Durable Medical Equipment Supply Owner and Operator Plead Guilty in Case Involving False Statements to Medicare About Inhalation Drugs Being Non-Compounded Drugs

Compounded medications and drugs have been under close scrutiny the past number of years. Claiming a drug is not compounded when it is compounded can be a "false claim" subjecting a business and its owners or managers subject to criminal prosecution and civil penalties. 

A recent case involving a durable medical equipment company and compounded inhalation drugs billed to Medicare shows what can happen where the drugs are not characterized properly on claims forms in order to avoid new billing rules.  

The rule being avoided was that as of July 1, 2007, Centers for Medicare/Medicaid Services revised nationwide policy regarding compounded inhalation solutions. After July 1, 2007, all compounded inhalation solutions were denied as not medically necessary for dates of service on or after July 1, 2007. 

Korean-American Owner of California Management Company for Physical Therapy and Occupational Therapy Clinics Sentenced to 121 Months

A recent health care fraud case shows what happens when business people get in a highly regulated business and do not follow the rules or have any compliance program. It also shows what happens when business people decide to enter a healthcare business and cater to an ethnic community which wants services others than those paid for by Medicare.

In this case, it involves the Korean American community in Los Angeles and Orange Counties which is hardworking and entreprenurial but where some do not necessarily understand the full consequences when regulations are not followed. Those consequences? Audits, fines, civil lawsuits and, in this case, criminal cases with lengthy prison sentences.

On January 10, 2017, a California man Simon Hong (also known as Seong Wook Hong) who ran management companies which allegedly operated rehabilitation clinics in Walnut, Torrance and Los Angeles was sentenced to 121 months in federal prison by United States District Judge David O. Carter. At the conclusion of the sentencing hearing, Judge Carter ordered Mr. Hong remanded into custody.

This is not just a straight forward fraud case. One of the issues is providers giving patients in an ethnic community services other than physical therapy but billing and documenting for physical therapy. In addition, it is a businessman operating clinics and then getting a percentge of income for referring the business. There were traditional health care fraud issues present but it shows what happens when business people decide to operate or manage a clinic.  

Mr. Hong owned or operated physical therapy clinics operated by companies called Hong’s Medical Management, Inc., CMH Practice Solution, and HK Practice and Solution, Inc. As part of his business, Mr. Hong recruited Medicare providers and beneficiaries and provided uncovered services like massage and acupuncture for the beneficiaries. Even though many of the beneficiaries did not receive actual physical therapy, those who worked with Mr. Hong billed Medicare for physical therapy, and then paid a large percentage (allegedly 56 percent) of the reimbursement funds back to Mr. Hong's management companies.

Neurosurgeon Sentenced for Health Care Fraud Involving Spinal Implant Devices. Admitted Hiding Financial Interest in Implant Company From California Hospitals

Spinal implant billing by hospitals has been an area of intense investigation and scrutiny for the past five years. Physicians who performed spinal surgeries at hospitals have been investigated to see whether they have ownership or other financial arrangement with companies selling implants to the hospitals. 

A recent case involving a neurosurgeon who used to practice in California where his plea agreement included admissions that he had an interest in an implant company that sold implants to California hospitals where he performed surgeries and that he his his financial interest from the hospitals. 

On January 8, 2017,  Detroit-area neurosurgeon Aria O. Sabit M.D., who previously practiced in Ventura, California, was sentenced to 235 months in prison after he pleaded guilty to four counts of health care fraud, one count of conspiracy to commit health care fraud and one count of unlawful distribution of a controlled substance. 

Before moving to moving to Michigan, Dr.  Sabit practiced in Ventura, California. Dr. Sabit admitted in his plea that in approximately February 2010, while he was on the staff of a California hospital, he became involved with Apex Medical Technologies LLC (Apex), which was owned by another neurosurgeon and three non-physicians. Dr. Sabit is also is a defendant in two civil False Claims Act cases brought by the Justice Department in the Central District of California and these cases are pending.  

In exchange for the opportunity to invest in Apex and share in its profits, Dr. Sabit admitted he agreed to convince his hospital to buy spinal implant devices from Apex and to use a substantial number Apex spinal implant devices in his surgical procedures. Dr. Sabit further admitted that he and Apex’s co-owners concealed Dr. Sabit’s involvement in Apex from the hospitals and surgical centers.

