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The Department of Health and Human Services
And
The Department of Justice
Health Care Fraud and Abuse Control Program
Annual Report for Fiscal Year 2015
FEBRUARY 2016
TABLE OF CONTENTS
I.
Executive Summary
1
Statutory Background
3
III.
Program Results and Accomplishments
Monetary Results
Expenditures
Overall Recoveries
Health Care Fraud Prevention and Enforcement Action Team
Health Care Fraud Prevention Partnership
Medicare Fraud Strike Force
Highlights of Successful Criminal and Civil Investigations
5
5
7
8
8
9
10
12
IV.
Department of Health and Human Services
Office of Inspector General
Centers for Medicare & Medicaid Services
Administration on Community Living
Office of the General Counsel
Food and Drug Administration Pharmaceutical Fraud Program
36
36
45
56
58
62
Department of Justice
United States Attorneys
Civil Division
Criminal Division
Civil Rights Division
64
64
66
69
72
Appendix
Federal Bureau of Investigation
Return on Investment Calculation
Total HCFAC Resources
77
77
80
81
Glossary of Terms
82
II.
V.
VI.
VII.
GENERAL NOTE
All years are fiscal years unless otherwise
noted in the text.
EXECUTIVE SUMMARY
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) established a national
Health Care Fraud and Abuse Control Program (HCFAC or the Program) under the joint
direction of the Attorney General and the Secretary of the Department of Health and Human
Services (HHS)1, acting through the Inspector General, designed to coordinate federal, state and
local law enforcement activities with respect to health care fraud and abuse. In its nineteenth
year of operation, the Program’s continued success confirms the soundness of a collaborative
approach to identify and prosecute the most egregious instances of health care fraud, to prevent
future fraud and abuse, and to protect program beneficiaries.
Monetary Results
During Fiscal Year (FY) 2015, the Federal Government won or negotiated over $1.9 billion in
health care fraud judgments and settlements2, and it attained additional administrative
impositions in health care fraud cases and proceedings. As a result of these efforts, as well as
those of preceding years, in FY 2015, approximately $2.4 billion was returned to the Federal
Government or paid to private persons. Of this $2.4 billion, the Medicare Trust Funds3 received
transfers of approximately $1.6 billion during this period, and $135.9 million in Federal
Medicaid money was similarly transferred separately to the Treasury as a result of these
efforts. Of the approximately $29.4 billion returned by the HCFAC account to the Medicare
Trust Funds since the inception of the Program in 1997, over $16.2 billion has been returned
between 2009 and 2015.
Enforcement Actions
In FY 2015, the Department of Justice (DOJ) opened 983 new criminal health care fraud
investigations. Federal prosecutors filed criminal charges in 463 cases involving 888 defendants.
A total of 613 defendants were convicted of health care fraud-related crimes during the year.
Also in FY 2015, DOJ opened 808 new civil health care fraud investigations and had 1,048 civil
health care fraud matters pending at the end of the fiscal year. In FY 2015, the FBI investigative
efforts resulted in over 625 operational disruptions of criminal fraud organizations and the
dismantlement of the criminal hierarchy of more than 144 health care fraud criminal enterprises.
In FY 2015, HHS’ Office of Inspector General (HHS-OIG) investigations resulted in 800
criminal actions against individuals or entities that engaged in crimes related to Medicare and
Medicaid, and 667 civil actions, which include false claims and unjust-enrichment lawsuits filed
in federal district court, civil monetary penalties (CMP) settlements, and administrative
recoveries related to provider self-disclosure matters. HHS-OIG also excluded 4,112 individuals
1
Hereafter, referred to as the Secretary.
The amount reported as won or negotiated only reflects the federal recoveries and therefore does not reflect state
Medicaid monies recovered as part of any global federal-state settlements.
3
Also known as the Medicare Hospital Insurance (Part A) Trust Fund and the Supplemental Medical Insurance (Part
B) Trust Fund.
2
1
and entities from participation in Medicare, Medicaid, and other federal health care programs.
Among these were exclusions based on criminal convictions for crimes related to Medicare and
Medicaid (1,329) or to other health care programs (424), for patient abuse or neglect (302), and
as a result of licensure revocations (1,743). HHS-OIG also issued numerous audits and
evaluations with recommendations that, when implemented, would correct program
vulnerabilities and save program funds.
Sequestration Impact
Due to sequestration of mandatory funding in 2015, there were fewer resources for DOJ, FBI,
HHS, and HHS-OIG to fight fraud and abuses against Medicare, Medicaid, and other health care
programs. A total of $22.0 million was sequestered from the HCFAC program in FY 2015, for a
combined total of $74.2 million in the past three years. Including funds sequestered from the
FBI, the total equals $101.2 million in the past three years.
2
STATUTORY BACKGROUND
The Annual Report of the Attorney General and the Secretary detailing expenditures and
revenues under the Health Care Fraud and Abuse Control Program for Fiscal Year 2015 is
provided as required by Section 1817(k)(5) of the Social Security Act.
The Social Security Act Section 1128C(a), as established by the Health Insurance Portability and
Accountability Act of 1996 (P.L. 104-191, HIPAA or the Act), created the Health Care Fraud
and Abuse Control Program, a far-reaching program to combat fraud and abuse in health care,
including both public and private health plans.
As was the case before HIPAA, amounts paid to Medicare in restitution or for compensatory
damages must be deposited in the Medicare Trust Funds. The Act requires that an amount
equaling recoveries from health care investigations—including criminal fines, forfeitures, civil
settlements and judgments, and administrative penalties—also be deposited in the Trust Funds.
