CLIENT ALERT: 138 Individuals, Including Physicians and Other Medical Professionals, Charged with Healthcare Fraud Involving Telemedicine, Improper Referrals, and Medically Unnecessary Claims

Who should read this notice:

  • All healthcare professionals, especially those utilizing telemedicine services
  • Owners, operators and managers of laboratories and/or other testing and treatment facilities
  • Pharmacies and other medical professionals

On September 18, 2021, the Department of Justice (“DOJ”), in its latest enforcement action, indicted 138 individuals on charges related to healthcare fraud that allegedly resulted in a $1.4 billion dollar loss to the Government. The DOJ indicted individuals suspected of committing fraud related to telemedicine, COVID-19, genetic testing, as well as engaging in healthcare fraud involving substance abuse treatment facilities and/or illegal opioid distribution. Specifically, this takedown operation focused on individuals involved in illegal kickback schemes that resulted in improper referrals for medically unnecessary testing, both in the COVID-19 context and genetic cancer testing (CGx). The indictments also addressed the submission of false claims stemming from said kickback conspiracies.

With telemedicine on the rise due to the ongoing pandemic, it is expected that healthcare providers utilizing telemedicine in their practice will come under additional scrutiny in the coming months. To that end, suspect telemedicine arrangements involving illegal fee agreements that result in medically unnecessary services billed to Medicare and Medicaid, will continue to be the focus of many government investigations.  We have previously discussed the telemedicine trend and potential enforcement activities as they relate to medically unnecessary laboratory testing referrals, and medically unnecessary durable medical equipment prescriptions here and here

While telemedicine is becoming more commonplace, healthcare providers utilizing telemedicine in their practices must ensure strict compliance with the state and federal laws that govern it. Moreover, healthcare providers and suppliers should be vigilant when it comes to ensuring statutory compliance, especially when the providers are employing sales representatives, marketers, and/or marketing companies to promote their laboratory or treatment facilities.

Notably, if providers (i.e., the laboratory testing facilities and/or treatment facilities) are receiving referrals, via telemedicine or otherwise, the onus is always on them to verify that they did not unduly influence any of their referrals by paying improper remuneration in violation of the Federal Anti-Kickback Statute (“AKS”), Eliminating Kickbacks in Recovery Act (“EKRA”), and the False Claims Act (“FCA”). For a detailed overview of the relevant laws, click here. Providers should start by overhauling all relevant contractual agreements to ensure that the language contained therein is permissible.  In addition, robust compliance programming in these areas is critical in the event that questions are raised to show reliance on those processes in preventing and detecting misconduct.

Because many of the most recent indictments and government prosecutions stem from illegal contractual relationships between pharmacies, laboratories or treatment facilities and marketing companies and/or telemedicine doctors, providers must remain diligent in ensuring their contractual agreements comply with all applicable laws. In many instances, compensation structures that are acceptable in other industries can violate state and federal laws when used in the healthcare space. Agreements that may appear legitimate to laypersons can violate a myriad of state and federal laws, which may result in hefty penalties and/or criminal charges. 

By way of example, in most instances, it is not permissible for healthcare facilities and/or pharmacies to offer commission-based or per-referral compensation to marketers and/or other healthcare providers. Even if such compensation is not specifically intended to improperly influence referrals, it may, nonetheless, be in violation of FCA, AKS and/or EKRA. As such, in order to avoid disciplinary action and/or potential criminal liability, it is imperative that healthcare providers take immediate and swift measures to ensure compliance with all applicable laws. The first step is to have an experienced attorney review and evaluate the providers’ current agreements, including those agreements with marketers and telemedicine providers, as these areas are ripe for government investigation.

How Frier Levitt Can Help

Frier Levitt attorneys have extensive experience drafting contracts for health care professionals, providers, and suppliers, including developing arrangements that eliminate potentially problematic fee structures. Moreover, Frier Levitt’s transactional attorneys are well-equipped to proactively identify and manage additional types of risk related to healthcare laws, whereas its white collar and government defense team stands ready to remediate instances of noncompliance, respond to regulatory inquiries and criminal investigations on your behalf, and, if it becomes necessary, put forth a rigorous criminal defense.