Health Care Fraud Blog

A garden variety Medicaid fraud case with a twist. A pharmacist in the Pittsburgh area was arrested for false claims to Medicaid and a private insurer for medications not ordered or provided. However, the pharmacist is also accused of submitting false rebate requests for drugs such as Levitra, for erectile dysfunction, and Marinol, a synthetic marijuana. The twist is that the drug rebate requests are also believed to be false because they relate to claims for services provided to prisoners in a county jail.

Click here to read the complete story.

Attorney General Andrew Cuomo announced that the State of New York has recovered $263 million in Medicaid funds in 2008, the most in any year and up from $114 million in 2007. $35 million came from one managed care provider, Healthfirst, and $28 million from civil settlements with home health care companies. There were also 150 convictions for Medicaid fraud in the State of NY last year, 35 related to fraudulent home health care claims.

To read the press release click here.

In a move targeted to increase health care fraud enforcement by the State of Florida, the Florida legislature has recently passed legislation containing a number of new fraud provisions, including:

* elevating Medicaid fraud from a third degree felony to first, second and third degree felonies based upon dollar amounts of fraud and increasing fines to five times the amount of the fraud;

* designating Miami-Dade County as a “health care fraud crisis area” and increasing the monitoring of home health care in Miami-Dade County requirements that owners of home health agencies to be residents of the United States for at least five years or to post a $500,000.00 bond to own a health care clinic, a home health agency or a DME company;

* increasing the number of disqualifying prior criminal offenses for home health care business ownership;

* an increase in funding for rewards for people who report health care fraud and awarding 25% or $500,000 as a reward for successful actions based upon information received;

* limits a defendant’s ability to collect attorney’s fees if successful in defending a false claims action;

* prohibits alteration of records after the commencement of an investigation or audit; and

* provides that Medicaid program terminated provider’s names will be placed on a website and physician practitioner profiles will indicate if a practitioner was terminated from the Medicaid Program.

To read the new law, click here.

The term “medically necessary” in the context of Medicare and Medicaid reimbursement has been under some scrutiny lately. Medicare defines "medical necessity" as services or items reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member. Medicaid has a similar definition. For items or services where there is no specific limitation based upon a coverage policy, medical necessity has often been left to the good faith determination of a physician. However, in several prosecutions of physicians for infusion of HIV drugs, the government has relied on fraudulent diagnosis or unnecessary prescribing of medications as a basis of prosecution, citing to the physician motive of profit over appropriate patient care. In addition, the 11th Circuit Court of Appeals in Atlanta has recently held that the Medicaid program in Georgia can overrule a physician’s determination of medical necessity.

The case involved a young girl whose physician ordered additional nursing care than was available under a Medicaid policy. A Federal District Court Judge found that the state could not override the physician’s order and that "the state's discretion is limited to a review of the request for fraud, abuse of the Medicaid system, and whether the service is within the reasonable standards of medical care." The Eleventh Circuit disagreed, saying both the state and the treating physician have roles in determining what is medically necessary. It cited a federal regulation that says a Medicaid agency "may place appropriate limits on a service based on such criteria as medical necessity or utilization control procedures." The Court concluded that "A private physician's word on medical necessity is not dispositive."

The case is Moore v. Medows, No. 08-13926. To read the case, click here. To read more, click here.

Legislation before the Florida House and Senate would require a controlled substances reporting database containing all prescribing and dispensing information related to certain controlled substances.

The purpose and intent of the statute is to prevent drug abuse and profit making by the over prescribing of controlled substances. The database would be accessible by pharmacists and practitioners dispensing medications to patients to make sure a patient has not received multiple prescriptions for controlled substances. However, somewhat disconcerting from a civil liberties perspective is that the database would also be accessible to law enforcement as part of an “active investigation.” This includes State Boards, Medicaid fraud investigations or any investigation concerning fraud, prescribing, or dispensing controlled substances which seems to include any time law enforcement wants the information. Active investigation is defined as “an investigation that is being conducted with a reasonable, good faith belief that it could lead to the filing of administrative, civil, or criminal proceedings, or that is ongoing and continuing and for which there is a reasonable, good faith anticipation of securing an arrest or prosecution in the foreseeable future.”

Th read the legislation click here and here.

There has been a substantial crackdown by federal and state authorities in Florida over the last several years with regard to Medicare and Medicaid payments related to respiratory conditions such as COPD. The enforcement has typically focused on the durable medical equipment (DME) providers. However, after a large number of indictments related to DME companies and with Medicare moving toward a bidding process for DME suppliers, the focus has been turning to the physicians who prescribe DME and the often expensive medications associated with respiratory illness. According to a recent report by Medicare (via the Miami Herald), there was some cause for concern.

