Non-Physician Operator of Medical Clinic in Burbank Sentenced to 37 Months for Federal Healthcare Fraud in U.S. Central District

Years ago, healthcare fraud would be prosecuted primarily if there were "ghost" billing (billing for non-existent patients or services that were never provided). That has changed significantly and billing for patients who were brought in by marketers for allegedly "medically unnecessary" services has become more common. A recent case shows how these cases are being aggressively handled at the federal level in Los Angeles.

On October 2, 2017, Knarik Vardumyan, a non-physician "owner-operator" of a Burbank medical clinic was sentenced to 37 months in federal prison on federal healthcare fraud charges for participating in a scheme to defraud Medicare by prescribing unnecessary services and equipment, which allegedly often were not even provided. The sentence was imposed by United States District Judge Dale S. Fischer. 

Judge Fischer also ordered Ms. Vardumyan to pay $1,711,789 in restitution to the Centers for Medicare & Medicaid Services. There was no trial in this case since Ms. Vardumyan pleaded guilty in April 2017 to two counts of federal healthcare fraud.

In the plea agreement, Ms. Vardumyan admitted that she knowingly and unlawfully participated in a scheme to defraud Medicare by billing Medicare for “medically unnecessary office visits and diagnostic tests,” and by arranging “for the issuance of . . . prescriptions and orders for medically unnecessary durable medical equipment” and “home health services.” This case involved billing for office visits, diagnostic tests, durable medical equipment and home health. This means that there must have been some coordination between the ancillary services and Ms. Vardumyan's clinic.

There was improper marketing since Ms. Vardumyan further admitted, “many, if not all” of the people who visited her clinic “were brought . . . by co-schemers known as ‘marketers,’ who offered promises of free, medically unnecessary [equipment] or food” to those Medicare beneficiaries who were willing to attend Vardumyan’s clinic.

Although there was a plea, the government suggested a 37 month sentence which Judge Fischer apparently agreed with in addition to the sentence suggested by Pretrial Services. The sentence suggests to me that Ms. Vardumyan was not able to repay much restitution prior to sentencing.

This was was investigated by the Federal Bureau of Investigation which has a strong healthcare fraud unit.

Posted by Tracy Green, Esq.

Southern California Physician Indicted For Illegally Prescribing Controlled Drugs Including to Out-of-State Residents Without an In-Person Physical Examination

The investigations of physicians for prescribing scheduled drugs to patients including Oxycodone, Xanax, Soma and other medications continues. Last week on July 6, 2017, a physician Jeffrey Olsen D.O. was Indicted in the Central District of California, Case No. SA CR-17-76. Dr. Olsen is presumed innocent and an Indictment is not evidence. 

One issue I have with these criminal cases is that in order to "catch" the physicians, the DEA will wait for a year or more to get the "evidence" to support criminal cases. In Dr. Olsen's case, the charges date from 2013 to January 2016. While it is not clear here, most cases I see have the government investigators sending in undercover agents and seeking to get evidence to support the criminal charges. In the meantime, allowing the physician to continue to prescribe. Public safety is being sacrificed to make sure the "criminal" case is as open and shut as possible. 

In Dr. Olsen's case, the DEA went in on or about March 18, 2016 and suspended his DEA registration. There was no arrest or charges at that point in time but I suspect that his charts were seized or reviewed by the DEA.

The Indictment alleges that Dr. Olsen allegedly sold prescriptions to addicts and drug dealers in exchange for fixed cash fees, without any medical basis for the prescriptions. It is also alleged that during the investigation, Dr. Olsen also sold hundreds of prescriptions to addicts in other states, such as Oregon, without ever seeing the “patients” for an in-person examination. 

It is alleged that in text messages to these out-of-state customers, Dr. Olsen allegedly told customers that, in exchange for fees up to $3,000, he would write prescriptions for them. It is alleged that Dr. Olsen let the patients select the medications and that he failed to follow the standard of practice and determine whether they were actually taking the prescribed drugs or whether they were getting additional narcotic prescriptions from other doctors. 

It is alleged that Dr. Olsen's prescriptions resulted in more than 1.2 million pills of narcotics, which were almost entirely at maximum strength, in addition to hundreds of thousands of pills of other controlled drugs such as the sedatives Xanax and Soma. Dr. Olsen was charged with 34 counts of drug related charges under 21 U.S. Code Section 841(a)(1) for "distributing" oxycodone, amphetamine salts, alparzolam and hydrocodone to various patients who are listed by initials in the Indictment. 

