BILL COPELAND’S HEALTH LAW INSIGHTS

It never ceases to amaze me how intelligent, well-educated professional people can get involved in schemes that are outlandishly illegal. Not only do they put their professional careers in jeopardy, most of the time, their freedom is also at stake. However, I guess greed takes over.

Take for instance the case in California, announced February 14, 2007 by the United States Attorneys Office for the Central District of California.¹ An indictment charged eighteen defendants, including nine physicians, with fraudulently billing Medicare for more than $12 million. The treatments were either not provided or were not necessary.

In this scheme, the doctors, marketers, called "cappers," and administrators at board-and-care facilities worked jointly to provide respiratory procedures to elderly, infirm and mentally ill people that were unnecessary or not performed in a manner acceptable to Medicare. In some cases, they provided no treatments at all. In furtherance of the scheme, the doctors paid illegal kickbacks to the cappers and to the board-and-care facility owners and administrators to provide the elderly, infirm and mentally ill patients to the doctors for treatment.

The indictment charges 12 of the 18 defendants with conspiracy and 68 counts of health care fraud. It also charges three of the marketers and six of the doctors with money laundering.

According to the indictment:

... [T]his scheme targeted elderly, infirm and mentally ill residents of board-and-care facilities throughout Southern California. The doctors paid kickbacks to gain access to residents of board-and-care facilities. The doctors would order respiratory treatment for the residents regardless of whether the residents had respiratory conditions. Respiratory therapists were paid to go out to the board-and-care facilities to perform daily or almost-daily respiratory treatments on the residence. The therapists were ordered to entice the residents to undergo the treatments with gifts, such as sodas, candy and doughnuts. These respiratory treatments would take place without any doctor present, although Medicare requires a doctor to be present because of the potential danger of a reaction to the treatment. Further, the respiratory treatments were falsely billed as being performed at the doctor's offices or in a mobile medical van because Medicare prohibited the treatments being performed at board-and-care facilities.

As an indication of how blatant the scheme was, they billed Medicare for treatments on dates that the patients were not even at the board-and-care facilities, but were hospital inpatients. Doctors even billed some claims on dates they were out of the state or the country.

According to the press release, "the defendants each face a statutory maximum sentence of 10 years in federal prison for each health care fraud count, 20 years in federal prison for each money laundering count, and five years in prison for the conspiracy count."

This case comes on the heels of the September 2006 conviction and sentencing of a Southern California doctor for a similar scheme.² He received 15 years in federal prison, and the court ordered him to pay $2.5 million in restitution. I was under the impression that the September conviction was an isolated case of a physician using bad judgment. However, when there are nine more physicians involved in this evil scheme, it becomes much more ominous.

In addition, such conduct is not limited to California. In Chicago, the United States Attorney for the Northern District of Illinois announced the indictment of four doctors along with six other individuals in a scheme to defraud patients and insurance companies in connection with allergy testing and shots.³

To the best of my knowledge, there were no kickbacks involved, just fraudulent activity. However, according to the press release:

The indictment alleges that [American Institute of Allergy (AIA)] patient's were recruited with promises of free blood tests for allergies. In fact, according to the indictment, doctors never saw patients to determine that the testing was medically necessary, and patients' blood samples often were not sent for testing until their insurance companies agreed to pay for the test, even though this delay sometimes cause the blood to deteriorate and rendered the allergy tests unreliable. The indictment also alleges that patients whose blood tests showed positive reactions to allergens were advised to receive allergy shots.... these allergy shots were ordered without a doctor's evaluation of risk to patients, were prepared for unqualified personnel and unsanitary conditions, and were dispensed without the equipment and trained personnel necessary to ensure patients' safety.

The six individuals were either employees or principals in a group of companies either owned or controlled by AIA. The four doctors were medical directors of AIA entities in various states. According to the press release, the scheme defrauded insurance companies out of more than $1.5 million, and more than 500 AIA patients were victims.

Here in Ohio, the United States Attorney for the Southern District of Ohio announced that the owner of Columbus-based Community Home Health Care Inc., pled guilty to one count of health care fraud and one count of money laundering. He also pled guilty to one count of manufacturing crack cocaine and one count of possession of a firearm during a drug crime.⁴ According to the press release, "[H]e solicited a population of the immigrant community to provide unnecessary medical services and billed Medicaid for those services. He facilitated the fraud by having doctors sign plans of care, indicating that skilled nursing and home health aide services were necessary. In reality, physicians never saw the patients. The government was defrauded up more than $564,630."

