Health Care Fraud Blog

SAN DIEGO (January 26) Less than a year after a South Florida internet Pharmacy trial was dismissed in part due to prosecutorial misconduct, (click: here to read more) another large internet pharmacy case may be heading the same way. A federal judge in San Diego is considering dismissal of a case that initially ended in a mistrial last year after allegations arose that the prosecutor in the case made misstatements to the court about data on computer servers obtained by the government that defense attorneys had requested and were told didn’t exist. We reported about this case last summer here.

The Affpower case was the first internet pharmacy case to use the racketeering statute to prosecute a number of participants in an alleged unlawful internet pharmacy operation and for one of the first times included website owners who were marketers and not involved in the pharmacy or medical affairs of the operation. Defense attorneys had requested access to the computer servers holding the original data, a copy of some of which was used at trial. The prosecutor in the case reported to the Defendants and reportedly the court that the original data had been wiped clean off of the servers, the only data available was that which the government would be using at trial.

The mistrial occurred after the jury originally announced guilty verdicts for all defendants; the jury was polled and it was discovered that one juror did not agree with the verdict. In preparing for the retrial, defense attorneys asked to have an expert review the servers; the expert found that all of the original data was still on the servers. In a bluntly worded order, Chief Judge Irma Gonzalez has ordered prosecutors to explain why she should not dismiss the case due to the misconduct.

For more, click: here.

HOUSTON - Whether it is known as “courtroom rent” or by some other name, the dangers of going to trial as opposed to pleading guilty requires a careful consideration of the case, the facts, the sentencing guidelines and the judge.

Two Texas DME owners learned the very hard way yesterday at their sentencing following a trial. Rhonda Fleming was sentenced to 30 years in prison for her role in a DME scheme, she was the alleged owner of three DME companies and a billing company that submitted the claims, totaling $36 million. Her trial co-defendants, a co-owner of one DME and a “runner” (someone who supplied patient information for the others in the scheme) were sentenced to 11 years 3 months and seven and a half years in prison. Their co-defendants, who plead guilty before trial and testified at trial received 12 months, 60 months and 70 months in prison.

For more info, click: here.

Health and Human Services Office of Inspector General released an updated fraud alert “Telemarketing by Durable Medical Equipment Suppliers” originally published in March 2003.

The Fraud Alert states in relevant part:

Section 1834(a)(17)(A) of the Social Security Act prohibits suppliers of durable medical equipment (DME) from making unsolicited telephone calls to Medicare beneficiaries regarding the furnishing of a covered item, except in three specific situations: (i) the beneficiary has given written permission to the supplier to make contact by telephone; (ii) the contact is regarding a covered item that the supplier has already furnished the beneficiary; or (iii) the supplier has furnished at least one covered item to the beneficiary during the preceding 15 months. Section 1834(a)(17)(B) specifically prohibits payment to a supplier that knowingly submits a claim generated pursuant to a prohibited telephone solicitation. Accordingly, such claims for payment are false and violators are potentially subject to criminal, civil, and administrative penalties, including exclusion from Federal health care programs.

The Office of Inspector General (OIG) has received credible information that some DME suppliers continue to use independent marketing firms to make unsolicited telephone calls to Medicare beneficiaries to market DME, notwithstanding the clear statutory prohibition. Suppliers cannot do indirectly that which they are prohibited from doing directly. OIG has also been made aware of instances when DME suppliers, notwithstanding the clear statutory prohibition, contact Medicare beneficiaries by telephone based solely on treating physicians’ preliminary written or verbal orders prescribing DME for the beneficiaries. A physician’s preliminary written or verbal order is not a substitute for the requisite written consent of a Medicare beneficiary.

To read the Fraud Alert: Click here.

All OIG Special Fraud Alerts are available on the OIG Web
site at: http://oig.hhs.gov/fraud/fraudalerts.asp

To read the Federal Register: Click here.

As the federal government’s Medicare Fraud Task Force called HEAT (Health Care Fraud Prevention and Enforcement Action Team), left Miami and deployed out across the country in six phases to Houston, Los Angeles, Detroit, Tampa, Baton Rouge and Brooklyn, it seemed many of the initial arrests, particularly out of the Detroit area, had a Miami connection as if the frauds were Miami transplant operations.

Well, finally, a sizeable operation with it seems nary a link to Miami. More importantly, this arrest out of Detroit of 13 people and many of the latest arrests are all pointing towards home health as the priority. Several home health operators and several doctors were arrested in an alleged scheme involving paid patients, false plans of care, and services never performed.

To read more: Click here.

Recently state and federal authorities announced a regional health care fraud strike force in the Tampa and Orlando region. In what may be one of the first operations of that strike force, a Lakeland, Florida couple, Lilian Pagkaliwangan, 40, and Raymundo P. Arellano, 42, operators of Lakeland Therapy Providers Inc. and Optimum Therapy Inc., were arrested for health care fraud with respect to the operation of those businesses. The charges include alleged fraudulent billing for services not provided.

According to the indictment the couple submitted claims for reimbursement for medical services not rendered, including services that were claimed to have been provided on days when the patients were not present at the clinic and couldn't receive services.