One questions why the Medical Board is not used to get an immediate administrative suspensions along with DEA when there is significant evidence of improper prescribing. Is it wise for the government to wait one or two years to "investigate" and build criminal cases just to make sure they can get high sentences against physicians? 

The final count was for a violation of 21 US Code Section 843(a)(4)(A) for making an alleged False Statement in a DEA Registration Application. This relates to Dr. Olsen applying for DEA registration on or about May 23, 2016 and failing to disclose his DEA suspension on March 18, 2016. It is critical for physicians to ensure they do not make any misrepresentations in filling out these forms.

It is not clear if the government offered Dr. Olsen the opportunity to plea or cooperate before Indictment. However, these charges are heavy handed and could expose Dr. Olsen to 20 years' in custody and a mandatory minimum term. I still wonder what would have happened if the conduct had been stopped back in 2013 or 2014.

Posted by Tracy Green, Esq.

Green and Associates

Email: tgreen@greenassoc.com

Office: 213-233-2260

Indictment Filed Against Northern California Physician For 36 Counts of Unlawfully Distributing Oxycodone by Prescribing It "Outside the Course of Usual Professional Practice"

When it comes to prosecuting physicians for unlawful prescribing of opioids or scheduled drugs, federal authorities have more stringent laws and sentencing guidelines. Recently a physician was arrested last year by the San Francisco District Attorney's Office and charges were not filed. However, just more than six months later federal charges were filed against the same physician. 

On or about July 11, 2017, Christopher Owens, a physician licensed to practice in California, was indicted on charges relating to unlawfully prescribing oxycodone. Dr. Owens now lives in Indiana but previously practiced at UCSF. Dr. Owens is presumed innocent and charges in an Indictment are not evidence. The DEA is one of the investigating agencies and can also proceed administratively against the physician.

The Indictment alleges that over a three-year period between September of 2012 and June of 2015, Dr. Owens intended to act outside the course of usual professional practice and without a legitimate medical purpose when he prescribed oxycodone on numerous occasions.  In sum, Owens is charged with 36 counts of distributing oxycodone, in violation of 21 U.S.C. § 841(a)(1) and (b)(1)(C). Each count of oxycodone prescription can carry a separate long sentence.

Dr. Owens was arrested on Tuesday, July 11, 2017, in Indianapolis, Indiana, and was to appear in Indiana before a U.S. Magistrate Judge for a detention hearing on Monday, July 17th. He will then be ordered to appear in San Francisco federal court.

Dr. Owens was a well known vascular surgeon who had privileges at UCSF. He was placed on administrative leave back in June 2016 according to UCSF just a few days after his girlfriend passed away due to a drug related overdose. Later, UCSF reported that they revoked his privileges in October 2016. 

Then in early November 2016, the San Francisco DA's Office filed 99 counts for distributing, prescribing or giving away controlled substances against Dr. Owens. The charges were dismissed and it seems there was a decision to allow the federal authorities to pursue the case.  

These federal charges for prescribing or distributing oxycodone can be very serious with sentences up to 20 years and a mandatory minimum 10 year sentence. The mandatory minimum sentence can be negotiated with a plea agreement but when the government picks and chooses the prescription counts, these cases can be difficult to defend unless there was legitimate medical need for the prescription. It is usually a battle of the experts and a microscope is taken to the medical records and the patients' prior medical history.

In addition to the criminal case, the physician will also face the DEA and the Medical Boards of each state in which he is licensed. There can also be potential malpractice cases although each of the prescriptions are more than two years old. Publicity can bring out malpractice cases. Collateral consequences of this type of case is often as punishing as the potential prison time and fines. 

Posted by Tracy Green, Esq. 
Green and Associates, Attorneys at Law
Email: tgreen@greenassoc.com
Office: 213-233-2260

CVS Pharmacy Inc. Pays $5 Million to Settle Alleged Violations of the Controlled Substance Act in Sacramento Federal Case

As is the norm, national chain pharmacies get fines and compliance plans while small businesses get criminally prosecuted. A recent settlement between the Department of Justice and Drug Enforcement Administration (DEA) with a national chain pharmacy is no different.

On or about July 5, 2017, CVS Pharmacy Inc. agreed to pay $5 million to resolve federal Controlled Substances Act (CSA) allegations that its pharmacies in the Eastern District of California failed to keep and maintain accurate records of Schedule II, III, IV, and V controlled substances. This payment covered only one federal court district. 

