New Civil Qui Tam Lawsuit Filed Against South Dakota Neurosurgeon and His Physician-Owned Distributorships (PODs) Alleging Kickbacks for Devices Used in Spinal Surgeries

2016 Senate Report on PODs

The issue of physician owned distributorships (PODs) is still an issue with orthopedic surgeons and neurosurgeons. The Justice Department is still filing qui tam actions and joining actions filed by whistleblowers. Physicians need to be very careful when forming their own device companies or distributorships. Since 2013, OIG has stated that PODs are "inherently suspect" under the federal anti-kickback statute.

Recently, on November 14, 2019, the United States filed a civil qui tam complaint against South Dakota neurosurgeon Wilson Asfora M.D. and his medical device companies Medical Designs LLC and Sicage LLC. The complaint alleges False Claims Act violations arising from the alleged payment of kickbacks to Dr. Asfora tied to the devices he used in spinal surgeries which were purchased from his own distributorships Medical Designs and Sicage.          

The Anti‑Kickback Statute prohibits offering or paying anything of value to induce the referral of items or services covered by Medicare, Medicaid, and other federal healthcare programs.  The government’s civil complaint alleges that Dr. Asfora, Medical Designs, and Sicage engaged in multiple kickback schemes designed to pay Dr. Asfora hundreds of thousands of dollars in exchange for Dr. Asfora using spinal devices distributed by Medical Designs and Sicage in his spine surgeries. 

The civil lawsuit also alleges that despite receiving numerous warnings that he was performing medically unnecessary procedures with the devices in which he had a financial interest, Dr. Asfora allegedly continued to perform such procedures while personally profiting from his use of devices sold by Medical Designs and Sicage. 

The case is captioned United States ex rel. Bechtold, et al. v. Asfora, et al., No. 4:16-cv-04115-LLP (D.S.D.).  The claims asserted against the defendants are allegations only, and there has been no determination of liability.

California Physician Charged in Self-Referral Case With Felony Insurance Fraud and Perjury for Allegedly Referring Workers Comp Patients to a Laboratory and Surgery Center In Which He Allegedly Had Ownership Interest

Referring patients to other business entities that a physician has an ownership interest in can be a violation of the law depending on the type of patient (Medicare, workers' compensation) and it is important to ensure that the rules are being followed. California workers' compensation rules can be as more complex as those governing Medicare patients.

A recent case shows what can happen if the government contends that self-referral rules under the California Labor Code are violated for workers' compensation patients. There may be very good defenses here where the surgery center was part of the same practice and there was an in-office laboratory that is CLIA certified. 

A Corona physician (anesthesiologist who specializes in pain management), Dr. Sanjoy Banerjee, is charged with felony workers’ compensation insurance fraud (two counts Ins. Code Section 550(a)(1)) and perjury (five counts Penal Code 118(a)) by the Riverside County District Attorney’s Office after investigators claimed he referred patients to a clinical laboratory and surgical center he allegedly owned or had some ownership interest. Dr. Banerjee is presumed innocent.

Dr. Banerjee works as a pain management doctor who saw workers’ compensation patients  (probably among other types of patients) at a medical clinic he owned called Pacific Pain Care. The prosecution contends that Dr. Banerjee signed under penalty of perjury five workers' compensation doctor’s reports stating that he had not referred workers’ compensation patients to companies he owned. I doubt that is what the doctor's reports stated but it was probably just a form statement that there was no violation of Labor Code Section 139.3.

Investigators alleged that Dr. Banerjee had referred some of his patients to a "different business" he owned, Rochester Imperial Surgical Center, also located in the Pacific Pain Care office suite.  The prosecution alleges that Dr. Banerjee billed for more than $180,000 worth of urine toxicology testing and epidural injections through the laboratory and surgical center. One of the key issues will be whether this was a "different" business if it was owned by the same physician in the same office suite and met the exceptions of the in-office ancillary exception. If it met the exception, there is NO criminal case.