The Act appropriates monies from the Medicare Hospital Insurance Trust Fund to an expenditure
account, called the Health Care Fraud and Abuse Control Account (the Account), in amounts that
the Secretary and Attorney General jointly certify as necessary to finance anti-fraud activities.
The maximum amounts available for certification are specified in the Act. Certain of these sums
are to be used only for activities of the HHS-OIG, with respect to the Medicare and Medicaid
programs. In FY 2006, the Tax Relief and Health Care Act (TRHCA) (P.L 109-432, §303)
amended the Act so that funds allotted from the Account are “available until expended.”
TRHCA also allowed for yearly increases to the Account based on the change in the consumer
price index for all urban consumers (all items, United States city average) (CPI-U) over the
previous fiscal year for fiscal years for 2007 through 2010.4 In FY 2010, the Patient Protection
and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act,
collectively referred to as the Affordable Care Act (P.L. 111-148, ACA) extended permanently
the yearly increases to the Account based upon the change in the consumer price index for all
urban consumers, or CPI-U.
In FY 2015, the Secretary and the Attorney General certified $279.7 million in mandatory
funding to the Account after accounting for sequester reductions of $22.0 million to the total
appropriation. Additionally, Congress appropriated $672.0 million in discretionary funding. A
detailed breakdown of the allocation of these funds is set forth later in this report. HCFAC
appropriations generally supplement the direct appropriations of HHS that are devoted to health
care fraud enforcement and supported over two-thirds of DOJ’s health care fraud funding and
over three-fourths of HHS-OIG’s appropriated budget in FY 2015. (Separately, the FBI, which
is discussed in the appendix, received $129.2 million from HIPAA, after accounting for $10.2
million in mandatory sequester reductions.) Under the joint direction of the Attorney General
and the Secretary, the Program’s goals are:
4
The CPI-U adjustment in TRHCA did not apply to the Medicare Integrity Program (MIP). Section 6402 of the
ACA indexed Medicare Integrity Program funding to inflation starting in FY 2010.
3
(1)
to coordinate federal, state and local law enforcement efforts relating to health care fraud
and abuse with respect to health plans;
(2)
to conduct investigations, audits, inspections, and evaluations relating to the delivery of
and payment for health care in the United States;
(3)
to facilitate enforcement of all applicable remedies for such fraud; and
(4)
to provide education and guidance regarding complying with current health care law.
The Act requires the Attorney General and the Secretary to submit a joint annual report to the
Congress that identifies both:
(1)
the amounts appropriated to the Trust Funds for the previous fiscal year under various
categories and the source of such amounts; and
(2)
the amounts appropriated from the Trust Funds for such year for use by the Attorney
General and the Secretary and the justification for the expenditure of such amounts.
This annual report fulfills the above statutory requirements.
Additionally, this report fulfills the requirement in the annual discretionary HCFAC
appropriation (Public Law 113-235 “Consolidated and Further Continuing Appropriations Act,
2015”) that this report “include measures of the operational efficiency and impact on fraud,
waste, and abuse in the Medicare, Medicaid, and CHIP programs for the funds provided by this
appropriation.”
4
PROGRAM RESULTS AND ACCOMPLISHMENTS
As required by the Act, HHS and DOJ must detail in this Annual Report the amounts deposited
to the Medicare Trust Funds and the source of such deposits. In FY 2015, approximately
$2.4 billion was deposited with the Department of the Treasury and CMS, transferred to other
federal agencies administering health care programs, or paid to private persons during the fiscal
year. Monetary results from these transfers and deposits are provided in the table below:
Monetary Results: Total Transfers/Deposits by Recipient FY 2015
Department of the Treasury
Deposits to the Medicare Trust Funds, as required by HIPAA
Gifts and Bequests
Amount Equal to Criminal Fines
Civil Monetary Penalties
Asset Forfeiture
Penalties and Multiple Damages
Subtotal
Centers for Medicare & Medicaid Services
HHS-OIG Audit Disallowances — Recovered - Medicare
Restitution/Compensatory Damages
Subtotal*
Grand Total of Amounts Transferred to the Medicare Trust Funds
Amount
$10,372
56,549,115
45,772,271
14,791,644
512,054,108
629,177,509
132,612,502
793,934,739
926,547,241
$1,555,724,750
Restitution/Compensatory Damages to Federal Agencies
HHS/Other
TRICARE
CMS
HHS-OIG Cost of Audits, Investigations and Compliance Monitoring
Other Agencies
Centers for Medicare and Medicaid Services
Federal Share of Medicaid
HHS-OIG Audit Disallowances — Recovered - Medicaid
Subtotal
Relators= Payments**
TOTAL***
$31,355,848
14,921,254
8,253,589
7,766,281
18,200,774
135,866,585
168,955,572
385,319,903
414,456,455
$2,355,501,108
*Restitution, compensatory damages, and recovered audit disallowances include returns to both the Medicare
Hospital Insurance (Part A) Trust Fund and the Supplemental Medical Insurance (Part B) Trust Fund.
**These are funds awarded to private persons who file suits on behalf of the Federal Government under the qui tam
(whistleblower) provisions of the False Claims Act, 31 U.S.C. ' 3730(b).
***State funds are also collected on behalf of state Medicaid programs; only the Federal share of Medicaid funds
transferred to CMS are represented here.
5
The above transfers include certain collections, or amounts equal to certain collections, required
by HIPAA to be deposited directly into the Medicare Trust Funds. These amounts include:
(1)
Gifts and bequests made unconditionally to the Trust Funds, for the benefit of the
Account or any activity financed through the Account;
(2)
Criminal fines recovered in cases involving a federal health care offense, including
collections under section 24(a) of Title 18, United States Code (relating to health care
fraud);
(3)
Civil monetary penalties in cases involving a federal health care offense;
(4)
Amounts resulting from the forfeiture of property by reason of a federal health care
offense, including collections under section 982(a)(7) of Title 18, United States Code;
and
(5)
Penalties and damages obtained and otherwise creditable to miscellaneous receipts of the
general fund of the Treasury obtained under sections 3729 through 3733 of Title 31,
United States Code (known as the False Claims Act, or FCA), in cases involving claims
related to the provision of health care items and services (other than funds awarded to a
relator, for restitution or otherwise authorized by law).
