In a stark reminder of the legal perils facing the telehealth and health technology industries, the Department of Justice (DOJ) announced that a CEO of a health care software company was sentenced to 15 years in prison and ordered to pay more than $452 million in restitution following his conviction in a scheme that defrauded Medicare and other federal health care benefit programs in amounts exceeding $1 billion.
According to the DOJ, a federal jury convicted the 79-year-old CEO of Power Mobility Doctor Rx, LLC (DMERx) of conspiracy to commit health care fraud and wire fraud, three counts of health care fraud, conspiracy to pay and receive health care kickbacks and conspiracy to defraud the United States and make false statements in connection with health care matters.
The scheme centered on an internet-based platform (DMERx) that generated fraudulent physician orders for medically unnecessary durable medical equipment (DME), orthotic braces, pain creams, and other items. Thousands of Medicare beneficiaries were targeted through misleading mailers, call centers, and television advertisements, often without any legitimate medical evaluation. Prosecutors detailed how the CEO facilitated relationships among pharmacies, DME suppliers, marketers, and telemedicine providers who accepted kickbacks and bribes in exchange for physicians’ signed orders using the DMERx platform. These fraudulent orders were then used to bill Medicare and other federal insurers for items that were medically unnecessary, resulting in over $1 billion in false claims and more than $360 million in paid claims.
The case underscores the seriousness with which federal authorities are policing deceptive telemedicine practices and fraud schemes that exploit vulnerable populations and taxpayer-funded programs.
What This Means for Telehealth Stakeholders
- Regulatory Scrutiny of Telehealth Platforms Will Intensify
Federal prosecutors and investigators are focusing on tech platforms that facilitate questionable clinical workflows or billing practices. The DMERx case sends a clear message that telemedicine platforms, and not just pharmacies and providers, are targets for fraud prosecution, especially when used to circumvent clinical standards or regulatory requirements.
- Valid Telehealth Encounters, Billing, and Clinical Documentation
There must be a valid telehealth encounter that establishes a bona fide patient-practitioner relationship, consistent with the applicable standard of care and state law requirements, before a healthcare provider issues a prescription. However, fraudulent doctors’ orders were generated when DMERx falsely represented that a doctor had examined and treated the Medicare beneficiaries when, in fact, purported telemedicine companies paid doctors to sign the orders without regard to medical necessity, based only on a brief live telephone call with the beneficiary, or no interaction with the beneficiary at all. The CEO and his co-conspirators concealed the scheme through sham contracts and by eliminating “dangerous words,” such as “telemedicine” or “phone conversations” from doctors’ orders that might cause Medicare to audit the model’s DME suppliers. Additionally, the CEO and his co-conspirators created a variety of different “narratives” that would randomly populate into the practitioners’ chart notes in the electronic medical record to prevent the orders from appearing the same and triggering audits.
- Kickbacks and Referral Arrangements Are Enforcement Priorities
The DMERx platform facilitated kickbacks and questionable referral arrangements in exchange for orders. Specifically, DME suppliers, pharmacies, and telemarketing companies paid kickbacks and bribes to the defendants in exchange for signed physicians’ orders generated through the DMERx platform, which, in turn, paid practitioners to sign those orders. Providers and vendors engaged in telehealth models must ensure compliance with the federal Anti-Kickback Statute (AKS) and comparable state laws. Stakeholders are encouraged to conduct a compliance checkup, including for in-progress relationships to assess risk.
How Frier Levitt Can Help
Telehealth companies, technology vendors, and healthcare providers should ensure their workflows, documentation, and compensation arrangements comply with applicable state and federal laws. Frier Levitt has extensive experience advising clients on telehealth compliance and fraud risk mitigation, including structuring compliant agreements and financial arrangements between health technology vendors, prescribers, and ancillary service providers, assessing billing and medical-necessity risks; and counseling on compliant ordering practices. We also represent clients in government audits and investigations, as well as civil, administrative, and criminal matters involving allegations of unlawful prescribing, ordering, or claims submission. Contact Frier Levitt to speak to an experienced attorney about how we can assist your organization in navigating the regulatory issues impacting telehealth models.