“Although South Florida is home to 2 percent of the nation's Medicare beneficiaries, the region accounts for 17 percent of the government program's total spending on inhalation drugs because of potential fraud, a new federal study says. In 2007, Medicare spent $143 million on claims for drugs to treat respiratory ailments in Miami-Dade County, according to the report by the Department of Health and Human Services released Tuesday. That's 20 times more than the amount Medicare spent in the Chicago area, which has twice as many beneficiaries.”

And this: “''In Florida alone, approximately 60 percent of the top 100 ordering physicians are the subject of administrative actions by [Medicare] or its contractors or are the subject of law enforcement investigations,'' acting administrator Charlene Frizzera wrote Inspector General Daniel R. Levinson in March.

The Miami Herald has been doing a fantastic job in recent months reporting the recent health care fraud enforcement efforts. Click here for the full report.

As the results of a whistleblower lawsuit under the federal False Claims Act, a division of Quest labs of New Jersey entered a guilty plea in federal court to a felony charge of misbranding in Wednesday and agreed to pay $302 million which includes a 40 million dollar criminal penalty to settle charges that it marketed a flawed renal testing kit for kidney dialysis patients that produced inaccurate results.

Thomas Cantor, a CEO of a lab in California , will collect $45 million of the settlement as Relator. Under the False Claims Act, a Relator privately initiates a lawsuit on behalf of the government for fraud on government programs and receives up to 15 percent of any recovery.

For more details, click here.

One significant development in the area of medical and pharmacy practice was the passage last year of The Ryan Haight Online Pharmacy Consumer Protection Act of 2008. This Act modifies the Controlled Substances Act to address the facilitation of the purchase or dispensing or controlled substances via the internet.

Under current DEA regulations, dispensing includes the not just the sale or provision of a prescription drug, but also the issuance of a prescription. The Act also seeks to define components of telemedicine involving controlled substances. The Act takes effect today. On April 6, 2009, the DEA issued interim rules on the implementation of the Act while regulations are formalized. The interim rules require any on-line pharmacy or physician practicing telemedicine to register with the DEA. However, some definitions and the commentary pertaining to the scope of the Act include some interesting positions as to the potential scope of the Act.

Among the changes to the current Controlled Substances Act is a requirement of a face to face physician encounter prior to the issuance of a prescription for a controlled substances and a definition of a “covering physician” and “in person medical evaluation.” The regulatory definition of a “valid prescription” now is part of the statute and includes, in addition to the previous requirement that a prescription be “for a legitimate medical purpose in the usual course of a physician’s practice” to include that the practitioner must have conducted a least one in-person medical evaluation of the patient or be a covering physician.

The in-person evaluation requirement requires that the evaluation be in the physical presence of the physician regardless of what healthcare worker conducts the evaluation. Although there is an argument that since the first part of the Act's provisions only applies to prescriptions facilitated by the internet, and the valid prescription language does as well, any practitioner in an abundance of caution should govern their conduct accordingly.

A copy of the Act was too large to upload, but can be found by searching online for 21 CFR Par t 1 300, 1 301 , 1 304, et al. Implementation of the Ryan Haight Online Pharmacy Consumer Protection Act of 2008; Final Rule.

Florida, New York and California are generally on the cutting edge of Medicare fraud, and many hours of law enforcement time is taken to uncover the next wave of perceived schemes. However, fresh from Georgia: hyperbaric oxygen therapy fraud.

A clinic owner in Georgia plead guilty to receiving over $1,000,0000 in reimbursement for treatment, “Hyperbaric chambers have a number of legitimate medical uses, as varied as helping burn victims and even scuba divers in their recovery. This defendant, however, turned a hyperbaric chamber into a means of generating over a million dollars in fraudulent claims…” said United States Attorney David E. Nahmias. To read more about this, click here

While it appears on the surface that fraudulent claims, particularly arising out of a single clinic would be quickly discovered and it would also seem that there are not enough burn victims or senior citizen scuba divers with the bends to make such treatment viable in the Medicare context, those are not the only reimbursable services. There is a national coverage determination (NCD) NCD 20.29 that permits hyperbaric oxygen therapy (HBOT) for several uses, particularly diabetic patients who have diabetic wounds of the lower extremities after there are no measurable signs of healing for at least 30 days of treatment with standard wound therapy and must be used in addition to standard wound care. There is also a Florida local coverage determination (LCD); LCD L28887. Click here for more.

You can read the USAO Press Release about the case by clicking here.

Many in the healthcare industry and the attorneys who represent them in South Florida notice trends in law enforcement and criminal prosecutions that are logically preceded by increased audit activity. There are generally surges in prosecutions following increased outlays in Medicare and Medicaid spending on services, claims or equipment. Recently, the federal government has dedicated substantial resources, particularly in South Florida , to the prosecutions of physicians and clinic owners alleged to be engaged in fraud related to the administration of HIV medications; these were preceded by increased audits and overpayment demands with regard to most of the physicians and clinics later prosecuted.

