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.





Arrests made in alleged $66 million military medical insurance fraud


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A Utah pharmacy and the husband-and-wife owners of a Tennessee medical practice have been indicted on allegations that they used Marines and sailors in San Diego County as pawns in a nearly $66 million medical insurance scheme, according to an indictment unsealed Friday.

Jimmy and Ashley Collins, who own Choice MD in Cleveland, Tenn., made their first court appearance Friday in Chattanooga, a precursor to an upcoming San Diego hearing.

The charges accuse the couple, as well as CFK Inc., owners of a pharmacy in Bountiful, Utah, of defrauding the military’s health insurance system TRICARE.

At the center of the alleged scheme are compound medications — drugs that are custom-made by pharmacists to tailor to a patient’s unique needs and are significantly more expensive than typical prescription drugs. The ingredients are not FDA approved.

Military members in San Diego would be paid to recruit other service members to participate in a fake medical study, according to the allegations. The participants were paid $100 to $300 to speak with a doctor in a telemedicine session and would be prescribed compound medication — some in cream form, according to details in a search warrant affidavit obtained last year by the Union-Tribune.

Many of the compound drugs came from the pharmacy in Utah, which was then known as The Medicine Shoppe but has since changed its name to Bountiful Drug under new ownership, according to the indictment.

The number of compound medications to TRICARE patients from the pharmacy skyrocketed, from 218 such medications in all of 2013 to 4,637 in the first four months of 2015, records say. The batch in 2015 elicited $67.3 million in reimbursement claims, according to court records.

Many of the prescriptions were authorized by physicians working for Choice MD.

Investigators tracked millions of dollars flowing among the office, the pharmacy and alleged recruiters. The Collinses were paid $45 million in kickbacks, according to the indictment. They bought up property around Tennessee, a yacht and luxury cars, including two Aston-Martins, prosecutors said.

The compound prescriptions stopped after a government audit in May 2015 looked into the sudden rise in claims and payment was denied.


Editorial: Illinois’ home health care hustle


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For those who are ailing but hope to stay out of nursing homes or hospitals — and who wouldn’t? — there’s an increasingly popular alternative: home health care providers. These are doctors, nurses and other medical staffers who visit patients at home, with the goal of treating chronic conditions and keeping people healthy enough to avoid costly long-term stays in more intensive facilities. That saves patients, and the health care system, money.

But, as with all things in the health field, there are plenty of caveats for potential customers.

Illinois is a field of dreams for home health care fraud, the Tribune’s Michael J. Berens reports. Why? Because state public health regulators doled out too many home health licenses too fast in the past decade. The state allowed almost anyone with a $25 licensing fee to open a home health care business but fails to provide meaningful oversight on hundreds of operators. You can find Berens’ full report at chicagotribune.com/homehealth.

The upshot of lax oversight: In the last five years, area home health agencies have improperly collected at least $104 million in Medicare dollars, Berens reports. (Most patients in home health care are covered by Medicare.) Often the home health businesses did that by falsely certifying that Medicare patients were homebound and in need of nursing care.

But the problem here isn’t measured only in Medicare dollars wasted. It’s measured in patients at risk or harmed. Thousands of patients have been subjected to unwarranted procedures, therapies and tests; some were prescribed unneeded and powerful drugs, the Tribune analysis concludes.

So what can patients, and their families, do to protect themselves? How can someone in Illinois — or her family — shop smartly for a home health care provider? It’s not easy, but here are a few tips:

  • First, you can check a federal website that offers star ratings for home health providers at medicare.gov/homehealthcompare.
  • Then, be vigilant. Make sure a home health care agency coordinates care with your existing primary physician. If a home health care company makes lots of visits but does little more than check your blood pressure, be wary.
  • Check your monthly Medicare statement to monitor services that a home health care company claims to have provided.

On average, some 10,000 Americans turn 65 every day. That means the market for home health will likely continue to surge, placing greater demands on regulators.

In 2013, the federal government banned Illinois from issuing new licenses. The feds said that fraud was rampant, driven by too many home health companies for too few patients. Still, Cook County has more home health companies than the entire state of New York.

Many companies provide excellent care for their customers. The industry’s trade association, the Illinois Homecare and Hospice Council, represents about 160 providers (among the 750 or so licensed in the state).

“We support the moratorium,” Executive Director Sara Ratcliffe told the Tribune. “We want more enforcement.”

So do we. This field of dreams needs to be weeded of fraudsters. At least 357 active home health companies in the Chicago area have been linked to potential financial fraud by federal investigators but never charged.