6
Expenditures
In the nineteenth year of operation, the Secretary and the Attorney General certified
$279.7 million in mandatory funding as necessary for the Program, after accounting for
mandatory sequester reductions of $22.0 million as required by law. Additionally, Congress
appropriated $672.0 million in discretionary funding. See allocation by recipient below:
FY 2015 ALLOCATION OF HCFAC APPROPRIATION
Organization
Department of Health and Human
Services
Office of Inspector General6
Office of the General Counsel
Administration for Community
Living
Food and Drug Administration
Centers for Medicare & Medicaid
Services
Unallocated Funding
Subtotal
Department of Justice
United States Attorneys
Civil Division7
Criminal Division
Civil Rights Division
Justice Management Division
Department of Justice - Other
Subtotal
TOTAL8
Mandatory
Allocation5
$200,718,475
10,000,000
Discretionary
Allocation
Funds
Sequestered
Total
Allocation
$67,200,000 ($14,652,449) $253,266,026
0
0
10,000,000
8,710,136
0
0
8,710,136
3,377,220
0
0
3,377,220
13,500,000
544,320,000
0
577,820,000
2,802,456
239,108,287
0
611,520,000
(2,802,456)
(17,454,905)
0
853,173,382
31,400,000
19,538,751
4,580,184
2,376,000
200,000
4,574,898
62,669,833
20,505,542
12,093,818
10,162,659
5,443,276
100,000
12,174,705
60,480,000
(4,574,898)
(4,574,898)
51,905,542
31,632,569
14,742,843
7,819,276
300,000
12,174,705
118,574,935
$301,778,120
5
$672,000,000 ($22,029,803) $971,748,317
As of FY 2007, mandatory funds are available until expended. Discretionary funds are available for two years.
In addition, HHS-OIG obligated $9.8 million in funds received as “reimbursement for the costs of conducting
investigations and audits and for monitoring compliance plans” as authorized by section 1128C(b) of the Social
Security Act, 42 U.S.C. § 1320a-7c(b).
7
The Elder Justice Initiative, managed by the Civil Division, is included in the Civil Division figures.
8
Amounts only represent those that are provided by statute, and do not include other mandatory sources or
discretionary appropriated sources provided through Departments’ annual appropriations.
6
7
Overall Recoveries
During this fiscal year, the Federal Government won or negotiated over $1.9 billion in judgments
and settlements, and attained additional administrative impositions in health care fraud cases and
proceedings. As a result of these efforts, as well as those of preceding years, approximately $2.4
billion was returned to the Federal Government or private persons. Of this $2.4 billion, the
Medicare Trust Funds received transfers of approximately $1.6 billion during this period; and
another $135.9 million in Federal Medicaid money was transferred to the Treasury separately as
a result of these efforts.9
In addition to these enforcement actions, numerous audits, evaluations and other coordinated
efforts yielded recoveries of overpaid funds, and prompted changes in federal health care
programs that reduce vulnerability to fraud.
The return on investment (ROI) for the HCFAC program over the last three years (2013-2015) is
$6.10 returned for every $1.00 expended. Because the annual ROI can vary from year to year
depending on the number and type of cases that are settled or adjudicated during that year, DOJ
and HHS use a three-year rolling average ROI for results contained in the report. Additional
information on how the ROI is calculated can be found in the Appendix.
Health Care Fraud Prevention and Enforcement Action Team (HEAT)
The Attorney General and the Secretary maintain regular consultation at both senior and staff
levels to accomplish the goals of the HCFAC Program. On May 20, 2009, Attorney General
Holder and Secretary Sebelius announced the Health Care Fraud Prevention & Enforcement
Action Team (HEAT), a new effort with increased tools and resources, and a sustained focus by
senior level leadership to enhance collaboration between the Departments of Health and Human
Services and Justice. With the creation of the new HEAT effort, DOJ and HHS pledged a
Cabinet-level commitment to prevent and prosecute health care fraud. HEAT, which is jointly
led by the Deputy Attorney General and HHS Deputy Secretary, is comprised of top level law
enforcement agents, prosecutors, attorneys, auditors, evaluators, and other staff from DOJ and
HHS and their operating divisions, and is dedicated to joint efforts across government to both
prevent fraud and enforce current anti-fraud laws around the country. The Medicare Fraud
Strike Force teams are a key component of HEAT.
The mission of HEAT is:
•
To marshal significant resources across government to prevent waste, fraud and
abuse in the Medicare and Medicaid programs and crack down on the fraud
perpetrators who are abusing the system and costing us all billions of dollars.
•
To reduce health care costs and improve the quality of care by ridding the system of
perpetrators who are preying on Medicare and Medicaid beneficiaries.
9
Note that some of the judgments, settlements, and administrative actions that occurred in FY 2015 will result in
transfers in future years, just as some of the transfers in FY 2015 are attributable to actions from prior years.
8
•
To highlight best practices by providers and public sector employees who are
dedicated to ending waste, fraud, and abuse in Medicare.
•
To build upon existing partnerships between DOJ and HHS, such as our Medicare
Fraud Strike Force Teams, to reduce fraud and recover taxpayer dollars.
