Referral-kickback and bribery schemes that included medical laboratory tests bilked private insurers and government health plans out of $150 million over six-year period

Andrew Hillman, former co-owner of Next Health LLC, a network of drug and genetic-testing laboratories and pharmacies based in Dallas, who pleaded guilty in 2018 to violating federal anti-kickback laws, has been sentenced to 66 months in prison and ordered to pay $3 million in restitution for his role in Medicare fraud, money laundering, healthcare bribes, and doctor kickbacks, reported The Dallas Morning News.

Dark Daily’s sister publication The Dark Report (TDR) previously reported on the federal lawsuit filed by UnitedHealthcare (NYSE:UNH) against Next Health in 2017 for allegedly running fraudulent drug testing and doctor kickback schemes from 2012-2018 in Dallas.

The two owners of Next Health, Andrew Hillman and Semyon Narosov, pleaded guilty to “multiple medical kickback schemes in Dallas in which doctors were paid to steer patients to certain hospitals,” The Dallas Morning News reported. One scheme involved clinical laboratory test specimens that “were sent to the Next Health labs for a battery of unnecessary and expensive tests under the guise of a wellness study, court records say, and doctors were paid kickbacks for referring patients.”

Hillman and Narosov admitted to defrauding both government and private insurance through the phony “wellness” program and through a separate physician kickback scheme in which doctors were paid to refer patients to the now-closed Forest Park Medical Center (FPMC) in Dallas. In court filings, they admitted that “Next Health billed private and government health insurance plans more than $450 million between 2012 and 2018 and collected about $150 million in fraudulent proceeds,” Dallas Morning News reported.

Though Hillman’s guilty plea could have resulted in a 15-year prison sentence, he cooperated with federal investigators in the FPMC bribery scheme investigation and for that he received a reduced sentence. Narosov also pleaded guilty in both cases, but he has not yet been sentenced. 

UnitedHealthcare Uncovers Multiple Healthcare Fraud Schemes

Clinical laboratories were at the center of the Next Health money laundering scheme, which involved multiple shell companies, limited liability companies (LLCs) and umbrella corporations to shield the unlawful conduct from detection. And it worked for five years until 2017, when UnitedHealthcare (UHC) filed a $100 million federal lawsuit against Dallas-based Next Health and its subsidiary labs:

Additionally, two individuals also were charged: former Next Health marketing representative Erik Bugen and Kirk Zajac.

As outlined in the lawsuit, UnitedHealthcare initially uncovered the fraud during a review of routine medical laboratory test claims to identify abnormal testing activity. Upon a deeper investigation, the insurer discovered an array of bribes and kickbacks and other potential crimes. In one illicit arrangement, Next Health sales consultants provided $50 gift cards to people who provided urine samples in a Whataburger bathroom as part of the “wellness study.”

Clinical laboratory specimens were sent to Next Health laboratories for “multiple unnecessary and expensive drug tests that were later billed to United and its customers,” the lawsuit states.

The lawsuit contends the defendants:

  • Paid bribes and kickbacks to referral sources, including physicians, sober homes and sales consultants, in exchange for requesting out-of-network lab services;
  • Billed for lab services that were not ordered by medical providers;
  • Inflated claims by utilizing standing protocols for blanket testing, regardless of patients’ medical histories, clinical conditions, or needs;
  • Billed for services the defendants did not perform; and
  • Billed charges the defendants never intended to collect from patients.
UnitedHealthcare Director of Communications Matthew Rodriguez (above) told the Dallas Morning News, “UnitedHealthcare has taken an active role in recent years in prosecuting instances of lab fraud, and this decision will continue to shine light on companies engaged in inappropriate lab services that put patients at risk and drive up costs.” He said the nation’s largest single health insurer will continue to go after clinical laboratories they suspect may be defrauding the healthcare industry. [Photo copyright: BusinessWire.]

Other Healthcare Frauds and Kickback Schemes Against UnitedHealthcare

As TDR detailed in “Allegations in UHC Health Insurance Fraud Case Involve Multiple Defendants,” January 22, 2018, Hillman and several other defendants were not novices in devising healthcare kickback schemes. TDR noted the UnitedHealthcare lawsuit was the “visible tip of a large iceberg,” with the insurance giant the latest victim in a pattern of potential fraud and abuse that extended back almost a decade. Included in the laundry list of other allegedly illegal schemes was one distinctly similar to the Next Health fraud.

A year earlier, the US Attorney’s Office of the Northern District of Texas brought indictments against 21 persons affiliated with the physician-owned Forest Park Medical Center in Dallas. Next Health’s Hillman and Narosov were also included in that indictment, as well as 38 subsidiaries of U.S. Health Group, an earlier incarnation of Next Health.

The pair’s ownership and management positions within Next Health and its subsidiaries created “an illegal scheme that was similar to the one in place at Forrest [sic] Park,” UnitedHealthcare stated in its complaint.

The indictment alleged FPMC paid approximately $40 million in bribes and kickbacks to physicians, recruiters, and others in exchange for referring lucrative patients—particularly those with high-reimbursing, private health insurance or benefits under certain federal programs—to the out-of-network hospital.

Hillman, who was among 10 defendants who pleaded guilty before the FPMC case went to trial, testified for the government, the federal Department of Justice (DOJ) said in a statement.

In addition, seven others were convicted of conspiracy to pay or receive healthcare bribes.

“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 for the Northern District of Texas Erin Nealy Cox, JD, said in a press release announcing the guilty verdicts.

US District Court Judge John Parker, JD, who served as US Attorney for the Northern District of Texas when the FPMC indictments were handed down, explained the impact of fraud on the healthcare system.

“Medical providers who enrich themselves through bribes and kickbacks are not only perverting our critical healthcare system, but they are committing a serious crime,” Parker said in a statement announcing the FPMC indictments. “Massive, multi-faceted schemes such as this one, built on illegal financial relationships, drive up the cost of healthcare for everyone and must be stopped.”

The lesson for clinical laboratory leaders is that vigilance is key to spotting bad actors who wish to defraud the healthcare system. This is double critical at a same time when labs are under increased scrutiny from payers, federal and state regulators, and law enforcement.

—Andrea Downing Peck

Related Information:

Architect of Massive Medical Kickback Schemes Gets Light Prison Term after Giving Feds the Goods

Feds Raid Another Pharmacy as Dallas becomes Hot Spot for Physician Kickbacks

UnitedHealthcare Servs., Inc. v. Next Health, LLC

Prison Time for Another Man Who Ripped Off Health Insurance Program for Troops

Executives, Surgeons, Physicians, and Others Affiliated with Forest Park Medical Center (FPMC) in Dallas Indicted in Massive Conspiracy

Seven Guilty in Forest Park Healthcare Fraud Trial

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

Allegations in UHC Health Insurance Fraud Case Involve Multiple Defendants