California Meat Processing Company and Two Company Officials Plead Guilty to Selling Misbranded Beef, Pork and Poultry They Falsely Claimed Had Been Inspected

Regulatory cases can turn criminal and the resolution often takes years. A recent case began on the regulatory side in 2012 and became a criminal case which has taken six years to resolve. The case has also cost the company millions of dollars in product seizures, recall requirements, legal fees and fines. It shows the potential risk of non-compliance.

On August 1, 2018, a meat processor Golden Key Food, Inc. dba AA Meat Products Corp. was investigated in 2012 by the U.S. Department of Agriculture (USDA) for selling meat that was produced without federal inspection. The government alleged that AA Meat products had a plant in Maywood that was operating under a USDA grant of inspection where meat and poultry food products were properly federally inspected, but that they had a second facility in Commerce did not have USDA inspection grant. USDA alleged that AA Meat produced and sold meat (such as trip, duck feet, and other less expensive parts) from its Commerce plant that had not been inspected but was stamped as if it had been inspected.

In 2012, the USDA investigators came in and seized approximately 568,000 pounds of meat and poultry products. The USDA then issued a Class I recall led to the recovery of another nearly one-half million pounds of meat – all of which had to be destroyed.

Connecticut Hospital Paid Fines for Stark Law Violations for Renting Space to Medical Practice at Less Than Fair Market Value

On April 24, 2018, after it self-disclosed conduct to OIG, Hartford Hospital in Connecticut, agreed to pay $423,017.45 for allegedly violating the Civil Monetary Penalties Law provisions applicable to physician self-referrals and kickbacks. 

The OIG alleged that Hartford Hospital provided remuneration to a medical practice in the form of office space, where Hartford Hospital charged the practice rent at less than fair market value. The remuneration created a financial relationship between Hartford Hospital and the practice that caused Hartford Hospital to present claims for health services that resulted from prohibited referrals in violation of the Stark law.

Rental arrangements where there are patient referrals need to be reviewed for compliance with Stark and Anti-Kickback statutes. This case is an example of the high fines that can result. Luckily, the self-disclosure likely prevented more severe sanctions such as exclusion or criminal referral. 

Posted by Tracy Green

Green and Associates

U.S. Department of Justice Intervenes in Five Civil Qui Tam Lawuits in Los Angeles Accusing Insys Therapeutics of Paying Kickbacks in Form of Speaker Fees, Meals, Entertainment, Jobs, Etc. to Encourage Physicians Promote Sybsys, a Sublingual Spray Form of Fentanyl

On May 15, 2018, the United States intervened in five “whistleblower” lawsuits that have been consolidated in United States District Court in Los Angeles and accuse Insys Therapeutics, Inc. of paying illegal kickbacks and defrauding federal health programs in connection with the marketing of Subsys, an opioid painkiller manufactured and sold by the Arizona-based company.   The civil claims asserted against Insys are allegations only, and there has been no determination of liability.

The five cases brought pursuant to the False Claims Act were ordered unsealed late last week, as was the government’s complaint in intervention. The United States has separately pursued a number of criminal cases against Insys employees and Subsys prescribers.

The cases allege illegal marketing tactics related to Subsys, a sublingual spray form of fentanyl, an opioid painkiller. In 2012, Subsys was approved by the Food and Drug Administration for the treatment of persistent breakthrough pain in adult cancer patients who are already receiving, and tolerant to, around-the-clock opioid therapy.

The government’s complaint alleges that Insys paid kickbacks to induce physicians and nurse practitioners to prescribe Subsys for their patients. Many of these kickbacks allegedly took the form of sham speaker fees to physicians, jobs for the prescribers’ relatives and friends, and lavish meals and entertainment.

The United States also alleges that Insys improperly encouraged physicians to prescribe Subsys for patients who did not have cancer, and that Insys employees lied to insurers about patients’ diagnoses in order to obtain reimbursement for Subsys prescriptions that had been written for Medicare and TRICARE beneficiaries.

Pharmacy Owner And Pharmacist Sentenced To 160 Months In Prison For $4.3 Million Pain And Scar Compounding Creams Where Referral Payments Received When TRICARE Insurance Billed

The compounding cream cases where pharmacies engaged in marketing to obtain patients and where there were billings to TRICARE insurance continue. 

