Charges include $1.1 billion in alleged telemedicine and fraudulent clinical laboratory testing
Nearly 200 individuals in 25 states are facing charges for alleged participation in a variety of healthcare frauds, the US Department of Justice (DOJ) announced in a press release. This major enforcement action involves telemedicine and clinical laboratory testing as well as other healthcare schemes. In total, the DOJ is alleging the defendants are responsible for $2.75 billion in intended losses and $1.6 billion in actual losses.
The charges include:
$1.1 billion in alleged telemedicine and clinical laboratory fraud.
As part of the action, the government has seized more than $231 million in assets, including cash, luxury vehicles, and gold.
Monica Cooper, JD (above), a DOJ trial attorney and member of the Texas Strike Force, is one of two attorneys prosecuting the case against Harold Albert “Al” Knowles of Delray Beach, Fla., and Chantal Swart of Boca Raton, Fla., in the DOJ’s latest crackdown on healthcare fraud. Charges against Knowles and Swart include conspiracy to commit healthcare fraud, conspiracy to defraud the United States, and paying/receiving healthcare kickbacks in a $359 million scheme to bill Medicare for medically unnecessary genetic tests at two Houston clinical laboratories. (Photo copyright: US Department of Justice.)
Houston-Area Labs Charged in $359 Million Scheme
In one case, the government charged Florida residents Harold Albert “Al” Knowles and Chantal Swart in a $359 million scheme involving fraudulent Medicare billing for medically unnecessary genetic tests. Knowles owned two Houston-area labs—Bio Choice Laboratories, Inc. and Bios Scientific, LLC—while Swart ran a telemarketing operation. According to DOJ case summaries, the government alleges that Knowles paid kickbacks to Swart to obtain DNA samples and doctors’ orders for tests.
“Knowles, Swart, and others obtained access to tens of thousands of beneficiaries across the United States by targeting them with deceptive telemarketing campaigns,” the indictments allege. “Call center representatives—who were almost never medical professionals—often prompted beneficiaries to disclose their medical conditions and induced them to agree to genetic testing regardless of medical necessity.”
In addition, “Knowles, Swart, and others agreed that Swart and others would pay illegal kickbacks and bribes to purported telemedicine companies to obtain signed doctors’ orders for genetic testing after only a brief telemedicine visit,” the indictment stated. “Knowles and his co-conspirators knew that the purported telemedicine companies’ physicians were rarely, if ever, the beneficiaries’ treating physicians and rarely, if ever, used the genetic testing results in the beneficiaries’ treatment.”
Dallas-Area Labs Charged in $335 Million Scheme
In another case, the federal government charged that the owner of two Dallas-area clinical laboratories engaged in a $335 million Medicare billing scheme.
Keith Gray, owner of Axis Professional Labs, LLC and Kingdom Health Laboratory, LLC, “offered and paid kickbacks to marketers in exchange for their referral to Axis and Kingdom of Medicare beneficiaries’ DNA samples, personally identifiable information (including Medicare numbers), and signed doctors’ orders authorizing medically unnecessary cardio genetic testing,” the government alleged. “As part of the scheme, the marketers engaged other companies to solicit Medicare beneficiaries through telemarketing and to engage in ‘doctor chase,’ i.e., to obtain the identity of beneficiaries’ primary care physicians and pressure them to approve genetic testing orders for patients who purportedly had already been ‘qualified’ for the testing.”
Other Clinical Laboratory and Healthcare Fraud Cases
DOJ attorneys charged the owners of Innovative Genomics, a clinical laboratory in San Antonio, in a $65 million scheme to bill Medicare and the COVID-19 Uninsured Program for “medically unnecessary and otherwise non-reimbursable COVID-19 and genetic testing,” according to the indictment. Also charged were two patient recruiters who allegedly received kickbacks for referring patients.
Richard Abrazi of New York City was charged in a $60 million Medicare billing scheme. Abrazi owned two clinical laboratories: Enigma Management Corp. and Up Services Inc. Both operated as Alliance Laboratories.
“Abrazi and others engaged in a scheme to pay and receive kickbacks and bribes in exchange for laboratory tests, including genetic tests, that Enigma and Up billed to Medicare,” the indictment alleges. “Abrazi and others 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.”
The DOJ charged Brian Cotugno, of Auburn, Ga., and James Matthew Thorton “Bo” Potter, of Santa Rosa Beach, Fla., in a $20 million Medicare billing scheme. Cotugno, the indictment alleges, sold Medicare Beneficiary Identification Numbers (BINs) to two Alabama laboratories co-owned by Potter.
“The BINs were used to bill Medicare tens of millions of dollars for OTC COVID-19 test kits, many of which had not been requested by the beneficiaries,” the government alleged.
These are only a few of the recent cases the DOJ brought against defendants nationwide for healthcare, telemedicine, and clinical laboratory fraud. Both Dark Daily and our sister publication The Dark Report have covered these ongoing investigations for years. And we will continue to do so because it’s important that lab managers and pathology group leaders are aware of the lengths to which the DOJ is pursuing bad actors in healthcare.
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.
“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.
Clinical Laboratory Actions Should Be Listed in the HIPDB
The HIPDB is a national database of adverse actions taken by federal agencies against “healthcare practitioners, providers and suppliers,” who are defined in the OIG report as medical doctors, laboratories, clinics, nursing homes, managed care facilities, prescription drug plans and durable medical equipment (DME) suppliers.
