The United States Department of Justice (DOJ) recently charged 14 people for engaging in alleged healthcare fraud schemes related to the COVID-19 pandemic, resulting in more than $143 million in false billings. The charges implicate a telemedicine company executive, physician, marketers, and medical business owners.
The defendants allegedly engaged in various health care fraud schemes in an attempt to exploit the COVID-19 pandemic. Some defendants offered COVID-19 tests to Medicare beneficiaries at senior living facilities, drive-through COVID-19 testing sites, and medical offices to get the beneficiaries to provide their personal identifying information and a saliva/blood sample. Those defendants then allegedly misused the information and samples to submit claims to Medicare for unrelated, medically unnecessary, and much more expensive laboratory tests (including cancer genetic testing, allergy testing, and respiratory pathogen panel tests). In some cases, the COVID-19 test results were either not provided in a timely manner or were not reliable. The proceeds of the scheme were allegedly laundered through shell corporations and used to buy exotic cars and luxury real estate.
Other defendants allegedly exploited CMS policies that were put in place to allow for increased access to health care during the pandemic. Some of the cases included first-in-the-nation charges for allegedly exploiting the expanded telehealth regulations and rules by submitting false and fraudulent claims to Medicare for sham telemedicine encounters that did not occur. In those instances, medical professionals allegedly offered and paid bribes in exchange for the referral of medically unnecessary testing.
Western District of Arkansas
Billy Joe Taylor, the owner/operator of two testing laboratories, Vitas Laboratories LLC and Beach Tox LLC, was charged with health care fraud in connection with an alleged scheme to defraud the United States of over $88 million, including over $42 million in false and fraudulent claims that were billed in combination with claims that were submitted for testing for COVID-19 and other respiratory illnesses.
Taylor allegedly used access to beneficiary and medical provider information from prior laboratory testing orders to submit fraudulent claims for urine drug tests and other laboratory tests, including respiratory pathogen panel and COVID-19 tests, that were not actually ordered or performed. The complaint also alleges that hundreds of claims were submitted for beneficiaries after they had died or otherwise ceased providing samples.
Northern District of California
Mark Schena, the president of Arrayit Corporation, is charged along with two others, the Arrayit Vice President of Marketing and the President of an Arizona marketing organization, in connection with the submission of over $70 million in false and fraudulent claims for allergy and COVID-19 testing.
The superseding indictment against Schena includes new counts of health care fraud, a conspiracy to pay kickbacks, and payment of kickbacks in connection with false and fraudulent statements about the existence, regulatory status, and accuracy of an Arrayit COVID-19 test. The conspiracy allegedly sought to induce the ordering of the Arrayit COVID-19 test and to bundle, i.e., require combination with, the COVID-19 test and Arrayit’s medically unnecessary allergy test. The COVID-19 test results were not provided in a timely fashion and were not reliable in detecting COVID-19.
Central District of California
Petros Hannesyan, the owner of Hollywood Home Health Services, Inc., a home health agency located in Los Angeles, was charged with the theft of government property and wire fraud in connection with $229,454 that he obtained from COVID-19 relief programs. Hannesyan allegedly misappropriated funds from the CARES Act Provider Relief Fund and submitted false loan applications and a false loan agreement to the Economic Injury Disaster Loan Program, rather than use the funds for COVID-19 patient care and to support small businesses experiencing disruption due to the COVID-19 pandemic.
Southern District of Florida
Michael Stein, the owner and operator of a purported consulting company (1523 Holdings, LLC), and Leonel Palatnik, an owner and operator of Panda Conservation Group, LLC, a Texas company that owned and operated testing laboratories in Dallas and Denton, Texas, were charged in connection with an alleged $73 million conspiracy to defraud the United States and to pay and receive health care kickbacks during the COVID-19 pandemic. Stein and Palatnik allegedly exploited temporary waivers of telehealth restrictions by offering telehealth providers access to Medicare beneficiaries for whom they could bill consultations. In exchange, these providers agreed to refer beneficiaries to Panda’s laboratories for expensive and medically unnecessary cancer and cardiovascular genetic testing.
