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Florida Nurse Practitioner Convicted for Involvement in $200 Million Medicare Fraud Scheme Involving Clinical Laboratory Tests, Other Procedures

Federal prosecutors allege that this nurse practitioner ordered more genetic tests for Medicare beneficiaries than any other provider during 2020

Cases of Medicare fraud involving clinical laboratory testing continue to be prosecuted by the federal Department of Justice. A jury in Miami recently convicted a nurse practitioner (NP) for her role in a massive Medicare fraud scheme for millions of dollars in medically unnecessary genetic testing and durable medical equipment. She faces 75 years in prison when sentenced in December.  

In their indictment, federal prosecutors alleged that from August 2018 through June 2021 Elizabeth Mercedes Hernandez, NP, of Homestead, Florida, worked with more than eight telemedicine and marketing companies to sign “thousands of orders for medically unnecessary orthotic braces and genetic tests, resulting in fraudulent Medicare billings in excess of $200 million,” according to a US Department of Justice (DOJ) news release announcing the conviction.

“Hernandez personally pocketed approximately $1.6 million in the scheme, which she used to purchase expensive cars, jewelry, home renovations, and travel,” the press release noted.

Hernandez was indicted in April 2022 as part of a larger DOJ crackdown on healthcare fraud related to the COVID-19 outbreak.

Luis Quesada

“Throughout the pandemic, we have seen trusted medical professionals orchestrate and carry out egregious crimes against their patients all for financial gain,” said Assistant Director Luis Quesada (above) of the FBI’s Criminal Investigative Division, in a DOJ press release. Clinical laboratory managers would be wise to monitor these Medicare fraud cases. (Photo copyright: Federal Bureau of Investigation.)

Nurse Practitioner Received Kickbacks and Bribes

Federal prosecutors alleged that the scheme involved telemarketing companies that contacted Medicare beneficiaries and persuaded them to request genetic tests and orthotic braces. Hernandez, they said, then signed pre-filled orders, “attesting that she had examined or treated the patients,” according to the DOJ news release.

In many cases, Hernandez had not even spoken with the patients, prosecutors said. “She then billed Medicare as though she were conducting complex office visits with these patients, and routinely billed more than 24 hours of ‘office visits’ in a single day,” according to the news release.

In total, Hernandez submitted fraudulent claims of approximately $119 million for genetic tests, the indictment stated. “In 2020, Hernandez ordered more cancer genetic (CGx) tests for Medicare beneficiaries than any other provider in the nation, including oncologists and geneticists,” according to the news release.

The indictment noted that because CGx tests do not diagnose cancer, Medicare covers them only “in limited circumstances, such as when a beneficiary had cancer and the beneficiary’s treating physician deemed such testing necessary for the beneficiary’s treatment of that cancer. Medicare did not cover CGx testing for beneficiaries who did not have cancer or lacked symptoms of cancer.”

In exchange for signing the orders, Hernandez received kickbacks and bribes from companies that claimed to be in the telemedicine business, the indictment stated.

“These healthcare fraud abuses erode the integrity and trust patients have with those in the healthcare industry … the FBI, working in coordination with our law enforcement partners, will continue to investigate and pursue those who exploit the integrity of the healthcare industry for profit,” said Assistant Director Luis Quesada of the Federal Bureau of Investigation’s Criminal Investigative Division, in the DOJ press release.

Conspirators Took Advantage of COVID-19 Pandemic

Prosecutors alleged that as part of the scheme, she and her co-conspirators took advantage of temporary amendments to rules involving telehealth services—changes that were enacted by Medicare in response to the COVID-19 pandemic.

The indictment noted that prior to the pandemic, Medicare covered expenses for telehealth services only if the beneficiary “was located in a rural or health professional shortage area,” and “was in a practitioner’s office or a specified medical facility—not at a beneficiary’s home.”

But in response to the pandemic, Medicare relaxed the restrictions to allow coverage “even if the beneficiary was not located in a rural area or a health professional shortage area, and even if the telehealth services were furnished to beneficiaries in their home.”

Hernandez was convicted of:

  • One count of conspiracy to commit healthcare fraud and wire fraud.
  • Four counts of healthcare fraud.
  • Three counts of making false statements.

