Health Care Fraud Blog

We have previously written about the federal government’s HEAT, a task force dedicated to rooting out health care fraud in several cities very prominently including Miami. In the last legislative session, the Sate of Florida also got into the Act. The legislature designated Miami-Dade County as a “health care fraud area” requiring special scrutiny and presumably more funds for Medicaid / Medicare fraud enforcement. In addition, with Miami ’s immigrant community in mind, the legislature also now requires a $500,000 bond to be posted for any new or change of ownership for health care clinics, DME and home health providers. Those following the legislative process noted that the original intention was to eliminate non-citizen ownership altogether, citing to the amount of fraud coming from entities with immigrant owners being used as straw men for the actual operators. However, there were constitutional concerns that led to the bond requirement. To read more, click here.

Florida is among the few states that permit what is referred to as the “corporate practice of medicine.” In many other states, medical and other health care entities are required to be owned by medical professionals individually or through professional associations that include only medical professionals.

Florida still requires practitioner only practices for dentists and last year enacted restrictions on Chiropractic practices. In many states that have these laws, non-practitioners have to go through legal machinations to have an investment interest in a medical practice without actually owning the practice. In many instances in Florida and elsewhere, physicians act as “straw owners” of their own medical practices and are in fact employees or partners with other individuals who control the practice.

In 2004, following the recommendations of a Statewide Grand Jury that looked into abuses with respect to Medicaid and personal injury clinics, Florida passed legislation to specifically permit ownership of health care practices by non-medical professionals with the Health Care Clinic Act. Disturbingly, the Act, which was enacted to shed light on ownership of health care clinics and prevent abuses, has become increasing difficult for applicants. In addition, the surveys of facilities required under the act have also gotten tougher. Oddly, the result of the increasingly tougher regulation may now cause the opposite result, causing many non-practitioners to go back to less open methods of ownership.

Effective July 1, 2009, persons applying for clinic, home health agency or DME provider licensure or a change of ownership now must a host of new financial information. Previously the financials included only a pro-forma for the operation of the clinic. Now, detailed financials also include information about the owner and how the entity will be capitalized.

To read more, click here.

By Robert David Malove, Esquire

Exclusive to the Health Care Fraud Blog

SAN DIEGO (July 15) In San Diego, on the 44th day of a trial highly touted “Affpower enterprise” internet pharmacy prosecution by the Justice Department, seven defendants learned they were convicted of a range of charges including racketeering. Ten minutes later, after the jury was polled, a juror stated she was coerced into her verdict. A mistrial was declared later, the government indicated it would be trying the defendants again and a briefing schedule was set for motions to dismiss indictment.

The indictment alleged that three U.S. physicians and two pharmacists as well as 11 others, including a pharmacy operator, two recruiters, a credit card processor and eight affiliate web site operators participated in the Affpower distribution network. The 313-count indictment alleged the operation handled more than 1 million online orders and grossed approximately $126 million over a two-year period.

In addition to the doctors and the pharmacists, the indictment named Affpower, located in Costa Rica with computer servers in Cyprus . Affpower further relied on foreign-based agencies, including RX Payments Ltd. of Tel-Aviv , Israel , to process credit-card transactions, and used various bank accounts and an accounting firm in Nicosia , Cyprus , to distribute proceeds of the enterprise.

The defendants were charged with various racketeering and conspiracy to commit racketeering counts. The charges also included the distribution and dispensing of controlled substances, mail and wire fraud, conspiracy to commit money laundering and conspiracy to dispense misbranded drugs with the intent to defraud and mislead.

If convicted, the defendants face a maximum 20 years in prison for RICO and RICO conspiracy; 20 years for mail and wire fraud; 20 years for conspiracy to commit mail and wire fraud; five years for conspiracy to distribute and dispense controlled substances; 20 years for money laundering; five years for conspiracy to violate the Federal Food, Drug, and Cosmetic Act (FDCA), and three years for violating the FDCA. The defendants also face millions of dollars in fines.”

The trial was unusual in several respects. This was one of the first trials charging so called “affiliates,” individuals who are freelance internet advertisers for internet pharmacy operations and are not directly associated with the operation. Secondly, Federal prosecutions often work in a bottom up approach. Lower level participants are generally arrested first, plead guilty and assist the government in the prosecution of those higher in the organization. Here, the case proceeded in a top down approach, the leader of the operation was arrested and assisted in recording his associates and then testified against them. Those that went to trial included 2 pharmacists and five affiliates.

