DOJ Announces Wide-Ranging Healthcare Fraud Enforcement Action, Underscoring Need for Developing Compliant Relationships

Recently, the Department of Justice announced a series of prosecutions against numerous individuals, including a physician, a telemedicine executive, marketers, and various laboratory and pharmacy owners. In sum, 14 defendants across seven federal districts were charged for their alleged participation in various health care fraud schemes.

The announcement is significant for its breadth and underscores that prosecuting health care fraud will remain a priority for the Department of Justice. Of note, the Department highlighted its focus on prosecuting misconduct with a nexus to the COVID-19 public health emergency (“PHE”). In particular, several of the announced prosecutions involve the ordering of unnecessary genetic or other laboratory testing, telemedicine-related fraud, and the payment of kickbacks.

In Arkansas, the owner of two laboratories was charged with health care fraud as a result of the owner’s alleged submission of over $42 million in false and fraudulent claims during the PHE. The defendant allegedly used beneficiary information from prior laboratory test orders to submit claims for various tests that were not actually ordered or performed, including respiratory pathogen panels and COVID-19 tests.

In California, the President of Arrayit Corporation was charged, along with two co-conspirators, in connection with the submission of over $70 million in false and fraudulent claims for allergy and COVID-19 testing. It is alleged that the defendants sought to induce the ordering of an Arrayit COVID-19 test, and to bundle that COVID-19 test with a medically unnecessary allergy test.

In addition, the owner of a California home health agency was charged with the theft of government property and wire fraud in connection with $229,454 that he obtained from COVID-19 relief programs, including the CARES Act Provider Relief Fund, and the Economic Injury Disaster Loan Program. The individual is alleged to have misappropriated the relief funds and submitted false loan applications and loan agreements.

In Florida, two defendants were charged in connection with an alleged $73 million telehealth-related conspiracy to defraud the United States and to pay and receive health care kickbacks. It is alleged that the defendants offered telehealth providers access to Medicare beneficiaries for whom the providers could bill consultations based on waivers implemented during the PHE. In exchange, these providers agreed to refer beneficiaries to a laboratory for medically unnecessary cancer and cardiovascular genetic testing.

Moreover, three Florida individuals were charged as a result of their participation in an alleged $9.3 million health care kickback scheme wherein kickbacks were paid to patient brokers in exchange for referring Medicare beneficiaries to an affiliated laboratory for the purpose of offering the patients various medically unnecessary laboratory tests, including genetic tests, which were improperly bundled with COVID-19 tests.

In Louisiana, the owner of a clinical laboratory was charged in an alleged $15 million scheme to commit health care fraud, to defraud the United States, and to pay and receive health care kickbacks in exchange for referrals of various specimens for testing, including COVID-19 and respiratory pathogen testing. Moreover, the owner was also alleged to have submitted over $10 million in claims to Medicare, Medicaid, and Blue Cross Blue Shield of Louisiana for panels of expensive respiratory testing that was medically unnecessary.

In New Jersey, a physician was charged with six counts of health care fraud as a result of the physician’s participation in a COVID-19 testing event. It is alleged that the physician, in addition to ordering a COVID-19 test for patients, also ordered expensive and medically unnecessary cancer genetic testing for Medicare beneficiaries who attended the event. In addition, it is alleged that the physician subsequently billed Medicare for additional services, including office visits, that he never provided to beneficiaries.

Separately, in New Jersey, a partner of a diagnostic testing laboratory was charged in connection with a $5.4 million conspiracy to defraud the United States and pay and receive health care kickbacks. The defendant is alleged to have paid kickbacks in exchange for the ordering of a respiratory pathogen panel test, which was bundled with COVID-19 tests and billed to Medicare. In addition, the defendant is alleged to have paid kickbacks and bribes in exchange for the ordering of medically unnecessary genetic tests.

In New York, two owners of several pharmacies were charged in a superseding indictment in an alleged $45 million health care fraud, wire fraud, and money laundering scheme. The defendants allegedly submitted false and fraudulent claims to Medicare, including by using COVID-19 override billing codes to circumvent pre-authorization requirements and limits on the frequency of refills.

Although the announced prosecutions vary widely in scope, a common thread is the Department’s allegations that medically unnecessary tests were ordered, whether through telemedicine or in-person physician encounters, through waivers initiated as a result of the PHE or for tests or treatments that were directly related to COVID-19.

How Frier Levitt Can Help

By their very nature, business development and marketing arrangements exist for the purpose of increasing patient use of a certain provider, product, or test. However, unless appropriately structured by competent healthcare counsel, these arrangements can pose significant risk to all stakeholders, including marketers who help curate consumer leads, physicians who place orders or prescribe for the patients, and ancillary service providers, including laboratories and pharmacies, who ultimately rely on a physician’s order or prescription for testing or dispensing.

Frier Levitt has extensive experience advising a myriad of stakeholders on structuring compliant arrangements. In addition, our White Collar Defense & Government Investigations Practice Group has decades of experience defending corporate entities, executives, and healthcare and life sciences professionals under scrutiny for alleged healthcare violations. Contact us for both proactive or reactive assistance to mitigate applicable risk and exposure in your business model.

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