With the 2006 amendments to Medicare and the creation of Part D, there was a tremendous surge in prescription drug spending by the Medicare Program, however the audit activity did not really catch up with the increased spending until recently. In South Florida, private Medicare contractors including Integrity Health, Trust Solutions and National Audit, along with the internal units of drug plan insurers have vigorously stepped up activity with fraud units conducting expansive and coordinated and almost search warrant like audits. The targets of these audit investigations often extend not only to pharmacies, but physicians who issue a large number of prescriptions for expensive medications.

The stakes can be quite high. Pharmacy owners, providers and health care administrators should be aware that these audits are not random and are generally a pretext to a referral to law enforcement authorities and should treat an audit like a search, including the use of competent counsel to preserve the provider’s rights and to avoid questioning intended to elicit incriminating information

One recent article indicates that audit activity has detected increased pharmacy fraud is found here.

By Robert David Malove, Esquire

Exclusive to the Health Care Fraud Blog

FORT LAUDERDALE, FL (April 6, 2008) In a stunning development with implications in two large prosecutions, the United States dismissed with prejudice an Indictment against 10 individuals today in a South Florida courtroom, two of whom had already plead guilty and testified in the trial against the other eight defendants. This follows an eight week trial featuring two mistrials, one based on prosecutorial misconduct and also included accusations against the government of witness tampering and the testimony of a federal prosecutor to attempt to refute the testimony that the government gave permission for one of the defendants to operate his business.

The events leading to the dismissal were set in place last week when Judge William Zloch refused to sentence two defendants, Emanuel Anotonio and Theopholis Antoniuo. The judge then issued an order to the remaining defendants to provide legal authority to enable the court to dismiss the remaining defendants. This came after the judge expressed misgivings about whether the government had demonstrated the illegality of the activity of the defendants. The government then filed an unopposed motion to dismiss the remaining defendants, except one physician. It now appears the government is going to dismiss these charges as well.

The government originally charged 13 defendants in a 2007 Indictment in connection with the dispensing of prescription medications, diet drugs, via the internet. The defendants in US v. Hernandez, et al, were physicians, pharmacists, a prescription drug wholesaler and software operators charged with conspiracy and trafficking in controlled substances. The trial began in February of 2009. The nine defendants asserted at trial that their activities as doctors, pharmacists and software providers were lawful and approved by attorneys. The case took several unusual turns, including a government witness, a physician, testifying that he believed he had not committed a crime and had been coerced by federal prosecutors to testify. Two other witnesses, who had plead guilty had their guilty pleas vacated and their charges dismissed today, were operators of software designed to facilitate internet transactions and also had some difficulty explaining why they believed their actions were crimes.

However, the trial got even more unusual when one defendant, Lawrence Pinkoff, presented evidence over the objection of the government that the defendant had been operating his internet pharmacy related business for several years with the knowledge and permission of the United States government while he was a cooperating witness in an investigation in the Southern District of Georgia. This lead to the government presenting the testimony of an Assistant United States Attorney, James Durham, the prosecutor in the Georgia case.

The prosecutor testified that he was unaware of Mr. Pinkoff’s business activities despite being present and failing to object to those same activities at a hearing in 2003 in which the defendant sought permission of the court in Georgia to do so. Mr. Pinkoff had testified that he had told the government on numerous occasions about his business, so much so that the business formed the basis for his undercover work for the United States.

Mr. Durham’s testimony and the other evidence presented in the Hernandez trial lead to a motion filed last week by lawyers for the defendants in the Georgia prosecution, US v. Bradley, seeking to overturn the convictions of the defendants in that case and permit the defendants to take discovery depositions of federal agents and prosecutors. The basis of the motion was the failure of the United States to turn over evidence that Mr. Pinkoff was being simultaneously investigated and being used as a cooperating witness in that prosecution. The prosecution of Mr. Pinkoff in the Southern District of Florida commenced several months after the convictions of the Bradley defendants. Mr. Pinkoff’s attorney argued at trial that the government used his client to secure the Bradley conviction, allowing him to operate his business without disclosing to him they intended to prosecute him after he was done testifying.

The Hernandez trial originally made headlines when a mistrial had been declared after several jurors admitted to doing outside research during the trial, including Googling the defendants. One week earlier the judge declared a mistrial and dismissed four defendants for prosecutorial misconduct when the prosecutor made inappropriate comments during the testimony of defendant, Frank Hernandez, regarding the defendants’ Fifth Amendment Privilege. The judge ruled that the inappropriate comments were intentional and dismissed the four defendants that had not testified.

The United States has had an uneven record in prosecuting internet pharmacy cases. This has in part led to amendment of the Controlled Substances Act in 2008 through the Ryan Haight Act, designed to clarify the law concerning internet pharmacy and telemedicine. The Act became law in October of 2008 and regulations are currently pending.

Prior to adjourning, Judge Zloch commented that the case had indeed been a fascinating one. Several defense attorneys thanked the Court and government attorneys for the manner in which the case was ultimately resolved.