In a recent case, after a five-day trial of one count of conspiracy to pay health care kickbacks and paying and receiving kickbacks, a long sentence was handed out by a federal district court judge to a pharmacy owner and pharmacist.  

On March 30, 2018, the owner of a Florida pharmacy, Larry B. Howard, also a licensed pharmacist, was sentenced by U.S. District Judge Paul G. Byron to serve 160 months in prison and ordered to pay $4.3 million in restitution for his role in this case.

Physicians Performing Work Outside the U.S. Need to Be Careful of IRS and FBAR Rules: Recent Case of Beverly Hills Plastic Surgeon Who Did Procedures in Dubai and Plead Guilty to Failing to Disclose A Foreign Bank Account to the IRS

Physicians have been more likely the past 10 years to travel abroad and perform medical procedures there. Whether it's Russia, Dubai, Mexico, Canada or Korea, two issues to be aware of are reporting the existence of foreign financial accounts and reporting the earnings on a U.S. tax return. 

A recent case shows the perils of not following the Internal Revenue Service (IRS) and foreign bank account reporting rules carefully.

The basic rule on foreign bank accounts is that United States citizens who have an interest in or authority over a financial account in a foreign country with assets over $10,000 are required to disclose and report the foreign financial account to the United States Department of Treasury for each year the financial account exists.

The case study here which all can learn from is as follows. According to the plea agreement filed in this case, Dr. Marc Edward Mani, a Beverly Hills plastic surgeon, began to travel to Dubai in 2011 to perform plastic surgery for a foreign medical center. 

Two Northern California Doctors Face Sentencing in April 2018 After Being Convicted by Jury of Health Care Fraud After 8 Week Trial for Billing for Unperformed Services, Unseen Patients and Other False Billing Statements

Years ago, health care fraud cases would only be brought in extreme cases for ghost billing or outrageous conduct. We are seeing cases involving upcoding the office visit, not adding a physician to the group or not dropping the physician to the group, and for exaggerating conditions. A recent case seems to fit in that profile.  

Two physicians who went to trial and were convicted of some counts are awaiting sentencing. Dr. Vilasini Ganesh, a family practice physician and head of Campbell Medical Group, was convicted of 10 health care fraud and false statements relating to health care matters and Dr. Gregory Belcher (an orthopedic surgeon) was convicted of one count of making false statements relating to health care matters. Both were acquitted of some counts. There was an 8 week trial before the Honorable Lucy H. Koh, U.S. District Court Judge, and sentencing is now set for April 4, 2018 before the same judge.

The government contended that the evidence at trial showed that from 2009 to 2014, Dr. Ganesh submitted false and fraudulent claims to several health care benefit programs for services that she knew were not properly payable, by including claims for days when the patient had not been seen by the provider, exaggerated the amount of time spent with the patient, and submitting claims showing patients were seen by another physician provider who was no longer affiliated with her practice. There was alleged billing when the office was closed or the doctors or staff were out of state.  The government also contended that Dr. Belcher had on at least one occasion submitted a false claim in connection with a billing matter related to his physical therapy practice.  

This case moved relatively quickly since it was in July 2017 that the doctors were indicted by a federal grand jury charging them with one count of conspiracy to commit health care fraud, in violation of 18 U.S.C. § 1349; one count of conspiracy to commit money laundering, in violation of 18 U.S.C. § 1956(h); and multiple counts health care fraud, in violation of 18 U.S.C. § 1347, and 2 and false statement relating to health care matters, in violation of 18 U.S.C. § 1035.   

The maximum sentence is not indicative of what the sentence will be but it still frightens any physician or individual faced with these charges. The maximum statutory penalty for each count in violation of 18 U.S.C. Section 1347 is 10 years imprisonment and a $250,000 fine plus restitution, if appropriate.  The maximum statutory penalty for each count in violation of 18 U.S.C. Section 1035 is five years imprisonment and a $250,000 fine plus restitution, if appropriate.  However, any sentence will be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553. 

I would assume that there may be motions for a new trial, possible appeals and potential resolutions given that the acquittals on the money laundering counts and some of the other counts.