The is the second internet pharmacy trial in a year that was mistried after several months. Previously, Southern District of Florida Case U.S. v. Hernandez, et al, resulted in a mistrial after it was learned jurors were doing research on the case and defendants outside the courtroom.

USA v. Heredia et al Southern District of California case number 3:07-cr-02016-IEG-16

07/10/2009

DE 758 -Minute Entry for proceedings held before Judge Irma E. Gonzalez: Jury Trial as to Dolores Lovin, Mary Aronson, Richard Edward Koch, Philip James Bidwell, Jeffrey A. Light, Tracy ONeal Tyler, Peter P. Bragansa held on 7/10/2009. Day of Trial 44TH. Jury returned at 11:10 AM. Verdicts were read. Jury was polled. Jury Hung and Court declares mistrial.

07/15/2009

DE 764 -Minute Entry for proceedings held before Judge Irma E. Gonzalez: Status Hearing re jury trial as to Dolores Lovin, Mary Aronson, Richard Edward Koch, Philip James Bidwell, Jeffrey A. Light, Tracy ONeal Tyler, Peter P. Bragansa held on 7/15/2009. Government will proceed to trial. Rule 29 Motion Hearing set for 10/15/2009 02:00 PM in Courtroom 01 before Judge Irma E. Gonzalez. Motions due 9/17/2009, Government Response due 10/2/2009. Jury Trial set for 2/2/2010 09:00 AM in Courtroom 01 before Judge Irma E. Gonzalez. Excludable(s) started as to Dolores Lovin, Mary Aronson, Richard Edward Koch, Philip James Bidwell, Jeffrey A. Light, Tracy ONeal Tyler, Peter P. Bragansa: Pursuant 3161(h) Court grants government oral motion to declare the case complex.

A new moniker in the long list of federal task forces. Federal Agencies generally get the three letter moinker; FBI, IRS, CIA, OIG, DOD, etc. Task forces get more letters and try to do acronyms; HIDTA (DEA), FinCEN, OFAC (Treasury), OCDETF (DOJ).

Now we finally have a task force with a cool name: HEAT (Health Care Fraud Prevention and Enforcement Action Team). And they have been busy between Miami, Detroit and Huston. In one week, six indictments and allegations of $282 million in fraud from DME, to Pain Management, to therapy.

For more, click here.

The recent arrests of by the DOJ-HHS health care fraud task force, HEAT, of 52 individuals related to Medicare Fraud in Detroit, and the allegation that the crimes were somewhat commuter crimes, brought to Detroit from Miami has also raised an issue of the involvement of certain ethnic groups, and particularly recent Cuban immigrants, in the offenses. The history of the United States has certainly involved the rise of organized crime through immigrant groups, generally criminal activity becoming much easier to organize among insular communities who are suspicious of the larger communities or government to protect them.

While it is unfair to brand entire nationalities for the crimes of extreme minorities of those groups, certain ethnic groups come to be associated with certain crimes. Much has been made in lore about the Italian Mafia’s association with organized crime generally, others include Jamaican drug gangs in the 1980s, Chinese gangs in the slave trade, Nigerian credit card frauds. One other is the Miami-Cuban connection to Medicare Fraud schemes.

Such is the perception that the recent Florida Anti-Health Care Fraud legislation created a provision requiring immigrants to obtain a bond prior to obtaining a clinic license. A Miami Herald article addresses the issue of the Cuban connection to Medicare Fraud, with an interesting aside thrown in, an often raised but not yet proven allegation as to whether the Cuban government itself is involved in Medicare fraud. To read the Herald article and comments posted there, click here.

The CEO of WellCare Health Plans, Inc., Health Schiesser, resigned after the insurer reached an agreement to settle claims with the federal government and Florida Medicaid for $80 million. The company is also keeping a reserve of $50 million to pay other claims. The settlement is the result of a whistleblower suit by a former employee, alleging that that company used a shell company to bill the insurer for services it did not perform as to inflate Wellcare’s claims to the federal government and Medicaid. The HCFBlog has written about this before here.

For more on this click here.