Since its creation in May 2009, HEAT has focused on key areas for coordination and
improvement. HEAT members are working to identify new enforcement initiatives and areas for
increased oversight and prevention to increase efficiency in areas such as pharmaceutical and
device investigations. DOJ and HHS have expanded data sharing and improved information
sharing procedures in order to get critical data and information into the hands of law enforcement
to track patterns of fraud and abuse and increase efficiency in investigating and prosecuting
complex health care fraud cases. The departments established a cross-government health care
fraud data intelligence sharing workgroup to share fraud trends, new initiatives, ideas, and
success stories to improve awareness across of issues relating to health care fraud.
Both departments also have developed training programs to prevent honest mistakes and help
stop potential fraud before it happens. This includes CMS compliance training for providers, ongoing meetings at U.S. Attorneys’ Offices (USAOs) with the public and private sector, and
increased efforts by HHS to educate specific groups—including elderly and immigrant
communities—to help protect them. In addition, DOJ conducts, with the support of HHS, a
Medicare Fraud Strike Force training program designed to teach the Strike Force concept and
case model to prosecutors, law enforcement agents, and administrative support teams.
Healthcare Fraud Prevention Partnership (HFPP)
The Healthcare Fraud Prevention Partnership (HFPP) is the groundbreaking public/private
partnership between the Federal Government, State officials, law enforcement, private health
insurance plans and associations, and healthcare anti-fraud associations. The purpose of the
partnership is to exchange data and information between the partners to help improve capabilities
to fight fraud, waste and abuse in the health care industry. Since its inception in 2012, the
number of participants has increased to 45 public, private and state partner organizations. The
Partnership has completed several studies associated with fraud, waste or abuse that have yielded
successful results for participating partners. Studies have examined such subjects as “false store
fronts” or “phantom providers” and top billing pharmacies. Additional studies are underway and
the Partnership has established a Trusted Third Party (TTP) which conducts HFPP data
exchanges, research, data consolidation and aggregation, reporting, and analysis. The TTP will
not share the source of the data (i.e., which partner submitted what data) during an exchange in
order to keep the identity of the data source confidential. HFPP is continuing to expand with
new partners.
The Partnership is a demonstrated example of effective departmental collaboration between HHS
and DOJ, working together to create a strong partnership with the states and private payers to
detect fraud, waste, and abuse. In FY 2015, the Partnership hosted its fifth Executive Board
meeting. The meeting focused on developing a strategy to ensure the productivity of the
Partnership and highlighted achievements and progress since the last meeting including data
exchanges, information sharing, and partnership growth.
9
Medicare Fraud Strike Force
The first Medicare Fraud Strike Force (Strike Force) was launched in March 2007 as part of the
South Florida Initiative, a joint investigative and prosecutorial effort against Medicare fraud and
abuse in South Florida. The Strike Force is comprised of interagency teams made up of
investigators and prosecutors that focus on the worst offenders in regions with the highest known
concentration of fraudulent activities. The Strike Force uses advanced data analysis techniques
to identify aberrant billing levels in health care fraud “hot spots”—cities with high levels of
billing fraud—and target suspicious billing patterns, as well as emerging schemes and schemes
that migrate from one community to another. Based on the success of these efforts and increased
appropriated funding for the HCFAC program from Congress and the Administration, DOJ and
HHS expanded Strike Force operations to a total of nine areas in the United States—Miami,
Florida; Los Angeles, California; Detroit, Michigan; Southern Texas; Brooklyn, New York;
Southern Louisiana; Tampa, Florida; Chicago, Illinois; and Dallas, Texas.
Each Medicare Fraud Strike Force team brings the investigative and analytical resources of the
FBI and HHS-OIG and the prosecutorial resources of the Criminal Division’s Fraud Section and
the USAOs to analyze data obtained from CMS and bring cases in federal district court. Strike
Force accomplishments in the areas noted above and USAO accomplishments in their districts
during FY 2015 include10:
•
200 indictments, informations and complaints involving charges filed against
391 defendants who allegedly collectively billed the Medicare program approximately
$1.4 billion;
•
314 guilty pleas negotiated and 28 jury trials litigated, with guilty verdicts against
48 defendants; and
•
Imprisonment for 263 defendants sentenced during the fiscal year, averaging more than
56 months of incarceration.
In the eight and a half years since its inception, Strike Force prosecutors filed more than
1,164 cases charging more than 2,536 defendants who collectively billed the Medicare program
more than $8 billion; 1,781 defendants pleaded guilty and 243 others were convicted in jury
trials; and 1,477 defendants were sentenced to imprisonment for an average term of
approximately 49 months.11
Medicare payment trends demonstrate the positive impact of Strike Force enforcement and
prevention efforts. For example, Medicare payments for home health care increased from 2006
until 2010. In 2009, CMS changed Medicare’s Home Health Agency (HHA) outlier coverage
policy, following federal enforcement actions initiated by the HEAT Strike Force case U.S. v.
Zambrana in Miami and HHS-OIG reports regarding home health outlier payments. As reflected
10
The accomplishments figures presented in the bullets include all reported Strike Force cases handled by DOJ
Criminal Division attorneys and AUSAs in the respective USAOs during FY 2015.
11
These statistics are for the period of May 7, 2007 through September 30, 2015.
10
on the chart below, since 2010, payments for HHAs in Miami decreased by $100 million per
quarter since the peak in 2009, and continue to decline. In Dallas and Detroit, payments for
HHAs are down by over $40 million and $25 million per quarter, respectively, since 2010. This
may suggest that the home health fraud convictions not only eliminated some of the bad actors
but also deterred other fraudsters from exploiting the outlier coverage policy. We have seen
similar patterns of decreased Medicare payments for Durable Medical Equipment (DME) and
community mental health services (CMHC) following concentrated law enforcement initiatives
and administrative fraud prevention efforts.