Posted by Tracy Green, Esq.
Green and Associates  

Scripps Health to Pay $1.5 Million to Settle False Claims Act for Services Rendered by Physical Therapists Who Did Not Have Billing Privileges or Were Not Supervised by Authorized Provider

One issue I see happen with medical groups or providers is when physicians or other health care providers are not properly added to the group before they provide services to patients. Often this occurs when the administrators do not ensure it is done and then when it goes to billing, the biller can't use the NPI number of the rendering provider and so they use the NPI of a different provider. This can be a false claim when done this way. 

There are also complexities when a decision is made to bill the service as "incident to" a physician services but the rules here are complex and if not followed correctly that can also be viewed as a "false claim." A recent case show that this can happen at hospitals or large providers as well.

On or about January 19, 2018, Scripps Health (Scripps), a health care system based in San Diego, California, agreed to pay $1.5 million to resolve allegations that it violated the False Claims Act by charging federal health care programs for physical therapy services that were rendered by therapists who did not have billing privileges for these programs and were not supervised by an authorized provider.  The settlement resolves allegations filed in a federal qui tam lawsuit filed by a former employee where the U.S. decided to intervene and join. The settlement is not an admission of wrongdoing. 

  

Medicare and TRICARE (and private insurance and Medi-Cal/Medicaid as well) limit billing privileges to enrolled providers. Services from unenrolled providers can be billed as “incident to” the services of an enrolled physician, but only if the physician provided direct supervision. Direct supervision is quite specific in what falls under it.  

In this civil health care lawsuit dispute, the United States alleged that Scripps billed Medicare and TRICARE for physical therapy services provided by therapists without billing privileges and without the appropriate supervision by a physician. The United States intervened in a whistleblower lawsuit filed by a former Scripps employee.

Suzanne Forrest, a former Scripps employee, filed a federal lawsuit under the qui tam provisions of the False Claims Act (FCA). The FCA permits private individuals to sue for false claims on behalf of the government and to share in any recovery.  The civil lawsuit was filed in the Southern District of California and is captioned United States ex rel. Forrest v. Scripps Health, Case No. 16-CV-0634. As part of this settlement, Ms. Forrest will receive $225,000. 

While the claims resolved by this settlement are allegations only and there has been no determination of liability, this is an expensive lesson for the hospital. It is one that other providers can learn from. Understanding how billing "incident to" is allowed, the scope of "direct supervision," and when providers need to be added to a group or hospital will help prevent civil qui tam lawsuits, audits for overpayment and/or criminal investigations. 

Posted by Tracy Green, Esq.

Green and Associates, Attorneys at Law

Two Northern California Urologists Agree To Pay More Than $1 Million To Settle Civil False Claims Act Allegations Related To Image Guided Radiation Therapy (IGRT) Referrals for Medicare Patients

On January 23, 2018, Drs. Aytac Apaydin and Stephen Worsham, urologists based in Northern California, agreed to a civil compromise with no admission of liability in which they will pay $1.085 million to resolve allegations that they submitted and caused the submission of false claims to Medicare for image guided radiation therapy (IGRT). 

IGRT is used to treat patients who are diagnosed with cancer, including prostate cancer patients. The government alleged that these IGRT claims were referred and billed in violation of the physician self-referral law (commonly known as the “Stark Law”) and the Anti-Kickback Statute.

The factual background according to the Department of Justice is that Drs. Apaydin and Worsham own and operate Salinas Valley Urology Associates (SVUA) in Salinas, California. They also owned Advance Radiation Oncology Center (AROC), located in Salinas, California, which dissolved in 2016.  

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

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).  

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

Forest Laboratories and Pharmaceuticals to Pay $38 million to Resolve Kickback Allegations for Payments to Physicians for Speaking Programs

The government has become far more aggressive in classifying payments to physicians by drug companies as "kickbacks" unless certain criteria are met. 

In a recent case, Forest Laboratories LLC, located in New York, New York, and its subsidiary, Forest Pharmaceuticals Inc., agreed in December 2016 to pay $38 million to resolve allegations that they violated the False Claims Act by paying "kickbacks" through payments and meals for alleged sham speaking programs to induce physicians to prescribe the drugs Bystolic®, Savella®, and Namenda®.  