Juan Nava Ruiz and Eric Frank, both patient brokers, were charged for their involvement in an alleged $9.3 million kickback scheme, along with Christopher Licata, an owner of Boca Toxicology, LLC, a clinical laboratory based in Boca Raton, who was previously charged in a separate Indictment. Licata allegedly offered and paid kickbacks to patient brokers, including Ruiz and Frank, in exchange for referring Medicare beneficiaries to Boca Toxicology for various forms of genetic testing and other laboratory testing that they did not need, including the submission of $422,748 in claims related to medically unnecessary respiratory pathogen panel testing and genetic testing that was improperly bundled with COVID-19 testing.
Middle District of Louisiana
Malena Lepetich, the owner of MedLogic, LLC, a clinical laboratory based in Baton Rouge, Louisiana, was charged for involvement in an alleged $15 million scheme to commit health care fraud, to defraud the United States, and to pay and receive health care kickbacks. Lepetich allegedly solicited and received kickbacks in exchange for referrals of urine specimens for medically unnecessary testing. Lepetich also allegedly offered to pay kickbacks for referrals of specimens for COVID-19 and respiratory pathogen testing. Finally, Lepetich allegedly caused the submission of over $10 million in claims to Medicare, Medicaid, and Blue Cross Blue Shield of Louisiana for panels of expensive respiratory testing that was medically unnecessary.
District of New Jersey
Alexander Baldonado, a medical doctor, was charged with six counts of health care fraud. Baldonado allegedly participated in an event that advertised COVID-19 testing. In addition to authorizing the COVID-19 tests, Baldonado allegedly ordered expensive and medically unnecessary cancer genetic testing for Medicare beneficiaries who attended the event. Baldonado also allegedly billed Medicare for services, including lengthy office visits, that he never provided to these beneficiaries. Approximately $2 million in claims were submitted as a result of Baldonado’s COVID-19 health care fraud scheme, and approximately $17 million in claims were submitted as a result of Baldonado’s broader health care fraud scheme.
Donald Clarkin, a partner at a diagnostic testing laboratory, was charged in connection with a $5.4 million conspiracy to defraud the United States and pay and receive health care kickbacks. Clarkin allegedly exploited the pandemic by offering kickbacks in exchange for respiratory pathogen panel tests that would be improperly bundled with COVID-19 tests and billed to Medicare. Clarkin also allegedly paid and received kickbacks and bribes in exchange for arranging for the ordering of medically unnecessary genetic tests that were ineligible for Medicare reimbursement.
Eastern District of New York
Peter Khaim and Arkadiy Khaimov, owners of several New York pharmacies and sham pharmacy wholesaling companies, were charged in a superseding indictment for their participation in an alleged $45 million health care fraud, wire fraud, and money laundering scheme. The defendants and their co-conspirators allegedly obtained billing privileges for multiple pharmacies by using nominees to serve as the purported owners and supervising pharmacists. The defendants then allegedly submitted false and fraudulent claims to Medicare, including by using COVID-19 “emergency override” billing codes to circumvent otherwise applicable pre-authorization requirements and limits on the frequency of refills for expensive drugs (primarily, the cancer treatment gels Targretin and Panretin). The defendants allegedly used an elaborate network of international money laundering operations to conceal and disguise the proceeds of the scheme.
Additional Charges
On the same day the DOJ announced the criminal charges, the Center for Program Integrity, Centers for Medicare & Medicaid Services (CPI/CMS) separately announced that it took administrative actions against more than 50 medical providers for their involvement in health care fraud schemes relating to COVID-19 or abuse of CMS programs that were designed to encourage access to medical care during the pandemic.
Conclusion
While we expect to see more charges and indictments related to COVID-19, it is unlikely that other enforcement efforts that the DOJ has focused on in recent years (i.e., Anti-Kickback Statute and False Claims Act violations) will be reduced by a significant number.