CVS also agreed to an administrative compliance plan with the DEA. The payment and plan resolve the United States’ allegations that during the period from April 30, 2011, through April 30, 2013, CVS pharmacies failed to provide effective controls and procedures to guard against diversion when CVS allegedly failed to:
(1) record the amount received and the date received of Schedule II drugs on DEA-222 Forms;
(2) maintain DEA-222 Forms and keep them separate from other records;
(3) record the date of acquisition of controlled substances in Schedules II through V; and
(4) maintain invoices for drugs in Schedules III through V and keep the records separate from non-controlled substance records; and conduct a biennial inventory on one specific day.

Under the settlement reached July 5, 2017, CVS acknowledged that its DEA-registered pharmacies were and are required to comply with the CSA, and that nine CVS pharmacies in the Eastern District of California failed to fulfill these recordkeeping obligations in a manner fully consistent with CVS’s responsibilities under the CSA. The settlement and compliance plan cover the 168 CVS pharmacies that operated in the Eastern District of California from April 30, 2011, through April 30, 2013.

The allegations resolved by this settlement were uncovered during a DEA investigation that began in 2012 after CVS self-reported thefts and losses of hydrocodone, a Schedule III drug at the time, at five of its Sacramento-area pharmacies. Under the CSA, DEA-registered pharmacies are obligated to report any thefts or significant losses of controlled substances to DEA.

On the compliance side, to address the issues uncovered by this investigation, CVS made improvements to its pharmacies in the Eastern District of California by, among other things, instituting annual CSA compliance training of its pharmacy staff, increasing loss prevention oversight, and excluding controlled substances prescriptions from the volume metric that can impact pharmacy staff compensation.

All non-chain pharmacies can learn from this compliance plan and how record keeping issues can result in large fines. It's especially critical for non-chains since they can get their DEA pulled and even criminal prosecution.

Posted by Tracy Green, Esq.

Email: tgreen@greenassoc.com

Office: 213-233-2260

Los Angeles Dentist Charged With Fraud for Allegedly Billing Insurance Carriers for Services Not Provided Over 7 Year Period

We have seen an increase in audits of dentists by private insurers. Big data and updated computer systems have made it easier for insurance carriers to flag suspicious billings. 

If intentional billing for services not provided is found, it can be referred for criminal prosecution and/or to the Dental Board. This is one reason to handle audits very carefully and to address any billing errors or other issues in a way that does not create additional problems.

A Los Angeles dentist, Carlos Maria Vallarta Fausto, self-surrendered on a case filed by Los Angeles District Attorney's Office after he was charged with two felony counts of insurance fraud for allegedly charging insurers more than $31,000 in billings for services not performed on patients in his Los Angeles area dental practice between January 1, 2007 and December 31, 2014. Dr. Fausto is presumed innocent and a felony complaint is not evidence. The bail on this case was set at $25,000 and he was released immediately.

After an audit, an insurer filed a complaint against him with the California Department of Insurance which launched its own investigation, which allegedly revealed Dr. Fausto billed multiple insurance companies for dental treatment he did not render to his patients over this seven-year period. The case has also been referred  to the Dental Board of California, which is responsible for licensing dentists in California.

Attorney Commentary: There are several things to note from this case. First, even with a loss amount of $31,000 over a seven-year period, the case was referred criminally. Years ago, low loss amounts were not filed. Prosecutors are getting more aggressive about smaller cases especially where they believe there is "ghost" billing or billing for services not provided.

Second, these allegations are from years ago but the statute of limitation continues to run where the alleged fraud is not discovered.  Thus, even though some of the services were 10 years old (2007), charges were just filed. It takes years for these cases to be investigated and the alleged misconduct stopped in 2014.  The state statute of limitation is 4 years from date of discovery.  

Third, it should be remembered that even if the criminal case is dismissed or won, the dentist will still need to address the Dental Board which has a lower burden of proof and usually waits until the criminal case is concluded. The Dental Board can be very aggressive and the dental license is the tail that wags the dog in this type of case.

Finally, periodic self-audits, compliance and making sure that insurance billing is accurate is good business. When you bill insurance companies or the government, you need to be extra careful. The old saying of it's better to ask forgiveness than permission doesn't work in government or insurance billing.  

Even a $30,000 billing issue over seven years does not always just go away by paying the funds back in today's world.  I have seen cases where repayment upon discovery of erroneous billing helped avoid criminal and Dental Board referrals but these cases need to be handled carefully and with a view of the big picture at 40,000 feet.

Posted by Tracy Green, Esq.