Medicare Payments for CMHC, DME, and HHA Services,
Calendar Years 2006-2015
$275
CMHC-National
Millions
$250
HHA-Miami area
$225
DME-Miami area
$200
HHA-Detroit area
$175
HHA Dallas area
$150
$125
$100
$75
$50
$25
$0
For examples of successful Strike Force cases initiated or concluded during FY 2015, please see
“Highlights of Successful Criminal and Civil Investigations” beginning on p. 12.
11
Highlights of Successful Criminal and Civil Investigations
Our respective Departments successfully pursued Medicare Fraud Strike Force matters, as well
as other criminal and civil investigations in a wide range of areas. Cases are organized by type
and presented in chronological order. Strike Force cases are denoted by (SF) in the lead
sentence.
Ambulance and Transportation Services
In November 2014, the co-owner of Brotherly Love, a Philadelphia, Pennsylvania ambulance
company, was sentenced to 5 years and 4 months of incarceration and was ordered to pay more
than $2 million in restitution after pleading guilty to health care fraud and the anti-kickback
statute (AKS) charges. The investigation revealed that the co-owner and her co-conspirators
transported by ambulance patients who could walk; transported patients in personally owned
vehicles, but billed as if the patients were transported by ambulance; used patient information to
bill as if the patients had been transported by ambulance when, in fact, the patients actually
transported themselves; and paid patients to be transported by Brotherly Love.
In May 2015, five Orange County California ambulance companies in San Diego, California
agreed to pay a total of more than $11.5 million to settle civil False Claims Act (FCA)
allegations that they engaged in so-called “swapping” kickback schemes by providing deeply
discounted—and often below cost—ambulance services to hospitals and/or skilled nursing
facilities (SNFs) in exchange for exclusive rights to the facilities’ more lucrative Medicare
patient referrals in violation of the AKS. The government alleged that the arrangements resulted
in false claims for Medicare Part B transports, which in essence subsidized the discounted trips.
The settling defendants were Pacific Ambulance, Inc., Bowers Companies, Inc., Care
Ambulance Service, Inc., Balboa Ambulance Service, Inc., and E.R. Ambulance, Inc.
(SF) In August 2015, the owner, operators, and managers of ProMed Medical Transportation, an
ambulance transportation company in the greater Los Angeles area, were convicted after trial for
their roles in a $2.4 million Medicare fraud scheme. The evidence at trial demonstrated that the
defendants conspired to bill Medicare for ambulance transportation services for individuals
whom the defendants knew did not need such services. The defendants also instructed
emergency medical technicians who worked at ProMed to conceal the true medical conditions of
patients they were transporting by altering requisite paperwork and creating fraudulent
documents to justify the transportation services.
(SF) In June 2015, a general manager and a dispatch supervisor of Mauran Ambulance Inc., an
ambulance company in San Fernando, California, were indicted for their roles in a $28 million
Medicare fraud scheme. The defendants allegedly billed Medicare for medically unnecessary
ambulance transportation services, which primarily were to and from dialysis treatments. In
their respective roles at Mauran, the defendants instructed emergency medical technicians who
worked at Mauran to conceal the true medical condition of patients they were transporting by
altering paperwork and creating false reasons to justify Mauran’s ambulance transportation
services. A former administrator of a dialysis clinic was also indicted for receiving cash
kickbacks from Mauran’s general manager in exchange for patient referrals.
12
Clinics
In FY 2015, DaVita Healthcare Partners, Inc., the nation’s largest provider of dialysis services,
agreed to pay a total of $800 million to settle allegations made in two civil FCA actions. In
October 2014, DaVita agreed to pay $350 million to settle civil FCA allegations that it paid
kickbacks to induce the referral of patients to its dialysis clinics. The government alleged that
DaVita offered physicians lucrative opportunities to acquire and/or sell an interest in DaVita
dialysis clinics to which their patients would be referred for treatment and then prevented the
physicians from referring their patients to other dialysis providers through a series of noncompete and non-disparagement agreements with the physicians. In June 2015, DaVita paid an
additional $450 million to settle civil FCA allegations pursued by two whistleblowers that it
created unnecessary waste in administering the drugs Zemplar and Venofer to dialysis patients,
and then billed federal health care programs for such avoidable waste.
(SF) In October 2014, two owners of several Brooklyn, NY medical clinics pled guilty to health
care fraud conspiracy and falsification of records in the Eastern District of New York. The
medical director of one clinic pled guilty to health care fraud conspiracy in March 2015. The
defendants owned and operated a series of medical clinics that were used to submit more than
$14.3 million in Medicare claims, of which $5.3 million was paid. The indictment alleged that
the majority of the claims were fraudulent because they were for services such as vitamin
infusions, physical and occupational therapy, and diagnostic tests that were medically
unnecessary, not provided, or otherwise not reimbursable. The defendants also allegedly
laundered the proceeds of the fraudulent scheme and falsified documents, which they then
provided to Medicare auditors and the FBI in order to conceal the fraudulent scheme.
(SF) In October 2014, an occupational therapist pled guilty in the Eastern District of New York
to health care fraud conspiracy for his role in a scheme that involved the payment of cash
kickbacks to elderly beneficiaries who received massages and light group exercises that were
billed to Medicare and Medicaid as individual one-on-one occupational therapy and other
occupational therapy services. As part of the scheme, the defendant, who was a full-time
therapist for the New York Board of Education, signed false and fabricated patient charts and
billing records for therapy that was not actually provided. As part of the plea, the defendant
agreed to restitution and forfeiture of $1.6 million. Between February 2008 and February 2011,
the defendant was the seventh-highest biller of occupational therapy in the country.