Here in Cincinnati, Dr. Gregory L. Ebner received 24 months of incarceration, followed by three years of supervised release. In addition, he must pay a fine of $10,000 for his role in the scheme involving money laundering and structuring money transactions regarding proceeds he received from prescribing controlled substances at pain clinics in Southern Ohio.⁵ According to the press release:

Ebner worked in the "pain clinics" two or three days a week and saw around 30 patients a day.... Ebner prescribed drugs including Lorcet and Xanax after cursory medical examinations in which he never checked the height, weight, or blood pressure of his patients. Ebner never maintained any diagnostic equipment at the "pain clinics". [sic] Patient's paid cash in amounts ranging from $175 to $200 per visit. The "pain clinics" would not accept insurance, personal checks, credit cards, or any other form of payment. New patients were required to bring an X-Ray or MRI to create an aura of legitimacy to the "pain clinics." Despite different ailments and complaints, all patients received prescriptions that were called into a pharmacy from the "pain clinic". [sic]. The prescriptions were filled in only a few pharmacies, including the South Shore Pharmacy in South Shore, Kentucky. Many other patients signed an agreement to use only this pharmacy. Ebner admitted that what he was doing at "pain clinics." was below the accepted standards of medical practice.

Ebner evenly split the patient payments with [the clinics' owner]. Ebner took the illegal "pain clinic" proceeds and laundered and structured these funds in order to conceal and hide his involvement in this illegal activity. Ebner did this by leading others to believe these were legitimate medical practice proceeds, and he broke down these funds into smaller amounts of currency, typically under $10,000, for deposit into his personal bank accounts so as to avoid the Currency Transaction Reporting (CTR) requirements. This is known as structuring. Ebner took the easy illegal proceeds and initiated checks for investments. These investments included a down payment on real estate, purchased [sic] of shares of a medical partnership, and a pay-off of his home mortgage.

The grand jury has also indicted the other physician who staffed the "pain clinics," as well as the owner of the clinics.

While all of these things I have discussed are extremely egregious activities, it does not have to be "extremely egregious" to get you in trouble, as some providers have found out through the school of hard knocks. Before engaging in any kind of transactional activity, even activity that is touted as the greatest thing since sliced bread, have it reviewed carefully by an attorney experienced in fraud and abuse and transactional activities. Healthcare law, particularly in the fraud and abuse area, is extremely complicated and very complex. Providers are routinely finding out the hard way that what on the surface looks like an extremely good deal, and in the ordinary course of business would be legal, many times has idiosyncrasies in the healthcare arena that can lead to an untoward legal result. I strongly recommend that competent legal counsel review any transactional activity in health care.

Upcoming Article

Hospitals & Health Networks OnLine is to publish my article, "The Anti-Kickback Statute Just Won't Go Away," on March 6, 2007. Please look for it, and let me know if you find it helpful.

¹Release No. 07-020, "Nine Doctors, Nine Others Indicted In Health-Care Scam That Bilked Federal Medicare Program Out Of $12 Million By Giving Unneeded Treatment To Elderly, Mentally Ill," United States Attorney's Office, Central District of California, February 14, 2007.
²Release No 06-126, "Southern California Doctors Sentenced To 15 Years For Defrauding Medicare Program Out Of $3.1 Million, United States Attorney, Central District of California, September 25, 2006.
³Press Release, "Ten Individuals, Including Four Doctors, Indicted In Alleged Scheme To Defraud Patience And Insurance Companies In Connection With Allergy Testing In Shots, United States Attorney, Northern District of Illinois, February 15, 2007.
⁴Press Release, "Owner of a Home Health Company Pleads Guilty to Health-Care Fraud, Money Laundering, Drug Crimes, United States Attorney, Southern District of Ohio, March 2, 2006.
⁵Press Release, "Cincinnati Doctor Receives Two-Year Sentence For Money Laundering In Connection With Role In Southern Ohio Pain Clinics, United States Attorney, Southern District of Ohio, January 19, 2007.

Copyright 2007 William Mack Copeland. You can reprint any part of this newsletter by providing the following acknowledgement: "Reprinted with permission. William Mack Copeland, www.wmcopeland.com."