Click here to read more.

Sometimes it takes some knowledge of how prosecutions generally work to see through press releases and newspaper articles touting big victories by the government. The State of Florida issued a press release yesterday regarding the conviction of a so called “pill mill” operator on charges including adulteration and misbranding of drugs related to the internet sales, without a prescription, of $10 million dollars worth of drugs including controlled substances.

The scheme sounds pretty nefarious. Abel Rodriguez was convicted for his role in setting up pharmacies that didn’t operate except to purchase drugs from wholesalers and passing those drugs on to bought the drugs from wholesalers and then sent the drugs to co-conspirators who then sold the drugs out of warehouses via the internet without a doctor’s prescription.

Generally, you would expect the individual to be charged, as most are in these types of cases, with charges more severe than misbranding and adulteration, which under Florida law at the time were lower level felonies and had previously been misdemeanors. However, a review of the court docket indicates that in fact Mr. Rodriguez was charged with not only drug trafficking, but also racketeering, one carrying mandatory minimum imprisonment and the other with sentences up to thirty years in prison.

What the article and press release do not disclose is that those charges were dismissed by the court. Therefore, the victory was likely not as great as the State and federal government probably anticipated when they charged Mr. Rodriguez in 2005. Of course Mr. Rodriguez is certainly looking at possible prison time, but certainly not as much as he would be if the greater charges survived.

LOS ANGELES, CA - January 8, 2010 - The U.S. Attorney’s Office for the Central District of California announced that a former UCLA Healthcare System employee pleaded guilty to four counts of illegally reading private and confidential medical records, mostly from celebrities and other high-profile patients.

Huping Zhou, 48, of Los Angeles, pleaded guilty prior to a trial to four misdemeanor counts of violating the federal privacy provisions of the Health Insurance Portability and Accountability Act (HIPAA). Appearing before United States Magistrate Judge Andrew J. Wistrich, Zhou admitted to knowingly obtaining individually identifiable health information without a valid reason, medical or otherwise. Zhou becomes one of the first people in the nation to be convicted of violating the privacy provisions of HIPAA.

Zhou, who is a licensed cardiothoracic surgeon in China, was employed in 2003 at UCLA as a researcher with the UCLA School of Medicine. On October 29, 2003, Zhou received a notice of intent to dismiss him from UCLA for job performance reasons unrelated to his illegal access of medical records. That night, Zhou, without any legal or medical reason, accessed and read his immediate supervisor’s medical records and those of other co-workers. For the next three weeks, Zhou’s continued his illegal accessing of patient records and expanded his illegal conduct to include confidential health records belonging to various celebrities. According to court documents, Zhou accessed the UCLA patient records system 323 times during the three-week period, with most of the accesses involving well known celebrities.

To read more: Click here.

Medicare is not supposed to be free medical care. Medicare rules require an annual deductible and a 20% co-payment by patients for services under Medicare Part B. The co-payment is in part to defray costs and to hold down costs under the theory that if patients are paying some part of the fee out-of-pocket they are more inclined to scrutinize and object to excessive or unnecessary services or procedures.

In many instances however, in sort of a wink and a nod, providers either do not charge a co-payment due to “financial hardship” or bill patients for co-payments but fail to aggressively collect the payment.

The Office of Inspector General (OIG) has previously issued guidance stating that the routine waiver of co-payments is a kickback and leads to fraud: Routine waiver of deductibles and copayments by charge-based providers, practitioners or suppliers is unlawful because it results in (1) false claims, (2) violations of the anti-kickback statute, and (3)excessive utilization of items and services paid for by Medicare.

A provider, practitioner or supplier who routinely waives Medicare co-payments or deductibles is misstating its actual charge. For example, if a supplier claims that its charge for a piece of equipment is $100, but routinely waives the co-payment, the actual charge is $80. Medicare should be paying 80% of $80 (or $64), rather than 80 percent of $100 (or $80). As a consequence of the provider's misrepresentation, Medicare program is paying $16 more than it otherwise should for this item.

In certain cases, a provider, practitioner or supplier who routinely waives Medicare co-payments or deductibles also could be held liable under the Medicare and Medicaid anti-kickback statute, 42 U.S.C. 1320a-7b(b), which makes it illegal to offer, pay, solicit or receive anything of value as an inducement to generate business payable by Medicare or Medicaid. When providers, practitioners or suppliers forgive financial obligations for reasons other than genuine financial hardship of the particular patient, they may be unlawfully inducing that patient to purchase items or services from them. Check out this HHS OIG Fraud Alert regarding this practice.

The routine waiver of co-payments is difficult to prove if the provider makes some effort, however nominal, to collect those fees. The failure to collect co-payments is rarely charged as a crime, but has been the subject of whistleblower actions. Nevertheless, it is substantially easier to prove a crime if, like nine Podiatrists in the New York area, a provider specifically advertises in subways, billboards and on flyers that Medicare beneficiaries can get free services. Three of those nine providers were convicted and sentenced to prison recently for Health Care Fraud in part due to the failure to collect overpayments. To read more, click here.