Kusserow’s Corner: New Fraud Actions, Settlements for 2014

Additional Home Health Fraud Actions Start Off the New Year

The owner and operator of a Miami medical clinic pleaded guilty today in connection with multiple health care fraud schemes involving the defunct medical clinic Merfi Corp. With sentencing scheduled for March 14, 2014.  The clinic employed physicians, physician assistants and other medical professionals who were authorized by law to dispense prescriptions for home health care services. The owner and co-conspirators provided fraudulent home health and therapy prescriptions and other medical documentation to the owners and operators of home health care agencies, as well as to patient recruiters, in return for kickbacks and bribes.  The home health agencies purported to provide home health and therapy services to Medicare beneficiaries, but were in fact operated for the purpose of billing the Medicare program for, among other things, expensive physical therapy and home health care services that were not medically necessary and/or not provided.  This scheme resulted in losses to the Medicare Program exceeding $20 million.

In a related case, several patient recruiters, including a medical clinic owner, pleaded guilty today in connection with a health care fraud scheme involving a now defunct home health care company.  Under the scheme $8 million in claims to Medicare were made for fraudulent claims for home health services. Sentencing has been scheduled for March 14, 2014.  The defendants worked as patient recruiters for the owners and operators of a Miami home health care agency that purported to provide home health and physical therapy services to Medicare beneficiaries. It operated for the purpose of billing the Medicare program for, among other things, expensive physical therapy and home health care services that were not medically necessary and/or were not provided.   The defendants would recruit patients and solicit and receive kickbacks and bribes from the owners and operators in return for allowing the agency to bill the Medicare program on behalf of the recruited Medicare patients. These Medicare beneficiaries were billed for home health care and therapy services that were not medically necessary and/or not provided.

Medical Device Manufacturer Charged With Major Securities Fraud Scheme

ArthroCare Corporation,  an Austin Texas medical device manufacturer trading on the NASDAQ stock exchange, has agreed to pay a $30 million monetary penalty to resolve charges that senior executives at the company engaged in a securities fraud scheme that resulted in more than $400 million in shareholder losses.  ArthroCare had previously entered into a multi-million dollar settlement agreement with shareholder victims.  As part of the agreed-upon resolution, the DOJ filed a criminal information charging ArthroCare with one count of conspiracy to commit securities fraud and wire fraud.

ArthoCare has admitted that:

  • Senior executives of the company inflated revenue by tens of millions of dollars; concealed the nature and financial significance of ArthroCare’s relationship with its largest distributor, DiscoCare Inc., and other distributors; and used a series of sham transactions to manipulate revenue and earnings as reported to investors.
  • Its executives determined the type and amount of product to be shipped to distributors, notably DiscoCare, based on ArthroCare’s need to meet sales forecasts, rather than the distributors’ actual orders.
  • Executives and others then caused ArthroCare to “park” millions of dollars worth of ArthroCare’s medical devices at its distributors at the end of each relevant quarter so the company could report these shipments as sales in its quarterly and annual filings and so the company would appear to have met or exceeded internal and external earnings forecasts

ArthroCare also agreed to cooperate with the department in its continuing investigation and prosecution of individuals responsible for the scheme and to continue to implement an enhanced compliance program and internal controls designed to prevent and detect violations of the federal securities laws and federal laws relating to the company’s relationships and transactions with health care providers.

Two former senior vice presidents of ArthroCare, previously pleaded guilty to conspiracy to commit securities and wire fraud in connection with the fraud scheme.  The former chief executive officer and chief financial officer are scheduled to stand trial on related charges on May 5, 2014.

DOJ Settles False Claims Act Allegations Against Florida Vein Clinic and Its Owner

A Tampa, Florida-based physician, has agreed to pay $400,000 to resolve allegations that he and his clinics violated the False Claims Act by knowingly billing Medicare for vein injections and physician office visits performed by unqualified personnel. The government alleged that text messages were sent to the office manager instructing her to perform varicose vein injections on patients when he was not in the office.  In addition the physician performed unnecessary vein injections and unnecessary ultrasound imaging procedures associated with those vein injections.

Allegedly, unqualified personnel met with patients of the clinic that were charged against Medicare using the physician’s provider number.  The allegations covered by the settlement were originally raised in a lawsuit filed by the former office manager under the qui tam, or whistleblower, provisions of the False Claims Act.  He will receive $72,000.

The settlement includes a three-year Integrity Agreement with the OIG and provides for an independent external review of his federal health care program coding and billing procedures.

Diabetes Durable Medical Equipment Supplier, Telemarketing Company, and Their Owner-Executives Agree to Exclusions in Settlements with OIG

Washington, DC. Four Leaf Clover, Inc. (FLC), a diabetes supply company; Team Tech Solutions, Inc. (TTS), a telemarketing company; and their owner-executives have been excluded by the OIG from participation in Federal health care programs. The OIG alleged that the companies and their executives violated the Civil Monetary Penalties Law by paying and receiving kickbacks and causing the submission of false and fraudulent Medicare claims for DME resulting from illegal telemarketing. Specifically, OIG alleged that FLC contracted with TTS to make unsolicited calls to Medicare beneficiaries and paid TTS for each Medicare beneficiary referred for diabetes supplies. OIG also alleged that these beneficiaries (1) were new customers, (2) did not have an established relationship with FLC, and (3) did not request in writing to be contacted regarding FLC’s DME equipment.

Under the terms of the settlements, FLC, its owner and President and its former co-owner and Chief Operating Officer will be permanently excluded from participation in Federal health care programs. FLC’s primary telemarketing partner, TTS, and its owner and President will be excluded for 10 years. OIG also collectively recovered $472,000 in civil monetary penalties from the companies and their executives. This matter follows a DME investigation into their marketing and billing practices.

It should be noted that in January 2010, OIG issued a Special Fraud Alert warning DME suppliers and telemarketers that they may both be liable for engaging in prohibited marketing activities.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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Copyright © 2014 Strategic Management Services, LLC. Published with permission.