Medscape noted that she was acquitted of two counts of healthcare fraud. The trial lasted six days, Medscape reported.

Hernandez’s sentencing hearing is scheduled for Dec. 14.

Co-Conspirators Plead Guilty

Two other co-conspirators in the case, Leonel Palatnik and Michael Stein, had previously pleaded guilty and received sentences, the Miami Herald reported.

Palatnik was co-owner of Panda Conservation Group LLC, which operated two genetic testing laboratories in Florida. Prosecutors said that Palatnik paid kickbacks to Stein, owner of 1523 Holdings LLC, “in exchange for his work arranging for telemedicine providers to authorize genetic testing orders for Panda’s laboratories,” according to a DOJ press release. The kickbacks were disguised as payments for information technology (IT) and consulting services.

“1523 Holdings then exploited temporary amendments to telehealth restrictions enacted during the pandemic by offering telehealth providers access to Medicare beneficiaries for whom they could bill consultations,” the press release states. “In exchange, these providers agreed to refer beneficiaries to Panda’s laboratories for expensive and medically unnecessary cancer and cardiovascular genetic testing.”

Palatnik pleaded guilty to his role in the kickback scheme in August 2021 and was sentenced to 82 months in prison, a DOJ press release states.

Stein pleaded guilty in April and was sentenced to five years in prison, the Miami Herald reported. He was also ordered to pay $63.3 million in restitution.

These federal cases involving clinical laboratory genetic testing and other tests and medical equipment indicate a commitment on the DOJ’s part to continue cracking down on healthcare fraud.

—Stephen Beale

Related Information:

Nurse Practitioner Convicted of $200M Health Care Fraud Scheme

Florida Nurse Practitioner Convicted in $200 Million Medicare Scheme

Florida Nurse Convicted for Fraudulent Orders Billing Medicare for $200M

South Florida Nurse Convicted of Medicare Scheme for Approving $200 Million in Bogus Products

Justice Department Announces Nationwide Coordinated Law Enforcement Action to Combat COVID-19 Health Care Fraud

Laboratory Owner Pleads Guilty to $73 Million Medicare Kickback Scheme

Laboratory Owner Sentenced to 82 Months in Prison for COVID-19 Kickback Scheme

California Clinical Laboratory Owners among 21 Defendants Indicted or Criminally Charged for COVID-19 Test Fraud and Other Schemes Totaling $214 Million

Federal agents allege ‘healthcare fraud abuses erode the integrity and trust patients have with those in the healthcare industry’

Here’s yet another example of how federal and state law enforcement agencies intend to further crack down on fraud involving COVID-19 testing, financial relief programs, vaccination cards, and other pandemic-related programs.

The United States Department of Justice (DOJ) announced it has charged the owners of a Calif. clinical laboratory—as well as 19 other defendants—for their roles in fraudulent billing, kickbacks, and money laundering schemes to defraud Medicare of more than $214 million.

Imran Shams and Lourdes Navarro—owners of Matias Clinical Laboratory, Inc., in Baldwin Park, Glendale, Calif.—which was doing business as Health Care Providers Laboratory, Inc. (Matias)—were charged along with the other defendants with participating in fraud that took place in nine federal court districts.

The indictment alleges the pair paid kickbacks to marketers to obtain specimens and test orders. The lab company owners then laundered their profits through shell corporations in the US, transferred the money to foreign countries, and used it to purchase “real estate, luxury items, and goods and services for their personal use,” according to court documents.

“While millions of Americans were suffering and desperately seeking testing and treatment for COVID-19, some saw an opportunity for profit,” said Assistant Attorney General for the Criminal Division Kenneth A. Polite Jr., JD, during a news conference at the Justice Department, The New York Times reported.

“The actions of these criminals are unacceptable, and the FBI, working in coordination with our law enforcement partners, will continue to investigate and pursue those who exploit the integrity of the healthcare industry for profit,” said Luis Quesada of the Federal Bureau of Investigation’s (FBI) Criminal Investigative Division in a press release.

Assistant Director Luis Quesada of the FBI

“Throughout the pandemic, we have seen trusted medical professionals orchestrate and carry out egregious crimes against their patients all for financial gain,” said Assistant Director Luis Quesada (above) of the FBI’s Criminal Investigative Division in a DOJ press release. “These healthcare fraud abuses erode the integrity and trust patients have with those in the healthcare industry, particularly during a vulnerable and worrisome time for many individuals.” Clinical laboratories throughout the US should be aware of increased scrutiny to Medicare billing by the DOJ. (Photo copyright: El Paso Times.)