Email: tgreen@greenassoc.com

Office: 213-233-2260

The Fifth. Why Michael Flynn's Lawyer Properly Advised Him to Exercise His 5th Amendment Rights in Response to Congressional Subpoena.

No one should be in favor of overzealous prosecutions. We should also let all people exercise their constitutional rights. Even when we disagree with their politics or actions. The case of Ret. Lt. Gen. Flynn is no different. If anything, we need to be even more careful since this is a high profile case and is related to one of the most important criminal investigations in recent U.S. history. 

If I were Michael Flynn's lawyer and he were subpoenaed to Congress, what would I do? Have him do exactly what was done by his lawyer - exercise his 5th Amendment right against self-incrimination. Doing anything else would be legal malpractice in my view unless there were a solid immunity agreement. Even the request for documents is a problem since there are testimonial issues in identifying and producing documents that relate to his 5th Amendment rights.  

First, don't let a client testify or be interviewed when there's a criminal investigation. Simple. Don't care if he looks guilty. Gotta do it. If you don't it's malpractice or folly. You cannot care about the "optics" or that "someone will look guilty." Clients have a hard time understanding it but it is critical to not give into that type of thinking. I would lay down in the street outside my office in downtown Los Angeles before I'd let a client testify under these circumstances.

I would have Mr. Flynn exercise his 5th Amendment rights for numerous reasons. Let us just use his public FARA filings as one basis since we can review them.  To look at the issue, just take a look at the Mr. Flynn's Supplemental Foreign Agent Registration Act (FARA) filings on 3/7/17. They were signed by him electronically under penalty of perjury. Read them if you like [here's the FARA document search link], type in Flynn, click and see what you think. 

Walgreen Paid $9.86 Million to Settle False Claim Allegations of Improper Medi-Cal Billings for Code 1 Drugs

It's not just small pharmacies that get false claims (qui tam) cases. The chains are ripe targets for cases but they have the resources to defend, pay settlements and stay in business. A recent case shows that even large pharmacies will settle rather than go to trial in these cases.

On April 20, 2017, Walgreens paid $9.86 million to resolve civil lawsuit allegations that it violated the federal False Claims Act when it knowingly submitted claims for reimbursement to California’s Medi-Cal program for Code 1 Drugs that were not supported by applicable diagnosis and documentation requirements. There were no admissions. 

This settlement surrounded the nuances of pharmacy billing for Medi-Cal. Medi-Cal utilizes a formulary list, commonly known as “Code 1” drugs, which designates certain restrictions for each listed drug, including restrictions pertaining to diagnoses. Medi-Cal will reimburse certain Code 1 drugs only for approved diagnoses, taking into account criteria such as the drug’s safety, efficacy, misuse potential, and cost. Pharmacies confirm and certify that these Code 1 drugs are dispensed for the approved diagnoses. Walgreens may bill for drugs prescribed outside of the approved diagnoses, but it must submit a request to DHCS that includes a justification for the non‑approved use (often called a TAR).

California Dermatologist Indicted For Health Care Fraud for Allegedly Billing Microdermabrasions or Chemical Peels Performed by Staff as Acne Surgeries to Private Insurers

The number of prosecutions for health care fraud involving private insurance is on the rise as shown by a recent case. 

In years past, the insurance carriers would have audited and demanded a repayment or cancelled their contract. That has definitely changed.

On May 11, 2017, a Fresno federal grand jury returned an eight-count indictment for health care fraud against dermatologist Dr. Basil Hantash who is the medical director of Advanced Skin Institute (ASI) in Turlock, California. 

According to the Indictment from 2011 through April 2016, Dr. Hantash submitted claims to private insurance companies requesting payment for performing acne surgeries. It is alleged that staff at ASI had performed only "cosmetic" procedures known as microdermabrasions or chemical peels.  

California Oncology Therapy Center Pays $2.8 Million to Resolve Allegations of Providing Radiation Treatments Without Radiation Oncologist Present

The nuances of "incident-to" billing and the alleged lack of physician supervision from 2006 to 2015 at one of its locations is at the heart of a false claims settlement between Valley Tumor Medical Group Oncology and the United States. The case is United States ex rel. Shindler v. Valley Tumor Medical Group, et al., CV 15-2249.

Valley Tumor paid $2,865,693 to the United States and $134,307 to the State of California on April 13, 2017 to resolve allegations in the lawsuit that it submitted fraudulent bills to the Medicare, Medi-Cal and TRICARE programs when it did not have the required supervision at its Ridgecrest location (which is now closed).  