The civil settlement resolves a qui tam lawsuit filed by former Forest employee Kurt Kroening, in federal court in Milwaukee, Wisconsin that the federal government and some state governments joined. The allegations were that Forest violated the Anti-Kickback Statute, which prohibits the payment of remuneration to induce referrals of items or services covered by federal health care programs, by providing payments and meals to certain physicians in connection with speaker programs about Bystolic®, Savella®, or Namenda® between Jan. 1, 2008 and Dec. 31, 2011.  

The United States contends that the payments and meals were intended as improper inducements because Forest provided these benefits even when the programs were cancelled (and Forest provided no evidence of a bona fide reason for the cancellation), when no licensed health care professionals attended the programs, when the same attendees had attended multiple programs over a short period of time, or when the meals associated with the programs exceeded Forest’s internal cost limitations. 

Physicians who receive payments or meals from drug companies for speaking need to ensure that they do the speaking, that the programs are current and occurred. In the Forest case, the physicians received payments even when the speaking programs were cancelled. It would also be good practice to notify patients in writing when prescribing medications for which payment has been received that they have received payments from the drug manufacturer. 

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

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.

New York Doctor Charged With Taking Kickbacks In Test-Referral Arrangement With Clinical Lab. Huge Case With 27 Doctors Pleading Guilty.

Federal health care fraud cases involving payments for referrals are getting larger, involving more health care providers and get prosecuted in phases. One case in New York how these cases keep coming out of the same investigation. 

On December 20, 2016, Thomas V. Savino, M.D., a doctor practicing in Staten Island, New York, was charged with accepting payments (bribes) in exchange for test referrals as part of a long-running marketing arrangement operated by Biodiagnostic Laboratory Services LLC (BLS) of New Jersey. He is the 30th physician charged who referred cases to BLS. 

The cases arising out of BLS' operations is believed to be the largest number of medical professionals ever prosecuted in a kickback case. The investigation has thus far resulted in 41 guilty pleas – 27 of them from doctors – in connection with the marketing and kickback arrangements. Some of these were alleged sham lease, service and consulting agreements. On June 28, 2016, BLS, which is no longer operational, pleaded guilty and was required to forfeit all of its assets. The investigation has to date recovered more than $12 million through forfeiture. 

This case went to Indictment after Dr. Savino did not voluntarily plead guilty.  According to the indictment, from July 2012 through April 2013, Dr. Savino allegedly received cash payments totaling at least $25,000 from BLS employees and associates. Dr. Savino’s referrals allegedly generated approximately $375,000 in lab business for BLS. The government is charging that the inducements were for Medicare and private insurance.

The sales representatives for BLS often used other entities to make payments. The government also alleges in many of these cases that the patients were never informed that the cases were referred to a laboratory where the physician would receive a payment.

New Jersey Woman Pleads Guilty to Role In Medicare Fraud by Clinical Laboratory Billing for Genetic DNA Testing on Seniors Where Healthcare Providers Were Paid for Authorizations

Fraud prosecutions in clinical laboratories are on the rise. Marketing is usually at the heart of these cases. A recent case involving DNA testing shows marketing issues on the patient side and on the referring or authorizing physician side as well as issues of medical necessity. 

One of the reasons that paying outside marketers commissions creates issues is that the health care provider often does not know how the marketer finds the patients or accounts. This case shows how creative outside marketers can be in finding patients and health care providers to earn commissions. 

On December 1, 2016, Sheila Kahl of New Jersey pleaded guilty before U.S. District Judge Anne E. Thompson in Trenton federal court to an information charging her with one count of conspiring to commit health care fraud and one count of conspiring to wrongfully access individually identifiable health information and pay illegal remunerations to health care professionals. Sentencing for Ms. Kahl is scheduled for March 14, 2017.

Ms. Kahl's actions involved an entity known as The Good Samaritans of America which the government alleged was not a true not-for-profit and was a marketing company front to get elderly patients to submit to genetic testing so it could get commission payments from clinical laboratories. 