According to the DOJ’s Summary of Criminal Charges, “Matias” Clinical Laboratory also “performed and billed Medicare for urinalysis, routine blood work, and other tests, despite the fact that Shams had been excluded from all participation in Medicare for several decades.” The indictment alleges that Shams and Navarro fraudulently concealed Sham’s role in the clinical laboratory and his prior healthcare-related criminal convictions.

Navarro’s attorney, Mark Werksman, JD, Managing Partner at Werksman, Jackson and Quinn LLP, told The Wall Street Journal (WSJ) Navarro would plead not guilty to charges.

“She always tried to follow the law and provide appropriate and quality testing services to the laboratory’s patients. She looks forward to clearing her name in court,” Werksman said.

However, both Navarro and Shams have a checkered past with law enforcement agencies. According to a State of California Department of Justice news release, in 2000, the two were convicted in California on felony counts of Medi-Cal fraud, grand theft, money laundering, and identity theft for using the names of legitimate physicians without permission and filing thousands of false claims with the state for medical tests never performed.

The Calif. Attorney General’s Division of Medi-Cal Fraud and Elder Abuse (DMFEA) seized approximately $1.1 million in uncashed warrants, which were returned to the Medi-Cal program. Since the 2000 case, Shams has been barred from filing for Medicare reimbursement, the New York Times reported.

Other Felony Indictments and Criminal Complaints for Healthcare Fraud

In a separate case, the DOJ announced Ron K. Elfenbein, MD, 47, of Arnold, Md., was charged by indictment with three counts of healthcare fraud in connection with an alleged scheme to defraud the US of more than $1.5 million in claims that were billed in connection with COVID-19 testing. Elfenbein is owner and medical director of Drs Ergent Care, LLC, which operates as FirstCall Medical Center. Elfenbein allegedly told his employees to submit claims to Medicare and other insurers for “moderate-complexity office visits” even though the COVID-19 test patients’ visits lasted five minutes or less.

And in April, the DOJ filed a criminal complaint against Colorado resident, Robert Van Camp, 53, for allegedly forging and selling hundreds of fake COVID-19 vaccination cards, which he sold to buyers and distributors in at least a dozen states.  

“Van Camp allegedly told an undercover agent that he had sold cards to ‘people that are going to the Olympics in Tokyo, three Olympians and their coach in Tokyo, Amsterdam, Hawaii, Costa Rica, Honduras,’” the DOJ said in a news release, CNBC reported.

Van Camp also allegedly told that agent, “I’ve got a company, a veterinary company, has 30 people going to Canada every f— day, Canada back. Mexico is big. And like I said, I’m in 12 or 13 states, so until I get caught and go to jail, f— it, I’m taking the money, (laughs)! I don’t care,” the DOJ stated.

Clinical laboratory directors and pathologists know these fraud charges provide another example of how the misdeeds of a few reflect on the entire healthcare industry, potentially causing people to lose trust in organizations tasked with providing their healthcare. 

Andrea Downing Peck

Related Information:

Justice Department Announces Nationwide Coordinated Law Enforcement Action to Combat Healthcare-Related COVID-19 Fraud

Alleged Covid-19 Fraud Schemes Totaling $150 Million Draw Criminal Charges

Maryland Doctor Facing Federal Indictment for COVID-19 Healthcare Fraud Scheme Is Part of a Nationwide Coordinated Law Enforcement Action to Combat Health Care Related COVID-19 Fraud Announced by the Justice Department Today

Attorney General Lockyer Announces Four Arrests, Two Convictions in Crackdown on Medi-Cal Fraud by Blood Laboratories

U.S. Department of Justice: Summary of Criminal Charges

U.S. v. Imran Shams and Lourdes Navarro, aka ‘Lulu,’ Defendants

DOJ Announces $150 Million in COVID Health Fraud, Bogus Vaccination Prosecutions Nationwide