California Oxygen Equipment Provider Pays $11.4 Million To Resolve Allegations of False Claims and Cross-Referral Kickbacks With Sleep Clinics

On April 25, 2017, Braden Partners, L.P., doing business as Pacific Pulmonary Services,  a DME based in California, has agreed to pay $11.4 million to resolve allegations against it and its general partner, Teijin Pharma USA LLC, to resolve a False Claims Act (qui tam) lawsuit filed in federal court in San Francisco.  

The lawsuit resolved by the settlement contains allegations only and there has been no admisison of liability. 

Pacific Pulmonary Services is a DME home medical business and provides stationary and portable oxygen tanks and related supplies, and sleep therapy equipment, such as Continuous Positive Airway Pressure, Bilevel Positive Airway Pressure masks and related supplies, to patients’ homes in California and other states.  

The qui tam lawsuit was originally filed by Manuel Alcaine, a former sales representative of Pacific Pulmonary Services. The government intervened and took over the action, as it did in this case.  In this case, Mr. Alcaine will receive a hefty $1,824,000 of the settlement funds. This is why compliance plans are needed since former employees can file a lawsuit any alleged wrongdoing and profit from it instead of having to report it to the company before they quit or are terminated.  

Orange County Workers' Compensation Fraud Cases Plead Out. Aspen Durable Medical Equipment Owners Get Minimal Jail Time, Pay Over $8 Million in Restitution and Dismiss $139 Million in Liens at WCAB

In criminal fraud cases, restitution is usually key to obtaining favorable plea terms. In workers' compensation fraud cases, releasing the right to collect on liens or receivables at the Workers' Compensation Board is also an important part of plea deals especially in light of Labor Code 139.31. 

This is evidenced in two complex workers' compensation fraud cases, known as the Aspen Medical DME cases, which plead out on May 5, 2017 in Orange County Superior Court. 

The three individual owners -- Jeffrey Edward Campau, Landen Alan Mirallegro and Abraham Khorshad -- agreed to pay jointly $8,621,845.96 in restitution, dismiss liens (charged and uncharged) worth over $139 million and pay other penalties in exchange for county jail terms (with state prison suspended) and where they will be eligible for house arrest with electronic monitoring. 

Owner of Holter Labs, Cardiac Monitoring Services Company, Convicted for Health Care Fraud for Billing for Services Not Performed

On May 2, 2017, Michael Mirando, an owner of Holter Labs, which provided cardiac monitoring services, was found guilty after a week long federal trial of 15 counts of health care fraud for submitting bills to insurance companies for tests and services that were never performed from 2009 to 2016. 

This case was before Judge Percy Anderson and sentencing is scheduled for August 21, 2017.  After the jury verdict, Mr. Mirando signed a stipulation indicating that his home had been bought with proceeds from the business and thus there will likely be a forfeiture component to this case which can be used for restitution.  

Holter Labs was a company that provided physicians with equipment for cardio monitoring and let the physician bill the patients' insurance for the professional components (hookup and interpretation) and the company billed for the technical component. The government presented evidence that Holter Labs submitted bills for services never ordered (such as 30-day tests) and for services the devices could not perform (such as brain scans and oxygen studies). The government alleged that $7 million in billing was for services never performed and $1 million was for duplicate date of services and that Holter Labs collected at least $2.5 million on these false claims.

These type of companies have been under scrutiny even without alleged false billing. Companies offer physicians a revenue stream where they send the equipment for free to the physicians' offices, have the data downloaded for the physicians who get to bill for the professional component. Since holter monitoring is not a designated health service the Stark rules do not apply but it should be determined whether providing the software and printing reports could be consideration for the referral of the technical patient billing. Any arrangement with the companies should be reviewed for compliance.

Posted by Tracy Green, Esq.

Green and Associates, Attorneys at Law

Email: tgreen@greenassoc.com

Work: 213-233-2260

     

Los Angeles Dermatologist Pays $2.6 Million to Resolve False Claim Allegations He Billed Medicare for Unnecessary Mohs Skin Cancer Surgeries

On April 10, 2017,  Dr. Norman A. Brooks, M.D., the owner of The Skin Cancer Medical Center in Los Angeles paid the United States $2,681,400 as part of a settlement to resolve allegations that he submitted bills to Medicare for Mohs micrographic surgeries for skin cancers that were medically unnecessary. In settling the case, Dr. Brooks did not admit liability in the matter.

As part of the settlement, Dr. Brooks and his entity entered into a three-year Integrity Agreement with the U.S. Department of Health and Human Services, Office of Inspector General. Under the Integrity Agreement, Dr. Brooks will establish and maintain a compliance program that includes, among other things, mandated training for him and his employees and review procedures for claims submitted to Medicare and Medicaid programs.