(SF) In January 2015, two physician owners of Spectrum Care P.A., a Houston community
mental health clinic, were sentenced to 148 months and 120 months, respectively, for their roles
in a $97 million Medicare fraud scheme. The physician defendants were convicted, along with
three co-defendants—a group home owner, a physician assistant, and an office manager—of
health care fraud conspiracy and substantive counts of health care fraud following a five-week
jury trial. The evidence at trial showed that the physician defendants signed admission
documents and progress notes certifying that Medicare beneficiaries qualified for partial
hospitalization services, when they did not. The evidence also showed that the physician
defendants paid kickbacks to group home operators and patient recruiters, including their codefendants, in exchange for the referral of beneficiaries. The group home owner was sentenced
to 54 months’ imprisonment, the office manager was sentenced to 60 months’ imprisonment, and
the physician assistant was sentenced to 68 months’ imprisonment.
13
In January 2015, six co-conspirators in Arlington, Texas were sentenced for submitting over $5
million in false health insurance claims to Blue Cross Blue Shield of Texas (BCBS), the Federal
Employees Health Benefits Program, and other insurers for services not rendered at a
chiropractic clinic. The co-conspirators included a licensed chiropractor and occupational
therapist who allowed the use of their provider numbers to fraudulently bill insurers for services
not provided. To further the scheme, a union representative for a Texas automotive parts
manufacturer actively recruited employees to go to the co-conspirators’ chiropractic clinic. The
union representative and recruited employees received illegal kickback for these referrals. The
sentences imposed in this case ranged from 6 months imprisonment to 156 months
imprisonment, and restitution from $1.3 to $2.4 million.
(SF) In February 2015, the co-owners of BONB LLC, aka Bioscan, were sentenced to 57 and 37
months’ imprisonment in the Middle District of Florida for their roles in a health care fraud and
money laundering scheme. Bioscan was a shell company the defendants used to facilitate a
multi-million dollar fraud scheme executed through several purported medical clinics. As part of
their guilty pleas, the defendants admitted that their co-conspirators submitted $12 million in
fraudulent claims to Medicare, including claims resulting from illegal kickback arrangements
and claims for radiology, audiology, neurology, and cardiology services that were never
rendered. The defendants admitted to attempting to conceal the proceeds of the fraudulent
claims by transferring funds through bank accounts for Bioscan and other entities. In addition to
the prison sentences, one defendant agreed to forfeit a $60,000 platinum and diamond ring he
purchased with health care fraud proceeds.
In July 2015, the operator of a sham clinic in the Central District of California was sentenced
after being convicted at trial to 15 years in federal prison for his role in a $20 million scheme to
defraud Medicare and Medicaid by fraudulently prescribing expensive anti-psychotic
medications, selling these drugs on the black market, and then redistributing them to pharmacies,
where the drugs would be subject to new claims made to Medicare and Medicaid as though they
were new bottles of drugs. Employees of sham clinic generated thousands of prescriptions for
identity theft victims—such as elderly Vietnamese beneficiaries of Medicare and Medicaid,
military veterans who were recruited from drug rehab programs, and denizens of Skid Row.
This case was the first in the nation involving an organized scheme to defraud government health
care programs through fraudulent claims for expensive anti-psychotic medications.
Community Mental Health Centers
(SF) In December 2014, a certified nursing assistant in Miami, Florida was sentenced to 12 years
and six months in prison and ordered to pay $18.2 million in joint and several restitution after
being convicted by a jury on charges of relating to health care fraud. American Therapeutic
Corporation (ATC) operated several purported partial hospitalization programs (PHP)
throughout Florida. Evidence at trial demonstrated that the defendant received thousands of
dollars a month in cash kickbacks in exchange for referring Medicare patients to ATC. The
evidence also demonstrated that the beneficiaries he sent to ATC did not need, qualify for, or
receive PHP treatment. Nevertheless, ATC submitted false claims to Medicare for PHP services
purportedly provided to each of these patients. To date, 30 defendants, including the owners of
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ATC, have previously pleaded guilty or been convicted at trial on charges related to the ATC
scheme, which resulted in more than $200 million in fraudulent Medicare billings.
(SF) In January 2015, two physicians in Houston, Texas were sentenced to a combined 22 years
and 4 months in prison and ordered to pay a combined $8 million in restitution after being
convicted by a jury on charges relating to health care fraud. The two physicians owned a
community mental health center (CMHC) that purportedly provided PHP services to Medicare
beneficiaries. Evidence at trial showed that the two physicians paid kickbacks to group care
home operators and patient recruiters in exchange for bringing ineligible Medicare beneficiaries
to their CMHC. They then signed admission documents and progress notes certifying that the
beneficiaries qualified for PHP services when, in fact, they did not qualify for or need these
services and/or the actual services were not performed. The CMHC billed Medicare
approximately $97 million for these fraudulent services. One of the group home owners was
sentenced to 4-and-a-half years in prison and ordered to pay $1.8 million in restitution.
(SF) In April 2015, a licensed mental health counselor in Miami, Florida was sentenced to 4
years in prison and ordered to pay $13.6 million in joint and several restitution after pleading
guilty to conspiracy to commit health care fraud. The defendant worked as a therapist for Health
Care Solutions Network, Inc., in Florida (HCSN-FL). He admitted that he provided intensive
therapy to mental health patients who were ineligible to receive the therapy or could not benefit
from partial hospitalization program (PHP) services, including patients suffering from dementia,
mental retardation, and Alzheimer’s disease. He signed fabricated PHP therapy notes and other
medical records, which were used to support the false claims to Medicare and Medicaid. During
his employment, the defendant and his co-conspirators submitted approximately $31 million in
false claims to Medicare and Florida Medicaid programs.