The Justice Department Charged 21 People over Coronavirus-Related Fraud Schemes

Maryland Doctor Facing Federal Indictment for COVID-19 Healthcare Fraud Scheme Is Part of a Nationwide Coordinated Law Enforcement Action to Combat Healthcare Related COVID-19 Fraud Announced by the Justice Department Today

Federal Investigations into Alleged Kickback Schemes between Hospitals and Physicians Increase in Number and Scope

Hospitals and other organizations are finding ways to pay physicians for referrals in ways that don’t always look like kickbacks

Hospitals nationwide are being scrutinized by the federal Office of the Inspector General (OIG) for allegedly violating federal anti-kickback statutes. This will be of interest to clinical pathology laboratories that have been under a similar spotlight for various referral-kickback schemes and arrangements in the last few years, which Dark Daily repeatedly covered.

Kaiser Health News (KHN) recently reported on investigations by the OIG into hospitals allegedly offering unusually high salaries and other perks to specialists because they attract highly profitable business.

In the KHN article, titled, “Hospitals Accused of Paying Doctors Large Kickbacks in Quest for Patients,” Senior Correspondent Jordan Rau describes one investigation of salaries that involved certain high-profile specialists at Wheeling Hospital, in Wheeling, W.Va.

Wheeling, KHN reported, paid one anesthesiologist $1.2 million per year, which, Rau notes, is higher than the salaries of 90% of the pain management specialists around the country. Rau went on to describe how Wheeling also paid one obstetrician-gynecologist $1.3 million per year, and a cardiothoracic surgeon $770,000 per year along with 12 weeks of vacation time.

In each of those cases, the whistleblower who prompted the qui tam investigation reported that the specialists’ various departments were frequently in the red, reported KHN.

“The problem, according to the government, is that the efforts run counter to federal self-referral bans and anti-kickback laws that are designed to prevent financial considerations from warping physicians’ clinical decisions,” wrote Rau.

Wheeling not only contests the lawsuits brought against it, but also has filed a countersuit against the whistleblower. KHN said the hospital claims “its generous salaries were not kickbacks but the only way it could provide specialized care to local residents who otherwise would have to travel to other cities for services such as labor and delivery that are best provided near home.”

“We are confident that, if this case goes to a trial, there will be no evidence of wrongdoing—only proof that Wheeling Hospital offers the Northern Panhandle Community access to superior care, [and] world class physicians and services,” KHN reported Gregg Warren (above), Vice President of Marketing and Public Relations at Wheeling Hospital, saying in a statement. (Photo copyright: LinkedIn.)

OIG’s Fraud and Abuse Laws: A Roadmap for Physicians

The KHN article mentions five laws the OIG lists on its website that are particularly important for physicians to be aware of. They include the:

  • False Claims Act: states that it’s illegal to file false Medicare or Medicaid claims.
  • Anti-Kickback Statute: states that paying for referrals is illegal, that physicians can’t provide free or discounted services to uninsured people, and that money and gifts from drug and device makers to physicians are prohibited.
  • Stark Law(physician self-referral): says that referrals to entities with whom the physician has a familial or financial relationship are off-limits.
  • Exclusion Statue: describes who cannot participate in federal programs, such as Medicare.
  • Civil Monetary Penalties Law: authorizes the Secretary of Health and Human Services, which operates the OIG, to impose penalties in cases of fraud and abuse that involve Medicare or Medicaid.

“Together, these rules are intended to remove financial incentives that can lead doctors to order up extraneous tests and treatments that increase costs to Medicare and other insurers and expose patients to unnecessary risks,” KHN said.

Other Hospitals Under Investigation

Wheeling Hospital is not the only healthcare institution facing investigation. The Dallas Morning News (DMN) reported on a case involving Forest Park Medical Center (FPMC) in Dallas that resulted in the conviction of seven defendants, including four doctors. Prosecutors outlined the scheme in court, saying that FPMC illegally paid for surgeries.

“Prosecutors said the surgeons agreed to refer patients to the Dallas hospital in exchange for money to market their practices,” DMN reported, adding “Patients were a valuable commodity sold to the highest bidder, according to the government.” 

One of the convicted physicians, Michael Rimlawi, MD, told DMN, “I’m in disbelief. I thought we had a good system, a fair system.” His statement may indicate the level to which some healthcare providers at FPMC did not clearly understand how anti-kickback laws work.