The settlement resolves allegations made in a lawsuit filed by Dr. Brooks' former Brooks employee Janet Burke under the qui tam, or “whistleblower,” provisions of the False Claims Act, which permit private parties to sue on behalf of the government and receive a share of any recovery. For her role in the case, Ms. Burke will receive $482,652.

          

The lawsuit alleged that Brooks falsely diagnosed skin cancer in some of his patients so that he could perform, and bill for, Mohs surgeries. Mohs surgery is a specialized surgical procedure for removing certain types of skin cancers in specific areas of the body, including the face. The surgery is performed in stages during which the surgeon removes a single layer of tissue which undergoes a microscopic evaluation. 

The surgeon performs additional stages, if necessary, until all of the cancer is removed. Given the complexity and time required to perform the procedure, Mohs yields a higher Medicare reimbursement than other procedures used to remove skin lesions.

Dermatology is under greater scrutiny by government billing programs (Medicare, TriCare, etc.) and we have seen an increased rate of audits. A compliance plan is never too late to start and can help prevent whistleblower cases when a practice self-reports or discovers the employee's allegations during employment or at an exit interview.

Posted by Tracy Green, Esq.
Email: tgreen@greenassoc.com
Work: 213-233-2260

When Is Physician Billing for In Office Prescriptions, Compounded Medications and Urine Toxicology Screening for Workers’ Compensation Patients Illegal? Orange County DA Charges Doctors, Pharmacists and Business Owners Alleging Insurance Fraud and Illegal Referral Fees

For years, there have been companies who approach physicians and offer ways they can add to their revenue stream.  This has been more common with physicians who treat workers’ compensation patients.  

Some of the common revenue enhancements are:  

(1) dispensing oral prescription medications in-office to patients;

(2) dispensing a 3-day supply of compound medications in-office to patients; and

(3) performing point of care urine toxicology testing on patients in-office.

Under California workers’ compensation law, there are ways for these medically necessary services and goods to be legally provided and billed. However, if the laws and regulations are not followed, the claims can be denied or the basis for insurance fraud charges.

A recent criminal prosecution in Orange County Superior Court shows what happens when workers' compensation insurance fraud and illegal referral fees are alleged in providing these types of goods and services (prescription medications, compounded medications and toxicology laboratory testing) to patients.

The Orange County District Attorney’s (OCDA) Office filed 26 felony criminal complaints in April 2017 against 25 physicians, a physician assistant, two pharmacists and the two owners of the billing and medical management companies King Medical King Medical Management, Inc., Monarch Medical Group, Inc. and/or One Source Laboratories, Inc. for services and goods provided and/or billed from 2011 to 2015.

Links to the Orange County DA criminal complaints are on the Department of Insurance press release issued on this investigation.  All physician defendants are presumed innocent and a felony complaint is not evidence.

It appears the OCDA decided to file a criminal case against each provider separately in order to not have a single multi-defendant case that would progress slowly and for other tactical reasons. However, there is a conspiracy count in each criminal complaint filed against the physicians or pharmacists in which the owner(s) of the medical management and billing companies are named as uncharged co-conspirators. The OCDA views the management billing companies as the hub in these cases.

Unnecessary Genetic Testing on Medicare Skilled Nursing Facility Patients Alleged in Federal Qui Tam Case Involving California Based Laboratory

Genetic testing is currently the subject of numerous qui tam cases and investigations by the Office of Inspector General. This is in addition to any investigations by private insurance carriers. A recent federal qui tam case shows that the government is going after those involved in the ordering of such tests as well as the laboratories.

One issue that arises is where genetic tests are ordered by physicians who are not the regularly treating physicians of the Medicare patients. In order to be considered medically necessary and thus reimbursable under Medicare, the general rule is that the laboratory test must be ordered by the physician treating the resident. 

What happens when a laboratory test is ordered by a physician who is not the regular treating physician of the patient? For example, what if the physician is an outside physician whose only role is ordering a genetic test? In a recent case, a federal qui tam (false claims) lawsuit was filed as a result against skilled nursing facilities who gave a laboratory access to its patients. This lawsuit and settlement can serve as a teaching moment for those who order genetic testing. 

On April 10, 2017, a multi-state nursing home company Prestige Administrative Services, LLC d/b/a Prestige Healthcare (Prestige) based in Kentucky agreed to pay the United States $995,500 to resolve allegations that it violated the False Claims Act with regard to its role in an alleged scheme to falsely bill Medicare for unnecessary genetic testing on skilled nursing home patients in four facilities located in Wisconsin.