In connection with his guilty plea, Dr. Sabit admitted that the financial incentives provided to him by Apex and his co-conspirators caused him to use more spinal implant devices than were medically necessary to treat his patients in order to generate more sales revenue for Apex, which resulted in serious bodily injury to his patients. Dr. Sabit also admitted that, on a few occasions, the money he made from using Apex spinal implant devices motivated him either to refer patients for unnecessary spine surgeries or for more complex procedures that they did not need.

Dietary Supplements Are Subject to FDA Investigation. GNC Entered Into Agreement with Department of Justice to Keep Potentially Illegal Dietary Supplements Out of the Marketplace.

Nutritional supplements are often recommended or sold by practitioners such as chiropractors, naturopathic doctors and other providers. Determining what ingredients are in the products is difficult and a recent settlement shows that retailers will be held responsible for selling products with misbranded supplements or that promise to treat or cure a disease. 

All providers who sell supplements should ensure that the products do not include unlawful dietary supplements to the extent possible. How can a retailer determine if supplements are from natural plants or are synthetic? 

On December 7, 2016, the world’s largest dietary supplement retailer, GNC Holdings Inc. (GNC), entered into a wide-ranging agreement with the Department of Justice to reform its practices related to potentially unlawful dietary ingredients and dietary supplements, and has further promised to embark on a series of voluntary initiatives designed to improve the quality and purity of dietary supplements.

The non-prosecution agreement resolves GNC’s liability for selling certain dietary supplements produced by a firm currently under indictment.  As part of the agreement, GNC has agreed to pay $2.25 million to the U.S. government and cooperate in dietary supplement investigations conducted by the government.

A lengthy investigation conducted by the U.S. Food and Drug Administration (FDA), the U.S. Attorney’s Office for the Northern District of Texas, and the Consumer Protection Branch of the Department of Justice’s Civil Division resulted in allegations that GNC’s practices related to ensuring the legality of products on its shelves were lacking. 

According to an agreed-upon statement of facts that accompanies the non-prosecution agreement, GNC admitted it engaged in acts and omissions that allowed a misbranded supplement— OxyElite Pro Advanced Formula, a product of Dallas-based USPlabs LLC (USP Labs)—to be sold at GNC locations nationwide in 2013.  The statement of facts notes that GNC sold the product based on representations from USP Labs that ingredients contained in the product complied with the law.  It further notes that GNC did not undertake additional testing or require additional certifications to confirm such representations or to verify that the ingredients in the product were as represented. 

USP Labs was indicted in November 2015 and is awaiting trial.  The indictment alleges, among other things, that USP Labs engaged in a conspiracy to import ingredients from China using false certificates of analysis and false labeling, and then lied about the source and nature of those ingredients after it put them in its products.  According to the indictment, USP Labs told some of its retailers and wholesalers that it used natural plant extracts in some of its products, when in fact it was using synthetic stimulants manufactured in a Chinese chemical factory.

When Can Patients Be Offered Free or Local Discounted Local Transportation Without Violating the Anti-Kickback Statute? OIG Releases New Rules and Safe Harbor Guidelines for Free and Discounted Transportation to Established Patients.

One persistent and tricky regulatory issue in healthcare is when can patients be offered free or discounted local transportation without it being deemed a violation of the Anti-Kickback Statute (AKS)? 

In other words, when is offering transportation part of promoting access to care and not a prohibited inducement or a recruiting tool?  

Good news: the healthcare industry have new guidance from the Office of the Inspector General (OIG). However, these sets of rules will be effective on January 6, 2017 and if your transportation program does not meet the criteria, your business will be out of compliance.

The OIG's final rule 42 CFR 1001.952 adds certain “low risk” safe harbors under the AKS including protection for free or discounted local transportation services that meet specified criteria. Transportation is the focus in this blog post.

How and When Can You Give Free or Discounted Local Transportation Services to Patents Without Violating the AKS?

The regulations contain a new safe harbor that protects free or discounted local transportation provided by physician, physical therapists, hospitals. surgery centers, laboratories and many other providers.  It does not apply to any person or entity whose primary business is to supply health care items (such as pharmaceutical companies or durable medical companies).  There are clearly patients who would benefit from free or discounted transportion, such as those who cannot drive or take public transportation, mentally ill patients or isolated/homebound patients.