“The verdict in the Forest Park case is a reminder to healthcare practitioners across the district that patients—not payments—should guide decisions about how and where doctors administer treatment,” US Attorney Erin Nealy Cox told DMN.

Know What Is and Is Not a Kickback

Both the Wheeling Hospital investigation and the Forest Park Medical Center case make it clear that kickbacks don’t always look like kickbacks. Becker’s Hospital Review published an article titled “Four Biggest Anti-Kickback Settlements Involving Hospitals in 2018” that details cases in which hospitals chose to settle.

These four incidents involved hospitals in Tennessee, Montana, Pennsylvania, and New York. This demonstrates that kickback schemes take place nationwide. And they show that violations of the Stark Law, the False Claims Act, and the Anti-Kickback Statute can happen in numerous ways.

Whether in a clinical laboratory or an enterprisewide health network, violating laws written to prevent money—rather than appropriate patient care—from being the primary motivator in hiring decisions, may result in investigation, charges, fines, and even conviction.

“If we’re going to solve the healthcare pricing problem, these kinds of practices are going to have to go away,” Vikas Saini, MD, President of the Lown Institute, a Massachusetts nonprofit that advocates for affordable care, told KHN.

Though these recent OIG investigations target hospitals, clinical laboratory leaders know from past experience that they also must be vigilant and ensure their hiring practices do not run afoul of anti-kickback legislation.

—Dava Stewart

Related Information:

Hospitals Accused of Paying Doctors Large Kickbacks in Quest for Patients

A Roadmap for New Physicians: Fraud and Abuse Laws

Surgeons, hospital owner convicted in massive kickback scheme involving Forest Park Medical Center

Four Biggest Anti-Kickback Settlements Involving Hospitals in 2018

Clinical Laboratory Compliance Practices Under Pressure as Federal Spotlight Is Aimed at Common Fraud and Abuse Schemes; Penalties for Violations Surge

Biodiagnostic Laboratory Services Leaders Sentenced to Prison in $100-Million Lab Test Kickback Scheme That Also Led to Convictions of 38 Physicians Does New Opioid Law Require Clinical Laboratories to Change How They Pay Sales Employees?

Biodiagnostic Laboratory Services Leaders Sentenced to Prison in $100-Million Lab Test Kickback Scheme That Also Led to Convictions of 38 Physicians

DOJ says now-defunct clinical laboratory in New Jersey generated test orders by bribing physicians with cash, concert tickets, vacations, high-end automobiles, and prostitutes 

It finally happened! Two medical laboratory executives were given jail sentences for their role in the rampant fraud and abuse committed during the operation of Biodiagnostic Laboratory Services (BLS) of Parsippany, N.J. The court accepted their guilty pleas in 2015, but delayed sentencing until this year, because the two defendants cooperated with prosecutors.

Anatomic pathologists and clinical laboratory managers pushing for stronger enforcement of anti-kickback laws may have gotten their wish with the sentences announced by the federal judge. The two BLS executives admitted to bribing doctors in a $100-million kickback scheme. Thirty-eight doctors also have been convicted of criminal felony charges during the more than five-year investigation.

On June 13, the judge sentenced David Nicoll, 44, President of now-defunct BLS, to six years in federal prison. His brother Scott Nicoll, 37, a concert ticket broker who became a senior BLS employee, received a 43-month sentence. Each defendant previously had pled guilty to one count of conspiracy to violate the Anti-Kickback Statute and the Federal Travel Act and one count of money laundering.

“Today, the president of a diagnostic lab company and his brother were sentenced for their leading roles in a scam that led to one of the largest ever prosecutions of medical professionals in a bribery case,” U.S. Attorney Craig Carpenito, JD, stated in a U.S. Attorney’s Office news release. “Medical referrals from a doctor should be based on what’s in the patient’s best interest, not on how much money the doctor is offered in kickbacks. The number of doctors and medical professionals sent to prison in this case should make that message abundantly clear.”

Hundreds of Doctors Bribed!

Prosecutors believe BLS may be one of the largest medical frauds ever prosecuted, with the federal investigation into the scheme leading to convictions of 53 defendants including:

  • BLS President David Nicoll;
  • BLS employee Scott Nicoll;
  • 38 physicians and physician assistants;
  • Three Nicoll extended-family members; and,
  • 10 others, including numerous other BLS employees.

