In October 2023, the HHS-OIG issued its annual report on the Health Care Fraud and Abuse Control Program for fiscal year 2022 (Health Care Fraud and Abuse Control Program Annual Report for Fiscal Year 2022 (hhs.gov). This comprehensive document delves into Program and Department of Justice (DOJ) activities, providing summaries of significant healthcare fraud prosecutions, as well as highlighting HHS-OIG’s and other federal healthcare programs’ activities and actions. It is a crucial resource for practitioners in this field.
Enforcement Actions
In FY 2022, the DOJ initiated over 809 new criminal healthcare fraud investigations. Federal prosecutors filed criminal charges in 419 cases involving at least 680 defendants, with over 477 convictions. Additionally, the DOJ opened 774 new civil health care fraud investigations, ending the FY with 1,288 civil healthcare fraud matters pending.
HHS-OIG investigations resulted in 661 criminal actions and 726 civil actions against individuals or entities engaged in crimes related to Medicare and Medicaid. Notably, 2,332 individuals and entities were excluded from participation in Medicare, Medicaid, and other Federal health care programs. Significant Texas related prosecutions cited in the Report are summarized below.
In July 2022, Inform Diagnostics, Inc. (Inform), a clinical laboratory based in Irving, Texas, reached a settlement agreement to pay $16.0 million to resolve civil False Claims Act (FCA) allegations. According to the settlement, Inform routinely and automatically conducted additional tests on biopsy specimens prior to a pathologist’s review, without an individualized determination regarding the medical necessity of these additional tests. The company’s practice of routinely conducting such additional tests led to the performance of numerous medically unnecessary tests, which it submitted for payment.
In August 2022, 13 defendants were collectively sentenced to 84 years in Federal prison for their involvement in orchestrating a scheme that resulted in fraudulent hospice services claims amounting to $27.0 million being paid by Medicare and Medicaid between July 2012 and May 2016. The defendants, including the CEO of Novus Health Services, a Dallas-based hospice agency, along with other company executives, nurses, and physicians serving as medical directors, were found guilty of various offenses. These included submitting false claims for hospice services, filing deceptive claims for continuous care hospice services, recruiting ineligible hospice beneficiaries through kickbacks to referring physicians and healthcare facilities, violating HIPAA to attract potential hospice patients, dispensing Schedule II controlled substances to patients without proper medical oversight, and utilizing a new company for Medicare billing to evade a Medicare suspension.
In July 2022, Metric Lab Services and Metric Management Services LLC (Metric) and Spectrum Diagnostic Labs LLC (Spectrum) clinical laboratories based in Mississippi and Texas, and two of their owners and operators, agreed to a $5.7 million settlement to resolve allegations. The claims suggested that they facilitated the submission of false claims to Medicare by engaging in kickback schemes for genetic testing samples. The United States asserted that the defendants participated in a fraudulent genetic testing scheme with marketers who solicited genetic testing samples from Medicare beneficiaries. Marketers orchestrated the acquisition of a physician’s fraudulent attestation regarding the medical necessity of genetic testing. Subsequently, Metric and Spectrum processed these tests, received reimbursement from Medicare, and, in turn, disbursed a portion of that reimbursement to the marketers. Each of the individual defendants previously pleaded guilty and were awaiting sentencing.
In November 2021, Flower Mound Hospital Partners LLC (Flower Mound Hospital), a hospital partially owned by physicians in Flower Mound, Texas, agreed to a settlement of $18.2 million to address FCA allegations. The accusations spanned the period between July 2019 and June 2021, asserting that Flower Mound Hospital knowingly submitted claims to Medicare, Medicaid, and TRICARE programs that stemmed from breaches of the Physician Self-Referral Law (Stark Law) and the Anti-Kickback Statute (AKS). The settlement resolves claims that Flower Mound Hospital violated the Stark Law and AKS by repurchasing shares from physician-owners aged 63 or older and subsequently reselling those shares to younger physicians. The United States contended that Flower Mound Hospital inappropriately factored in the volume or value of specific physicians’ referrals when selecting physicians for share resale and determining the quantity of shares each physician would receive. As part of the settlement, Flower Mound Hospital entered into a five-year Corporate Integrity Agreement (CIA) with HHS-OIG.
