There has been a significant increase in investigations and cases involving skin substitutes utilized in wound care. As it frequently does, the Government is focusing on these high reimbursement products. These cases and requests have been administrative, civil, and criminal matters. Based on current investigative activity, additional cases will surely follow.
Administrative Cases and Insurer Audits
While there is little to no public information regarding these administrative and insurance company inquiries, there are dozens if not hundreds of such ongoing audits. For example, Qlarant (which is a private organization that conducts Medicare and Medicaid audits), has sent many requests for medical records to providers who have billed the government for these products. Providers should keep in mind that while Qlarant medical requests can be resolved administratively, Qlarant can and does work with and make referrals to the Department of Justice for civil or criminal prosecution. Private insurers are also auditing codes utilized for these products and services.
Cases that resolve administratively or as a routine audit generally do not have the more egregious conduct found in the civil and criminal cases discussed below. However, federal criminal healthcare fraud statutes are interpreted broadly, and so conduct that may appear legal could violate such statutes. For example, in the criminal Gehrke case discussed below, the kickbacks were not additional payments but rather manufacturer rebates. Also, payors sometimes extrapolate alleged overpayment amounts from what appears to be a limited inquiry for medical records. Thus, it is imperative that providers take these inquiries seriously.
Below are examples of some recent Department of Justice (DOJ) cases involving skin substitute grafts. Future cases will almost certainly include similar allegations and fact patterns.
Civil False Claims Act Cases
The False Claims Act (FCA) is a federal law that imposes civil liability on any person who submits false claims to the federal government. The law imposes treble damages and civil penalties on those who submit false claims. In fiscal year 2023, FCA settlements and judgements totaled almost $2.7 billion, with $1.8 billion of that amount attributable to healthcare cases. Under the FCA, whistleblowers (called “relators”) can file cases under seal on behalf of the Government. The Government then opens an investigation to determine whether they should intervene in the case. The relators who bring these cases share in the recovery obtained by the Government. A detailed discussion of the FCA can be found at https://wirskyelawfirm.com/false-claims-act-basics/.
Tareen Dermatology and Dr. Tareen
In August 2024, the DOJ reached a $1.63 million settlement with Tareen Dermatology, P.A., its CEO, and Dr. Mohiba Tareen in a qui tam case initiated by two whistleblowers alleging improper billing for certain skin grafts in certain circumstances. More specifically, the settlement resolved allegations that the defendants caused false claims to be submitted to Medicare and VA-administered programs in connection with certain surgeries for (1) services billed as though performed under the supervision of Dr. Tareen on days she was not physically present in the clinic, (2) office visits for which Defendants inappropriately waived beneficiary co-pays, and (3) the use of certain skin grafts in circumstances in which their usage was not justified as billed. (https://www.justice.gov/usao-mn/pr/tareen-dermatology-agrees-pay-more-16-million-resolve-alleged-false-claims-act).
Dr. Joel Aronowitz, Daniel Aronowitz, and Joel A. Aronowitz, M.D.
In April 2023, the DOJ settled a False Claims Act case brought by whistleblowers against a Beverly Hills plastic surgeon, his sons, medical practices, and billing companies for almost $24 million. The government alleged that defendants double-billed by reusing single-use skin graft materials and falsified the place of service for skin grafts to fraudulently maximize reimbursements. In addition to the monetary payment, Dr. Aronowitz agreed to a 15-year voluntary exclusion, and Daniel Aronowitz was excluded for 3 years. (https://www.justice.gov/opa/pr/beverly-hills-plastic-surgeon-agrees-pay-nearly-24-million-settle-false-claims-act).
Criminal Cases
Alexandra Gehrke and Jeffrey King
In June 2024, Alexandra Gehrke, Jeffrey King, and two nurse practitioners working with them were charged in the District of Arizona for targeting elderly Medicare patients for medically unnecessary and expensive amniotic wound grafts. Medicare and other health care benefit programs paid over $600 million on $900 million of claims in sixteen months. (https://www.justice.gov/usao-az/pr/seven-charged-arizona-part-department-justices-2024-national-health-care-fraud).
According to the indictment, Gehrke and King targeted elderly Medicare patients, including many who were terminally ill and in hospice care, and caused unnecessary amniotic tissue grafts to be applied to wounds that did not need this treatment – and they allegedly did so without proper treatment for infection or coordination with the patients’ treating physicians. Gehrke and King were also accused of causing nurse practitioners to apply the expensive grafts in sizes that were excessively larger than the wounds, thereby improperly increasing their Medicare reimbursement, and receiving more than $330 million in illegal kickbacks as manufacturer rebates in exchange for purchasing the grafts that were then billed to Medicare. (2:24-cr-01040-ROS D. Ariz.).
In October 2024, Alexandra Gehrke plead guilty to conspiracy to commit wire fraud and faces up to 20 years in prison. The plea agreement includes a nonbinding United States Sentencing Guidelines calculation of level 46, which equates to a life sentence (this is capped at 20 years under this plea agreement). Gehrke also agreed to pay almost $591 million in restitution.
Ameet Goyal (7:19-cr-00844-CS SD NY)
This was a parallel criminal and civil investigation that involved oculoplastic procedures billed with grafts. A key component of the alleged fraud related to whether the grafts were performed and if medical documentation accurately described what happened. There were also allegations of duplicate billing, improper use of modifiers, and upcoding. The defendant plead guilty and was sentenced to 96 months in prison and is required to pay approximately $3.6 million in restitution.
Takeaways
Providers should take extra care to ensure that they have robust and accurate contemporaneous documentation in their medical records that support the codes billed for and related to skin grafts. In this area, pictures are helpful to show that services were provided and necessary. Necessity is also interpreted as not using larger than necessary grafts and certainly never as cutting and reusing grafts as in the Aronowitz case. Providers should also ensure that necessity can be supported, as this will be scrutinized even if facts in this paragraph are not an issue. Finally, based on the government and insurers mining data for providers who bill large amounts, providers should understand that if their numbers are high, they are more likely to be on the radar.
In addition to providers, manufacturers, their employees, and marketers also have exposure. These parties should discontinue the use of rebates or other discounts based on the government’s characterizing them as kickbacks as in the Gehrke case. Of course, other alleged kickbacks, which could include dinners, gifts, speaker fees, medical director or consulting agreements, or other items of value, should be discontinued too. Marketers’ employment arrangements and compensation should also be compliant with the anti-kickback statute.
Individuals and entities should take all administrative requests, CIDs (used in FCA cases), and subpoenas (used in civil and criminal cases) for records regarding skin grafts seriously due to significant government scrutiny. They should retain counsel so that their response is appropriate and complete, and there are no missteps that could escalate their case, such as altering or deleting records. They should also keep a copy of exactly what was provided if the case escalates. Overall, it would be prudent for individuals or entities in this area to consult with experienced counsel regarding developments and potential steps they can take to proactively protect themselves.