That’s a daunting fact for families and patients seeking home health care. The state could help prospective patients by posting disciplinary and enforcement actions on the web. More sunshine — readily available information on providers’ performance and disciplinary records — would help them make a wise choice.


Whistleblowers: United Healthcare Hid Complaints About Medicare Advantage


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The suit, filed by United Healthcare sales agents accuses the giant insurer of keeping a “dual set of books” to hide serious complaints about its services

United Healthcare Services Inc., which runs the nation’s largest private Medicare Advantage insurance plan, concealed hundreds of complaints of enrollment fraud and other misconduct from federal officials as part of a scheme to collect bonus payments it didn’t deserve, a newly unsealed whistleblower lawsuit alleges.

The suit, filed by United Healthcare sales agents in Wisconsin, accuses the giant insurer of keeping a “dual set of books” to hide serious complaints about its services and of being “intentionally ineffective” at investigating misconduct by its sales staff. A federal judge unsealed the lawsuit, first filed in October 2016, on Tuesday.

The company knew of accusations that at least one sales agent forged signatures on enrollment forms and had been the subject of dozens of other misconduct complaints, according to the suit. In another case, a sales agent allegedly engaged in a “brazen kickback scheme” in which she promised iPads to people who agreed to sign up and stay with the health plan for six months, according to the suit.

Though it fired the female sales agent, United Healthcare concluded the kickback allegations against her were “inconclusive” and did not report the incident to the Centers for Medicare & Medicaid Services, according to the suit.

Asked for comment on the allegations in the suit, United Healthcare spokesman Matt Burns said: “We reject them.”

Medicare serves about 56 million people, both people with disabilities and those 65 and older. About 19 million have chosen to enroll in Medicare Advantage plans as an alternative to standard Medicare. United Healthcare is the nation’s biggest operator, covering about 3.6 million patients last year.

The whistleblowers accuse United Healthcare of hiding misconduct complaints from federal officials to avoid jeopardizing its high rankings on government quality scales. These rankings are used both as a marketing tool to entice members and as a way for the government to pay bonuses to high-quality plans.

Medicare paid United Healthcare $1.4 billion in bonuses in fiscal 2016 based upon their high quality ratings, compared with $564 million in 2015, according to the suit. CMS relies on the health plans to report problems and does not verify the accuracy of these reports before issuing any bonus payments.

The suit alleges the bonuses were “fraudulently obtained” because the company concealed the true extent of complaints. In March 2016, for instance, the company advised CMS only of 257 serious complaints, or about a third of the 771 actually logged, according to the suit.

The suit was filed by James Mlaker, of Milwaukee, a sales agent with the insurance plan in Wisconsin, and David Jurczyk, a resident of Waterford, Wis., a sales manager with the company.

The suit says Jurczyk had access to “dual” complaint databases, described as “the accurate one with a complete list of complaints and more details of the offenses and the fraudulent, truncated one provided to CMS.”

Jurczyk “has direct, personal knowledge of dozens of cases in Wisconsin alone in which customer complaints raising serious issues were routinely determined and falsely documented as either “inconclusive” or “unsubstantiated” by the company, according to the suit. Overall, about 84 percent of complaints alleging major infractions, such as forging signatures on enrollment forms, were determined to be inconclusive or unsubstantiated, according to the suit.

According to Mlaker, one sales agent faced little disciplinary action even after allegedly forging a customer’s signature on an enrollment form. The customer was “shocked” to learn that the agent had enrolled him because he had told the agent he was “not interested and did not want to enroll,” according to the complaint.

As a result, according to the suit, CMS officials never learned of these customer complaints.

The two men said that in early 2013 they began noticing that investigations of serious customer complaints that previously would have been completed “swiftly” instead “were drawn out; little actual inquiry was made, or even worse, known facts were ignored and discounted to falsify findings,” according to the suit.

Complaints also brought “much fewer and less serious corrective or disciplinary actions,” according to the suit. According to the suit, United Healthcare took steps to encourage any members with complaints to report them directly to the company rather than to complain to CMS.

The unsealing of the Wisconsin cases comes as United Healthcare and other Medicare Advantage plans are facing numerous cases brought under the Federal False Claims Act. At least a half-dozen of the whistleblower suits have surfaced since 2014.

The law allows private citizens to bring actions to recover damages on behalf of the federal government and retain a share. The Justice Department elected not to take over the Wisconsin case, which could limit the amount of money, if any, recovered. United Healthcare spokesman Burns said the company agreed with that decision.

In May, the Justice Department accused United Healthcare of overcharging the federal government by more than $1 billion by improperly jacking up risk scores over the course of a decade.

