"Honest Services" Mail Fraud and Kickback Case: How The Feds Are Asserting Jurisction in Charging a Shockwave Therapy Company and its Purported Owners, a Referring Chiropractor, Unindicted Referring Doctors and Unindicted Marketers Over Workers' Compensation Patient Referrals and Alleged Kickbacks Disguised as Agreements for Billing, Rent, Receivables and/or Management Services

For the past five years, after the conviction of former Enron CEO Jeffrey Skilling was upheld at the U.S. Supreme Court, federal authorities have been getting ready to use "honest services" mail fraud in health care fraud and kickback cases involving private insurance, workers' compensation insurance as well as Medicare and Medicaid (Medi-Cal) billing. 

In Skilling, the U.S. Supreme Court found clear congressional inent to limit honest services prosecutions to "offenders who, in violation of fiduciary duty, participated in bribery or kickback schemes." In state health care, physicians and chiropractors owe a general fiduciary and statutory duty as part of their professional duties to patients to disclose financial relationships they have with referring businesses (Bus. and Prof. Code Section 654.2) and this will be the core of the conspiracy count but the prosecutors have alleged specific violations of state law which prohibit unlawful referral arrangements for workers' compensation patients as well. 

In three California cases filed this past week, the U.S. Attorney's Office for the Southern District of California (San Diego) is using honest services mail fraud (18 U.S.C. Section 1341 and 1346) and the travel act (18 U.S.C. Section 1952) to prosecute kickbacks and unlawful referral arrangements in treatment of California workers' compensation patients. 

Apart from the fiduciary duty to patients, these honest services fraud cases are also using violation of the underlying California state laws that prohibit referring patients to providers or individuals where the referring person has a financial interest or relationship with them (Labor Code Sections 139.3 and 3125), and state laws that prohibit kickbacks or any compensation or inducement for referring patients (Bus. and Prof. Code Section 650 and Insurance Code 750). 

In one of them filed in the Southern District of California on November 6, 2015, United States v. Reese, Mathis, et al., Case No. 15CR2822, charges were filed against:


(1) Chiropractor George Reese and his professional corporation, 
(2) Foremost Shockwave Solutions, a shock wave therapy services company,
(3) Lee Mathis, a purported partial owner of Foremost who is also an attorney who allegedly owned management and/or billing companies that are referenced in the Indictment, and
(4)  Fernando Valdes who is also a purported owner of Foremost.  
Anyone charged is presumed innocent, and charges in an Indictment are not evidence.

Texas Home-Health Agency Owners, Director of Nursing And Marketers Indicted For Illegal Patient Marketing, Providing Unnecessary Services and $13 Million in Alleged Medicare Fraud

The health care fraud cases against home health and hospice owners continue to get filed in federal court. The most recent case is one in which the owners, the director of nursing and patient recruiters of a home-health agency based in Houston were arrested November 10, 2015 for their alleged roles in conspiracies to defraud Medicare, to pay illegal healthcare kickbacks and to commit money laundering in an Indictment filed in the Southern District of Texas.  

According to the Indictment, Ebong Tilong and Marie Neba used the Texas-based, home-health agency that they owned to bill Medicare for home-health services that were not provided or not medically necessary. 

The Indictment then alleges they orchestrated this scheme by paying kickbacks to a series of individuals as follows: 

First, Tilong and Neba allegedly paid illegal kickbacks to physicians in exchange for authorizing medically unnecessary home-health services. 

Second, using the money that Medicare paid for such alleged unnecessary or fraudulent claims, Tilong and Neba allegedly paid illegal kickbacks to marketers (patient recruiters) Daisy Carter and Connie Ray Island in exchange for referring Medicare beneficiaries for home-health services. 

Millennium Health Laboratories Agrees to Pay $256 Million to Resolve Qui Tam Allegations of Unnecessary Urine Drug and Genetic Testing and Illegal Kickbacks to Physicians

Millennium Health, formerly Millennium Laboratories, has agreed to pay $256 million to resolve alleged violations of the False Claims Act for billing Medicare, Medicaid and other federal health care programs for medically unnecessary urine drug and genetic testing and for providing free items to physicians who agreed to refer expensive laboratory testing business to Millennium. 

The United States alleged that Millennium caused physicians to order excessive numbers of urine drug tests, in part through the promotion of “custom profiles,” which, instead of being tailored to individual patients, were in effect standing orders that caused physicians to order large number of tests without an individualized assessment of each patient’s needs. 

The United States also alleged that Millennium’s provision of free point of care urine drug test cups to physicians—expressly conditioned on the physicians’ agreement to return the urine specimens to Millennium for hundreds of dollars’ worth of additional testing — violated the Stark Law and the Anti-Kickback Statute.  The Stark Law and the Anti-Kickback Statute generally prohibit laboratories from giving physicians anything of value in exchange for referrals of tests.

Millennium, headquartered in San Diego, is one of the largest urine drug testing laboratories in the United States and conducts business nationwide.

Pain Management Physicians' Treatment Plans And Records Are Being Reviewed With Great Scrutiny - How To Respond To Request For Records and Interview

Board certified pain management physicians are beginning to have records requested from the California Medical Board with greater frequency. In many cases, the Medical Board has requested them due to complaints from family members or pharmacists. 