Device Companies
In December 2014, OtisMed Corp. of Newark, New Jersey was ordered to pay $34.4 million in
fines and $5.1 million in forfeiture after pleading guilty to distributing, with the intent to defraud
and mislead, adulterated medical devices into interstate commerce in violation of the Food,
Drug, and Cosmetic Act. OtisMed submitted a pre-market notification to the Food and Drug
Administration (FDA) seeking clearance to market the OtisKnee in October 2008. In September
2009, the FDA sent OtisMed a notice that its submission was denied, stating that the company
failed to demonstrate that the OtisKnee was as safe and effective as other legally marketed
devices. Despite his awareness of the letter and advice from legal counsel that it would be
unlawful to continue distributing the OtisKnee, the Chief Executive Officer ordered employees
at OtisMed to distribute more than 200 OtisKnee devices to surgeons throughout the United
States. The CEO and others also concealed the shipments from the FDA, and did not disclose
that distributing OtisKnee was prohibited. The CEO pleaded guilty to introducing adulterated
medical devices in interstate commerce and was sentenced on June 29, 2015 to 24 months in
prison. Apart from the criminal plea, OtisMed agreed to pay a $41.2 million settlement to
resolve its civil FCA liability arising from the marketing and distribution of the OtisKnee, and to
be excluded from participation in federal health care programs for 20 years.
In February 2015, medical device manufacturer ev3 Inc., formerly known as Fox Hollow
Technologies Inc., agreed to pay $1.3 million to resolve civil FCA allegations that it caused
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certain hospitals to submit false claims to Medicare for unnecessary inpatient admissions for
procedures involving its atherectory device. Atherectomy is a minimally-invasive surgical
procedure that uses a small cutting device to remove atherosclerosis, or hardening of the arteries,
from large blood vessels within the body. The government alleged that to increase hospital
purchases of its atherectomy devices, Fox Hollow advised hospitals that they should bill
atherectomy procedures as more expensive inpatient claims, as opposed to less costly outpatient
claims. As a result, certain hospitals allegedly claimed greater reimbursement than they were
entitled to receive for procedures involving Fox Hollow’s devices.
In April 2015, Medtronic plc and certain affiliated Medtronic companies agreed to pay
$4.4 million to settle civil FCA allegations that they made false statements to the U.S.
Department of Veterans Affairs and the U.S. Department of Defense regarding the country of
origin of certain Medtronic products sold to the United States. The Trade Agreements Act of
1979 (TAA) generally requires companies selling products to the United States to manufacture
them in the United States or in another designated country. The settlement resolved allegations
that Medtronic sold to the United States products manufactured in China and Malaysia; under the
TAA, the Government is precluded from acquiring the products at issue from those countries.
The specific Medtronic products included anchoring sleeves sold with cardiac leads and used to
secure the leads to patients, certain instruments and devices used in spine surgeries, and a
handheld patient assistant used with a wireless cardiac device.
In July 2015, NuVasive Inc. of San Diego, California, agreed to pay $13.5 million to resolve
allegations that the company promoted its CoRoent System for surgical uses that were not
approved or cleared by the FDA and paid kickbacks to induce physicians to use its CoRoent
System. The government alleged that, between 2008 and 2013, NuVasive promoted its CoRoent
System for certain surgical uses, including for use in treating two complex spine deformities:
severe scoliosis and severe spondylolisthesis. Because these specific uses were not approved or
cleared by the FDA, the claims submitted to Medicare and Medicaid from physicians and
hospitals for these spine surgeries were not eligible for reimbursement. The government also
alleged that NuVasive knowingly offered and paid illegal remuneration to certain physicians to
induce them to use the CoRoent System in spine fusion surgeries, in violation of the Federal antikickback statute. The alleged illegal remuneration consisted of promotional speaker fees,
honoraria, and expenses relating to physicians’ attendance at events sponsored by a group that
was allegedly created, funded, and operated by NuVasive.
Drug Companies
In January 2015, Daiichi Sankyo Inc., a global pharmaceutical company, agreed to pay
$39 million to resolve civil FCA allegations that it paid kickbacks to induce physicians to
prescribe Daiichi drugs, including Azor, Benicar, Tribenzor and Welchol. The alleged kickbacks
took the form of honoraria payments, lavish meals, and other remuneration to physicians who
participated, or supposedly participated, in speaker programs. Daiichi allegedly made payments
to physicians even when physicians took turns “speaking” on duplicative topics over Daiichipaid dinners, the recipient spoke only to members of his or her own staff in his or her own office,
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or the associated dinner was so lavish that its cost exceeded Daiichi’s own internal cost
limitation of $140 per person.
In February and May 2015, Medco Health Solutions, Inc., a wholly-owned subsidiary of the
pharmacy benefit manager Express Scripts Holding Company, and AstraZeneca, a
pharmaceutical manufacturer, agreed to pay a total of $15.8 million to settle civil FCA
allegations of a kick-back scheme involving marketing and selling pharmaceutical products. The
government alleged that AstraZeneca paid kickbacks to Medco in exchange for identifying
Nexium as the “sole and exclusive” proton pump inhibitor on certain of Medco’s prescription
drug lists known as formularies. The alleged remuneration from AstraZeneca took the form of
price concessions on certain AstraZeneca drugs other than Nexium, namely on Prilosec, Toprol
XL, and Plendil.