Florida health administrator charged in $1B fraud case



Bribes paid to a state health administrator are central to one of the biggest healthcare fraud cases to date, according to federal authorities.

The Department of Justice has charged Bertha Blanco, a former employee at Florida’s Agency for Health Care Administration (AHCA) with bribery in connection with a $1 billion Miami fraud case. Federal investigators said Blanco received bribes from Philip Esformes, the CEO of a Miami chain of skilled nursing facilities and assisted-living facilities, and his associates.

Blanco received cash bribes from Medicare and Medicaid providers in exchange for confidential AHCA reports, including patient complaints and unannounced AHCA inspection schedules that were then used to make false Medicare and Medicaid claims, according to DOJ. Blanco did not receive payouts directly from Esformes but through a series of intermediaries, the Miami Herald reports.

Esformes, who made FierceHealthcare’s list of notorious healthcare executives last year, has been charged with fraud and bribery in the case. He has been behind bars in federal prison since July 2016 awaiting a trial set for March 2018.

Assistant Attorney General Leslie R. Caldwell called the scheme “ruthlessly efficient,” with conspirators using a network of corrupt providers to shuffle patients between various healthcare facilities while exchanging kickbacks disguised in various sham agreements, as FierceHealthcare has previously reported.

Blanco’s defense attorney Robyn Blake told the Herald that she is reviewing the DOJ’s evidence before deciding to pursue a full trial or take a plea deal. Blanco was arrested earlier this month and was released on $250,000 bond; she will be arraigned on Sept. 1.

Esformes’ attorneys maintain his innocence, according to the Herald. Two of the Esformes’ alleged co-conspirators have pleaded guilty to Medicare fraud charges, and Michael Pasano, Esformes’ lead attorney, said the pair worked independently without Esformes’  involvement.

Another fraud case: Vanderbilt Hospital settles overbilling suit

In other fraud news, Vanderbilt University Medical Center has paid out $6.5 million to settle a federal lawsuit that alleged the hospital overbilled Medicare and Medicaid, the Associated Press reports.

The suit was brought in 2013 by whistleblowers who claimed the hospital overbilled federal healthcare programs for more than a decade. Vanderbilt’s counsel, Michael Regier, said that the settlement aimed to avoid further costs and distractions related to the suit, according to the article, and that the hospital still disputes the claims in the lawsuit.

The hospital and the feds found no evidence of wrongdoing on Vanderbilt’s part, Regier said.

HHS announces ‘largest fraud takedown in history’


The Department of Health and Human Services Office of Inspector General, state and federal law enforcement executed a massive fraud takedown this month that charged more than 400 defendants in connection with healthcare fraud schemes that involved roughly $1.3 billion in fraudulent billings to government payers including Medicare and Medicaid, the OIG announced.

The takedown is being called the largest in history, both for the number of defendants charged and the amount of money lost, OIG said.

Additionally, OIG issued exclusion notices to 295 doctors, nurses, and other providers related to opioid diversion and abuse. The notices ban participation in or claim submissions to, all Federal healthcare programs.Those who got the notices include 57 doctors, 162 nurses, and 36 pharmacists.

“Takedowns protect Medicare and Medicaid and deter fraud — sending a strong signal that theft from these taxpayer-funded programs will not be tolerated. The money taxpayers spend fighting fraud is an excellent investment: For every $1.00 spent on health care-related fraud and abuse investigations in the last three years, more than $5.00 has been recovered,” OIG said in a statement.

The schemes spanned the entire nation, from Washington to Puerto Rico, and 115 of those charged are medical professionals, specifically doctors and nurses. Among the fraud schemes, a Texas provider was charged with overprescribing narcotics to patients who had no medical need for them, and some of whom died from drug overdoses. The doctor allegedly fraudulently billed Medicare, netting more than $1.2 million in reimbursement. Another scheme involved seven Michigan defendants, including five physicians, who allegedly perpetrated illegal kickbacks and billing for medically unnecessary joint injections, drug screenings, and home health services. One of the defendants owned multiple health-related businesses and allegedly billed Medicare $126 million as part of the fraud scheme.

Another notable fraud case recently announced by the Department of Justice involved a landmark settlement with historically unique requirements. Pharmaceutical manufacturer Mallinckrodt, one of the largest manufacturers of generic oxycodone, agreed to pay $35 million to settle allegations that it violated the Controlled Substances Act when it failed to report “suspicious orders” for controlled substances, as well as record-keeping infractions. The DOJ said that from 2008 until 2011, Mallinckrodt supplied distributors an “increasingly excessive quantity” of oxycodone pills but didn’t notify the DEA of these suspicious orders. The distributors then supplied various U.S. pharmacies and pain clinics.