According to documents filed in the case and statements made in court, from July 2014 through December 2015, Seth Rehfuss, Ms. Kahl, and others used The Good Samaritans of America to gain access to low-income senior housing complexes. Mr. Rehfuss and others claimed that The Good Samaritans of America was a “trusted non-profit” that assisted senior citizens in navigating federal benefit programs. The government alleged that The Good Samaritans of America was a front to present information about genetic testing and they used advertisements for free ice cream to ensure attendance at the presentations.

California Facilities Owned By Rideout Health to Pay Civil Monetary Penalties and Agree to 3-Year Compliance Plan to Resolve Controlled Substance Act Claims

The Drug Enforcement Administration (DEA) is becoming more aggressive about enforcing recordkeeping and other rules for controlled substances in hospitals, surgery centers, urgent care clinics and so on. We have handled audits by the DEA and fines are a significant part of their enforcement. A recent case shows what can happen to health care facilities when the recordkeeping rules are not followed. This case also shows that even with cooperation the fines can be significant.

On December 6, 2016, Rideout Health entered into a settlement agreement in which it will pay the United States $2,425,000 to settle the federal claims of alleged violations of the Controlled Substances Act including record keeping. The alleged violations were by three of Rideout Health’s facilities in Yuba and Sutter Counties: Rideout Memorial Hospital, Fremont Medical Center, and Feather River Surgery Center. There were no allegations of diversion or improper prescribing. 

This settlement arises from a DEA investigation that began after DEA received information from the California State Board of Pharmacy that Fremont Medical Center’s DEA Registration had expired, and that from October 23, 2012, to October 23, 2014, pharmacy technicians at Rideout Memorial Hospital were transporting controlled substances between Rideout Health facilities with little or no security controls in place.

In addition, Rideout Health has agreed to a three-year compliance plan. The payment and plan resolve the United States' claims that the three Rideout Health facilities failed to properly record and maintain thousands of transactions involving controlled substances in violation of the Controlled Substances Act and its implementing regulations.

The settlement also resolves the United States’ contention that the system Rideout Health used during that time to distribute controlled substances between these facilities failed to provide sufficient security controls. 

There was a lot of cooperation here once the investigation began. Rideout Health worked with the DEA and the United States Attorney’s Office to develop a detailed compliance plan to address the deficiencies in Rideout Health’s handling of controlled substances. 

Rideout Health also took proactive steps to reorganize its Compliance Department to improve controls with respect to the purchase, storage and dispensing of controlled substances. The compliance plan with the DEA is designed to advance Rideout Health’s ability to meet its record keeping requirements and enhance its ability to detect and prevent drug diversion. These are the type of actions that begin once any entity becomes aware of an investigation. Being proactive is very important and does not indicate weakness or constitute an admission of wrongdoing. It is just good practice.

Posted by Tracy Green, Esq.
Email: tgreen@greenassoc.com
Green and Associates, Attorneys at Law

California Registered Nurse Who Ordered Botox From Canadian Company Via Internet for Medical Spa Pleads Guilty to Federal Charge of Receipt and Delivery of a Misbranded Drug

One important issue for all medical providers is to understand where FDA medications and injectables come from. Ordering on the Internet or from unauthorized distributers can create serious legal issues, including criminal charges, license discipline and in cases where insurance or Medicare/Medi-Cal (Medicaid) has been billed there will be demands for overpayment and allegations of fraudulent billing.

A registered nurse who owned and operated a day spa in Laguna Niguel, California has learned this lesson the hard way. This month she agreed to plead guilty to a federal charge related to the illegal distribution of Botox that was not approved for use in the United States.  

Bridget “Gigi” Goddard, who allegedly owned Pure Indulgence Skin Rejuvenation in Laguna Niguel, has agreed to plead guilty to one count of receipt and delivery of a misbranded drug, a crime that carries a statutory maximum penalty of three years in federal prison. It would be highly unlikely she would receive the maximum but it is a felony and will likely have license repurcussions.