While the brothers’ sentences were far below the 25-year combined maximum jail time they faced after pleading guilty to conspiracy to bribe doctors and money laundering, their cooperation with prosecutors led to reduced sentences.

A one-time nurse and former pharmaceutical sales representative, David Nicoll purchased BLS in 2005, which was then a failing clinical testing laboratory. In his testimony for the government prosecution, the 44-year-old Nicoll described how his company took business away from competing labs by bribing doctors to steer blood samples to BLS for testing.

Now-defunct Biodiagnostic Laboratory Services President David Nicoll (second from left) and his brother Scott Nicoll (far right) leave a Newark courthouse in 2013 accompanied by their representatives. The two New Jersey brothers, who admitted to bribing hundreds of doctors and laundering money for fraudulent blood testing services, recently were sentenced to prison for their roles in the $100-million scheme. (Photo copyright: Associated Press.)

According to the Associated Press, Nicoll changed the lab’s fortunes by signing phony leases for space in doctors’ offices. After New Jersey outlawed the practice, BLS “switched to bribing doctors with bogus consultant agreements paid for by shell corporations formed specifically for that purpose.” Nicoll testified he bribed “the large majority” of the “probably hundreds” of doctors with whom he did business.

NJ Advance Media detailed the wide-reaching bribery scheme. It included not only monthly payments to physicians to keep the blood work orders flowing, but also big ticket payoffs, according to a U.S States Attorney’s Office District of New Jersey news release. The briberies included:

  • $50,000 Audi S5 turbocharged coupe;
  • Private jet to Key West for deep-see fishing;
  • Charter flight to the Super Bowl;
  • Tickets to a Katy Perry concert; and,
  • Prostitutes provided to at least five physicians.

Nicoll is alleged to have reaped huge personal gain from the fraud, including more than $33 million in distributions from the $200 million BLS received from the testing of blood specimens and related services between 2006 and 2013. In another article NJ Advance Media outlined some of the millions Nicoll spent to enhance his lifestyle, including an $800,000 Mickey Mouse-shaped backyard pool, trips on charter jets to four Super Bowls, and a collection of classic American muscle cars.

“The president and other employees of BLS bribed physicians to refer patients to their lab and order unnecessary lab tests, reaping millions of dollars, all in the name of greed,” Shantelle P. Kitchen, Acting Special Agent in Charge, IRS Criminal Investigation/Criminal Enforcement, Newark field office, stated in the U.S. Attorney’s Office statement, released in 2013 when the Nicolls’ brothers and a third BLS employee were arrested.

“Medical tests should only be run when medically necessary, not so someone can buy exotic cars and charter private jets. This type of healthcare fraud will not be tolerated and IRS-Criminal Investigations, along with our law enforcement partners, will vigorously investigate these crimes to bring the perpetrators to justice.”

More Physicians Plead Guilty to Fraud, Money Laundering, Tax Evasion

While dozens of physicians ultimately admitted to accepting bribes to refer business to BLS, New Jersey internist Frank Santangelo, MD, may have reaped the biggest payoff. Santangelo pleaded guilty in July 2013 of accepting more than $1.8 million in bribe payments from BLS for referrals, for which the lab was paid more than $6 million by Medicare and various insurance agencies between 2006 and 2012.

According to a July 8, 2015, U.S. Department of Justice (DOJ) news release, Santangelo was sentenced to 63 months in prison, fined $6,250 and forfeited $1.8 million as part of his plea agreement for violations of the Federal Travel Act, money laundering, and failing to file tax returns.

“Santangelo admitted he violated the trust of his patients, who should be able to count on their doctors’ prescribing only tests that are necessary, and recommending providers based solely on their qualifications,” stated then-U.S. Attorney Paul J. Fishman for the District of New Jersey, in the DOJ statement.

In another highly publicized case, George Roussis, a pediatrician, and his brother Nicholas Roussis, an obstetrician-gynecologist, both with practices in Staten Island, N.Y., were convicted of accepting cash payments totaling $175,000 from BLS employees and associates between 2010 and 2013. In addition, the U.S. Attorney’s Office said in a 2017 statement that BLS paid for strip club trips for the brothers, who in return funneled $1,450,000 and $250,000 of lab business to BLS, respectively. George Roussis, 45, was sentenced to 37 months in prison, while Nicholas Roussis, 49, received a 24-month sentence.