The United States alleged that in 2014, Prestige was approached by an entity known as Genomix, LLC, which claimed that it could perform genetic testing on Prestige’s Medicare residents in order to ascertain whether Prestige’s patients were properly metabolizing their medications. 

The United States alleged that in 2014 and 2015, Prestige provided Genomix with insurance and personal medical information, as well as access to Prestige patients in nursing homes in several states, including Wisconsin, for purposes of conducting the testing. Genomix conducted the testing by taking cheek swabs of each Prestige patient and then sending the cheek swab to a laboratory for analysis.

The United States alleged that Prestige failed to ensure that physician orders were obtained for the genetic testing prior to its being conducted, and that Prestige's physicians were not aware of and did not agree with the medical necessity of the testing. 

United States also alleged that Prestige failed to ensure that its patients (or, in some cases, their family members responsible for their medical decisions) were appropriately informed of the testing prior to its being conducted and provided with the opportunity to decline the testing. Finally, the United States alleged that the lack of physician orders and patient consent was discovered during a survey conducted by state regulators in late 2015.

While it is not unusual for skilled nursing facility (SNF) operators, such as Prestige, to coordinate in placing orders with clinical laboratories for medically necessary diagnostic laboratory tests for their residents, the treating physician must order the test. This is a basic tenet that in order to be considered medically necessary and thus reimbursable under Medicare, the laboratory test must be ordered by the physician treating the resident. 

The settlement announced resolved only Prestige’s civil liability and did not resolve any liability of any other individuals or entities, including that of Genomix, which is a separate entity headquartered in Southern California. As part of the settlement, Prestige agreed to cooperate in the United States’ ongoing investigation. 

Based on what we hear in the healthcare legal community, we can expect to see more investigations, lawsuits and even potential criminal prosecutions involving genetic testing. There are allegations in other cases indicating that physicians are being paid as experts or researchers by laboratories to order genetic tests on their patients and that in some cases, these fees are disguised kickbacks. Any physician in such an arrangement with a laboratory should ensure that it is compliant with federal and state law.  

Posted by Tracy Green, Esq.
Green and Associates, Attorneys at Law
Work: 213-233-2261
Email: tgreen@greenassoc.com

Billing for Prescriptions Not Dispensed to Patients Results in 4 Year Sentence for Los Angeles Medical Clinic Manager After Federal Trial

Federal prosecutors used to devote healthcare fraud resources to mainly government programs and allow private insurance carriers to handle the cases with special investigation units or with state prosecutions. A recent case shows how private insurance healthcare fraud is being pursued forcefully. This is in large part due to the overlap between private and public and the fact that the federal government pays subsidies for tens of millions of people who have private insurance.

The recent case was one of ghost billing. On March 28, 2017, Michael Huynh, the office manager and purported part-owner of a Los Angeles area medical clinic in Reseda was sentenced to 51 months in federal prison for his role in billing private insurance plans for prescription medication that was never dispensed to insured patients and failing to report such income on his federal income tax returns. Following a seven-day trial in September 2016, Mr. Huynh was found guilty of one count of conspiracy to commit healthcare fraud and 11 counts of filing false tax returns.

Mr. Huynh, age 67, was sentenced by United States District Judge Otis D. Wright II. In addition to the prison term, Judge Wright ordered Mr. Huynh to pay just over $1.9 million in restitution to the victim insurance companies and back taxes – estimated to be nearly $950,000 – to the Internal Revenue Service.

      

The evidence introduced at trial showed that between January 2004 and November 2009 Mr. Huynh and a pharmacist (Farhad N. Dany Sharim,  a co-owner of Century Discount Pharmacy in Reseda) participated in a healthcare fraud scheme that billed private insurance plans for prescription medication that was never dispensed to insured patients. Mr. Sharim, age 57, previously pleaded guilty to conspiracy to commit healthcare fraud and will be sentenced by Judge Wright on May 1.

The evidence at trial was that Mr. Huyhn provided Mr. Sharim with fabricated prescriptions purportedly for patients of the medial clinic who were insured by healthcare benefit programs. Mr. Sharim's pharmacy then submitted false and fraudulent bills for prescription drugs that had not been dispensed to the patients and received substantial payments from various health care benefit programs to which it was not entitled. Mr. Sharim allegedly paid Mr. Huyhn and/or the medical clinic more than $1.1 million.