The DOJ called the settlement groundbreaking for a couple reasons. First, it involves requiring a manufacturer to utilize chargeback and similar data to monitor and report suspicious sales of its oxycodone at the next level in the supply chain. This typically means sales from distributors to independent and small chain pharmacy and pain clinic customers. Also, it requires a parallel agreement with the DEA through which the company will analyze data it collects on orders from customers down the supply chain to identify suspicious sales.

It is clear government agencies and law enforcement are increasingly zeroing in on healthcare fraud, with other notable settlements in recent months with well-known providers related to False Claims Act violations. Those systems include Carolinas Healthcare, Freedom Health, Los Angeles hospital Pacific Alliance Medical Center, Genesis Healthcare, and even Walmart.

Mylan Sued by Consumers claiming PBM Rebates Are Just Kickbacks


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Three consumers filed a lawsuit accusing Mylan Pharmaceuticals of paying kickbacks to pharmacy benefits managers in order to boost EpiPen sales, which caused them to unfairly overpay for the allergy-reaction device that has been at the center of the national debate over the high cost of medicines.

Their allegations take aim at the convoluted interplay between drug makers and pharmacy benefit managers, which are middlemen that negotiate favorable insurance coverage for medicines on behalf of insurers. The PBMs attempt to extract the best prices from drug makers and, for their trouble receive rebates, some of which are held back as fees.

The lawsuit, which charges Mylan engaged in racketeering, seeks class action status and claims that Mylan “gamed the system” and pretended to blame PBMs for demanding ever-higher rebates for its decisions to regularly raise the price for EpiPen.

The consumers maintain that Mylan paid continually higher rebates in order to book larger sales and ensure favorable insurance coverage, especially as competition to EpiPen arrived. The lawsuit, however, argued that the rising rebates “saddled” consumers who either did not have insurance or have high-deductible plans with “crushing out-of-pocket expenses.”

One of the women who brought the suit, Lisa Vogel of Takoma Park, Md., purchased EpiPen Jr. two-packs several time for her son, who is allergic to peanuts and amoxicillin, according to the lawsuit. Her family has a high-deductible plan from Aetna and, on June 13, 2014, her out-of-pocket cost was $351.73. A year later, on June 22, 2015, her share of the cost $453.49, the lawsuit stated.

The lawsuit also pointed to recent research in the Journal of the American Medical Association that found between January 2007 and December 2014, out-of-pocket spending for each EpiPen patient rose nearly 124 percent, to $75.50 from $33.80. “Mylan’s list price has become an artificial and phony price established and driven up as part of a kickback scheme from Mylan to the PBMs,” the lawsuit argued.

“Mylan is no victim,” the lawsuit continued. “Instead, Mylan participated in and benefited from the high list price scheme and from paying high rebates or kickbacks to PBMs to ensure EpiPen’s market dominance. In fact, from at least 2008 until 2011, when Mylan stopped reporting this information, EpiPen had a 95 percent market share” for auto-injector allergy devices.

There are no PBMs named as defendants. A Mylan spokeswoman declined to comment.


Editor’s Corner: Why are we still letting pharma pay physicians?


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Last month, W. Carl Reichel was acquitted of charges that he oversaw a kickback scheme designed to induce physicians to prescribe certain drugs manufactured by Warner Chilcott LLC.

The president and CEO of the pharmaceutical company was acquitted of those charges despite the fact that the company itself pleaded guilty to “knowingly and willfully” paying off physicians in the form of sham speaking fees and meals at high-end restaurants, and agreed to pay the government $125 million in civil and criminal fines.

He was acquitted even though prosecutors trotted out nearly a dozen witnesses who worked under Reichel to testify against him, some of whom admitted to participating in the scheme that used “medical education” events–including barbecues, picnics, parties and trips to a casino–to improve physician prescribing rates. The government also alleged that Reichel oversaw the whole thing by demanding sales reps engage in “business conversations” about “clinical experience,” which was code for a physician’s prescribing rate.

But most importantly, he was acquitted because his attorneys never denied that he oversaw any of these payments, or that he instructed sales staff to take physicians out “at least twice a week.” They merely argued that “relationship building” is “widely accepted conduct” in the medical community.

They aren’t lying–allowing pharmaceutical companies to pay physicians large sums of money is a widely accepted practice. The question we should be asking ourselves is, why?


Healthcare frauds and settlements in 2017: Running list


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