According to the U.S. Attorney’s Office statement, the government has recovered more than $15 million through forfeiture in what is believed to be a record-setting healthcare fraud case.

Criminal prosecution by federal prosecutors of both the clinical laboratory owners and the physicians who accepted bribes and illegal inducements in return for referring medical laboratory tests is not common. That fact makes this case noteworthy. It serves as a warning to all clinical laboratory professionals and the physicians who may accept kickbacks or illegal inducements that there is a risk that they can be prosecuted for these crimes.

—Andrea Downing Peck


Related Information:

He Bribed Doctors with Cash and Prostitutes. Here’s How much Time He’ll Spend in Prison

President of New Jersey Clinical Laboratory and his Brother, a Senior Employee, Sentenced to Prison in $100m+ Test Referral/Bribery Scheme

Doctor Sentenced to 63 Months in Prison for Accepting $1.8 Million in Bribes for Test Referrals

Brothers Who Ran $100M Health Fraud Scam Sentenced to Prison

Strip Clubs Bribes and Blood Money: The Inside Story of a $150M Medical Fraud

New Jersey Clinical Lab at Center of Largest Physician Bribery Case Ever Prosecuted Pleads Guilty

Five Doctors Plead Guilty in Connection with Test-Referral Scheme with New Jersey Clinical Lab

Clinical Laboratory Compliance Practices Under Pressure as Federal Spotlight Is Aimed at Common Fraud and Abuse Schemes; Penalties for Violations Surge

New healthcare fraud prevention partnership white paper outlines the most common abuses and the reasons clinical laboratories are susceptible to fraudulent practices

When it comes to questionable marketing and billing practices for lab testing, clinical laboratory companies can expect increased scrutiny and enforcement actions by federal healthcare authorities. That’s one message in a recently-issued white paper that was jointly authored by the Centers for Medicare and Medicaid Services (CMS) and the Healthcare Fraud Prevention Partnership (HFPP).

Systemic Challenges That Put Clinical Labs at Risk

According to the CMS/HFPP report: “Examining Clinical Laboratory Services: What You Need to Know, How You Can Avoid its Consequences, and What to Do if You Are a Target of This Enforcement,” clinical laboratories face systemic challenges that can lead to the potential for fraud and abuse. Those include the:

  • Number and variability of laboratories;
  • High-volume, low-dollar nature of ordering, providing, and billing for clinical laboratory services; and,
  • Technical complexity and continuing evolution of clinical laboratory services.

While HFPP, a public-private partnership of healthcare payers and allied organizations, notes it is difficult to put a price on the cost of laboratory fraud and abuse, it concludes, “[Fraud] can negatively impact patient care and outcomes, cause financial harm to legitimate service providers and drive up the cost of care for all.”

The CMS/HFPP white paper points out that fraud within the clinical laboratory industry typically is related to abuse of billing standards, improper laboratory relationships, and medically unnecessary testing, such as:

  • Improper use of Current Procedural Terminology Code Modifier 91, which indicates when a test needs to be repeated on the same day;
  • Unbundling of laboratory panels;
  • Pass-through billing schemes;
  • Rural health pass-through billing;
  • Physician partial ownership of laboratories and co-referral networks;
  • Use of exclusively large panels;
  • Standing orders for laboratory tests;
  • Excessive or improper urine drug testing;
  • Sober living facilities (Sober Homes) that profit from urine drug testing; and,
  • Excessive or improper genetic testing.

As the spotlight intensifies on an industry ripe for potential abuse, criminal and civil penalties for fraudulent and/or improper billing for medical laboratory services skyrocket as well.

This means clinical laboratory managers and pathologists can no longer simply rely on written compliance programs. They must implement compliance procedures that can stand up to investigations and enforcement actions and keep pace with frequently changing laws and regulations.

Diagnostic laboratories that fail to comply with healthcare fraud and abuse regulations face increasing legal risk. The Bipartisan Budget Act of 2018 (BBA) doubled many healthcare fraud and abuse penalties. The maximum penalties under U.S. Code § 1320a–7a—the Civil Monetary Penalties Law (CMPL)—for knowingly filing an improper claim jumped to $20,000; $30,000; or $100,000, depending on the violation.