In July 2015, drug manufacturers AstraZeneca LP and Cephalon, Inc. agreed to pay a total of
$54 million to settle civil FCA allegations that they knowingly underpaid rebates owed under the
Medicaid Drug Rebate Program (MDRP). Pursuant to the MDRP, drug manufacturers must pay
quarterly rebates to state Medicaid programs in exchange for Medicaid’s coverage of the
manufacturers’ drugs. The rebates are based, in part, on the Average Manufacturer Prices
(AMPs) that the manufacturers report to the government for each of their covered drugs. The
settlements with AstraZeneca and Cephalon resolved allegations that they underreported AMPs
for a number of their drugs by improperly reducing the reported AMPs for service fees they paid
to wholesalers. As a result, the government contended that AstraZeneca and Cephalon underpaid
quarterly rebates owed to the states and caused the United States to be overcharged for its
payments to the states for the Medicaid program.
Durable Medical Equipment (DME)
In December 2014, a medical supplies company owner was sentenced in Baton Rouge, Louisiana
to 156 months imprisonment for submitting hundreds of false and fraudulent claims to Medicare
for medical devices over a two year period. For instance, he submitted claims for “brace kits,”
regardless of whether any of the Medicare beneficiaries named in the claims needed or had
prescriptions for the items, submitted claims for custom-fabricated devices which were never
provided, and submitted numerous claims for expensive replacement power wheelchairs that he
falsely claimed had been damaged or destroyed by a hurricane. The owner was ordered to make
restitution to the Medicare program in the amount of $1.2 million, to forfeit the proceeds of his
criminal activity up to an additional $1.2 million, and to serve a two-year term of supervised
release.
(SF) In February 2015 and May 2015, two individuals pled guilty to health care fraud conspiracy
for their roles in a $13 million long-running scheme to submit false claims for durable medical
equipment to a government-sponsored organization for managed care in New York. The scheme
involved the defendants using information for approved, in-network equipment providers to
obtain approvals that were then used to secure payments on behalf of sham companies that the
defendants set up. Companies believed to have been involved in the scheme submitted
fraudulent claims to the managed care organization in amounts over $13 million since 2008. In
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September 2015, one of the defendants was sentenced to 21 months in jail and ordered to pay
over $337,000 in forfeiture and the same amount in restitution.
(SF) In March 2015, an owner of Colonial Medical Supply, a durable medical equipment
company in Los Angeles, was convicted after a jury trial for his role in a $3.3 million Medicare
fraud scheme. The evidence at trial established that the defendant paid cash kickbacks to
medical clinics for fraudulent prescriptions for durable medical equipment, such as expensive
power wheel chairs, which the patients did not need. The defendant then used these
prescriptions to bill Medicare for the medically unnecessary equipment. In May 2015, the
defendant was sentenced to 84 months’ imprisonment.
(SF) In March 2015, an owner of Ezcor-9000, Inc., a durable medical equipment company in
Valencia, California, was convicted after an eight-day jury trial for her role in a $3.5 million
Medicare fraud scheme. The evidence at trial established that the defendant paid illegal
kickbacks to patient recruiters in exchange for patient referrals. The evidence also showed that
the defendant paid kickbacks to physicians for fraudulent prescriptions—primarily for medically
unnecessary, but expensive, power wheelchairs—that she then used to support her fraudulent
bills to Medicare. In June 2015, the defendant was sentenced to 97 months in prison.
In May 2015, DME suppliers Orbit Medical Inc. and its partial successor, Rehab Medical Inc.,
agreed to pay $7.5 million to settle civil FCA allegations that Orbit submitted false claims to
federal health care programs for power wheelchairs and accessories. The settlement resolved
allegations that Orbit sales representatives knowingly altered physician prescriptions and
supporting documentation to get Orbit’s power wheelchair and accessory claims paid by
Medicare, the Federal Employees Health Benefits Plan and the Defense Health Agency. In
particular, the government alleged that Orbit sales representatives changed or added dates to
physician prescriptions and chart notes to falsely document that the prescription was sent to the
supplier within 45 days of the face-to-face beneficiary exam; changed the physician prescription,
chart notes, and other documentation to falsely establish medical necessity for the power
wheelchair or accessory; and added facsimile stamps to supporting documentation to make it
appear as though the physician’s office had sent the documents to Orbit.
In May 2015, a DME supplier in Austin, Texas was sentenced to 36 months imprisonment and 3
years supervised release, and ordered to pay $846,171 in restitution for submitting fraudulent
bills through the Department of Labor for items never sent to patients. The supplier was billing
primarily for electrode pads. The false claims were for DME supplies for U.S. Postal employees.
The scheme ran for at least three years and involved billings to the Government of over $1
million. The supplier paid the restitution/forfeiture up-front, and the forfeiture included cash and
a 2014 BMW.
(SF) In May 2015, a registered nurse and owner of a DME company in Los Angeles, California
was sentenced to 4 years in prison and ordered to pay $4.3 million in joint and several restitution
after being convicted of health care fraud and laundering of monetary instruments. According to
the investigation, the nurse/owner and her co-conspirators used cash and checks to pay illegal
kickbacks to recruit Medicare beneficiaries for power wheelchairs and other DME, to which the
beneficiaries did not have a legitimate medical need. She and her co-conspirators also paid
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illegal kickbacks to a physician in exchange for writing false prescriptions and documents for the
DME, which was then used to fraudulently bill Medicare.
Electronic Health Records
In June 2015, the Chief Financial Officer (CFO) of Shelby Regional Medical Center of Center,
Texas, was sentenced to 1 year and 11 months in jail and ordered to pay $4.4 million in
restitution after pleading guilty to making a false statement. As CFO he oversaw the
implementation of electronic health records (EHR) for the hospital and was responsible for
attesting that the hospital’s EHR platform met meaningful use requirements in order to qualify
for incentive payments under Medicare’s EHR Incentive Program. During FY 2012, Shelby
Regional did not meaningfully use the EHR platform, despite an attestation from the CFO that it...