A 59-year-old man was convicted on all 15 counts for orchestrating a massive Medicare fraud scheme involving the fraudulent billing of expensive topical creams, announced US Attorney Alamdar S. Hamdani on October 15.
From 2014 through 2021, the defendant operated a company that ran 14 pharmacies with straw owners. He illegally acquired thousands of Medicare beneficiaries’ personal information, including identification numbers and health records, specifically targeting elderly diabetic patients reliant on diabetic testing supplies.
To maximize reimbursements without regard for medical necessity, the defendant instructed his employees to use these patients’ data to file insurance claims for topical creams, Omega-3 pills, and other medications he intended to sell. He paid between $16 and $40 per Medicare beneficiary for their information.
Under his direction, employees would fax pre-filled prescription requests to doctors, making it appear that patients were requesting diabetic testing supplies, with topical creams added at the bottom. These faxes included false statements that the patients had chosen his pharmacies for their medications. In many cases, the patients were unaware that such requests were being made on their behalf.
Many doctors accepted these faxes at face value, signing and returning the prefilled prescriptions to the defendant’s company. His call center, first in Houston and later in Egypt, then contacted patients, providing false and misleading information about the topical creams and their doctor’s orders. His pharmacies shipped numerous topical creams, often on auto-refill, while excessively billing Medicare, Medicaid, and private insurance plans. The scheme netted over $200 million.
Additionally, from 2015 through 2020, the defendant made a series of bribe payments, totaling over $188,000, to an employee of a pharmacy benefits manager. These bribes, ranging from $2,000 to $5,000, secured favorable treatment for his pharmacies, allowing them to participate in retail network agreements and the Medicare Part D program. He also received critical information about audits and strategies to delay the termination of his pharmacies by the benefits manager.
Sentencing is scheduled for January 7, 2025. The defendant faces up to 20 years for conspiracy to commit mail fraud and healthcare fraud, 10 years for each of five counts of healthcare fraud, and six counts of money laundering, among other charges. He could also face fines up to $4 million and restitution exceeding $160 million. Previously released on bond, he was taken into custody pending sentencing.
Compliance Perspective
Issue
Medical identity theft occurs when someone’s personal information, such as their name, Social Security number, or Medicare number, is stolen. Criminals or fraudulent providers use those medical identities to get medical care, buy drugs, or submit false billings to Medicare or Medicaid. Nursing facilities have an obligation to protect residents from financial abuse and exploitation by safeguarding personal identifiable information (PII). Additionally, submitting false or fraudulent claims for payment to Medicare or Medicaid is illegal. Violators may face fines up to three times the programs’ loss plus $11,000 per claim filed. The civil False Claims Act considers each billed item or service as a separate claim, so fines can accumulate rapidly. Facility staff should be knowledgeable in how to report suspicious billing practices. A nonretaliatory environment for reporting suspicious billing practices is mandatory for all facilities.
Discussion Points
- Regularly review and update your policies and procedures for protecting residents’ PII and preventing financial abuse and exploitation. Ensure your protocols for preventing and reporting false claims are current and effective.
- Train staff who have access to residents’ PII on your policies for protecting the information. Also train staff on what can be considered a false claim. Include information on how to report concerns and suspected violations, and make sure staff know that prompt reporting is mandatory. Document training sessions and file signed acknowledgments in each employee’s education file.
- Conduct periodic audits to verify that staff understand proper procedures for preventing PII exposure. Also periodically perform audits to ensure staff are aware of their responsibility to identify and report compliance and ethics concerns, and understand that it is their responsibility to report violations to their supervisor, the compliance officer, or via the anonymous hotline.
*This news alert has been prepared by Med-Net Concepts, Inc. for informational purposes only and is not intended to provide legal advice.*