In addition to the healthcare fraud scheme, Mr. Huynh was charged with filing false federal tax returns for tax years 2007 through 2011 that underreported the medical clinic’s gross receipts and sales by more than $1.6 million.

Posted by Tracy Green, Esq.

Green and Associates, Attorneys at Law

Office: 213-233-2260

Email: tgreen@greenassoc.com

Surrendering a Healthcare or Medical License While Disciplinary Charges Pending Will Get You a Medi-Cal Suspension

When a physician, nurse or any licensed healthcare provider has a state disciplinary proceeding pending, one of the issues that arises is whether they should surrender the license. In order to analyze this issue, one question is whether the person will be working in healthcare in any capacity in the future.

Imagine a case where a licensed physician or nurse decides to stop practicing medicine but still wants to work in healthcare businesses and wants to surrender his or her license while an Accusation is pending.  Another example is where the physician or nurse is not using their New York license and ends up on probation in New York due to being on probation in California and decides to surrender the New York license. What happens to their ability to work at a healthcare business that bills government programs?

Under California Welfare and Institutions Code Section 14043.6 if your healthcare license is suspended while an Accusation is pending (or revoked after a hearing), Medi-Cal will automatically put you on a "Suspended and Ineligible" List on the effective date of the suspension or revocation. If the individual is suspended from Medi-Cal, he or she cannot work, own or operate a business that receives Medi-Cal or Medicare funds in any capacity.

I am seeing more frequently people who surrendered their license and and did not understand that this is one of the harsh penalties of surrendering that is not set forth in the surrender agreement. It also seems some attorneys do not tell their clients that this will happen and the person finds out a year or more later of this consequence after they have been working in healthcare.

We have handled a number of cases in getting people reinstated to Medi-Cal in these situations and it is an unpredictable and long process. In one case, the healthcare provider surrendered one license and had another active one that was not surrendered but the suspension went into effect and jeopardized the ability to work in healthcare. In another case, a nurse surrendered a license while an Accusation was pending and then was not able to work at the healthcare business in which he was a part-owner in any capacity.  We have also handled audits for overpayment where a healthcare provider did business with an entity or person suspended under Medi-Cal.

In sum, in analyzing whether it makes sense to surrender any healthcare license in California, the licensee should understand that a surrender will prevent the person from working in any healthcare facility that takes government funds (Medicare and Medi-Cal) even if the person is not working as a licensed health care provider. Make sure you look at all the angles in making these decisions.

Posted by Tracy Green, Esq.
Green and Associates
Email: tgreen@greenassoc.com
Office: 213-233-2260

Two Florida Owners of Sober Homes and Alcohol and Drug Treatment Centers Plead Guilty for Filing Fraudulent Insurance Claims and Paying Kickbacks for Referrals

Audits of alcohol and drug addiction treatment centers have been on the rise. We have also seen an increase in criminal filings relating to billing for medically unnecessary services and payment of kickbacks for the referral of rehab patients. However, the facts when cases go criminal tend to be ones where there is outrageous conduct.  A recent Florida case fits that profile. 

Although the facts in this case are on one end of the spectrum, alcohol and drug treatment centers need to be very careful about paying marketing fees for the referral of patients, offering patients free or reduced rent at sober homes, paying for patients' insurance, ordering excessive lab tests for patients and any financial arrangements with laboratories.  

On March 15, 2017, Kenneth Chatman and Laura Chatman, owners of sober homes and alcohol and drug addiction treatment centers, pled guilty to one count of conspiracy to commit health care fraud in violation of 18 USC Section 1349 for the filing of fraudulent insurance claim forms and defrauding health care benefit programs. Their plea also included money laundering and sex trafficking conspiracy (the outrageous facts) counts.  

  

According to the plea agreements, Mr. Chatman established a series of sober homes, including Stay’n Alive, Inc., Total Recovery Sober Living LLC, and several other multi-bed residences operating as sober homes in Palm Beach and Broward Counties under his wife's name. These sober home facilities were in the business of providing safe and drug-free residences for individuals suffering from drug and alcohol addiction. 

Mr. Chatman admitted he paid kickbacks and bribes to sober home owners for referring their residents to Reflections Treatment Center LLC in Margate, Florida and Journey to Recovery LLC in Lake Worth, Florida for treatment. Mr. Chatman called these referral payments “case management fees,” “consulting fees,” “marketing fees” and “commissions” but the government viewed them as kickbacks. The referring sober home owners met with Kenneth Chatman on a weekly basis to collect the referral payments, which were based on the number of insured patients that received treatment each week.