged deficiencies.”

A team of state and federal inspectors arrived at Medicus’ laboratory in April for a five-day inspection, reportedly in response to an anonymous complaint, the lawsuit said. The team also inspected five other labs owned in part by Next Health, the lawsuit said.

Next Health’s chief compliance officer, who accompanied the inspectors, noticed a copy of an email left in plain sight from one team member to others, saying the labs had received ample media attention and that the inspectors needed to find a way to pursue a “complaint investigation,” the lawsuit said.

“Defendants’ employees and agents were instructed to make findings that would close down plaintiffs’ operations before they even went to plaintiff’s laboratories,” the suit says.

The email is proof, the lawsuit says, that the inspection was not due to a complaint but part of an effort to shut down Medicus’ lab and prevent Next Health from running any other labs “through a regulatory ban.”

A May 10 letter from the Centers for Medicare & Medicaid Services to Next Health and Medicus officials — appended in the lawsuit — said inspectors found problems with testing.

“Your laboratory demonstrated systemic and pervasive problems throughout the laboratory which has led to the findings of immediate jeopardy,” the letter says.

A finding of immediate jeopardy allows CMS to suspend, limit or revoke a laboratory’s license to operate without a hearing or opportunity for the lab to refute the allegations, the lawsuit says.

A CMS representative said the agency does not comment on pending lawsuits.

Federal charges

It’s not the first time Hillman has been in trouble with the law over alleged health care fraud.

In 2005, Hillman and his high school friend, Jason White, were indicted on mail fraud and health care fraud charges for an alleged scheme to defraud workers’ compensation insurance companies by getting them to pay for unnecessary medical equipment.

The following year, the U.S. attorney’s office in Dallas dropped the charges against Hillman after White took blame for the fraud and said Hillman had nothing to do with it, according to court records. That came after White had already pleaded guilty to conspiring with Hillman to commit the fraud, court records show.

Hillman was indicted for a second time in November — in the Forest Park Medical case — along with Narosov, a licensed physical therapist.

The indictment says the hospital paid Hillman and Narosov about $190,000 in kickbacks and bribes for referring patients to Forest Park Medical for surgeries and other procedures.

Both men have pleaded not guilty in that case and have filed a motion to dismiss the indictment. Attorneys for Hillman and Narosov said in court filings that their clients are not part of the alleged conspiracy and that the five-year statute of limitations bars charges against their clients in the case.

Narosov’s lawyer declined to comment. Hillman and Next Health and their lawyers could not be reached for comment.

Gift cards for urine

One of Next Health’s former marketing contractors was implicated in an unrelated criminal case involving an alleged laboratory kickback scheme.

Erik Bugen, of Austin, was indicted in July. Prosecutors say a company he co-founded, the ADAR Group, drummed up unnecessary tests for different labs and got the military’s health care system, Tricare, to pay for them. Soldiers were given Wal-Mart gift cards in exchange for providing saliva and urine, the criminal filing said.

Bugen has pleaded not guilty. He and his lawyer could not be reached.

The ADAR Group also found specimens for Next Health by giving people $50 gift cards to urinate in cups at Whataburger restrooms, according to the UnitedHealthcare lawsuit. Next Health labs conducted the tests under the guise of a “wellness study,” the lawsuit alleges.

Next Health lawyers have filed a motion to dismiss the lawsuit, saying UnitedHealthcare has failed to show any evidence of fraud.

“UHC has failed to allege any facts demonstrating a ‘meeting of the minds’ necessary to establish a claim for ‘conspiracy to commit fraud,’” said Ernest Martin Jr., one of the Next Health’s attorneys, in the filing.

Martin said doctors referring specimens for testing at the Next Health labs “exercise independent professional judgment in determining what testing services are appropriate and necessary.”