Lesson of the Case. The issue is often whether there is criminal intent and there have been thousands of physicians purchasing. How is that shown? One way is whether the individual received a letter from FDA about it and continued to order from other countries.  FDA has been transparent about notifying medical providers about illegal use of Botox and other medications from outside the U.S. On the FDA website there's a list of medical providers who were notified from 2013 to the present and there's a list of "repeat offenders." Ms. Goddard unfortunately was one of those listed as having been notified in 2013 and apparently still used product from outside the U.S. The undercover agent was key in her case. 

Government Has List of Providers Who Bought From SB Medical, Inc., TC Medical and Gallant Pharmaceutical. This case comes out of a larger federal case against SB Medical that was filed in Alexandria, Virginia against SB Medical, Inc. and its principals. In that case, the company plead guilty and was ordered to pay a $45 million fine and to forfeit $30 million for smuggle misbranded pharmaceuticals into the United States. The government sent letters to medical clinics and medical spas who had bought Botox and other injectables from SB Medical, Inc. and other companies under investigation and then followed up with them. Other entities that were also prosecuted include Gallant Pharmaceutical. 

Allegations Against Ms. Goddard. The government alleged that the Botox that Ms. Goddard purchased had been manufactured for distribution in foreign nations such as Turkey and was not approved by the FDA for distribution in the United States. All Botox products approved for distribution in the United States by the United States Food and Drug Administration are manufactured by Allergan and must be administered under the supervision of a licensed physician. 

Ms. Goddard admitted in her plea agreement that, over the course of several years, she ordered Botox over the internet from Canadian companies that sold unapproved drugs to customers in the United States. In April 2016, the government send an undercover FDA agent to Pure Indulgence which compounded Ms. Goddard's legal issues.  The government alleges that at this undercover visit, Ms. Goddard told the undercover agent that the undercover agent did not need to be examined by a physician before the Botox injections were administered, and she knowingly misled the agent as to whether the Botox was approved for use in the United States.

Ms. Goddard is scheduled to make her first appearance in this case in United States District Court in Santa Ana on December 12. The investigation into Goddard was conducted by FDA’s Office of Criminal Investigation. The case is being prosecuted by Assistant United States Attorney Scott D. Tenley of the Santa Ana branch office.

Attorney Commentary. The high price of Botox and other injectibles have caused entrepreneurs to buy overseas and sell in the U.S. in person or through the Internet. The salespersons represent that the product is the "same" but often that is not the case. In addition, even if the product were Allergan from overseas - if the drugs are not distributed by Allergan and sold in the U.S., it is illegal to import the products from outside the U.S. One of the reasons is that there are counterfeiters who repackage, are not using real product, and the chain of custody is not guaranteed. In addition, there is product liability insurance in the U.S. that is not available for products purchased from outside the U.S. 

While the pricing structure of pharmaceuticals and medical devices may not seem fair, it is the law and medical providers must be careful and instruct office managers and nurses to order from the manufacturer or authorized distributors. If there is an investigation or visit by an FDA agent, it is important to not handle this alone and seek experience counsel since mistakes during an interview can have serious repurcussions.

How do you prevent an FDA investigation from turning into a criminal case? The government looks for criminal intent. The FDA had been heavy handed in some cases and was even named the Botox Police. Allergan had its own financial interest in pursuing charges. 

Tips. First, if there is an interview request -- and trust me, the agents do not call for an appointment and simply show up in pairs -- be polite and ask for time to have an attorney present and so you can gather all your records and prepare for an interview (or decide not to be interviewed depending on the facts). 

Second, do not lie. Do not fabricate records. Do not ask anyone else to lie or fabricate an invoice. This is what the government loves - when someone panics and acts like a foolish teenager and lies without thinking - since it shows "criminal intent." 

Third, do not minimize the importance of these investigations and attempt to handle it on your own. When you are stressed, part of your brain shuts down and at the time of the interview, the FDA or other goverment agency knows a lot more facts than you.

Finally, each case is different and there could be an additional 10 tips but it will be case specific. Even chain pharmacies have counterfeit and fake drugs and over the counter medications. Counterfeiting is a huge business. Be smart and breathe, take your time to get experienced representation and prepare for an interview like you would anything else.

Posted by Tracy Green, Esq.

Green and Associates, Attorneys at Law
Email:  tgreen@greenassoc.com
Office: 213-233-2261