What are the basic rules a physician, hospital, surgery center or other provider needs to follow in order to fall within this new safe harbor when it gives free or discounted transportation to patients? These are the starting guidelines that need to be evaluated on a case-by-case basis:

1.  There should be a company policy that sets forth the availability of the free or discounted transportation. It is to be applied uniformly and consistently. It is not determined in a manner related to past or anticipated volume or value of federal health care program business.

2.  The transportation should be offered to all established patients, not just Medicare patients for example, that meet the established criteria in the policy.

California Sleep Clinic Agrees To Settle False Claims Case for Billing Medicare for Diagnostic Sleep Tests. Pays $2.6 Million Fine and Loses Provider Numbers for 3 Years.

Diagnostic sleep studies have been under scrutiny and audit by Medicare and private insurers for the past 5 years. Recently, a false claims civil lawsuit resulted in a large settlement by a California sleep diagnostic clinic. 

One requirement of this recent civil settlement was that the business lose its provider numbers and not be allowed to re-enroll for 3 years. That essentially closes the business and does not allow it to be sold to a third party. Essentially, this shows the government decided it wanted this provider out of the program. 

On December 28, 2016, Bay Sleep Clinic, its related businesses — Qualium Corporation and Amerimed Corporation — and their owners and operators, Anooshiravan Mostowfipour and Tara Nader agreed to pay $2.6 million to settle allegations that they fraudulently billed the Medicare program. The claims resolved by this settlement are allegations only and there has been no determination of liability.

The allegations against the Defendants were set out in an amended False Claims Act complaint filed by the United States on August 8, 2016. According to the complaint, California residents Mostowfipour and Nader own Amerimed Corporation (that was doing business as Amerimed Sleep Diagnostics and Amerimed CPAP Specialists) and Qualium Corporation, which operated twenty sleep clinics doing business as Bay Sleep Clinic.  

The government alleged that as early as April 2002, Mostowfipour, Nader, and their businesses fraudulently billed Medicare for sleep tests performed by technicians lacking the licenses or certifications required by Medicare payment rules.  It was also alleged that there was billing to Medicare for sleep tests that allegedly were conducted at unenrolled and unapproved locations.  

Specifically, the government alleged that defendants regularly falsified documents to make it appear that a sleep test had been given at one of the two Medicare-approved locations when, in fact, the test had been conducted at another, unapproved facility.  

Minnesota Chiropractors Who Paid Referral Fees to Marketers Charged in Federal Criminal Case for Personal Injury Auto Insurance Accident Cases

For years, health care providers in personal injury or workers' compensation cases were rarely prosecuted federally unless they billed Medicare or Medi-Cal (Medicaid). That is changing rapidly as recent federal criminal cases in Minnesota show which target personal injury fraud. It is clear that federal prosecution will increasingly include all types of health care fraud even where Medicare is not involved.

Across the country, including in California, we are expecting a large increase in prosecuting health care cases where there are allegedly illegal referral fees and alleged unnecessary medical services in private insurance, workers compensation and personal injury cases.  

On December 21, 2016, federal charges were brought against 21 defendants, including 6 chiropractors alleging that between 2010 and 2015 chiropractors engaged in activities with others to defraud automobile insurance companies by submitting fraudulent no-fault insurance claims. Chiropractors Angela A. Schulz, Preston E. Forthun, Huy Ngoc Nguyen and Adam J. Burke were indicted and arrested. Chiropractors Marlyn Comes and Darryl Hummeny were charged in an Information which likely means that a plea deal has been or will be made. All defendants are presumed innocent and Indictments are not evidence.

It is alleged that the chiropractors cumulatively charged billed “no-fault” insurance policies for more than $20 million dollars. The defendants were charged with conspiracy to commit health care fraud and conspiracy to commit mail fraud.  These 21 defendants were charged in 6 separate cases: 4 indictments and 2 felony informations. In cases like this, the government usually relies on cooperating witnesses to record or obtain evidence recorded on video or in texts or emails to show the knowledge of fraud and lack of medical necessity. More charges are expected according to the government.