It is critical to be prepared and handle any requests for records or interviews with great care and seek expert attorney and expert witness review at the earliest time. 

It is also important to review your office's systems and documentation standards now before any records are requested. Remember, if any complaint is made it is highly likely that records will be requested and patient charts are not usually perfectly documented and the standards 

What You Can Learn From One Pain Management Physician's Medical Board Case. 

Here is a sample case of a pain management physician that ended up in a Medical Board Accusation being filed against him for unprofessional conduct, gross negligence, repeated negligence, and excessively prescribing to a patient without a proper medical indication in violation of California Business and Profession Code Section 725, 2234(b)(c) or (d), and 2242(a) relating to several patients.  This was a highly trained and regarded physician in the field of pain management.

How did this case end up as an Accusation and what can you do to avoid a similar situation? 

1.  Documentation Issues - Especially With Long Term Patients. The pain management physician had treated each of the patients for over ten (10) years and as trust and time goes on, the documentation is not always as thorough as it is for short-term patients. Document the rationale for decreasing or increasing dosages or changing medications even if it is brief. Document the treatment plan with the objective for caring for the patient, treating the underlying condition causing the pain, and addressing the pain.

New York Physician Assistant Arrested For Conspiracy To Illegally Prescribe Oxycodone

A physician assistant, Michael Troyan, who operated two urgent care clinics on the east end of Long Island was arrested on November 4, 2015 after being indicted on federal charges of conspiring to illegally distribute oxycodone. At the time of his arrest, the DEA executed search warrants at these two clinics: East End Urgent and Primary Care in Riverhead, New York.

The indictment and public filings allege that between November 2011 and October 2015, physician assistant Troyan with authority to prescribe controlled substances, issued prescriptions for thousands of oxycodone pills to co-conspirators for the purpose of illegally re-selling the pills for cash.  PA Troyan was allegedly captured on video in an undercover operation writing medically unnecessary prescriptions for OxyCodone and receiving large quantities of cash at his Riverhead medical office for prior illegal sales.  It is alleged that PA Troyan was receiving half of the profit from the sale of the oxycodone pills.

The DEA is taking great interest in these cases due to the link now determined between heroin addiction and the taking of prescription painkillers.  The federal sentencing laws for distributing OxyCodone are potentially harsh in that if convicted, PA Troyan faces a maximum sentence of 20 years’ imprisonment and a $1 million fine.

Attorney Commentary: In a case like this, there was significant investigation before the Indictment and search warrant was executed including surveillance and recording. There are physicians who also worked at these clinics who were hired by the physician assistant to be his supervisors. While those physicians would not have written the prescriptions, they would have some responsibilites as supervising physician. Long Island has had a signficiant heroin addiction problem and the DEA is being aggressive in investigating physicians and advanced care providers who prescribe painkillers.

Posted by Tracy Green, Esq.

Green and Associates

Work: 213-233-2260

Prosthetic Limb Maker CEO Charged With State Insurance Fraud For Billing Anthem For Prosthetic Arm After Patient Died and Forging Patient's Name on Delivery Slips

Peter Lira, CEO of Am-Pro Prosthetics and Orthotics in Whittier, was arrested on three felony counts of insurance fraud in Los Angeles County Superior Court for allegedly billing Anthem Blue Cross for a $170,000 prosthetic arm for a Los Angeles County Public Defender who died of cancer after Mr. Lira was notified the patient had died. Mr. Lira was released on bond pending trial on these charges.

Mr. Lira is presumed innocent unless and until he is proved guilty beyond a reasonable doubt. These are only charges at this time.

The Department of Insurance alleges that detectives found evidence that Mr. Lira allegedly submitted fraudulent invoices and forged the deceased patient's signature on the delivery receipt to collect payment for manufacturing a prosthetic arm even though the patient has died. The Department of Insurance also alleges that Mr. Lira is believed to have changed the circumstances under which the arm was needed, claiming the man was still alive and needed the limb because of an industrial accident.

Suspecting fraud, Anthem referred the claim to the Department of Insurance for investigation. This case is being prosecuted by the Los Angeles County District Attorney's Office. Mr. Lira faces a maximum exposure of five years in prison, if convicted on all counts.

Attorney Commentary: There are times where billing for medical equipment could occur if a patient has died between the time of the order and delivery. In addition, there are times when billing mistakes occur. Statistically, that is the case.

In this matter, the Prosecution needs to prove beyond a reasonable doubt that Mr. Lira personally had “intent” to defraud. This is why there are allegations that the deceased patient’s signature was “forged” and that the “reason” the arm was needed was changed.

In a case like this, only the “billing” need to have occurred and even if the prosthetic company was not paid for the prosthetic arm, the insurance fraud charge can be alleged. Insurance companies are being more aggressive in private insurance in reporting suspected fraud. It used to be that there was simply a denial of claim but now the referrals are being made even when government insurance (Medicare or Medi-Cal) are not involved. In our office, we also see more referrals for "suspicious" claims where the patients are current or former government employees.

Posted by Tracy Green, Esq.

Green and Associates, Attorneys at Law

Office: 213-233-2260