In June 2022, in the Northern District of Texas, a licensed pharmacist and owner of a compounding pharmacy was sentenced after entering a guilty plea in October 2021. The pharmacist pled guilty to distributing an adulterated drug used in cataract surgeries. The drug contained an excessive amount of inactive ingredients thus causing its purity and quality to fall below what was represented to the medical community. The pharmacist was sentenced to two years’ probation.
Strike Force
Established in 2007, Strike Force Teams operate in 27 districts in the United States, including Houston, San Antonio, Dallas, and the Rio Grande Valley, Texas, along with the National Rapid Response Strike Force (NRRSF) located in Washington, D.C. Since its inception, the Strike Force has played a pivotal role in handling large-scale and multi-jurisdictional healthcare fraud cases.
The Strike Force’s 2022 accomplishments included the following:
- Filing 266 indictments against 392 defendants, who collectively billed approximately $2.2 billion to federal and private healthcare programs.
- Obtaining 395 guilty pleas and litigating 42 jury trials, resulting in guilty verdicts against 48 defendants.
- Securing imprisonment for 323 defendants, with an average sentence exceeding 53 months.
Below are summaries of some significant Texas related Strike Force prosecutions.
In May 2022, a jury convicted the owners and operators of four orthotic brace suppliers in Texas and Arkansas for a $6.5 million illegal kickback scheme. The evidence presented at trial showed that the defendants concealed the scheme by entering into agreements with purported marketing companies that characterized the illegal payments for doctors’ orders as “marketing” expenses. The defendants await sentencing.
In March 2022, the proprietor of a cash-only pill mill in Houston was convicted following trial on charges including one count of conspiring to unlawfully distribute and dispense controlled substances, four counts of unlawfully distributing and dispensing controlled substances, one count of conspiring to launder monetary instruments, and two counts of engaging in monetary transactions involving funds derived from specified unlawful activity. The conspiracy involved the distribution and dispensing of approximately 739,000 hydrocodone pills and 344,000 oxycodone pills, predominantly at their maximum strength, without a legitimate medical purpose. On June 24, 2022, the defendant was sentenced to 240 months.
In April 2022, a Texas husband and wife were found guilty at trial for orchestrating a $1.0 million Medicare fraud scheme. As outlined in court documents and evidence during the trial, the defendants served as patient recruiters who owned and managed group homes where Medicare beneficiaries resided. In return for directing their group home residents to a community mental health center (CMHC) that claimed to offer partial hospitalization services, the CMHC paid kickbacks to the defendants and other patient recruiters, frequently disguising them as compensation for “transportation” or other fictitious services.
Significant Priorities – Opioid Fraud and COVID-19 Pandemic Related Enforcement
Opioid-related fraud continues to be a priority. In FY 2022, the OFAD AUSA program focused on opioid-related health care fraud, resulting in 42 cases filed against 72 defendants, covering charges such as health care fraud, drug trafficking, and money laundering.
Examples of cases include a prosecution of a Michigan doctor who pleaded guilty to conspiring with patient recruiters and others to distribute prescription opioid pills in violation of his medical and DEA licenses. He prescribed 12,500 hydrocodone pills without regard to medical necessity and outside the course of professional medical practice. In another matter, a former Tennessee clinic owner was sentenced to 168 months in prison for unlawfully distributing opioids. He was found guilty of six counts of unlawfully distributing controlled substances and one count of maintaining drug-involved premises. Evidence supported that he prescribed approximately 15,000 opioid pills to three women with whom he had sexual relationships and a male patient who later passed away. Overall, the sentences in these types of cases are lengthy.
Not surprisingly, COVID-19 cases continued to be a priority. CMS identified potential fraud risks related to the COVID-19 pandemic, including (1) offering unnecessary services and tests for personal information, (2) performing unnecessary tests in addition to COVID-19 tests, (3) schemes involving false representations regarding COVID-19 testing, treatments and cures, and (4) fraudulently obtaining COVID-19 healthcare relief funds through false claims and applications.
Takeaways
Those who do business with the government, and particularly in the health care sector, should be more vigilant than ever. That means prioritizing compliance to avoid a potential healthcare fraud investigation.