Similarly, the maximum financial penalty related to payments to induce the reduction or limitation of services increased from $2,000 to $5,000. Criminal penalties for felony convictions of the Anti-Kickback Statute (AKS) also were substantially increased. Previously, a provider who violated the AKS could be fined as much as $25,000 and receive a maximum five-year prison sentence. As of February 9, 2018, AKS violations now can result in a maximum fine of $100,000 and up to a 10-year prison term.

Since 2015, monetary penalties for non-compliance with CMPL and AKS regulations have included an annual inflation adjustment, making the recently enacted increases less dramatic than they first appeared. Nonetheless, the BBA has upped the ante for clinical laboratories.

Protecting Your Clinical Laboratory Against Compliance Violations

“The BBA contained key changes to federal healthcare fraud statutes that, on the whole, reflect ongoing Congressional efforts to heighten penalties for healthcare fraud infractions. The revisions to the AKS and CMPL will, in Congress’s view, raise the stakes companies and individuals face in healthcare fraud cases,” noted law firm Hogan Lovells of Washington, D.C.

To help clinical laboratories and pathologists understand the significance of the CMS/HFPP white paper, and to navigate the increasingly treacherous regulatory and legal landscape, Dark Daily will be presenting a July 18 webinar titled “The New CMS White Paper on Healthcare Fraud Prevention: What You Need to Know, How You Can Avoid its Consequences, and What to Do if You Are a Target of This Enforcement.”

Melissa Jampol and Charles Dunham, IV

Melissa Jampol (left) and Charles Dunham, IV (right), are with Epstein Becker and Green, P.C., a national law firm with decades of experience focusing on healthcare and life science regulatory and enforcement issues that impact clinical and anatomic pathology laboratories, hospitals and health systems, and physician group practices and networks. (Photo copyrights: Epstein Becker and Green.)

During this valuable webinar, you will hear from two legal experts—Charles Dunham, IV, (above right) and Melissa Jampol (above left)—both of Epstein Becker and Green, P.C. (EBG). They have extensive healthcare industry regulatory experience and understand the enforcement process. They will provide diagnostic laboratories with a critical understanding of:

  • Department of Justice operations, procedures and techniques for fraud enforcement, as well as laboratory actions that could be viewed as signs of potential fraud or abuse;
  • Non-governmental enforcement procedures and techniques used by private health insurers;
  • Tools for dealing with enforcement procedures or actions;
  • How to build a compliance program that becomes infused in the culture of a clinical laboratory’s operations; and,
  • Best practices designed to protect your lab from compliance violations or to mitigate potential problems, and more.

First to speak will be Charles Dunham, who is a partner at EBG. His national practice includes representation of healthcare providers and health-related entities. He has a particular focus on clinical and anatomic pathology laboratories, hospitals and health systems, and physician group practices and networks. His national clientele provides him with a wide view of the latest and most important developments in how laboratories, hospitals, and physicians need to comply with state and federal laws.

Clinical lab managers and pathologists participating in the webinar will get a unique, insider’s perspective from the co-presenter. Melissa Jampol is a former Assistant U.S. Attorney now at EBG. In this role, she has significant experience interacting with a range of federal and state law enforcement agencies on cases involving healthcare fraud and abuse. Her earlier experience includes more than six years as an Assistant District Attorney at the New York County District Attorney’s office.

To register for this crucial webinar and see essential details about discussion topics, use this link (or copy and paste this URL into your browser:

While only a small percentage of labs engage in fraudulent business practices, all laboratory organizations today are subject to increased scrutiny and potential enforcement action. This essential webinar will provide in-depth information for laboratory managers and pathologists seeking practical advice on how to decrease non-compliance risks.

Don’t miss this unique opportunity to proactively protect your lab or pathology group from future problems, and learn how to respond if you are the subject of a payer audit, served with a Civil Investigative Demand letter, a subpoena, or other action. Register today!

—Andrea Downing Peck

Related Information:

Examining Clinical Laboratory Services: A Review by the Healthcare Fraud Prevention Partnership

Health Care Program Penalties Rise with Bipartisan Budget Act of 2018

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